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

OET-69 – real name: “OET Bulletin No. 69 Longley-Rice Methodology for Evaluating TV Coverage and Interference” – is, of course, the how-to guide developed by OET over the years for predicting, through use of the Longley-Rice propagation model, TV service coverage and the likelihood of interference. By a complex set of computerized calculations, which incorporate a detailed database of terrain variations, Longley-Rice facilitates “predictions of radio field strength at specific geographic points based on the elevation profile of terrain between the transmitter and each specific reception point.” Predictions generated through Longley-Rice are generally deemed to be more accurate than those produced by the Commission’s traditional methods. (Those traditional methods first relied on hand-cranked charts and tables; they later migrated to a relatively crude computerized method that produced only a statistical prediction of signal strength over a broad geographic area rather than at any individual location.)

The greater precision provided by OET-69 was central to the vast transition of the U.S. television industry from analog to digital, a process that stretched over decades and wrapped up in 2009. The currently authorized service areas of all full-service TV stations were determined, directly or otherwise, through operation of OET-69.

That’s important here because, in directing the Commission to conduct incentive auctions, Congress recognized that TV licensees who opted not to turn in their licenses – and who would thus be subject to possible channel reassignment – should be assured that, when the dust settles on the auction/reassignment process, they will still be able to serve the areas and populations they had previously been authorized to serve. Also, knowing with certainty what will await them post-auction could induce some licensees to participate in the auction.

If the method of predicting service areas and populations changes in mid-stream, stations could end up with less than they thought they would have once the re-packing process is completed. You may recall that a fixed reduction in service area for all stations was considered by the FCC at one time as a way to pack stations closer together, but Congress nixed that idea, instead directing that:

[i]n making any reassignments or reallocations . . ., the Commission shall make all reasonable efforts to preserve, as of the date of the enactment of this Act, the coverage area and population served of each broadcast television licensee, as determined using the methodology described in OET Bulletin 69 of the Office of Engineering and Technology of the Commission.

(Those are our italics, not Congress’s.) Congress seemed clearly to be saying that existing licensees should be entitled to keep their existing OET-69-determined service areas and populations.

But now OET has unveiled TVStudy – which the Commission “plans to use in connection with” the incentive auctions. According to OET, TVStudy, when compared with OET-69-related software, “runs much faster, provides greater accuracy in modeling and analysis, and is easier to use and more versatile”. Wow, what’s not to like about that?

Maybe a lot, if you’re a TV broadcaster.

Focus, please, on the notion of “greater accuracy in modeling and analysis”. That suggests that, by using TVStudy, the Commission could come up with service areas/populations different from – and possibly smaller than – those generated by the long-accepted OET-69 software. Smaller areas/pops calculations could diminish broadcasters’ expectations, whether they plan to (a) stay in the business (in which case their service areas might be reduced) or (b) participate in the auction (in which case the auction payment they could expect to receive might be reduced).

Suspicious folks may be wary of back-door, fine-print devices by which the FCC might be planning, on the QT, to disadvantage broadcasters in the auction process by achieving the reduced service areas that Congress rejected. Such folks might view the development and anticipated implementation of TVStudy with some skepticism. After all, when Congress mandated the use of OET-69, wouldn’t you think that they had a specific method in mind and not just the title of a program that the FCC could then change however it wanted?

That is not to say that OET is completely off-base in thinking that OET-69 might need some spiffing up. Some of the software underlying the current OET-69 process was developed three decades ago, which alone suggests that some updating might be useful. Moreover, as detailed in OET’s request for comments on TVStudy, other intervening developments – the availability of a more recent census and more accurate terrain data, determinations of errors in the existing software, to name a few – may also justify an updating effort. We can all stipulate that, in a perfect world, the Commission could probably improve on its existing OET-69 software, at least by updating the underlying data used in the calculations, and TVStudy might do just that in all the right ways.

But consider the timing. OET’s notice and request for comments about TVStudy was issued ten days after the deadline for comments on the overall incentive auction plan. Comments in response aren’t due to be filed until a couple of weeks after reply comments are due in the incentive auction proceeding. How can anyone reasonably be expected to comment on the incentive auction plan when an important element of that plan – i.e., the method to be used to calculate services areas and populations – is still up in the air?

And bear in mind, too, that OET-69 methodology in its current form was good enough to use in the DTV transition completed in 2009. (OET-69 has been around in one form or another since 1977. The current version of OET-69 is dated 2004.) If the underlying software is now unreliably old and flawed, how come the Commission didn’t update it for the DTV transition?

If the Commission plans to use TVStudy instead of its standard OET-69 approach when the auction rolls around, why didn’t the FCC include TVStudy as a component of the incentive auction NPRM? And while, with all due respect, we doubt that anyone on the Eighth Floor would ordinarily be capable of producing anything as technically complex as TVStudy – that’s why, after all, the Commission has an OET in the first place – why aren’t the details of TVStudy and its anticipated implementation being overseen by the full Commission (as opposed to OET) as part of the run-up to the incentive auctions?

There may be perfectly rational, arguably credible, answers to these questions, but it’s hard to see what they might be. The Commission has known since the passage of the Spectrum Act that OET-69 calculations would be central to the auction process. And don’t forget that, three years ago, in connection with the National Broadband Plan, the agency described an “Allotment Optimization Model” (AOM) it was then working to develop. Since the AOM (which was never released to the public) did not incorporate OET-69, it can’t be used for incentive auction purposes thanks to Congress’s specific insistence on OET-69 methodology. 

We’re guessing that the Commission has been looking at alternatives to the AOM, including the TVStudy idea, for a considerable time, probably since well before the issuance of the incentive auction NPRM. The fact that we’re only hearing about TVStudy now, and from OET rather than the Commission itself, raises legitimate concerns about what exactly the FCC’s game plan here might be.

The NAB has already weighed in, at least preliminarily. In response to OET’s request for comments, the NAB has argued that now is not the time to patch together a quick fix to OET-69 methodology. The NAB acknowledges that OET-69 might be improved on . . . just not now, with so many other loose ends still to be tied down relative to the incentive auctions.

Back in the day, accuracy in signal prediction was often a function of the sharpness of the pencil being used to draw contour lines on a paper map. The pencil was sharpened some when the first computerized contour calculations were introduced, although those used crude terrain data limited to a 2-10 mile donut shaped circle. OET-69 sharpened the pencil further by introducing more detailed data over a wider area. TVStudy may be just a modern-day means of sharpening the pencil even more. 

While, as a general rule, greater accuracy is the preferred course in most situations, there are times when the desirability of some arguably greater accuracy may be outweighed by other factors. Here, the Commission is apparently committed to conducting incentive auctions at the earliest possible time with maximum participation from broadcasters. Introducing uncertainty relative to an essential aspect of that participation – i.e., the calculation of relevant service areas and populations – could result in delay of the auctions and/or significantly reduced broadcaster participation. Further, Congress itself specified use of OET-69 without indicating any concern about possible inaccuracies. And finally, let’s not lose sight of the fact that we are talking about predictions of signal coverage. Neither OET-69 nor TVStudy will guarantee absolute precision in any event.

Those factors being the case, perhaps the Commission should stick with the pencil as it is.

Comments on TVStudy are currently due to be filed by March 21, 2013; reply comments are due by April 5, 2013.

And when I refer to “webcasters”, I’m referring not only to my primary target audience, i.e., FCC- licensed radio stations who are webcasting. (See below for more details on the three different categories of broadcaster/webcaster). Beyond that radio-based universe is a larger universe of operators engaging in “non-interactive webcasting”, perhaps more commonly referred to as “streaming”. (These are folks who, in overly simplified terms, don’t allow the user to request and directly hear a song.) The information in this post is generally applicable to all webcasters, radio-based and non-radio-based alike. 

Radio stations who are streaming online (most often consisting of a simulcast of the station’s over-the-air signal, though perhaps offering one or more “side channels” as well) normally fall into one of three categories: commercial broadcaster, noncommercial webcaster, and noncommercial educational webcaster. Remember that the distinction between “commercial” and “noncommercial” is based not on the station’s FCC license, but rather on whether the entity offering the webcasting service is exempt from federal income taxation under Section 501(c) of the Internal Revenue Code. There is a further distinction between “noncommercial webcaster” and “noncommercial educational webcaster”, the latter being affiliated with an accredited educational institution whose students substantially staff the webcasting operations.

There are also sub-categories within each category. For instance, a noncommercial webcaster can self-classify under the “CRB” or “WSA” designations. “CRB” stations are subject to the rules put in place by the Copyright Royalty Board in its Webcasting III decision applicable to the years 2011-2015; “WSA” stations are subject to the relevant Webcaster Settlement Agreement. 

The designations of “commercial broadcaster”, “noncommercial webcaster (WSA)” and “noncommercial educational webcasters” include special categories for smaller entities which come with some benefits. By paying an extra $100 “proxy fee” with its annual minimum payment, a commercial broadcaster who had fewer than 27,777 “aggregate tuning hours” in the previous year and expects to do so again can receive an exemption from the rather onerous monthly “Playlist Report of Use” requirement. Ditto both for a noncommercial webcaster (WSA) who had fewer than 44,000 aggregate tuning hours in the previous year and expects to do so again, and for the noncommercial educational webcaster who had fewer than 55,000 aggregate tuning hours in every month (though you can go over in one month) and expects to do so again. 

You choose your category – or, if applicable, your status as a small broadcaster or microcaster – when you file your Annual Minimum Fee Statement of Account form with SoundExchange. That form is due by January 31, 2013. Note: in prior years, small broadcasters or microcasters had to file a separate “Notice of Election” form; this year that election is incorporated into the Annual Minimum Fee Statement of Account form, which includes a line where the webcaster will indicate its election to pay the $100 “proxy fee”. 

But that’s not all: your obligations continue throughout the year. With the exception of the noncommercial educational microcaster, everyone – whether payment is required or not – must file a Monthly Statement of Account form with SoundExchange within 45 days of the end of the month in question. Full-sized commercial broadcasters, noncommercial webcasters and noncommercial educational webcasters have to file Playlist Reports of Use on a regular basis – generally monthly – as well.

So consider yourself reminded: if you are engaged in “non-interactive webcasting”, you will need to find the proper Annual Minimum Fee Statement of Account Form and send it to SoundExchange along with your payment of $500.00 per channel by January 31, 2013. If you qualify either as a “small broadcaster” or under one of the “microcaster” categories, you may also pay an extra $100 per channel in exchange for an exemption from the requirement that you file Playlist Reports of Use on a monthly or quarterly basis (but you don’t need to use a separate Notice of Election form this year).  However – with one very minor exception for noncommercial microcasters – regardless of your classification or size, your obligations do NOT end on January 31, 2013. You will need to file Statement of Account forms and, possibly, Playlist Reports of Use throughout the year.   

You can get more detailed information about every category via the “How do I Pay” page on the SoundExchange website. We’re here to help as well.

[UPDATE:  This morning, after we had posted this piece, our friends at SoundExchange sent around a note advising webcasters of a new SoundExchange-produced video in which they “break down what your service needs to submit to be compliant with the statutory license for 2013”.  You can find that video at this link.  And, of course, webcasters can also get help from the SoundExchange Licensee Relations group at 202-559-0555.]

Bear in mind, the 80-minute delay in the start of yesterday’s session was caused by the apparent inability of the FCC – that would be (Irony Alert!) the Federal Communications Commission – to get its phone bridge to work. That alone doesn’t inspire confidence. And, according to a message typed on the online video feed early during the delay period, that inability in turn arose because more than 700 people were logged onto the phone bridge. 

Um, what did the FCC expect? Its new public file system is going to be a necessary part of the lives of thousands of TV stations starting tomorrow, and yesterday afternoon’s demonstration was for most of those stations the first time that they would have a chance to check out the system. (Yes, I know that there was a demonstration on July 17 – but the online feed of that show reportedly didn’t provide adequate access. And yes, I know that there was a second demonstration on Monday morning, July 30, at 9:00 – but since that demo wasn’t announced until late on the preceding Friday afternoon, the Commission couldn’t reasonably have expected a huge turnout. That left yesterday’s show, so the FCC could and should have expected a throng.)

Additionally, it was apparent during the demonstration that the system is still a work-in-progress in a number of respects. Some functions aren’t yet working, some aren’t working with pre-Version 7 versions of Internet Explorer, etc. While this is to be expected in any complex system like this one, you’d think that, before the Commission forces thousands of broadcast stations to use the system, the Commission would have tried to work out more of the bugs.

And one more cause for hesitation: while the Commission folks indicated that help would be available online and by phone once the system kicks in, it looks like their expectation is that most users will familiarize themselves with the system by reading through an extensive – and apparently to-be-regularly-updated – FAQ page. For sure, FAQ’s are a well-established feature of the Internet environment, but it’s not clear that, as a federal administrative agency imposing affirmative obligations on thousands of regulatees, the FCC can appropriately rely on something as informal as an FAQ page to instruct those regulatees how to meet those obligations.

So the preliminary bottom line is: the system looks very sharp (“neato” was one oddly anachronistic descriptive reportedly submitted by an attendee of yesterday’s demo) and may prove user-friendly. Certainly it appears to have been designed in large measure with the uploading station in mind. That’s a great comfort (particularly for those of us who have wrestled with CDBS for years).

But this is a lot like buying a car. The new model always looks great in the ads and great in the showroom. It probably also feels great to drive when you take it for a test spin under the watchful eye of the dealer in the passenger seat. But the real questions don’t usually pop up until you’ve brought it home and driven it in all kinds of conditions -- and your 16-year-old student driver and your 85-year-old parent have also tried to drive it (because, bear in mind, most licensees will likely be relying on station staff to handle most, if not all, uploading to the system).

So rather than give the FCC’s new system any final thumbs up (or thumbs down), let’s reserve judgment until we’ve all had a chance to use it in everyday, real-world situations. 

For those of you who have not yet sat in on one of the FCC’s demonstrations, we strongly recommend that you take the time to do so at Noon (ET) today, August 1.

The public file system allows stations to use Dropbox and other similar non-FCC online cloud storage systems to gather documents before uploading them to the FCC’s system. If you want to use Dropbox, you will have to (a) create a separate Dropbox folder and then (b) download an app that allows exchange of documents between the FCC and that one Dropbox folder.  But watch your step – the drag and drop function from your computer or Dropbox onto the FCC’s website works well with many browsers but apparently has some problems (which the FCC is working to fix) with the most popular browser, Internet Explorer, especially versions 7 and older.

To upload materials to a station’s online file, stations will use the URL http://stationaccess.fcc.gov.  (We just tried and it’s not an active site as of July 30, 2012.)  To review a station’s online public file, members of the public will go to http://public-inspection-file.stations.fcc.gov.  (Also not yet active, as far as we can tell.)

Most of us are used to converting documents to .PDF format for submission to the FCC – mainly because the CDBS electronic filing system accepts only .PDFs and the ECFS system for filing rulemaking comments converts incoming documents to .PDF. The public file upload process, however, is different. Documents headed for the online public file must be uploaded in their native format, whatever it may be (e.g., MS-Word, Excel, WordPerfect).  FCC will take care of converting to word-searchable .PDF format.  If the document to be uploaded was initially created in .PDF, it may be uploaded that way – but it should be in searchable .PDFform. (Cautionary note: many .PDF writer programs do not create searchable .PDFs as a default. Check you’re your IT folks if you have any questions on this front.)

The station profile on the FCC’s website now includes the main studio address.  Remember that a main studio must as a general rule be staffed by at least two employees (one of them management-level) during the normal 40-hour business week. With the main studio address posted on the Internet, FCC inspectors (and others) will have no problem locating the studio for inspection purposes.

The Commission is advising that stations should probably keep back-ups of the documents they upload, just in case.  But stations do not have to maintain copies of uploaded materials at the station for the public to inspect – once the materials have been uploaded to the FCC’s online system, the station’s obligation to make those materials available to the public has been satisfied.  But remember that an on-site public file is still required for letters/communications from the general public for all TV/Class A stations, old political file documents for all TV/Class A stations, and newly-created political file documents for all TV/Class A stations except for affiliates of the Top Four networks in the Top 50 markets. Stations may voluntarily upload political file documents to reduce their on-site paper obligations. However, letters/communications from the public should not be uploaded because of privacy concerns (including especially the provisions of the Children’s Online Privacy Protection Act (COPPA)).

The FCC is not requiring stations to provide a computer terminal to allow the public to go to the FCC’s website.  Staff at today’s session recommended that stations post the URL of the FCC’s public file website on their own station websites.  Whether or not that recommendation can turn into a formal requirement isn’t clear (since it may not have been specifically addressed in the rulemaking proceeding leading up to the adoption of the online system).  But it is clear that the FCC wouldn’t object if those URLs were to get included on stations’ websites.

Important final advisory: The online public file system is still on track to go live on Wednesday, August 1, the day before the online filing requirement becomes effective.

The Commission is planning to provide another demonstration of the system tomorrow, July 31 at 4:00 p.m.  Given the additional information which has come to light since the July 17 demonstration, we’d treat tomorrow’s demonstration as Must See.   This is not conventional webinar. A special platform is used to display a computer desktop that is manipulated by the FCC. Audio is available only by telephone. Access information is available at www.fcc.gov/events/demonstrations-online-public-inspection-file-interface.  The FCC warns that “[p]arties must join the call before the scheduled start time.” Last-minute registration and dial-in were possible today, but there were only 190 participants on the line (possibly because of the late notice provided by the Commission). We don’t know when or if the capacity of the FCC’s telephone bridge might be filled.

Media Bureau waives political file uploading requirement

Even before the new online public file requirement could take effect, it’s been waived!  In a Memorandum Opinion and Order, the Bureau released three days before the effective date, the Bureau has let Station WHAG-TV, Hagerstown, Maryland off the hook as far as uploading any new political file materials goes.

As diligent readers will recall, the online public file rule requires that Top Four networks affiliates in the Top 50 markets must begin uploading all newly-created political materials starting August 2.  WHAG-TV is an NBC affiliate in the Washington, D.C. DMA, which is Market No. 8.  So WHAG-TV was directly in the crosshairs of the rule.

Hold on there, said the station.  It’s not the primary NBC affiliate in the DC market.  That distinction goes to WRC-TV, the NBC O&O in Washington.  In fact, WHAG-TV’s assignment to the DC market is really a matter of “happenstance”.  That’s because, back when Arbitron designated TV markets, Hagerstown was its own market and, trust us, it wasn’t in the Top 50.  (Actually, it was Market 192.)  When Arbitron got out of the TV market designation business around 1996 and the FCC shifted to Nielsen-prepared DMA rankings, Hagerstown got lumped into the DC market and so, too, did WHAG-TV.

But even when that happened, WHAG-TV didn’t embrace its new DMA home.  In 1998 it argued successfully that it shouldn’t be classified as being in any of the Top 100 markets for regulatory fee purposes – and the Commission agreed, possibly on the basis of the Television and Cable Factbook 1997.  The Factbook indicated that the number of DMA television households served by WHAG was “equivalent [to] a remaining market station.”  (WHAG also helpfully observed that, where each of the TV stations licensed to Washington, D.C. proper serve over 2.3 million households, WHAG serves less than a quarter of that number in the DC DMA.)

The Bureau agreed that WHAG really does serve a smaller market and that holding it to the requirements for Big Market stations would run contrary to the fact that the FCC had decided to exempt small market stations from the initial political file upload chore.  Accordingly, waiver granted, and the folks at WHAG are doubtless breathing a bit easier.  (But the waiver applies only to the obligation to upload newly-created political file materials; the station will still be on the hook to upload other, non-political materials.)

They’re scheduled for Monday, July 30 at 9:00 a.m. and Tuesday, July 31 at 4:00 p.m. (We’re guessing that the times are ET, but the notice doesn’t actually specify that.) The notice provides information for accessing the show – but be alert: the audio for the demos is by teleconference, and the notice emphatically instructs that “[p]arties must join the call before the scheduled start time.”

Our colleague Peter Tannenwald attended the July17 demonstration and reported favorably about the FCC’s system. Since it appears that that system is indeed going to be with us for a while, it’s a good idea to get as familiar as possible with it. The online demos are probably a good place to start. And while the new rule applies only to TV stations for now, the smart money figures that it’s just a matter of time before the FCC expands it to include radio stations as well. With that in mind, radio licensees might want to take advantage of this opportunity to see what is likely in store for them.

One final observation. The timing of the notice concerning the demonstrations is puzzling. Why issue this late on a Friday afternoon in order to announce a demonstration occurring at 9:00 a.m. the following Monday? We happened to receive the notice because we subscribe to a service that delivers FCC releases as they get issued. But we suspect that the vast majority of broadcasters don’t enjoy that luxury. And the late release of the notice assured that it would not be included in the Friday afternoon editions of most trade journals. So while it’s nice that the FCC is apparently trying to introduce us all to its spiffy new online filing system (even if that introduction is occurring just a couple of days before we’re all supposed to be using that system officially), the Commission might want to work on its scheduling skills a bit. 

Perhaps the Commission was counting on CommLawBlog to get the word out. In that case, mission accomplished.

First, you’ll file a partially-completed Form 854 in the FCC’s ASR system. This will consist of information previously required on Form 854, plus tower lighting information and specification of the date on which the applicant wants the FCC to post the application on the Commission’s website for comments.

Once Form 854 has been filed, you’ll have to publish a notice (“in a local newspaper or by other means”). The Bureau isn’t specific about the precise content of the required public notice or what “other means” – besides a local paper – might be. But the purpose of the local notice appears to be to let folks know about the registration application and the opportunity to submit comments to the FCC about it. The local notice has got to be made on or before the date the applicant has designated in its application for posting of the application on the FCC’s website.

The comment period will be open for 30 days, during which time members of the public can ask the Commission for further environmental review. 

If the FCC staff concludes that no additional environmental review is required, the applicant will then move on to Step Two of the process. In that step, the applicant will have to amend its application to reflect (a) the FAA’s study number and issue date (if those haven’t already been provided in the initial application), (b) the date of the local public notice, and (c) a certification that the proposed construction will have no significant environmental impact. According to the FCC’s public notice, that could happen “after approximately 40 days” – but the notice doesn’t say whether that means 40 days after the opening of the comment period or the close of the comment period or some other date.

But if, after considering the initial, partial Form 854 and any public comments that roll in the door, the FCC decides that more review is required, it will require the submission of an Environmental Assessment (assuming, of course, that the applicant hasn’t already filed such an Assessment on its own). It’s safe to say that that would extend the processing time considerably. If an Environmental Assessment is required, the FCC will first have to issue a Finding of No Significant Impact before the applicant can proceed to Step Two with the necessary amendment of its application. 

Interestingly, it appears from the FCC’s public notice that the Commission doesn’t plan to directly notify applicants when their applications are ready for Step Two. According to the notice, “[a]pplicants will be able to determine which of their pending applications are ready for completion of Part 2 by logging into the ASR system, where these applications will be listed as Ready for Certification.”

The FCC’s public notice also lists some additional obligations relating to service-specific applications, and provides information about the opportunity for members of the public to file “Environmental Requests”. Such “Requests” will seek further FCC environmental review.

Obviously, the Wireless Bureau has been hard at work gearing up for the eventual implementation of the new environmental processes. The public notice lists a range of updates that have been made to Commission systems and forms as part of the process. And if you’re curious about how all this is going to work, the Commission will present a demonstration of the changes at 11:00 a.m. on May 21, 2012. You can attend in person at the FCC’s D.C. headquarters, or you can view it online. (Online viewers can get to the webcast by going to www.fcc.gov/live and clicking on the appropriate event link.)

The new registration process is not yet effective, but that could change any day now. The Office of Management and Budget has apparently signed off on the new regimen, so it’s presumably just a matter of time before the Commission makes it official. Check back here for updates.

Under new rules adopted last December (but which – as explained below – have not yet taken effect), anticipated tower construction subject to the ASR program must be brought to the Commission’s attention before any application is filed. That is, before formally applying for an ASR (much less for the particular RF facilities to be installed on the to-be-built structure), prospective applicants must first submit a partially completed Form 854 (the standard ASR application form). That will include information regarding the type of tower proposed and the lighting that will be used. The prospective applicant must also provide local notice of the filing in a newspaper or through “other appropriate means.” 

Once filed, that partial Form 854 will be available for public review and comment for at least 30 days on the FCC’s ASR website. Commenters may request that the tower proposal be subject to additional environmental review. (The tower proponent is entitled to respond to any such request.) The Commission will then evaluate the filings.  If the Commission concludes that no additional review is necessary, the tower proponent will be allowed to submit a complete Form 854. But if additional review is found to be warranted, the proponent will have to submit an Environmental Assessment (EA) showing in detail why the proposed tower will not have a significant environmental impact.    

If an EA is required, it, too, will be posted on the Commission’s ASR website and subject to public comment, although no second local notice will be required. (If a tower proponent determines on its own, prior to filing the partially completed 854, that an EA is required, that EA is to be submitted with the partially completed Form 854 at the beginning of the process.) 

The process outlined above will cover any applications for new towers that require ASRs. Administrative modifications to ASRs (e.g., changes in ownership or contact information) will not be subject to the new provisions. Also exempted will be replacement of any existing tower with a tower which (a) has identical physical characteristics and (b) is located within one second of latitude and longitude from the original tower. 

In addition to new towers, the partial Form 854 approach will be required for some, but not all, modifications to existing towers (including collocation of new antennas on existing towers). Generally, if a modification does not involve a “substantial” increase in the size of the tower or any new construction or excavation more than 30 feet beyond the existing tower, the new provisions will not apply. As used in the new processing rules, the concept of “substantial” changes will be defined as it is in the Commission’s Nationwide Programmatic Agreement for Review of Effects on Historic Properties (NPA). For readers who haven’t brushed up on their NPA definitions recently, “substantial” changes include (but aren’t necessarily limited to) height increases of greater than 10 percent, and increases in the width of a tower by more than 20 feet. 

Changes in the lighting used on an existing tower may also be subject to the new process. In its Order, the Commission has adopted a three-tiered system of “preferred” lighting styles, running from “most preferred” (i.e., no lights at all) to “least preferred” (i.e., red steady lights), with anything else falling in the middle. Changes from a more preferred style to a less preferred style will be subject to the partial Form 854 process, while “improvements” (i.e., changes that would result in a more preferred lighting arrangement) will not. 

Also exempt from the new processing rules are towers located on federal land, as long as the agency responsible for the land will assess the proposed tower’s environmental impact. 

Finally, the Commission cautions that any application – even one that does not require an ASR and thus does not involve construction subject to the new processes – can be challenged based on claimed environmental impact. 

In a separate but related change adopted in the same order, the FCC concluded that all proposals for towers over 450 feet must be accompanied by an EA to be submitted with the partially completed Form 854 at the beginning of the process. Public notice of the filing of the EA must be provided.  

When do the new procedures kick in? It’s hard to say. Because they involve “information collections”, they must first be approved by the Office of Management and Budget pursuant to the Paperwork Reduction Act. The process for securing that approval has begun, but the initial phase of that process won’t wrap up before early March, and the second phase will likely stretch into April, maybe even May. Until OMB blesses the new rules, they can’t take effect. 

And while we don’t want to confuse things even more than they may already be, we are constrained to point out that the new procedures described above will – even once they take effect – be essentially non-permanent, interim measures. That’s because the Commission has not yet completed its full assessment of the environmental impact of its own ASR program (the Programmatic Environmental Assessment, or PEA). Depending on the outcome of the PEA, the Commission may need to prepare a further Environmental Impact Statement, and may adopt new processing rules based on the results of the PEA and/or the EIS.

But the completion of the PEA and/or EIS and the adoption of permanent rules are not likely to occur in the near term. (Frame of reference: the Commission initiated its review of the impact of the ASR process on migratory birds not quite a decade ago, and it was ordered by the D.C. Circuit to proceed “with dispatch” in wrapping that proceeding up four years ago. Time, it would seem, is not of the essence here.) In the meantime, the procedures adopted last December and outlined above will have to be satisfied, once they become effective. 

When the new processing rules do become effective, they will be applied only prospectively. Any pending applications for ASRs or service-specific applications will not need to be amended to address the new requirements. Since the new ASR procedures, once they take effect, will probably add significant delay to the FCC’s processing of applications, folks planning to build a tower subject to the ASR rules might want to get their applications filed as quickly as possible, to avoid that additional delay.

This year my post will be more streamlined than in previous years. That’s because, for the first time in about five years, there is some semblance of stability in the webcasting world. In previous years we’ve had intervening court decisions, actions by the Copyright Royalty Board (CRB), proposed legislation, settlement agreements and other factors that contributed a sense that the system was constantly in flux. Not this year. The only substantive changes from last year are: (1) an increase in the royalty rate that is applied to each service category and (2) slight changes to the particular forms to reflect that increase. (And even the increase in royalty rate is no surprise – it’s just what was provided in the five-year plan adopted by the CRB in 2010.)

In addition, the SoundExchange website has really improved since I started these reminders, as has SoundExchange’s outreach to the industry. Most registered webcasters (those who have filed the Notice of Use of Sound Recording Under Statutory License form and made payments/filed Playlist Reports of Use in the past) have probably received a reminder from SoundExchange already. So it’s easier to get clear information about an already simplified process with which many radio stations are already pretty familiar. I've heard from a number of folks that SoundExchange’s responsiveness to individual inquiries has improved as well.

Another reason for this year’s more streamlined approach: we aren’t in the business of just giving it away. If you’re still not clear on the obligations, you’re reaching out to us – or another law firm – seeking to utilize our specialized expertise. We’re happy to help, but bear in mind that there may not be a one-size-fits-all solution available for your particular circumstances.  I, for one, would prefer to provide clients with individualized guidance to ensure that they are fully compliant and can remain that way with the minimum cost and effort.

With that behind us, the 2012 SoundExchange basics come down to a simple “who”, “what”, and “when” – as in, “who am I”, “what must I file” and “when do I have to file it by”.

Who: Any radio station almost certainly falls into one of three basic service categories: commercial, noncommercial (determined by the webcasters’ 501(c)(3) status, not its FCC-licensure) or noncommercial educational (a noncommercial webcaster affiliated with an educational institution whose operations are also substantially staffed by students). Within each service category, there are sub-categories for small broadcasters or microcasters that offer relief if the webcaster stays under a certain aggregate tuning hour threshold (27,777 ATH/yr for commercial broadcasters, 44,000 ATH/yr for noncommercial and 55,000 ATH/month for noncommercial educational). Note that some service categories and, especially, small broadcaster or microcaster sub-classifications may require you to also file a Notice of Election by January 31. (Failure to opt into service categories subject to this deadline could bar you from the category for the rest of the year.)

What: Regardless of the category, each webcaster is required to make payments to SoundExchange. The amount due is tied to the royalty rate for the webcaster’s particular service category:

• commercial broadcasters pay $0.0020 per performance;
• noncommercial webcasters of all stripes get the first 159,140 ATH per month free and pay on a per performance basis after that (noncommercial webcasters following the CRB decision for 2011-2015 pay $0.0021 per performance; noncommercial webcasters opting into the general noncommercial webcasting settlement agreement pay $0.00067 per performance)
• noncommercial educational pay $0.0020 per performance

Of course, all webcasters must also pay a $500.00 per station annual minimum fee.

Most stations must also file Playlist Reports of Use with SoundExchange, listing key information about every song played during the relevant reporting period. The self-classification process becomes especially important here, as noncommercial webcasters operating under the settlement agreements have relaxed reporting requirements, while small broadcasters and noncommercial and noncommercial educational microcasters may be able to pay a $100 “proxy fee” to be exempted from the Playlist Report of Use requirement entirely.

When: Notices of Election, if applicable, and Annual Minimum Payment Statements of Account are due on January 31.Monthly Statements of Account are due every month thereafter, within 45 days of the end of the month to which they pertain (i.e., by March 16 for January, April 14 for February, etc.). These filings must occur, for most service categories, even if you do not have a payment to make for that month (whether because you didn’t reach the required noncommercial threshold or because your accumulated royalties haven’t exceeded $500.00 for the year to date). You must also file your Playlist Reports of Use on this same schedule (subject to certain relaxations for qualifying noncommercial webcasters who might only file quarterly or the small broadcasters or noncommercial/noncommercial educational microcasters who might not file at all). 

That’s the basic structure – same as last year. Clients of the firm should already have received a specialized e-mail as well that outlines the choices you must make and the factors that will influence your decision; our e-mail also provides links to the specific forms you will need. Otherwise, SoundExchange has accumulated all the information and link to the relevant form on one convenient page (Internet-only, non-FCC licensed webcasters will find their information here as well). You should feel free to contact us if you have further questions.

The new rules and procedures are designed: (a) to address the Court’s finding that the Commission’s existing ASR approval process fails to provide an opportunity for public comment; and (b) to implement certain provisions of a private compromise agreement reached last year by a number of tower-related and environmental groups.  (We reported on that agreement here.) Comments on the proposed rules are due by May 5, 2011. (There will be no opportunity to file reply comments.)

Under the proposed rules, obtaining approval to construct any new tower subject to registration in the ASR system would become more complicated, particularly for towers over 450 feet. (Most towers up to 200 feet tall and not in the glide slope of an airport can be built without an ASR. While the public notice does not say so expressly, we understand from folks close to the FCC process that the new rules are not intended to change this important exception. Let’s hope that holds true.)

The proposed new rules would require a period for public comment on any new tower construction or major modification requiring ASR before a formal proposal for the construction/modification is filed with the FCC. After the comment period, the FCC would determine whether an Environmental Assessment (EA) is required before approving the tower. At least until the Commission completes its own PEA of the entire ASR program, individual EAs will automatically be required for any proposed tower or modification over 450 feet.

According to the public notice, anyone intending to register a new or substantially changed tower subject to ASR requirements would commence the process by providing the Commission with the details of the construction which the proponent intends to propose. The public notice doesn’t say exactly how the information is to be submitted – by letter, electronically, some other way. It does suggest that proponents might file a “partially completed” Form 854 ASR form. Not fully completed, mind you – just partially.

The information to be submitted must include, “at a minimum,” all of the information required by Form 854 relative to ownership and contact information, geographic location, height, type of structure, and anticipated lighting.   (You may want to take a look at Form 854. Since you’re going to end up having to file a full Form 854 eventually, we’re not sure why it wouldn’t be easier to just require applicants to file the form to begin with. But that’s what the public notice says.)

So prospective tower proponents don’t file a complete Form 854 ASR application. Instead, they’re supposed to file the information they would have filed on Form 854 if they could have filed such a form. They must also provide local public notice of the to-be-proposed tower construction, either in a local newspaper or through “other appropriate means.” This local notice must provide the details of the to-be-proposed construction as well as instructions on how to file comments about it with the Commission.

Meanwhile, using the information submitted to it, the Commission will post on its website a national notice of the to-be-proposed tower construction. That national notice will include the information filed by the prospective proponent, together with the date of the local public notice. If the prospective proponent has already determined that the tower requires an EA (based on the Commission’s existing rules, or the presumption associated with 450-foot-plus towers), that EA is also to be submitted to the FCC at this time.

The proposed rules don’t make any promises about when the national notice will appear on the FCC’s website – only that it will be “on or after” the date of the local public notice. Once the national notice does appear, interested parties will have 30 days to file a “Request for Environmental Processing” asking the Commission to require the prospective applicant to prepare an EA. Any party making such a request would have to explain why the to-be-proposed construction would have such a significant environmental impact that an EA should be required (or, if an EA has already been submitted, why that EA doesn’t do the trick). The prospective tower proponent would then have ten days to oppose the Request, and the requestor an additional five days to reply.

Once the pleading cycle has ended, the FCC will determine whether an EA is required; if an EA was submitted initially, the Commission will evaluate it and determine whether the to-be-proposed tower will have a significant environmental impact. If the Commission determines that it will not have such an impact (either after evaluating an EA or determining that none is required), it will advise the prospective proponent, who can than finally file the ASR Form 854.

Let’s review the bidding.

You decide that you want to build or modify a tower structure that would require registration. Before you can file for that registration, you have to tell the FCC, and the rest of the world, what you have in mind. And you invite the rest of the world to chip in their two cents’ worth on your idea. Then you wait for the FCC to give everything the once-over. And only if, after all that, the FCC decides that your idea won’t be a problem, you can proceed to file the necessary applications.

To be sure, the proposed rules do provide for filing service-specific applications before antenna registration has been granted (as has historically been the case). But under the proposed rules, service-specific applications could be filed only after the local and national public notices have been provided and the full Form 854 ASR has been filed. And the full Form 854 can’t be filed until after the Commission has determined whether an EA will be required and, if an EA is required, after the FCC has considered it – and we have no idea how long that will take. So it’s not at all clear when exactly a service-specific application can be filed. This could wreak havoc on applications that are time-sensitive or that would attempt to take advantage of the Commission’s first-in-time interference protection and processing rules.

Of course, the creation of delay in the FCC’s processes is not an accident here – rather, it’s one of the goals of the birders. For years the avian advocates have complained that the FCC’s processes do not afford them adequate opportunity to review new/modified tower proposals and interpose objections before those proposals are realized. The 2008 court decision largely agreed with those complaints, so we shouldn’t be surprised that delay is woven deeply into the Commission’s new approach. Unfortunately, the new process affords plenty of opportunity for non-birders (for example, competitors, NIMBYs) to slow things down as well.

While the Commission is awaiting comment on these new procedures, it also continues to conduct its own PEA assessing the entire ASR program. The FCC held a workshop in early April to discuss its approach to the PEA – and in the course of the workshop, some interesting information about birds and towers came out. For instance, while communications towers – especially taller towers, towers using guy wires, and towers using steady, non-flashing, lighting – do contribute to bird deaths, their impact is “incremental.” At least one study cited by the Commission found that less than 1% of bird deaths could be attributed to communications towers, compared to more than 10% attributed to cats, and almost 60% attributed to buildings and windows. (Hey, given those numbers, if we’re regulating towers, shouldn’t we also be regulating cats?)

The Commission expects to wrap up the first phase of the PEA in June, when it will likely release a draft PEA addressing three alternative courses of action. One possible choice: a “no action” alternative which would effectively etch in stone the interim procedures outlined in the public notice. (To call this a “no action” alternative here is a bit misleading, since this option would clearly involve a reasonably significant change in existing rules and policies.) The second and third alternatives would both entail further changes to the ASR program. One alternative would require EAs from all ASR applicants; the other would require EAs from some ASR-dependent proponents (e.g., applicants proposing tall towers, use of guy wires or steady, non-flashing lighting, and/or location in an “environmentally sensitive” area).

The public will have an opportunity (at least 30 days, maybe more) to comment on the draft PEA once it’s released. In the meantime, the proposed rules and procedures outlined in the Public Notice are open for comment now, so if you have concerns about those proposals, you may want to let the FCC know by May 5.

First, the White Paper urges Congress to “clarify that infringement by streaming . . . is a felony in appropriate circumstances.” (We can hear it now – “Book ‘em, Dan-O. Streaming in the first degree”.) The brief discussion accompanying this recommendation isn’t entirely clear, but the appearance of the word “streaming” got our attention. 

At first glance, one could take “streaming” here to mean “webcasting” in the broadest sense. In that case it would be a good idea to heed our frequent admonitions about jumping through all of SoundExchange’s various hoops. But our gut instinct is that this isn’t the “streaming” that the Administration is worried about. Rather, the White Paper refers to “the illegal streaming of content” – so we’re guessing that its real target is something along the lines of the illegal file sharing we’ve discussed in the past, or maybe the live streaming of broadcast content – often sporting events – by some users of services like UStream.com or Justin.Tv.  That more limited interpretation makes more sense in terms of the actual economic damage involved. But given the plain language meaning of “streaming”, we can’t rule out the possibility that the Administration may indeed want to criminalize any unauthorized streaming of music. Such a get-tough approach would arguably be consistent with the Administration’s recommendation (described below) concerning performance rights.

The second item of interest appears in the very last section of the White Paper, which recommends that “Congress create a right of public performance for sound recordings transmitted by over-the-air broadcast stations." That's right – the White House is now on record as officially endorsing the Performance Rights Act (PRA). According to the White Paper, the fact that the U.S. has no performance right for recordings “disadvantages” U.S. copyright owners overseas, since “[t]hey are not permitted to collect overseas royalties because they are not granted rights in the U.S.” The White Paper contains no extensive discussion (much less specific support) for this assertion. Indeed, the entire section on this point is a total of five sentences long.

We don't know how much effect this endorsement will have. The PRA has yet to be reintroduced in either the Senate or the House in the 112th Congress, and the last time it was introduced (in the 111th) it clearly didn’t have the votes to pass.  But, as endorsements go, this is a pretty big one. If nothing else, it might lead to the introduction of a bill, thus starting the legislative process yet again. Or it could resurrect the currently dormant discussions between the NAB and the RIAA regarding an accord on this issue. (The success of any legislation will likely depend on those two parties reaching an agreement that both can live with.) But the White House could play a role here, especially if it follows up on the White Paper by using its “bully pulpit” to bring the parties to the negotiating table.  Let’s just say the gauntlet has been thrown down and we think the PRA can fairly be described as “in play” at this point. 

Of course, despite the fact that these recommendations come from the White House, they are nothing more than recommendations. It is up to Congress to act on them or not, as it sees fit. And it remains to be seen whether Congress will do so.  We’ll just say that, if it does, we hope that Congress will consider all points of view and move cautiously, with clarity and precision, to ensure that legitimate rights, including First Amendment rights, are not infringed.

A.        Noncommercial webcasters who have NOT elected to participate in any major webcaster settlement agreement

There is absolutely no distinction on the noncommercial side between a webcaster that operates a broadcast station and one that does not. But there is a distinction between an entity that elects to participate in the general noncommercial webcasters settlement agreement (the “General Agreement”) and one that does not.  (Note: Participation in that agreement offers significantly better terms, in my view.) Fortunately, you can elect that status even if you have not done so before. (Helpful reminder: even if you have previously elected that status, you must “re-up” every year.) For reasons discussed in Section C below, I strongly recommend that the General Agreement option be chosen, if at all possible.

However, if you cannot or decide not to participate in the General Agreement or any other webcaster settlement agreement, your obligations are:

Annual Minimum Statement of Account Form and Fee – File an annual minimum fee of $500 per channel by January 31, 2011 using the 2011 Noncommercial Webcaster Minimum Fee Statement of Account form found here. A separate form must be filed for each channel or station. 

Monthly Statement of Account Form and Fee – File any fees incurred for exceeding the 159,140 aggregate tuning hour maximum, along with the 2011 Noncommercial Webcaster Monthly Usage Statement of Account form found here.  You must file this form even if no fees have been incurred, marking “zero” in the "excess performances" column.  Again, a separate form must be filed for each channel or station.

Playlist Reports of Use – Playlist Reports of Use must be filed on a quarterly basis using the template report for filing (in Excel format) found here, unless you exceed 159,140 aggregate tuning hours in a given month during 2010 or 2011, in which case you file on monthly basis. Also note that you may be able to opt out of this requirement if you qualify as a Noncommercial Microcaster (see Section D below for details).

Notice of Election – No notice of election is required. 

B.        Noncommercial webcasters who HAVE elected to participate in the webcaster settlement agreement between CPB (on behalf of PUBLIC RADIO STATIONS) and SoundExchange

As in previous years, some noncommercial stations do not have to file forms with SoundExchange. Entities subject to this exemption include station that are: CPB-supported; NPR members; National Federation of Community Broadcasters members; or part of American Public Media, the Public Radio Exchange or Public Radio International. Under the terms of the separate CPB/SoundExchange settlement agreement, NPR’s Public Radio Interactive is making those payments. Stations participating in the CPB/SoundExchange agreement will be contacted by Public Radio Interactive with regard to their obligations.

C.       Noncommercial webcasters who HAVE elected to participate in the General Agreement and are NOT considered Microcasters because they have an average of at least 44,000 aggregate tuning hours per year 

While a decision (“Webcasting III”) by the Copyright Royalty Board last December sets the default royalty rates and related terms for non-interactive webcasters, those rates and terms vary somewhat from rates and terms specified in the General Agreement. If you are a party to the General Agreement (and I recommend that all eligible entities take this option), you are still subject to certain obligations. (As mentioned in Section A, above, you must renew this classification each year.) Those obligations include:

Notice of Election – File a Notice of Election by January 31, 2011 on the 2011 Notice of Election for Rates and Terms for Noncommercial Webcasters Form found here. 

Annual Minimum Statement of Account Form and Fee – File an annual minimum fee of $500 per channel by January 31, 2011 using the 2011 Noncommercial Webcaster Minimum Fee Statement of Account form found here. A separate form must be filed for each channel or station.

Monthly Statement of Account Form and Fee – File any fees incurred for exceeding the 159,140 aggregate tuning hour (ATH) maximum, along with the 2011 Noncommercial Webcaster Monthly Usage Statement of Account form found here. You must file this form even if no fees have been incurred, and you must calculate and insert your total ATH in the appropriate columns even if you do not exceed the maximum. Again, a separate form must be filed for each channel or station.

Playlist Reports of Use – Playlist Reports of Use must be filed on a quarterly basis using the template report for filing (in Excel format) found here, unless you:

exceed 159,140 aggregate tuning hours in a given month during 2010 or 2011, in which case you file on monthly basis; and

do not exceed 44,000 aggregate tuning hours in the entire year 2010, in which case you can pay $ 100 for the right to be exempted from this requirement altogether, as per section D, below. 

D.        Noncommercial Webcasters who HAVE elected to participate in the GENERAL AGREEMENT and ARE considered Microcasters because they had fewer 44,000 aggregate tuning hours last year.

This section applies to extremely small noncommercial webcasters who have signed onto the General Agreement. As we have explained in years past, these webcasters can be exempted from the playlist reporting requirement and, by definition, will not be paying royalties because they will never exceed 159,140 aggregate tuning hours in any given month.  Again, to be eligible, you must have elected to participate in the General Agreement in previous years and renew that election this year.

If you choose this category, your obligations are:

Notice of Election – File a Notice of Election by January 31, 2011 on the 2011 Notice of Election for Rates and Terms for Noncommercial Microcaster Form found here. If you wish to avoid filing Playlist Reports of Use, you must file a $100 proxy fee with this form.

Annual Minimum Statement of Account Form and Fee – File an annual minimum fee of $500 per channel by January 31, 2011 using the 2011 Noncommercial Microcaster Minimum Fee Statement of Account form found here. A separate statement of account must be filed for each channel or station.

Monthly Statement of Account Form and Fee – By definition, a station in this classification will not exceed 159,140 aggregate tuning hours, so no monthly statement of account is required.  

Playlist Reports of Use – Of course, the benefit of this classification is that you can opt out of filing Playlist Reports of Use. If you do not choose this option, the reports must be filed on a monthly basis; SoundExchange prefers that you adhere to the template report for filing (in Excel format) found here. Each Playlist Report of Use is also due within 45 days of the end of the month to which it pertains. 

Again, the requirements described in all of the above sections do not apply to "noncommercial educational" webcasters, i.e., noncomm stations whose operations are not substantially staffed by students. If you are a noncommercial educational webcaster, you should review our post relating to your particular situation.

Remember, your annual minimum statement of account forms and payments (and Notice of Election, if applicable) are due by January 31, 2011.  You cannot file these forms electronically, and there is a penalty for late payment (or worse consequences, for late-filing a Notice of Election), so if you haven’t gotten started yet, now would be a good time.

Annual Minimum Statement of Account Form and Fee - You must file an annual minimum fee of $500 per channel by January 31, 2011 (or within 45 days of commencing webcasting). The fee must be filed along with the 2011 Noncommercial Educational Webcaster Minimum Fee Statement of Account form found here. A separate form must be filed for each channel or station. 

Monthly Statement of Account Form and Fee – You must also file the 2011 Noncommercial Educational Webcaster Excess Monthly Liability Statement of Account form found here. If you exceeded the 159,140 aggregate tuning hour maximum, you must submit any resulting fees along with the form.  You must file this form even if no fees have been incurred, and you must calculate and insert your total ATH in the appropriate columns even if you do not exceed the maximum. Again, a separate form must be filed for each channel or station.

Playlist Reports of Use – Playlist Reports of Use must be filed on a quarterly basis using the template report for filing (in Excel format) found here, unless you:

exceeded 159,140 aggregate tuning hours in a given month during 2010 or 2011, in which case you file on a monthly basis; or

did not exceed 55,000 aggregate tuning hours in any given month in 2010 and do not expect to exceed that level in the year 2011 – in which case you can file the proper Notice of Election form (see below) and pay $100 for the right to be exempted from this requirement altogether.

Notice of Election – There is no need to file a Notice of Election unless you qualify for exemption from filing of Playlist Reports of Use. If you never exceeded 55,000 aggregate tuning hours in any month in 2010 and choose to pay a $100 “proxy fee” in lieu of filing reports, you may elect to do so by filing a Notice of Election. You do that by filing the 2011 Noncommercial Educational Webcaster Notice of Election form found here. If you do not meet the eligibility standards, or if you choose not to seek an exemption, you need not file the form.

Again, these forms apply to stations that are noncommercial educational webcasters. If you are not a noncommercial educational webcaster, please check our posts describing the requirements for commercial webcasters or noncommercial (but not educational) webcasters.

Remember, your annual minimum statement of account forms and payments (and Notice of Election, if applicable) are due by January 31, 2011.  You cannot file these forms electronically, and there is a penalty for late payment (or worse consequences, for late-filing a Notice of Election), so if you haven’t gotten started yet, now would be a good time.

A.        Commercial broadcasters, whether or not participating in the Webcaster Settlement Agreement between the NAB and SoundExchange:

There used to be a distinction between those broadcasters who had chosen to participate in the settlement agreement (NAB/SoundExchange Agreement) between the National Association of Broadcasters and SoundExchange and those who had not signed onto that agreement. However, the recent Webcasting III decision of the Copyright Royalty Board (CRB) has eliminated any such distinction on the commercial side. As a result, all Commercial Webcasters who are (a) FCC licensees of an AM or FM radio station and (b) simulcasting at least one channel on the Internet, have these obligations in 2011:

Notice of Election – There is no requirement to file a notice of election unless you are not currently participating in the NAB/SoundExchange Agreement and wish to do so (although as far as I can see there is absolutely no benefit to joining that agreement now). 

Annual Minimum Statement of Account Form and Fee – File an annual minimum fee of $500 per channel by January 31, 2011 using the 2011 Broadcaster Minimum Fee Statement of Account form found here. (Note: The form refers to the NAB/SoundExchange Agreement but that is of no consequence because the Webcasting III decision eliminated all distinctions between the rates and terms specified by the CRB and those laid out in the NAB/SoundExchange Agreement. As a result, all commercial webcasters who are also broadcasters are now created equal for copyright royalty purposes.) 

Monthly Statement of Account Form and Fee – File any fees incurred beyond the $500 annual minimum already paid by using the 2011 Broadcaster Monthly Liability Statement of Account form found here. You must file this form even if you’re not actually paying because your cumulative fees for the year have not yet exceeded $500.  Each Statement of Account is due within 45 days of the end of the month to which it pertains. 

Playlist Reports of Use – Playlist Reports of Use must be filed on a monthly basis. SoundExchange prefers that you adhere to the template report for filing (in Excel format) found here. Each Playlist Report of Use is also due within 45 days of the end of the month to which it pertains. 

B.        SMALL commercial broadcasters who HAVE elected to participate in the Webcaster Settlement Agreement between the NAB and SoundExchange:  

A select few broadcasters who are simulcasting on the web also qualify as “Small Commercial Broadcasters” and are treated differently, mainly because they can be exempted from filing Playlist Reports of Use. 

This distinct classification applies only to those broadcasters who: (1) elected to participate in the NAB/SoundExchange Agreement; and (2) had fewer than 27,777 aggregate tuning hours in the previous year.  These Small Commercial Broadcasters have one additional step to complete before January 31, but they will save a lot of time in the future because they do not have to file playlist reports of use on a monthly basis.  Operators qualifying as “Small Broadcasters” have these obligations in 2011: 

Notice of Election – File a Notice of Election by January 31, 2011 on the 2011 Notice of Election for Rates and Terms for Small Broadcasters Form found here. This Notice of Election must be accompanied by your $100 “proxy fee”. 

Annual Minimum Statement of Account Form and Fee – File an annual minimum fee of $500 per channel by January 31, 2011 using the 2011 Small Broadcaster Minimum Fee Statement of Account form found here. 

Monthly Statement of Account Form and Fee – File any fees incurred beyond the $500 annual minimum already paid by using the 2011 Small Broadcaster Monthly Liability Statement of Account form found here. While it is extremely unlikely that a small broadcaster’s cumulative fees for the year would exceed $500, you must file this form every month whether or not any payment is due. Each Statement of Account is due within 45 days of the end of the month to which it pertains. 

Playlist Reports of Use – Of course, the benefit of this classification is that you can opt out of filing Playlist Reports of Use. If you do not choose this option, the reports must be filed on a monthly basis.  SoundExchange prefers that you adhere to the template report for filing (in Excel format) found here. Each Playlist Report of Use is also due within 45 days of the end of the month to which it pertains. 

Remember, your annual minimum statement of account forms and payments (and Notice of Election, if applicable) are due by January 31, 2011.  You cannot file these forms electronically, and there is a penalty for late payment (or worse consequences, for late-filing a Notice of Election), so if you haven’t gotten started yet, now would be a good time.

Environmental groups have long claimed that towers kill as many as 50 million birds per year, and that the Commission should therefore apply NEPA procedures to the ASR program. Tower operators protest that towers kill fewer than that. Previously, the FCC claimed this lack of consensus – and the lack of specific evidence – relieved it of the NEPA-imposed obligation to consider the environmental effects of the ASR program.

In 2008, the D.C. Circuit rejected the Commission’s argument. Under Commission’s own rules implementing NEPA, if an action “may have significant environmental impact, the Bureau will require the applicant to prepare an EA”. According to the Court, the Commission’s insistence that environmental groups show definitive evidence of significant effects “plainly contravenes the ‘may’ standard”.   Furthermore, the squabble over the number of birds killed confirms, rather than refutes, that registered towers may have significant environmental impact. Finally, the Court observed, the FCC’s refusal to consider the environmental effects of on these grounds goes against the basic intent of NEPA: ensuring that agencies consider environmental impacts before they act – that is, before the full ramifications are known – rather than wait until it is too late.

Accordingly, the Court held, the Commission must conduct an EA to determine whether an EIS is called for before the Commission can refuse to conduct an EIS. Pursuant to the Court’s direction, the Commission is, by its recent Public Notice, doing just that: a Programmatic Environmental Assessment (PEA) of the ASR program to (a) examine the potential effects of that program on migratory birds and (b) determine whether a programmatic EIS is necessary.

What does all this paperwork do for the birds? NEPA does not operate by imposing substantive environmental mandates on federal agencies. Rather, it requires them to explicitly thinkabout environmental issues before they take action. Specifically, preparing an EIS will require the FCC to set out a number of alternative ways to reach its regulatory goals and the environmental impact (e.g., the anticipated mortality rates of migrating birds) of each alternative. The purpose is to ensure that the agency has before it the environmental consequences of each scenario before it chooses which way to go. (The process also informs the public of the environmental aspects of the proposed action.) In this case, even if the Commission concludes from its EA that no EIS is necessary, the Commission has already committed to use the EA process to “consider alternatives to address potential environmental effects”.

Although NEPA does not require the FCC to complicate its tower registration program, it may well have that effect. Historically, tower registration has been a simple matter of uploading certain basic information about the tower to the Commission’s ASR system, which then automatically generates a registration number with no muss and no fuss. The upcoming EA process will undoubtedly serve as yet another forum for the ongoing struggle between tower owners and environmental groups. Any resulting compromise, such as the one put forth last spring, seems likely to add layers of bureaucratic complexity to the ASR system, particularly if the Commission is expected to assess the potential environmental impact of any individual towers (there are over 100,000 towers in the Commission’s database).

Comments about the PEA may be submitted by mail, by hand, or electronically through a link on the Commission’s PEA website. The deadline is January 14, 2011. Or better yet, you can present your comments in person at one of the three “scoping meetings” currently on the schedule. Those meetings are on tap in Washington, D.C. (1:30-4:30 p.m. ET on December 6, 2010), Chula Vista, California (6:00-8:30 p.m. PT on December 13, 2010) and Tampa, Florida (6:00-8:30 p.m. ET on December 15). The DC meeting will be held in the FCC headquarters. The Chula Vista gig will be at Civic Center there, and the Tampa confab will be at the John F. Germany Public Library. Come one, come all – but note that seating may be limited.

• Revenue-based royalty payment structure for over-the-air performance of music

The NAB proposes that the performance right royalty be calculated as 1% of a station’s revenue for commercial stations with at least $1.25 million in revenue. The following tiers would apply to smaller and/or noncommercial radio stations:

• Annual revenues                                                                    Payment

< $50,000 (commercial or nonprofit)                           Lesser of $100/year or 1% of revenue

$50,000-$100,000 (commercial or nonprofit)       $500/year

> $100,000 (nonprofit only)                                           $1000/year

$100,000-$500,000 (commercial only)                     Lesser of $2,500/year or 1% of revenue

$500,000-$1.25 million (commercial only)              $5,000/year

> $1.25 million (commercial only)                                   1% of revenue

Stations making only incidental use of music (e.g., news, talk or sports stations) would not pay at all for use of copyrighted music. Similarly, no payment obligation would arise from music used in religious services broadcast on the radio, although religious music stations would still be subject to the rate structure above.

Note that these royalty levels would be phased in subject to the extent of inclusion and activation of radio chips in mobile devices (see below).

• Broadcasters would receive a break on royalties arising from their webcasting/streaming or other non-terrestrial transmissions.  Those non-broadcast rates would be tied to the “pureplay” webcasting rates, resulting in a reduction in current streaming rates. This new calculation approach would be effective until December 31, 2016, with rates to be adjusted for six years terms thereafter.

• The NAB and MusicFirst would push for legislation requiring the inclusion and activation of radio chips in mobile devices, with an acceptable phase-in period and inclusion of HD when feasible. Because the electronics manufacturers would likely oppose such a requirement, the Term Sheet specifies a “market-based phase-in” approach to the royalty rates listed above. That phase-in would apply if the NAB and musicFirst “determine that legislation mandating the inclusion of radio chips on mobile devices is unattainable”, and would apply as follows:
  
  
  • The percentage rate would be “tied to (mirror) the market percentage of mobile devices that include an enable radio chip”, although a 0.25% floor would apply regardless of penetration. In other words, even if no mobile devices included chips, large commercial stations would be on the performance royalty hook for 0.25% of their revenues; they would then increase in a way that mirrors the market percentage of mobile devices until 75% of all mobile devices have a radio chip, at which point the full rates kick in.
  • The phase-in approach would apply to small, noncommercial, religious and/or non-music stations as well.
  • The discounted rates for webcasting/streaming/non-terrestrial transmission would not take effect until 50% of all mobile devices have a radio chip.  But if that 50% threshold is not reached by 2016, any existing streaming rates will continue to apply.

• Broadcasters would report their data using the sample reporting methodology currently used by ASCAP/BMI rather than the more intensive “census” reporting currently submitted to SoundExchange for the webcasting statutory license

• The NAB and musicFirst would agree to the following “policy” considerations:
  
  
  • The Copyright Royalty Board (CRB) would have absolutely no involvement in setting terrestrial or streaming rates.
  • The agreed-to royalty structure would be predicated on the express acknowledgement by AFTRA that broadcasters have a right to fully simulcast their terrestrial broadcasts on the Internet. In other words, the ongoing dispute regarding the requirement to remove some broadcast commercials from streamed content will be resolved.
    
  • The text of any eventual bill would explicitly acknowledge the “value to artists and record labels of promotion on free, over-the-air terrestrial radio”. 

From a practical perspective, we should also note that, by including the radio chip as an essential element of the deal, the NAB has roped the electronics manufacturers into the process. Ditto for AFTRA, with respect to the provision about streaming commercials. Of course, the presence of these particular additional players is technically not necessary for the resolution of the essential question of whether or not any performance royalty obligation exists. But by increasing the number of parties at the negotiating table, the NAB has almost certainly assured that the negotiation will take considerably longer than would otherwise be the case.

But now that we know what the Term Sheet looks like, the real question is: does it make sense for broadcasters?

Hard to say for sure, because different stations will be affected in different ways. Even the smallest station might have trouble paying $100 per year if it’s barely meeting expenses anyway. But that same station might find – maybe now, maybe in the relative near-term – that the reductions in streaming royalties more than offset the new royalties for over-the-air broadcasts in the long term. Locking in reduced streaming royalty rates now may pay handsome rewards down the line, particularly if, absent some such legislation, the CRB continues its exponential increase of webcasting royalties.

For that reason, you might want to run some numbers yourself.  Figure out how much you’d be paying this year, and for the next five years, under the NAB’s proposal. (We’re happy to help you work through this – though, as lawyers, we can’t vouch for the math.) Compare that to what you’re paying now.   If your overall royalty obligation would go up, would the increase be completely untenable under your current budget (or your anticipated budgets for future years)?

But before you answer, consider a couple of other factors. The NAB’s approach would remove the CRB from the rate-setting process, and would ideally substitute a more rational, and predictable, rate-setting mechanism going forward. Nothing wrong with that. Moreover, the NAB Term Sheet would also streamline reporting requirements for webcasting – which could relieve broadcasters of a significant headache and thereby encourage them to stake out a more substantial web presence.

And while the question of performance royalties – or anything relating to your pocketbook – is among the most important issues facing any radio broadcaster, it’s not the only issue. It’s just one of many legislative and policy matters facing the industry. NAB members expect, and need, the NAB to represent them before Congress and the agencies on all these issues. And for itself to survive, the NAB has to be sure that it’s doing precisely that. As I noted in an earlier post, the siege effort that the NAB has waged for years against the PRA has been successful, but costly. And unless something happens – like a negotiated settlement – it’s likely to continue to be costly for years more, sapping the NAB’s, and broadcasters’, political capital.

Of course, if you’re an unhappy NAB member, speak up about it – especially if your unhappiness derives from a lack of communication from between leadership and membership. That’s one of your rights as a member and the only way any final deal will be the best deal for the majority of radio broadcasters.

• The PRA (HR 848 and S 379) was introduced in Congress over 18 months ago. While HR 848 passed the House Judiciary Committee soon after introduction, neither bill has moved forward since. This is largely because there are more than 260 House Members on record as opposing a performance right applicable to over-the-air broadcasts. That’s a strong level of opposition – a factor which can be ascribed at least in part to a substantial lobbying effort by the NAB and broadcasters generally. Basically, despite years-long, high-profile efforts by the recording industry to secure some form of legislative relief on the performance rights front – efforts which have gained support from a number of influential legislators – the bill has been stalemated. That may be viewed as a success story for broadcasters.
• But now the NAB appears at least to be considering compromise on the issue. Note that the NAB has not, to my knowledge, said that it will compromise on this issue, now or in the future. To the contrary, an NAB spokesperson told RBR that the NAB has “reiterated its strong opposition to the pending bill in Congress”. But – and here’s a big “but” – the NAB has acknowledged “an ongoing dialogue with the Board and NAB membership on possible alternatives to pending legislation that would be devastating to the future of free and local radio . . . while agreeing that it is appropriate for NAB representatives to continue discussions with musicFirst.”
• According to published reports, those discussions have centered on:

a permanent, tiered royalty rate which would not exceed one percent of net revenue for any broadcastpermanent removal of Copyright Royalty Board jurisdiction over terrestrial and streaming royalty rates;

a reduction in those streaming rates;

the possibility of requiring radio chips to be installed on all new mobile phones; and

resolution of all ongoing issues regarding insertion of commercials into webcast.

Here’s at least some of the stuff we don’t know: 

• Would the tiered rate in the proposed agreement apply to royalties for over-the-air performances only or to over-the-air and internet/digital performances?
• If the tiered rate were to apply only to over-the-air, how would the adjustment of internet/digital royalty rates occur? Would the reduction in streaming rates also be permanent?
• If the CRB were to end up with no jurisdiction over terrestrial or streaming operations, but there was still some statutory license applicable to performances, who would oversee and implement it, especially if the rates aren’t permanent?
• Would performance to a mobile phone with a radio chip be considered an over-the-air performance or a digital transmission (webcast)?

Obviously, these are all factors which could dramatically affect the extent to which any compromise might work to the ultimate benefit of broadcasters in the long run. It would therefore help to have a better handle on them – and many others – before we all start debating the wisdom of the NAB’s approach here.

Too late. That debate has already started.

Many broadcasters and their allies are expressing serious concern about anything that might be interpreted as a retreat on performance rights issues, and certainly NAB discussions with musicFirst (or any other recording reps) could be seen as a retreat. After all, broadcasters have incredibly strong arguments here, arguments which they have brandished effectively. The mere contemplation of “alternatives” to the PRA suggests that the notion of any performance rights might be valid – and broadcasters (including the NAB) have argued convincingly that that notion is not valid.

Moreover, the argument goes, since when does it make sense to run up the white flag when you’re winning?   If anything, the broadcast industry’s track record on the PRA front in Congress has been remarkably good. If you’ve got the enemy on the run, why try to negotiate a truce?

And finally, even if the NAB is on the right track here, some broadcasters question why the NAB hasn’t been a bit more forthright – “transparent”, to invoke a favorite FCC descriptive – with its them. Having faithfully followed the NAB in its staunch resistance to the PRA, many feel seduced and abandoned upon hearing that the NAB may be getting in bed with the bad guys. This is especially so in view of the fact that many small radio licensees, in particular, may legitimately fear that any performance rights royalties could have a devastating effect on their bottom lines. Why shouldn’t they feel bitter and resentful if it looks like the NAB is now helping those fears become a reality?

While these broadcasters' views are understandable and while I agree with their calls for transparency, let’s not lose sight of the fact that there may be some method to the NAB’s seeming madness. In particular, at the risk of appearing to defend the PRA (or any other performance rights claim) – and let me stress here that I am NOT defending or endorsing anything of the kind – I think a couple of things should be considered.

Are broadcasters’ arguments against performance rights claims valid? Of course they are. Will they stay that way forever? That’s impossible to say. Historically – up to and including today – performers and radio broadcasters have enjoyed a quasi-symbiotic relationship which has benefited both sides, thus eliminating any need for the strict debit-and-credit accounting called for by the PRA. But like it or not, technology and demographics and society all change. Let’s not forget that the FCC is pushing more and more insistently on the expansion of Internet capacity to serve as a common medium. 

Suppose over-the-air radio listenership decreases and online listenership continues to increase (in part because people are listening via Internet in their cars or on their phones). And suppose that, in response, broadcasters shift their focus to more Internet-centric operations. And finally, suppose that a compromise is struck providing that performances to a mobile phone are to be considered digital transmissions (a/k/a “streaming”), rather than over-the-air broadcasting.  

If the NAB were able – today, in advance of those changes – to reach an agreement with the recording industry that, in exchange for, say, 1% of net revenues for over-the-air performance royalties, royalties for streaming would be reduced significantly, that could be a boon for broadcasters in the foreseeable future. And if that decrease in streaming royalties were locked in for the long term, during which time over-the-air listenership continues to decrease and online listenership continues to increase – well, I’m not an economist, but I can envision that situation actually leading to an overall decrease in royalty rates over the long term.

What about calling a truce when the enemy’s on the run? The critics are right: it normally does not make sense to do that. But that’s not necessarily the situation we have here. What we have is more like a siege. Neither side is on the run; rather, both are deeply dug in for the long haul. Can broadcasters sustain the siege? Probably. Can the recording industry? Probably.

And that’s precisely the problem.

A siege is expensive in many ways. It chews up resources and creates distractions that may impede progress in other arenas. And it goes on and on and on. In this case, the broadcast industry as a whole has spent, and continues to spend, an enormous amount of “political capital” in rallying legislators to its anti-PRA cause. In so doing, however, the industry has almost certainly lessened its ability to convince those same legislators to back other pro-broadcast measures. And that political capital is being spent not in a way which puts a permanent end to the threat, but rather in a way which merely tends to perpetuate the stalemate.

In these circumstances, it might make sense for broadcasters to take advantage of the leverage that their current superior position gives them to try to devise an endgame strategy that looks to the future. After all, there’s no doubt that the more than 262 co-sponsors of the Local Radio Freedom Act give the NAB a strong bargaining position.

To be sure, the NAB’s less-than-inclusive approach leading up to its initial talks with the recording industry has alienated a number of its erstwhile supporters. That alienation is regrettable. However, negotiations have to start somewhere, and often they require initiative from one or two players to get the ball rolling. Perhaps that’s what’s going on here. But the NAB disserves its members when it consults only with a select group on an issue of this magnitude, as it appears to have done to this point. If momentum builds, the NAB must, voluntarily or otherwise, find ways to include a more representative universe in the discussions (if you take one thing away from this particular blogger's take on the subject, I hope it is my call for increased transparency in the process and inclusion of “the little guys” that might be the most affected by these changes).

So yes, there’s a lot of buzz about the possibility of a brokered resolution of the PRA impasse. And yes, it’s easy to see why many broadcasters may view that possibility with considerable alarm. And yes, very few of us currently know exactly what has been done, said or offered – by either the NAB or the recording industry – much less how any such discussions will ultimately shake out. 

Two things that we do know for sure are that (a) we don’t know very much of what is actually happening here, and (2) none of us can be sure of precisely what the future holds for any communications operation in this era of dramatic technological change. Because of that, it may be best to keep an open mind for the time being, with eyes fixed firmly, if warily, on the future in the broadest sense.

With the FCC’s wheels grinding ever so slowly, the parties – that is, a number of bird groups, on the one hand, and a number of tower folks, on the other – got together to work out some guidelines of their own. The parties to the MOU include the American Bird Conservancy, Defenders of Wildlife and National Audubon Society (collectively referred to as the “Conservation Groups”), and CTIA, NAB, PCIA and the National Association of Tower Erectors (collectively, the “Infrastructure Coalition”). 

The MOU is the result of their efforts. The MOU creates three categories of ASR actions, each entailing different notice and filing requirements. 

• Category #1 ASRs include new towers taller than 450 feet above ground level (AGL). For these bad boys, the ASR filing would have to include an Environmental Assessment (EA) and public notice by the FCC. An EA is no small matter. It requires, first, that the applicant undertake a detailed assessment of an extensive panoply of environmental, cultural, historical and other factors.  The Commission then conducts an independent review of the EA and any comments received to determine whether the proposed facility is worthy of a Finding of No Significant Impact (FONSI) on the environment.  If the Commission concludes that a FONSI is in order, then the application can be granted.
• Category #2 ASRs include: (a) new towers between 351 and 450 feet AGL and (b) certain changes in lighting styles (i.e., from a “more preferred FAA Lighting Style” to a “less preferred” style). These would have to be put out on public notice, but no EA would be required up front, although the Commission could eventually require an EA to be filed after the agency reviews the ASR application and any comments filed in response to the public notice.
• Category #3 ASRs include: (a) new towers no taller than 350 feet AGL; (b) certain other types of tower modifications that normally require an ASR (such as administrative or ownership changes, dismantlement, repair, parts replacement, etc.); and (c) certain changes in lighting styles (i.e., from “less preferred” to “more preferred”). No up-front EA would be required for these. The parties could not agree on whether public notice should be required.

The MOU includes some fine print concerning what constitutes a “replacement tower” as opposed to a “new tower”, and some cross-references to certain FAA Advisory Circulars. But by and large the MOU is a short and sweet document that gets right to the point. It also specifically identifies as an “unresolved issue” the question of whether public notice should be required for Category #3 ASRs, but the parties all agree to abide by whatever the FCC may decide in that regard.

The concept of pre-registration public notice for two large categories of towers is a major change from the way the Commission has historically done business. But the fact is that the 2008 opinion by the D.C. Circuit clearly directed the Commission to come up with some notice mechanism to “ensure meaningful public involvement” in the tower registration process – so the FCC doesn’t have much wiggle room there.

The parties have submitted the MOU to the Commission in the still-on-going bird-related proceedings started back in 2003 and 2008. While there’s never any guarantee about such things, it’s hard to imagine why the Commission would not embrace the MOU’s approach. But you never can tell, so stay tuned for further developments.

We’ve also heard that the way the Request came by its official docket number was a bit, um, unorthodox, but what the heck – the FCC controls its docket number assignment processes, and as long as it can keep those numbers straight, it can assign them however it wants.

While documents can be misfiled or mislaid by even the best of us, the Commission’s delay in making a copy of the Request available for public review is troubling. In our experience the Secretary’s office is one of the tightest-run ships around, so it’s striking that they reportedly haven’t been able to come up with a stamped copy. Unfortunately, thanks to the delay, we’ve already burned through five of the 30 days provided for comments. Since the deadline for comments was thoughtfully set for the Tuesday after Labor Day weekend, every day counts here.  (Yes, we know that this doesn’t affect us, because we’ve already got our copy. But what about everybody else?)

Perhaps most distressing is the question of why there has been any problem here at all.  After all, the Commission issues public notices and opens up dockets all the time. Presumably it has a standard operating procedure to assure that everything is in order before a proceeding is initiated, a docket number assigned, public comments invited, etc. And (also presumably), if that SOP had been followed, somebody would have realized that the stamped copy of the Request – i.e., evidence that the Request had in fact been filed at all – had apparently gone missing. We like to think that the process would then have stopped until the supposedly errant copy had been wrangled back into the files.

So the fact that the public notice was hustled out as a “late release” (supposedly on Friday evening, but did anybody actually see it released before Monday morning?) is odd. After all, what’s the hurry here? Why was it so darned important to get the notice out the door on August 7 when August 10, 11, 12, etc., all would presumably have done just as well?

It is, of course, entirely possible that there are perfectly reasonable answers to these questions. But we’re having trouble coming up with any. The seemingly slapdash haste with which the invitation for comments was issued is particularly problematic in view of the fundamental questions of First Amendment protections and scope of FCC authority posed by the Request.

Unless and until the Commission provides some explanation for both (a) the delay in getting a copy (and particularly a stamped copy) of the Request posted for all to see and (b) the decision to release the public notice on a rush-rush basis late on a Friday with the stamped copy still AWOL, folks at the FCC should not be surprised if many of us take their paeans to “transparency” (like here, or here, or here) with more than a grain of salt.

In June MusicFIRST filed its Request, alleging that, “[b]y using their licenses over public airwaves to promote their own pecuniary interests and to distort an important matter of public debate”, broadcasters are violating their public interest obligations. The Coalition suggested that the Commission should consider “strengthening the license renewal process and shortening license terms”.

Acting with unusual speed – in our experience, this kind of declaratory ruling request can gather dust for months, if not years, before the FCC even acknowledges that it’s been filed – the Commission has invited comments. In particular, the agency is looking for input on the following points:

• whether and to what extent certain broadcasters are “targeting and threatening artists who have spoken out in favor of the PRA,” including a refusal to air the music of such artists;
• the effects of radio broadcasters’ alleged refusal to air advertisements from MusicFIRST in support of the PRA;
• whether and to what extent broadcasters are engaging in a media campaign, coordinated by NAB, which disseminates falsities about the PRA; and
• whether certain broadcasters have evaded the public file requirements by characterizing their on-air spots in opposition to the PRA as public service announcements.

MusicFIRST is clearly trying to get broadcasters’ attention by attacking them where they are arguably most vulnerable – in the soft white underbelly of the regulatory/licensing process.

Of course, the Request does not ask the FCC to address the merits (or lack thereof) of the PRA . . . and properly so, since the FCC has neither the expertise nor the statutory authority to weigh in on such issues. Rather, the Request gets the FCC’s attention by claiming that at least some broadcasters may not be playing by the rules and may be acting unfairly in some way. Using that as a hook, MusicFIRST suggests regulatory responses (e.g., shortened renewal terms, possible disciplinary action) that might, um, incentivize broadcasters to be more, er, open to the PRA and its advocates.

The Request is particularly interesting for what it does not provide: any significant, detailed, factual information to support its extravagant claims of some industry-wide cabal resulting in rampant disregard for any particular rule(s). While the Request purports to “reveal a pattern of threats and intimidation by which broadcasters are using their licenses” improperly, the Request describes in the tersest possible manner a total of five instances of such supposed misconduct. And those instances are not identified with respect to the station(s) in question or the artists who were supposedly threatened or intimidated. While such vague, unverified and unverifiable charges may have worked for Joe McCarthy back in the day, we thought that government had gotten past that particular gambit by now. Apparently not.

Moreover, even if the five examples sketched anonymously in the Request could be shown to be every bit as bad as MusicFIRST would have us believe, that would still reflect the conduct of but a very, very small handful of stations in a radio industry numbering more than 14,000 stations. (By the way, one of the five anonymous instances referred to in the Request has been tracked down by a newspaper: it turns out to be a 100-watt noncommercial high school station in Delaware at which the students opted for a one-month boycott of MusicFIRST-related artists two years ago. It would be difficult to claim with a straight face that that incident reflects some industry-wide “pattern of threats and intimidation”.)

The Request also alleges that “broadcasters are refusing to accept ads” from MusicFIRST and its allies relative to the PRA. Again, however, the “evidence” of such refusals is slim at best. The Request mentions six – count 'em, six – stations (by call sign) which purportedly declined the MusicFIRST spots. It also says that a request to run the spots “in 38 different markets on a variety of different types of stations” was sent to Clear Channel – and as of the date of the Request, Clear Channel had not responded, even though “[i]t has now been over a week since we sent the script.” No real smoking gun there.

The Request claims that broadcasters are “spread[ing] malicious and untruthful information about the PRA.” MusicFIRST’s knickers are all in a twist because, for example, some anti-PRA materials distributed by some broadcasters refer to the PRA as a “tax”.   MusicFIRST’s position is that the term “tax” can refer only to situations involving making payments to a government, and since the PRA provides for no such payments, well, then, obviously, use of the word “tax” has got to be a Big Lie. But the word “tax” also means “a heavy burden”, without reference to the precise nature of the burden. If the promo items in question had been hypertechnical legal documents in which the use of the word “tax” called for ultra-precision, MusicFIRST’s criticism might have some basis. But the materials don’t appear to have called for such nice distinctions. And since pretty much everybody agrees that the PRA would, in fact, impose a heavy burden on broadcasters, it’s hardly malicious or untruthful to refer to it as a “tax”.

Finally, MusicFIRST frets that all of this supposed nefarious skullduggery is being orchestrated by the NAB and is “blatantly anti-competitive”.

So, gesticulating wildly at all that blue smoke and all those mirrors, MusicFIRST urges the Commission to come to the rescue. Interestingly, while the gist of the Request sounds an awful lot like a complaint under the long-gone Fairness Doctrine, MusicFIRST defensively claims that that’s not the case. But it asserts that broadcasters “have a statutory duty to use their monopoly . . . responsibly and not simply to further their own economic interests.”

The Commission, for its part, acknowledges that “substantial First Amendment interests are involved in the examination of speech of any kind.” It also recognizes that no remedies may be necessary, or available, to address the activities which MusicFIRST alleges.

But none of that is stopping the Commission from jumping right into this fracas with both feet, notwithstanding the anonymous, non-specified, unverified and unverifiable nature of MusicFIRST’s claims. By doing so, the FCC seems to be signaling its sympathy for the artists’ position – for sure, by inviting any comments at all the Commission appears to be giving the benefit of every conceivable doubt to MusicFIRST.

If you want to chip in your two cents’ worth, you have until September 8, 2009 to file comments. Reply comments are due by September 23.

In order to be covered by the settlement, a webcaster must: 

• Be Licensed by the Federal Communications Commission;
• Originate programming (not be solely a repeater station);
• Be a member or affiliate of:
  
  • NPR
  • American Public Media
  • Public Radio International,
  • Public Radio Exchange, 
  • the  National Federation of Community Broadcasters, or
  • or be a public radio station that is qualified to receive funding from CPB.
    
• Qualify as a "noncommercial broadcaster" under the statutory licensing rules; and
• Webcast as part of the mission that entitles the owner to be exempt from taxation under Section 501 of the Internal Revenue Code, or, if it is owned by a government entity, operate for a public purpose. 

The 450 or so qualifying stations agreed to make a $1.85 million lump sum payment to SoundExchange covering the years 2006-2010.  We now understand that individual stations covered by this settlement will be making their payments to NPR Public Interactive.

So, public radio licensees, keep an eye out for correspondence from NPR Public Interactive.  If you believe yourself to be covered by this settlement and don't hear something from NPR Public Interactive in the very near future, please let us know, as first reports to SoundExchange will be made in mid-July.

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.

• Record labels, artists and radio broadcasters have a mutually beneficial relationship: Free airplay of music by radio stations promotes record labels and artists, and generates billions in music sales.
   
• Three out of the four largest record label conglomerates are internationally-based, which means such a tax would take money out of local communities and send it overseas.
   
• The effects of a performance tax would be catastrophic to communities, potentially forcing stations out of business, threatening jobs, stifling new artists and reducing choice for the listening public who depend on local radio.
   
• Because the big foreign-owned record companies have a failing business model that has not adapted to the digital age, they are now asking Congress to upend a mutually beneficial relationship and tax local radio stations.

Be sure to review the full contest rules and regulations, as they contain sponsorship identification and political advertising requirements. 

The contest comes as the fight over the Performance Rights Act continues to heat up.  As have previously reporters, HR 848 passed the House Judiciary Committee by a 21-9 vote on May 13. However, support for H. Con. Res. 49 is now at 208 co-sponsors, very close to the all-important number of 218 representatives that would constitute a formal majority against the performance right.   More Representatives are expected to sign on to H. Con. Res. 49 as legislators presumably will be hearing from local radio broadcasters while home for the Memorial Day recess. 

Opponents are working the Senate as well, with Radio Ink reporting that minority broadcasters have asked Senate Judiciary Committee Chairman Patrick Leahy to hold a hearing on S 379 before moving forward with a Committee vote.  That could be enough to delay any effective action on the Performance Rights Act in the Senate in light of a presumptive House defeat.  

So go forth, radio broadcasters, and take the advocacy into your own hands!  

As Judiciary Committee Chair John Conyers is also the sponsor of HR 848, the outcome of this vote was never really in doubt.    But even as a watered down version was working its way out of the Judiciary Committee, more Representatives were jumping in to block the legislation.  By the time the Committee voted, 192 Representatives were official co-sponsors of the Local Radio Freedom Act (H Con. Res 49).  Just 26 more are needed for this opposition movement to become the necessary majority to defeat HR 848.

Sensing that his chances are slipping away,  Chairman Conyers amended HR 848 prior to the Committee vote to reduce the impact on small broadcasters.   The major amendments are:

• Creation of a multi-tiered flat fee paid by qualifying "Minority, Female, Religious, Rural, Small, Noncommercial, Public, Educational and Community Stations and Certain Uses"  which actually have nothing to do with these designations everything to do with gross revenues: 
  
  
  • For any station that qualifies as a "public broadcasting entity" under the Copyright Act: 
    
    
    • A station with less than $ 100,000 in gross annual revenues must pay annual royalties of $ 500.00
       
    • A station with at least $ 100,000 in gross revenues must pay annual royalties of $ 1000.00
       
  • For any other stations:
    
    
    • A station with less than $ 100,000 in gross annual revenues must pay annual royalties of $ 500.00
       
    • A station with at least $ 100,000 but less than $ 500,000 in gross revenues must pay annual royalties of $ 2500.00
       
    • A station with at least $ 500,000 but less than $ 1.25 million in gross revenues must pay annual royalties of $ 5000.00. 
       
    • A station with at least $ 1.25 million in gross revenues will pay according to the results of any eventual Copyright Royalty Board ratemaking proceeding. 
       
• The station's payment requirement becomes effective on a delayed basis, according to the total gross revenues achieved by the station during the previous four calendar quarters: 
  
  
  • A station with less than $ 5,000,000 over the previous four calendar quarters will not have to pay a performance royalty for the three years following enactment of this law
     
  • A station with less than $ 5,000,000 over the previous four calendar quarters will not have to pay a performance royalty for the first year following enactment of this law
     

Of course, even most small broadcasters will still fall into the highest payment bracket.  We've had conversations with broadcasters large and small and every one of them says, without fail, that adding a $ 5,000 annual expense would be difficult to endure.  We doubt that having 3 years to prepare for such payments would ease the pain. 

That may not be a problem, though, as it's hard to believe these amendments will move the co-sponsors of the Local Radio Freedom Act.  H. Con Res. 49 is a rather unqualified statement against any performance right:

Congress should not impose any new performance fee, tax, royalty, or other charge relating to the public performance of sound recordings on a local radio station for broadcasting sound recordings over-the-air, or on any business for such public performance of sound recordings.

Meanwhile, the Judiciary Committee also passed HR  2334, a bill only recently introduced by Chairman Conyers.  HR 2334 creates a 30 day window in which webcasters and SoundExchange can continue to negotiate alternative royalty rates for performance of sound recordings via the Internet to those which were adopted by the Copyright Royalty Board in March 2007 and those which are being considered in a current proceeding applicable to the years 2011-2015.  Because the NAB and several noncommercial webcasters have already reached distinct agreements with SoundExchange, HR 2334 primarily works to the benefit of larger, web-only music programmers. 

We have prepared a series of interlinked informational slides to guide you along the path. By clicking on the links that apply to your own situation, you can wend your way through the Webcast Royalty Maze. (Don’t worry about making a mistake: you can go back at any time if you think you've answered a question wrong or if you think that you'd like to take advantage of some other available option.)

NOTE: This was created prior to the execution of settlement agreements in August 2009 that cover noncommercial webcasters and noncommercial educational webcasters.  If you are a noncommercial webcaster who might be eligible for one of these agreements, please look for an updated version of this step-by-step guide or contact us for more information.

So, let's begin with an easy one: If you are engaged in the non-interactive public performance of sound recordings by means of a digital audio transmission, click here. 

If you are not engaged in the non-interactive public performance of sound recordings by means of a digital audio transmission, then the statutory license for webcasting does not even apply to you.