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

Apropos of comparative considerations, each applicant’s positive comparative attributes will be frozen as of the close of the window.  On the other hand, post-window changes that detract from an applicant’s comparative position will be considered, to the applicant’s detriment.  So an applicant’s comparative qualifications cannot be improved – but can be reduced – by changes after the window slams shut. To the extent that an applicant does claim comparative “points”, it will have to submit documentation to support such claims – and the Commission “recommends” that such documentation be included as exhibits to the application.

One narrow exception to the no-comparative-improvements rule: in some limited instances, an applicant which holds certain other interests – say, an LPFM or a fill-in translator or a same-area Class D station – may avoid the adverse comparative impact of those holdings by committing, in its application prior to the close of the window, to divest them. In other words, the divestiture does not have to occur prior to the close of the window, but the commitment to divest must be made by then. Check out the public notice for further details.

The Commission’s notice also underscores a technical peculiarity which must be addressed in each application. The channels up for grabs are in the portion of the FM band ordinarily used for commercial stations. They were reserved for non-commercial operation pursuant to a policy adopted six years ago, a policy designed to accommodate situations in which no NCE channels were available for use in a given geographical area. (You can read a bit about the background of that policy here.)  Under that policy, certain showings had to be made relative to the channel before the FCC would reserve it for NCE use. That being the case, the Commission wants to be sure that the conditions underlying the reservation remain applicable.

Three such conditions apply here. A commercial channel may be reserved for non-commercial use if it is shown that: (a) no NCE channel could be used without causing prohibited interference to TV Channel 6 stations; (b) no NCE channel could be used without causing prohibited interference to foreign broadcast stations; or (c) no NCE channel is available and the proposed reserved channel would “would provide a first and/or second NCE radio service to at least ten percent of the population within the 1 mV/m contour of its proposed station”. If a channel was reserved pursuant to (c), NCE applicants for that channel must demonstrate, in their applications, that their proposals will satisfy that condition – i.e., first/second NCE service to at least ten percent of the 1 mV/m population, AND that service area population must be at least 2,000 persons.

The Commission has helpfully identified the channels which were reserved on the basis of the “first/second NCE service” criterion. Those channels are marked with double-asterisks on the channel list issued with the public notice. Approximately 90% of the 67 listed channels are so marked.

The public notice also alerts prospective applicants that they are expected to have both (a) “reasonable assurance” of the availability of their proposed antenna sites and (b) sufficient financial wherewithal (liquid assets on hand or otherwise committed) to build and operate the station for three months. For tie-breaker purposes, they must also list all applications they are filing in the window (including the subject application itself) as well as any application filed prior to the window which has not been granted, dismissed or denied prior to the opening of the window. (Requests filed on Form 175 to participate in channel auctions need not be included.)

There is no cap on the number of applications which may be filed during the window but applicants should bear in mind that, if it comes down to a tie-breaker, the applicant with the fewest pending new/major change applications in the same service should prevail.

In view of the fact that the Commission’s staff has still not completed the processing of all the applications that were filed in the 2003 FM translator window or the 2007 NCE window (which was limited to channels in the NCE end of the band), it’s not likely that we’ll be seeing too many filing opportunities for new NCE stations in the foreseeable future. For that reason alone a considerable turn-out for the December window may be expected.

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

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

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

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

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

Thinking along these lines, a number of applicants either sought waivers of the protection rules or entered into, and submitted, contingent agreements with the nearby Channel 6 station.  (The contingent agreements reflected the Channel 6 licensee’s consent to the filing of the NCE FM application, generally with the proviso that the FM wouldn’t crank up – and thereby cause interference – until the TV station had vacated the Channel 6 premises, thereby eliminating the possibility of interference entirely.)

As far as we can tell, neither the full Commission nor the Bureau nor the Audio Division had opined as to the acceptability of that approach prior to the October, 2007, window.  Since then the Division has indicated in one or two decisions that it was not inclined to accept such applications.  But the Bureau’s April 1, 2009 Notice – issued a mere 18 months after the applications were filed – conclusively slams the door by barring such creative solutions.  The Notice states unequivocally that the Bureau will dismiss any NCE application that conflicts with the interference rules and fails to include either: (a) a showing that no more than 3,000 people would be subject to the predicted interference; or (b) an “unconditional consent letter” from the Channel 6 licensee. To make itself perfectly clear, the Notice warns that that consent “cannot contain any contingencies, conditions, qualifications or restrictions.”  (We get it; we really do.) 

Applications filed in the October, 2007, window are subject to the terms of the Notice, which means that any such application that doesn’t satisfy the Notice is toast, since the Bureau emphasized that any attempt to revive the application through an amendment or a petition for reconsideration (even after the Channel 6 station goes away)  will be unceremoniously rejected.  Further, with regard to currently mutually-exclusive NCE applications for new stations, the Bureau notes it will dismiss the applications of NCE FM “tentative selectees” who have attempted the end run described above. 

The Notice does magnanimously indicate that, after the June 12 DTV transition, the Bureau will open a filing window for NCE stations to permit them to take advantage of the Channel 6 migration.  (The Notice refers only to "stations", which suggests that the window may be limited to licensees seeking to modify their facilities -- that is, the window would appear not to be available for new applications.  Time will tell.)  But applicants for minor changes who attempt to do so before the window opens will  in any event be shown the door.  And, oh by the way, the Commission will start a rulemaking to evaluate the “continued viability” of the Channel 6 protection requirements after completion of the digital TV changeover.

While we appreciate the efficient processing considerations that underlie the Bureau’s approach, that approach may elevate form over substance in view of the imminent departure of most full-power Channel 6 stations.

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

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

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

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

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

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

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

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

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

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

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

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

SoundExchange and the Corporation for Public Broadcasting have announced that a settlement has been reached that will alter the way in which these stations pay royalties and report webcasting performances through 2010. 

The current royalty rates have been the subject of significant discussion in the broadcasting community, including  several  informative  articles  in  this  very blog.  The sharp increase in rates for the period 2006-2010 was especially feared by noncommercial stations with a large web audience, as those noncommercial stations would pay at commercial rates anytime their internet listenership exceeded 159,140 "aggregate tuning hours" in a given month, as opposed to the flat fee these stations (and small webcasters) had paid prior to the institution of new rates.

Pursuant to the Webcaster Settlement Act of 2008, this settlement agreement can go into effect immediately, with the following applicable terms: 

• Any eligible radio station which chooses to participate will not have to make any further royalty payments until December 31, 2010, as CPB will make a single, up front payment of $ 1.85 million to SoundExchange on behalf of public radio staitons. 
   
• SoundExchange will also create a consolidated playlist reporting system for use by all stations which choose to become a part of this program; those stations will be responsible for providing playlist information to CPB.
   
• Stations wishing to participate must register their intent with CPB on a designted website; CPB will provide details regarding that registration website in the near future.
   
• This agreement does not affect the "sound performance complement" portion of the statutory license (the restrictions on the number of songs that can be played from a certain CD or by a certain artist within a given time frame, the length of time for which a program can be archived, etc), meaning even participating stations must follow those rules.
   
• As a condition of the settlement, NPR will withdraw its appeal of the Copyright Royalty Board decision (we see this as an indication that more settlement discussions continue between SoundExchange and those segments of the webcasting community that are part of the pending court appeal).

No station is required to participate in this settlement. Thus, a station that is certain it will never exceed the aggregate tuning hour limitation in any given month may simply decide to ride out the next two years until the new rates are determined for 2011 and beyond in a proceeding that will commence in the near future (more on that soon).  Still, if you believe you may be eligible and wish to participate, keep an eye out for further communications from CPB or contact a Fletcher, Heald & Hildreth attorney.

Not surprisingly, a number of the tossed-out NCE folks asked the Commission to give this another think.  And after five (count ‘em, five) years of re-thinking, the Commission has now decided that the NCE applicants deserve a break.  Accordingly, the Media Bureau staff will be announcing, in the near future, a window period during which the NCE applicants in the 19 or so mixed groups will be given a one-time-only chance to amend their applications “for the sole purpose of applying for a commercial station.”  This means that NCE applicants in the affected groups who wish to proceed will have to move forward as if they were commercial applicants – which means that they will have to participate in an auction. 

In its decision the Commission did not identify the particular MX groups, although it did say that the 19 or so groups include 13 FM’s, four TV’s and two FM translators.  (In order to be included in those groups, the affected NCE applications must have been both filed, and MX with a commercial application, as of April 10, 2003.)   Keep an eye out for the Bureau’s public notice of the opening of the window if you think that you may be one of the lucky ones.

A settlement must propose the grant of at least one technically acceptable application with an MX group and must not create any new MX conflicts. All settlements are subject to reimbursement restrictions - that is, neither the applicant nor any of its principals may received (or be promised) consideration in excess of the legitimate and prudent expenses incurred in the preparation, filing, prosecution and settling of the application.

Technical amendments must resolve all conflicts between at least one applicant and all other applications filed in the window. Only "minor" engineering amendments will be accepted. Such amendments would include specification of an adjacent channel, a new transmitter site, lower power, and the like.

A copy of the Commission's announcement - which specifies a number of filing requirements associated with the submission of settlements - may be found here.

According to the public notice, all applications filed during the October, 2007 window are being made publicly available as of November 8. However, a public notice identifying the various MX groups of applications will not be released until after the close of the settlement window. In other words, it's up to the applicants to determine any and all pending MX proposals for settlement purposes.

Note that the limit applies only to applications for new stations filed during the October, 2007 window. Major mod applications (which may also be filed during the window) do NOT count toward the limit. Similarly, any already pending application which was not filed during the October, 2007 window does NOT count toward the limit.

As a general matter in the FCC's eyes, a party has an "attributable interest" in an application if the party is the applicant, or an officer, director or 5% or greater owner of the applicant. Narrow exceptions exist for certain "limited partners" or members of "limited liability companies" - but if an applicant hopes to take advantage of those exceptions, special care should be taken and the fine print of the FCC's rules should be consulted.

Complicating matters further, interests may be attributed indirectly. F'rinstance, let's say A owns 10% of company X, which owns 60% of company Y, which owns 25% of an applicant. In cases like that, the FCC applies a multiplier: thus, X's interest in the applicant would be a respectable - and attributable - 25% (i.e., the same as Y's interest because X's interest in Y exceeds 50%), while A's interest in the applicant would be a non-attributable 2.5% (i.e., 0.1 x 0.25).

 The possible need for a cap on applications arises from a number of factors, including: (a) the lack of any filing fee for new NCE permits; (b) the lack of any ownership limits in the NCE band; (c) the fact that, because of a longstanding freeze, no one has been able to file for such permits for more than seven years; and (d) full-service NCE authorizations have considerable value in the marketplace.  Another significant factor is the Commission's experience in 2003, when it opened a window for new FM translator applications.  No cap was imposed during that window, and more than 13,000 applications rolled in the door - by some estimates more five or six times more than the FCC had originally anticipated.  To avoid a similar avalanche of applications - and the significant disruptions that it can cause - the Commission has proposed the following limit:

A party to an application filed in the NCE FM filing window may hold attributable interests in no more than a total of ten applications filed in the window. If it is determined that any party to an application has an attributable interest in more than ten applications, the Bureau will retain the ten applications that were filed first - based on application file number - and dismiss all other applications.  Major modification applications will not count toward the limit.  Pending new and major change applications filed under former licensing procedures also will not count toward the limit.

There is an extremely short opportunity to file comments and replies: 15 days and 25 days, respectively, from the date the NPRM is published in the Federal Register.  Check out the NPRM for the nitty-gritty details governing the filing of comments, or contact us.

The Bureau's public notice does not appear to contain any surprises, but it does put everyone on notice that a freeze on all minor change applications (and amendments thereto) in both the NCE band and Channels 221, 222 and 223 of the commercial band (because of their proximity to, and potential RF impact on, the upper NCE channels) will commence on September 8, 2007 and continue until the close of the window (which is currently set for October 19).