Radio Multiple Ownership: Market Manipulation Minus the Wait?

Depending on who’s doing the including, inclusion of a radio station in an Arbitron market may not be subject to a two-year waiting period for purposes of multiple ownership calculation.

While the heyday of radio consolidation is fading in the rearview, some opportunities still exist. As Cumulus Licensing LLC recently demonstrated, with a quick change in a station’s city of license, an otherwise impermissible ownership situation can become permissible – thanks to a helpful Audio Division interpretation of the contour overlap standard that has governed radio multiple ownership for nearly a decade.

Concentration of control in the radio world hasn’t been on many people’s radar for a while, so some background may be in order. 

Since back in the 1990s, radio ownership in any particular market has been subject to caps depending on the number of other stations present in the particular market. In the ‘90s, the relevant “market” for any proposed acquisition depended on the particular contours of the particular stations owned and proposed to be owned by the buyer. That gave rise to considerable flexibility for buyers, who were able to some degree to manipulate the scope of the relevant market to their advantage.

That signal contour approach to market definition was largely tossed out in 2003, when the Commission adopted an Arbitron/geography-based approach. Under the “new” approach, radio ownership caps are determined by the number of stations located in (or “home to”) Arbitron-defined markets. By relying on the independent determination of Arbitron as to which (and, thus, how many) stations were in each market, the FCC theoretically reduced the flexibility the signal contour approach had afforded to inventive applicants.

But, as the Commission acknowledged, even the Arbitron approach was subject to manipulation.

Station licensees could persuade Arbitron to modify its market definitions to increase some markets to include particular stations, or decrease them to exclude particular stations. The result of such modifications: some deals that might not otherwise have met the FCC’s ownership caps could suddenly be acceptable. To discourage rampant, licensee-induced changes in the Arbitron market definitions, the Commission imposed a two-year waiting period before any such changes could be relied on to demonstrate compliance with the ownership caps.

Of course, some stations aren’t located in (or “home to”) any Arbitron-defined markets. Such stations are still subject to the signal contour method of determining local ownership caps.

So what happened with Cumulus?

Cumulus was looking to improve its position in the adjacent Mobile, Alabama and Pensacola, Florida Arbitron markets. No problem there. It entered into agreements with a couple of other licensees to acquire a total of three stations, one in the Mobile market, the others in the Pensacola market. The proposed acquisitions would, once granted, still leave Cumulus safely within the permissible caps for those markets.

But wait. As a petitioner to deny the deal pointed out, of the stations that Cumulus already owned in the Mobile market, one had just been the subject of a recent change-of-community application that brought it from scenic Atmore, Alabama to slightly more scenic (from a 307(b) perspective, anyway) Saraland, Alabama. That change just happened to bring the station from outside the geographical boundaries of Arbitron’s Mobile market to within those boundaries. According to the petitioner, if that change had not been made, Cumulus’s proposed acquisitions would have had to be assessed under the signal contour approach and (again according to the petitioner) those acquisitions would have exceeded the relevant ownership caps and the assignment applications would have to be rejected.

As the petitioner saw it, the change-of-community application was essentially the same as an effort to modify the Arbitron market definition; since (as noted above), such market modifications are subject to a two-year waiting period, Cumulus could not take advantage of the change for two years. 

The Audio Division didn’t buy it.

According to the Division, the two-year waiting period applies only to market changes effected through Arbitron’s processes, i.e., changes in market boundaries (making a market bigger or smaller) or changing a particular station’s “home” designation for Arbitron purposes. Change-of-community applications, by contrast, are handled through the FCC’s own processes. The Commission can thus take into account the potential effect of such proposed changes on such regulatory considerations as multiple ownership and market size before deciding whether to grant the change. So the two-year holding period is irrelevant with respect to changes approved through the FCC’s processes.

In this case, the change-of-community application had already been granted before Cumulus filed its applications to acquire other stations in the market. Just before, as it turns out – the change-of-community application was granted on May 7, 2012, while the first of Cumulus’s assignment applications was filed two days later. That may, of course, have been purely coincidental; but – call us crazy – it seems to us that it’s a good bet that the filing of the assignment applications was timed to occur after Cumulus was successful in moving its existing station within the geographical boundaries of the Mobile market. 

In any event, since the petitioner’s beef was really with the grant of the change-of-community application rather than with the follow-up assignment applications, the Division concluded that it was too late for the petitioner to raise the issue now.

Another point weighing against the petitioner: even before the change-of-community, that particular Cumulus station had already been counted by Arbitron as “home to” the Mobile market for more than eight years, so the move into Saraland did not affect the practical Arbitron status of the station. It seems to us that the Division could have avoided any discussion of the two-year waiting period by mentioning this, since the station’s status as “home to” Mobile had clearly been in place for well more than two years before the change-in-community.  (It’s possible that the staff was concerned about the fact that formally moving the station from Atmore to Saraland meant that the Atmore market – not an Arbitron-defined market – would be losing a station, so Arbitron’s historical treatment of the station didn’t completely resolve all conceivable market-related questions. But that factor implicates Section 307(b) considerations more than multiple ownership concerns, at least as far as we can see.)

The Division opted instead to focus on the alternate rationale that FCC-granted changes potentially affecting a station’s market status are not subject to the waiting period. By doing so, the Division appears to have endorsed a way of circumventing the contour-overlap approach to the radio multiple ownership rules. 

But don’t look for a boatload of applications trying to take advantage of what might be classified as a loophole. The limitations on “move-in” applications that take stations from outside a market to inside the market have been considerably tightened in recent years. As a result, it seems unlikely that very many folks will be able to take advantage of the Division’s decision. Nevertheless, licensees looking to max out their local ownership interests may want to consider whether an otherwise impermissible acquisition might be made possible through the change in one or another station’s community of license.

Update: Forms 314, 315 Revised To Reflect "Tribal Priority" Policies

New certifications for radio assignment/transfer applicants

Over the last couple of years, the Commission has, in its “Rural Radio” proceeding, taken steps to facilitate the acquisition, by Native American Tribes, of radio broadcast stations designed to serve primarily Tribal Lands. (You can read about some of those steps here, here and here.) The most recent of those steps were taken late last year but, as we reported last January, they did not all become effective then because of the Paperwork Reduction Act. Now, at long last, the Commission has announced that the Office of Management and Budget has approved some relatively modest changes to FCC Forms 314 and 315. Those changes should assist in the implementation of the service-to-Tribal-Lands initiative by requiring certifications concerning whether the station to be assigned (through FCC Form 314) or transferred (through FCC Form 315) is subject to “Tribal Priority” restrictions. The revised forms are in effect as of December 4, 2012.

Rural Radio Rules Revisited (Again)

FCC tweaks with the fine-tuning knob, but whether the picture is any clearer remains to be seen.

In early 2011, the Commission shook up the radio world by adopting dramatic changes to policies governing the extent to which radio stations might be able to locate themselves in or near larger urban areas. In a recently-released document we’ll refer to here as Recon II (official title: “Second Order on Reconsideration”), those revised policies have now been tweaked (a) to exempt a limited number of applications, and (b) for those still subject to the policies, to change the way certain things are handled. Depending on any proponent’s particular circumstances, those changes might or might not make it harder for the proponent to get FCC clearance to change its community of license.

The revised “rural radio” policies (which appeared in a document we have referred to in previous posts as the Second R&O) are described in detail in our post from March, 2011. If you haven’t read that lately, take the time to read it now. We’ll wait.

In a nutshell, the 2011 changes imposed a new presumption (“the Presumption”) that makes it considerably more difficult to modify an AM or FM station in any way that would move it into, or nearer to, an Urbanized Area. This, of course, was a disappointment to many entrepreneurs who had spent considerable time and effort designing – and often effectuating – precisely such “move-ins”. 

The latest tweaks aren’t likely to allay that disappointment, except for a relatively small universe of applicants who, thanks to Recon II, are now not subject to the Presumption. You’re in that universe if you are:

an applicant to change community of license and your application was filed before April 20, 2009 (i.e., the date the Notice of Proposed Rulemaking in the Rural Radio proceeding was released);

the proponent in an FM allotment proceeding and your petition for rulemaking was filed before April 20, 2009; or

an applicant for a community of license change application or a proponent in an FM allotment proceeding in which a decision on your proposal was released before March 3, 2011 (i.e., the date of the Second R&O).

If you’re in one of those categories, you’re excused and need read no further. 

(Note also that the Commission expressed a willingness to waive the requirements on a case-by-case basis – in particular, where equities exist that might call for an applicant to be excused from the new procedures. One example cited by the Commission: a case where the proposed modification is contingent on a modification of another facility that cannot be easily undone due to the subsequent actions of other licenses.)

As for the tweaks to the policy, here’s a quick summary of the highlights from Recon II:

Tuck tweaksAs we previously reported, parties looking to get out from under the Presumption can still submit a “Tuck showing”. Such a showing (named after the 1988 case in which the showing made its regulatory debut) consists of an extensive laundry list of information designed to establish that the proposed community of license really does have an independent need for its own local station. In Recon II¸the Commission emphasizes applicants seeking to rebut the Presumption with, e.g., a Tuck showing will be given wide latitude to present whatever additional facts they deem appropriate.  However, in evaluating such showings, the FCC will place particular emphasis on (a) the degree to which the proposed station will provide coverage to the Urbanized Area and (b) the size and proximity of the proposed community of license relative to the central city of the Urbanized Area. Oh yeah, the Commission has now concluded that, because the “ubiquity of ZIP codes gives the presence of a dedicated ZIP code little probative significance”, the fact that a proposed community of license may have its own ZIP code will be given “little weight”.

An applicant seeking to change its community of license will not be required to submit a Tuck showing in some limited cases. Specifically, no such showing will be necessary where: (a) both the current and proposed communities are in the same Urbanized Area or the current and proposed facilities cover, or could be modified to cover, 50% or more of the same Urbanized Area; and (b ) the applicant is not relying on a first local service preference. If the applicant is relying on such a preference, the Presumption would apply and the applicant would have to make a Tuck showing to rebut it.

Gain/Loss CalculationsUnder the policies as revised in 2011, the relative sizes of gain and loss areas assumed a considerably greater importance than had previously been the case. In Recon II, the Commission has made adjustments in how those areas are to be calculated.

For an application proposing a change in an FM station’s community of license, in order to determine the number of reception services in the gain/loss areas, the actual and proposed contours must now be calculated using the transmitter site coordinates of the present facility and of the proposed new facility. (Traditionally, the allotment site coordinates had been used.) Moreover, those service contours are to be calculated based on the station’s authorized and proposed effective radiated power, height above average terrain and the actual terrain (using the prediction methodology in Section 73.313 of the Commission’s rules, not any alternative predictive methods, like Longley-Rice). Previously, such calculations were based on the maximum class facilities for all stations except full Class C and NCE stations and on the bizarre presumption that all the terrain in question was uniform.  

Also, when an applicant seeking to change its community of license needs to calculate the area and population an AM station serves, the predicted or measured daytime 2.0 mV/m groundwave contour is to be used. Those calculations must be made for both the applicant’s current and proposed transmitter site coordinates. In this particular context, the Commission is choosing to disregard the fact that the “primary service contour” for communities with populations under 2,500 is defined elsewhere in the rules as the 0.5 mV/m daytime groundwave contour. Note, however, that applicants for new AM stations are to continue to count populations served by using the primary contours set forth in Section 73.182(d) of the FCC’s rules (0.5 mV/m for communities under 2,500 and 2.0 mV/m for communities over 2,500).

For purposes of gain and loss area calculations under Priority 4 (the catch-all public interest category for Section 307(b) determinations), applicants are to count all full-service AM (including daytime-only AM), FM and NCE FM stations, including all granted but unbuilt construction permits. However, vacant FM allotments are not to be considered. The Commission, looking at the results of the last couple of FM allotment auctions, wisely concluded there is no guarantee any particular vacant allotment ever will be filled. 

Applications filed after October 12, 2012 (i.e., the release date of Recon II) must use these revised standards. Those with pending applications can elect to amend their proposals to use the new standards or stick with their already-filed technical showings.                       

In Recon II the Commission rejects a variety of proposals. The most noteworthy: William B. Clay’s assertion that the Second R&O didn’t go far enough and that the new procedures should be applied to all community of license change applications where the proposed facility will primarily serve communities and populations other than the proposed community of license. Clay would have had the Commission implement “a universal policy that directly links grant of any ‘local service’ preference to the community or collection of communities most likely to benefit from the transmission service provided by a facility proposed in any geographic area”. 

The FCC wasn’t buying what Clay was selling. In the Commission’s view, his proposal “would take the choice of community of license – at least where first transmission service is being claimed – away from the applicant”, and instead have the Commission designate that community. The Commission was unwilling to go that far if a station isn’t in or near an Urbanized Area. 

At least it isn’t for the time being. Let’s not forget that the Commission and the Courts of Appeals have struggled for decades with how to apply Section 307(b). It’s a near certainty that Recon II will not be the last word on the subject.

Update: Effective Date Set For Refinements in Tribal Priority Process

Commercial FM channel preference policy established in Rural Radio proceeding kicks in July 2.

In January we reported on the release of the Third Report and Order (3rd R&O) in the long-running Rural Radio proceeding. That’s the decision that created a short-cut available to Native American Tribes seeking new commercial FM stations primarily serving Tribal Lands. (As used by the Commission, “Tribes” is a collective term referring to federally-recognized Native American Tribes and Alaska Native Villages.) We're pleased to report that the revised versions of Section 73.3573 and Form 301 adopted in the 3rd R&O have received OMB’s seal of Paperwork Reduction Act approval. It says so right here in the Federal Register. And according to that notice, the revised rule and related form will become effective on July 2, 2012.

Rural Radio: Tribal Applicants Finally Moving to the Head of Some (but not all) Lines

FCC adopts process to assure that Native American tribes get first dibs on commercial FM channels allotted pursuant to Tribal Priorities

For nearly three years the Commission has been working to develop mechanisms to promote new radio stations serving Native Americans. The process has been gradual, to say the least. Starting in 2009 with a proposal to create a Section 307(b) priority for Native Americans, the Commission has taken a series of steps looking to facilitate the entry of “Tribes” (a collective term used by the FCC to refer to federally-recognized Native American Tribes and Alaska Native Villages) into the ranks of broadcast owners.

In the closing days of 2011 the Commission took one more step in that process by creating a short-cut available to Tribes seeking new commercial FM stations primarily serving Tribal Lands. The new approach – which might also create opportunities for non-Tribal entrepreneurs willing to work with Tribal applicants in certain capacities – is designed to assure Tribal applicants the first opportunity to apply for such stations, free from competition from non-Tribal applicants. But the path blazed by the Commission imposes its own considerable set of hurdles.

The short-cut was necessitated by the fact that the allotment process for commercial FM channels is different from the process for allotting AM or noncommercial FM channels. For AMs and noncom FMs, a party who identifies the availability of a channel can get a lock on the channel simply by filing an application for it. In the case of commercial FM channels, on the other hand, the first step in the process merely allots the channel; after that, the channel is made available to the highest bidder at an auction, regardless of whether that highest bidder is a Tribe. 

And there’s the problem.

If the goal is to assure that Tribes get first dibs on channels serving Tribal members, the Commission had to figure out how to keep that particular class of FM channel off the auction block long enough to give Tribes first crack. (To be clear, that “particular class” of channels includes channels allotted according to the “Tribal Priority” adopted in 2010. Fuzzy on the details of the “Tribal Priority”? Check out our 2010 post for background.)

Here’s what the Commission has come up with:

After a Tribal Allotment – i.e., a channel allotted pursuant to a Tribal Priority – is made, the FCC will open a Threshold Qualifications (TQ) Window. During the TQ Window, any Tribe or Tribally-controlled entity can apply for the allotment. The applicant would have to satisfy the Tribal Priority factors underlying that particular Tribal Allotment. The relevant factors are numerous (stick with me, this gets a little complicated): 

  • The applicant is either a federally recognized Tribe or Tribal consortium, or an entity owned or controlled 51% or more by a Tribe or Tribes.
  • At least a portion of Tribal lands within the proposed city-grade (70 dBu) contour must be those of the Tribe or Tribes holding at least 51% ownership or control of the applicant.
  • At least 50% of the area within the proposed city-grade contour is Tribal Land of the applicant Tribe or, alternatively, the city-grade contour (a) covers 50% or more the applicant’s Tribal Lands, (b) serves at least 2,000 people living on Tribal Lands, and (c) the population on Tribal Lands within the proposed 60 dBu (yes, the 60 dBu) contour constitutes at least 50% of the total population covered.
  • The proposed station’s city-grade contour does not cover 50% or more of the Tribal Lands of a Tribe that is not a party to the application.
  • The proposed community of license is located on Tribal Lands.
  • The proposed station constitutes a first or second reception service or a first local Tribe-owned commercial station at the proposed community of license.

Careful readers will have noted that those criteria would exclude any Tribe that lacks Tribal Lands – and there are a significant number of Tribes in that position. No problem: the Commission will entertain waivers of the Tribal Lands coverage requirements if a particular geographical portion of the station’s proposed coverage area is identified with a Tribe that is a party to the application.

If only one acceptable application is filed during the TQ Window, that applicant will get the station. If two or more acceptable applications are filed, the Commission will establish a period during which the applicants may negotiate a settlement or a merger.  (Caution: Engineering settlements that would result in more than one application being granted won’t be allowed.)

If no settlement or merger is reached, the allotment will be auctioned, but only those applicants accepted during the TQ Window and the original proponent of the Tribal Allotment will be allowed to bid.  The winner will need to file a Form 301 or, in the case of the original proponent, go forward with the Form 301 it filed with its allotment proposal.

In the event no qualifying party files during the TQ Window and the Tribal Allotment proponent asks that its pending Form 301 not be immediately processed, the Tribal Allotment will be set for auction. But the first time that allotment is offered at auction, only applicants meeting the Tribal Priority criteria for the allotment will be allowed to bid.

If no qualifying party bids on the Tribal Allotment in that first auction, at the next auction in which that allotment is offered, any applicant – whether or not a Tribe or Tribal entity – may bid.

Any license issued for a Tribal Allotment – whether through grant of a singleton application or following an auction – will be subject to a holding period. For four years after the station goes on the air, it may not be assigned or transferred unless the party that would get the station also could have qualified for the Tribal Priority under which this particular Tribal Allotment was awarded.

Interestingly, the newly adopted process will allow non-Tribal parties to partner with qualifying Tribes to go after new FM allotments – provided that the qualifying Tribe or Tribal consortium retains 51% ownership or control of the applicant entity. It remains to be seen whether non-Tribal entrepreneurs will find such partnering opportunities attractive.  And in view of the major league restrictions that characterize the entire Tribal Allotment process, it also remains to be seen whether very many of these allotments will come into being in the first place.

But one thing is clear: the Commission has committed itself to promoting broadcast ownership by, and broadcast service for, Native Americans. And more importantly, the Commission has acted – slowly, perhaps, but still aggressively – to make good on that commitment.

[While the FCC has formally adopted the new process for dealing with commercial FM Tribal Allotments, that process is not yet in effect: thanks to our old friend, the Paperwork Reduction Act, the process needs to be blessed by OMB before it can kick in. We’ll let you know when that happens.]

Update: FCC Invites Comments on Recons

Sure, the Commission’s been sitting on the petitions for months (in one proceeding) and years (in another), but so what?  You’ve got two weeks (including Christmas and New Year’s) to check them out and respond to them.

Got your 2012 calendar yet? Better get on it, because deadlines for the new year are starting to pile up.

For instance, remember the rural radio proceeding, which (among other things) established new, and considerably more rigorous, criteria for radio station “move-in” applications? You could be forgiven if that particular item has been swept out of your short-term memory, because the Commission’s Second Report and Order there was released back in early March. In any event, the FCC has now announced that six petitions for reconsideration of that decision have been filed.  Apparently time is not of the essence here, because the petitions were filed back in late April and early May, right around the time the new rules became effective. Never you mind about that, though, because the clock is now ticking if you want to respond to any or all of the petitions. Oppositions to the petitions are due by January 5, 2012, and replies to oppositions are due by January 17, 2012

In case you want to check out the petitions yourself, here are links to each:

Friendship Broadcasting LLC

Radio One, Inc.

Entravision Communications Corporation

M&M Broadcasting Ltd.

William B. Clay

Educational Media Foundation/the Kent Frandsen Radio Companies

You may as well keep your calendar opened to January 5 and January 17, because the Commission has also announced that two petitions for reconsideration were filed with respect to the FCC’s Report and Order permitting FM translators to rebroadcast the signals of AM stations.

That decision was released in (are you sitting down?) June, 2009. The petitions have been hanging around since July-August, 2009, a tad over two years ago. In the meantime, of course, Congress enacted the Local Community Radio Act and the Commission has taken a giant step or two toward resolving many of the thorny issues relative to the ever-prickly translator/LPFM relationship – including some tweaks relating to carriage of AM stations by translators. As a result, who knows whether the issues raised way back in 2009 are still hot and happening? Whatever the case may be, if you want to oppose either of these two petitions, you’ve got until January 5, 2012. Replies are due (no big surprise here) by January 17. You can find the two petitions here:

Robert A. Lynch

Edward A. Schober

Rural Radio: Certification Requirements Now In Effect

If you’ve got a pending community-of-license application pending for an AM or FM station, you may be hearing from the FCC shortly

Last March (as we reported back then) the Commission took aggressive steps to stem the flow of radio stations away from rural areas and into urban areas. A central aspect of that action was a set of modified priorities by which the acceptability of proposed community-of-license changes by AM and FM applicants is to be assessed. The new priorities are to be applied to proposals for new and modified AM and FM facilities already in the pipeline as of the new policy’s adoption back in March, as well as all further such proposals (one exception: the new priorities won’t be applied to any still-pending new/major change AM applications filed during the Auction 84 window in 2006). In our earlier post we spelled out the details of the new priorities, including the overriding “Presumption” of service that serves as a cornerstone to the new approach. 

As we have reported since last March, the precise effective date of the new priorities has been a bit hazy. (Check out our follow-up posts here and here and here.) But never fear, the haze has now lifted.  The new priorities – complete with required certifications – have all formally taken effect as of July 19, 2011. This is thanks to (a) prompt and favorable review by OMB relative to the new allotment drill, and (b) publication of a Federal Register notice announcing OMB’s blessing.

The official effectiveness of the new priorities and related Presumption/certification requirements means that the Commission’s staff is now free to require pending applicants to demonstrate that they comply with the priorities and Presumption. Since the staff has been working with the new policies for some time already (hey, they’re the ones who cooked up the new priorities in the first place), the staff has a pretty good idea of which pending applications comply and which don’t – and we’re guessing that lots of those applications don’t. 

We understand that pending applicants may expect to receive “deficiency letters” in the not-too-distant future. These billets doux from the staff will be directed to any applicant whose currently pending showing fails to establish that the proposed change in community of license satisfies the new priorities. We’re guessing that the deficiency letter will afford the applicant an opportunity to demonstrate that its proposal does comply with the new allotment approach. Failure to make that showing will result in the dismissal of the application.

One other aspect of the new allotment priorities – creating a “tribal preference” designed to increase the number of radio stations owned by Native American tribes – has also now taken effect. That preference, though, is likely to have a greater impact on future applications than on many (if any) applications already in the pipeline.

Update: New Rural Radio Certifications Out For Comment . . . Again

Those of you who have been monitoring the gestation of the Commission’s revised rural radio policies will be pleased to know that those policies have taken what could be their penultimate step toward formal effectiveness. You may recall that, back in March, the FCC invited comments (as required by the Paperwork Reduction Act) on the certification requirements newly-imposed by the revised policies. The deadline for those comments (which were to be filed with the Commission) was May 23. With that deadline having come and gone, the Commission is wasting no time: according to a public notice in the Federal Register, the FCC has now bundled the whole shebang up and shipped it over to the Office of Management and Budget for its look-see.   If and when OMB gives the new certification requirements the thumbs up, the Commission will be able to put them into effect.

This is your last chance to toss in your two cents’ worth on the new requirements. This time, though, you’ll have to direct your comments to the OMB. The deadline is June 27, 2011 – which means that we can probably expect the new certification requirements to kick in for real sometime in July or August. The Commission will presumably issue a notice to let us know when that happens.

Update: Effective Date Of New Rural Radio Rules Set

But what about the new Section 307(b) policies?

The Second Report and Order (Second R&O) in the rural radio proceeding has been published in the Federal Register. According to the notice as it appeared in the Register, the new rules will become effective on May 6, 2011, except for newly-revised Section 73.7000. (That section, which relates primarily to Native American Tribal factors, entails certain “information collections” that must first be approved by the Office of Management and Budget (OMB).)

For many broadcasters, though, the real attention-grabber of the Second R&O was not the rule changes it effected, but rather its overhaul of Section 307(b) policies. Perhaps even more important were the new certification requirements imposed on community-of-license-change proponents as a result of that overhaul.

So the real questions are: when do the new Section 307(b) policies become effective, and when will pending proposals have to be amended to include the new 307(b) certifications?

The answer to the latter question is a piece of cake. Since the new certifications constitute “information collections” subject to the Paperwork Reduction Act (PRA), they must go through the standard PRA drill. We noted this back when the Second R&O was first released, and we followed up with a report on the official commencement of the PRA process in March.

But what about the underlying 307(b) policies? Are they in effect now or not? 

The answer to that isn’t clear.

That's because the Federal Register publication makes no reference to any effective date for the policies.  Oops.  As a practical matter, though, the precise effective date of the new policies is probably immaterial. Even if the policies are not now in effect, the Audio Division’s processing staff is not likely to take any actions inconsistent with the announced policies. So if you’ve got an application on file that will clearly not make the grade once it comes time to file the new 307(b) certifications, you probably shouldn’t hold out any hope of a grant between now and then.

But let’s look on the bright side. If you’ve got an application pending that is (or should be) grantable under the new policies, do you have to wait for the certifications to clear the OMB PRA review process before you can expect action? Good news. The answer is that you can probably file your certifications now as an amendment to your application. You can use the Second R&O as a guide relative to the analyses you would need to perform in order to support a proper certification. Include a request that the staff go ahead and process the application. We understand that, given those circumstances, the Audio Division may be inclined to move things along now rather than wait for completion of OMB review. 

Of course, the number of applicants able to take advantage of this opportunity is probably pretty limited, but if there are any, they may wish to act now.

Update: New Rural Radio Certifications Out For Comment

New “information collection” requirements for AM/FM change-of-community applications to undergo Paperwork Reduction Act review before taking effect

A couple of weeks ago we described the FCC’s revised approach to proposed changes in the communities of AM and FM stations and allotments. As we noted, the Commission’s Second Report and Order (Second R&O) indicated that that new approach would become effective upon publication of the Second R&O in the Federal Register. But that estimation seemed a bit at odds with reality – or, more specifically, with the Paperwork Reduction Act (PRA), which requires that most new “information collections” be run past the Office of Management and Budget. (We pointed that out, too.)

And sure enough, the Commission has now signaled that the new change-of-community showings do indeed need to be approved by OMB. This may slow the implementation of the revised policies, if only because OMB approval normally adds at least 90 days to the process. Since the new policies will apply to all change-of-community applications pending as of the release of the Second R&O (i.e., March 3, 2011), that delay could be an annoyance for folks whose applications may be stuck in the queue. It remains to be seen whether the Commission’s staff will be inclined to find some way to implement the new standards any earlier.

Often, when the FCC imposes a new “information collection”, it involves a new, or revised, application form. Here the Commission is asking for comments on the instructions to Form 301, even though it has not changed any questions on the form or added any new questions. According to the latest notice, the revised form will lay out, in updated instructions, the certification requirements adopted in the Second R&O (and described in some detail in our earlier post here).

Anyone wishing to comment on the revised application requirements may do so until May 23, 2011. Comments should be limited to the following:

  • whether the proposed collection of information is necessary for the proper performance of the functions of the Commission, including whether the information shall have practical utility;
  • the accuracy of the Commission's burden estimate (The Commission estimates that it will require somewhere between 1-6.25 hours, on average, to address the new requirements);
  • ways to enhance the quality, utility, and clarity of the information collected;
  • ways to minimize the burden of the collection of information on the respondents, including the use of automated collection techniques or other forms of information technology, and
  • ways to further reduce the information collection burden on small business concerns with fewer than 25 employees.

Once the 60-day FCC comment period wraps up, the Commission will refer the matter to OMB, which will provide interested parties an additional 30-day comment period. Based on that time line, it’s likely that the new requirements won’t become effective until mid- to late summer, at the earliest.

Extreme Makeover - Radio Edition

AM/FM allotment policies overhauled as Commission looks to discourage relocation of service from rural to urban areas 

If you’re looking to move an AM or FM radio station from a small community to a different, bigger, community, your job probably just got a boatload harder. The Commission has released a wide-ranging decision – technically, a “Second Report and Order, First Order on Reconsideration, and Second Further Notice of Proposed Rulemaking” (ouch – let’s just call it the Second R&O for short) – in its two-year old “rural radio” proceeding. Unlike the Commission’s first order in that proceeding, the Second R&O tightens up radio channel allotment standards considerably.

Since radio broadcasting began, entrepreneurs have been inexorably drawn to the bright lights (and larger audiences) of big cities. Eschewing the bucolic delights of rural America, entrepreneurial folks have strived to locate stations in or near metropolitan areas. In response, the FCC has strived to keep the metro-bound tide in check. In recent years, though, the regulatory levees have been relatively easy to overcome, leading to a steady influx of channels to metro areas. With the release of the Second R&O, however, the flood barriers have been raised higher . . . much higher.  And, as a bonus, the Commission has made it harder for FM translators to pop in or out of the reserved portion of the FM band.    

First, some background.

For almost 30 years, radio allotments have been subject to a set of four priorities. In the Commission’s view, the highest priority (dubbed Priority 1) calls for channels to provide first fulltime audio reception service. If a radio proposal would deliver service to areas and populations that don’t already receive any radio service at all, that proposal moves to the front of the line. Next up (Priority 2) are proposals which would provide a second fulltime audio service to areas/populations that receive only one other such service.

As a practical matter, though, there are very, very few areas/populations in the U.S. that do not already receive at least two aural services. So Priorities 1 and 2 are largely vestigial; they seldom if ever come into play anymore.

That leaves Priorities 3 and 4. Priority 3 awards preference to any proposal which would result in a community receiving its first local station. The idea is that, to the extent possible, every community should have its own radio station which would, the FCC imagines, focus its programming on the needs and interests of its community of license. Priority 4 is a catch-all, rewarding “other public interest matters”. (Normally, Priority 4 tends to involve comparisons of populations proposed to be served by competing proponents; the nod generally goes to the proposal promising to serve the greatest population.)

Note that Priority 3 requires only that the proposed station be the first in the community. It says nothing about where that community might be, or how many other radio services it may already receive. Accordingly, for many years the typical way to get the okay to put a station in an urban area has been to specify a community of license in or near the urban area, with no local station. 

Presumably suspecting that the “first local station” test might lead to less-than-sincere proposals, the Commission eventually imposed additional mandatory showings if a proposed allotment brushed up against an urbanized area. In particular, the so-called “Tuck showing” (named after the 1988 decision in which the showing made its regulatory debut) requires allotment proponents to provide an extensive laundry list of information designed to establish that the proposed community of license really does have an independent need for its own local station.

But over the years, move-in proponents and their lawyers have become adept at making the required Tuck showings – possibly, in the view of some at the FCC, too adept.

The New Presumption. Concerned that the continuing trend of stations toward metro areas may be leaving the radio needs of rural areas underserved, the FCC has now come up with a new approach designed to slow (if not stop altogether) that trend. The Second R&O creates a “rebuttable presumption” applicable to proposals to allot AM or FM channels either: (a) to a community in an urbanized area or (b) in such a way that the facilities proposed would (or, with a minor modification application, could) cover 50% or more of the urbanized area with a city-grade signal (for AM’s, that would be the daytime city-grade). If either of those conditions is met, then the proposal will be presumed to be proposing service to the entire urbanized area rather than the named community of license.   In other words, no Priority 3 preference would be awarded, even if the proposed community of license technically did not have any other local stations. For ease of reference, we’ll call this concept “the Presumption”.    

Additionally, the FCC has tweaked Priority 4 to put much greater emphasis on coverage of relatively underserved areas rather than raw differences in the number of people covered.

The Second R&O explains how these changes are to be applied to various common radio allotment situations. Those include: (a) proposed community of license changes (for both FM and AM stations); (b) applications for new AM stations and major modifications to existing AM stations; and (c) new FM allotment proposals.

Community of License Changes. To change an AM or FM station’s community of license, the applicant must demonstrate that the proposed facilities in the proposed community will serve the FCC’s allotment priorities better than do the station’s present facilities in its present community.

The FCC will apply the Presumption to all such proposals – even those that were pending before the Second R&O was released. That will limit severely the ability of proponents to avail themselves of Priority 3.

Recall that the Presumption applies not only when a proposal would put a city-grade signal over at least 50% of the urban area, but also if the proposed facilities could do so after a minor mod. Because of that, the applicant will also need, in effect, to demonstrate a negative – i.e., that it will not be able to use its proposed facilities as a launching pad for a change that would produce 50% or greater urban area coverage. 

It’s always hard to prove a negative, of course. In this context, the Second R&O addresses that problem by requiring proponents to certify that “there are no existing towers in the area to which, at the time of filing, the applicant’s antenna could be relocated through a minor modification application to serve 50% or more of an urbanized area and still cover its proposed community of license.” In making that certification, the applicant will be required to consider every existing tower with an Antenna Structure Registration and every unregistered tower currently used by licensed radio station. The applicant also must consider possible use of a directional antenna, contour protection and other techniques widely employed to fashion a rule-compliant modification application.

The Commission will also impose an absolute bar to any facility modification that would create a “white” area (i.e., an area with no over-the-air service available) or a “gray” area (an area with only one over-the-air service available).

And under the newly-tweaked Priority 4, the Commission will “strongly disfavor”: (a) any change that would result in the net loss of third, fourth, or fifth reception service to more than 15% of the population in the station’s current protected contour; and (b) any proposed removal of a second local transmission service from a community with a population of 7,500 or greater.

There’s more. Applicants will have to set forth the size of the populations that would gain and lose service, together with the numbers of services those populations will receive if the application is granted. Historically, in this context the Commission’s concern has topped out if at least five other services were shown to be available to a given area; that is, once a proponent could show that at least five services were available, it could stop counting. No longer. Here’s how the FCC describes the showing it would expect in a proposal to provide a 21st new reception service to 500,000 people while removing the sixth reception service from 50,000:

A detailed summary should suffice, for example, to point out that 50,000 people would receive 20 or more services, 10,000 would receive between 15 and 20 services, 7,000 would receive between 10 and 15 services, etc. The showing should, however, state what service the modified facility would represent to the majority of the population gaining new service, e.g., the 16th service to 58 percent of the population, and the corresponding service that the majority of the population losing service would lose, e.g., 60 percent of the current coverage population would lose the ninth reception service. New service or service losses to underserved listeners should be detailed.

The Presumption is, by its very terms, rebuttable presumption. Like all rebuttable presumptions, it can be, um, rebutted. But to do so, a proponent must make a “compelling” show. You can start with a Tuck showing, but that may not be enough. The Commission has said it will scrutinize Tuck showings more rigorously “than has sometimes been the case in the past”. For example, an applicant “should submit actual evidence of the number of local residents who work in the community, not merely extrapolations from commute times or observations that there are businesses where local residents could work if they so chose.”    

Proposals for New/Major Mod AM Facilities. Like proposals to change community of license, applications filed during an auction window for a new AM station or major changes of an existing station will be subject to the Presumption. In such cases, applicants have historically been able to prevail without going to auction if they can demonstrate up front that their proposal is preferable on Section 307(b) grounds. Factoring in the Presumption will likely make such auction-free results more difficult to achieve. 

As with community of license changes, the Commission will consider not only whether the proposal itself would serve the urban area, but also whether the applicant might be able to realize such service through a minor mod of the proposed facilities. In assessing the hypothetical potential for such service, the Commission will consider only whether the applicant could file a minor mod specifying the same site and a frequency available at the time the filing window closed without changing the proposed antenna configuration.

With respect to Priority 4, large service population differentials between competing applicants, without more, will not be sufficient to secure a dispositive Section 307 (b) preference. But an AM applicant that will provide third, fourth and/or fifth reception service to at least 25% of the population within its proposed primary service area and has specified a community of license with no more than two local stations may receive a dispositive Section 307(b) preference. 

An AM applicant also may, but is not required to, submit something called a Service Value Index (SVI) showing. This complicated (indeed, geeky) formula takes into consideration the population served and the number of reception services received by segments of that population. In order for an AM applicant to prevail with an SVI showing, it must demonstrate a 30% differential between its proposal and the next-highest-rated proposal.

The Presumption and the other policies and procedures adopted in the Second R&O will not be applied to the applications still pending from the AM Auction 84 window, which closed in 2004. But they will be applied the next time an AM window is opened.

The Commission also formally codified a previously informal standard used to determine when the nighttime proposals included applications for new AM stations or major changes of existing stations are mutually exclusive. Detailed explanation of this is best left to the engineers. According to the Commission, two applications will be deemed mutually exclusive if either application’s nighttime proposal would enter into the 25% exclusion RSS nighttime limit of the other. That will be the case even if each applicant could still provide the requisite nighttime coverage of its community of license.       

FM Allotment Proposals. The Presumption and the policy under Priority 4 of putting heavier emphasis on reaching underserved populations (as opposed to simply reaching a greater total population) will be applied immediately to all pending petitions to amend the FM Table of Allotments, all other open FM allotment proceedings and all non-final FM allotment orders – except any non-final FM allotment proceeding in which the Commission has already modified a radio station license or granted a construction permit.

FM Translator “Band-Hopping” Applications. The FCC has decided it does not like it when the owner of an unbuilt or relatively new FM translator seeks to “hop” in or out the NCE reserved portion of the FM band (88.1 MHz to 91.9 MHz). The Commission is concerned that that practice might reflect an effort by some applicants to game the system. For example, an applicant might apply during a filing window for translators in the non-reserved portion of the band. With a non-reserved permit in hand, it could then modify to the permit to hop over to the reserved portion and thereby take advantage of certain less strict regulations applicable to the reserved portion. 

The Commission is not enthusiastic about such initiative. According to the Second R&O, the practice wastes staff resources and otherwise is, well, not a good thing.  So an application to change an FM translator’s frequency from the non-reserved potion of the band to the reserved portion or vice versa may now be filed only by an FM translator station that has been (a) licensed (or for which a licensee application has been pending) and (b) operating for at least two years. (Note, however, that the rule language adopted by the Commission makes no mention of any two-year holding period. If the FCC really does want to impose such a limit, we may be seeing an erratum in the near future spelling that out officially.)

Tribal Priority. The Second R&O also adopted certain changes, and proposes other changes, regarding the Tribal Priority which the focus of last year’s preliminary action in this proceeding. Since the Tribal Priority is available only to a very limited universe of applicants (i.e., an applicant  that is itself an Indian Tribe or of which the majority owner is an Indian Tribe), we will leave to another time the discussion of this topic, although we stand ready to field any questions that come our way.

The Second R&O is a sweeping action which reflects the Commission’s determination to stem the flow of radio service toward urban, and away from rural, areas. Whether – and if so, for how long – these changes will serve that purpose remains to be seen. 

According to the Second R&O, all the changes made in the order will become effective as soon as it’s published in the Federal Register – except for one aspect of the Tribal Priority rule, which will require prior OMB approval. It’s not clear, though, that other changes – including, e.g., some of the new certification requirements – may not also require OMB approval, as they could be construed to be new “information collection” requirements. The Second R&O doesn’t address that possibility. Check back here for updates on these and other developments on this front.