‘Leased’ Access or ‘Least’ Access? FCC Chucks 2008 Order and Asks What It Should Do Next

Photo courtesy of the Chris Brown using the Creative Commons Licence.

Requirements that cable television systems make a certain amount of channel capacity available for leasing to non-affiliated programmers have been in place since the time when George Orwell predicted that “Big Brother” would control the world – 1984. The leasing rules have never brought about an active leasing marketplace. The FCC is now taking another look at the situation, issuing a Further Notice of Proposed Rulemaking in an old 2007 docket and inviting comments on whether to stir the soup, add ingredients, or maybe even dump out the pot and try some other recipe.

The availability of cable channels for commercial leasing is embodied in Section 612 of the Communications Act (47 USC § 532). In 1992, Congress amended the statute to allow the FCC to regulate leasing rates, which might suggest a desire to prohibit price gouging; but they threw in a little twist by saying that the rates must not adversely affect the cable operator, its financial condition, or its market development. Those words opened the door to legal skirmishes about what it means not to affect financial condition adversely. The rate rules adopted in 1993 were upheld in court, establishing that cable operators can’t be required to make less on leased access than they can make from other uses of a channel. When the FCC revised the rate rules in 2008, cable interests went to work again and won a court stay, based on potential harm caused by low rates and the possibility that leased channels could displace other programming. They also got the Office of Management and Budget (OMB) to take the rather rare step of disapproving several of the provisions based on the burden they imposed on cable operators. Fast forward to today: the 2008 rules remain subject to the judicial stay and without OMB approval, and the old 1993 rules remain in effect.

What’s wrong with the 1993 rules? Well, almost no one could afford to lease channels the way they were priced, so it was pretty clear that if Congress intended to encourage leased access, that goal was not achieved. Also, the FCC’s rate rules specified only maximum permissible rates. Cable operators were permitted to discriminate, offering lower rates to lessees they preferred, and only a few channels had to be made available for leasing; so it was difficult in practice for programmers who were not in favor to lease channel capacity. For example, some people thought that low power TV stations without must-carry rights might be good prospects for leasing channels, but most couldn’t pay the freight. From the point of view of cable operators, however, they were properly not required to lose money, as they are not common carriers; and the law recognized that cable channels are the property of the cable operator, which can steer their use toward content that would likely attract the most viewers.

The FCC now figures that after 10 years of a litigation stalemate, it’s time to scrap the 2008 rules and figure out what it oughtta, shouldda, wouldda do. It asks what the state of the leasing market is today and whether market conditions, including the availability of competitors to cable, indicate that cable leasing still needs to be regulated. The statute is still in place, so channels must be made available for leasing; but the FCC doesn’t have to regulate leasing in detail.

Continue Reading

U.S. v. AT&T and Time Warner: The Death of the ‘Must-Have’ Programming Theory

In a decision issued Tuesday, Judge Richard Leon of the U.S. District Court for the District of Columbia approved the proposed merger of AT&T and Time Warner. In doing so, he rejected the “must-have” programming theory that was the core of the government’s antitrust case seeking to block the merger. The “must-have” programming theory asserts that multi-channel video programming distributors cannot succeed without access to certain television programming (in this case, Time Warner’s popular cable channels such as HBO, TNT, TBS, CNN, etc.), and that if owners of such “must have” programming deny a distributor access to that programming on competitive terms, that would destroy the distributor and deeply harm competition in the video marketplace.

That theory was rejected on Tuesday when Judge Leon ruled that the merger would not violate antitrust principles. But, this was not the first venue where the “must-have” programming theory failed: cable TV and satellite operators have asserted the theory for years in proceedings at the FCC, in an attempt to regain some leverage against TV stations in retransmission consent negotiations, but the FCC never endorsed it. Tuesday’s court decision may be the final blow to the “must-have” programming theory, but if so, the theory was ultimately killed by recent changes in the video marketplace, particularly Internet distribution of diverse and smaller programming packages.

In rejecting the government’s antitrust claims, Judge Leon first noted the importance of the recent rise of Internet-distributed “over-the-top” video programming packages, including “lower-cost, better-tailored programming content … of leading [subscription video on demand providers – “SVODs”] in particular, including Netflix, Hulu, and Amazon Prime ….” Judge Leon also pointed to the growth of “cord cutting” and “cord shaving,” that is, when a household “departs a traditional [multi-channel video distributor—“MVPD” such as a cable TV or satellite operator] for one of the many virtual MVPDs, which … typically carry smaller bundles of networks at lower price points.”

Judge Leon then laid out the government’s theory of market harm from a merger: that when Time Warner negotiates with rivals of AT&T’s MVPDs (DirecTV, DirecTVNow and AT&T U-Verse), it would have anti-competitive leverage over the rivals allowing it to either charge supra-competitive rates or to withhold the programming from the rivals entirely. Any lost fees to Time Warner from withholding programming would be, according to the government, offset by new benefits to AT&T: “1) some of the rival distributor’s customers would depart or fail to join the distributor due to the missing [Time Warner] content; 2) some portion of those lost customers would choose to sign up with AT&T’s video distributors (which would have [Time Warner programming]) and; 3) AT&T would profit from those gained subscribers.” Judge Leon concluded, however, that the evidence produced in the trial did not support that scenario. Rather, he pointed to evidence that some distributors, such as Dish’s virtual MVPD Sling, offer packages without “must-have” programming from broadcast TV network affiliates, and competitive distributors such as Comcast testified that they saw no such risk from a Time Warner-AT&T merger. Judge Leon also noted that “the ‘must have’ status of [Time Warner] content varies based on whether the content is available for viewing through other means, such as over the internet…” and pointed to consumer direct access to March Madness basketball games and HBO via Internet streaming. Judge Leon also addressed the impact of the growing market for Internet distribution of smaller, less expensive “skinny bundles” of video programming to personal mobile wireless devices from Sony’s Playstation Vue, Hulu Live, Google’s YouTube TV, etc. ̶ holding that the evidence showed that AT&T intends to embrace these providers to increase profits from Time Warner programming.

This is not the first time, though, that the “must-have” programming theory has failed to gain traction. Continue Reading

FCC Advances Toward 5G

Photo by freddie marriage on Unsplash

Not long from now, your new phone will come with 5G mobile data service: dizzyingly fast with near-zero latency (delay). But don’t expect service everywhere. 5G needs high frequencies for its high data capacity; but the physics of those frequencies means the range will be short, a few hundred meters at most. This will require miniature cell towers in each city block, mounted on light poles or the sides of buildings – that’s fine for downtown, but maybe not out in the suburbs. Indoor service will need an indoor base station, so 5G will work in well-appointed office buildings, but probably not your neighborhood restaurant. Where it does work, though, those silly cat videos will download in a flash.

The FCC calls 5G Upper Microwave Flexible Use Service, or UMFUS. The agency is doing the hard and thankless work of identifying radio spectrum for UMFUS, figuring out how UMFUS can share with other users of the bands, and working out operating rules to promote widespread coverage with a minimum of interference.

The FCC took a big step forward with its catchily-titled “Third Report and Order, Memorandum Opinion and Order, and Third Further Notice of Proposed Rulemaking.” This is a long, dense document in itself, and the fifth major release in a complex proceeding. All we can provide here is a superficial summary.

There are five UMFUS frequency bands – 24, 28, 37, 39, and 48 GHz – and two more proposed at 42 and 51 GHz. Three of the bands – 24, 28 and 39 GHz – are repurposed. The FCC auctioned off licenses for fixed microwave use of these same bands in the 1990s and 2000s, but later took back thousands of licenses because the auction winners had not met their obligations to construct facilities. The fixed licenses still in force in the 28 and 39 GHz bands have been converted to UMFUS licenses. Plans are underway to re-auction the 24 and 28 GHz bands.

The FCC activity at this stage is mostly tying off loose ends: adopting rules proposed earlier, denying reconsideration of rules adopted earlier, and proposing new rules to close out controversies. Even by CommLawBlog standards, this stuff is deep in the weeds. It won’t interest everyone. So we’ve kept it simple and listed the more important elements below for readers who are following the proceeding. Still, if any of this affects you or your business, we urge you to make a pot of strong coffee, click on the link above, and sit down for a long night of reading. Continue Reading

July 18 Filing Deadline Approaching for FSS Receive Only Earth Stations in the 3.7-4.2 GHz C Band

The filing window for receive only C Band earth stations closes July 18. As a reminder, the FCC instituted a filing freeze on applications in the 3.7 – 4.2 GHz Band but allowed for a 90-day filing window exception (which we wrote about here) to allow the filing of new or modification applications for C band receive only fixed-satellite (FSS) earth station licenses.

Entities operating such FSS earth stations may file an application to register or license the earth station, or they may file an application to modify a current registration or license. During this filing period the FCC has also waived the frequency coordination requirement for the applications.

This filing window was initiated as the Commission is in the middle of an inquiry on whether it should allow permitting mobile broadband use in the C Band.

If you need assistance in filing your application for the licenses or registration, contact us at 703-812-0400.

FM Class C4 Station Proposal Hits the Streets

The FCC has launched a Notice of Inquiry looking toward the creation of a new “C4” class of FM broadcast station, with an effective radiated power (ERP) limit of 12 kW.

Although recent press reports suggested that the proposal was getting nowhere at the FCC, someone must have sent in a turn-around specialist, and the C4 idea has now been put out for public comment. The proposal is very important to many Class A stations, now limited to 6 kW ERP, that have difficulty competing with more powerful neighbors. If you were a 6 kW David in a market full of 50 kw or 100 kw Goliaths, you would likely perk up fast at the opportunity to double the power in your slingshot.

To some extent, the FCC is for now only is kicking the can down the road, as the proceeding is only an inquiry and not a rulemaking. It won’t result in actual new rules until a subsequent rulemaking proceeding is initiated and concluded. Moreover, the FCC suggests that its enthusiasm about creating a new opportunity for FM improvement is tempered by concern over the potential impact on FM translators and that might be displaced from their channels if full power stations are allowed to upgrade. In other words, how many stations might benefit compared to how many might be hurt?

C4 enthusiasts should first note that the FCC has proposed to allow 12 kW ERP only in Zone II. The country is divided into three geographic zones: I, I-A, and II. Zone I cuts a swath from Michigan and Wisconsin eastward across to New England. Zone I-A includes most of California and all of Puerto Rico, and the U.S. Virgin Islands. If your station is in the densely populated northeast or California, you are not in the game so far, although we would not be surprised to see stations in those areas file comments saying “no fair leaving me out.” Continue Reading

FCC Enforces Against Drone Radios

We amateur drone pilots are well schooled in the dangers. We don’t fly close to airports, near power lines, or anywhere in the no-drone-zone that stretches across the entirety of the Washington D.C. region (including, sadly, our own CommLawBlog rooftop deck, which would otherwise be a great place to fly).

But we don’t worry much about violating FCC rules. Drones come under FAA jurisdiction, right? – and that’s a whole different set of rules.

True, the flying-in-the-air part is an FAA responsibility. But along with the video cameras and flashing lights, drones also carry radio receivers and transmitters: receivers so the operator on the ground can control the flight, and transmitters to send video back to the ground. Both the ground-based control transmitter and the airborne video transmitter come under FCC regulation.

The inexpensive hobby drones sold to consumers mostly use unlicensed radios in the same bands that carry Wi-Fi and Bluetooth. The transmitters need FCC equipment approval, but then anyone can sell them and use them. The bigger professional drones often use licensed frequencies for greater power, range, and reliability. In addition to FCC transmitter approval, these need a license for the particular frequencies they use (or permission of a licensee). A third category operates on amateur radio frequencies, which also require a license – one that many consumers have – but not equipment approval.

A collection of related companies that share the name Hobby King sell drones and model airplanes, along with the related radio gear. Their video transmitters are popular for drone racing. But they are less popular at the FCC, which says that some are capable of operating outside the unlicensed and amateur bands, and at higher-than-allowed power levels.

After receiving complaints, the FCC began investigating Hobby King in 2015, and by 2016 had determined the company was selling noncompliant transmitters. A Citation and Order told Hobby King to stop selling the devices and formally warned it that further violations could bring fines and seizure of equipment.

The complaints kept coming. In 2017, the FCC sent Hobby King a Letter of Inquiry. Typically these ask the recipient what devices it sells and why the recipient thinks it is legal to sell them, and requires an affidavit that makes the recipient liable for perjury. Hobby King made only a partial response, one the FCC found unsatisfactory. Following two more invitations to respond in full, the FCC issued a second Citation and Order telling Hobby King to come into compliance. Hobby King ignored it. Continue Reading

FM Translator Reforms Comment Deadline Set for July 6

A summary of the FCC’s proposed rule changes regarding procedures to resolve complaints of interference caused by FM Translators to primary stations was published in the Federal Register today.  That event established July 6 as the deadline for initial comments and August 6 as the deadline for replies.

The FCC proposals are designed to streamline the interference resolution process. The proposed changes address both 1) what will be required in filing complaints and 2) the options available to resolve interference.

For more in-depth analysis of this proposal, CommLawBlog has it all broken down here, courtesy of Dan Kirkpatrick.

If we can help you prepare comments, contact us at (703) 813-0400.

FCC Moves to Eliminate Posting of Broadcasting License

Fifty-years ago this fall, as a bewildered University of Oregon freshman, I showed up for an orientation session for newbies who wanted to be on the air at what was then student-programmed KWAX. The station’s chief engineer introduced us to the program log, told us how to take meter readings (required every half hour as I recall) and showed us where the station’s license was posted. He then stuck in our hands a study guide for an FCC Third Class Radio Telephone Operator Permit and told us to come back when we had our “Third Phone.” Third Phone and program log requirements disappeared long ago and for many years stations have had the discretion to decide when or if to take most meter readings. The only vestige of my 1968 introduction to broadcasting that has remained is the obligation for the station’s license to be posted. And that may soon be a thing of the past.

On May 10, the FCC unanimously voted to issue a Notice of Proposed Rulemaking (NPRM) suggesting elimination of various rules requiring broadcasters to post their licenses, ownership information, and contact information in a physical location. This measure is part of the Commission’s continued push in its Modernization of Media Regulation Initiative, which aims to update the regulations of the FCC.

The FCC argues that the rules on posting this type of information are “redundant and obsolete now that licensing information is readily accessible online.”

The Modernization of Media Regulation Initiative aims to also “remove unnecessary requirements that can impede competition and innovation in the media marketplace.” I don’t know that getting rid of license posting rules will foster “competition and innovation in the media marketplace,” but it will eliminate one small hassle broadcasters have had to deal with over the years.

The FCC is currently seeking comment on several issues regarding the current posting rules, including:

  • Whether the rules continue to serve the public interest (given that this information is easily accessible online);
  • Whether these rules serve any public safety purposes; and
  • Whether there is any continuing need for LPTV, FM and TV translator, and booster stations to post signs on their towers reporting the name and address of the person and place where station records are stored.

During the FCC’s May Open Meeting, Commissioner O’Rielly commented on his recent visit to One World Trade Center where he saw broadcaster licenses and authorizations “literally taped to the wall. No member of the public has access to this facility to view this paperwork, which was in fact conspicuously placed.” Similarly, Chairman Pai stated, “As a result, I’m skeptical that our license posting rules currently serve any useful purpose and look forward to reviewing comments from stakeholders discussing whether they should be eliminated.” This marks the tenth “modernization” item to be crossed off of Chairman Ajit Pai’s regulatory weed whacking efforts.

Comments on this matter are due 30 days after publication in the Federal Register.

 

FCC Establishes Funds for Post-Hurricane Recovery Efforts in Puerto Rico and the U.S. Virgin Islands

Photo by Ricardo Dominguez

The FCC on Tuesday announced the establishment of the Uniendo a Puerto Rico Fund and the Connect USVI Fund in an effort to help “rebuild, improve, and expand voice and broadband networks in Puerto Rico and the U.S. Virgin Islands.” These funds are part of the FCC’s ongoing efforts to rebuild communications networks in Puerto Rico and the U.S. Virgin Islands following two devastating hurricanes last year. In Puerto Rico alone, the government estimates that both Hurricanes Maria and Irma caused upwards of approximately $1.5 billion in damages to communications networks on the island.

In its proposal, the FCC says that it expects that “this support will provide meaningful relief to carriers in the storm-ravaged territories in a targeted and cost-effective manner.”

The Order establishes additional funding to “accelerate the restoration of communications networks” through:

  • New and immediate relief funding of $51.2 million for Puerto Rico and $13 million for the U.S. Virgin Islands to restore voice and broadband service;
  • Puerto Rico getting $699 million in additional funding over the course of a 10-year period for rebuilding, improving, and expanding voice and broadband networks in the long term;

The NPRM seeks comment on the following proposals to expand and improve broadband access:

  • $191 million in funding to the U.S. Virgin Islands over a 10-year period for rebuilding, improving, and expanding voice and broadband networks in the long term ;
  • Fixed broadband funding of $444.5 million and $254 million over three years for 4G LTE mobile broadband in Puerto Rico;
  • Fixed broadband funding of $186.5 million and $4.4 million over three years for 4G LTE mobile broadband in the U.S. Virgin Islands.

The FCC seeks specific comments on the appropriate allocation of these funds, whether this budget is appropriate, whether additional support beyond current levels will be necessary, how to ensure that service is rebuilt efficiently, whether areas that didn’t have coverage before the storm should be given it now, and how to balance competing objectives to rebuilding Puerto Rico and the U.S. Virgin Islands.

The FCC proposes that these measures will be rolled out in a two-stage process based on short (Stage 1) and long-term (Stage 2) funding requests.

To participate in Stage 1, facilities-based providers will need to submit a certification stating how many subscribers (voice or broadband Internet access service members) they served as of June 30, 2017 before Hurricanes Maria and Irma hit. Those wishing to participate and receive funding will need to provide certification and accompanying evidence through the Commission’s Electronic Comment Filing System.  The FCC proposes that participants must be designated as an Eligible Telecommunications Carrier. Stage 1 will also allocate 60 percent of funding to fixed network operators and 40 percent of the funding to mobile network operators. Providers must certify their eligibility to participate by no later than 14 days after publication of the order in the Federal Register.

To participate in Stage 2, the FCC proposes that providers would receive this funding if they had an existing fixed network and provided broadband service to these islands as of June 2017 according to FCC Form 477 data. The FCC is seeking comment on whether participation should be limited to only providers that served areas before the hurricanes.

The Wireline Competition Bureau and the Wireless Telecommunications Bureau will be responsible for distributing these funds to providers based on its number of subscribers.

Comments on these issues in addition to other general issues set forth in the Order and Notice of Proposed Rulemaking will be due 21 days after publication in the Federal Register with reply comments due 35 days after publication in the Federal Register.

FCC Proposes 2018 Regulatory Fees

As we pack up our swimming trunks and beach umbrellas for the unofficial start of summer, the FCC this week issued its 2018 Regulatory Fee Notice of Proposed Rulemaking (NPRM). This NPRM puts in motion the process for payment of regulatory fees which will likely be due sometime in September.

For the most part, the specific fees proposed for 2018 (with a few exceptions noted below) represent decreases from the amounts due in 2017. This is not surprising, since the total amount of fees collected in a year is supposed to match the FCC’s Congressional appropriation, which is also down in 2018. Fee reductions may be particularly noticeable for large-market television stations, which could save as much as about 15 percent from last year’s fees. On the flip side, the proposed fees would again hit direct broadcast satellite (DBS) providers with an additional ten cent per subscriber increase, as the Commission continues to attempt to bring DBS fees in line with those imposed on traditional cable television/IPTV operators (who now pay 77 cents per subscriber).

In addition to the specific fees proposed for 2018, the NPRM seeks comment on a few proposed changes to how fees will be calculated for various services, including:

  1. Proposing a new methodology for television broadcast regulatory fees for FY 2019: the FCC proposes calculating regulatory fees based on the actual population covered by a station’s predicted over-the-air contour rather than using the Nielsen Designated Market Areas (DMA) to define a station’s market. The FCC seeks comment on this proposal generally, and in particular on whether regulatory fees should be calculated based on the specific population covered by each station or if stations should be grouped into tiers based on population, as is currently the case for broadcast radio stations. (For those who may be interested, the FCC attaches this as an Appendix to the NPRM listing the FCC’s determination of the population served by every full-power station) Continue Reading
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