FCC finally sets eligibility guidelines for set-aside Sirius/XM channels
Look for diversity to start raining down from the skies. The FCC has finally filled in the details for implementation of the Sirius/XM set-asides which were initially approved, in non-detailed terms, more than two years ago. Those new rules are set to be implemented by April 17, 2011.
But the diversity we’ll be seeing may be different from the diversity that some folks might have expected.
Back in 2008, the FCC decided to let XM and Sirius merge. In response to objections that maybe, just maybe, reducing the number of satellite radio services from two to one might reduce competition and diversity, XM and Sirius took a bold step: they made a number of “voluntary” commitments aimed at defusing those objections. (We put “voluntary” in quotes here because the Commission’s 2008 order granting the merger made clear that, without those commitments, the merger would not have been approved.) One of those commitments involved setting aside 4% of the capacity on each of the Sirius and XM platforms for long-term leases for noncommercial educational (NCE) programming and programming by one or more “Qualified Entities”.
The term “Qualified Entity” was defined by Sirius/XM as “any entity that is majority-owned by persons who are African American, not of Hispanic origin; Asian or Pacific Islanders; American Indians or Alaskan Natives; or Hispanics.”
The Commission approved the merger with those commitments attached; it also set a deadline for implementation of the commitments, but told the parties it would get back to them relative to just how that condition would be implemented. That was in July, 2008. Since then, the FCC has repeatedly, on its own motion, extended the implementation deadline while struggling to work out details – thereby illustrating the truth of the old saying that “the devil is in the details.”
One of the thornier details confronting the Commission: the definition of “Qualified Entities”.
The definition which Sirius and XM came up with (noted above) was explicitly race-based. Not surprisingly, the constitutionality of such a provision was questioned by some and defended by others. The defenders argued that the racial/ethnic identity of programmers would promote diversity. Challengers, on the other hand, argued that such governmental race/ethnicity-based decisionmaking is very likely unconstitutional under the Fifth Amendment’s equal protection clause.
The Commission decided that it would rather switch than fight. Preferring to avoid prolonged litigation on the constitutionality of the definition of “Qualified Entity”, the FCC has opted instead for race-neutral criteria. Gone are references to race or ethnicity. Now, a Qualified Entity is one that does not share ownership, officers, directors, or employees with Sirius/XM and which has not had a relationship for the delivery of programming to Sirius/XM within the past two years. While certain constituencies are sure to be unhappy about this decision, as a practical matter it has eliminated further years of potential litigation-induced delay.
(An interesting aspect of the newly-announced definition: broadcast licensees are now eligible for some of the set-aside channel capacity.)
Having expanded the universe of potential channel lessees considerably, the Commission also decided to let Sirius/XM pick and choose from among the Qualified Entities to decide who the lucky ones will be. As long as Sirius/XM sticks to certain established guidelines, it gets to make the call. The Commission figures that Sirius/XM will be better able to determine whether any potential lessee might create technical issues and otherwise have the wherewithal, financial and otherwise, to follow through on its proposal. (By deferring to Sirius/XM, the FCC manages to dodge yet another potentially sticky Constitutional issue – this time involving the First Amendment.)
Among the criteria which the FCC expects to use Sirius/XM are whether:
- the lessee would provide a new source of programming or be a new entrant;
- the lessee’s programming would serve historically underserved groups;
- the lessee would provide a diverse viewpoint; and,
- the lessee would, in Sirius/XM’s reasonable judgment, be able to meet its obligations and delivery programming throughout the entire lease term.
Leases available for the set-aside capacity will run for at least five years. And get this – Sirius/XM can’t charge lease payments for any of these set-aside channels (although it may impose "customary terms, fees and conditions", whatever those may be).
The Commission will monitor to ensure a fair and transparent decision-making process. Sirius/XM must set up a public website or similarly accessible source to inform interested entities about the application process (e.g., how to apply, eligibility requirements, selection criteria). No more than half of the available channels may be leased to broadcast licensees, and no more than four channels may be leased to any one entity. Sirius/XM may divide up channels into share-time arrangements or not, as it sees fit, and may offer different deals to different programmers.
Once Sirius/XM picks lessees for the set-aside channels, it’s going to have to submit its selections to the FCC’s Media Bureau before inking any leases. The Bureau’s role will be not to second-guess Sirius/XM’s choices, but to confirm that the correct selection process was followed. If the Bureau doesn’t disapprove within 45 days, then the selections will be deemed to be approved – at which point Sirius/XM may enter into the leases.
The set-aside channels, which will not be subject to editorial control by Sirius/XM, must be available to all subscribers. Sirius/XM must allow its lessees to advertise, but it may not require that them to accept advertising from Sirius/XM other than normal cross-promotion of other channels on the system. All of the leases must be in place by the April 17, 2011, implementation deadline, though the commencement date of service is still up in the air.
Anyone potentially interested in applying for some of the set-aside capacity (and, with no lease payments payable, who wouldn’t be interested?) should keep an eye out for announcements from Sirius/XM. But be aware that anyone disappointed by the FCC’s order could seek reconsideration or review of it, which might gum up the works for a while longer. We’ll try to keep you posted as developments warrant.