Commission looks to update its methodology for calculating regulatory fees, but proposes a possible alternative approach to cushion the blow this year.

One of the time-honored rites of spring – at least at the FCC – is the release, every April or May, of a Notice of Proposed Rulemaking setting out the schedule of regulatory fees the Commission thinks it may impose on all regulatees come August-September. Historically, we here at CommLawBlog have tried to be Johnny-on-the-spot in letting our readers know the fees that have been proposed, even though the fees that eventually adopted (usually in July) may vary here and there from the initial proposal.

But this year is different.

Instead of providing one set of proposed fees, the Commission has given us a Notice of Proposed Rulemaking (NPRM) laying out two sets of possible fees . . . because it’s in the process of a much-needed update of its calculation methodology, and it’s still not sure: (a) whether the new approach is exactly right and, even if it is, (b) whether that new approach should be applied this year. Depending on which method it ultimately adopts, the fees for some broadcasters could swing by a couple of thousand dollars. As a result, we’ve had to prepare a more elaborate table reflecting the proposals, so we’re a day or so behind our usual curve. Please bear with us.

To understand what’s going on here, you have to understand how reg fees are calculated.

The FCC is required by Congress to collect enough reg fees to, in effect, cover the FCC’s costs of operation. Those are determined by Congress through the annual appropriations process. This year the FCC’s nut is $339,844,000. (Note that the FCC’s actual costs are technically lower thanks to the sequester that kicked in earlier this year, but the nut remains the same because of Congress’s appropriation.)

Starting with the total amount it must collect, the Commission then allocates that amount based on the number of full-time FCC employees (FTEs) devoted to the various fee categories carried out by its various bureaus. We don’t need to get into the nitty-gritty of that particular process – which even the Government Accountability Office acknowledged has been less than fully transparent – except to note that the FTE figures the FCC has been using date back to 1998. Those interested in delving more deeply here may want to check out our post from last fall where we addressed the subject in more detail.

We can all agree (as the Commission itself concedes) that things in the regulatory world have changed a bunch in the last 15 years. As a result, maybe reliance on 15-year-old FTE data isn’t the best, or at least the most accurate, way to determine reg fees.

That being the case, the Commission has revised its FTE numbers (using September, 2012 figures) and its overall inter-Bureau allocations (with particular focus on International Bureau activities, which relate in large measure to regulatees across several other bureaus). The result of these revisions: a new allocation of costs that would reduce the reg fee burden to be imposed on regulatory activities associated strictly with the International Bureau, but substantially increase the share of costs to be borne by Media Bureau and Wireless Bureau regulatees.

In its NPRM the Commission specifically seeks comment on its revised approach to cost allocation.

The Commission recognizes that its re-jiggered allocation method would lead to significantly higher fees for some of its regulatees. Because of that, it is proposing to cap rate increases at 7.5% for this year. But presumably recognizing that any change – and particularly substantial change – can cause discomfort, the FCC is also suggesting that it might instead maintain its historical allocations at least for purposes of calculating the 2013 fees. The end result: two different sets of proposed fees to consider and comment on.

We have laid out the two proposed sets of fees, along with last year’s fees (for comparison purposes) in a couple of tables you can find here. It’s likely that most broadcasters would favor keeping the previous allocation method, since that would result in lower fees for all radio licensees and the vast majority of TV licensees. The difference for some TV folks would be significant: VHF licensees in the Top 10 markets would be on the hook for more than $4,000 more under the updated approach; for Markets 26-50, the difference on the VHF side would be more than $3,000. Bear in mind, though, that it is pretty much a given that the Commission will implement its adjusted allocation method eventually.

Beyond the methodological questions, the FCC is proposing additional changes in the reg fee drill. Of particular interest to TV licensees is the notion of treating VHF and UHF stations as essentially identical for reg fee purposes. This is based on the perception that the historical preference for VHF stations has largely, if not entirely, disappeared as a result of the 2009 DTV transition. Reg fees for TV stations would still be tiered based on market size, but no distinction would be made between UHF and VHF. The Commission is asking for comments on this, and promises that, if the proposal is adopted, it won’t kick in until 2014.

With respect to TV translator, LPTV and Class A TV and TV booster stations, however, the Commission plans to continue charging only one fee per station, even if the station is transmitting both an analog and a digital signal. This is a hold-over from pre-transition days, and will be re-visited in future years as any remaining analog operations switch over to digital-only.

And perhaps most jarring for the Luddites and traditionalists among us: the Commission is proposing to stop accepting paper and check transactions for reg fee payments, starting as of October 1, 2013. This is in keeping with an overall governmental shift toward a “paperless Treasury”. Under the new approach, the Commission would not accept payments by check (not even cashier’s checks!) or any accompanying hardcopy forms (e.g., Form 159) in connection with reg fee payments. Those of you with a couple of checks still left in the checkbook may take heart: since this change would not take effect until October, and since 2013 reg fees will have to be paid sometime in August or September (if the FCC’s past practice holds true), you’ll still be able to make one more paper payment before moving ahead into the 21st Century.

Comments on all of the proposals set out in the NPRM are due by June 19, 2013; reply comments are due by June 26. Again, the NPRM – and the fees described in it – are still only proposals. We won’t know the final fees until sometime this summer, and we won’t know the deadline for paying the fees until sometime later – although the fees are generally due in late August or early/mid-September. Check back here for updates.