[Editor’s Note:  This is part 1 of a two part series.  Part 2, addressing repack funds for FM stations, will be available tomorrow]

As we reported in August 2018, the Federal Communications Commission (“FCC” or “Commission”) at that time released a Notice of Proposed Rulemaking laying out how it would parcel out reimbursement funds for Low Power TV (LPTV), TV Translator, and FM stations impacted by the post-incentive auction repacking of full-power television stations.  The Commission has now adopted an Order with the final rules governing such reimbursements.  While the rules are largely as proposed in the NPRM, there are a few crucial differences.  This post provides an updated report on how reimbursements will be issued.

Back in March 2018, Congress passed the Reimbursement Expansion Act (REA), which allocated additional funds to be used to reimburse broadcasters involuntarily affected by the post-incentive auction repacking of television stations. In addition to providing additional money for full-power and Class A stations, the REA for the first time expanded the universe of stations eligible to receive reimbursements to include: LPTV stations, TV translator stations, and FM radio stations.

In the REA, Congress allocated a total of 1 billion additional dollars, with $600 million for the fiscal year 2018 and an additional $400 million in 2019. While the majority of these funds are reserved for full-power and Class A stations subject to involuntary repacking, the REA did authorize the Commission to award, in the fiscal year 2018, up to $150 million to LPTV and TV translators, and up to $50 million for FM stations – along with $50 million for the Commission’s own consumer education efforts. For the fiscal year 2019, the REA did not provide any specific allocations of the $400 million total.  In the Order, the Commission determines that it has the authority to include LPTV, TV Translator, and FM stations as recipients of those funds, but also determines that it will prioritize payments to full power and Class A TV stations and MVPDs before reimbursing LPTV, TV translator, or FM stations from 2019 funds.  In other words: if the available funds are not sufficient to reimburse all eligible stations, LPTV, TV translator, and FM stations may receive less than 100% of their otherwise eligible costs.

As was proposed in the NPRM, the Order adopts rules governing which stations are eligible for reimbursement, and what kinds of expenses can be reimbursed, as well as the procedures eligible stations must use to apply for and receive funds. Because the rules on eligibility for LPTV/TV translators differ from those for FM stations, we will be posting two separate articles – one addressing the LPTV/Translator rules and one the FM rules.

I. Eligible Stations

The Order limits the universe of LPTV and TV translator stations eligible to receive reimbursements to those that receive a construction permit resulting from an application during the Special Displacement Window that closed June 1, 2018. Because their applications were treated as if they had been filed during the window, those stations who were subject to displacement before that window opened and filed early displacement applications (with appropriate waivers) will also be eligible. Eligibility will be limited not just to those stations that filed during the window, but to those whose displacement applications have been granted – although this will include stations whose initial displacement applications were dismissed, but who are later able to re-file for displacement relief and obtain a grant, as long as they had originally been eligible to file in the initial Special Displacement Window.  LPTV and TV translator stations, built or unbuilt, that did not file in the now-closed window because they were not eligible for any reason or simply failed to file will not be eligible for any reimbursement, even if they are involuntarily displaced and are ultimately authorized to move to new channels.

Eligible stations also must have been operating pursuant to a license (or a pending covering license application) for at least nine of the 12 months prior to April 13, 2017. For purposes of this determination, the Commission will consider a station to have been “operating” as long as it was broadcasting at least two hours per day and 28 hours per week; a standard it incorporates from the minimum operating schedule requirements applicable to full-power television stations. Although recognizing that the LPTV rules themselves do not include minimum operating hours requirements, the Commission in the Order determines that the language of the REA requires the imposition of some minimum operating hours requirement for reimbursement eligibility and subjects LPTV and TV translator stations seeking funds to an on-air requirement that they may never have contemplated would affect them.

The Order also clarifies that analog-to-digital replacement translators, assuming they meet other eligibility criteria, will be able to apply for reimbursements. Digital-to-digital replacement translators will not be eligible, as no such translators were authorized in time to satisfy the “licensed and operating” requirements for reimbursement.  The Commission also takes pains to note that Class A stations, which are already eligible for reimbursement under the existing program, will not be able to apply for funds allocated to LPTV and TV translator stations.

II. Eligible Costs

Under the REA, the Commission was authorized to reimburse costs “reasonably incurred” as a result of the repack. In the Order, the Commission determines that it will reimburse costs incurred as a result of the involuntary displacement of LPTV and translator stations by full power and Class A station’s initial post-auction applications and any “maximization” applications.

For displaced LPTV and translator stations, the FCC will reimburse eligible stations’ costs actually incurred in building out approved displacement facilities. Both hard (e.g., equipment) and soft (e.g., legal and engineering fees) costs would be reimbursable, with no priority given to hard costs over soft (a change from the proposal in the NPRM, which would have prioritized hard costs).  No reimbursements will be provided to cover lost revenues, a restriction also applied to full power and Class A station reimbursements, nor may stations seek reimbursement for the cost of time spent by their own personnel. While the Order also confirms that the Commission will in general not reimburse licensees for that portion of their costs attributable to upgraded equipment capability, it does note that in some cases (i.e. stations replacing very old equipment), it may be impossible for licensees to find equipment that does not include some level of upgrade.  In such cases, the Order notes that reimbursement may be provided on a case-by-case basis. (In other cases, stations are still allowed to purchase upgraded equipment, but they may seek reimbursement for only the lesser costs they would have incurred had they purchased the same kind of equipment they previously operated).  Also like full power and Class A stations, LPTV and TV translator stations will be encouraged to reuse existing equipment wherever possible and will need to justify any new equipment purchases.

Unlike full power and Class A stations, LPTV and translator stations will not generally be able to receive reimbursement for interim facilities, based on the Commission’s conclusions that such facilities would largely not be necessary for LPTV and translator stations.  While the Commission stands by this conclusion, it acknowledges in the Order that there may be isolated cases of LPTV stations requiring interim facilities (such as stations forced to abandon their licensed channel by 600 MHz auction winners but cannot immediately move to their approved new channel available until full power and Class A stations in or near their market implement their own transition to new channels), and agrees to consider such requests on a case-by-case basis. Similarly, the Order provides that requests for reimbursement of expenses related to new or modified STL or microwave facilities will be considered on a case-by-case basis.

As proposed in the NPRM, only costs incurred after January 1, 2017, would be reimbursable. Costs incurred in resolving mutually exclusive applications (whether by settlement or auction) will not be reimbursable, although costs to build out amended proposals approved pursuant to a settlement would be.

Finally, recognizing that some LPTV and translator stations have received, or will receive, funds from T-Mobile and other wireless licensees causing displacements, or through other sources such as state grants, the Commission concludes that stations may only seek reimbursement for costs that are not reimbursed from other sources. Prior to seeking reimbursement from the Commission, licensees will be required to seek funding from such other sources and will be required to certify in any reimbursement requests that the licensee has not received, and does not expect to receive, reimbursement from any other source.  Licensees will be allowed to seek reimbursement for costs that exceed the amounts paid by third-party sources.

III. Reimbursement Procedures

As proposed in the NPRM, the Commission also adopts multi-step reimbursement procedures for LPTV and TV translator stations similar to those applied to full power and Class A television stations. These procedures require that all stations believing they are or will be, eligible to receive funds first file an Eligibility Certification using the FCC’s online LMS system. These Eligibility Certifications will document that the applicable station is, in fact, eligible for reimbursement. LPTV and TV translator stations, and stations will be required to prove that they were on-air during the required time frame by documenting their programming aired, providing power bills, or other means.

Licensees seeking reimbursement will next be required to file an initial Reimbursement Form identifying their existing broadcasting equipment, along with the types and estimated amounts of costs they expect to incur and for which they will seek reimbursement. The Commission has also adopted a new catalog of approved cost amounts to apply to LPTV and TV translator stations, as was done for full power and Class A stations, and intends to incorporate that catalog into the revised Reimbursement Form. Because many licensees will have incurred significant actual costs by the time the FCC adopts and releases these reimbursement forms, the Order confirms that licensees may submit actual costs where applicable instead of estimated costs.  Stations seeking more than the amounts in the FCC’s catalog will be required to demonstrate why they cannot reasonably remain within the catalog limits.

Once all Eligibility Certifications and initial Reimbursement Forms have been submitted and reviewed by the Media Bureau, the Commission plans to issue an initial allocation to each eligible station. As was the case with full-power television reimbursements, this allocation will be based on a to-be-determined percentage of anticipated and approved costs. In the event the total amount of reimbursement funds is not sufficient to fulfill all requests, the Commission delegates to the Media Bureau the task of determining what costs should be prioritized, although it directs that hard costs not be prioritized over soft costs generally.

Once allocations are made, licensees will be entitled to draw down funds by submitting documentation of actual incurred costs. As with full power and Class A stations, this will be done by updating online a licensee’s previously filed Reimbursement Request form. Prior to receiving any reimbursements, eligible licensees will also need to file confidential information about their destination bank account for payments, using the FCC Form 1876 and the CORES Incentive Auction Financial Module.

Once a licensee’s final payment is made, which is supposed to occur by November 13, 2020, but may be extended until no later than July 3, 2023, the licensee will be required to retain relevant documentation for a period of ten years. To attempt to prevent fraud, waste, and abuse, the Commission also, as it has done with television licensees, reserves the right to audit licensees who have requested and received reimbursement funds.

IV. Effective Dates

The Order is due to become effective on April 25, 2019.  However, the filing process will not begin until the Commission has finalized, and received Office of Management and Budget approval for, the Eligibility Certifications and Reimbursement Forms. Those submissions will then need to be reviewed, along with required financial information, before licensees can receive reimbursements. Nonetheless, any licensee expecting to claim reimbursement money should begin confirming their eligibility and in the meantime should retain documentation of any expenses it incurs.