On December 10, 2020, the Federal Communications Commission (“FCC” or the “Commission”) released a Report and Order that is intended to encourage further deployment of the ATSC 3.0 Next Generation Television Standard (ATSC 3.0), and particularly to facilitate the expansion of new and innovative ancillary and supplementary “Broadcast Internet” services by noncommercial educational (NCE) stations. These Broadcast Internet services are distinct from traditional over-the-air video programming services.

The Report and Order is the culmination of a proceeding commenced last year with the Commission’s release of a Declaratory Ruling and Notice of Proposed Rulemaking (NPRM). That Declaratory Ruling clarified that a broadcaster’s lease of spectrum to a third party for provision of ancillary, non-broadcast services does not trigger attribution for the FCC’s broadcast ownership rules. In the NPRM, the Commission sought comment on several issues to enhance the growth of ATSC 3.0-enabled Broadcast Internet services. The Report and Order acts on a number of those issues. 

  1. Ancillary and Supplementary Service Fees

Except for NCE stations discussed further below, the Report and Order declines to adjust the Commission’s current ancillary and supplementary services fee of 5% of the gross revenues received by a broadcaster for any fee-able ancillary or supplementary services provided. Broadcasters must pay such fees for ancillary and supplementary services which the broadcaster charges a subscription fee or receives compensation from a third party. The Report and Order does conclude, however, that in the case where a broadcaster is leasing spectrum to a third party for ancillary services, the service fees should be calculated based on the gross revenues received by the broadcaster, rather than revenue received by the spectrum lessee. The Order also provides that to the extent a licensee and a lessee are affiliated, the Commission will attribute the gross revenue of the lessee to the licensee for purposes of calculating the ancillary and supplementary services fee, based on the share of gross revenue that is proportional to the licensee’s stake in the lessee.

  1. Noncommercial Educational Television Stations

In light of the important role that NCE stations play in providing educational programming to their communities, the Report and Order adopts several proposals designed to promote and support NCE stations’ provision of Broadcast Internet services.

First, the Report and Order provides NCE stations with enhanced flexibility to provide Broadcast Internet services alongside their required free, over-the-air, noncommercial educational video broadcast service. In 2001, the Commission interpreted Section 73.621 of its rules, which requires that an NCE broadcaster use its spectrum “primarily” for nonprofit, noncommercial, and educational purposes, asmeaning that a “substantial majority” of an NCE station’s digital capacity must be dedicated to the provision of nonprofit, noncommercial, and educational broadcast services, thus limiting the amount of ancillary and supplementary services an NCE station could otherwise provide. The recent Report and Order clarifies that an NCE station may provide any type of Broadcast Internet services, provided that the “substantial majority” of its 6 MHz channel is dedicated to a combination of free, over-the-air, noncommercial, educational television broadcast service and any noncommercial, educational ancillary and supplementary services it chooses to provide. The Report and Order declines, however, to specifically define what constitutes a “substantial majority” of an NCE station’s digital bitstream, though it promises to address that in a future proceeding.

The Report and Order also holds that, to the extent NCE stations offer ancillary or supplementary services that are considered “primary” services (i.e., nonprofit, noncommercial, and educational in nature), those services will be subject to a reduced fee of 2.5% on gross revenues generated by the services. This is a reduction from the 5% fee otherwise applicable to commercial television stations.

Lastly, the Report and Order clarifies that when an NCE station provides “donor exclusive” ancillary and supplementary services that are nominal in value in return for contributions to the licensee, the Commission will not treat such contributions as “subscription fees” subject to the agency’s ancillary and supplementary services fee program. The Report and Order identifies as examples of “donor exclusive” services exclusive links to supplemental content, such as extended interviews or reference materials for public affairs programming, or enhanced viewing experiences such as an opportunity to view a local orchestra performance in 4K definition and immersive sound. Such “donor exclusive” services will not be considered fee-able, provided that the services are comparable in value to the kinds of small gifts that NCE stations often give to donors in exchange for contributions (e.g., coffee mugs or tote bags).

  1. Derogation of Service Standard

As long as broadcasters provide at least one free stream of video programming to viewers, they may also offer any number of ancillary and supplementary services, provided that such services do not “derogate” the broadcaster’s free over-the-air video programming service. Under the Commission’s current rules, TV licensees must transmit at least one free standard-definition over-the-air video program signal to viewers that is at least comparable in resolution to analog television programming. But analog TV is long gone, folks, so that is a very difficult comparison to make! The Report and Order now defines a non-derogated video service with the precise minimum resolution of 480i (a vertical resolution of 480 lines, interlaced). This 480i standard replaces the requirement that the free stream be “at least comparable in resolution to analog television programming.”

The Report and Order will become effective 30 days after publication in the Federal Register, which has not yet occurred.   More changes to ATSC 3.0 rules will be forthcoming, so stay tuned to CommLawBlog, and contact us directly if you have questions, or need further information.