DataConnex Gets Hit with $18.7M Fine for Violation of the Rural Health Care Program

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As it has for many months now, the FCC at its January Open Meeting continued its review of the Rural Health Care Program (RHCP). This time, it issued a proposed $18.7M fine against health care telecommunications service provider DataConnex. A reseller of telecommunications services, DataConnex is alleged to have taken in millions of dollars from the RHCP that it was not entitled to. Primarily, the FCC alleges that DataConnex “willfully and repeatedly” provided inaccurate, forged, misleading, or unsubstantiated documents to support that it had made payments to the Universal Service Fund. Furthermore, the FCC says that DataConnex violated the RHC’s competitive bidding rules.

What is most significant about this forfeiture is the amount of the proposed fine. DataConnex’s fine is three times the amount it wrongfully received from the RHCP and the FCC has warned it may revoke the company’s authorization to sell telecommunications services altogether. Plus, the FCC said it is considering a measure to waive the competitive bidding rules on account that DataConnex played the system to its advantage, thus undermining the bidding process for other telecommunications services in the RHCP. Continue Reading

FCC Annual CPNI Certifications Are Back After One Year Off – Due March 1

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It’s that time of year again! (Well, again after a one-year hiatus, that is.) Time for our annual reminder that the annual customer proprietary network information (CPNI) certifications are due by March 1 for most (but not necessarily all) telecommunications carriers and interconnected VoIP providers.

CPNI includes a variety of sensitive customer data such as, among other things, telephone numbers of people you call and people who call you. To address privacy concerns, the FCC’s regulations help protect CPNI from unauthorized access, use, or disclosure, and all covered entities are required to file, by March 1, an annual certification of compliance with CPNI rules during the previous calendar year.

You may have noticed that our last reminder about the annual certification was in 2016. That’s because in 2016 the FCC, under Chairman Wheeler, completely revised its privacy rules to also encompass providers of broadband Internet access service. Under those rules, the annual March 1 certification was not required in 2017. But those rules were abandoned in 2017 after the Republican administration took over and the FCC restored the prior CPNI requirements (including the annual March 1 certification) to their former glory.

That brings us to the present day where the FCC’s Wireline Competition Bureau has released a Public Notice reminder that the annual CPNI certification is again due by March 1. While the reminder still includes the typical warning that noncompliance can result in hefty penalties, it doesn’t quite strike the same ominous tone as prior reminders issued by the FCC’s Enforcement Bureau (for example, see this FCC Enforcement Advisory from 2016).

Of course, that doesn’t mean you should take the annual CPNI certification any less seriously. Those with long memories will recall the days when failure to file came with a nearly automatic $20,000 forfeiture penalty. So hopefully you’ll also still remember how to get the CPNI certification submitted on a timely basis. As always, if you’re unsure of how to comply, or whether this requirement applies to your company, be sure to seek appropriate guidance.

Noncommercial Stations Beware: When ‘Underwriting’ Spots Turn into Advertising, a Big Penalty Can Follow

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Many noncommercial educational (NCE) stations – and their lawyers – were caught by surprise last week when the FCC issued a $115,000 civil penalty against an NCE licensee. The Cesar Chavez Foundation (CCF) was hit for running underwriting spots promoting for-profit entities. CCF agreed to the monetary penalty as part of an FCC approved consent decree released on Feb. 1.

In the past, FCC civil penalties and forfeitures for violation of underwriting restrictions have been more modest, typically $12,500 or less. The size of this penalty may indicate an interest by Chairman Pai’s new Enforcement Bureau Chief, Rosemary Harold, to get tougher about NCE underwriting practices. But it also might indicate a loss of patience with CCF, since this is not the first, not the second, but at least the third time that CCF has been cross-wise with the FCC over underwriting copy. Specifically, in 2012 CCF was hit with a $12,500 forfeiture and then in 2016 it agreed to another $12,500 civil penalty as part of a consent decree deal.

The penalties in this latest CCF latest case include, in addition to the $115,000 assessment a one-year prohibition on broadcasting any underwriting announcements on behalf of for-profit entities. A death knell for many NCE stations –  this is the first time we can recall such a restriction being imposed.

The practice of resolving cases through consent decrees, where the licensee agrees to certain sanctions in return for closure of an investigation, makes it difficult for other NCE stations and their lawyers to tell how egregious the offensive announcements were, because decrees typically don’t quote the offending language. But In this case, the FCC accompanied the consent decree with a news release that provides a little more detail.

According to the FCC, the spots CCF aired ran afoul of the underwriting rules in various ways by:

  • Drawing comparisons between an underwriter’s products or services and those of its competitors and making a qualitative statement (“There are times that we fear going to see cars because we don’t know who to trust. You can trust the Bill Luke car dealership”);
  • Including information on prices, savings, or value (“Additional holiday bonus savings on select models”);
  • Making calls to action (“Are you ready to buy a house? Want to know if you qualify?”);
  • Listing a “menu” of products or services (“Cell phones from companies such as Verizon Wireless, Cricket, T-Mobile, Virgin Mobile, Trac-Fone”); and
  • Making the spots too long (here, between 30 and 60 seconds in duration).

Regarding this last point, while the FCC has not set a maximum length for underwriting spots, it has said, “the longer the announcement, the more likely it is to contain material that is inconsistent with their ‘identification only’ purpose.”

As to the “menu” restriction, we don’t recall seeing that policy being applied to a spot listing as few as five items, which is the number in the example included in the FCC’s news release. Seven, yes; five, no.

Whether the CCF consent decree marks the beginning of enhanced enforcement of the FCC’s underwriting restrictions or only an outlier involving a repeat offender remains to be seen. But in any case, going forward NCE stations should exercise particular care in reviewing underwriting copy. More and more, underwriters are pushing stations toward going over the line. Stations now have a concrete reason to push back against calls to action and qualitative or comparative claims. It could get them in trouble if they don’t.


Upcoming FCC Deadlines February 2018 – March 2018

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Do you know what FCC filing deadlines are in the coming months? We do. Time to mark up calendars so you’re not late on these important deadlines. Call FHH if you have trouble meeting this deadlines or need assistance.

February 9 –  Revising Requirements for “Twilight Towers” –  Comments are due with regard to the Public Notice whereby the FCC has requested comments on a draft Program Comment addressing the historic preservation review requirements for collocating wireless communications facilities on certain communications towers, referred to as “Twilight Towers.”

February 20 – Next Generation TV – ATSC 3.0 – Comments are due in response to the Commission’s Further Notice of Proposed Rule Making, which accompanied its November Report and Order authorizing television broadcasters to use the Next Generation television transmission standard (ATSC 3.0).

February 26 – National TV Audience Reach Limits –  Comments are due in response to the FCC’s Notice of Proposed Rule Making which seeks input on whether to modify, retain or eliminate the national TV multiple ownership rule (or national TV audience reach cap), a rule that limits the number of TV stations a single entity may own nationwide to an audience reach of 39% of all television households.

Revising Requirements for “Twilight Towers” –  Reply Comments are due with regard to the Public Notice whereby the FCC has requested comments on a draft Program Comment addressing the historic preservation review requirements for collocating wireless communications facilities on certain communications towers, referred to as “Twilight Towers.”

March 1 – Radio Station Online Public Files – All radio stations in all markets must have uploaded their entire public inspection files, with the exception of the political file, to the location provided for such public files on the FCC’s website.  The records which must be uploaded by March 1, 2018 include, but are not limited to, any and all issues/programs lists and EEO public file reports for the current license term, as well as either a current list of or copies of organizational documents and contracts required to be filed with the Commission. Continue Reading

Third Circuit Asked to Delay Implementation of Media Ownership Rules

As we previously reported, the deregulatory changes the FCC recently adopted to its media ownership rules are due to take effect on Feb. 7. Prometheus Radio Project and Media Mobilizing Project, however, have filed an appeal of those rule changes in the U.S. Court of Appeals for the Third Circuit and, as expected, have now asked the Court to delay the FCC’s implementation of those changes.

Photo by John Hult via the Creative Commons License

Interestingly, appellants here have not filed a traditional request for a stay. Rather, they have filed a petition for writ of mandamus. In that petition, they note that the Commission’s ownership orders (the August 2016 Order under former Chairman Wheeler and the December 2017 Reconsideration Order under Chairman Pai) were both adopted at least in part in response to a remand order from the Court. The petition argues that the Court should order the Commission to delay the effectiveness of the rule changes because the orders do not respond to that remand in so far as it directed the Commission to adopt a definition of “eligible entities” or conclude that it could not do so. The petition also argues that the Reconsideration Order does not address the impact its changes would have on minority and female ownership and that the consolidation allowed by the rule changes would likely have an adverse, and irreparable, effect on existing and potential female and minority owners.

The petition not only asks that the Court stay the effectiveness of the rule changes adopted in the Reconsideration Order, but further asks the Court to enjoin the Commission from approving any applications that would be inconsistent with the current ownership rules and to appoint a “special master.” This “special master” would supervise the Commission’s compliance with the Court’s orders in this proceeding.

In light of the limited time remaining before the scheduled effective date of Feb. 7, the Court has ordered the FCC to respond to the petition by no later than Feb. 2. A number of other interested parties, including Sinclair, Fox, the News Media Alliance, and the NAB, have asked the Court to allow them to participate in the proceeding as well. While courts are generally reluctant to stay agency rules, or issue writs of mandamus, the ultimate outcome here remains uncertain. We here at CommLawBlog will keep you updated as the proceeding develops.

Comment Period Now Open on National Ownership Cap

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Last Friday, the FCC published the December Notice of Proposed Rulemaking regarding the national ownership cap in the Federal Register.

As we wrote about back in December, the NPRM addresses the current prohibition on any entity owning or controlling television stations that reach more than 39 percent of US television households. The NPRM requests comment on whether the Commission can and should reduce or completely eliminate the national ownership cap in light of changes in the media landscape since it was adopted back in 2004.

In addition to asking for comment on the threshold issue of whether the Commission has the authority to modify the 39 percent cap, which is included in the Communications Act, the Commission is seeking comment on whether the current media landscape still necessitates a national ownership cap at all and whether the UHF discount should be modified or eliminated. On the UHF discount, the Commission is seeking comment on what impact an elimination of the UHF discount would have on the broader video marketplace.

Publication of the NPRM in the Federal Register means that comments are now due by no later than Feb. 26 with reply comments due before March 27.

White House Deliberates Centralized 5G Network Proposal

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Telecommunications companies today got a rude awakening when Axios broke news that the Trump administration is considering a recommendation to centralize and build a 5G wireless network. According to multiple news outlets, members of the U.S. National Security Council (NSC) presented senior White House officials with recommendations to centralize the United States’ 5G network in order to prevent cyberattacks and meddling from China. The Council recommends that this plan be executed by the end of President Trump’s first term. Axios quotes a source familiar with the documents saying that a single centralized network is “what’s required to protect America against China and other bad actors.”

However, when asked about this proposal in today’s daily press conference, White House Press Secretary Sarah Huckabee Sanders said that the White House was in the “very earliest stages of the conversation” and that no decision had been made yet.

5G infrastructure control would be extremely controversial because telecommunications has traditionally been a privately controlled industry. Moreover, the major wireless carriers are all in the process of developing their own 5G networks which they would fund without taxpayer dollars. The proposal recommended that the U.S. government pay to build a single 5G network and allow for telecommunications companies to compete with one another on where to build their own 5G networks that would then “rent” access from the government. How this network would respond to the unique needs of different carriers is unknown.

I have to believe that the NSC is somewhat unfamiliar with longstanding federal communications policy favoring competition and has not assessed the problems involved in governmental ownership of companies operating in traditionally private sector industries. Federalizing a dynamic industry is in direct contrast with the deregulatory policy that the Trump administration has espoused. Implementing 5G is going to involve millions of small cell sites, a lot of “on street furniture,” and a single 5G system will cost an enormous amount of money to build, maintain, and operate. If adopted, a national wholesale 5G system would be a disaster, forcing the carriers into a one-size-fits-all solution, adding to the national debt, and killing competition for 5G deployments.

Not to mention that the four major U.S. carriers are already committed to implementing 5G initiatives with their own funds.

As a result, the cost controlling aspects of competition would not be present and competitive innovation would be stifled. These problems would be tolerated for a claim of greater security, which seems illusory. And the FCC agrees.

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Children’s Programming Requirements on the Chopping Block?

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Could the FCC’s children’s programming requirements (colloquially known as “kidvid”) be on their way out? If Commissioner O’Rielly gets his way, it seems that they might be; Or at the very least they will be subject to some significant revision. In a blog post released on Friday, O’Rielly argued that the rules are outdated, impose unnecessary burdens on broadcasters, and are ripe for review, and eyes eliminating (or significantly reducing) the requirements they place on broadcasters.

Since the 1990’s, commercial broadcast television stations have been required by the Communications Act (as amended by the Children’s Television Act of 1990) to air programming responsive to the educational and informational needs of children 16 and under. While the Act requires only that the Commission consider, in granting license renewal applications, how a station has served these needs, the Commission has adopted rules providing much more specific requirements.

In 1996, the Commission adopted a “processing guideline” requiring stations to air at least three hours of “core” educational/informational programming to receive staff-level processing of their renewal applications. In addition to these programming requirements, licensees are required to file reports (Form 398) each quarter providing detailed information on the educational/informational programming that they broadcast. Licensees must then separately place a record in their public files certifying that the core programming (and any other programming targeted to children) met the limitations on the number and lengths of commercial advertising within the programming. In addition to the ongoing regulatory burden of filing these forms and certifications, in recent license renewal cycles, failure to file these forms has also been a source of numerous fines imposed on broadcast licensees.

Under current law, the Commission cannot, on its own, entirely remove broadcaster’s obligation to air educational/informational children’s programming, since that requirement is statutory. Continue Reading

Webcaster Wake Up Call!

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Three weeks into 2018, we’ll confess to still writing “2017” on the occasional check. Admit it: you probably have too (we can’t be the ONLY ones still writing checks every now and again).

Webcasters complying with the statutory licenses found in Sections 112 and 114 of the Copyright Act – which permit them to webcast sound recordings if they comply with the license requirements – are unlikely to make that mistake in the coming year because:

1)  a rate change for 2018 offers a pretty stark reminder that we’re not in 2017 anymore; and

2) they are less likely to submit payments via check in 2018.

Before we get to the two major changes in play this year, a brief reminder of the basic obligations required of webcasters throughout the year:

  • File an Annual Minimum Fee Statement of Account form and pay the associated $500 per channel minimum fee. This must occur no later than January 31. Noncommercial educational webcasters who stream 80,000 or fewer monthly aggregate tuning hours may also pay a $100 per webcaster “proxy fee” with the Annual Minimum Fee if they want to be exempt from filing Reports of Use.
  • Pay any additional usage fees and file Monthly Statements of Account associated with those payments. This does not apply to everyone (in fact, noncommercial educational webcasters do not have to do this at all because, by definition, they will not exceed the $500 annual minimum fee). For months where additional royalties and accompanying Monthly Statements of Account are required, they are due no later than 45 days after the end of the relevant month.
  • File Reports of Use. Again, not every webcaster must file Reports of Use (we’re looking at you, noncommercial educational webcasters who pay the $100 proxy fee). But even some of the commercial webcasters, noncommercial webcasters, and noncommercial educational webcasters who choose not to pay the proxy fee do not have to engage in “census” filing on a monthly basis if they do not owe additional royalties beyond the minimum fee. Instead, they may file “sample” reports on a quarterly basis for two weeks of that quarter. Reports of Use are due no later than 45 days after the end of the relevant month or quarter.

Those basic requirements haven’t changed from last year. So what are the two changes we hinted at above?

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Rates to Perform Musical Compositions in 2018-2022 Published for Noncommercial Broadcasters

Attention, noncommercial educational (NCE, a/k/a “public”) broadcasters! If you have been wondering how much you’ll have to pay to broadcast musical compositions this year (and beyond), wonder no more. The rates for 2018 through 2022 were published in the Federal Register on January 19.

For those new to the issue, these rates have been administered by a governmentally appointed decision maker for many decades. Congress has given that decision maker the power to determine those rates and terms for a five-year license term if broadcasters and copyright owners are unable to agree to rates on their own. Currently, that decision maker is a three-judge panel known as the “Copyright Royalty Judges” (i.e. “Judges”).

It is important that you understand what the published rates do and do not cover (so that you know which other licenses you may need to use music in certain ways):

  1. The rates do cover over-the-air broadcasting of musical compositionsi.e., the music and lyrics that make up a song – by NCE broadcasters.
  2. The rates do not cover webcasting of musical compositions. NCE broadcasters are required to obtain additional licenses for that activity. (For stations affiliated with a college or university, however, this rate is usually folded into the so-called “campus licenses” offered by the performing rights organizations (PROs) such as ASCAP, BMI, and SESAC).
  3. The rates do not cover public performances of sound recordingsi.e., specific recorded versions of a song. NCE broadcasters are required to pay additional, separate royalties to webcast sound recordings, typically under a governmentally established statutory license, with royalty collection and distribution administered by SoundExchange. NCE broadcasters are not required to pay royalties to broadcast sound recordings over the air – that activity has long been outside the scope of the exclusive rights that are recognized under U.S. copyright law.

With that background out of way, let’s get to the numbers themselves. We’ll focus on NCE broadcasters not eligible to receive funding from the Corporation for Public Broadcasting (“CPB”). If you are a CPB-affiliated broadcaster, contact the CPB directly for more information about your rates – they were the subject of a confidential settlement agreement and have not been publicly disclosed.

For NCE broadcasters not eligible to receive funding from the CPB, there are no big surprises – the rates simply inch up from the current royalties. Non-CPB NCE broadcasters fall into two major rate categories: those affiliated with an accredited university or other educational institution and those that are not.

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