IN THIS ISSUE PAY THE PIPER REGULATORY FEES DUE BY AUGUST 31, 2010 BROADBAND V. BROADCAST HOW DO YOU DEFINE VOLUNTARY? BROADBAND V.

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1 AUGUST 2010 IN THIS ISSUE PAY THE PIPER REGULATORY FEES DUE BY AUGUST 31, BROADBAND V. BROADCAST HOW DO YOU DEFINE VOLUNTARY?... 1 ANOTHER 122 RADIO STATIONS AUDITED FOR EEO COMPLIANCE.. 2 UNIVISION PAYOLA CASE RESOLVED W/ FINES AND CRIMINAL PLEA DEAL... 3 MUSIC ROYALTY SETTLEMENT IN THE WORKS?... 3 FEE SCALE... 4 INDECENCY DEVELOPMENTS... 4 DIRS REMINDER... 4 WHEN IS A MAIN STUDIO A MAIN STUDIO?... 4 DESIGNATED FOR HEARING FOR FALSE CERTIFICATION... 5 PAY THE PIPER REGULATORY FEES DUE BY AUGUST 31, 2010 As with most FCC rules or deadlines, non-compliance has a price. For the FCC s annual regulatory fee payment deadline, the price for late submission is a penalty equal to 25% of your station s annual regulatory fee. This year, the deadline is earlier than usual, so make sure you re paying attention. To be timely, your regulatory fees must be received by the FCC no later than 11:59 p.m. Eastern Time on August 31, As many stations have already realized, the regulatory fees this year substantially increased over last year s amounts. This year, every station is required to use the FCC s Fee Filer system as part of the fee payment process. While there is still an opportunity to mail in your regulatory fees (after printing out certain documents from the Fee Filer system), we strongly recommend that you remit the fees electronically using the FCC s system at We have already assisted several firm clients with this process and remain available to assist any other clients or those that require assistance. Stations should remember to include the small fees associated with any auxiliary licenses when remitting their regulatory fees. If you re not sure about that process, let us know and we ll point you in the right direction. BROADBAND V. BROADCAST HOW DO YOU DEFINE VOLUNTARY? As we ve covered in our past reviews of the FCC s National Broadband Plan, the FCC needs specific authority from Congress to conduct broadband auctions that include portions of the current spectrum occupied by television stations. You may recall that the NBP has targeted 120 MHz (20 full power TV channels) to be repurposed for broadband use, leaving a virtual heap of questions about whether broadcasters will be coerced into coughing up their spectrum. The NBP s initial position that TV spectrum would only be repurposed if voluntarily surrendered by broadcasters left many suspicious about how the plan could truly be voluntary. The early analysis was that the FCC s definition of voluntary was very loose because the methods to incentivize DATES TO REMEMBER... 5

2 voluntary participation in broadband auctions by broadcasters contained penalty-driven provisions. That s where Congress comes in. Several bills are now pending in both the Senate and House that contain provisions permitting auctions or requiring spectrum inventory, but they differ on how/whether TV broadcaster participation in broadband auctions will be truly voluntary. Senate Bill 3610 (S.3610) is sponsored by Sens. Snowe and Kerry. It is drafted for the purpose of a spectrum inventory, but includes authorization for the FCC to determine whether to reclaim spectrum and then consider and determine (in its own discretion) how/whether broadcasters whose spectrum is reclaimed could share in spectrum proceeds. In addition, it introduces an authorization for the FCC to impose spectrum fees on any spectrum holder. This bill doesn t ring any voluntary bells for us. Instead, it has a huge stick (the spectrum fee) that is clearly designed to force broadcasters to relinquish their spectrum. House Bill 5947 (HR 5947) is sponsored by Reps. Boucher and Stearns. It is called the Voluntary Incentive Auctions Act of Its brevity suggests that it was designed to counter S.3610 on the voluntary issue. The proposed bill has a revenue sharing provision enabling TV broadcasters to share in auction proceeds, but it makes clear that spectrum to be auctioned must be voluntarily relinquished. In fact, the bill actually prohibits the FCC from "reclaiming" TV spectrum for auction purposes on an involuntary basis. In introductory remarks, Boucher makes clear that imposing a spectrum fee would make an auction participation by a TV broadcaster "involuntary". Reps. Boucher and Stearns head up the House Energy and Commerce Communications Subcommittee, so this bill has some clout. The bill makes no reference to spectrum fees. Senate Bill 3756 (S.3756) is authored by Jay Rockefeller, chairman of the Senate Committee for Commerce, Science and Transportation, which has direct say over FCC operations. S.3756 is called the "Public Safety Spectrum and Wireless Innovation Act" and appears mostly directed at the specific frequencies that are devoted to public safety. It contains a clause that if the FCC decides that it is in the public interest for a licensee to voluntarily relinquish some or all of its spectrum rights, the FCC can share spectrum proceeds. However, it then makes clear that nothing in the bill authorizes the FCC to reclaim broadcast TV spectrum on an involuntary basis. Like HR 5947, it imposes no spectrum fees. All three bills do ultimately leave the adoption of specific rules and qualifying criteria for auction participation, including revenue sharing by broadcasters, to the FCC (that s a little scary to us too!). The FCC has previously scheduled the release of a Notice of Proposed Rulemaking in the third quarter of this year on changes to the TV interference rules, channel-sharing, and other measures that could free up additional TV spectrum for the broadband auction. We expect the NPRM to be issued notwithstanding ongoing Congressional legislative undertakings, and to address the voluntary or non-voluntary question. TV broadcasters should prepare to carefully dissect the NPRM, and file comments in support or opposition of the NPRM s various proposals. ANOTHER 122 RADIO STATIONS AUDITED FOR EEO COMPLIANCE After auditing 179 radio stations for EEO compliance in April of this year, the FCC has now issued EEO audit notices to another 122 radio stations, each of which has until September 27, 2010 to respond. When the FCC adopted the current EEO rules in 2003, it decided that for compliance purposes, it would conduct random audits of up to 5% of broadcast stations annually. However, since EEO audits began, it appears that the percentage of stations audited has not quite reached the 5% level. As an example, from a radio-only perspective, the 301 stations tagged for audits thus far this year represent only 2% of the 14,503 full power AM and FM stations licensed as of June While it remains possible that another round of broadcast station audits will issue later this year, the FCC s August audit has historically been the last one for the year. 2

3 As we have recommended in the past, we suggest that even if your station is not being audited in this latest round, take the opportunity to review the FCC s standard EEO Audit Letter to gauge your compliance and address any issues that could present problems. We ll be happy to you a copy if you ll send a request to admin@hardycarey.com. While many stations may have fortuitously missed the audit cut over these past few years, it is important to remember that EEO compliance is carefully scrutinized at license renewal time. If you haven t recently reviewed FCC Form 303-S, the broadcast station license renewal form, now might be a good time to focus on the questions you ll have to answer as part of that process. First, you ll have to certify to filing FCC Form 396 (Broadcast EEO Program Report), which will require the submission of your most recent two EEO public file reports, and disclosure of any discrimination complaints filed against the station. Second, you ll have to certify that you timely posted your most recent EEO public file report on the station s website (the FCC will check your website, so be absolutely certain of the posting when making this certification). UNIVISION PAYOLA CASE RESOLVED WITH FINES AND CRIMINAL PLEA DEAL The FCC and the Department of Justice recently announced resolutions of enforcement and criminal actions against Univision to resolve allegations that its radio stations or employees secretly accepted payment from a record label in exchange for more frequent airplay of the label s artists. To resolve the FCC enforcement action, Univision entered into a consent decree agreeing to pay $500,000 to the US Treasury, and implement various business reforms and compliance measures, including (1) prohibiting stations or employees for exchanging airplay for cash or other items of value absent disclosures under the sponsorship identification rules; (2) limiting the size of gifts, concert tickets, and other items that stations and employees can accept from record labels; (3) appointment of a compliance officer to monitor and report company compliance to the FCC; and (4) regular training of programming personnel on payola restrictions. To resolve the DOJ criminal complaint, which included conspiracy to commit mail fraud and the use of fraudulent contract invoices and payments, Univision pled guilty to one count of conspiracy, paid another fine of $500,000 to the US Treasury, and agreed to cooperate fully with DOJ and other law enforcement agencies in related matters. When was the last time your station conducted payola training, or required employees to sign agreements acknowledging what payola is and its prohibition? As this example makes clear, payola is a serious matter and the FCC has a zero tolerance policy. If you have questions on what is or isn t permissible under the payola rules, contact us. MUSIC ROYALTY SETTLEMENT IN THE WORKS? In recent days, NAB sent a letter to its radio station members reporting on NAB s negotiations/ discussions with representatives of MusicFirst, an organization seeking the imposition of steep performance royalty payments by radio stations to broadcast music over their facilities. MusicFirst has been a strong proponent of pending legislation called the Performance Rights Act, which would have imposed a royalty for music-play, while NAB has been a strong proponent of the Local Radio Freedom Act, which opposes any performance tax. The NAB letter reports that the parties have discussed potential terms of an agreement that would statutorily cap royalty payments at 1% of revenue, a rate much lower than the anticipated 8% revenue royalty that MusicFirst is seeking and that would likely be imposed by the Copyright Royalty Board under the proposed Performance Rights Act. Other potential terms include permanent removal of Copyright Royalty Board jurisdiction for broadcast and internet streaming rates, an internet streaming rate reduction, and inclusion of an activated radio chip on all future mobile phones. The settlement terms would be implemented by Congress through legislation, which could not be changed without a 3

4 new law being passed or a joint agreement between the parties. The fee scale being discussed is as follows: Commercial Stations $50,000 annual revenue = lesser of $100 or 1% of revenue annually $50,000 - $100,000 annual revenue = $500 annually $100,000 - $500,000 annual revenue = less of $2,500 or 1% of revenue annually $500,000 - $1,250,000 annual revenue = $5,000 annually More than $1,250,000 annual revenue = 1% of revenue annually Noncommercial Stations $50,000 annual revenue = lesser of $100 or 1% of revenue annually $50,000 - $100,000 annual revenue = $500 annually More than $100,000 annual revenue = $1,000 annually Stations with incidental music use (news, talk, sports) would not pay a music royalty. In addition, religious services (not religious music) would be exempt from music fees. INDECENCY DEVELOPMENTS Last month, we wrote about a 2 nd Circuit Court of Appeals three-judge panel ruling that the FCC s indecency enforcement methods were unconstitutional, and postulated that an appeal of the decision by the FCC was likely. The FCC has now suggested just such a course of action in a recent court filing in the 3 rd Circuit Court of Appeals, where a case involving nudity in an NYPD Blue episode is pending. In its 3 rd Circuit filing, which was prompted by the court s inquiry into how the 2 nd Circuit decision might impact its proceeding, the FCC takes the position that because the 2 nd Circuit ruling found that the FCC s contextual approach to applying the indecency statute was unconstitutional, it invalidated the Commission s indecency policy in its entirety, and therefore directly affects the pending 3 rd Circuit case. The FCC indicates that it and the Department of Justice are contemplating filing a request for all of the 2 nd Circuit judges to review the 3-judge panel decision. The deadline for doing so is Friday, August 27 th. DIRS REMINDER Earlier this month, the FCC encouraged radio and television stations that have not yet voluntarily enrolled in the FCC s Disaster Information Reporting System (DIRS) to do so, or to update their information if already enrolled. Developed after Hurricane Katrina, DIRS is now expanded to address any emergency situation. It helps the FCC remain aware of the impact of a disaster or largescale emergency and direct needed assistance to maintain or restore broadcasts in the affected area. The FCC is requesting that each broadcaster participating in DIRS obtain an individual DIRS User ID for all employees who may provide information on the status of their company s equipment in a disaster. You can access DIRS at Only 800 broadcasters are currently enrolled nationwide. Especially because of hurricane season, the FCC is encouraging stations to register. WHEN IS A MAIN STUDIO A MAIN STUDIO? When the FCC sends inspectors to a broadcast station, they re usually looking for compliance on a particular issue or issues, but often discover other problems along the way. That s what happened to a station an FCC inspector visited to determine EAS compliance. In trying to do so, the inspector couldn t find the station main studio and called the station manager to get directions. The manager indicated that the station had moved out of its previous main studio location and was using its transmitter site as the new main studio. The inspector then visited the new main studio during normal business hours, only to find a locked fence around a building and no station staff present. The inspector ultimately spoke with the station engineer, who came to the site and participated in an EAS inspection but denied any knowledge of regular staffing at the studio. A 4

5 month later, the inspector again tried to visit the new main studio, and again found it locked with no staff present. The inspector s office then issued a notice of apparent liability for a forfeiture of $15,000 for EAS and main studio rule violations. In reviewing the main studio violation, the FCC reiterated its policy that a meaningful management and staff presence was necessary for a location to be considered a main studio, and cited its 1991 decision finding that at least one managerial employee and one staff employee must report to work and be present during normal business hours (though not chained to their desks) in order for the meaningful presence standard to be satisfied. Though it reduced the fine to $8,500, the main studio finding remained. DESIGNATED FOR HEARING FOR FALSE CERTIFICATION It s rare for applications filed at the FCC to be designated for hearing before an administrative law judge, but it does happen from time to time. The FCC recently designated certain FM translator applications for hearing after learning that the licensee (an individual) had been convicted of felonies related to money laundering, but falsely certified in applications before the FCC that no adverse finding or final action had been taken against him related to a felony. At the time of those false certifications, the individual making them was actually serving prison time for felony convictions. In addition to designating the applications for hearing, the FCC issued an order to show cause as to the individual s continued fitness to be a licensee. The question at issue in the above case appears on virtually every application that broadcasters file with the FCC, and is as follows: Licensee/permittee certifies that, with respect to the licensee/permittee and any party to the application, no adverse finding has been made, nor has an adverse final action been taken by any court or administrative body in a civil or criminal proceeding brought under the provisions of any law related to the following: any felony; mass media-related antitrust or unfair competition; fraudulent statements to another government unit; or discrimination. Note that the certification includes any party to the application, which means officers, directors, and certain shareholders. It s a good practice for licensees to periodically canvas or question such parties to make sure there are no such issues (current or past) that could result in problems at the FCC. We periodically provide a questionnaire to clients for this purpose, and would be happy to do so upon receipt of request at admin@hardycarey.com. DATES TO REMEMBER August 1, 2010 Commercial and Non-Commercial AM & FM Stations in North Carolina, South Carolina and California: if full time employee threshold is met, complete EEO public file report and place same in public file Commercial AM & FM Stations in Illinois & Wisconsin: if full time employee threshold is met, complete EEO public file report and place same in public file NCE ONLY AM & FM Stations in Illinois & Wisconsin: complete and electronically file your biennial ownership report on Form 323-E and place copy in public file. Also, if full time employee threshold is met, complete EEO Commercial and Non-Commercial Class A & TV Stations in Illinois & Wisconsin: if full time employee threshold is met, complete EEO NCE ONLY TV Stations in North Carolina & South Carolina: complete and electronically file your biennial ownership report on Form 323-E and place copy in public file. Also, if full time employee threshold is met, complete EEO 5

6 Commercial Class A & TV Stations in California: if full time employee threshold is met, complete and electronically file your Mid- Term EEO Report on Form 397 and attach the two most recent EEO Public File Reports, including the report covering the term ending July 31, Remember to post the most recent EEO public file report on website. NCE ONLY TV Stations in California: complete and electronically file your biennial ownership report on Form 323-E and place copy in public file. Also, if full time employee threshold is met, complete and electronically file your Mid- Term EEO Report on Form 397 and attach the two most recent EEO Public File Reports, including the report covering the term ending July 31, Remember to post the most recent EEO public file report on website. August 13, 2010 Comments due on data collection practices of the Media Bureau. August 31, 2010 Regulatory fee payments are due no later than 11:59pm Eastern time. September 3, 2010 Lowest unit charge goes into effect for Federal and State general election. September 13, 2010 Reply comments due on data collection practices of the Media Bureau. October 1, 2010 AM & FM Stations in Alaska, American Samoa, Florida, Guam, Hawaii, Oregon, Puerto Rico, Virgin Islands & Washington State: if full time employee threshold is met, complete EEO NCE Television Stations in Florida, Puerto Rico & Virgin Islands: complete and electronically file your biennial ownership report on Form 323-E and place copy in public file. Also, if full time employee threshold is met, complete EEO Commercial Television Stations in Florida, Iowa, Missouri, Puerto Rico & Virgin Islands: if full time employee threshold is met, complete EEO public file report and place same in public file NCE AM & FM Stations in Iowa & Missouri: complete and electronically file your biennial ownership report on Form 323-E and place copy in public file. Also, if full time employee threshold is met, complete EEO public file report and place same in public file as well as post on website. Commercial AM & FM Stations in Iowa & Missouri: if full time employee threshold is met, complete EEO public file report and place same in public file NCE Television Stations in Alaska, American Samoa, Guam, Hawaii, Oregon & Washington: complete and electronically file your biennial ownership report on Form 323-E and place copy in public file. Also, if full time employee threshold is met, complete and electronically file your Mid-Term EEO Report on Form 397 and attach the two most recent EEO Public File Reports, including the report covering the term ending September 30, Remember to post the most recent EEO public file report on website. Commercial TV & Class A Stations in Alaska, American Samoa, Guam, Hawaii, Oregon & Washington: if full time employee threshold is met, complete and electronically file your Mid- Term EEO Report on Form 397 and attach the 6

7 two most recent EEO Public File Reports, including the report covering the term ending September 30, Remember to post the most recent EEO public file report on website. October 10, 2010 TV, Class A TV, AM & FM Stations (commercial & NCE): complete third quarter 2010 issues/program lists and place in your public inspection file. TV & Class A TV Stations (commercial only): complete and electronically file FCC Form 398 Children s Television Programming Report for third quarter 2010 and place copy in public file. Also compile and place in public file records relating to station s compliance with children s programming commercial limits. November 2, 2010 Federal and State General Elections 2010 Hardy, Carey, Chautin & Balkin, LLP For more info, contact Joe Chautin, Mark Balkin, or Elise Stubbe. Phone Fax Actual resolution of legal issues depends upon many factors, including variations of facts and applicable Federal laws. This publication is not intended to provide legal advice on specific subjects, rather, it seeks to provide insight into legal developments and issues that we feel could be useful to our clients and friends. 7

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