What Washington Has in Store for Broadcasters in 2016 – Looking at the Legal Issues that the FCC Will Be Considering in the New Year

It’s that time of the year when we need to dust off the crystal ball and make predictions about the legal issues that will impact the business of broadcasters in 2016.  While we try to look ahead to identify the issues that are on the agenda of the FCC and other government agencies, there are always surprises as the regulators come up with issues that we did not anticipate. With this being an election year, issues may arise as regulators look to make a political point, or as Commissioners look to establish a legacy before the end of their terms in office.  And you can count on there being issues that arise that were unanticipated at the beginning of the year.

But, we’ll nevertheless give it a try – trying to guess the issues that we will likely be covering this year.  We’ll start today with issues likely to be considered by the FCC, and we’ll write later about issues that may arise on Capitol Hill and elsewhere in the maze of government agencies and courts who deal with broadcast issues.  In addition, watch these pages for our calendar of regulatory deadlines for broadcasters in the next few days.

So here are some issues that are on the table at the FCC.  While the TV incentive auction may well suck up much of the attention, especially in the first half of the year, there are many other issues to consider.  We’ll start below with issues affecting all stations, and then move on to TV and radio issues in separate sections below. 

General Broadcast Issues

Issues likely to be considered this year that could affect both radio and television broadcasters, include:

Multiple Ownership Rules Review: In 2014, the FCC addressed its long outstanding Quadrennial Review of the broadcast multiple ownership rules by pushing its consideration of most of the rules until 2016. Even the one issue considered in 2014, prohibiting Joint Sales Agreements between TV stations in the same market that could not be commonly owned, has been put on hold for a decade by a recent act of Congress, grandfathering all of the JSAs that were in effect prior to the FCC’s 2014 decision.  But the issues raised in the 2014 notice in the current Quadrennial Review, reach across the broadcast spectrum.  Issues that are to be considered in the ownership review that is supposed to take place this year include revisions to the local ownership limits for radio or TV (such as loosening the ownership caps for TV stations in smaller markets, which the FCC tentatively suggested that they would not do), any revision to the newspaper-broadcast cross-ownership rule (which the FCC tentatively suggested that they would consider – perhaps so that this rule can be changed before the newspaper becomes extinct), and questions about the attribution of TV Shared Services Agreements (which the FCC is already scrutinizing under an Interim Policy adopted by the Media Bureau).

Also under consideration is whether the FCC should continue to apply “the UHF discount” in assessing compliance with national ownership caps for TV, an issues which is discussed in more detail in the Television section, below.

Indecency: After the Supreme Court decision in June 2012, upholding the FCC’s right to regulate indecency but questioning the current procedure for doing so, the FCC’s regulation of indecency has been up in the air. In 2013, the FCC took public comments asking how it should proceed in this area, suggesting that it reserve enforcement actions for egregious violations – and asking for comments on how such complaints should be identified.  While last year brought a $325,000 fine for a violation of the indecency rules (the first fine of that magnitude issued by the FCC), in general, the FCC has been quiet in enforcing its indecency rules since the Supreme Court decision.  As the FCC’s 2013 proposals drew many agitated comments and prompted much media attention, in an election year, don’t look to the FCC to resolve the ambiguities in this long-outstanding proceeding.

Foreign Ownership of Broadcast Stations.  In late 2013, the FCC issued a statement clarifying its policies on the foreign ownership of broadcast licensees, making clear that what was thought to be an absolute prohibition on the ownership of more than 25% of the stock of the parent company of a licensee by non-US citizens was in fact only a guideline that could be exceeded if proposed greater foreign ownership of a station would not adversely affect the public interest.  While many thought that this would bring an influx of foreign investors to the US broadcast marketplace, the first company to file an application seeking FCC consent under this new policy was Pandora, and not because it believed that its foreign ownership exceeded 25%, but instead because, as a public company, they could not absolutely prove the citizenship of all of their shareholders using standards that the FCC adopted in the 1970s, long before many of the current ways of trading public securities came into being.  At the end of last year, the FCC requested and received comments on its proposals to somewhat simplify the process of identifying foreign owners.  While the issues are now teed up for FCC action, this is another proceeding that could raise political issues, so if the FCC actually takes action here, it may well be late in the year after the elections.

EEO Rules: There are fundamental issues about the FCC’s EEO policies that have not been addressed in the 12 years since these rules were first adopted. Proposals to extend the rules to part-time employees, and to require the filing of FCC Form 395 (the form that classifies all employees by race and gender), are still pending from that long-ago proceeding. Also pending are proposals sought in requests for reconsideration of the adoption of the EEO rules that would make the EEO rules comport with today’s reality – such as the proposals to allow Internet-based EEO recruiting. Given last year’s announcement to allow the Internet to serve as the primary location for notifying the public about broadcast contest rules, maybe this will be the year that some of these outstanding issues are finally resolved.

Political Rules: In what will probably be a big political broadcasting year, don’t expect any fundamental changes in the FCC’s political broadcasting rules to address the impact of the Citizens United case in the significant political spending on broadcast commercials by third-party organizations. While there have been calls for more regulation on such ads, we don’t expect action in that area from the FCC. Instead, at the FCC, there may be some minor tweaking of the political broadcasting rules as cases come before the Commission.  The one area where the FCC may be active is in the area of sponsorship identification.  We have seen the FCC impose a large sanction – $540,000 – on a radio operator for not fully identifying the sponsor of an issue ad. Plus there are complaints pending against many TV stations for not identifying the “true” sponsor of PAC ads, where the PAC was principally funded by a single individual.  We are still looking at other outstanding issues pending before the FCC from previous elections – including appeals of the decision of the FCC, issued just before the last Presidential election, holding that TV stations have to give candidates equal access to certain single-issue candidates – even though such candidates are qualified only in the distant reaches of the station’s coverage area, and even when such candidates are “running” for office not with any expectation that they will be elected, but instead simply so that they can get access to television stations to run some controversial commercials not primarily intended to promote their candidacy, but instead to promote their position on some other issue. The FCC also asked about the last in, first out policies that stations use to determine which ads to preempt when they have too many preemptible ads, and whether such policies, when applied to political candidates, are an issue.   While these are outstanding, given the time before the election, we doubt that there will be much resolution here, and in fact new issues may arise that will join these in the queue for resolution next year.

Public Interest Programming Reports: In a proposal released in 2011, the FCC issued a Notice of Inquiry to look at the adoption of a new form on which broadcasters would report the public interest programming that they do. This form would replace the Quarterly Issues Programs list, and the Form 355 adopted 8 years ago for television but never implemented. The proposal was simply a Notice of Inquiry, meaning that the FCC would need to adopt a Notice of Proposed Rulemaking to move further on this proposal. We have not heard much about the status of this proposal lately.  As no Notice of Proposed Rulemaking has yet to be released, before any new rules were adopted a whole new set of comments would need to be received. So don’t expect a new form this year.

Television Issues

The Incentive Auction has been the dominant concern for TV broadcasters for several years now, and, barring any last minute glitches, this will be the year that it actually happens.  With TV broadcasters just this week having submitted their applications to participate in the “Reverse Auction,” and with wireless companies having soon to submit their applications to participate in the “Forward Auction” to buy the reclaimed spectrum, the Incentive Auction looks to be a reality that will reshape the TV landscape for years to come.  Not only will a number of stations disappear, but the remainder will be repacked into a much smaller TV band.  This smaller band, until the next generation of digital television through ATSC 3.0 becomes a reality, will have less opportunities for new broadcasters, and may result in the loss of many LPTV and TV translator operators.  The results may begin to take shape late this year of the bidding can be completed by then.

While the Incentive Auction will certainly take center stage for many months, even limiting the conversations that broadcasters can have with each other about buying and selling stations and otherwise planning for the future, there are many other issues before the Commission that could also have a significant impact on the operation of the remaining TV stations.  These include an FCC examination of the rules dealing with the negotiations between stations and cable and satellite television providers about the compensation to be paid for carriage of those stations, the treatment of the UHF discount for multiple ownership purposes, and definition of an MVPD (multichannel video programming distributor) for FCC purposes. Issues about accessibility to video programming and the implementation of other consumer protection issues are also on the agenda. Specific issues for TV include:

Retransmission Consent Reform: Another issue that has been on our list for the last few years, and which now bubbles to the top, is the question as to whether to change the nature of the retransmission consent negotiation process.  After every dispute between an MVPD and a TV broadcaster over retransmission fees there are new cries for legislative or regulatory changes to the retransmission consent process.  Last year, the FCC started a proceeding looking to further define “good faith negotiation” of retransmission consent – in many cases proposing rules that could limit the power that a TV station has to block access to its signal, the heart of the station’s leverage in the negotiation process.  The FCC Chairman has stated that will resolve the proceeding this year. So watch for the fireworks that are bound to ensue.  Last year, the Chairman has attempted to get through the FCC rule changes to eliminate the network nonduplication and syndicated exclusivity rules.  These efforts failed, reportedly as he could not get a majority of Commissioners to support his position.  This issue is still on the table, but given the objections from other Commissioners, and the opposition of many in both parties in Congress, we would doubt that the issue will resurface soon.  But retransmission consent is sure to be a contentious issue again this year.

Defining an MVPD:  Three years ago, the FCC initiated a proceeding to determine if an Internet-delivered video programming service could qualify as an MVPD. Last year, that proceeding matured into a full Notice of Proposed Rulemaking, proposing to treat many Internet video systems as MVPDs, subjecting them to FCC rules – including must carry and retransmission consent rules, and perhaps program access rules giving them access to certain cable programming.  While these rules would benefit some “OTT” (over-the-top) video programming providers, others opposed the proposals seemingly more concerned about being subject to FCC regulation.  Thus, this proceeding, too, seems to be stalled.

UHF Discount:  In 2013, the FCC proposed repeal of the “UHF discount,” which counts a UHF station as reaching only half of a market’s population in assessing a television company’s compliance with the current rules that limit any company to at most stations reaching 39% of the US TV households.  The FCC has tentatively concluded that the digital conversion has made the discount counterproductive as UHF stations have better coverage in a digital world, instead of suffering from the coverage issues that they faced in analog TV at the time that the rule was adopted.  TV station owners argue that getting rid of the discount is changing the rules in the middle of the game, especially as many of these companies have deals in the works at the current time.  In a multichannel universe where most households have access to dozens, sometime hundreds of nationwide or worldwide networks, limiting the reach of a station group no longer makes sense as it once did, and effectively reducing that reach by adopting the change in the rules makes even less sense.  While many thought that this issue would be resolved quickly, it has lingered officially unresolved (though effectively in place as the FCC’s staff is not processing applications that would violate the proposed rule), but look for much lobbying on it this year, and a decision may come in connection with Quadrennial Ownership Review referenced above.

Accessibility: In the last few years, many new rules on making video programming accessible to hearing or visually impaired viewers have come into effect.  These include rules mandating the quality of closed captioning, the captioning of online video clips, and new rules about making available audio versions on TV stations’ SAP channels of emergency warnings carried in crawls and otherwise visually presented during entertainment programming.  While we have seen a plethora of new rules, so far FCC enforcement of these rules has not been active.  Given the aggressive enforcement of FCC rules in other area, we would not be surprised to see enforcement here as well.

Also on the Commission’s agenda will be the resolution of remaining issues relating to the repurposing of captioned broadcast video onto the Internet.  The FCC left open certain issues about the new captioning requirements for video clips – including whether to require that they be captioned when used on third-party websites, and how to deal with “mash-ups” of video clips taken from TV programs with video that comes from other sources.  Look for this issue to be considered later this year.

Radio Issues

While radio issues are perhaps not as dramatic as those facing TV, there are still a number of very important proceedings that will have a major impact on radio broadcasters.  In addition to the general issues discussed above (multiple ownership, indecency, EEO, documentation of public interest efforts), issues on the radar screen for radio include:

AM Radio:  Late in 2015, the FCC finally took its first steps to help revitalize AM radio.  The first effort to assist AM owners begins later this month, when the window for filing to move FM translators as much as 250 miles to serve an AM station opens.  Also this year, the FCC will implement certain other technical rules that were changed in its Revitalization Order.  But fundamental issues, like lessening protections of clear channel stations or, more dramatically, moving to a fully digitized transmission system, seem far off.  But at least there may be some discussion of these issues this year.

Online Public File for Radio Stations.  The proposal to require an online public file for radio stations rocketed onto the FCC docket in late 2014.  It now looks like that proposal will be adopted later this month, and implemented, at least for some stations, in time so that large-market stations will have their political files online in time for the 2016 election.  Look for the roll-out schedule when the FCC acts on this issue late this month.

FM Translator Issues: While the issues involving FM translator applications left from the 2003 FM translator window have largely been settled, and thousands of new FM translators from that window granted in 2013 (see our articles here and here), there are still applications that are mutually exclusive that remain to be processed.  Look for an auction for these final applications to be announced later this year. The FCC promised to resolve those applications so, in 2017, it can open a new translator window for AM stations who did not get translators this year through the process described above, allowing them to be moved up to 250 miles.

LPFM Applications.  The remaining LPFM applications from the 2014 window will probably be processed this year.  Surprisingly, the number of interference complaints from full-power stations to all the new LPFM stations has not been great.  But as more of the recently-granted LPFMs get on the air, watch for the number of those complaints to rise.

Conclusion

These are but some of the legal and regulatory issues that will be facing broadcasters in the upcoming year. There are many other proceedings at the FCC that have been long outstanding, some of which may be resolved this year.  These include the reexamination of the EAS rules  (which includes the proposal for some stations to have mandatory obligations to give emergency warnings in languages other than English), review of the environmental and FAA rules applicable to tower construction, and a reexamination of the allocation of FCC costs as reflected in the annual regulatory fees that broadcasters pay.  There are also other issues that are pending but have seemingly stalled at the FCC, including a reexamination of the sponsorship identification rules (sponsorship ID having been the subject of a number of recent fines, most notably the $540,000 fine referenced above issued to Cumulus for failing to explicitly identify the sponsor of an issue ad),  a review of the Biennial broadcast ownership filings (including whether there should be reporting of some nonattributable interests and whether noncommercial broadcasters should be brought under the same process as commercial broadcasters), and the proceeding to reexamine the rules that prohibit noncommercial broadcasters from interrupting their programming to fund-raise for third parties.  Any of these proceedings could pop back to the top of the FCC’s stack at any time. These and many other issues can pop up at the FCC at any time, so keep watching.

And there are many issues in Congress or at other agencies that could affect broadcasters.  We will write about those issues in another article in the near future.  But, just from the list here, you can