Broadcast Advisory Bulletin
2007: What Washington, D.C. Has In Store for the Broadcaster
By David D. Oxenford
[January 2007]
It’s time to throw out old calendars, to change the date on your checks, to reflect on what’s happened in the broadcast world in the past year, and to fearlessly predict what the city of Washington and the legal establishment have in store for the broadcast industry in the new year. Usually, in preparing these lists, we look at the pending proceedings before the FCC and try to predict which proceedings will get the Commission’s attention in the coming months. This year, what is striking when we look into our crystal ball is how many significant actions affecting broadcasters may come not from the FCC, but from the courts and other agencies within the Washington bureaucracy. And who knows what issues Congress may choose to deal with which may add new topics to this list.
With that background, here are some of the important legal and regulatory issues and decisions broadcasters can look forward to in 2007.
Multiple Ownership: In the current ownership proceeding, reply comments are due on January 16. But the filing of these comments hardly signals the end of the process. Instead, there is much that needs to occur before a decision in this proceeding can be expected. The Commission needs to complete its promised studies on the effect of consolidation. It has also promised four more field hearings around the country to hear local comments on the impact of consolidation. In recent correspondence with Congress, Chairman Kevin J. Martin has also promised to complete the “localism” proceeding begun in 2005 before resolving the ownership proceeding. All these preconditions, plus the normal delays for analyzing the issues, writing a decision, listening to various groups lobbying the FCC, and any political advice from Congress may well push a Commission decision out of 2007.
But court intervention is possible. Courts have already ruled that the FCC’s rules on local television ownership and newspaper-broadcast cross ownership need to be revised, and FCC delays in making those revisions could prompt a court order requiring the Commission to act sooner. So watch to see if the first substantive action we see on ownership this year comes from the courts, not the FCC.
Indecency: The FCC has had dozens, and perhaps hundreds, of pending indecency objections against radio broadcasters, many of which are years old. Decisions in these cases have been rumored for almost a year—but may or may not see the light of day this year. Instead, on indecency, like on ownership, it may be the courts which provide new precedent for the broadcaster. Both the case involving the use of an isolated profanity in TV awards shows (the Golden Globe and Billboard Music programs) and the case involving the Janet Jackson Super Bowl clothing malfunction are pending in court, have been briefed, and will be ready for decision in the coming year. These cases may radically change the ability of the FCC to enforce its indecency prohibitions. Look for the first of these decisions early in the year.
Digital Television: As the clock counts down to the end of the digital transition in 2009, there are still many issues to decide. In many ways, the FCC has completed most of its work—substantially completing the digital table of allotments, with only a few issues yet to be resolved as addressed in comments filed this month.
But there are other issues to be decided by other agencies that will have a significant impact on the transition. The National Telecommunications and Information Administration (NTIA) is deciding how to distribute government subsidies to homes for the purchase of converter boxes that will allow households with analog television sets to receive digital signals. NTIA will also adopt standards for those converter boxes.
In addition, the Copyright Office will be considering the copyright status of multicast signals for cable carriage purposes. The Copyright Office has tentatively concluded that multicast signals are “local signals” within a local market when carried by a cable television system or other multichannel video provider. However, if a television signal is imported by one of these systems from a distant market, and that station is multicasting on its digital stream, will it count as one station or multiple stations for purposes of the copyright fees that the system must pay for the programs carried by the distant station? If it is decided that it will be counted as multiple stations, it may be less likely that any multicast digital signals would be imported from distant markets.
Digital Radio: One issue that the FCC will be considering will be the final rules on digital radio. The issues include the possible authorization of AM nighttime operation, and the issuance of permanent authorization for all digital operations—including the multicast channels being provided by many HD stations—all of which are currently operating under temporary or experimental authority. This item was on the agenda to be considered at an FCC meeting last summer, but was pulled at the last minute. Since then, it has been held up, reportedly over questions of the public interest obligations of multicast channels. In other words, certain FCC Commissioners wanted to be certain that it was made clear that the additional digital programming streams will be subject to the same public service obligations as the radio station’s main service. This would include obligations for quarterly issues programming lists, political broadcasting requirements and other obligations necessary to serve the public interest. Look for the log jam to be broken, and for some action on this matter, early this year.
Internet Radio: The FCC has nothing to do with the royalties paid for the use of music by Internet radio stations. In the digital world, royalties have to be paid not just for the music composition (which is paid to ASCAP, BMI and SESAC), but also for the use of the actual recording (the “sound recording”). That fee is paid to an entity called SoundExchange. The amount of the royalty for use of the sound recording is decided by the Copyright Royalty Board (CRB) – a three judge panel associated with the Copyright Office. The Judges held a trial on the royalties for 2006-2010 last year, and should issue a decision on Internet radio royalties by March 4, 2007. While broadcasters and webcasters have argued that rates should fall, the recording industry has asked for rates to be increased substantially. So the CRB decision on royalties could well dictate the future of the Internet radio industry.
Payola: Elliot Spitzer’s investigations in New York into the payola practices of broadcasters and record companies have resulted in several FCC investigations. These investigations have resulted in delayed license renewals, and held up a number of station sales. The results of the FCC investigations, and possible revisions of FCC policies on payola, may be forthcoming this year. Recent press reports indicate that a settlement of the possible FCC violations is in the works—so look for action on this issue in the near future.
VNRs: Related to the payola investigations is the issue of whether proper sponsorship identification is provided in connection with the use of other on-air broadcasts. One issue has been raised by the use of Video New Releases (VNRs)—news releases provided by entities with financial interests in the subject being discussed. Objections have been raised as to whether the use of a VNR, without source attribution, violates the sponsorship identification rule. Decisions on the issue could well come this year.
EEO: The FCC’s “new” EEO rules have been effective for three years, but there are still pending petitions for reconsideration on some aspect of those rules. The resurrection of Form 395—the annual filing providing a breakdown of all employees by race and gender—is also still pending at the FCC while it is determined if this report will be a public document. Finally, a rulemaking to extend the EEO rules to part-time employees has not yet been addressed. All these long unresolved proceedings may be resolved in the coming year.
Political Broadcasting: While 2007 is not an election year, 2008 will no doubt be the biggest election year ever for broadcasters. In preparation for that election, the FCC may be issuing clarifications of its rules anticipated since the Bipartisan Campaign Reform Act was adopted in 2002. In addition, issues have arisen about impact on the political broadcasting rules of on-line ad sales by Google and other Internet marketplaces. It is quite possible that the FCC may clarify the impact on lowest unit rates of advertising sales by these entities.
Tower Issues: The FCC is soon receiving comments on the impact of tower construction on migratory birds. In addition, the FAA has a pending proceeding that has proposed that FAA approval would be required any time any new user is added to a communications tower. Both the migratory bird issue and the FAA issue could significantly complicate the process of owning a communications tower. Watch for these decisions.
While this looks like a significant list of legal issues affecting broadcasters in 2007, we have no doubt that additional issues not on the list will arise. Congress is always unpredictable as to what topics they may choose to tackle and, with the change in control that has just occurred, that unpredictability has increased. Will Congress intervene in the multiple ownership debate or on retransmission issues that have received so much attention in recent months, or possibly on the importation of distant signals by satellite television services? Will nationwide video franchise laws be addressed or some form of net neutrality legislation be adopted? Or will copyright reform affect digital music rights of broadcasters and their competitors? Any of these issues may well be addressed by Congress this year.
Advertising and programming rules could also be the subject of new rules or new legislation—from Congress, from the FCC or the FTC, or even from other government agencies. Issues concerning the advertisement of unhealthy foods to children have been raised. Questions have been raised about prescription drug advertising. And in the last week, questions about violence in television programming have arisen. Any of these matters could become the subject of some regulator’s crusade.
Obviously, there is no lack of issues that could affect the broadcaster in this new year. As always, broadcasters should keep a close eye to what’s going on in Washington, as it may well have an impact on the bottom line. Watch our blog—www.broadcastlawblog.com—for updates on these and other regulatory issues of importance to broadcasters throughout the year.
For more information, please contact:
This advisory is a publication of the Broadcast Group of Davis Wright Tremaine LLP. Our purpose in publishing this advisory is to inform our clients and friends of recent developments in the broadcasting industry. It is not intended, nor should it be used, as a substitute for specific legal advice as legal counsel may only be given in response to inquiries regarding particular situations. Attorney Advertising. Prior results do not guarantee a similar outcome. Thank you.
Copyright © 2007, Davis Wright Tremaine LLP.
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