Expanded Use of FRNs Proposed for Ownership Report

The FCC has proposed to increase the scope of the use of FCC Registration Numbers (or "FRNs") in connection with reporting attributable broadcast interests in the Ownership Reports that all broadcast licensees (and certain entities related to them) must file with the Commission. Ownership Reports are submitted on Form 323 for commercial stations, and Form 323-E for noncommercial stations. Licensees and permittees must file such reports within 30 days of the grant of an application for a new station or within 30 days of completing an assignment or transfer of control of an existing station. Beyond that, all licensees must submit reports biennially.

FRNs are generated by submitting identification information to the Commission's Registration System ("CORES"). Every person or business entity with an attributable interest in a broadcast station must be identified in the Ownership Report and associated with his/her/its specific FRN. Among the identification data required to get an FRN is the party's Tax Identification Number, which for individuals is the Social Security Number ("SSN"). Attributable interests include being an officer, director or significant equity holder in a licensee entity.

The obligation to furnish an FRN for each person with an attributable interest is relatively new, having been instituted in 2009. Since its inception, a controversial element of the process has been the requirement for individuals to submit their personal SSNs to the FCC's CORES in order to obtain an FRN. The opposition to the use of SSNs was so adamant that the Commission resorted to a temporary fix so that it could collect ownership data smoothly without the distraction of litigation over the SSN issue. It created a device known as a "Special Use FRN." If, after a diligent and good faith effort, the preparer/filer of the Ownership Report is unable to obtain or does not have permission to use an SSN in order to generate an FRN for an individual, the filer may use a Special Use FRN. The Special Use FRN is a place-holder number generated on demand by the Commission's online system without the need to input an SSN.

The Commission says that all reportable interest holders who are individuals need to be identified by SSNs in order to ensure the most complete and accurate ownership database. The concern for database accuracy stems from the judicial criticism that the Commission received about its diversity efforts. The Court of Appeals observed that it was impossible to know the status of diversification of ownership of the broadcast industry without accurate data. The agency states that a fundamental objective of the biennial From 323 filing requirement is to track trends in media ownership by individuals with particular racial, ethnic and gender characteristics. In furtherance of that objective, the Commission now proposes to eliminate the Special Use FRN so that every reportable interest holder would have to obtain a real FRN.

In the alternative, the Special Use FRN use could be limited to situations where an individual absolutely refuses to submit his or her SSN to the FCC in order to obtain a personal FRN. In such cases, the filer of the Report could obtain a Special Use FRN for the reluctant interest holder, and the filer's Ownership Report would be deemed to be rule-compliant. However, the Commission poses the possibility of using its enforcement powers to fine the individuals who refuse to comply with the FRN requirement. Comment is invited.

The Commission proposes to require FRNs of holders of interests that are not attributable under the current rules. These include minority shareholders in a company where a majority of the stock is held by a signal shareholder, and interests held in eligible entities.

Further expansion of the use of personal FRNs is proposed for noncommercial broadcasters. While officers and directors of the nonprofit licensees of noncommercial stations are considered to have attributable interests, they have not yet been required to obtain personal FRNs in connection with the Ownership Reports for these stations on Form 323- E. For this entire category of holders of attributable interests, the question of SSN submission to obtain personal FRNs has not yet arisen. However, the Commission now proposes to require all such interest holders to obtain FRNs, and therefore, to submit their SSNs.

These proposals are published in the Sixth Further Notice of Proposed Rulemaking in Docket 07-294. The Commission solicits public comments – to be filed by February 14. Reply comments can be submitted until March 1.

New DBS Provider Authorized

The FCC's International Bureau has granted the request of SES Americom, Inc. for access to the United States market using the planned AMC-20 geostationary satellite in the Direct Broadcast Service. The satellite will be stationed in orbit at 105.5 degrees west longitude and will operate under the supervision of British authorities in Gibraltar.

SES Americom has been waiting several years for this green light. Its original request was placed on public notice in February, 2007. DIRECTV opposed the request on procedural and technical grounds. Most notably, DIRECTV asserted that the satellite's position, called a "tweener," because it is directly between two other orbital locations also used to serve the United States, would give rise to interference. However, the Bureau noted that its prior approval for two other "tweeners" had been affirmed by the full Commission with due regard for the need for spectrum coordination. It relied on that decision as governing precedent for its action in this case.

In a 1997 ruling known as the DISCO II Order, the Commission established a framework for evaluating requests for foreign satellites to provide service to the United States. This process includes analysis of the impact on competition, technical feasibility, spectrum availability and legal qualifications of the applicant. The Bureau considered all of these factors and concluded that granting SES Americom's proposal would be in the public interest. The grant is subject to stringent coordination requirements with respect to the operation of other satellites and all of the rules governing DBS, including copyright and must-carry obligations regarding the carriage of terrestrial television stations.

As is the practice in authorizing satellite services, the grant order includes a schedule of milestones that SES Americom must meet: (1) enter into a binding construction contract by January 16, 2014; (2) complete critical design review by January 16, 2015; (3) complete construction by January 16, 2017; and (4) launch and commence operations by January 16, 2019.

High-Profile Defamation Suit Ends in Verdict for the Defense

A raucous defamation lawsuit between two dueling radio personalities ended at the close of January in a Tampa, Florida courtroom with a jury verdict for the defendant. The case arose from accusations by Todd "MJ Kelli" Schmitt that rival radio celebrity, "Bubba the Love Sponge" Clem, had defamed him and Schmitt's wife during Clem's on-air remarks. A two-week trial served as the climax to many years of boisterous on-air cross-town shouting matches between the two and nearly two years of pre-trial legal maneuvering in court.

Schnitt sued Clem, claiming that he and his wife were defamed by Clem when the latter, among other things, called Schnitt's wife a whore, and portrayed Schnitt as rigging the ratings for his show and taking bribes.

The trial included a curious turn into a mini soap opera within the larger drama. One of Schnitt's attorneys was arrested for DUI in the midst of the proceedings. He alleged later that he had been set up by Clem's counsel. Drinking one evening after court with a woman who he did not realize worked as a paralegal for Clem's attorneys, the Schnitt attorney left the restaurant with her, driving her car. She apparently had helpfully tipped off police to ambush them and thereby to find the attorney driving when he should have been merely a passenger. He was arrested and carted off to jail, leaving his briefcase containing his client's trial papers in the car with the paralegal from the law firm representing Clem. Schnitt's lawyers moved for a mistrial on the basis of this incident. The judge declined to rule on that motion while the trial was in progress.

Schnitt and his wife argued that they had been shamefully badgered by an on-air bully. Clem's attorneys responded that Clem was only exercising his First Amendment right to present entertaining content for his radio show. The jury agreed with Clem, or at least decided that the Schnitts had not been defamed and were not entitled to damages.

After the verdict, Schnitt was quoted as having tweeted, "I feel good that we took the high road and will always be comfortable with the fact that we did the right thing. My wife & I were protecting our reputations & also standing up for so many others who have been defamed, but didn't have the means to fight."

Clem's lawyers' post-trial analysis emphasized the importance of their defense of the First Amendment. Clem himself was quoted by the Tampa Bay Times as following that with the commitment, "I'm not going to change what I do. I'm the people's hammer."

$75K Fine for Auction Collusion Affirmed

The FCC's Enforcement Bureau has issued a Forfeiture Order affirming the $75,000 fine it proposed to levy against Cascade Access, LLC in a 2009 Notice of Apparent Liability for Forfeiture (the "NAL") for violating the Commission's anti-collusion rules in Auction No. 73.

In Auction No. 73, the FCC offered licenses to use spectrum in the 700 MHz band. Cascade filed a short-form application for one license on which it wished to bid – located at White Pine, Nevada. Verizon Wireless also applied to bid on that license.

Section 1.2105(c) of the Commission's rules prohibits communications between auction competitors from the closing of the short-form filing window until the deadline for the winning bidder to tender its down payment for the license it purchased. Competitors are precluded from communicating about their bids, bidding strategies or the post-auction structure of the relevant market. If such communications are sent or received, the FCC is to be notified within five days. There is an exception to this strict prohibition for applicants who have bidding agreements with each other, and who disclose on their short-form applications all such agreements. Neither Cascade nor Verizon disclosed on its short-form application that it had an agreement with the other.

Bidding in Auction 73 began on January 24, 2008, and continued until March 18, 2008. During that period, on February 11, a Verizon executive named William Hickey received an email from Bob Milliken, a board member of a parent entity of Cascade. Milliken wrote to Hickey, stating "[w]e have dropped out of the 700 mhz auction" and are "ready to talk/meet" with Verizon Wireless. Cascade explained later to the FCC that Milliken's purpose in sending the email was "to address when a representative of Cascade could communicate with Verizon Wireless regarding Verizon's interest in the acquisition of an ownership in the AZ 1 RSA Mohave Wireless Partnership."

Verizon's counsel promptly reported this communication to the FCC, and responded to Milliken that the parties could not then have communications because they were subject to the Commission's anti-collusion rules. Cascade did not report this incident to the FCC because, in its view, the email did not include any information requiring disclosure.

Cascade maintained that Milliken's contact primarily concerned a business matter completely unrelated to the auction, and that it was therefore not subject to the anti-collusion rules. However, the Commission found that Milliken's opening remark that "[w]e have dropped out of the 700 mhz auction" was the contaminating element. By informing a competing bidder that it was no longer active in the pursuit of a specific license, Milliken undermined the integrity of the auction and potentially jeopardized the formation of a competitive post-auction market structure. The Enforcement Bureau determined that Cascade, through Milliken, committed serious violations of the anti-collusion rules by initiating the email in the manner that it did, and proposed the fine.

Cascade responded to the NAL in March, 2009 and requested cancellation or reduction of the amount of the forfeiture. Cascade said the forfeiture should be cancelled because Milliken's statement did not communicate the "substance" of bids or bidding strategies, as prohibited by the anti-collusion rule; the prohibited conduct is not clearly stated in the rule; the Commission previously disseminated to the public the type of information disclosed by Milliken; and the agency has allowed similar communications between auction applicants in other cases. To support its argument that the fine should be reduced, Cascade said that it had not intended to violate the rule; that its action did not cause Verizon to change its bidding strategy or otherwise compromise the auction process; its offense was less egregious than that of a bidder in another case where a $75,000 fine was imposed; and Cascade has a history of compliance with the Commission's rules.

The Enforcement Bureau found no merit in any of Cascade's arguments. It observed initially, again, that numerous public notices released prior to and during the auction had advised applicants about the prohibition on communications with each other. All participants were well informed about the rule. The Bureau reasoned that disclosing a decision to drop out of bidding is no less significant than disclosing an intention to bid a particular amount or to bid on a particular license in a specific market. The Bureau said that the potential for such a disclosure to compromise the competitive nature of the bidding process and the post-auction market structure is precisely why such communications are prohibited.

As to Cascade's assertion that it did not intend to violate the rule, the Bureau held that a party's volition can be gauged by its primary actions. Certainly, Milliken did not inadvertently contact the Verizon executive and did not inadvertently make the comments that he did. Whether in so doing he actually intended to violate the rule is irrelevant. Cascade's actions were clearly "willful" as defined by the Communications Act.

Cascade asserted that its conduct in this case was less egregious than that of an applicant in another case where a fine of the same amount was imposed. In that case, two bidders were actively communicating with each other. In this case, the other bidder, Verizon, did not respond or participate in the communication. Verizon's failure to respond to Cascade's communication does not provide grounds for mitigating the fine for Cascade.

The Commission's anti-collusion rules apply to all auctions – including those for broadcast permits.

Legislation Introduced to Study Video Violence

Senator Jay Rockefeller (D-WV) has introduced legislation in Congress to authorize research on the impact of violent video games and programming on children. The bill, S. 134, entitled The Violent Content Research Act of 2013, is co-sponsored by Senators Richard Blumenthal (D-CT), Mike Johanns (R-NE), Dean Heller (R-NV) and Tom Coburn (R-OK).

The legislation directs the FCC, the Federal Trade Commission and the Department of Health and Human Services to jointly make arrangements within 30 days of enactment with the National Academy of Sciences to conduct a comprehensive investigation of whether exposure to violent video games and violent video programming, has harmful effects on children.

The study is to investigate whether such exposure to violence (1) causes children to act aggressively or causes other measurable harm to children; (2) has a disproportionately harmful effect on children already prone to aggressive behavior, or other identifiable groups of children; or (3) has a harmful effect that is distinguishable from any negative effects produced by other types of media. The study should also probe whether any harm identified in these investigations has a direct and long-lasting impact on a child's well-being. The Academy is to report the results of the study and its recommendations for future research to Congress and to the administrative agencies within 15 months.

The bill was referred to the Committee on Commerce, Science and Transportion.

Upload Waived for Older Issues/Programs Lists

At the request of KTBS-TV, Shreveport, Louisiana, the FCC has partially waived Section 73.3526 (and 73.3527 for noncommercial stations) of its rules with respect to the requirement to maintain quarterly issues/programs lists on the Commission's website. Effective August 2, 2012, all television stations were to upload to the agency's publicly accessible website all of the materials required to be in their public inspection files on a current basis (except for documents otherwise already on file with the Commission and publicly available online). Stations were given an additional six months, until February 2, 2013, in which to complete uploading older documents required to be in the file prior to August 2. (Because February 2 falls on a Saturday, the deadline is moved forward to February 4.)

This mandate to upload included the quarterly issues/programs lists. The rule requires those lists to be maintained in the public inspection file for the entire license term and until the next license renewal application has been granted with finality. Occasionally, license renewal applications remain pending for considerable periods of time – sometimes even until the end of the next eight-year license term. In such a situation, a station would be required to maintain all of the issues-program lists for two complete license terms – 16 years.

KTBS-TV is presently in this circumstance. It's renewal application filed in 2005 has not been acted upon and it is now time to file another application in early 2013. KTBS-TV asked the Commission to waive the requirement to upload to the FCC's website all of the issues/programs lists from the earlier license term (1997-2005), asserting that that task was an unwieldy burden. KTBS-TV committed to maintain those lists for public review at the station until the 2005 application is granted.

The Commission granted KTBS-TV's waiver request in a Memorandum Opinion and Order in Docket 00-168, and extended it to all similarly situated television stations with an unresolved license renewal application from a previous license term – but with certain conditions. Those conditions include the following:

  1. The old pending license renewal application must be unopposed by any member of the public.
  2. Deferral of action on the pending application must be due to enforcement matters unrelated to the station's obligation to air programming responsive to the needs and interests of its community or the related recordkeeping.
  3. All issues/programs lists from the prior term for which the old application is pending must be maintained at the station for public inspection until the renewal application is granted.

The waiver does not cover any other documents required to be in the public file from the prior license term. Those must be uploaded to the FCC's website.

Illinois Moves to Credential Emergency News Personnel

Illinois has become the first state to enact legislation to establish a system for assigning credentials to broadcast news reporters and support personnel enabling them to gain easier access to breaking news sites. The First Informer Broadcasters Act authorizes the Illinois Emergency Management Agency to identify and create a training curriculum that broadcast and cable personnel will have to complete in order to earn emergency credentials. Credentials will permit news personnel, their equipment and vehicles, and supplies (such as fuel) to move promptly through security perimeters so that events can be covered at close proximity and the outside world can be accurately informed as quickly as possible. Similar legislation is under consideration in a number of other states.

Second Ticket for Public File Problem Runs $15K

In March of last year, FCC agents from the Enforcement Bureau's Detroit Office visited the studios of WEKC(AM), Williamsburg, Kentucky. Their review of the station's public inspection file revealed that it contained no issues and programs lists whatsoever. According to their calculations, it should have contained 19 such lists. The Commission's rules require a station to compile an issues and programs list for each calendar quarter, and then to maintain those lists in the public inspection file for the entire license term. The station owner apparently had no explanation for the lack of issues and programs lists in the public file.

The Commission's Forfeiture Policy Statement establishes a base amount of $10,000 for violations of the public inspection file rule. In deliberating the nature and severity of the sanction to impose for a violation, the Commission staff can adjust the base amount to take into account such factors as the nature, circumstances, extent and gravity of the violation as well as the degree of the violator's culpability and any history of prior offenses. A major factor in this case that led to an upward adjustment in the amount of the fine was the fact that the licensee of WEKC had previously been fined for failing to have the required issues and programs lists in the public inspection file. Repeat offenders can expect an upward adjustment in the fine, and that is what happened in this case. The Bureau raised the fine by $5,000 and issued the station a Notice of Apparent Liability for Forfeiture and Order for $15,000.

The licensee was also ordered to file a statement with the Detroit Office within 30 days of release of the Order in which he certifies under the penalty of perjury that the station is then in complete compliance with the public inspection file rules.

Station Fined for Lacking EAS Override

The FCC's Enforcement Bureau has proposed to fine WVID(FM), Anasco, Puerto Rico, $8,000 because the station's EAS equipment was not configured to interrupt regular programming with EAS announcements. Responding to a complaint, FCC personnel from the agency's San Juan office visited the station. They found that the station's EAS equipment was installed and operational in every respect except that it was incapable of transmitting an EAS message unless station staff manually reduced or muted the on-air program volume. The EAS lacked the capability to automatically override or interrupt regular programming. When station staff is present, the system can function adequately. However, although WVID is the on the air 24 hours per day, it operates unattended from 6 a.m. to 7 p.m. Without a human being present to assist, the EAS was stifled at night and no emergency messages could be broadcast.

The Commission's rules mandate that stations be EAS-capable at all times they are on the air – whether attended or unattended by live personnel. The Enforcement Bureau decidedly concluded that WVID was in willful violation of this rule. It was unclear how long this condition had existed. The station manager disclosed to the Commission inspectors that the situation had been this way since he assumed his current position in September, 2011. WVID is a noncommercial station licensed to a small college. Nonetheless, the Enforcement Bureau issued a Notice of Proposed Liability for Forfeiture and Order that includes a fine for the full amount of the base forfeiture of $8,000 established in the Forfeiture Policy Statement. The station will also be required to certify to the Commission within 30 days that its EAS operation is fully rule compliant.

TV Pickup Sites to be Registered

Registration of stationary receive-only sites for pickup licenses in the 6875-7125 MHz and 12700-13200 MHz bands will become mandatory as of April 1, 2013. Although the FCC adopted this requirement in a new Section 74.605 of its rules in August, 2011, public notice of the effective date has only recently been published in the Federal Register. Registration can be accomplished through the Commission's Universal Licensing System. It has always been a good idea to register such sites – but now it is required.

The context for the adoption of this new regulation is the Commission's effort to increase spectrum availability and efficiency for wireless backhaul services. Wireless backhauling concerns the carriage of traffic for mobile telephone users between cell towers and trunk networks. The FCC allocated the two bands mentioned above for wireless backhauling on a shared basis with television pickup stations. Stationary receive-only sites do not need to be licensed because they are not the source of transmissions. However, they need to be identified and registered in the Commission's database so that the agency can protect them in its efforts to coordinate spectrum use among the different services.

Washington Hot Topics: What to Expect in 2013

By Mark Denbo

With the re-Inauguration of President Obama now in our rearview mirror, this is a good time for a brief outline of the goings-on in Washington that will be of particular concern to broadcasters in 2013.

New FCC Chair. It is widely expected that Chairman Julius Genachowski will announce soon that he is leaving the FCC. According to multiple reports, the next Chairman will not be either of the two sitting Democratic commissioners (Mignon Clyburn and Jessica Rosenworcel). Instead, recent speculation has centered on four current FCC "outsiders," all of whom have substantial communications experience: Karen Kornbluh, U.S. ambassador to the Organization for Economic Cooperation and Development, who headed the FCC's Legislative Affairs office in the late 1990s; Blair Levin, the primary author of the FCC's National Broadband Plan, who currently is a fellow at the Aspen Institute; Susan Ness, a former FCC Commissioner who now is a Senior Fellow at the Center for Transatlantic Relations at Johns Hopkins School of Advanced International Studies; and Lawrence Strickling, the Assistant Secretary of the National Telecommunications and Information Administration. Because Kornbluh was then-Senator Obama's Policy Director and has retained close ties, she has emerged as a frontrunner. Moreover, there may be pressure to nominate her because there has never been a female FCC chair and because most other nominees for top posts in President Obama's second administration are men.

Major Policy Initiatives at the FCC. The most pressing issues at the FCC primarily affect television broadcasters.

  • First and foremost is completing the proceeding that will provide rules of the road for the voluntary incentive auction and the involuntary "repacking" of television broadcast spectrum. Comments in the proceeding were due last month and reply comments are due by March 12. The FCC hopes to issue a Report and Order sometime in 2013 and hold an auction in 2014. It is possible that the first Report and Order will address only auction- related matters and save the more complex repacking items for a later date.
  • Also before the FCC are the intertwined issues of retransmission consent reform and review of the Commission's multiple ownership rules. It is expected that the FCC will not change either its rules governing retransmission consent or its rules governing the number of radio and TV stations one party may own, either locally or nationwide. However, the FCC may decide to "attribute" TV joint sales agreements. (JSAs already are attributable in radio.) That would mean, in applying the multiple ownership rules, a party providing such services would be treated by the FCC as if such party owned the affected station. We understand that a draft Report and Order on the multiple ownership rules is nearly complete, and that it would not allow full "grandfathering" of TV JSAs, but instead would require all existing arrangements to come into compliance within two years. If the new rules are not issued before Chairman Genachowski departs the FCC, a new Chair could substantially revise the current draft. It also is possible that Congress could intervene if it disagrees with the approach the FCC ultimately adopts.
  • Following the Supreme Court's June 2012 decision, which provided some level of clarity regarding the FCC's policies governing "indecent" programming, the FCC staff may begin granting the hundreds of radio and television station license renewal applications that have been pending for many years.

Major Policy Initiatives on Capitol Hill. In contrast, the major initiatives under consideration on the Hill primarily affect radio broadcasters.

  • Although the issue of a mandatory "performance royalty" has recently taken a step back (likely due in large part to the deals cut by certain broadcasters and smaller record labels), it could re-emerge in 2013 if broadcasters and the major record labels are unable to reach agreements on their own.
  • Radio broadcasters also have been pushing the wireless industry to include "FM chips" in mobile devices. Congress may take up the issue if both sides fail to reach an accord.
  • On the TV side, in the wake of the Sandy Hook massacre, Congress may enact legislation to study the effects of violence in television and video games on children. Congress also may seek to impose restrictions on violent programming if it does not feel as if television broadcasters are adequately addressing the issue.
  • Finally, it appears as if the leadership of the House Commerce Committee (and Telecommunications Subcommittee) will remain the same, with Fred Upton (R-MI) continuing as the Chairman of the full committee, Henry Waxman (D-CA) as ranking member and Greg Walden (R-OR) as chair of the subcommittee. In the Senate, there is some flux. The Chairman (for now) remains Jay Rockefeller (D-WV), but he is retiring at the end of 2014. The ranking member is expected to be John Thune (R-SD), who is replacing Kay Bailey Hutchison (R-TX). The head of the subcommittee currently is John Kerry (D-MA), but that will change once he is confirmed as Secretary of State. Next in line is Barbara Boxer (D-CA), but it is not known whether she will take over that position.

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