Earlier this year, there was a settlement window for mutually exclusive applications in the FCC’s application window for new FM translators for Class A and B AM stations. The FCC yesterday released a list of the applications that are now grantable as a result of conflict resolutions filed during that settlement window. These applicants must file their “long-form applications,” setting out the technical details of their proposed operations, during a filing window that will open October 4 and close November 5. The instructions for filing those applications are here. The list of applicants who are able to file is here. Also released was the same type of notice for three applications left over from the 2003 translator window, which were apparently left off earlier notices. That notice is here, and the list of applicants covered by it is here.
After the long-form application is submitted to the FCC, the application will be published in an FCC public notice of broadcast applications. Interested parties will have 15 days from that publication date to comment or object. If no comments are filed, and no other issues arise, the FCC’s Audio Division has become known for its speed in processing translator applications, so grants might be expected for many of the applications within 60 days of the end of any comment window.
The broadcast trade press was abuzz this morning with a report that an Arizona AM station currently simulcasting its programming on an FM translator has asked the FCC for permission to conduct a test where it would shut down its AM for about a year and operate solely through the FM translator. To grant this request, the FCC would need to waive its rule (Section 74.1263(b)) which prohibits an FM translator station from operating during extended periods when the primary station is not being retransmitted.
This idea of turning in an AM station to operate with a paired FM translator (though, in this case, the licensee promises to return the AM to the air within a year) is not a new one and has in fact been advanced in the AM Revitalization proceeding. The proposal offers pros and cons that the FCC will no doubt weigh in evaluating this proposal, and also raises many questions about the future of the AM band.
The immediate issue raised by the concept of trading an AM for an FM translator is what it says about the value of broadcasting on the AM dial. The once-dominant AM band has undoubtedly fallen on hard times in many parts of the country, with few AMs in major markets showing up among the ratings leaders in rated radio markets. Particularly in bigger markets, the AM band has been reduced to a few big signals that still have listeners and advertisers; some smaller specialty stations that have found profitable niches including ethnic, talk or brokered programming; and a number of struggling stations. FM translators have clearly made a difference for many of these struggling stations – not necessarily helping their AM operations but instead by giving their owners an opportunity to air their programming on the FM band where it is more likely to receive an audience.
Of course, right now, these FM translators are secondary stations, so any move to turn in an AM station to operate permanently on the translator risks having that translator knocked off the air because of an interference complaint (an issue that the FCC is currently trying to tackle in its proceeding on complaints about interference from FM translators – see our articles here and here) or because some full-power FM station increases power or a new FM station is added to the table of allotments. Some have suggested giving translators that have operated for a year or two without interference complaints some degree of protection from new or improved full-power stations (especially if the translator is associated with an AM station that agrees to surrender their AM signal), but whether the industry is ready to embrace that proposal is not yet clear. As evidenced by the mixed reaction to the proposal for C4 stations (see our articles here, here and here), some fear that the FM band is getting too crowded and that more FM signals preempt existing stations from improving their signals.
Getting rid of some of the weaker AM stations could have benefits to remaining stations, by reducing interference on the AM band, and potentially giving remaining stations some opportunities to improve their facilities. It could even lead, potentially, to more experimentation on the AM band – particularly with all-digital technologies that may improve the AM signal but will require much deeper penetration of HD AM radios before a large number would be willing to go that route for fear of not being able to be heard by their audience.
Another factor to consider is the role of changes in the FCC’s broadcast ownership rules. The NAB has proposed that AM stations no longer be counted in a multiple ownership analysis. Instead, ownership caps would apply only to FM stations (see our article here on the NAB proposal). While some have feared that this might mean that big broadcasters would abandon AM for FM operations, causing the state of technical operations and experimentation on AM to decline, others have suggested that this might free big groups or new entrants to gamble on AM by investing in a potentially unlimited number of such stations to program to niche audiences or for which to develop and deploy new technologies to make stations more viable.
Obviously, these musings run far afield from the issues facing the FCC in evaluating the proposal for the test by the Arizona station. But they are issues that need to be seriously considered by the industry as it contemplates the future of AM broadcasting. Certainly, some of these issues are likely to be discussed in the next phase of the AM Revitalization proceeding (see our articles here and here on possible issues to be considered in the future in that proceeding), and in the FCC’s upcoming Quadrennial Review of the radio ownership rules (see our post here on some of those issues). The Audio Competition report, on which comments are due next week, may also address some of these broader issues (see our articles here and here). There are no easy answers for AM, so the issues require thoughtful consideration by everyone in the radio industry.
On Friday, the FCC issued a reminder to all operators “of fixed-satellite service (FSS) earth stations in the 3.7-4.2 GHz band that were constructed and operational as of April 19, 2018 that the filing window to license or register such earth stations closes on October 17, 2018.” This frequency band is commonly referred to as the “C-Band”, and many of the “FSS earth stations” are satellite dishes that receive programming used by both radio and TV stations. The FCC is exploring allowing additional users into this spectrum, and has warned that only registered users of the spectrum will be entitled to any protections against any new users who may be authorized. In Friday’s public notice, the FCC also noted that those being protected not only need to have been operating by April 19 and registered by October 17 to be protected, but those entities will need to certify that the information in their registrations is correct on a form that will be made available at some point in the future. Users who have already registered are urged to make sure that their registrations are accurate by October 17, as certain corrections will not be allowed after that date. So broadcasters using this spectrum to receive satellite-delivered programming should heed the FCC’s advice and register by October 17.
The FCC last week issued a Public Notice announcing another window for mutually exclusive applicants filed in the second translator window to attempt to resolve the interference conflicts that the FCC found to exist between certain of these applications. A window for such settlements had been opened several months ago, but these are additional applications now identified as being in conflict. The conflicting applications are listed here. These applications were filed in the second translator window in late 2017, which was opened primarily so that Class A and B AM stations could seek authority to rebroadcast their signals on new FM translators that would be tied to those AM stations. Engineering amendments resolving the problems or other settlement agreements must be filed before September 20, 2018. If there is no resolution by that date, the applications will end up in an FCC auction.
As we wrote here, applications filed in the second translator window that were not mutually exclusive filed their “long-form” applications detailing their technical proposals back in May. Many of those applications and those that were able to resolve their issues in the first settlement window have already been granted. While these applications are being processed, the FCC is still dealing with other translator issues, including a pending petition for reconsideration of the FCC’s dismissal of objections filed by LPFM advocates in connection with hundreds of translator applications (see our summary of that pleading here), and the Notice of Proposed Rulemaking on translator interference (about which we wrote here). Reply comments in that proceeding were due last week, so stay tuned for an FCC decision on those issues.
On Thursday, we wrote about the FCC’s release of its order setting the amounts for the Annual Regulatory Fees paid by all of those regulated by the FCC. Those fees are due by September 25. On Friday, the FCC released a Fact Sheet detailing the fees for broadcast and other licensees regulated by the Media Bureau and how those fees should be paid. As we noted in our article last week, fees are due for stations based on the FCC authorization they held on October 1, 2017 – so even stations whose licenses have been surrendered (e.g. through the incentive auction or construction permits for new stations that were never built and expired) must pay fees on the authorizations in effect on October 1, 2017. The FCC also notes that expanded band AM stations, that have previously been exempt from fees as they are part of a paired license with stations in the core AM band, now have to pay fees independently from their paired station.
The Fact Sheet also sets out the fees owed by radio stations based on the population they serve, and for TV stations based on the size of the DMA in which they are located. The Fact Sheet links to this sheet for more information about how to access the FCC’s calculation of the specific amount owed for each of a licensee’s stations. The Fact Sheet also sets out details of the payment process, and notes that those licensees whose total fees are $1000 or less are exempt from any payment obligations as their fees are considered “de minimis.” Licensees who are in this de minimis category don’t even need to report that fact to the FCC – the Commission should be able to recognize that status on its own. Carefully read this information provided by the FCC, and submit your fees when ready – just be sure to do it before the September 25 deadline to avoid the substantial penalties for late payments.
Just when you thought that it might be safe to stop watching your email and prepare to enjoy the long weekend, the FCC comes along and reminds you that there is work ahead in September. As we warned in our summary of the regulatory dates for broadcasters in September, the FCC announced the deadline for filing annual regulatory fees – they will be due by 11:59 pm ET on September 25, 2018. A copy of the FCC order announcing the amounts of the new fees is available here. The filing date is available on the FCC’s website. Fee information is provided in Appendix C of the decision, which begins on Page 18 of order. In the past, the Media Bureau has followed up with a Public Notice and Filing Guide specifically addressing fees to be paid by broadcasters. Expect to see that in the next few days.
The Order also announces in Paragraph 14 of the decision that the method calculating TV regulatory fees will be changing beginning next year. It will be moving to a system for setting fees more like that used in radio by assessing fees for full-power broadcast TV stations based on the population covered by the station’s contour, instead of by the station’s DMA. Beginning in 2019, the FCC plans to adopt a fee based on an average of the current DMA methodology and the population covered by a full-power broadcast TV station’s contour. Thereafter, in 2020, the FCC will assess regulatory fees for full-power broadcast TV stations based solely on the population covered by the station’s contour. But for this year, the FCC detailed the procedures for payment that are much the same as last year.
Fees are set based on the station’s status as of October 1, 2017. So if, on that date, your now-operating station was just a construction permit, you pay the construction permit fee. If you have upgraded since last October, you have one more year of paying the amount due for a station with the facilities that you had last year. This even applies to TV stations that relinquished their licenses as part of the FCC incentive auction – if the station had a license last October that has since been surrendered following the Incentive Auction, it still owes a fee for last year’s operations.
All regulatory fee payments must be made by online Automated Clearing House (ACH) payment, online credit card, or wire transfer. Any other form of payment (e.g., checks, cashier’s checks, or money orders) will be rejected. For payments by wire, a Form 159-E should still be transmitted via fax so that the Commission can associate the wire payment with the correct regulatory fee information.
The maximum payment amount that can be charged on a credit card is $24,999.99. Licensees who need to pay an amount greater than $24,999.99 should consider available electronic alternatives such as Visa or MasterCard debit cards, ACH debits from a bank account, and wire transfers.
Under FCC’s de minimis rule for regulatory fee payments, a company or other legal entity is exempt from paying regulatory fees if the sum total of all of its annual regulatory fee liabilities is $1,000 or less for the fiscal year. Generally, that means that holders of an FM or AM construction permit need not pay fees, if that is their only FCC authorization.
So check your bank account and make the payment by September 25. Failure to pay on time brings a 25% penalty and puts a hold on the processing of any of your FCC applications. Look for more information shortly when the Fee Filing Guides are released.
While September is one of those months with neither EEO reports nor Quarterly Issues Programs or Children’s Television Reports, that does not mean that there are no regulatory matters of importance to broadcasters. Quite the contrary – as there are many deadlines to which broadcasters should be paying attention. The one regulatory obligation that in recent years has come to regularly fall in September is the requirement for commercial broadcasters to pay their regulatory fees – the fees that they pay to the US Treasury to reimburse the government for the costs of the FCC’s operations. We don’t know the specific window for filing those fees yet, nor do we know the exact amount of the fees. But we do know that the FCC will require that the fees be paid before the October 1 start of the next fiscal year, so be on the alert for the announcement of the filing deadline which should be released any day now.
September 20 brings the next Nationwide Test of the EAS system, and the obligations to submit information about that test to the FCC. As we have written before (here and here), the first of those forms, ETRS Form One, providing basic information about each station’s EAS status is due today, August 27. Form Two is due the day of the test – reporting as to whether or not the alert was received and transmitted. More detailed information about a station’s participation in the test is due by November 5 with the filing of ETRS Form Three. Also on the EAS front, comments are due by September 10 on the FCC’s proposal to require stations to report on any false or inaccurate EAS reports originated from their stations. See our articles here and here.
September also brings comment deadlines in numerous other important FCC proceedings. September 5 is the date for reply comments on the FCC’s Notice of Proposed Rulemaking on how to simplify the resolution of complaints about interference from new FM translators (see our summaries here and here). One of the most debated issues in the initial comments is whether to ignore complaints from full-power FM licensees and other existing FM broadcasters if those complaints originate outside of the complaining station’s 54 dBu contour. Many FM licensees, as well as the licensees of LPFM stations who are also protected from interference from new translators, contend that a substantial portion of their listening audience resides outside that contour and should not be left unprotected from new translators who interfere with such listening.
Reply comments are due September 10 on the FCC’s Notice of Inquiry as to whether to create a new class of C4 FM stations, and to make changes to allow for more short-spaced FM stations using Section 73.215. See our articles here and here on that proceeding.
Congress has also requested that the FCC provide it with a report on the state of competition in the Audio Marketplace. As we wrote here and here, we expect that, while this report is directed to Congress so that it can use this information in assessing statutory changes, as the report will be prepared at the same time as the FCC is working on the Notice of Proposed Rulemaking in its next Quadrennial Review which will likely review the radio ownership rules, the facts gathered in preparing the report to Congress are likely to be important in the Quadrennial review. Comments on this report to Congress are due September 24.
The potential for changes in the Children’s Television rules, particularly the rules mandating three hours of weekly educational and informational programming directed to children on each programming stream broadcast by a TV station, are being reviewed by the FCC. Comments on the FCC’s Notice of Proposed Rulemaking looking at potential changes in these rules (about which we wrote here) are also due September 24.
As the Incentive Auction repacking marches on (with the testing period for repacked stations in Phase 1 of the repacking starting in September), the FCC is also considering the reimbursement of expenses incurred by LPTV stations, TV translators, and FM broadcasters whose operations are affected by the repacking. Comments are due September 26 on the FCC’s proposals on eligibility and administration of the finds to reimburse these stations. See our article here for more details on these proposals.
Commercial radio stations that have been paying the newest Performing Rights Organization, GMR, under an interim license while litigation continues between GMR and the Radio Music License Committee (RMLC) to determine if GMR should be subject to any sort of antitrust regulation, have an interim license that expires at the end of September (see our article here). As the litigation is unlikely to be resolved in the next few months, GMR is reportedly offering yet another extension of its interim license through March 31, 2019. Look out for notice of that extension directly from GMR but, if you have not received it, you may want to reach out to them before the end of the month.
And watch for the agenda of the FCC meeting on September 26. That agenda should be released next week, and we will see what broadcast items may be on it just in time for the Radio Show at the end of the month. Plenty of issues to keep broadcasters busy. As always, check with your legal advisor to make sure that there are no other legal issues that may affect your station’s operations.
The state of the audio industry will no doubt be a crucial consideration in the next Quadrennial Review of the FCC’s ownership rules, expected to start late this year or early next. But, before that Review begins, the FCC has been tasked by Congress to write a report on the state of competition in the audio marketplace. In order to gather information for that report to Congress, the FCC is seeking public comment on the state of the industry, asking questions about the state of completion for listeners and advertisers – questions which we summarized here. A summary of the request for comments on the “Status of Competition in the Marketplace for Delivery of Audio Programming” was published in the Federal Register today, setting the comment deadline for September 24, 2018, with reply comments due by October 9.
With this report being prepared just as the FCC is beginning to consider what issues to tackle in the Quadrennial Review, we cannot help but believe that the FCC’s findings won’t be taken into consideration in the Quadrennial Review. The initial document to be released in the Quadrennial Review will be a Notice of Proposed Rulemaking putting forth the FCC’s initial take on whether any of its ownership rules are no longer in the public interest and therefore need to be modified or eliminated. The radio rules have not been subject to any changes in a dozen years, when the FCC switched from using a contour methodology to using Nielsen Audio (then Arbitron) data to compute the number of stations in a rated market. The number of stations any party is able to own in any market has remained unchanged since 1996, though audio competition has clearly grown (see our article here). The facts gathered in this report, while meant for consumption by Congress in its consideration of various legislative matters, will also be the FCC’s most thorough look at the marketplace in which radio competes in 20 years and will likely inform the FCC’s judgement as to whether the radio ownership rules should be amended (see our article here summarizing the NAB’s proposal for changing the rules). Thus, broadcast companies interested in changes in the radio ownership rules should be thinking about providing information to the FCC about the state of competition in the audio marketplace by the September 24 deadline.
FCC Chairman Ajit Pai, in a speech this week at the Michigan Association of Broadcasters Summer Convention (the text of the speech is available here), announced that he has circulated to the other Commissioners for review and approval a Notice of Proposed Rulemaking looking to make changes to AM interference standards. Specifically, he said that the NPRM would look at Class A AM interference standards. I was in the audience for the Chairman’s remarks, and audience reaction was muted – perhaps because so few people regularly use the term “Class A AM” when referring to what many call the “clear channel” stations – those big 50 kW AM stations that can often be heard halfway across the country at night because of their “skywave” service bouncing off the atmosphere to be received hundreds and sometimes thousands of miles from where the signal originates.
What to do about Class A AM stations was an issue teed up by the FCC in the AM Revitalization proceeding initiated several years ago (see our post here summarizing the issued raised by the FCC back in 2013). While these clear channel stations are enjoyed by listeners far from their own city of license (often bringing sports broadcasts to distant fans, or programs like the Grand Ole Opry that have become national institutions), the huge service areas of these stations does come at a cost to local service – as many lower powered AM stations operating on the same channel as these Class A stations have to either drastically reduce their power or cease operations all together during nighttime hours. While some AM licensees have received FM translators to fill in those service gaps, those translators do not bring listeners back to the AM band itself. So, in the Revitalization proceeding, the FCC asked for ideas as to what it should do with these stations – e.g. if it should advance proposals to reduce protection to the clear channel stations in order to allow more local AMs to increase their nighttime power. It appears that the NPRM announced by the Chairman on Tuesday will crystalize the comments received in response to the 2013 Notice into more specific proposals for action.
In his comments in Michigan, the Chairman said “our rules should reflect the reality of the current noise floor and appropriately balance the interests of Americans who want to listen to smaller local stations in their communities with those who enjoy listening to Class A stations.” Exactly how the FCC proposes to achieve that balance may not be clear until we see the release of the new NPRM. This is a controversial issue, as many owners of clear channel AMs argue that these stations are what keep listeners tuned to the AM dial and allowing more interference could weaken their ability to provide the attractive programming that many of them do. Of course, owners of the weaker AM stations want to serve their communities during all hours, not just during daylight hours. This further NPRM will no doubt be carefully watched, and we will see the arguments raised on both sides in the coming months.
At its meeting last week, the FCC adopted a Report and Order creating an incubator program to incentivize existing broadcasters to assist new entrants to get into broadcast ownership. The FCC in its order last year relaxing TV local ownership rules and abolishing the newspaper-broadcast cross-ownership rule had agreed to adopt an incubator program (see our articles here and here). In fact, the US Court of Appeals for the Third Circuit, which is reviewing the FCC’s ownership order, stayed the processing of that appeal to await the rules on the incubator program (see our article here), as the Court has previously indicated that considerations of how changes in the ownership rules affect new entrants is part of its analysis of the justification for such changes. What rules did the FCC adopt?
The FCC will encourage an existing broadcaster who successfully incubates a new entrant into broadcasting by giving them a “presumptive waiver” of the ownership rules. To understand what this means requires looking at several questions including (1) what services does the existing broadcaster have to provide to qualify for the credit; (2) which new entrants qualify for incubation; (3) what is a successful incubation; and (4) what does the presumptive waiver provide to the broadcaster providing the incubation services. Let’s look at each of these questions.
What services qualify as incubation? The FCC did not lay down hard and fast rules as to exactly what constitutes an incubation of an entrant. But it did say that incubation will likely consist of either financial assistance or management and operational services and training, or a combination of both. Any incubation plan needs to be submitted to the FCC for approval either with an application by the new entrant to acquire the station or in a petition for declaratory ruling if the new entrant already owns the station and is seeking incubation to help make it a success. As part of the plan, a written contract setting out the relationship between the parties must be submitted for FCC review.
The FCC did, however, put limits on the incubation. If the existing station provides financing by taking an equity interest in the company that is being incubated, the new entrant must retain voting control of the licensee of the incubated station. In addition to control, the new entrant will have to have at least a 15% equity interest in the company, and that interest will need to be at least 30% if some other entity (such as the broadcaster providing the incubation services) has more than 25% of the entity.
The new entrant must also have an option to buy back any interest that the existing station takes in the incubated station at the end of three years, at no more than fair market value. The new entrant may decide not to exercise the option at the end of three years, or it may decide to sell the incubated station – but the incubation will only be considered successful if the new entrant holds on to control of the incubated station or sells it and turns around and uses its proceeds to buy another radio station.
The new entrant must at all times maintain control of the licensee of the incubated station. The existing station cannot provide programming services to the new entrant through an LMA. It can do a JSA or Shared Services Agreement but, as the goal of the program is to end up with a successful, independent operation, the JSA or SSA must end after two years.
Who qualifies to be incubated? Initially, this program will only apply to radio stations. The FCC decided that radio offers the best opportunity for new entrants to get into the broadcasting business, though it may reevaluate that conclusion in the new Quadrennial Review to determine if incubation should be extended to television as well. While we have termed the entity being assisted by the incubator program as a “new entrant,” in fact that entity can have up to three other radio stations in addition to the station being incubated. So this program is also designed to assist small owners become more successful.
In addition to having no more than three existing radio ownership interests, any party being incubated must also meet Small Business Administration standards for being a small business. To be a small business under SBA rules, an entity must have less than $38.5 million in revenue. Note that the SBA rules attribute revenue from some affiliates of the entity being evaluated, so a big company can’t set up a shell corporation to be incubated. The FCC will also require certifications that the entity being incubated could not have acquired the incubated station or operated it successfully without the assistance of the company providing the incubation assistance. The new entrant will also be required to disclose all family broadcast interests to show that the entity is independent. The FCC reserves the right to investigate these certifications, and notes that it will revoke permission for an incubation program if it finds that the company being incubated in fact had access to a source of funds that made the incubation unnecessary (e.g., a “trust fund” in the example given by the FCC).
The existing station can help to incubate no more than one station in any given market. If it seeks to incubate stations in multiple markets, it will need to demonstrate that it has the capacity to do so.
When is an Incubation Successful? The incubation is normally to be for a period of three years. However, an incubated entity can ask for early termination if things take off, or one extension of up to three years. As noted above, the incubation will be successful if, at the end of three years, the incubated station can stand on its own, or if it has been sold with the new entrant buying another AM or FM station with the proceeds.
At the end of the incubation period, the parties must file a joint certified statement setting out the results of the incubation, and describing how the incubation assisted the new entrant to become a stable operation. If the FCC’s Media Bureau does not conclude that the incubation was unsuccessful within 120 days (or any longer period that the Bureau determines is necessary to review the final certifications), the station that provided the incubation services will get a presumptive waiver allowing it to exceed the multiple ownership rules in any comparably sized market.
What is the benefit of a Presumptive Waiver? The entity providing the incubation services will receive a Presumptive Waiver allowing it to acquire one station more than is allowed under the current FCC radio ownership rules. That waiver can be used for an acquisition of any station in a comparably sized market, i.e. one that has the same limits on the number of stations that can be owned in the market where the incubated station is located. So if an entity incubates a station in a market where one owner is allowed to own up to 6 stations, no more than 4 of which can be FM stations, that entity can acquire a 7th station in any market subject to the same ownership limits. The waiver can also be used in the same market as the incubated station. Once acquired, that additional station can be sold as part of the cluster of stations in the same market without any need for divestiture.
However, there are limits on the use of the waiver. The waiver cannot be used if the entity using the waiver would end up with more than 50% of the stations in the market. In addition, the market must have at least the same number of independent radio owners as the market in which the incubation occurred (at the time of the start of the incubation). Thus, if there were six independent radio station owners in the market where the incubation occurs, there must be at least 6 independent owners in the comparable market for the waiver to be used. The waiver must be used within 3 years of the end of the successful incubation.
There are many additional nuances to the incubator program, so if you are interested in taking advantage of the program, either to incubate a station to get a possible waiver of the radio ownership limits, or to help assure the success of a new station, read the Order and accompanying rules carefully, and seek assistance of an attorney familiar with FCC practice. These rules will become effective after they are approved under the Paperwork Reduction Act, and after the necessary changes to the FCC forms have been made.