Broadcasting in the United States

Broadcasting in Constitutional Law

According to the Encyclopedia of the American Constitution, about its article titled Broadcasting, it is the electronic transmission of sounds or images from a single transmitter to all those who have the appropriate receiving equipment. It is thus a powerful medium for communicating ideas, information, opinions, and entertainment. … The contours of modern U.S. broadcast regulation were set in red lion broadcasting co. v. fcc (1969) , in which the Supreme Court upheld the fairness doctrine, which required licensees to cover controversial issues of public importance and provide a reasonable opportunity for companies.

Regulation of Radio Broadcasting and Television

For more information, read the complete entry about the regulation of communications here.

The radio and television broadcasting industry is subject to extensive and changing federal regulation.

There are proceedings before the FCC and legislation has been proposed in Congress reexamining policies that now protect television stations’ rights to control the distribution of their programming within their local service areas. For example, the FCC has issued a notice of Proposed Rulemaking which proposes to regulate entities that deliver video programming over the Internet as MVPDs.

Pursuant to FCC rules, the broadcast licenses for stations remains in effect pending processing by the FCC of the timely filed renewal application. Interested parties may challenge a renewal application. The FCC has the authority to revoke licenses, not renew them, or renew them with conditions, including renewals for less than a full term.

Regulation Enforcement

The FCC may impose sanctions or penalties for violations of rules or regulations. Thus, if a company in the industry or any of its officers, directors or significant shareholders materially violate the FCC’s rules and regulations or are convicted of a felony or are found to have engaged in unlawful anticompetitive conduct or fraud upon another government agency, the FCC may, in response to a petition by a third party or on its own initiative, in its discretion, commence a proceeding to impose sanctions upon that company that could involve the imposition of monetary penalties, the denial of a license renewal application, revocation of a broadcast license or other sanctions. If the FCC were to issue an order denying a license renewal application or revoking a license, the company would be required to cease operating the broadcast station only after we had exhausted all administrative and judicial review without success.

In addition, the FCC has recently emphasized more vigorous enforcement of certain of its regulations, including indecency standards, sponsorship identification requirements, the prohibition on “payola” and equal employment opportunity outreach and recordkeeping requirements. These enhanced enforcement efforts could result in increased costs associated with the adoption and implementation of stricter compliance procedures at our broadcast facilities or FCC fines. In response to a complaint by a public interest organization, the FCC issued letters of inquiry to several dozen television stations seeking to determine whether their broadcast of “video news releases” (“VNRs”) violated the sponsorship identification rules by failing to disclose the source and sponsorship of the VNR materials. VNRs are news stories and feature materials produced by government agencies and commercial entities, among others, for use by broadcasters. In 2007, the FCC issued a forfeiture notice to one cable company for alleged violations of the sponsorship identification rules based on the use of VNRs.

Business acquisitions

The Federal Trade Commission, the United States Department of Justice and the FCC carefully review broadcasters proposed business acquisitions and dispositions under their respective regulatory authority, focusing on the effects on competition, the number and types of stations owned in a market and the effects on concentration of market revenue share. The Department of Justice has challenged proposed acquisitions of radio and television stations, particularly in instances where an existing licensee seeks to acquire additional stations in the same market. Some of these challenges ultimately resulted in consent decrees requiring, among other things, divestitures of certain stations. In general, the Department of Justice has more closely scrutinized broadcast station acquisitions that result in local market shares in excess of 40% of advertising revenue. Any delay, prohibition or modification required by regulatory authorities could adversely affect the terms of a proposed transaction or could require companies in the industry to modify or abandon an otherwise attractive acquisition opportunity. The filing of petitions or complaints against the company or any FCC licensee from which the company acquire a station could result in the FCC delaying the grant of, refusing to grant, or imposing conditions on its consent to the assignment or transfer of control of licenses.

NPRM

Regulatory changes may result in increased competition in the radio and television broadcasting business. Among other things, the Communications Act of 1934, as amended, and FCC rules and policies require FCC approval for transfers of control and assignments of licenses, and limit the number and types of broadcast properties in a market in which any person or entity may have an attributable interest. Media ownership restrictions include a variety of limits on local ownership, such as a limit of one television station in medium and smaller markets and two stations in larger markets as long as one station is not a top-four rated station (known as the duopoly rule), a prohibition on ownership of a daily English-language newspaper and a television or radio station in the same market, and limits both on the ownership of radio stations, and on common ownership of radio stations and television stations, in the same local market.

In December 2011, the FCC issued a Notice of Rulemaking (“Ownership NPRM”) proposing to modify the newspaper broadcast cross-ownership rule and to eliminate the radio television cross-ownership rule. The Ownership NPRM also raised questions regarding whether the regulatory treatment of joint operating agreements between television stations in a market that are not commonly owned, including agreements for joint sales of advertising time, news sharing, and the provision of technical, promotional, and back-office services, should be changed. Such arrangements are common among television stations in medium and smaller television markets where ownership of more than one television station is not permitted and the station providing services is not deemed to have an attributable interest in the station receiving services.

In the Ownership NPRM the FCC requested comments regarding whether such joint operating arrangements should be considered attributable. In March 2014, the FCC adopted an Order concluding that Joint Sales Agreements (“JSA”) under which on television station sells more than 15% of the advertising inventory of another station in a market that is not commonly owned are attributable to the selling station. Parties to JSAs in effect as of June 19, 2014 were given two years to come into compliance or seek a waiver. This deadline was extended to December 19, 2016 by the STELA Reauthorization Act of 2014. The FCC’s decision regarding the attribution of JSAs has been appealed. The FCC declined to make any other changes to its multiple ownership rules but issued a Further Notice of Proposed Rulemaking (“FNPRM”) initiating the 2014 quadrennial review, and stated that the record from the 2010 quadrennial review would be incorporated into the 2014 quadrennial review. We are unable to predict the outcome of the FNPRM or of requests for review or appeals of any rule changes adopted by the FCC.

In addition, the 2004 Consolidated Appropriations Act prohibits any person or entity from having an attributable interest in broadcast television stations with an aggregate audience reach exceeding 39% of television households nationally. The increase in the national television viewership cap gave the largest television operators the ability to continue to hold or to acquire additional stations, which may give them a competitive advantage over us, since they have much greater financial and other resources than we have. In addition, the networks’ ability to acquire additional stations could give them “leverage” over their affiliates on issues such as compensation, program clearance and program distribution other than through their affiliates, in part because of the risk that a network facing an uncooperative affiliate could acquire a station in the market and terminate its agreement with that affiliate. In calculating the number of households a station reaches, the FCC attributes a UHF television station with only 50% of the television households in a market. An FCC proceeding proposing to eliminate the UHF discount is pending. If the proposal were to be adopted, it could limit the ability of the largest television operators to continue to acquire additional television stations.

New Regulation

Congress, the FCC or other federal agencies may in the future consider and adopt new laws, regulations and policies regarding a wide variety of matters that could, directly or indirectly, affect the operation, ownership and profitability of television and radio stations. Examples of such changes include:

• proposals to increase regulatory fees or to impose spectrum use or other fees on FCC licenses;
• proposals to restrict or prohibit the advertising of beer, wine and other alcoholic beverages;
• proposals to limit the tax deductibility of advertising expenses by advertisers;
• proposals to impose sales tax on advertising expense;
• proposals to revise the rules relating to political broadcasting;
• proposals to require broadcast stations to operate studios in the communities to which they are licensed, requiring construction of new studios, and to provide staffing on a 24 hour per day basis; and
• proposals to require radio broadcasters to pay royalties to musicians and record labels for the performance of music played on the stations.

The FCC’s National Broadband Plan

In February 2012, Congress passed and the President signed legislation that, among other things, grants the FCC authority to conduct incentive auctions to recapture certain spectrum currently used by television broadcasters and repurpose it for other uses. In May 2014, the FCC released an Order establishing general rules for the auctions. Several petitions for reconsideration of certain of the rules were filed and remain pending. In addition, the FCC has released rulemaking proposals seeking comment regarding specific rules and procedures that will apply to the incentive auctions. That rulemaking process remains ongoing.

The proposed incentive auction process has three components. First, the FCC would conduct a reverse auction by which each television broadcaster may choose to retain its rights to a 6 MHz channel of spectrum or volunteer, in return for payment, to relinquish all of the station’s spectrum by surrendering its license; relinquish the right to some of its spectrum and thereafter share spectrum with another station; or modify its UHF channel license to a VHF channel license. Second, in order to accommodate the spectrum reallocated to new users, the FCC will “repack” the remaining television broadcast spectrum, which may require certain television stations that did not participate in the reverse auction to modify their transmission facilities, including requiring such stations to operate on different channels.

In addition, Congress directed the FCC, when repacking television broadcast spectrum to make reasonable efforts to preserve a station’s coverage area and population served. Also, the FCC is prohibited from requiring a station to move involuntarily from the UHF band to the VHF band or from the high VHF band to the low VHF band. The statue does not protect low power stations in the repacking process. Third, the FCC would conduct a forward auction of the relinquished spectrum to new users. The FCC must complete the reverse auction and the forward auction by September 30, 2022, and has announced that as of now it intends to conduct the auction during early 2016.

The outcome of the incentive auction and repacking of broadcast television spectrum, or the impact of such items on our business, cannot be predicted.

Royalties to record labels and recording artists

Proposed legislation could require radio broadcasters to pay royalties to record labels and recording artists.

Legislation has been previously introduced in Congress that would require radio broadcasters to pay a royalty to record labels and performing artists for use of their recorded songs. Thus far, the legislation failed to pass but it may be reintroduced in the future. Currently, broadcasters pay royalties to song composers and publishers, for example, through Broadcast Music, Inc. (“BMI”), the American Society of Composers, Authors and Publishers (“ASCAP”) and SESAC, Inc. (“SESAC”). The proposed legislation would add an additional layer of royalties to be paid directly to the record labels and artists. It is not currently known what proposed legislation, if any, will become law, whether industry groups will enter into an agreement with respect to fees, and what significance this royalty would have on our operations and financial results.

Broadcasting (Communications Law)

This section introduces, discusses and describes the basics of broadcasting. Then, cross references and a brief overview about Communications Lawin relation to broadcasting is provided. Note that a list of bibliography resources and other aids appears at the end of this entry.