All posts by David Oxenford

Playing Music in Bars and Restaurants – Cautions When Allowing Broadcast Stations to Play in Retail Outlets

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David Oxenford

By: David Oxenford, Wilkinson Barker Knauer LLP,

A few days ago, I noted a news story about a bar that stopped hosting live music when it was hit with a lawsuit by BMI because it had not paid royalties for its use of music. The issue of music in bars and restaurants also came up in a continuing legal education seminar on music licensing that I moderated the week before last. Given that I have not written on this topic in some time, I thought that it was worth a reminder that retail outlets, including bars and restaurants, have to pay music royalties to ASCAP, BMI, SESAC and perhaps GMR for the performance of music in their venues, except if they fit within very detailed exceptions that allow for certain businesses to avoid those payments.

We wrote an article here that goes into detail on the exceptions. Basically, for very small businesses, their employees can use a single device of the type used in a home to play music. This exception was designed to allow businesses to allow their employees to have personal audio devices to entertain themselves. So that portable radio on the counter of the dry cleaner or at the secretary’s desk can play music without paying royalties. For larger businesses there is a different exception that allows them to avoid liability but only if they meet very specific rules.

This exception is based on the physical size of the business and the number of broadcast receivers that it uses. It applies only when the business plays an FCC licensed radio or TV station (or cable or satellite TV programming) where the originator of the programming has paid the appropriate fees. The business that takes advantage of this exception can’t charge an admission fee. And the business must fit into one of these categories:

  • It has less than 2,000 gross square feet (excluding parking – but the parking area must be just used for parking – so the area around the gas pumps or other actively used outside areas would probably count toward the 2,000 square feet) or, for “food service or drinking establishments” (bars and restaurants), the square footage is less than 3750 gross square feet (excluding parking as long as the parking is only used for parking, e.g. it does not become a patio during good weather);
  • Or, if the business has more than the square footage set out above, then:
    • If the business only plays the radio, it can have no more than 6 total speakers, no more than 4 of which can be in one room (or adjoining outdoor space)
    • If the business plays TV, it can have no more than 4 TVs, none bigger than 55 inches (diagonal screen size), and no more than one in any room (and there can’t be more than 6 speakers providing the TV audio, with no more than 4 in any one room)

Note that this exception is not limited to consumer-type radios, but the business can only play FCC licensed radio or TV stations (cable and satellite TV count as TV too). No CDs, no hooking up to an iTunes library and no streaming services. If a business plays any of these other services, or features live music, then they must get public performance licenses.

For even more detail on these issues, see the article that I co-authored in the ABA Intellectual Property Division’s magazine Landslide that is available here. Avoid trouble – get the licenses that you need.

David Oxenford is MAB’s Washington Legal Counsel and provides members with answers to their legal questions with the MAB Legal Hotline. Access information here. (Members only access).

There are no additional costs for the call; the advice is free as part of your MAB membership.

FCC Starts Warning Stations of Noncompliance with Online Public Inspection File Rules

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David Oxenford

By: David Oxenford, Wilkinson Barker Knauer LLP,

On December 6, the FCC has started to email out notices to numerous radio stations throughout the country, notifying them that there are issues with their online public inspection files. The email notices do not reveal what the specific problem is – but instead simply say that there are issues and ask for notice of corrective actions to the FCC. We have been warning of the FCC’s concern about incomplete or inactive online public files for some time, and the potential impact that noncompliance could have on license renewal, which starts for radio stations in the Washington DC area in June 2019, and then moves across the country in this three-year renewal cycle (see, for instance, our articles here and here). Clearly, this is a warning to stations that the FCC is watching their public files, and that compliance problems will bring issues, and possibly fines, if the files are not complete by license renewal time (or even earlier if documents were not timely created).

As we have written before (here and here), the biggest issues will likely be with stations not uploading Quarterly Issues Programs Lists and, for stations that are part of clusters with 5 or more full-time employees, Annual EEO Public Inspection file reports. Look at your file now and make sure that you are in compliance with these and all other public file obligations to insure that you do not have issues that can come back to haunt you at renewal time – or at any other time that the FCC decides to use its enforcement authority to start issuing fines.

David Oxenford is MAB’s Washington Legal Counsel and provides members with answers to their legal questions with the MAB Legal Hotline. Access information here. (Members only access).

There are no additional costs for the call; the advice is free as part of your MAB membership.

The Importance of Assessing the Safety and Security of Broadcast Stations and Their Personnel

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David Oxenford

By: David Oxenford, Wilkinson Barker Knauer LLP,

A topic not much discussed among broadcasters, but one that should be paramount in the future planning of all broadcast companies, is insuring the security of their stations and the safety of their employees. This is an issue on which all broadcasters should be focusing. Last month, the Wisconsin Broadcasters Association for the second time featured a panel at one of its conventions dealing with this topic. While many might think that security issues won’t arise at their stations, in fact it can be an issue at any station in any market. Listening to the stories told by the participants on these panels, and in later discussions with audience members at the two WBA conferences where the panel has now been featured, and judging from news reports, the topic is clearly one that all broadcasters should be considering. Video of the panel held last month is available here.

While the panel was premised on protecting journalists who often are the highest profile “faces” of a TV station, from the discussion it was clear that the need for security planning is one that applies not just to TV stations with news operations, but even to radio stations and other media outlets that can, for one reason or another, be targeted by someone with a grudge against the outlet or one of its personalities. We have seen high profile incidents like the shooting of the Roanoke TV journalists or the employees of an Annapolis newspaper, and we have seen just in the last few weeks pipe bombs sent to news organizations and threats against cable TV hosts. But, as discussed at the WBA panel, there have been many less publicized incidents. Two of the panelists discussed their experiences, one a shooting at a small community-run radio station and the second an intruder making threats and smashing station property in broad daylight at a small market TV station. These incidents, beyond simply raising questions of employee safety, raise both practical and legal issues for all broadcasters.

As discussed in last month’s panel, the practical issues can be as simple as the question of how to conduct operations when your station has become a crime scene. The manager of the Wisconsin community radio station where a night-time intruder shot the on-air DJ discussed not only the security review that the incident prompted, but also the operational issues that resulted from the incident. While police investigated the incident, station employees could not get into their building to operate the station. This highlighted the need for disaster and emergency planning for all stations, not just because of incidents like this, but for any eventuality (e.g. flood or chemical spill) that could make a studio inaccessible. How does a station deal with the lack of access to their main studio? Can they keep operating if that happens? Have they made plans for such an event?

On these panels, law enforcement officials emphasized the need for planning and staff training sessions so that employees know what to do if a threat arises. Many businesses already undertake this kind of training, and local law enforcement authorities are often willing to help conduct the sessions. In the small market TV incident discussed on the panel, a stranger started banging on the front door of a TV station and then retreated to the front lawn of the station using a crucifix he had stolen from a local church to start attacking the sign identifying the station. In the video show during the discussion, a station employee can be seen running out to confront the attacker. Questions were raised as to whether the better and safer approach might have been to shelter in the studio building until law enforcement authorities trained in dealing with such situations arrived on the scene, especially without knowing what other weapons the individual might have had. Would your employees have known what to do in such a situation?

The discussion looked at other instances where stations should be assessing the safety of their employees. While technology has made it possible for station employees, by themselves, to broadcast from all sorts of remote locations, should they do so? Should the station be thinking about security before sending an employee to do a broadcast from a news scene or any other remote location – especially if the employee is going on their own?

Planning for these situations is important, and as I said in my remarks, there are already lawyers thinking about potential liability for stations that don’t do enough to keep their employees safe. Stations should be thinking about how to ensure a safe workplace, and taking active measures to reduce risks. Some companies have already started to review social media accounts of their stations and their on-air employees to try to identify threats early – as some online remarks may be indicative of real potential threats to station personnel. The FCC has eliminated the requirement that stations have a manned main studio accessible by the public during all business hours. While some stations feel that they need to maintain an accessible main studio to show their connection to their communities, others have decided that security is more important. Stations should make educated decisions about such matters, assessing the security implications of their choices.

These are not easy decisions, and there are no clear answers as to what stations need to do to keep their employees safe on the job, while still interacting with the community to provide the localism on which broadcasting thrives. In today’s world, journalists and broadcast companies are often vilified by public figures and even by private individuals who do not, for one reason or another, like what is being broadcast. Because of the attention they get, stations need to be thinking about these issues, and planning for the security issues that may come their way. We will be writing more about these questions in future articles, but start thinking about these issues now.

David Oxenford is MAB’s Washington Legal Counsel and provides members with answers to their legal questions with the MAB Legal Hotline. Access information here. (Members only access).

There are no additional costs for the call; the advice is free as part of your MAB membership.

FCC Reminder About Activation of the Online Public Inspection File – Potential Impact of Noncompliance at License Renewal Time

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David Oxenford

By: David Oxenford, Wilkinson Barker Knauer LLP

By March 1 of 2018, all radio stations were to have activated their online public file. We wrote about how that activation should be done here, and answered other questions about the online public file for radio here. Yet, from my own review, and from what I have heard from engineers who conduct reviews of broadcaster’s FCC compliance for the Alternate Broadcast Inspection Programs sponsored by state broadcast associations, there remain stations that have not yet complied with the requirement. The FCC has issued a reminder to all stations that their files are supposed to be live, and said that the FCC itself will be activating the file for any station that has not already done so by November 15. If they have to activate your public file, they may note that they had to do so, and that may have consequences for license renewals that will be filed for radio starting next year.

For any stations that have not activated their file, you really need to go to that file now and make sure that it is active and that all the required material is in the file. While the FCC will be automatically uploading copies of documents that are electronically filed at the FCC, every station has certain obligations where their own employees need to upload information into the file. For instance, every full-power station needs to upload on a quarterly basis its Quarterly Issues Programs Lists. As we wrote here, these lists are particularly important as they are the only way in which a licensee reports on how it served its community. With license renewals for radio starting in June 2019, a review of the online public file will likely be part of the FCC’s review of the renewal application. Not having these lists, or not having activated the file at all, will likely lead to FCC fines. So check out your online public inspection file, make sure that it is active, and that the information is complete and accurate. Failing to do so may end up costing substantial sums should the FCC find your compliance lacking – which they now can do from the comfort of their own computer, any time of any day.

David Oxenford is MAB’s Washington Legal Counsel and provides members with answers to their legal questions with the MAB Legal Hotline. Access information here. (Members only access).

There are no additional costs for the call; the advice is free as part of your MAB membership.

Demands to Pull Attack Ads in the Closing Days of the Election – What is a Station to Do?

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David Oxenford

By: David Oxenford, Wilkinson Barker Knauer LLP

As we approach Election Day, the political ads seem to be getting more and more frequent, and often more and more nasty. We provided an overview of what a station should do when it gets an attack ad two years ago, and the ads have not become kinder in the intervening period, so we will publish it again (with a few revisions). With the rise in the number of attack ads in this last week before the election, stations are facing more and more demands from candidates who are being attacked, asking that the ads be pulled from the airwaves because the content is not truthful or otherwise presents a distorted picture of reality. What do stations do when confronted with these claims?

We have written about this issue several times before (see, for instance, our articles here and here). In some cases, the stations can do nothing – if the attack is contained in an ad by a candidate or the candidate’s authorized campaign committee. If a candidate in his or her own ads attacks another candidate, the station cannot pull the ad based on its content. Ads by candidates and their authorized campaign committees are covered by the Communication Act’s “no censorship” provision, meaning that the station cannot (except in very limited circumstances) pull the ad based on its content (see more on the “no censorship” provision here). Because the station cannot pull the ad based on its content, the station has no liability if the candidate’s attack ad defames their opponent. In fact, we have heard of cases where a non-candidate group runs an attack ad containing claims that the target of the ad claims are untrue, where stations pull the ad, and where the claims soon reappear in the ads of the candidate who the third-party supported. When they objectionable claims are in a candidate’s own ads, the only remedy of the candidate that is being attacked is to sue the candidate who ran the ad. But what about allegedly false claims made in ads by third parties – like PACs, unions, political parties or other non-candidate groups?

Stations must take seriously any claim that a political ad that they are running is false, particularly where there is legal action threatened if the ad is not pulled from the airwaves. The Communications Act’s “no censorship rule” does not apply to third-party ads, only to candidate ads. Thus stations can pull a third-party ad because of its content. While stations need not fact- check every ad they receive, if an ad is defamatory – spreading falsehoods about a recognizable individual – it could result in civil liability to the station. Under Supreme Court precedent, statements made about public figures (such as political candidates) can be found defamatory only if the person or entity that is distributing them either knew that they were false or distributes them with “negligence,” e.g., where they had notice that the ads were false, yet they continued to distribute the false material anyway. Thus, if a station does not know that a claim in a third-party ad is false, but it is put on notice about the falsity (e.g., by a letter from an attorney representing the party being attacked), the station needs to take steps to investigate the truth of the ad.

If the station ignores a demand letter claiming that an ad is false, and keeps running the allegedly false ad anyway, and the ad is in fact false and defamatory, there is potential liability to the station. Stations should ask the sponsor of any attack ad for documentation backing up their claims, review the supporting material to see if it in fact backs up the claims made, and consult with their attorneys to determine if it is likely actionable. There are often no clear answers, so broadcast companies need to talk to their attorneys and make their own assessment of the risk of liability for continuing to run a third-party ad claimed to be untrue. Typical political claims (e.g. “candidate X is a big-spending liberal” or “candidate Y doesn’t care about our kids as he has voted against school funding increases 12 times”) are less likely to be actionable than are claims about the character, integrity and similar personal qualities of a candidate (e.g., a claim that a candidate did something illegal).

The FCC itself is not a fact checker of claims made in political ads. Many times letters demanding that attack ads be removed from the air suggest that running these ads somehow violates the FCC rules about stations operating in the public interest. Sometimes the demand letters even claim that the ads violate FCC rules against false and deceptive advertising – even though it is the FTC, not the FCC, which deals with deceptive ads. But even the FTC is not routinely involved with the political advertising process, given that the involvement of any government agency is assessing the truth or falsity of any political ad is so fraught with First Amendment issues. Generally, we don’t want a government agency deciding what is true in political ads and what is not. Thus, these questions are left to private actions for defamation.

While defamation actions against broadcasters for not pulling an attack ad are not common, there have been a few broadcast stations sued. These are stations that kept running an allegedly false political ad which they had been told was false. You don’t necessarily want to go to the time and expense involved in any such litigation, so assess these claims with your attorney once they come in. Many of these demand letters seem to be sent more to intimidate stations into pulling ads in the last few days before an election than to advance real legal claims, but you need to carefully review all the demands to make sure that the ones that you receive don’t have merit. Consult your attorney, as these are sometimes not easy calls to make.

For more on various political broadcasting issues, see our Political Broadcasting Guide, here.

David Oxenford is MAB’s Washington Legal Counsel and provides members with answers to their legal questions with the MAB Legal Hotline. Access information here. (Members only access).

There are no additional costs for the call; the advice is free as part of your MAB membership.

FCC Seeks Comments on Reimbursable Repacking Expenses for LPTV, TV Translators, and FM Radio

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David Oxenford

By: David Oxenford, Wilkinson Barker Knauer LLP

On October 22, the FCC released a Public Notice asking for comments on a “Catalog of Expenses” that would be reimbursed to licensees of LPTV and TV translator stations, as well as FM broadcasters, who are impacted by the repacking of the TV spectrum following the TV incentive auction. We wrote here about the FCC’s Notice of Proposed Rulemaking looking to establish rules for that reimbursement process (note that reply comments in that proceeding are due October 26). What this Notice does is put out for review the FCC’s best guess as to what it would cost to accomplish certain tasks caused by the repacking – whether it would be for replacement equipment or necessary professional services. The Catalog sets out an expected price range. If a licensee’s costs fall outside the estimated price range, before any reimbursement could be made, additional documentation and justification would be required.

Thus, these estimates are important to ease the reimbursement process. Any licensees who are likely to have to rely on this reimbursement should review the estimates and comment if they think that the FCC has missed the mark. Comments are due by November 21, with replies due December 6.

David Oxenford is MAB’s Washington Legal Counsel and provides members with answers to their legal questions with the MAB Legal Hotline. Access information here. (Members only access).

There are no additional costs for the call; the advice is free as part of your MAB membership.

Music Modernization Act Becomes Law – Mechanical Rights To Become Easier Just As Performance Rights May Become More Difficult

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David Oxenford

By: David Oxenford, Wilkinson Barker Knauer LLP

Last week, after passage by both chambers of Congress and signature by the President, the ‘‘Orrin G. Hatch–Bob Goodlatte Music Modernization Act’’ became law. The law underwent a few changes on its journey to approval, adding new provisions in the Senate to those which we summarized here upon its initial passage by the House. The Act retained its same principal purposes. The driving force behind the Act was the desire to simplify the payment of “mechanical royalties” by digital music services for the reproduction and distribution of the millions of musical compositions that they use in the songs that they serve up to more and more consumers across the country. That simplification was accomplished through the creation of a new collective through which these royalties will be paid – essentially a one-stop shop where the statutory royalty will be paid. The collective will have the responsibility for finding the copyright holders and songwriters who share in the royalties – removing the need for the music services to have to identify and pay all of the appropriate rightsholders, a process that has resulted in legal claims for hundreds of millions of dollars against these services for not being able to find all the parties who are supposed to be paid for the mechanical royalties.

The general layout of the system for dealing with the payment of these royalties, through a collective to be established, remains essentially the same as in the initial House Bill. Other provisions were added in the Senate (and then approved again by the House) dealing with matters including pre-1972 sound recordings, Sirius-XM royalties, and the ability of existing music organizations to continue to do direct licenses for mechanical and other rights outside the new statutory system. We may write about those issues later. But the Senate addition likely to have the most significance for the most music users was one having nothing to do with mechanical royalties, but instead with the performance royalty for music works (musical compositions) that is paid by music services, radio stations, bars and restaurants and any other location that plays music that is heard by the public at large. The new language added by the Senate requires that, before the Department of Justice recommends any changes to the consent decrees governing ASCAP and BMI, the DOJ must first notify Congress of any changes that it will be suggesting to the courts that administer the decrees, so that Congress can decide if it wants to take action to block or modify any such changes. Why is that significant?

Performance rights in the United States, until a few years ago, were relatively straightforward. Music users paid royalties to ASCAP, BMI and SESAC, and then pretty much were free to play almost any song that they wanted to. Sure, there were occasional issues over whether the royalties charged by these performing rights organizations (PROs) were fair, and having three PROs in the United States was two more than existed in most other major countries, but nevertheless the system generally worked especially as ASCAP and BMI, by far the two largest organizations, were governed by antitrust consent decrees overseen by U.S. District Court Judges in the Southern District of New York. These two PROs could not raise rates without the prospect of a rate court proceeding to determine if their proposed rates were fair. So, while there was no one-stop shop to which royalties were paid for the public performance of musical compositions, the three legacy PROs effectively provided a statutory license system without any statute having been adopted.

But, as we have written many times, that system is beginning to break down, as major publishing companies have threatened to withdraw their catalog from ASCAP and BMI to license it themselves (see our articles here and here), or as new PROs, like GMR, have been established to try to get higher royalties for the musical works to which they have rights. While there has been one lawsuit against GMR to try to bring it under some antitrust regime (and similar successful suits against SESAC which had never previously been subject to antitrust constraints, see our articles here, here and here), the pressures to splinter the performing rights licensing in the US has continued to grow. We wrote about some of the concerns that could arise with the splintering of performing rights organizations, especially given the often fractured nature of the ownership of copyright in musical works, here.

Further increasing the concerns about changes to the performing rights marketplace have been the numerous statements from the current head of the Antitrust Division of the Department of Justice that he does not believe that the Department should be setting regulations for industries through long-term antitrust consent decrees – that such regulations should be the role of Congress or administrative agencies. It has been made clear that these statements specifically include the ASCAP and BMI consent decrees, as they are among the consent decrees that have been in place for the longest period of time.

It would certainly be ironic for the Music Modernization Act to fix mechanical royalties by creating a one-stop shop for royalty payments, just as the performing rights licensing process was splintering. One complicated long-term problem would have been fixed, just as what was a relatively stable marketplace appears to be becoming more unstable. It was therefore important that Congress put this check on the DOJ taking action to further free the PROs from their current restraints. Of course, were Congress notified of the desire of the DOJ to make changes, it is an open question whether Congress could adopt a new statute to take the place of the current consent decrees in the time-frames set under the new Act. Given that many of the last-minute changes that were necessary to assure passage of the Music Modernization Act to relieve concerns of specific companies in the music industry, any reform of the performing rights process is likely to include even bigger players in the industry with even more entrenched interests that could take a long time to resolve. But at least Congress has the ability to put a check on the action – and these issues may well need to be resolved in the Music Modernization Act, Part II.

David Oxenford is MAB’s Washington Legal Counsel and provides members with answers to their legal questions with the MAB Legal Hotline. Access information here. (Members only access).

There are no additional costs for the call; the advice is free as part of your MAB membership.

FCC Proposes Lessened Interference Protections for Class A “Clear Channel” AM Stations

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David Oxenford

What Does This Proposal Mean for AM Revitalization?

By: David Oxenford, Wilkinson Barker Knauer LLP

Late last week, the FCC issued a “Second Further Notice of Proposed Rulemaking” in its AM Revitalization Proceeding. The FCC has been taking steps over the last several years to attempt to restore AM radio to health. In last week’s Further Notice, the FCC followed up on ideas that it floated in 2016 in a prior order in the AM revitalization proceeding (see our articles here and here) suggesting that protections afforded to Class A AM stations be lessened in order to allow increased power by other more localized AM stations. Class A stations, often referred to as “clear channel” stations, are those 50 kW AM stations that are currently given interference protections both during the day and to their nighttime “skywave” signals (the signals heard hundreds and sometimes thousands of miles from the station’s transmitter site after bouncing off the atmosphere). These protections allow these stations to cover large geographic areas, and were particularly important in the early days of radio when these stations provided the only radio services to vast portions of the country that did not have local radio stations. In the Further Notice released last week, the FCC questions whether such protections are still necessary given the proliferation of other sources of audio programming (including radio stations, satellite radio and the Internet), and advances specific proposals that would reduce the protections accorded to these stations to allow some power increases by local AM stations.

This proposal is not without controversy. Obviously, station owners who hold Class A licenses do not believe that the service provided by these stations should be impeded. In fact, they note that many of these stations are among the few profitable AM stations in the country, often providing unique programming and substantial programming diversity to rural residents. These stations have also always been a favorite of long-haul truckers and others driving at night for providing uninterrupted service over vast distances. Perhaps even more importantly, and a question specifically raised for comment by the FCC, is the impact that any loss of service from these stations would have on the EAS network. Many of these stations serve as the primary stations for relaying national emergency messages to the EAS network. In fact, many of these stations have been provided funds by FEMA to improve their facilities to insure that they are available to provide uninterrupted service in the event of a national emergency.

The specific proposals set out by the FCC are likely going to be most easily understood by those with technical backgrounds. They are set forth below:

Daytime hours proposal:

  • During daytime hours, Class A AM stations would protected to their 0.5 mV/m daytime groundwave contour, from both co-channel and first-adjacent channel stations;

Critical hours (two hours before sunset and sunrise) proposals:

  • Alternative 1: During critical hours, Class A AM stations would be afforded no protection from other AM stations, or
  • Alternative 2: During critical hours, Class A AM stations would be protected to their 0.5 mV/m groundwave contour.

Nighttime hours proposals:

  • Alternative 1: During nighttime hours, there would be allowed no overlap between a Class A AM station’s 0.5 mV/m nighttime groundwave contour and any interfering AM station’s 0.025 mV/m 10 percent skywave contour (calculated using the single station method); or
  • Alternative 2: During nighttime hours, Class A AM stations would be protected from other AM stations in the same manner as Class B AM stations are protected, that is, interference may not be increased above the greater of the 0.5 mV/m nighttime groundwave contour or the 50 percent exclusion Root Sum Squared Nighttime Interference-Free (“RSS NIF”) level (calculated using the multiple station method).
  • Currently, Class A stations are protected during the day to their 0.1 mV/m groundwave contour by co-channel stations (and to their 0.5 mV/m contour by adjacent channel stations) during the daytime; to their 0.5 mV/m-50 percent skywave contour by co-channel stations (and to their 0.5 mv/m groundwave contour by adjacent channel stations) at night; and to their 0.1 mV/m groundwave contour during critical hours. The FCC proposals set out above would, in some cases, result in a significant decrease in interference protections accorded to these stations.

The FCC notes that there are differing opinions, even among engineers, as to when a Class A station’s service can reliably be heard by listeners, and the extent to which distant listeners still rely on these services. Because of these differences in opinion, and the natural split between local station owners and those that hold licenses for Class A stations, this proceeding is likely to be controversial. And it may well implicate many of the issues about the future of AM radio more generally (see, for instance, our article here).

The FCC is not proposing at this time changes in the protections of other classes of AM stations, though that possibility had also been raised in earlier proceedings. But the FCC does ask for comments as to whether it should move ahead in a future proceeding with that idea – potentially increasing interference in areas further from some stations in exchange for the potential for other stations to increase power and service to more local areas. That, too, is likely to be a controversial issue – one that will be debated in more detail at a later date.

Comments on the Further Notice will be due 60 days after the document is published in the Federal Register, with replies due 30 days later.

David Oxenford is MAB’s Washington Legal Counsel and provides members with answers to their legal questions with the MAB Legal Hotline. Access information here. (Members only access).

There are no additional costs for the call; the advice is free as part of your MAB membership.

Beware of the Political File Obligations in this Hot Political Advertising Year

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David Oxenford

By: David Oxenford, Wilkinson Barker Knauer LLP

In this “political” year with Congressional mid-term elections in November, including many hotly contested races for seats in the U.S. House of Representatives and the Senate, as well as many state and local elections, I receive many questions from broadcasters across the country. Perhaps the area in which most questions are received deals with the “political file,” particularly because these files are now available online. The fact that this file can now be viewed by anyone anywhere across the country has raised many questions that were perhaps less top-of-mind when the file was available only by physically visiting the main studio of a broadcast station. So, with the election just over a month away, meaning that the busiest advertising period will be coming up between now and the election, I thought that it would be worth taking a look at some of the online public file issues.

As an initial matter, it is worth mentioning that the political file has two main purposes. First, it is designed to provide information to the public about who is trying to convince them to vote in a certain way or to take action on other political issues that may be facing their country or community. Second, the file is to inform one candidate of what uses of broadcast stations his or her opponents are making. Thus, the documents placed in the file must be kept in the file for only two years from the date that they were created – perhaps on the assumption that at that point, we will be on to the next election cycle and old documents really won’t matter to the public or to competing candidates in the last election. But what needs to go into the file?

For any request for advertising made by any legally qualified candidate for any public office (Federal, state or local), the following information needs to be maintained in the file:

  • Whether the request to purchase time was accepted or rejected;
  • If accepted, the rate charged for the ads in the advertising schedule;
  • The date and time that the ads are to be aired, with the exact times that they were aired to be added to the file after they run;
  • The class of advertising time purchased (which will be determined by the rights associated with the spots, e.g. whether they are fixed or preemptible, the daypart or rotation in which the spots will run, etc.)
  • The name of the candidate and his or her authorized committee, and the treasurer of the committee.

All information should go into the file as soon as an order is received – certainly within 24 hours. The only exception is for the details of the exact times that the spots ran, which can be inserted into the file when your traffic system generates those reports – provided that they must be provided sooner on request.

That same information as provided for a candidate ad needs to be put into the file for any advertising relating to a “political matter of national importance.” That would include any ad by a non-candidate group (e.g., a PAC, labor union, corporation or other interested individual) dealing with any issue likely to be dealt with here in Washington. Such issues would include:

  • Any ad dealing with a legally qualified candidate for Federal office (either attacking or supporting a candidate); or
  • Any national legislative issue of public importance (e.g., an ad saying “write your Congressman and tell him to vote” for or against some issue being dealt with by the Federal government).

In the political file for these Federal issue ads, in addition to all of the information for candidate ads, the file also needs to include a description of the issue that the ad addresses. That can be the name of the candidate that the ad supports or attacks, or the name of a Federal issue that the ad addresses. In some cases the ad can address both a candidate and an issue. In that case, it is probably safest for the political file to list both the candidate and the issues addressed. The FCC’s Media Bureau issued a decision in January 2017 requiring that dual identification (see our article here), but that decision was withdrawn when the current FCC Chairman came into office with a promise that the FCC would reexamine the issue and release a new decision (see our article here). While that new order has apparently been drafted and has been on circulation among the Commissioners for a vote since May 2018, the decision has not yet been released. Watch for a clarification that could come at any time.

All issue ads, whether dealing with Federal, state or local issues (state and local issues could include state ballot initiatives, local zoning or school bond issues, or attacks on state or local candidates), also require information about the sponsor of the ads. The information includes the following:

  • The name of the person or entity purchasing the time, and
  • A list of the chief executive officers, members of the executive committee or of the board of directors of such entity.

In the decision referenced above on which we are awaiting a final FCC ruling, the Media Bureau had required that stations, if they are given only a single name of an officer or director of an entity buying issue ads, ask the ad buyer for the names of additional officers or directors – on the assumption that it is unlikely that any organization has but a single officer or director. While that responsibility has not yet been clarified, it is probably advisable that stations make such inquiries.

We note that many stations use forms to gather the information necessary to respond to these questions – often forms generated by a group owner or one of the “PB” forms created by the NAB. These are good models to use to gather the information for the file, but the station still needs to make sure that the information provided by the political buyer fully responds to the questions on the form. We have heard of many cases where non-candidate groups do not want to say on the form that they are buying ads on a Federal issue, even when they are clearly attacking a candidate for Federal office, perhaps because they do not want all the information about the advertising buy (including the price and schedule) to be revealed in the public file. Stations need to inquire if the information provided is not complete, as the burden is on the station, not the ad buyer, for this information to be complete and accurate and timely placed in the online public file.

Also, do not put information into the file about the method of payment for the ads. We have seen cases where checks from advertisers, or worse yet, information about their electronic payment methods, have been included in the public file, potentially revealing sensitive information that could compromise bank accounts. Do not place this information into the file.

Finally, be alert to state record-keeping requirements. States including Washington and New York have recently enacted state laws that may impose different or additional paperwork obligations on political advertising (see our article here). If your station is in one of those states, be sure to not only observe the FCC’s rules, but also those of the state in which you are located.

Good luck in keeping all these rules straight in the last weeks before the election. For more information about political advertising obligations, see our Guide to Political Broadcasting, here. And, of course, ask your own lawyer as these issues arise, as they raise many tricky issues that may depend on the specific facts of your case to get the right answer.

David Oxenford is MAB’s Washington Legal Counsel and provides members with answers to their legal questions with the MAB Legal Hotline. Access information here. (Members only access).

There are no additional costs for the call; the advice is free as part of your MAB membership.

Court of Appeals Upholds Copyright Royalty Board’s 2015 Webcasting Rate Decision

David Oxenford - Color
David Oxenford

By: David Oxenford, Wilkinson Barker Knauer LLP

On September 18, The US Court of Appeals released a decision upholding the Copyright Royalty Board’s 2015 decision setting the SoundExchange royalty rates for 2016-2020. We wrote about that decision here, and provided more details here. In any appeal of an agency decision, the Court routinely affords the agency deference in reaching its decision. The Court will not overturn that decision unless it has no basis in the record developed on the matter before the agency, or unless the agency decision was arbitrary and capricious – in plain English, the agency did not reach a logical conclusion based on the facts before it. That means that the Courts will not overturn a decision just because the agency might have logically reached another decision – but instead it will only intervene where the agency came to a conclusion that could not be logically supported. In this case, no reason to overturn the CRB decision was found.

SoundExchange on appeal had attacked the CRB decision on several grounds – arguing that several defects led to an inappropriate decision as to the rates that would have been determined by a “willing buyer and willing seller” in a marketplace, the standard to be used by the CRB in setting rates. SoundExchange attacked the benchmarks that were relied on by the CRB to set the rates (the direct licensing deals on royalties arrived at between webcasters Pandora and iHeart Media and various record companies) arguing that these rates were too low as they were negotiated in the “shadow of the statutory license.” They argued that the only direct deals that could have been done were ones that were lower than the rates established by the CRB during the prior rate term, as no music service would agree to higher rates. Arguments were also raised that these rates relied on “steering” – the prospect that labels who agreed to the rates had songs played more frequently than those that did not agree to lower rates. SoundExchange argued that not all labels could take advantage of steering (as a label can only get the benefit of steering when a service is playing less of the music of labels that did not pay for steering). The appeals also challenged the determination that a qualified auditor to check royalty compliance had to be a CPA licensed in the state where the audit was conducted.

The Court looked at all of these arguments and a few related claims, and found that the CRB had adequately justified its decision. The direct deals were the only negotiated benchmarks that existed for noninteractive webcasting services, so they were appropriate to use in setting the royalties. The Court found that there was nothing wrong with relying on agreements that did exist, rather than trying to determine what agreements might exist in some hypothetical situation where a statutory royalty did not exist. The rejection of the steering argument was also appropriate, as the CRB had found that the royalties approximated what would happen in a competitive market were there no statutory royalties where labels were competing to get their product played on music services. The Court also found that the decision as the auditors had a basis in the record.

With this decision, any lingering doubts (see our article here about the appeal being filed) about the current royalties have been resolved, and the rates will (absent an unlikely further appeal) stay in place though the end of 2020. Of course, that is not far away, and next year, the process will begin again, as the CRB starts its proceeding to determine the rates for 2021-2025. The process that seemingly never ends…..

David Oxenford is MAB’s Washington Legal Counsel and provides members with answers to their legal questions with the MAB Legal Hotline. Access information here. (Members only access).

There are no additional costs for the call; the advice is free as part of your MAB membership.