Category Archives: Legislative Update

Local Radio Freedom Act Gains More Support

As of June 13, nine more members of the House of Representatives and one Senator have added their co-sponsorship to the Local Radio Freedom Act (LRFA), which is a resolution opposing “any new performance fee, tax, royalty, or other charge” on local broadcast radio stations.

In the House, more support came from Representative James Baird (R-IN-4), Troy Balderston (R-OH-12), Anthony Gonzalez (R-OH-16), Mike Johnson (R-LA-4), Daniel Meuser (R-PA-9), Denver Riggleman (R-VA-5), Mac Thornberry (R-TX-13), William Timmons (R-SC-4) and Rob Wittman (R-VA-1).

In the Senate, Senator Joni Ernst (R-IA) added her support.

The Local Radio Freedom Act says “Congress should not impose any new performance fee, tax, royalty, or other charge relating to the public performance of sound recordings on a local radio station for broadcasting sound recordings over the air, or on any business for the public performance of sound recordings on a local radio station broadcast over the air.”

Plan to Swap Sales Tax for Fuel Tax Headed to House Floor

MLive reports that House Republicans continue to push a budget plan that would replace the state’s 6-percent sales tax on gasoline with a fuel tax to be allocated to infrastructure. The House plan calls for all the funds currently collected as sales tax to be shifted to roads, generating an estimated $830 million.

Currently, the tax collected at the pump largely goes to schools and local governments.

In an effort to maintain existing funding for schools, the overall House plan shifts school aid fund dollars out of the university budget and into the K-12 budget.

The plan lacks Democratic support with one representative saying it doesn’t do enough to bring Michigan’s roads up to snuff.

Governor Creates Committee For Accurate Census Count; MAB’s Karole White Appointed

Governor Gretchen Whitmer

The AP reported on Wednesday (6/12) that Michigan Governor Gretchen Whitmer has signed an executive order creating a committee aimed at encouraging an accurate federal census in the state next year.

MAB President/CEO Karole L. White has been appointed to the committee.

“Not only does the state depend on the census as the basis for the number of federal funds it receives to help serve our residents, but broadcast markets are also drawn and ranked according to the population as set in the census,” she said. “Right now Detroit is in the 15th Media Market Nationally. Any slip in population or under count could mean a loss of market position resulting in a significant loss in advertising dollars for stations in rated markets.”

In a release, the governor said the 2020 United States Census Complete Count Committee, which she leads, has roughly 60 members from numerous organizations and communities statewide. It includes business, academic, governmental and faith-based representatives.

The purpose of the group, according to Whitmer, is to ensure a comprehensive count so Michigan gets the right amount of federal money as well as accurate representation in the U.S. House of Representatives. The committee is charged with raising awareness of the Census and identifying and overcoming barriers to achieving a full count.  The group will be advising the Department of Technology, Management and Budget.

More information on the Census to come as the very large committee gets together to set their plans.

DOJ Starts Review of BMI and ASCAP Consent Decrees – Exploring the Background of the Issues

David Oxenford - Color
David Oxenford

By: David Oxenford, Wilkinson Barker Knauer LLP

The Department of Justice’s Antitrust Division announced on June 5 that it was starting a review of the ASCAP and BMI antitrust consent decrees that govern the United States’ two largest performing rights organizations for musical compositions (referred to as the “musical work”). The DOJ’s announcement of the initiation of the examination of the consent decrees poses a series of questions to which it invites interested parties – including users, songwriters, publishers and other interested parties – to file comments on the decrees, detailing which provisions are good and bad and, more broadly, whether there is a continuing need for the decrees at all. Comments are due on July 10.

This re-examination of the decrees has been rumored for many months. Back in March, we wrote about those rumors and the role that Congress may play in adopting replacement rules should the DOJ decide to fundamentally change the current provisions of the consent decrees. The DOJ itself just recently looked at the consent decrees, starting a review only 5 years ago with questions very similar to those it posed yesterday (see our post here on the initiation of the last review 5 years ago). That review ended with the DOJ deciding that only one issue needed attention, whether the decrees permitted “fractional licensing” of a song. We wrote about that complex issue here. That issue deals with whether, when a PRO gives a user a license to play a song, that user can perform the song without permission from other PROs when the song was co-written by songwriters who are members of different PROs. The DOJ suggested that permission from one PRO gave the user rights to the entire song, an interpretation of the decrees that was ultimately rejected by the rate courts reviewing the decrees (see our article here). So, effectively, the multi-year review of the consent decrees that was just concluded led nowhere. But apparently the DOJ feels that it is time to do it all again. To fully understand the questions being asked, let’s look at what the consent decrees are, and why they are in place.

Because ASCAP and BMI together account for over 80% of musical compositions that are publicly performed by various music services, and tie all of the compositions that they represent in one blanket license sold to music users, they have, for almost 80 years, been subject to antitrust consent decrees. By tying the sale of these diverse musical compositions into one “take it or leave it” license – a license that virtually all music users cannot do without – these organizations have substantial market power. Thus, these consent decrees were put in place to guarantee that these PROs dealt fairly with both music users who buy the licenses to use the musical works, and with the songwriters and publishers whose music they license.

While the decrees are complex with many intricate details, and the two have provisions that are slightly different, perhaps the overriding consideration in each is that they treat similarly situated parties alike. The consent decrees require that ASCAP and BMI make available licenses on the same terms to all similarly situated music users. They also require that the PROs treat all songwriters in the same way. So whether you are a small AM station in the middle of Wyoming or a monster FM in New York City, the formula used to calculate the rates that apply to commercial radio stations are the same. Similarly, ASCAP and BMI pay all songwriters at the same rate for performances of their music – they can’t offer some famous composer a higher rate than they offer the writer of a single obscure song (of course, the popular writer will be paid more as his or her song will be used more than the obscure song – but the rates at which payment will be made will be the same). For music users, the decrees also set up a rate court process where, if the PRO cannot agree with users as to an appropriate license for a particular use of music, a US District Court will act as a “rate court” and conduct a judicial proceeding to decide a fair rate for the use of the music (see our article here about the current rate court proceeding between RMLC on behalf of the commercial radio industry and BMI).

With that background, let’s look at the questions posed. The DOJ asks questions including:

  • Do the Consent Decrees continue to serve important competitive purposes today? What provisions could be changed and how would those changes improve competition?
  • Are the differences between the two consent decrees important for competition?
  • Would termination of the Consent Decrees serve the public interest?
  • If termination would be in the public interest, should there be a sunset period and what rules would provide for an efficient transition?
  • Are there differences between ASCAP/BMI and PROs that are not subject to the Consent Decrees that adversely affect competition?
  • Are existing antitrust statutes and applicable caselaw sufficient to protect competition in the absence of the Consent Decrees?

Small users in particular should carefully consider this review. While, in the absence of consent decrees, big users might have the resources and marketplace clout to be able to negotiate their own music licenses (though, as set out below, that is not guaranteed), smaller users would find that process to be much more difficult. As we wrote back in March, there are no definitive databases that exist to determine who owns what songs (though one is promised by the recent Music Modernization Act) – and with fractional licensing there may be several permissions needed to simply play one song. For any music user that uses many songs – whether that user is a radio station, a webcaster, some sort on-demand music service, or a retail outlet or bar or restaurant that plays music for its customers – there are thousand or potentially millions of permissions that they would need to obtain. Small companies are not likely to have the resources or the knowledge to even find out who to negotiate with for the use of particular songs, and even if the PROs still exist in some less-regulated format, will these small services be able to effectively negotiate the necessary licenses? Now, they can rely on the resources of the bigger companies to negotiate fair rates that will apply to the entire industry. But if the PROs are no longer required to provide the same licenses to all users, will these small users be treated fairly? There is no apparent answer to the question of who is going to be able to fairly and equally provide that service currently provided by ASCAP and BMI under the current consent decrees.

With unregulated collectives, there are always concerns about anticompetitive behavior. The radio and TV music licensing committees both took SESAC, a privately-owned performing rights organization not subject to a consent decree, to court alleging anticompetitive behavior. Both ended up with private settlements imposing a rate-review processes that in many ways mimics the review provided under the consent decrees (see our article here on radio’s final result from the SESAC rate-setting, and here on the TV settlement). A similar process is now underway trying to bring GMR under such a rule process as the radio industry alleges that GMR is seeking rates that are not competitively based given its aggregation of certain must-have songwriters (see our articles here, here and here on the GMR litigation). Why would the DOJ look to be undoing rules on the two biggest PROs, while courts have imposed similar rules on smaller PROs?

The inefficiencies of the unregulated direct negotiation process are evident from the on-demand music services. Until the passage of the Music Modernization Act, these services had to negotiate with rights holders for all of the rights needed to provide music to their customers. That process, even with these large services with lots of resources to devote to music licensing issues, ended up resulting in lawsuits against companies by artists and their representatives claiming that they were not paid for the use of their music. The complexity of the licensing process led to the adoption of the Music Modernization Act which hopes to make that process easier through a legislatively-designed and government regulated (through the Copyright Royalty Board) process (see our articles here and here). So, while the Music Modernization Act makes what was the complex world of mechanical rights licensing easier, deregulating the PROs has the potential to make public performance space more complex (as we suggested here).

There are many issues to consider in this review of the consent decrees. We will no doubt be writing about other issues in coming weeks. But all music users should carefully be watching these proceedings, and should take the opportunity to let the DOJ know how the decrees affect the way that they do business, and what would happen if the decrees were to be fundamentally altered as a result of this review.

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.

NAB’s Gordon Smith: Let STELAR Expire

NAB President and CEO Gordon Smith testified on Tuesday morning (6/4) at House Energy & Commerce Subcommittee on Communications and Technology hearing entitled, “STELAR Review: Protecting Consumers in an Evolving Media Marketplace.”

In his prepared remarks, Smith stated, “On behalf of the free and local broadcast television stations serving your hometowns, I appreciate the opportunity to testify on how Congress can ensure that viewers are better able to access their local news, sports, weather and emergency information by allowing the expiring provisions of STELAR to sunset this year.”

Smith said Congress has achieved its goal of a competitive marketplace now essentially unrecognizable from the one that prompted the law. He said there are now “no technological impediments to providing satellite viewers with their local broadcast stations rather than out-of-market substitutes,” which he points out Dish has been doing for a decade.

“Viewers will benefit from eliminating this outdated law, ensuring they receive the local content most relevant to them. In rare instances where a local broadcast channel is not available, private business arrangements between satellite TV providers and broadcasters can resolve these issues,” he said.

That is a reference to one of the situations in which the license is used to import distant signals—so-called short markets that lack all of the Big Four affiliates.

Smith also said the part of the law that requires broadcasters and pay-TV providers, including cable, to negotiate in good faith has provided no quantifiable benefit, its good-faith origins notwithstanding.

FCC Now Accepting ATSC 3.0 Applications

On May 28, the Federal Communications Commission formally began accepting applications from television stations for ATSC 3.0 operations.

Applications must be filed by all full- and low-power TV stations, Class A and TV translator stations –except for licensed channel sharing stations—that intend to transmit 3.0.

Stations currently on air with 3.0 service are operating under Experimental Special Temporary Authority granted by the agency.

The new licensing form and procedure will need to be used going forward by stations voluntarily adopting Next-Gen TV service, including those operating under an experimental STA. Those stations must file a Next-Gen TV license application in LMS no later than the expiration date of their experimental authorization, the agency said.

More information is available on the FCC website here.

Michigan GOP Sues Over Petition Drive Rules

A lawsuit filed June 5 by the Michigan Republican Party to force implementation of new petition drive rules Michigan’s Republican-led House and Senate took a fight over tough new petition drive rules, despite the law’s invalidation by Democratic Attorney General Dana Nessel.

The new law would make petition drives more difficult by limiting groups to collecting no more than 15 percent of their required signatures from any single congressional district.

The GOP complaint targets Democratic Secretary of State Jocelyn Benson and seeks a court order requiring her to enforce the 2018 law and implement provisions Nessel deemed unconstitutional.

“While Secretary Benson requested the formal opinion under the guise of understanding how 2018 PA 608 ‘affects the rights’ of ‘potential petition sponsors, circulators and voters,’ the actual motivation for obtaining a formal opinion appears to have been so that she can circumvent the requirements of validly enacted statutes she has a legal duty to enforce,” Republican attorneys wrote.

Nessel, in a legal opinion, said the new petition drive rules would inappropriately limit voter participation in the petition drive process.

The League of Women Voters and Michiganders for Fair and Transparent Elections, which is considering a campaign finance reform petition drive, filed a separate lawsuit two weeks ago against the GOP law, arguing it is unconstitutional and “will impose formidable obstacles to the exercise of direct democracy.”

The rules were signed into law by former Governor Rick Snyder just four days before leaving office in late December.

Political Broadcasting Issues to Consider Now for the 2020 Election Campaign

David Oxenford - Color
David Oxenford

By: David Oxenford, Wilkinson Barker Knauer LLP

The 2020 presidential elections already loom large, with one of the over 20 Democratic candidates for the Presidential nomination seemingly appearing on whatever TV talk show you tune into on your TV set. With the first debate among these candidates scheduled for late June, it seems like we have a real election already underway – and it is time for broadcasters to start thinking about their political broadcasting obligations under FCC rules and the Communications Act, and beginning to make plans for compliance with those rules.

Stations in Iowa and other early primary states have already been receiving buys from Presidential candidates, PACs, and other third-party groups. That spending is sure to increase in the latter part of the year as these early primaries and caucuses are scheduled early in 2020. What should stations in Iowa and in other states be thinking about now to get ready for the 2020 elections?

We have written about some of the issues that broadcasters should already be considering in our Political Broadcasting Guide (which we plan to update shortly). Obviously, one of the primary issues is lowest unit rates – as those rates become effective 45 days before the primaries (or before any caucus which is open to members of the general public). Thus, the lowest unit charge windows for Presidential campaigns will start for the political contests in Iowa and New Hampshire in December, and roll across the country early next year as the other primaries and caucuses draw near. In addition to our Political Broadcasting Guide, we wrote about other issues you should be considering in determining your lowest unit rates here.

In addition to the question of rates for political ads, stations should be thinking about access for political candidates. Especially in the early primary and caucus states, with so many candidates for the Democratic nomination, spot availability may become tight in the weeks leading up to actual voting. But, as long as a candidate does not sit on their rights, equal opportunities requires that candidates have a right to respond to their opponents in equal amounts of broadcast time, and reasonable access requires that you make available time to all Federal candidates in reasonable amounts. But reasonable access does not require that you provide a candidate with all the time that they request (see our article here). As well-funded candidates come in to stations now to request big ad buys later in the political season, stations should consider whether they really want to sell those candidates all the time that they ask for – knowing that some of the less financially secure candidates may be delaying their buys until the last days before the primary. Equal opportunities will require that you fit in spots from those late-arriving candidates, so make sure you have sufficient advertising inventory in reserve in the weeks leading up to the election to make room for commercials from these candidates whose funding may not cover ads until late in the primary period.

There are issues to consider about free time for candidates. As we’ve written before, the FCC has determined that most interview programs where the content is under station control – even those that have little news value on the normal day – are deemed “news interview programs” exempt from equal time rules if they routinely cover issues of public importance. Bona fide news programming is also exempt from equal time. Thus, equal time is normally only an issue in making sure that all candidates have equal opportunities to buy spot time, and in those rare circumstances where a candidate appears on a purely entertainment program. In these days of media overload, candidates are looking for these nontraditional means of exposure in broadcast programming. So use care if a candidate appears as a character on a scripted TV show, or walks into the announcing booth at a local football game asking to do the play by play for a few minutes, or (especially when dealing with state and local candidates, see our posts here and here) where the candidate is a host of a broadcast program – as, depending on how these situations are handled, all could give rise to equal opportunity claims.

Another area where broadcasters need to pay attention is in connection with third party ads dealing with Federal issues. Sometimes the ads are subtle digs at the positions that a potential candidate is taking (“call Congressman X and tell him that he should stop voting for bills that are bankrupting the country”), and sometimes they are more direct attacks on the potential candidate. Sometimes they don’t directly address a particular politician at all, but are instead directed at an issue being debated in Congress. In any case, if the ads are dealing with Federal candidates or other issues being considered by the US House of Representatives or Senate, then they are Federal issue ads on which the station must maintain full online public file information, similar to that which is kept for any candidate advertising – the full schedule of advertising that is to be run, the class of time sold, the sponsor of the ad, and even the price that was paid for the spots (see our post here on the public file requirements for Federal issue ads).

We have also written, here, about issues concerning the content of these third-party ads, as stations can potentially have liability for defamatory content in those ads if the station knows or has reason to believe that the ads are in fact false. Being put on notice of the falsity of the ad by a letter from a representative of the candidate being attacked can constitute that reason to believe that the ad is false that, if it contains defamatory content, could theoretically result in liability to a station. Candidates who are attacked may be calling stations asking that ads from PACs and other third-parties be pulled from the airwaves, and stations need to have plans in place to be ready to evaluate and deal with such claims. While third-party ads do not get lowest unit rates, these ads can be more problematic than candidate ads as they potentially force stations to be judges of the truth of the content of those ads. Candidate-sponsored ads, on the other hand, cannot be censored, so stations have no liability for the broadcast content of those ads.

Finally, with the election season fast approaching, even stations not in early primary states should start planning. Some stations are no doubt already selling long-term contracts that will still be in effect during the primary season. Stations should be considering how to allocate the purchase price of these long-term contracts to reflect their actual seasonal value – rather than simply booking them as having a flat rate throughout the entire year – including the pre-election lowest unit rate periods. As we wrote in our Political Broadcasting Guide, the FCC allows you, in internal station documents, to allocate for lowest unit rate purposes, the purchase price of a long-term contract in a manner different than shown on invoices given to commercial clients, as long as that allocation more accurately reflects the seasonal value of the spots sold, adds up to the total purchase price of the package, and is not done simply to avoid the lowest unit rate periods. Consult with your attorney to make sure that you properly apply this process, but it could save you money in the long term.

These are but a few of the political issues that broadcasters should be considering. So start thinking about the political issues that will arise as we enter this political season, and check out our Political Broadcasting Guide and the guides prepared by the NAB and many other organizations representing broadcasters – as you can never have enough perspective on these issues. These rules are complex, and many candidates are getting smarter about the how to use the rules to their advantage, so be prepared for the upcoming onslaught of political advertising.

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.

NAB Files Comments Supporting Voluntary All-Digital AM

NABOn May 11, the National Association of Broadcasters (NAB) filed comments with the FCC supporting a petition to allow AM stations to broadcast an all-digital AM signal on a voluntary basis.

In late March, Texas-based Bryan Broadcasting filed a Petition for Rulemaking asking the commission to initiate a proceeding to authorize the MA3 all-digital mode of HD Radio for any AM station that chooses to do so.

Permitting such modernization would “give AM broadcasters a needed innovative tool with which to compete” without harming others in the spectrum ecosystem, it wrote.

In its comments, the NAB said that “we agree with the Petitioner that all-digital AM service will allow broadcasters to provide substantially improved sound quality that could help AM stations to retain and attract listeners in the increasingly competitive audio marketplace. Experimental testing and real-world implementation of all-digital AM, and industry interest in launching all-digital AM
services all support further consideration of rules to facilitate broadcasters’ voluntary transition to all-digital AM service.

Radio World notes that “All HD Radio receivers in the market that have AM functionality would be able to receive such all-digital signals. But legacy AM receivers would not, which has long been a barrier to serious discussion of all-digital. Now, some observers say, the availability of FM translators for AM licensees has made something that once seemed unthinkable at least worth discussing.”

Currently there is one station in the country that has been experimenting with an all-digital AM signal, under FCC experimental authority. Hubbard Radio’s WWFD-AM (Frederick, MD) has turned off its analog signal while remaining in all-digital mode.  NAB says that it understands that WWFD’s digital signal is robust and far more listenable than analog service. Hubbard has said it received encouraging feedback from listeners and informed NAB that it would consider transitioning additional AM stations to all-digital broadcasting, if permitted.

NAB Demands Answers from FCC for 20% Higher Annual Fees

NABAccording to a report in Inside Radio, the National Association of Broadcasters (NAB) has issued a letter to the FCC stating that because it has offered no explanation for the “remarkable” increase for its size, it’s nearly impossible for the industry’s trade group to offer any feedback on the proposed assessment.

Under the FCC’s proposed menu of fees, most stations would see a double-digit increase in what they’d have to pay to the FCC, according the Inside Radio report. For the biggest FMs in the largest markets, the annual fee would jump to $22,650 compared to $18,880 last year. On the AM dial the FCC has taken a similar approach, proposing the biggest AMs see their annual fee go up to $17,950 from last year’s $15,050. The Notice of Proposed Rulemaking approved by the Commission two weeks ago offered no explanation for why radio’s annual fees would suddenly increase just a year after they were reduced by an average 13% in 2018.

In a letter to the Commission, the NAB said the notice made no attempt to explain or justify the increase and will bring “an unexpected and substantial burden” for many broadcasters.

The FCC is giving broadcasters until June 7 to file their first round of comments on its proposal. Reply comments will then be due by June 24. It’s likely to adopt the final order later this summer and the new fees will be due on or before October 1.