Gazing Into the Crystal Ball: The Outlook for Broadcast Regulation in 2009

Here we are at the start of another new year, when it's time to speculate about the future—so we'll look into our crystal ball to try to discern what Washington may have in store for broadcasters in 2009. With each new year, broadcasters face a new set of regulatory issues from the powers-that-be in Washington. But this year, with a new presidential administration, new chairs of the congressional committees that regulate broadcasters, and with a new FCC on the way, the potential regulatory challenges may cause the broadcaster to look at the new year with even more trepidation than usual.

In a year when the digital television transition finally becomes a reality, and with a troubled economy and no election or Olympic dollars to ease the downturn, who wants to deal with new regulatory obstacles? Yet, there are potential changes that could affect virtually all phases of broadcast operations—technical, programming, sales, and even the use of music—all of which may have a direct impact on a station's bottom line and can't be ignored. Our broadcast group has covered many of these issues in greater detail on our blog, www.broadcastlawblog.com, but we offer this one-stop summary of what we see as some of the most important issues facing broadcasters this coming year.

Post-DTV transition issues: “White Spaces” and LPTV/translator digital conversion

With the Feb. 17 digital conversion deadline, one would think that television broadcasters have all the technical issues that they need for 2009. But the FCC's recent adoption of its “White Spaces” order, authorizing the operation of unlicensed wireless devices on the TV channels, insures that there will be other issues to watch. The decision will likely be appealed. While the appeal proceeds, the FCC will have to work on the details of the order's implementation, including approving operators of the database that is supposed to list all the stations that the new wireless devices will have to protect, as well as “type accepting” the devices themselves, essentially certifying that the devices can do what their backers claim—knowing where they are through the use of geolocation technology, “sniffing” out signals to protect, and communicating with the database to avoid interference with local television, land mobile radio, and wireless microphone signals.

The FCC will also have to complete the digital transition of TV translators and LPTV stations, which are not bound by the Feb. 17 digital conversion deadline. The FCC will need to set a digital conversion deadline for these stations—a conversion that many translator and low-power licensees are not looking forward to paying for, but which may be necessary to preserve their over-the-air viewership as the analog tuner becomes an historical relic.

Radio technical issues: IBOC power increases and FM band expansion

Radio, too, has its own technical issues to deal with. The Commission will be faced with resolving proposals for increased power for HD Radio operations (“in-band on-channel” or “IBOC” operations), which some broadcasters feel is necessary to make HD Radio a fully competitive service, but which others have opposed based on potential interference to stations on adjacent channels.

On an even more fundamental level, the Commission has also been asked to recapture some of the television spectrum, including Channel 6 and possibly Channel 5, and to use that spectrum for new radio stations. While some worry about the increased competition that new radio channels could bring, others see the expanded FM band as a way to eliminate congestion on the current band—giving LPFM stations places to operate without restricting FM upgrades or endangering FM translators—and others have even suggested that some or all AM stations could be moved onto these channels. This is likely to be a long-term project, but one that may get serious consideration this year.

Public service obligations: Localism, the Fairness Doctrine and violent programming

Programming may also come into focus for review this year. The Commission's rules, adopted a full year ago, requiring TV stations to document in minute detail their public interest programming on the newly created FCC Form 355, have never been implemented, as the form has never been approved by the Office of Management and Budget as being in compliance with the Paperwork Reduction Act. Because the form required so much new information, for no appreciable purpose, it seems unlikely that it could survive such a review in its current structure. Thus, it may be revised before being implemented, or it may wait for new FCC programming rules to be adopted as part of the FCC's localism proceeding. Such new programming rules might mandate some form of public interest programming, which could then be used to justify the collection of at least some of the data requested by the FCC Form 355.

Other aspects of the localism proceeding seem likely to be resolved in 2009 as well. The proposal to mandate that main studios be located in the station's city of license and fully manned during all hours of operation, seems to be less likely to be adopted this year as regulators realize the costs that such a requirement would impose. Yet requirements for some form of mandatory ascertainment of community needs, plus some enhanced disclosure of public interest programming, seem more likely.

Some of the proposals rumored to be on the table include judging broadcasters by whether they perform certain tasks from a menu of options by which they would demonstrate their service to the public. One would hope that any set of menu options would be broad enough to recognize all of the diverse ways that broadcasters serve their communities, and not so restrictive as to make every station meet the public interest standard in the same cookie-cutter way, which would eliminate the diversity in approaches that has allowed the broadcast industry to flourish.

The return of the Fairness Doctrine, which many conservative pundits have predicted, is unlikely because of the constitutional and practical problems of implementation. Yet mandated political coverage and issue-responsive programming may effectively take the place of the doctrine. Restrictions on violent programming could also be at the top of the congressional agenda, as Senator Rockefeller, the new head of the Senate Commerce Committee, has supported such regulation in the past.

Advertising: Embedded advertising, payola and prescription drugs

In the advertising world, the FCC will be resolving its embedded advertising and product placement proceeding, where some “public interest” groups have advocated a total ban on such advertising, while others have suggested immediate sponsorship identification, through a crawl or superimposed caption, of any product for which consideration has been paid for its inclusion.

The related issue of video news releases—whether stations have to identify the source of any material used on-air and given to them at no charge (e.g., a script, video footage, etc.) before its inclusion in a news report—will also likely be resolved.

Some have also suggested that the Commission may be planning some adjustments to its payola rules governing the consideration that a station can receive for its broadcast of music. What those changes would be, and how they would improve on the current rules, is hard to fathom, but changes are rumored.

There is also real concern that the congressional committees that oversee the FCC may well push proposals for limits on prescription drug advertising. The new chairman of the House Energy and Commerce Committee, Henry Waxman, has favored a moratorium on such advertising while the industry works out rules that restrict various perceived abuses. In addition, if industry voluntary agreements don't satisfy Congress, new restrictions on advertising directed to children are also possible, especially in connection with ads for food considered unhealthy (however that may be defined).

Copyrights issues: Music royalties and TV signal carriage

Copyright issues could also impact the broadcast industry this year—perhaps in ways more fundamental than any of the other issues discussed above. For radio, we may see the webcasting royalties issue resolved one way or the other. Congress has given webcasters and the recording industry until Feb. 15 to settle the Internet radio royalty issues and, if that doesn't result in a resolution of the issue, the pending appeals will be argued this year and perhaps resolved by the end of the year.

2009 will also bring about a renewed attempt by the recording industry to impose a performance royalty on broadcasters for their over-the-air signals, the “performance tax” as it has been labeled by the NAB. That performance royalty would require broadcasters to pay the recording industry and recording artists royalties for the use of music over-the-air—in addition to the ASCAP, BMI and SESAC royalties that are already paid to the composers.

The recording industry was able to get that proposal through the House Judiciary Committee last year, and will make a renewed attempt to have Congress adopt the legislation in its upcoming session. If such an attempt is successful, this potentially could result in the transfer of billions of dollars from the broadcasting industry to the recording industry.

TV has its own copyright issues, as the law permitting Dish and DirecTV to rebroadcast local broadcast stations into local markets must be renewed, and some have suggested that this might be the time to reexamine the must-carry and retransmission consent process for both cable and satellite. While nothing firm is on the table, this issue could arise just as retransmission consent fees are beginning to offer television broadcasters a meaningful new revenue stream

Leftovers: Indecency appeals, EEO, multiple-ownership and political broadcasting

All of these issues seem like plenty—but we haven't even discussed the resolution of the indecency cases currently pending before the courts that should come this year. The Commission ended 2008 with several large EEO fines, and this year may bring the resolution of long-pending petitions for reconsideration of the current EEO rules, as well as resolution of whether the Form 395 Annual Employment Report will make its reappearance and whether the information on the form should be available to the public to judge the EEO performance of broadcasters or whether it will simply be used in the aggregate for industry profiling. Commissioner Jonathan Adelstein suggested that the information should be public in his concurring opinion on these recent fines.

The FCC's change in its multiple-ownership rules to allow some broadcast-newspaper combinations is still on appeal as it becomes increasingly irrelevant (since newspaper companies don't have the money to buy broadcast stations, and broadcasters probably don't want to buy newspapers). Other ownership issues as to the local radio ownership rules in non-Arbitron markets and the attribution of TV joint sales agreements for multiple ownership purposes are still pending and may be resolved one day—perhaps this year.

Even political rules may be revisited in 2009—as the Commission has never issued rules implementing the BCRA requirements. It also has a long-pending proceeding to determine how to assess advertising spots sold by online services for purposes of determining their impact on lowest unit rate calculations.

Final thoughts

With these (and other) possible changes in the regulatory landscape, one can only hope that the government regulates with a light touch. While the Democrats who have been on the Commission during the Bush years have advocated tough, detailed regulatory mandates, the Obama administration has offered the hope of a less doctrinaire, more inclusive regulatory process.

Given the economic outlook for the coming year, and the costs and likely disruptions of the digital television transition, an administration that promises hope should deliver some to broadcasters simply by taking a break from excessive regulation to give everyone a chance to adjust to the new realities of 2009. But stayed tuned to our blog, http://www.broadcastlawblog.com/, to see what develops in this new year, or contact any of our attorneys with any questions.