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FCC Seeks Comment on Pandora’s Petition for Relief from the Communications Act’s 25% Foreign Ownership Benchmark

Posted in Broadcast Regulation, Foreign Ownership, Music Licensing

In the latest chapter of the attempt by Internet streaming music provider Pandora to acquire a South Dakota radio station, the Federal Communications Commission (FCC) has asked for comments on the petition for declaratory ruling that Pandora filed in late June.  The petition, as we explained previously, is the first one filed by an entity seeking to exceed the 25% benchmark for foreign investment in broadcast licensee parent companies imposed by Section 310(b)(4) of the Communications Act.  The FCC had previously applied a de facto rule prohibiting such investment, but in November of last year clarified that it would consider, on a case-by-case basis, proposals to exceed the 25% benchmark in the broadcast context.

As the FCC Public Notice requesting comment explains, Pandora’s petition states that although it has reason to believe its level of foreign ownership is less than 25%, it cannot demonstrate compliance in accordance with the guidelines set out by the FCC’s Audio Division in connection with Pandora’s application.  Those guidelines are derived from a 1974 internal FCC staff memo and require applicants seeking to demonstrate that they have foreign ownership of less than 25% to engage in a complex, multi-step analysis.  Among other things, an applicant with widely held shares must first ascertain the citizenship of as many of its shareholders as possible, and then conduct a statistically valid survey to determine the citizenship of the remaining shareholders.  If a shareholder does not respond to the survey or provides information that does not allow the applicant to determine with certainty that the shareholder is domestic, then the applicant must assume that the shareholder is foreign.

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FCC Adds IP Captioning Obligations to Video Clips

Posted in Broadcast Regulation, Broadcast Technology, MVPD Regulation, Online Video

Update (7/14):  The FCC released the text of the Second Order on Reconsideration and Second Further Notice of Proposed Rulemaking Monday.

The FCC adopted an Order today at its Open Meeting which expands the agency’s IP captioning rules to online video clips, subject to some important carve-outs that will be addressed in a Further Notice of Proposed Rulemaking.  The IP captioning rules currently exempt video clips, defined as “excerpts of full-length programming,” and apply only to full-length video programming that has previously aired on television with captions.

The new rules will phase in beginning in 2016.  Specifically, by January 1, 2016, video programming distributors (VPDs) must provide captions for “straight lift” clips of pre-recorded programming.  By January 1, 2017, montages of straight lift clips must be captioned.  Finally, by July 1, 2017, VPDs must provide captioning for clips of live and near-live programming; however, VPDs will have a grace period of 12 hours for live programming and 8 hours for near-live programming.  “Live programming” is programming “shown on television substantially simultaneous with its performance,” and “near-live programming” must be performed and recorded less than 24 hours prior to first airing on television.

Notably, the Commission indicated that it will entertain waiver requests based on the economically burdensome standard.  In addition, it clarified that the closed captioning quality rules, which take effect January 15, 2015, will apply to IP video clips.

The new rules also come with three important carve-outs.  First, clips posted before the appropriate phase-in deadlines do not need to be captioned after the deadline passes.  In other words, clips that are currently posted and that will be posted prior to the phase-in deadlines do not need captioning.  Second, the rules do not currently apply to “advance video clips,” which are clips posted online after the phase-in deadline but before the clip airs on television.  The Further Notice seeks comment on this exemption, which is of particular interest to stations that post clips of breaking news before the breaking news airs on television.  Third, the rules apply only when VPDs post clips on their own website or app, not when the clip is posted by third-party websites.  The Further Notice also seeks comment on this exemption.

The Further Notice also asks about decreasing or eliminating the grace period for live and near-live programming, a question Commissioner Pai deemed “odd” considering that the rule does not take effect for three years.  In addition, the Further Notice seeks comment on “mash-ups,” which the FCC defines as video packages that contain content shown on television with captions along with video not subject to the rules, such as online-only content.

We will provide further updates on comment deadlines when the Order and FNPRM are released and subsequently published in the Federal Register.

MVPD Faces $2.25 Million Forfeiture For Retransmitting Broadcast Stations Without Obtaining Consent

Posted in Broadcast Regulation, MVPD Regulation

The FCC has issued a $2.25 million forfeiture against Houston multichannel video programming distributor (MVPD) TV Max and its affiliates for continuing to retransmit six broadcast television stations after their agreements had expired.  The Forfeiture Order follows a June 2013 Notice of Apparent Liability, in which the Commission proposed the forfeiture.

Prior to January 1, 2012, TV Max had retransmission consent agreements with Fox Television Holdings, Inc.; Univision Communications, Inc.; Post-Newsweek Stations, Houston, Inc.; and ABC, Inc. for the six stations in question.  By March 2, 2012, however, each of those agreements had expired – yet TV Max continued to retransmit the signals of those stations without consent.  TV Max claimed that it was no longer required to obtain retransmission consent for those stations under the master antenna television (MATV) exception to the retransmission consent requirement.  Under that “narrow” exemption, an MVPD can provide a signal obtained using an MATV system without entering into a retransmission consent agreement only if: (1) the signal is available to the subscriber at no charge and at the subscriber’s option; and (2) the antenna facility is owned by the subscriber or the building owner or available for purchase by the subscriber or building owner upon termination of service.  The Commission found that although by January 1, 2012, TV Max had begun to install MATV systems on some of the buildings it serves, it did not complete the installation of those systems until July 26, 2012.  Even then, “TV Max retransmitted at least some broadcast signals received at its off-site cable headend via its fiber ring rather than through the on-site MATV system” – meaning that it would not have qualified for the exception.

The Forfeiture Order includes several points that will be of interest to broadcasters and MVPDs alike:

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Pandora Requests FCC Permission to Exceed 25% Foreign Ownership Benchmark Under Section 310(b)(4), Providing First Test of FCC’s Case-by-Case Approach to Broadcast Foreign Investment

Posted in Broadcast Regulation, Foreign Ownership, Music Licensing

Just over a year ago, Internet streaming music provider Pandora filed an application seeking FCC consent to acquire a South Dakota radio station, KXMZ(FM).  As we explained at the time, Pandora was motivated in part by a desire to qualify for lower royalties for public performances of musical works in the repertories of the American Society of Composers, Authors, and Publishers (ASCAP) and Broadcast Music, Inc. (BMI) that are made via Pandora’s webcasting service.  Those lower rates are available to the owners of terrestrial radio stations, but not to pure-play webcasters like Pandora.  ASCAP and BMI promptly opposed Pandora’s attempt to qualify for the lower rates, with ASCAP launching an attack on Pandora’s assignment application.  Among other things, ASCAP raised questions regarding Pandora’s ability to demonstrate compliance with the FCC’s foreign ownership limits.

At the time of ASCAP’s initial objection, the FCC had applied a de facto rule prohibiting investment in broadcast licensee parent companies in excess of 25%.  This rule derived from Section 310(b)(4) of the Communications Act, which authorizes the FCC to disallow such foreign investment if it finds that the public interest will be served by doing so.  Late last year, however, the FCC issued a Declaratory Ruling explaining that it will consider, on a case-by-case basis, requests to exceed the 25% limit in the broadcast context.

In response to ASCAP’s objection and resulting FCC inquiries as to its demonstration of compliance with the 25% foreign ownership limit, Pandora last week filed a Petition for Declaratory Ruling requesting authority to exceed the limit.  Continue Reading

FCC: Busy 2014 Precedes Mid-2015 Incentive Auction

Posted in Broadcast Regulation, Corporate/Business, Spectrum, Transactions

The FCC continues to target mid-2015 for conducting the incentive auction, according to an Estimated Timeline of Key Events released today.  To realize that goal, the FCC plans to release in the fast-approaching third quarter of 2014 the “Auction Comment Public Notice,” which, as detailed in a previous post, will seek comment on:

  • The methodology for determining starting prices in the reverse and forward auctions;
  • The “adjustment factors,” such as a station’s potential for interference, that affect the value of a station in clearing spectrum;
  • The specific benchmarks that the FCC will use for determining the final stage rule;
  • How much market variation to accommodate;
  • How prices will change from round to round; and
  • Details about the mechanics of the auction.

Also in the upcoming quarter, the Commission plans to adopt methodology for preventing “inter-service interference” between television and wireless broadband operations.   In addition, the Commission has slotted numerous auction and repacking-related proceedings for the third quarter of 2014 that will address:

  • The future of LPTV and TV translator stations;
  • Revision of the Part 15 rules to allow use of TV White Space devices in the repacked television spectrum, in the 600 MHz Band guard bands, and on Channel 37;
  • The long-term needs of wireless microphone users; and
  • Review of the Designated Entity rules.

The FCC plans to release orders in all of these proceedings by the first half of 2015.

In the first quarter of 2015, and with 90 days advance notice to broadcasters, the Media Bureau will announce its deadline for completion and license of “authorized construction of new full power station facilities, channel substitutions for licensed full power stations, modifications to existing full power and Class A facilities granted before the April 2013 freeze, and Class A digital conversion facilities.”  Only facilities licensed before that pre-auction licensing deadline will be entitled to repacking protection.  Then, in the first half of 2015, the FCC’s Office of Engineering and Technology will publish a baseline list of broadcast facilities eligible for preservation in the repacking process along with their coverage areas and population served.  Also during this timeframe, the Media Bureau will issue a final catalog of repacking costs eligible for reimbursement.

Following “bidder education tutorials and seminars,” the FCC will then conduct the incentive auction in mid-2015.

Post-Auction Timeline

Though the FCC is not committing to specific dates for post-auction activities, the Estimated Timeline did provide some detail on relative timeframes:

  • At auction completion, the FCC will announce final television channel assignments in the Channel Reassignment Public Notice.  Within three months of this PN, broadcasters and MVPDs must provide an estimate of relocation costs.  The Media Bureau will review these estimates and issue initial allocations from the TV Broadcast Reimbursement Fund.  Also within three months of the PN, broadcasters must file construction permit applications to operate on their new channels.  The Media Bureau will establish construction deadlines and also announce a limited window for operating LPTV and TV translators to submit displacement applications.  Within 39 months of the PN, broadcasters must complete their transition to their new channel or go dark on their pre-auction channels.
  • “As soon as practicable after conclusion of the auction,” the FCC will begin disbursing proceeds to broadcasters relinquishing some or all of their spectrum.  These stations have three months to terminate operations after receiving payment (stations which will channel share will have three months to terminate operations on their existing channels).

We will continue to provide coverage of ongoing incentive auction issues on our Twitter feed (@WileyonMedia) and on this blog.  As always, please contact us with any questions.

Supreme Court Sides with Broadcasters, Holding that Aereo Internet TV Service Infringes Public Performance Copyright Rights

Posted in Copyright

In a significant win for broadcasters, today the Supreme Court of the United States declared (6-3) in a broadly-worded ruling that transmissions of television programs by the Aereo Internet television service are “public performances” that infringe copyright owners’ rights under the Copyright Act.  In American Broadcasting Companies, Inc. v. Aereo, Inc. , the Court held that, despite technological differences, Aereo’s system functions in essentially the same way as the cable television (CATV) systems that Congress intended to capture in the 1976 amendments to the Copyright Act.  Justice Breyer wrote the majority opinion.  Justice Scalia dissented, joined by Justices Thomas and Alito, and would have held that the user, not Aereo, engages in the performance.

The Court reasoned that Aereo, by providing a system that transmits television programs in near real time to its subscribers, engages in the act of “performing” copyrighted works.  According to the Court, under the language adopted by Congress in 1976, “both the broadcaster and the viewer of a television program perform,’ because they both show the program’s images and make audible the program’s sounds.”  Further, according to the Court, under the “transmit clause” of the definition of public performance, “an entity that acts like a CATV system itself performs, even if when doing so, it simply enhances the viewers’ ability to receive the broadcast transmission signals.”  The Court was influenced by the similarity between Aereo and cable systems, and by the facts that “[i]n providing this service, Aereo uses its own equipment, housed in a centralized warehouse, outside of its users’ homes.”  The Court believed that the technological distinctions between Aereo’s service and cable systems “mean[] nothing to the subscriber” and “mean[] nothing to the broadcaster.”

The Court then held that Aereo’s performances are made to the public, despite the fact that the transmissions are made from separate copies that are created for each user.  According to the Court, the differences between Aereo’s system and traditional cable systems, “concern only the behind-the-scenes way in which Aereo delivers television programming to its viewers screens.  They do not render Aereo’s commercial objective any different from that of cable systems.  Nor do they significantly alter the viewing experience of Aereo’s subscribers.”

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Caution When Accepting Ads for Weight-Loss Products—If a Claim Sounds Too Good to Be True, it Probably Is! And the FTC and Congress Are Watching.

Posted in Advertising Issues, Broadcast Regulation, Program Content

 On June 17, 2014, the Senate Subcommittee on Consumer Protection held a hearing entitled “Protecting Consumers from False and Deceptive Advertising of Weight-Loss Products,” during which media outlets were urged to pay closer attention to the accuracy of claims made in ads for weight-loss products.  This hearing followed through on a promise made by Subcommittee Chairman Claire McCaskill (D-MO) in January.  Senator McCaskill’s pledge followed the Federal Trade Commission’s (“FTC”) announcement of renewed efforts to combat false and deceptive ad claims in this area through its “Operation Failed Resolution.”

Witnesses, including the FTC’s Mary Koelbel Engle, Associate Director of the Division of Advertising Practices, pointed to the FTC’s attempts to inform media outlets regarding the widespread use of outlandish claims by some weight-loss product manufacturers as part of the solution.  Ms. Engle observed that “[w]hen consumers see products and ingredients marketed in sophisticated ways on respected media outlets and praised by people they trust, it can be difficult for them to listen to their internal voices telling them to beware.”  She went on to explain that “[t]hat is why we have long sought the partnership of the media to screen deceptive diet ads before they run.”

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Mobile App Security Should Be Part of The Privacy Policy

Posted in Privacy

Are you paying attention to the security features of your mobile apps?

Earlier this year, the Federal Trade Commission announced consent decrees with two companies, Credit Karma and Fandango, for failing to take reasonable steps to secure their apps.

Interestingly, the FTC specifically cited both companies for disabling the SSL certificate validation, which would have verified that the apps’ communications were secure.  By disabling the certificate, the companies potentially exposed their users’ data to hackers and thieves.

The consent decrees being entered into in those cases will require the companies to put in place comprehensive security programs to address risks related to the development and management of new and existing products and to protect the security, integrity, and confidentiality of information covered by the order.  Under the decrees, the companies will remain subject to independent security audits every other year for the next 20 years.  A similar fate could well befall other companies that do not take what the FTC regards as reasonable steps to secure their apps.  Do you want to be that company?

No More Fast Talkers and Small Print? O’Rielly Supports Updating Contest Rule to Allow for Internet Disclosures

Posted in Contests

In a June 16, 2014 blog post, FCC Commissioner Michael O’Rielly voiced his support for updating the FCC’s Contest Rule, which currently requires broadcasters to periodically disclose a contest’s material terms on-air.  Noting the “super-fast” talkers rattling off contest terms on the radio, and the “small print” used for television disclosures, Commissioner O’Rielly stated that the Commission should consider updating the Contest Rule to allow broadcasters to substitute their current on-air contest notifications “with simple instructions to visit a specific website for more information.”    Posting such material online, Commissioner O’Rielly wrote, would have a number of benefits, including allowing listeners and viewers the opportunity to “actually read and digest the contest rules” and allowing broadcasters “to provide a more complete description of the contest, update it as necessary, and significantly reduce the instances that could lead to FCC enforcement actions.”   In addition, the change would better effectuate the original intent of the Contest Rule, which was designed to “require licensees who conduct broadcast contests to take certain steps to assure that they are promoted and conducted properly.” Continue Reading

Data Breach Laws and Privacy Policies

Posted in Privacy

The attention and lawsuits – and executive suite changes – relating to the highly-publicized 2013 data security breaches experienced by Target and by Neiman Marcus serve as a pointed reminder of the need to attend to data security throughout a company’s operations, both online and offline.  What can a business do to guard against similar breaches, what should it do to prepare for one, and what must, can, or should it say in a privacy policy?

More than 45 states now have breach notification laws on the books.  However, even if a company’s website has changed little over the past few years, the law has.  For example, user names and email addresses were not defined as “personal information” by California’s breach notification law until January 1 of this year, although they may meet the definition of personal information under other laws (such as the federal Children’s Online Privacy Protection Act).  This effectively converted a law meant to deter identity theft and financial fraud into a more general data protection statute.  This also means that a privacy policy that does not classify email addresses and user names as personal information is out of date.

Reviewing a privacy policy can provide a good opportunity for a company to address the risks of data security and how to provide notification to consumers in the event of a data security breach.  When was the last time the company reviewed the cybersecurity of your website, payment systems, or other electronic systems?  Does it have a plan to address cyber attacks?  To address data breaches?