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Stations Tussle Over Channel Change Reimbursements

Despite FCC rules that clarify reimbursement guidelines, conflicts can arise

When it comes to situations like the involuntary channel change of a station, the Federal Communications Commission has clear guidelines for how the impacted station may be reimbursed for its troubles. Engineering work-related reimbursements might be a ‘yes’ for reimbursement. Even marketing items embossed on lip balms, keychains and pint glasses might get a green light. But stations should be aware that these kinds of reimbursement requests must be clearly justified and closely documented — a situation made more fractious when there are disagreements between two station owners. 

That’s the current situation in Prescott Valley, Ariz. The Federal Communications Commission agreed to a request by Entravision Holdings to upgrade one of its stations, a decision that required station KPPV(FM) to be modified with a new channel and new frequency. The commission explained to both Entravision and KPPV’s licensee Prescott Valley Broadcasting Co. that Entravision would reimburse Prescott for legitimate and prudent costs related to this involuntary channel change.

Monitoring this reimbursement negotiation fell to the Media Bureau, which required the two parties to submit a report in writing to the bureau regarding the progress of their negotiations. If a reimbursement agreement had not reached by Feb. 24, 2022, Prescott would need to submit a list of all reimbursable expenses as well as documentation to support the estimated cost of each expense on that same date.

On that day in February, both Entravision and Prescott filed a statement to say they were unable to reach a final agreement on which expenses are legitimate. The two went back in forth in a series of reports, responses, updates and objections, asking the bureau to strike or reconsider reimbursement requests.

The bureau clarified a few things in its response. It reiterated that Prescott must submit “a list of all expenses it claims are reimbursable” by February 24, but left the door open for Prescott to submit additional approved expenses, a move that Entravision wanted to disregard. The bureau said it would accept new documentation and new factual information as the process moved forward, including potential reimbursement for items such as marketing materials, legal fee invoices, certain engineering expenses, office supplies, billboard advertising and the like.

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Although the bureau said it would review this additional documentation, it did not accept an argument that Prescott made in which it claimed that “circumstances beyond its control” prevented it from providing copies of all estimates and invoices. Prescott has long been aware that it needed to thoroughly document all expenses, the bureau said. “The fact that [Prescott] delayed obtaining documentation to support its estimates of the costs of various expense items was not a circumstance beyond its control,” the bureau said.

The bureau also reiterated that for expenses — like those listed above — to be reimbursable, there must be a “clear nexus between the frequency switch and the expense” and that all expenses must be “reasonable.” Prescott must show that the expense falls into one of a few categories: engineering, legal and equipment charges; printing of logs and stationery; out-of-pocket expenses while the station is off the air; advertising; or promotional materials. Prescott must also be able to prove that the expense is incurred solely because of the involuntary channel change. 

Among the reimbursements that the bureau approved was a $2,006 bill for engineering fees associated with a construction permit and a $4,130 legal bill for permit processing and reimbursement negotiations.

Items not entitled to reimbursement include a $10,700 legal bill for work performed prior to the involuntary channel change as well as a reimbursement request for legal fees related to the litigation surrounding escrow account payments. 

There is also a sizable list of charges that are still up for approval, including equipment, printing expenses, promotional expenses and miscellaneous expenses such as the repainting of a wall with new logos, payroll and overtime expenses and website redesign. The bureau is also requesting additional information on 16 other categories that resulted in legal work in 2020 and 2021.

Since the bureau is requesting additional information from Prescott, it also has given Entravision the opportunity to reply within 14 days after receiving Prescott’s response. The bureau also told Prescott that it will not accept any further submissions other than an outright request from the bureau, an update on an estimated cost or information on an expense that was not anticipated. Any other submissions will be dismissed. Likewise, unless the bureau requests a reply, the bureau will not accept any further submissions from Entravision either. 

Entravision has 20 days from the date of the letter to reimburse Prescott for the amounts that have been agreed upon so far, which total $17,931. In turn, Prescott has 14 days to respond to the bureau’s request for additional information and 30 days to send a receipt of its reimbursements to the commission.