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FCC Enforcement: What’s the Buzz?

FCC enforcement actions seem to run in cycles. New issues created by technical advancements or rule changes sometimes overtake concerns that had been hot buttons at the commission.

FCC enforcement actions seem to run in cycles. New issues created by technical advancements or rule changes sometimes overtake concerns that had been hot buttons at the commission.

For instance, radio has not been fined for indecency since March of last year, and legal experts believe the outcomes of two cases are expected to decide the fate of the FCC’s broadcast indecency policy.

Elsewhere, broadcast industry attorneys tracking compliance issues at the FCC are noting a steep rise in the number of so-called “tolling agreements” and a perceived policy shift on license transfer liability as the FCC attempts to strike a more cooperative chord with broadcasters.

A tolling agreement clears the way for the commission to grant a license renewal, which in turn clears the way for approval of a license transfer, with the caveat that the FCC can eventually come back and levy fines within a set period, typically two or three years.

Meanwhile, the FCC’s Enforcement Bureau, which enforces the Communications Act as well as the commission’s rules, orders and authorizations, has made no progress on the suspected thousands of pending indecency complaints against radio and TV broadcasters. The commission appears to be awaiting further clarification of its powers to fine broadcasters for slips of the tongue, industry observers said.

The backlog of indecency complaints in FCC files likely will remain unresolved until the commission finds out “if they have the power to punish for profanity,” said John King, a communications attorney with Garvey Schubert Barer.

“The FCC just is not sure where to go with it. They had their hat handed to them by the appeals court,” King said.

The Bush administration in September said it would ask the Supreme Court to reverse the lower court decision, which invalidated several indecency decisions and raised serious questions about the continuing validity of the commission’s broadcast indecency policy.

In June, the Second U.S. Circuit Court of Appeals struck down the FCC’s nearly zero-tolerance policy covering the broadcast of certain expletives, even if they were fleeting and unscripted. Now the U.S. solicitor general will seek a Supreme Court review of the decision, according to several accounts.

The FCC increased the maximum indecency fine it could hit broadcasters with $325,000 per violation in 2006.

Indecency remains in play

“The indecency issue is still very much in play and the commission is understandably quiet on that front because they are not sure what their rules are right now,” said Harry Cole of Fletcher, Heald & Hildreth, a Radio World contributor.

The Senate Commerce Committee in July passed the “Protecting Children from Indecent Programming Act.” The legislation is intended to overturn the Second Circuit of Appeals ruling and return to the FCC the right to fine broadcast stations for airing incidental words or images deemed indecent. However, the court also suggested that the FCC’s policy is unconstitutional, a flaw which legislation would not be able to correct.

The legislation specifically allows the FCC to establish that a single word or image in a given context may be considered indecent and levy fines against the broadcaster. A companion bill was introduced in the House in September.

While fines for filing a late license renewal form are still fairly commonplace, some industry insiders view the rise in tolling agreements between the FCC and individual broadcasters as a sign that the FCC is more willing to work with broadcasters to resolve complaints and allow license holders to transfer their station licenses.

The commission can penalize a licensee for misconduct occurring at any time during a license term as long as the licensee’s pending renewal application has not yet been granted. But as soon as the renewal is granted, the commission can issue a notice of apparent liability only for misconduct that has occurred within the 12 months preceding the notice. In order to avoid starting that 12-month clock, the FCC routinely doesn’t act on renewals that might be subject to a penalty.

By entering into a tolling agreement, the licensee agrees to give the commission more time to issue a notice of apparent liability, but in return it gets its license renewed. And since transfer and assignment applications can’t be granted unless the underlying licenses have been renewed, the tolling agreement also opens the door for getting such transfer deals approved.

“These agreements are becoming much more common, especially throughout the most recent re-licensing cycle. Pending indecency complaints are at the heart of most of the requests from broadcasters. The agreements benefit broadcasters by granting their license renewals and placing a deadline on when the FCC can fine them,” Cole said.

However, in several recent cases the FCC has tried to insist that the proposed buyer of a station agree to assume responsibility for any fines pending against the existing owner, Cole said.

“The old policy was that a person buying the station was never liable for outstanding complaints against the existing owner. The FCC hasn’t made any kind of official announcement in this regard about the change in policy, but it is happening in some cases,” he added.

‘Deal breaker’

Cole concludes that “such a stipulation by the FCC would most certainly be a deal-breaker for many suitors.”

Several other industry observers familiar with commission operations confirmed that several examples of the new policy have come to light.

“I think it is mostly the commission wanting to protect itself in scenarios where the existing owner will no longer own broadcast properties after the sale and therefore not be beholden to the FCC to pay any subsequent fines,” one observer stated.

Meanwhile, the commission says its interest is to maintain jurisdiction and access to the licensee responsible for any misconduct reflected in unresolved complaints.

“However, we want to avoid unnecessary delays in broadcast transactions. To that end, we work with parties to determine how we might preserve our cause of action without delaying or stalling the transaction altogether,” an FCC spokeswoman said.

“We have been able in some cases to cooperatively achieve these twin goals. We have not and are not requiring buyers to assume the liability. We always need to balance the need to enforce our rules and respond to complaints but do so with consideration for the real-world business requirements.”

This policy of holding the buyer responsible for the sins of the seller may not be long for this world. Reportedly the FCC may be backing off in response to considerable resistance to that policy from the communications bar.

Consent decrees are another popular alternative for broadcasters faced with possible FCC violations, said John Garziglia of Womble Carlyle.

“The FCC seems very willing to entertain consent decrees. They like this option, particularly if the FCC rule violations are multi-faceted and the commission might otherwise spend a lot of its resources in considering the alleged violations,” Garziglia said.

With a consent decree, in return for a clean bill of health the broadcaster agrees to make a voluntary contribution to the U.S. Treasury and take remedial steps to fix the problem, Garziglia said.

Technical violations

Communication attorneys point to several areas of compliance on which the FCC appears to be focusing.

David Oxenford of Davis Wright Tremaine LLP said, “Technical operations continue to be an issue, especially EAS equipment and tower site fencing and lighting. The FCC has been very diligent in carrying out these types of inspections and audits.”

Sponsorship identification is another issue the FCC takes seriously, Oxenford added.

“If you have someone buying program time, you must have that identified as such with sponsorship announcements at the beginning and end of the program. In fact, any programming going out over the air for which the station has received some kind of consideration must be identified,” Oxenford said.

“In the wake of the payola scandal, the commission is especially on the lookout for it.”

Other attorneys listed problems like failure to maintain EAS logs and public files as particular subjects of recent agency fines.

“If there is a visible pattern when you look at the fines, it’s back to the basics. Lots of focus and fines on technical and record keeping requirements, public file compliance, particularly Issues/Programs lists,” said John Crigler, a communications attorney specializing in public media with Garvey Schubert Barer.

A lack of EEO file compliance was mentioned often by those interviewed for this story.

One reason for a rise in the number of technical violations could be that the FCC is being more responsive to complaints about over-power operation, Womble Carlyle’s Garziglia said.

“It seems more likely today that such a complaint will result in a visit from an FCC inspector,” Garziglia concluded.

Honesty is always the best policy when facing an FCC inspection, Crigler said.

“An issue that starts out as a trivial matter can sometimes become major trouble if the broadcaster doesn’t fess up to the alleged violation. You can argue about fines and argue for a reduction later, but if the commission thinks you misled them at the beginning they are less likely to show any leniency,” Crigler said.

In general, Crigler said, the number of FCC enforcement actions generally is in decline.