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Radio’s FCC Fees Go Up, Though Less Than Expected

NAB welcomes FCC's plans to discuss fee methodology in an NOI

It’s official: FCC regulatory fees have gone up for U.S. radio and TV stations this year. But the increase is smaller than originally proposed.

The National Association of Broadcasters welcomed the adjustment along with news that the FCC has opened a notice of inquiry about the methodologies it uses to calculate fees.

The commission on Thursday adopted the fiscal 2022 regulatory fee schedule. Annual fees for radio stations — which are due later this month — go up 7 to 8% instead of the 13% hike that the commission had proposed and which broadcasters had resisted.

NAB President and CEO Curtis LeGeyt in a statement expressed appreciation for “the hard work and thoughtfulness shown by the commissioners and their staffs to reduce the exorbitant increase broadcasters faced in the FCC’s draft regulatory fees order.” He said a “bipartisan coalition of lawmakers” had voiced opposition to “overly burdensome regulatory fees.”

Here’s a chart of the new fees for radio stations. They range from $22,390 per station for the largest FMs in the biggest markets, down to $655 for certain small AMs. (Article continues below the chart.)

A chart of fees adopted by the FCC for various classes of radio stations in fiscal 2022

Across all industries, the commission will collect about $381.9 million this year. A calculation by Radio World finds that AM and FM stations in aggregate will pay about $32.1 million of that.

In its order, the commission said characterizations of its originally proposed increase as 13% were misleading because in 2021 it had issued a one-time reduction in broadcast fees due to unusual circumstances involving the FCC’s broadband work and a congressional earmark. It said it would not extend that reduction.

Nevertheless the fee increase for radio stations ends up at 7 to 8% because the FCC did agree with broadcasters on one point. It acknowledged that its method for calculating fees associated with 38 positions (“indirect full-time equivalents”) in the Wireline Competition Bureau was wrong; it said this should have been remedied sooner, given that broadcasters clearly don’t benefit from Universal Service Fund-related activities.

No major changes at this time

Throughout the rest of its order, the FCC rejected most of the arguments and requests made by the broadcast industry about its fee process, at least at this time.

There had been much criticism of how the commission assigns “full-time equivalents,” or FTEs, and whether the burden of the work of those employees is allocated correctly to specific industries, which in turn determines fees for those sectors.

The NAB, state broadcast associations and individual licensees argued that the commission assigns a disproportionate share of the costs of its 343 “indirect” FTEs to the Media Bureau. They believe broadcasters’ fees are inflated to cover the costs of work on non-broadcast issues.

However, “These commenters fail to recognize the fundamental task assigned to the commission,” the FCC wrote.

It said its appropriation for salaries and expenses must also fund costs that “do not directly equate with oversight and regulation of a particular regulatee, but instead benefit the commission and the industry as a whole.” The funds also must support costs like rent and utilities, as well as costs of regulating entities that are exempt from fees, such as nonprofits, amateur radio operators, and noncom radio and TV stations.

“[R]egulatory fees are not based on a precise allocation of specific employees with certain work assignments each year and instead are based on a higher-level approach,” it said. For instance, “Many commission attorneys, engineers, analysts and other staff work on a variety of issues during a single fiscal year.”

It laid out a detailed rationale around its methodologies and added that “regulatory fees are a zero-sum situation, so any decrease to the fees paid by one category of regulatees, such as broadcasters, necessitates an increase in fees for others.” Thus there must be “a very strong rationale” for changing its way of proportionally allocating FTEs.

“We disagree with the commenters’ contention that our methodology is arbitrary and capricious, inequitable and unlawful,” it said.

(We’ve posted the entire FCC order including the new fee charts.)

The FCC said an alternate approach to FTEs that was suggested by state broadcast associations “would not be administrable given the resources it would take to calculate and the resulting constantly shifting nature of the regulatory fee burdens.” It wouldn’t be practical to analyze hundreds of employees’ daily tasks and change their allocation to different fee categories as its staff receives new assignments and works on different issues. Also, it said, the results wouldn’t change anyway.

(In a lengthy footnote, the FCC also pushed back on complaints that the Media Bureau itself has too many full-time equivalents. “The FTEs in the Media Bureau perform a variety of functions of which commenters may not be aware,” for instance last year reviewing and processed more than 60,000 applications, reports or special requests.)

The commission rejected NAB’s contention that broadcasters should bear no responsibility for 84 direct FTEs in the Media Bureau that the FCC has said are working to promote a 100% broadband policy.

“The strategic goals are not aligned with a particular regulatory fee category and the exercise is guided by a wholly distinct statutory scheme. In addition, such strategic goals are intended to align with higher level priority goals of the overall federal government.”

Some organizations including the New Jersey Broadcasters Association had argued that radio/TV fees should be reduced given the impact of the pandemic on stations, the “longstanding special place” of broadcasters in American society, and the fact that broadcasters can’t charge subscriber fees. The FCC acknowledged those facts but said it has no latitude to exempt or lower fees on such grounds.

“[W]e cannot reduce FY 2022 fees across-the-board for one category of fee payor; we cannot re-apportion the fees among categories based on, for example, relative ability to pay, and we cannot exempt regulatees based on their financial circumstances.”

Broadcasters also failed to convince the FCC to increase the “de minimis threshold,” under which a licensee can get an exemption if the FCC decides that the cost of collecting would exceed the fee itself.

The threshold is currently set at $1,000 and will remain there. (NAB had proposed $1,200.) The FCC acknowledged that the threshold has a collateral effect of providing financial relief to some regulatees, but said this can’t be a factor in its calculations; and it said its average cost of collection has not increased above the $1,000 point.

NAB and others also wanted the commission to revise its methodology to reallocate broadband costs among only entities that benefit from the FCC’s broadband activities. They wanted a broadband internet access service fee category, but the commission said no and that, in any event, such a change would not make a big impact on broadcasters’ fees.

NAB also wanted the FCC to adopt a new regulatory fee category for users of spectrum on an unlicensed basis, including large technology companies. Many others opposed this in their comments, and the commission again said no. It rattled off a lengthy list of unlicensed spectrum use, from garage door openers and microwave ovens to cordless phones and Bluetooth speakers. It doesn’t see a “fair or rational way to assess regulatory fees” in such uses.

“Use of spectrum on an unlicensed basis is nearly ubiquitous in modern-day society, and confers widespread benefits,” it said. “Because of the large variety of uses of spectrum on an unlicensed basis, including for non-communications purposes, there is no specific user, service or facility using this spectrum that could form the basis for a regulatory fee category of similar services.

“Further, the commission has no reasonable means by which to comprehensively identify each and every individual user of RF devices on an unlicensed basis. Thus, it would be nearly impossible for the commission to annually assess and collect the regulatory fees each year in a fair and sustainable manner …”

The overall outcome in this order seems a mixed bag for radio broadcasters; their annual fees did go up, though less than originally planned, but numerous larger-scale changes to the system sought by broadcasters to the system seem to be going nowhere.

However the commission did open a new notice of inquiry, seeking comments on its methods allocating indirect full-time equivalents or FTEs. “The responses we receive will help us determine if there are lines of inquiry worth exploring in order to further revise our methodology.” It will take comments via its online comment system under MD Docket No. 22-301.

LeGeyt, the NAB leader, concluded in his public statement, “We hope the Notice of Inquiry serves as a springboard to a thorough modernization of the FCC’s regulatory fee methodology to ensure all parties that utilize and benefit from the commission’s work pay their fair and appropriate share. It is no longer good enough to tinker around the edges. We remain committed to working with the FCC, lawmakers and stakeholders to create a regulatory fee structure that promotes fairness, parity and consistency.”