Another year is upon us, and it’s time for predictions as to what Washington may have in store for broadcasters in 2010. Each year, when we look at what might be coming, we are amazed at the number of issues that could affect the industry – often issues that are the same year to year as final decisions are often hard to come by in Washington with the interplay between the FCC and other government agencies, the courts and Congress. This year, as usual, we see a whole list of issues, many of which remain from prior years. But this year is different, as we have had a list topped by issues such as the suggestion that television spectrum be reallotted for wireless uses and the radio performance royalty, that could fundamentally affect the broadcast business. The new administration at the FCC is only beginning to get down to business, having filling most of the decision-making positions at the Commission. Thus far, its attention has been focused on broadband, working diligently to complete a report to Congress on plans for implementation of a national broadband plan, a report that is required to be issued in February. But, from what little we have seen from the new Commission and its employees, there seems to be a willingness to reexamine many of the fundamental tenants of broadcasting. And Congress is not shy about offering its own opinions on how to make broadcasting "better." This willingness to reexamine some of the most fundamental tenets of broadcasting should make this a most interesting, and potentially frightening, year. Some of the issues to likely be facing television, radio and the broadcasting industry generally are set out below.

Television Issues.

In the television world, at this time last year, we were discussing the end of the digital television transition, and expressing the concern of broadcasters about the FCC’s White Spaces decision allowing unlicensed wireless devices into the television spectrum. While the White Spaces process still has not been finalized, that concern over the encroachment on the TV spectrum has taken a back seat to a far more fundamental issue of whether to repurpose large chunks of the television spectrum (if not the entire spectrum) for wireless users, while compressing television into an even smaller part of what’s left of the television band – if not migrating it altogether to multichannel providers like cable or satellite, with subscription fees for the poorest citizens being paid for from spectrum auction receipts. This proposal, while floated for years in academic circles, has in the last three months become one that is being legitimately debated in Washington, and one that television broadcasters have to take seriously, no matter how absurd it may seem at first glance. Who would have thought that just six month after the completion of the digital transition, when so much time and effort was expended to make sure that homes that receive free over-the-air television would not be adversely impacted by the digital transition, we could now be talking about abolishing free over-the-air television entirely? This cannot happen overnight, and it is a process sure to be resisted as broadcasters seek to protect their ability to roll out new digital multicast channels and their mobile platforms. But it is a real proposal which, if implemented, could fundamentally change the face of the television industry. Watch for this debate to continue this year.

Spectrum conflicts with radio will also be on the table. There have been proposals for the reallotment of TV Channel 6, and perhaps even Channel 5, to radio uses. Particularly given the issues that many major market television stations had with the digital conversion of VHF stations, and the demand by more and more entities for radio spectrum, this proposal has already been advanced for public comment by the FCC in several proceedings, and could theoretically be ripe for action. More likely is further consideration, as there are many issues that would need to be resolved – like who would pay for the few remaining TV stations on these channels to move elsewhere on the TV band, plus questions of how the spectrum, if reallocated to radio use, would be divided. More on that below in the radio discussion.

The FCC will also have to complete the digital transition of TV translators and LPTV stations, which were not bound by the June 2009 DTV conversion deadline. The FCC will need to set a digital conversion deadline – 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. This transition may also bring to the fore questions about the use of LPTV stations on Channel 6 for quasi-radio stations broadcasting audio that can be received on 87.7 or 87.9 on most radio receivers as analog television audio signals are just below the bottom of the FM dial. This use of channel 6 stations for Fm broadcasting would disappear if LPTV stations go digital, and thus there may be resistance to the transition from that element of the LPTV community.

Another carryover issue from 2009 is the status of the SHVERA extension, authorizing DirecTV and DISH Networks to rebroadcast local broadcast television signals to satellite TV subscribers in their markets. That authorization expired at the end of 2009, and has been extended by Congress, but only until March. While everyone seems to agree that a further extension is appropriate, many parties are trying to load up the bill with all sorts of goodies from the wish lists of various industries – everything from a mandatory extension of local-into-local service into every television market (as urged by TV interests), to changes in must-carry and retransmission consent schemes and rules on the importation of distant network affiliates (sought by various multichannel video providers), to issues about allowing the carriage of in-state TV stations in markets with counties that currently receive their television service from stations in adjoining states. These and other issues will need to be resolved before a more permanent extension can be granted.

Radio Issues

The most fundamental issue for radio broadcasters is the potential for the broadcast performance royalty – which would require that radio stations pay not only the composers for the use of music on the radio (which they currently do through ASCAP, BMI and SESAC payments), but also to pay performers (and the record companies, as the copyright holders in these performances) for the use of their recordings on the air. Radio has never paid such royalties, though digital cousins of radio – satellite radio, Internet radio and cable radio – have paid these royalties for the last decade. While broadcaster representatives have thus far been able to beat back attempts impose this performance royalty for the use of sound recordings, both the House and Senate Judiciary Committees passed forms of this legislation in 2009, and proponents of the royalty will be pushing for a vote on these bills this year. With the potential for a crippling new cost to be imposed on radio if these royalties are adopted and imposed on top of the royalties already paid to ASCAP, BMI and SESAC (which are themselves in negotiation for new royalty rates as old rate agreements expired at the end of 2009), music radio could be dealt a severe blow if the proposal was to be adopted in this time of decreasing revenue. While the new NAB President has seemingly taken a somewhat more conciliatory tone in dealing with this issue (no more claims that the royalty will only be discussed at knifepoint), it is difficult to see where the revenue to pay such royalties would come from. But it will be an issue that will be fought hard this coming year.

The digital transition in radio will also need to be addressed. While many stations are already operating with digital over-the air streams of programming, the Commission is still faced with resolving proposals for increased power for HD Radio operations (In-Band On Channel or IBOC digital radio), which some broadcasters have opposed as holding the potential for adjacent channel interference. While a compromise proposal to allow for IBOC power increases has been offered to the Commission, it has not yet been adopted. Watch for action on that front soon.

LPFM stations may become more common this year, as legislation to remove a ban on those stations causing third-adjacent channel interference to full-power FM stations may well be removed by Congress this year. A bill to do so has passed the House, and will likely be considered soon in the Senate. The House Bill did protect some full power stations from real cases of interference, and certain existing services like existing translators and stations proving reading services for the blind. But the bill must also be addressed by the Senate, and we will have to see what will be in the final legislation.

The related issues of the relationship between LPFM stations and other FM users also remain to be resolved at the FCC. A new LPFM window has been held up by issues on how to process the thousands of FM translator stations that remain pending from the 2003 translator window. Similarly, issues remain to be resolved on whether LPFM stations, which were authorized as secondary services, should be able to be protected from increases in power or other facility changes by full-power stations. Perhaps the removal of third-adjacent channel protections will alleviate some of the conflicts, but others are bound to remain.

The proposals discussed above to recapture some of the television spectrum, including Channel 6 and possibly Channel 5, and to use that spectrum for new radio stations, may provide a further outlet for LPFM stations to remove some of the conflict with translators and full-power stations. Proposals are already pending to immediately allow LPFM stations on 87.5, 87.7 and 87.9 – all parts of channel 6 that can be heard on most FM radio receivers. But a longer term solution could result from this reallocation, giving LPFM stations places to operate without restricting FM upgrades or endangering FM translators. 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 further serious consideration this year.

Finally, the FCC under Interim Chairman Copps, suggested rules that could limit the ability of FM stations to change city of license to move toward larger communities, undoing some of the flexibility accorded to stations in recent years to change city of license to reach larger audiences. Action on this proceeding might be forthcoming, or will perhaps be rolled into the localism proceeding discussed below.

Issues for Both Radio and Television

The FCC’s Localism proceeding remains on the table, proposing a whole host of requirements to assure that broadcasters are serving their communities and the “public interest”. While comments have been filed and the proceeding ready for resolution for over two years, there are so many controversial issues raised by the proposals that coming to any resolution will not be easy. Some proposals seem to be dead – like that for a fully manned main studio during all hours of operation, located in the station’s city of license, as regulators realize the costs that such a requirement would impose, and the likely impact that the requirement would have on new entrants and on the 24 hour operations of some stations. 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 requiring that broadcasters be judged by whether they perform certain tasks set out on a menu of options by which they would demonstrate their service of the public interest. One would hope that any set of menu options would be broad enough to recognize all the diverse ways that broadcasters serve their communities, and not so restrictive as to make every station meet the public interest in the same cookie-cutter way, and thus eliminating diversity in approaches that has allowed the broadcast industry to flourish.

The difficulty with localism issues is illustrated by the Commission’s rules, adopted over two years ago, requiring TV stations to document in minute detail their public interest programming on Form 355. This rule has never become effective, as the form has never been approved by the Office of Management and Budget as being in compliance with the Paperwork Reduction Act. As this form required so much new information, for no appreciable purpose, it seems unlikely that it could survive such a review. Broadcasters argued that the information required to be documented would require the hiring of new staff whose only role would be to fill out this form. In an era of declining revenues for broadcasters, hiring a person to deal with these issues would, of necessity, require cutbacks in other areas, possibly compromising service to the public.

While that would seem to be an issue, in recent hearings on the FCC multiple ownership rules, which will come up for a full review in 2010, certain public interest group representatives suggested that gathering detailed information about a station’s public service should be seen as a cost of doing business, and that owners who did not want to shoulder this burden should simply get out of the business. With views such as that being advanced in the multiple ownership proceeding, questions of how to modify the Commission’s ownership rules will not be easily resolved. The FCC’s 2007 modest relaxation of the broadcast-newspaper cross ownership rules has never been fully implemented, causing us to wonder if the restrictions may well outlive the newspaper itself. Broadcasters, especially small market TV operators, have also been looking for the ability to combine operations under more flexible rules – an issue to be examined by the FCC in this upcoming 2010 proceeding (though don’t expect any final resolution this year).

The troubles of the newspaper industry, and of some broadcast stations, in funding their news operations, has given the FCC and the FTC pause, with both agencies conducting reviews of how the government may be able to facilitate good journalism in the 21st century. The FCC has gone so far as to appoint a Special Advisor to the Chairman to look at the issues of how the media should best serve their local audiences and how to assure that service is forthcoming to local communities. One wonders what the government can do to mandate what are essentially business decisions. But some fear that any review of content issues, whether it be in the guise of community service or localism or some other form could be a backdoor way to bring back the Fairness Doctrine, which many conservative pundits have predicted. Certainly, many of these proposal would face constitutional and practical problems in implementation. Yet these will be matters which broadcasters will need to continue to monitor.

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 on-air anything given them at no charge (e.g. a script, video footage, etc.) before its inclusion into a news report – will also likely be resolved. Some have also suggested that the Commission may be planning some adjustments to its payola rules, though what those changes would be, and how they would improve on the current rules, is hard to fathom. We’ve also written about the FTC’s recent actions on sponsorship identification (especially for the new media) and celebrity endorsements, obligations that are only now being fully implemented.

There is also real concern that the Congressional committees which oversee the FCC may well push proposals for content regulations. Issues on limits on prescription drug advertising have been raised both independently and as part of the health care debate. Proposals on restrictions on violent programming and on advertising directed to children are also possible, especially in connection with ads for food considered unhealthy (however that may be defined). Congress also seems poised to pass a law regulating loud commercials – mandating that the volume on commercials be kept the same as that in programming, no matter how hard (and in some cases subjective) that may be to assure in reality.

Protecting children from violent or other potentially harmful content has also been the subject of both FCC and FTC proceedings, which may spur further actions this year. Indecency issues will also continue to be litigated in the Courts, as both the Janet Jackson clothing malfunction and the Golden Globes fleeting expletive cases are considered after their remand by the Supreme Court. The constitutional issues left unresolved by the Supreme Court may well be considered by the Courts of Appeals rehearing these cases, though an ultimate decision on the constitutional issues are probably several years down the road when these cases finally make their way back to the Supreme Court (so look for indecency on our list of issues next year).

And 2010 will be a big political broadcasting year. While the political broadcasting rules have for the most part remained unchanged for almost two decades, there are aspects of the rules that need to be addressed as the technology has changed since the current rules were adopted. The FCC has a long-outstanding proceeding to decide how on-line sales of broadcast inventory by various advertising clearinghouses and aggregators affect a station’s lowest unit rate. It’s interesting that the proceeding itself has outlasted most of the companies that were offering the on-line sales of broadcast inventory. Also, as both radio and TV are now multicasters in the digital world, the FCC has not yet addressed how reasonable access and other political rules apply to multicasting. Are a station's multiple streams each considered a separate “station” for reasonable access purposes, or can a station decide that candidates can be accommodated on one or more streams and kept off of others. While this may not be a big issue in this election as most multicast audiences are small, the issue will no doubt grow in significance in future elections.

Copyright issues could also impact the broadcast industry this year. We discussed the performance royalty above. But both radio and television have outstanding issues on their ASCAP and BMI royalties that could lead to rate court proceedings to decide what should be paid to composers for the use of their music. And TV broadcasters have brought a suit against SESAC to try to bring it under the antitrust laws, a suit that radio broadcasters may well consider joining at some point in the future,

Conclusion

Just a cursory look at the broadcast issues to be dealt with by Washington this year is enough to give any broadcaster pause about the future. And these are just some of the issues that could impact broadcasters. Broadband rollout, network neutrality, and regulation of wireless and wired carriers can fundamentally affect the competitive landscape for the media in general. And there are a whole host of other regulatory issues that we have not addressed here, including some that we have no idea are on the agenda but which are nevertheless bound to arise. In an industry rapidly adapting to new media competition and changes in the economy, broadcasters cannot afford to face the heavy hand of government regulation. Broadcasters need the freedom to adapt to marketplace changes and to address the new realities of the advertising supported media. One can only hope that Washington recognizes these new realities and regulates with a realistic hand, not one based on the realities of a totally different time and place. Stayed tuned to these pages to see what develops in this new year.