The FCC yesterday issued an order declining to allow experimentation with the noncommercial underwriting rules that was requested by the licensee of noncommercial radio stations in the Phoenix area. The licensee had asked the FCC for permission to conduct a three year experiment by relaxing the underwriting rules in certain ways to determine the effect such a relaxation would have on its ability to raise revenue, and the impact on the listening and support that the station currently enjoys. In denying the station experimental authority to conduct the test, the FCC determined that it lacked the authority to authorize it, as the relaxation that the license was seeking would be prohibited not only by FCC rules, but also by statute, and the FCC cannot waive or grant an exception to a statutory provision (unless specifically permitted by the statute).
The underwriting rules prohibit noncommercial stations from running advertising for commercial entities. These rules have been relaxed somewhat over the last 30 years to allow for “enhanced underwriting” announcements, which allow noncommercial stations to identify their sponsors, and provide limited information about the products and services of those sponsors. But the information cannot be promotional in nature. Specifically, there are a number of limitations put on these announcements. Some of these limitations include: (1) the announcements cannot contain “calls to action” – statements that suggest that listeners buy from the sponsor or patronize their place of business; (2) the announcements cannot have qualitative claims – so noncommercial stations cannot say that their sponsor was voted the “best car repair shop in the city by City Magazine,” even if that statement of fact is true; and (3) the announcement cannot provide price or other information relevant to a buying decision, e.g. where tickets are sold, interest rates, etc. For more information about these rules, see some of our previous articles on this topic here, here, here and here, as well as a presentation on that issue that is discussed here. What did this licensee seek to change in its experiment?The licensee sought to provide information about interest rates, sales and other discounts that were being offered by its sponsors, and qualitative claims that were verifiably true. Some specific examples of what it sought to promote, as set out in the decision, included:
that a bank is “offering certificates of deposit with rates up to 2.5 annual percentage yield;” that a car dealership is having a “Sale on Memorial Day;” and that others are “certified,” “accredited,” “award-winning,” “experienced,” “long-established,” or ranked. This, Maricopa argues, is merely a “gentle tweak” to the current underwriting guidelines
The Commission denied the request – finding that Section 399(B) of the Communications Act bans such announcements. That section of the law prohibits “public broadcasting stations” (which are defined as any station licensed as noncommercial by the FCC) from promoting any “service, facility or product” offered by any for-profit entity. While the law does not specifically set out what is promotional and what is not, the Commission felt that under its precedent the types of statements that the licensee wanted to make were within the statutory prohibition against promotional announcements. Thus, the entity’s only remedy would be to ask Congress to allow for the tests (or give discretion to the FCC to allow for the tests). As there was no statutory discretion to allow for waivers or exceptions to the prohibition against promotional announcements by noncommercial stations, and the experimental authority was denied.
In an interesting sidelight, Commissioner Pai concurred with the decision and issued a separate statement. He argued that the decision went too far; as the Commission did not need to determine that the statute prohibited the test proposed by the licensee. The Commissioner noted that the question of what is and what is not promotional is a difficult one over which the FCC should retain more jurisdiction and not tie its hands over future decisions in this area (citing examples of sponsorship identifications that he had seen on public TV stations that he believed to be as commercial as the ones requested here). Instead of determining that the statute prohibited these minor tweaks, he suggested that the experimental authority needed to be denied here because, if the rules were relaxed for this licensee, they would have to be relaxed for every other noncommercial operator who came along and requested similar relief.
This case makes clear that the FCC still intends to enforce its noncommercial rules to their full extent. Any permission for experimentation to find new ways to fund noncommercial stations will have to come from Congress. With recent calls by some for cutting back on funding for public broadcasting stations that receive state and federal funding, experimentation will seemingly become more and more important and necessary in the coming years.