The FCC has released a Notice of Proposed Rulemaking seeking comment on its proposed regulatory fees for fiscal year 2017.  Congress requires the FCC to annually collect regulatory fees to cover its operational costs, and the FCC sets the fees by calculating the proportion of the total number of FCC employees needed to regulate a particular service. 

In the NPRM, the FCC seeks comment on a number of proposed changes to its allocation of employees and fee structures, including whether to raise the de minimis exemption to $1,000 and whether to exempt cable operators with less than 1,000 subscribers.  In computing its proposed fees, the FCC took into account the proposed changes to its allocations of employees, which have the effect of raising fees due in some fee categories while lowering those due in others.  The FCC will release an order prior to date fees are due announcing the final amounts.

Comments are due June 22, 2017.  Reply Comments are due July 7, 2017.

Proposed Regulatory Fees.  The FCC has proposed the following regulatory fees:

• 2017 Cable/IPTV regulatory fee:  The FCC has proposed that cable systems (including IPTV systems) that had subscribers as of December 31, 2016 pay $0.96 per subscriber, a $0.04 decrease from 2016. 

• DBS regulatory fee:  In 2015, the FCC made DBS a sub-category of the Cable/IPTV fee category and adopted an initial regulatory fee of $0.12 per subscriber.  The FCC increased the DBS fee to $0.27 per subscriber in 2016 and has proposed a $0.38 per subscriber DBS fee for 2017.

• CARS licenses and permits:  The FCC has proposed that CARS facilities operating on October 1, 2016 pay $940.00, a $165 increase from 2016, even if the facility’s license expired after October 1, 2016. 

• Interconnected VoIP regulatory fee:  The FCC proposes an ITSP fee of $0.00302 for each dollar of interstate and international telecommunications revenue that a provider reports on its Form 499-A, a decrease from the $0.00371 fee of 2016. 

Filing Procedures and Window.  Following adoption of its FY 2017 Fee Order, the FCC will collect these fees during a filing window later this summer.  All licensees must use their FRN and password to access the Fee Filer System, and review, create, update, or change the fees owed.  Then, each licensee must make payments electronically – online payment with a credit card, online payment from a bank account, or by sending a wire transfer.  Fee Filer will print a Form 159-E for users to transmit via fax for wire transfers. 

If you have any questions about regulatory fee payments, please contact Scott Friedman at (312) 372-3930 or sfriedman@cinnamonmueller.com.

FCC Grants Broadcaster’s Market Modification Request

On May 25, 2017, the FCC’s Media Bureau released a Memorandum Opinion & Order granting a broadcaster’s petition to modify its television market.  Spanish Broadcasting System, Inc. and its subsidiary WSBS Licensing, Inc. had requested that the FCC modify the television market of WSBS-TV, Key West, Florida to include 41 cable communities in the Miami-Ft. Lauderdale DMA which had been deleted through prior market modifications between 1996 and 1999.

The Media Bureau granted WSBS’s Petition after finding that four of the five statutory factors the FCC must consider when reviewing market modification petitions weighed in favor of granting the petition.  The FCC also gave weight to additional factors such as the amount of WSBS advertising targeting the 41 communities, the overlap in the workforce from the Station’s location to the 41 communities, and the fact that the Station’s location and communities at issue are part of the same Congressional district and State Senate and House districts. 

This Order is a reminder that a station’s local market for must-carry and retransmission consent purposes is not set in stone.  In particular, for MVPDs without access to an in-state station, a 2014 change in the law provides support for adding in-state stations for cable systems that are grouped into an out-of-state DMA.  Market modification cases, however, can be complex and require a fair amount of fact-gathering.  To make sure you are prepared, we cover in this update the procedures and required evidence to seek a market modification. 

Background.  The Communications Act entitles commercial broadcast stations to assert mandatory carriage rights on cable systems located within their markets.  A station’s market for this purpose is its “designated market area,” or DMA, as defined by Nielsen Media Research. 

The Communications Act and FCC regulations provide detailed procedures under which the FCC may include or exclude communities from a station’s local market in response to a petition by a broadcast station or cable system.  The procedure is called “market modification.” The idea behind market modification is that a station’s DMA may not accurately reflect the area served by a station or the station’s actual economic market. 

 Factors considered.  The FCC is required to consider five statutory factors in determining whether to grant or deny a petition:

1. Historical cable carriage of the station;
2. Signal coverage;
3. Access to stations that originate in consumers’ State of residence
4. Carriage of other must-carry stations serving local programming needs; and
5. Viewing patterns in cable and non-cable households in the community in question.

The Commission decides each petition on a case-by-case basis.  None of the five factors, considered individually, is dispositive.  The FCC is free to – and frequently does – disregard one or more of the elements and will consider additional factors.

Required evidence.   FCC regulations require that a petitioner include certain evidence.  The Commission will dismiss a petition that does not include any of the required items.  Required evidence includes:

• A map illustrating the relevant communities and other features.
• NLSC maps of the station’s technical service area.
• Data on shopping and labor patterns in the local market.
• Station programming information.
• Cable system channel lineups or other exhibits establishing historic carriage.
• Published audience data.
• If applicable, a statement that the station is licensed to a community within the same state as the relevant community.  

New Law Emphasizing Access to In-State Stations.  The Satellite Television Extension and Localism Act Reauthorization Act of 2014, or STELAR, added a fifth factor for the FCC to consider – whether modifying the market would promote consumers’ access to in-state broadcast signals.

Decision timing.  By statute, the FCC must decide a market modification petition within 120 days of filing.             

The FCC has published a guide which provides an overview of the process for requesting modification of a station’s local market.  

If you have any questions regarding market modification, please contact Scott Friedman at sfriedman@cinnamonmueller.com or (312) 372-3930.