Sinclair to Make $9.45 Million Settlement Payment to U.S. Treasury         

On July 29, 2016, the FCC’s Media Bureau released an Order announcing that it had entered into a Consent Decree with Sinclair Broadcast Group (“Sinclair”), closing the Bureau’s investigation into whether Sinclair had violated its obligation to negotiate retransmission consent in good faith.  The Consent Decree also resolved complaints concerning Sinclair’s alleged acquisition of control of same-market television stations without the FCC’s consent and other rule violations.  This was a first-ever enforcement action under the good faith rules initiated by the FCC’s Media Bureau undertaken on its own accord.  It is consistent with Chairman Wheeler’s recent blog indicating that the FCC would act on its own accord to investigate potential good faith abuses and take enforcement action when a party fails to fulfill its statutory obligations.

Under the terms of the Consent Decree, Sinclair will adopt a three-year compliance plan that requires Sinclair to engage independent outside counsel and to consult with that counsel prior to proposing any non-industry-standard, non-price term in retransmission consent negotiations, report any non-compliance to the FCC, and make a $9,495,000 settlement payment to the U.S. Treasury.

Retransmission Consent Good Faith Investigation

Background.  Section 325 of the Communications Act and FCC regulations require broadcast television stations and MVPDs to negotiate in good faith for consent to retransmit commercial television broadcast signals.  In 2014, the FCC prohibited top four-rated television broadcast stations licensed in the same Designated Market Area (“DMA”) and not commonly owned, operated or controlled, from jointly negotiating retransmission consent agreements with a multichannel video programming distributor (“MVPD”).  Later that year in STELAR, Congress amended Section 325 to direct the FCC to establish regulations that prohibit a broadcaster from negotiating retransmission consent on a joint basis with another television broadcast station in the same local market unless the stations are under common de jure control permitted under FCC rules.  In February 2015, the FCC adopted a rule establishing that it would be a per se breach of a broadcaster’s good faith negotiation obligation to negotiate jointly for retransmission consent in these situations.

Investigation.  In the course of the Investigation, the Media Bureau found that Sinclair negotiated retransmission consent on behalf of (or coordinated negotiations with) 36 stations that it did not own between April 2, 2015 and November 30, 2015.  More specifically, the Bureau found that Sinclair negotiated retransmission consent for non-commonly owned stations through joint service agreements, local marketing agreements (“LMAs”) or shared services agreements and at least one Sinclair station in the same market.  Six different MVPDs were affected, and in some instances Sinclair represented a non-commonly owned station in negotiations with several MVPDs. 

Licensing Investigation

Background.  Section 310(d) of the Communications Act prohibits any transfer of control of a FCC license (whether de jure or de facto) without prior FCC consent.  FCC rules also permit common ownership of two full-power television stations licensed to communities in the same DMA only under specific circumstances.  Specifically, the Grade B contours may not overlap, unless, at the time the application to acquire the station(s) is filed: (i) at least one of the two stations is not ranked among the top four stations in the DMA; and (ii) at least eight independently owned and operating, full-power commercial and noncommercial television stations would remain in the DMA after the transaction.  The FCC uses the digital NLSC to approximate the same probability of service as the analog Grade B contour.

 Investigation.  The Media Bureau’s investigation determined that Sinclair’s acquisition of Allbritton Communications and LMA between WMMP and WTAT, both Charleston, South Carolina stations, violated the FCC’s local television ownership rules.  The Bureau and Sinclair entered into this Consent Decree even though the LMA is no longer in effect. 

Consent Decree.  By entering into the Consent Decree, Sinclair made no admission of liability.  To settle the investigation and complaints, Sinclair is required to designate a compliance officer, implement a compliance plan within 60 days, and file compliance reports with the FCC for a period of three years.  Sinclair will also make a $9,495,000 settlement payment to the U.S. Treasury.

If you have questions about the FCC’s good faith rules, or retransmission consent negotiations in general, please contact Barbara Esbin at besbin@cinnamonmueller.com or (202) 872-6811, or Scott Friedman at sfriedman@cinnamonmueller.com or (312) 372-3930, or Bruce Beard at bbeard@cinnamonmueller.com or (314) 394-1535. 

FCC Admonishes Momentum Telecom for Failing to Timely and Fully Contribute to the USF

On July 5, 2016, the FCC’s Enforcement Bureau released an Admonishment Order citing Momentum Telecom, Inc.(“Momentum”) for failing to timely and fully contribute to the Universal Service Fund (“USF”) for over 12 months and warning of possible substantial monetary forfeitures for future violations. 

Background.  The Communications Act and FCC rules mandate that all entities that provide interstate telecommunications providers to the public for a fee must contribute to the universal service support mechanisms.  Moreover, FCC rules require that these entities determine their contribution based upon its end-user telecommunications revenues.

On January 23, 2013, the Universal Service Administrative Company (“USAC”) referred Momentum to the Enforcement Bureau, alleging that Momentum failed to respond to requests for documents and information over a six-month period regarding potential violations of the Communications Act and FCC rules.  The Bureau initiated a broader investigation and issued a Letter of Inquiry (“LOI”) to Momentum on April 3, 2015 to collect information to determine which, if any, enforcement alternatives were appropriate.   Momentum complied with the investigation and responded to the LOI throughout the course of the following months.

Investigation.  The Enforcement Bureau found that Momentum’s records demonstrated that Momentum failed to timely and fully contribute to the USF beginning in September 2013 and did not fully correct its delinquency until October 2015, even though it owed only a de minimis amount as of July 20, 2015.  The Bureau also found that Momentum habitually paid late its share of contributions to USAC.  Between August 2014 and July 2015, Momentum owed more than $100,000 in past-due contributions. 

Though Momentum made payments of more than $1.5 million between September 2013 and October 2015, it continued to be in arrears and thus was not fully compliant. 

Momentum argued that its debts did not indicate willful, long-term avoidance of payment obligations and that the $100,000 debt was the result of a single missed invoice.  Momentum also highlighted that the FCC never placed it on “red light” status which would have withheld action on its applications to the FCC, nor were its debts referred to Treasury for collection. 

Admonishment Order.  The Bureau found that due to the magnitude of the debts and the duration of the delinquency, Momentum merited an admonishment.  The Bureau further found that long-term failures to timely and fully contribute to the USF gives delinquent contributors an economic advantage relative to competitors who timely and fully make USF contributions.

The Bureau took issued an admonishment rather than a forfeiture because the statute of limitations for all but a de minimis amount of delinquent USF debt had expired.  In this case, FCC rules prohibited forfeiture action where the violation occurred more than one year prior to the date on which the FCC issued the appropriate notice.  Had the Bureau been able to impose monetary damages for Momentum’s July 1, 2015 debt of $107,555.25, it would have resulted in a $322,665.75 base forfeiture. 

The Bureau admonished Momentum for its failure to timely and fully contribute to the USF for over 12 months and expressed its expectation that Momentum will conform its conduct to comply with the requirements in the future.  It cautioned that failure to do so may subject Momentum to substantial monetary forfeitures. 

This action is yet another signal that the FCC will vigorously enforce its rules and seek enforcement action against non-compliant licensees.  As this Order demonstrates, even a relatively small amount of unpaid debt puts a telecommunications entity at risk for admonishment and monetary forfeiture.  

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