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Picture a world where each episode of Sesame Street is brought to you by a letter, a number and a candidate for public office.  

Thanks to a recent appellate court decision, some spending on campaign advertising soon may be directed to an unexpected source: noncommercial broadcasters, such as public radio and TV stations.  In addition, a recent FCC decision has paved the way toward requiring these broadcasters to post online their local public file information about such advertising.  Unless the decisions are significantly modified or stricken, expect these rules to resonate through a political process that relies heavily on broadcast advertising.

A three-judge panel of the U.S. Court of Appeals for the 9th Circuit decided 2-1 to strike federal laws banning the airing of public issue and political advertisements on noncommercial broadcasting stations.  The statute in question, 47 U.S.C. Section 399b, prohibits noncommercial educational stations from broadcasting any of the following: 1) advertisements for goods and services on behalf of for-profit entities, 2) advertisements regarding "issues of public importance" and 3) political advertisements.  The decision invalidates the ban with respect to the last two categories, but not the first. Accordingly, advertisements for goods and services on behalf of for-profit entities remain impermissible.

The appellant, Minority Television Project, Inc. is a noncommercial broadcaster. The FCC had fined MTP $10,000 for "willfully and repeatedly" violating Section 399b by airing paid promotional messages from for-profit companies.  MTP alleged that it had declined to broadcast public issue and political advertisements out of concern of potential FCC fines and forfeitures arising from Section 399b. 

MTP argued that Section 399b violated the First Amendment because the "restriction on advertising was not narrowly tailored to the government's interest in preserving the educational programs on public broadcast stations."  The government countered that the restrictions on advertising were necessary to "preserve the educational nature of public interest broadcasting." Specifically, the government argued that making public stations dependent on advertising would result in stations replacing "their niche educational programs with more popular programs which have greater mass-market appeal, thus endangering the broadcast of the educational programs for which public broadcast stations exist."  

The court considered whether the government’s “broccoli is good for you” rationale passed constitutional muster. The panel rejected MTP’s call to hold the government to the “strict scrutiny” standard of First Amendment justification that applies to other media. Instead, the panel applied the "intermediate scrutiny" standard, and the government was required to prove that Section 399b was “narrowly tailored to further a substantial government interest.” The opinion noted that in a pending case before the U.S. Supreme Court, major broadcasters have challenged the continued application of “intermediate scrutiny” analysis to broadcast speech. The response: “just as golfers must play the ball as it lies, so too we must apply the law of broadcast regulation as it stands today.” According to the panel, the government’s case failed intermediate scrutiny with respect to the bans on issues of public importance and the bans on political advertisements.

Many questions remain as a result of the ruling:

Will noncommercial broadcasters begin accepting political announcements?  Even if a noncommercial station decides to begin accepting political announcements, there are legal risks.  First, the ruling is not yet final because it is subject to further judicial proceedings.  The FCC has a limited period to seek rehearing of the panel's decision. Often, but not always, the full appellate court affirms the decision of a three-judge panel of the same court. The U.S. Supreme Court case may also affect the timing of a decision on rehearing, particularly in the event of a change in the applicable legal standards (such as intermediate scrutiny) upon which the 9th Circuit panel relied.   Also, the ruling applies only to states in the 9th Circuit: Alaska, Arizona, California, Hawaii, Idaho, Montana, Nevada, Oregon and Washington. Noncommercial broadcasters in other states may find that courts in their jurisdictions would determine that they are not bound by the 9th Circuit’s decision.

Will Congress react to the court ruling and change the law? In effect, the panel invited Congress to revisit the law and to provide more evidence to demonstrate that the law is constitutional.  It seems unlikely that Congress would enact such legislation in an election year, assuming that a change in the law is a legislative priority.  Moreover, Congress likely would not intervene while the judicial process is ongoing.

How would the decision impact other rules? The ruling does not address other laws that relate to candidate appearances and advertising on broadcast stations.  For example, federal candidates have statutory rights of “reasonable access” to commercial broadcast stations, but noncommercial broadcast stations are exempt from this statute.  Stations that choose to accept an advertisement from a candidate for any public office are required to give "equal opportunities" to other candidates for the same office, and, unlike the case of the “reasonable access” rules, noncommercial stations have no statutory exemption.  A commercial broadcaster is obligated to provide a candidate the “lowest unit charge” of the station for the same class and amount of time for a given period prior to an election or primary.  If the ruling stands, the FCC would have to adopt rule changes to clarify how these rules would apply to noncommercial stations, which rely on public contributions, underwriting and similar sources of funds for station operations. 

Also noteworthy: last Friday, the FCC adopted new rules requiring broadcasters to post portions of their local public inspection file online.  Some of these requirements will apply to noncommercial television broadcasters effective July 1, 2014, including a requirement to place “any new political file material” on the Commission’s website.  At present, the new rules would not apply to noncommercial radio stations. While the FCC’s new rules don’t explicitly reference the MTP case, they ultimately may expand the scope of the materials that must be kept in the file and made available to the public.

If it’s true that “all politics is local,” then by extension local broadcast stations play an important role in the political process.  As the 2012 election year revs into high gear, many expect significant increases in political ad spending for the broadcast airwaves.

For many noncommercial broadcasters, it’s not easy being “green” or, in this economy, “nonprofit.” Many noncommercial stations may find that their local viewers are valuable targets for political advertisements. In light of funding challenges for such stations and the potential for new revenue sources, these recent legal developments may result in dramatic changes to the political landscape.

The Federal Communications Commission recently released its Report and Order adopting rules by which interconnected VoIP providers must report service outages. In a reversal of what the FCC had proposed in its Notice of Proposed Rulemaking, the FCC declined to impose similar obligations on broadband providers, determining that the issue "deserves further study." The new rules will be effective 90 days following Office of Management and Budget approval of the information collection procedures, a date that the FCC will announce by public notice. 

Here is a brief summary of the outage reporting rules that will apply to interconnected VoIP providers:

Facilities-based and non-facilities-based interconnected VoIP providers are subject to new reporting obligations. In contrast to the more onerous rules initially proposed by the FCC, providers will only need to report significant outages where customers lose service or connectivity, and are therefore unable to access 9-1-1 services. The FCC reasoned that interconnected VoIP providers have the ability to monitor VoIP-enabled end-user devices to determine whether connectivity is lost. The FCC does not expect that interconnected VoIP providers will need to purchase any equipment or software in order to comply with the new reporting rules.

The definition of "outage" will be the same definition that is in Part 4 of the FCC's rules: "a significant degradation in the ability of an end user to establish and maintain a channel of communications as a result of a failure or degradation in the performance of a communications provider's network." A "significant degradation" is one that results in "the complete loss of service or connectivity to customers."

When Outage Reports will be Required:

• An interconnected VoIP provider will be required to electronically notify the FCC within 24 hours of an "outage" it has experienced, on any facilities it owns, operates, leases or otherwise utilizes that is at least 30 minutes long and potentially affects (1) at least 900,000 user minutes of service and results in a complete loss of service, and (2) any special offices and facilities. Examples triggering this notification include a complete loss of an access router and a loss of all facilities connecting the access router to the backbone.
• An interconnected VoIP provider also will be required to file an electronic report within 240 minutes of discovering it has experienced on any facilities it owns, operates, leases or otherwise utilizes an outage of at least 30 minutes that potentially affects a 9-1-1 special facility. In addition, for this second category, the interconnected VoIP provider must contact by telephone of other means the point of contact for the 9-1-1 special facility, and shall convey information that might be useful to managing the affected facility in mitigating the effects of the outage on efforts to communicate with that facility. Examples would include loss of all facilities connecting a router to the Public Safety Answering Point (“PSAP”) and the complete loss of the ability to provide location information for interconnected VoIP calls.

Outage reports will be filed electronically using the FCC's Network Outage Reporting System (NORS). In addition to the initial reports, interconnected VoIP providers also must file a final report within 30 days after discovering the outage. The NORS system uses an encrypted technology to ensure the security of the reported information. The information reported will be "presumptively confidential."

In adopting the rules, the FCC emphasized the "public's increased reliance" on interconnected VoIP services and the critical needs of communications infrastructure for public safety goals. The new rules are merely the latest in a series of FCC actions to apply traditional telephone service regulations to Interconnected VoIP providers.  

Last week the Federal Communications Commission fined a radio broadcaster $44,000 for violating the Commission’s sponsorship identification rules. Even more of an attention getter than the amount of the fine is the way FCC determined the fine -- by fining the broadcaster for each violation. 

In response to an FCC inquiry, the broadcaster stated that between March 2009 and May 2009, it aired program matter on behalf of Workers Independent News (“WIN”) in exchange for consideration.   The program matter consisted of 45 ninety-second spots, 27 fifteen-second promotional announcements, 2 two-hour programs and 1 one-hour program.  The broadcaster claimed that the appropriate sponsorship identifications were made for 34 of the 45 ninety-second spots.  The broadcaster stated that these 11 spots referenced WIN and the narrator but did not specifically state that the program was sponsored, paid for or furnished by WIN.  The announcements were directed toward a state legislative issue impacting the local economy.

The broadcaster argued that it had satisfied the sponsorship identification requirements by 1) identifying the sponsor by name in each announcement and 2) including each announcement within the other commercial matter for WIN, not within the station’s news content.  The FCC rejected each argument.  The FCC reminded the broadcaster that the purpose of the sponsorship identification rule is to provide listeners and viewers with information concerning who is attempting to persuade them.  The FCC determined that the mere mention of WIN did not provide sufficient information to the listener.  The FCC determined that Section 73.1212(f) of the Commission’s Rules, which considers mentioning the sponsor’s corporate or trade name during commercial matters as acceptable sponsorship identification, did not apply in this instance.

The FCC similarly rejected the broadcaster’s argument that the announcements were included within other commercial matter and not within the station’s news programming.  The FCC concluded that because the 11 announcements focused on a state legislative issue impacting the local economy, it would not be apparent to the listeners that the announcements were indeed sponsored programming, even if commercial programming surrounded the announcements.

The FCC’s analysis and determination is not surprising, but the way the FCC arrived at the $44,000 fine is.  The FCC relied upon its forfeiture guidelines, which establish a base forfeiture amount of $4,000 for each sponsorship identification violation.  The FCC multiplied this amount by the 11 announcements to arrive at the $44,000 fine, thereby treating each announcement as a separate violation.  While the FCC has discretion here, the fine seems somewhat excessive given that the broadcaster complied with the sponsorship identification requirements for the program length material and for an overwhelming majority of the announcements.  The FCC should have taken this into consideration and imposed a lesser fine.  This could represent a shift in how the FCC determines forfeitures in the future.  Regardless, this decision should serve as a wake up for broadcasters of the importance of complying with the Commission’s rules.

The message from the Commission is clear and unmistakable.   The agency will fine broadcasters for each violation regardless of mitigating circumstances.  Substantial or good faith compliance will not be enough.  Broadcasters should review their procedures for broadcasting commercial matter both to determine compliance with the sponsorship identification rules and to make sure that no commercial matter slips through which inadvertently does not include the requisite sponsorship identification.

If there was one surprise in this week’s oral argument at the U.S. Supreme Court about FCC regulation of broadcast indecency, it was the nudity in the courtroom. 

The Court is considering the Federal Communications Commission’s authority to regulate nudity and “fleeting expletives” on the broadcast airwaves in Federal Communications Commission, et al. v. Fox Television Stations, Inc. et al. The case involves the FCC’s appeal of two court decisions – one involving the Fox network and one involving the ABC network – that struck down the FCC’s “broadcast indecency” policies.  At issue is whether these FCC decisions violated the First and/or Fifth Amendments to the U.S. Constitution and whether the Court will reshape the FCC’s authority to enforce indecency standards for the broadcast airwaves.

Nudity, “Fleeting Expletives” and the Constitution

The consolidated appeal involves network broadcasts containing instances of the “F-Word” (used by Cher during a 2002 awards show on the Fox network and by Nicole Richie during a 2003 awards show on the same network), the “S-Word” (also used by Richie in the same show) and a bare backside (which appeared for fewer than seven seconds in a 2003 episode of ABC’s “NYPD Blue”).  The broadcasts aired outside the FCC’s “safe harbor” hours of 10 p.m. to 6 a.m., and in each instance, the FCC found the broadcasts to be actionably indecent, which the FCC defines as “language or material that, in context, depicts or describes, in terms patently offensive as measured by contemporary community standards for the broadcast medium, sexual or excretory organs or activities.” The U.S. Court of Appeals for the 2nd Circuit eventually overturned these two determinations in separate appeals. 

• Fox Television Stations, Inc.  In the case of the two live awards show broadcasts, the FCC found the broadcasts to be indecent based on changes that the FCC made in January 2003 to its “fleeting expletives” policy. The FCC declined to issue a sanction, however, because the broadcasts occurred prior to this policy change. In 2007, the U.S. Court of Appeals for the 2nd Circuit found that the FCC’s policy was arbitrary and capricious under the Administrative Procedure Act (“APA”).  In 2009, the U.S. Supreme Court reversed and remanded the 2nd Circuit’s decision on APA grounds without reaching the constitutional questions. On remand, the 2nd Circuit in July 2010 struck the FCC’s orders on constitutional grounds, finding the FCC’s policy to be impermissibly and unconstitutionally vague.   

• ABC, Inc. In the case of the NYPD Blue episode, the FCC imposed an indecency forfeiture of $27,500 against several ABC network-owned stations and affiliates, finding that the view of a woman’s unclothed buttocks was “sufficiently graphic and explicit to support an indecency finding,” that the shots were “repeated” and that the scene was “pandering, titillating, and shocking.” In the ABC case, the 2nd Circuit, in reliance on its 2010 decision in the Fox case, tossed the FCC’s fine against the ABC stations (both network and affiliates).        

The Supreme Court has consolidated the FCC’s appeals of these two decisions by the 2nd Circuit.  The case brings new attention to the Court’s landmark broadcast indecency decision in 1978’s FCC v. Pacifica Foundation. There, the Court found that the FCC did not violate the First Amendment when it applied its definition of indecency to a broadcast of George Carlin’s famous “filthy words” monologue.  In upholding the FCC’s authority, the Court noted 1) the “uniquely pervasive presence” of the broadcast media, 2) that airwaves are available in the privacy of the home, 3) that broadcasting is “uniquely accessible” to children and 4) in the government’s interest “in the ‘well being of its youth’ and in supporting ‘parents’ claim to authority in their own household.”  Here, the Court has been asked to overrule Pacifica, and as expected, the oral argument dealt extensively with this precedent. 

Takeaways from the Oral Argument

• While it is problematic to read too much into questions that the Justices ask at oral argument, the Justices clearly struggled with the implications of the FCC’s broadcast indecency enforcement.  Justice Sotomayor, who formerly served as a Judge for the 2nd Circuit, is not participating in the case.  As a result, any 4-4 decision would allow the 2nd Circuit’s decision to stand.  In addition, this consolidated appeal involves two related cases involving different parties as well as different aspects of the FCC’s policy (i.e., nudity vs. “fleeting expletives”); accordingly, the Court may decide to treat these categories differently with separate rulings.

• Much of the oral argument focused on differences in content between broadcast channels and cable channels and on the pervasiveness of broadcasting compared to other forms of media. Broadcasters have asserted that Pacifica should be overturned because of the changes in the media landscape since 1978, among other reasons.  For example, Carter Phillips, counsel for Fox, asked “how is it permissible to allow the FCC to regulate the broadcast networks on standards that are fundamentally different than cable, the internet and every other medium that exists?” Justice Alito voiced his opinion that “broadcast TV is living on borrowed time. It is not going to be long before it goes the way of vinyl records and 8 track tapes.” 

• While the facts before the Court involve television broadcasts, the Solicitor General, representing the FCC, argued that overturning Pacifica would “sweep away indecency restriction with respect to radio as well as television” and that “a lot of the most vile and lewd material really is in radio.”  Justice Breyer asked whether the “First Amendment forbids the application of a good guideline to this case” and referred to the potential reversal of Pacifica as “earthshaking.”

• While some Justices appeared to have little appetite to overturn Pacifica, several Justices questioned the FCC’s handling of specific situations. For example, Justice Kagan said “the way that this policy seems to work, it’s like nobody can use dirty words or nudity except for Steven Spielberg.” Her comment refers to the FCC’s findings in other cases that the films “Saving Private Ryan” and “Schindler’s List,” both directed by Steven Spielberg, were not indecent. 

• Chief Justice Roberts said that “[a]ll we are asking for, what the government is asking for, is a few channels where you can say I’m not going to – they are not going to hear the S word, the F word. They are not going to see nudity.” Justices Kennedy and Scalia considered whether to hold broadcast media to a different standard in an effort to preserve a “safe haven.”  Justices Kennedy and Scalia cited the “symbolic value” of allowing the government to use public airwaves to “insist upon a certain modicum of decency.”  It is noteworthy that Scalia wrote the opinion in the recent Brown v. Entertainment Merchants Association case, where the Court found that video games qualify for First Amendment protection. There, Justice Scalia wrote that “Crudely violent video games, tawdry TV shows, and cheap novels and magazines are no less forms of speech than The Divine Comedy, and restrictions upon them must survive strict scrutiny.” 

• There was extensive discussion about the role of advertisers in encouraging broadcasters and cable programmers to limit the use of material that falls within the FCC’s indecency definition. Counsel also discussed whether and how broadcast standards and practices would be affected if Pacifica was overruled or limited.  

• Counsel for Fox disputed the suggestion by Justice Kagan that the current system “seems to work.” He argued that the “whole system has come to a screeching halt because of the difficulty in trying to resolve these issues.” He referred to the hold up of many TV license renewals at the FCC, an issue we’ve blogged about previously.  

• The FCC’s actions and its indecency policy were challenged as unconstitutionally vague under the Fifth Amendment on the grounds of a lack of fair notice of what was prohibited and of arbitrary and discriminatory enforcement. Some Justices questioned the FCC’s approach.  Justice Ginsburg referenced the “appearance of arbitrariness about how the FCC is defining indecency in concrete situations.” The Solicitor General conceded that “there is not perfect clarity in this rule” but that “the alternative [for example, bright-line proscriptions against certain words or nudity] … would be worse.”  He also argued that “there isn’t really a vagueness issue left with respect to the fleeting expletives in the Fox case, because the Court said [in 2009] that there is no problem of arbitrary punishment because there was no forfeiture or other sanction.” By contrast, the FCC fined ABC for the “NYPD Blue” broadcast, and the Solicitor General agreed that the vagueness issue remained in play for that broadcast. 

• As for the nudity in the courtroom?  The Justices asked about permissible displays of nudity on broadcast television – for example, whether broadcasters could air the musical “Hair,” the opera “Metropolis” or other programs without running afoul of the indecency regulations. Seth Waxman, counsel to ABC, pointed out that the FCC has pending complaints “about the opening episode of the last Olympics, which included a statue very much like some of the statues that are here in this courtroom, that had bare breasts and buttocks.” Time will tell whether these courtroom displays will sway any of the Justices. 

The Court is expected to rule on this case during its current term, which ends in June.

Earlier today, the FCC voted to adopt rules to reform the Universal Service Fund and Intercarrier Compensation systems and to create a "Connect America Fund" designed to extend broadband infrastructure to unserved areas.  In the video below, I discuss today's vote and what it means for broadband deployment.