By Richard R. Zaragoza

The Office of Management and Budget is currently considering whether to approve a revised version of FCC Form 303-S, the “Application For Renewal of Broadcast Station License” that all commercial and noncommercial full-power radio and television stations will be required to use when they file for their next renewal of license. The FCC has made several modifications to the prior version of the form.

One of the modifications is a new renewal certification which will constitute a material representation to a government agency. For that reason, every renewal applicant will want to be doubly sure that it has a reasonable, good faith basis for responding to the certification with an unqualified “Yes” and adequate documentation to support such response. Specifically, the revised renewal form seeks a “Yes” or “No” response to the new certification that the licensee’s “advertising sales agreements do not discriminate on the basis of race or ethnicity and that all such agreements held by the licensee contain nondiscrimination clauses.” According to the FCC, this new certification is needed to combat “no urban/no Spanish dictates” that have turned up in some broadcast advertising arrangements. The FCC believes that those “dictates” discriminate against broadcast stations which target African American and Hispanic audiences and the businesses they support.

When it adopted the “nondiscrimination clause” requirement, the FCC chose not to provide specific, or even illustrative, language to be included in advertising contracts. Such language would have given applicants a better idea of what the FCC actually believes qualifies as an adequate “nondiscrimination clause.” As a result, licensees have been left to rely upon their own interpretations of what constitutes compliance.

One question of interpretation relates to the scope of the nondiscrimination clause: is it adequate if only two types of prohibited discrimination are identified, namely race and ethnicity, or must the clause include all other types of discrimination prohibited under federal, state and local law? We know that the rule making from which the nondiscrimination clause arose focused only on “no urban/no Spanish dictates,” and that the FCC’s later issued “Erratum” substituted “ethnicity” for “gender” without retaining “gender.” From this it can be argued that the FCC did not intend to require stations to include in their nondiscrimination clauses other forms of discrimination prohibited by federal, state and local authorities, although stations are free to include them.

Additional interpretation is required to answer this question: is the nondiscrimination clause sufficient if each sales contract in effect proclaims (i) that no advertiser may use the station to discriminate on the basis of race or ethnicity and (ii) that any contract entered into with an advertiser whose intent is to use the station to unlawfully discriminate shall be null and void? Or must the nondiscrimination clause also include from the advertiser some type of certification or representation to the station disclaiming any intent to discriminate on the grounds of race or ethnicity? It is my experience that the approaches used by stations vary considerably. That fact may suggest that there are a number of interpretations that may be regarded as reasonable.

The third instance requiring interpretation relates to those stations that do not use formal sales contracts: how are they expected to comply with the nondiscrimination clause requirement? The answer to this question will turn on how flexible the FCC intends to be. We know that noncommercial educational stations filing their license renewal applications will not be asked to respond to this particular certification because such stations do not “sell” time, although they do enter into on-air and production relationships with their underwriters. Certainly a starting point for commercial stations that do not use formal sales contracts is to ensure they can adequately demonstrate to the FCC that their advertising sales arrangements with third parties in fact alert such parties to the station’s nondiscrimination policy and do not discriminate on the basis of race or ethnicity, e.g., website postings, standard email disclaimers, invoice/statement disclaimers.

The three questions posed above are not intended to deal with all of the issues raised by the new renewal certification. My observation is that if the FCC had been more clear when it adopted the nondiscrimination clause requirement, licensees would be able to make a more informed judgment in deciding whether they may responsibly respond to the new certification requirement with an unqualified “Yes,” or whether they will be required to answer “No” with an explanation, understanding that a “No” answer will likely result in the licensee’s application being pulled out of line and deferred for further scrutiny. Stations should consult with communications counsel now to assess whether, based on current practices, they will have a reasonable basis to respond “Yes” to the new renewal certification when it comes time to file their application for renewal of license.

After five years of rulemakings, the FCC is shortly expected to announce new technical standards for the “next generation” of the Emergency Alert System.  EAS will become part of a larger digital public warning network that will include pagers, beepers, cell phones, e-mail, text messages, highway warning signs, and other telecommunications networks that communicate with each other via Common Alerting Protocol (CAP).

The new system means new equipment for your station.  In order for you to be in compliance with revised Part 11 EAS rules, you will need a new Sage Endec (or similar device from another manufacturer) within 180 days of the FCC’s announcement.

You may recall that in 1994, NHAB committed $20,000 towards the bulk purchase of EAS equipment for member stations.  This subsidy substantially reduced the cost of the equipment for each station.  In order for NHAB to decide whether to take a similar action now, we need to survey members on their EAS plans.

Please go to http://www.surveymonkey.com/s/FV8LVZK and complete the brief questionnaire by Friday, September 24^th.  We need to determine how many boxes our members will need so we can consider whether or not to negotiate a group purchase of hardware.

Thank you very much!

Respectfully,

Jordan Walton, Executive Director

Ed Brouder, State EAS Chairman

From Pillsburylaw.com

Client Alert—Reminder—All Commercial Television and Radio Stations Must File Their Biennial Ownership Reports by July 8, 2010. FCC Announces Waiver Procedures for Recently Sold Stations, and a Last Minute Effort Is Underway to Have the FCC’s New Biennial Ownership Report Form Declared Unlawful.
Authors: Scott R. Flick, Paul A. Cicelski

As we wrote in an April 8, 2010 Client Alert, the FCC revised its Ownership Report form for commercial stations, Form 323, and announced that the deadline for all commercial broadcasters to file the new Form 323 is July 8, 2010. The FCC also expanded the types of entities and licensees required to file Form 323, and announced that owners of all commercial AM, FM, TV, LPTV and Class A TV stations would need to file the new form.

While you should proceed on the assumption that the July 8, 2010 date will hold, we note that yesterday the FCC filed an Opposition to a Petition filed by a group of broadcasters who have asked the United States Court of Appeals for the District of Columbia Circuit to prohibit the FCC from implementing the revised Form 323. Specifically, the broadcasters’ Petition asserts, among other things, that in imposing the new requirement that all “attributable” principals provide their Social Security Numbers to obtain a Federal Registration Number (FRN) to complete the new Form 323, the FCC violated the Administrative Procedure Act and the Privacy Act. In its Opposition, the FCC responds that it has complied with these statutes. The FCC also argues that the broadcasters’ claims are now moot because filers are not actually required to use Social Security Numbers, and can instead use a “Special Use FRN” if they do not “have [a person’s] permission to use a Social Security Number.” The court has not yet ruled on the matter and we will issue a subsequent alert if an order from the court alters the July 8, 2010 filing deadline.

Remember also that while the filing deadline is July 8, 2010, the information required to be listed on the form must reflect ownership interests as they existed on November 1, 2009. In addition, the FCC issued a Public Notice yesterday providing clarification regarding biennial ownership report filings for stations that have been or are being assigned/transferred after the November 1, 2009 reporting date. According to the Public Notice, for stations assigned/transferred between November 1, 2009 and June 23, 2010, andstations for which an assignment/transfer application was approved by the FCC between November 1, 2009 and June 23, 2010 but which has not yet been consummated, the FCC will accept written requests for waiver of the biennial Form 323 ownership filing requirement. The waiver requests must include a statement that “the assignee/transferee will be the licensee of record as of July 8 and will be unable to file the Form 323 because it either does not have and cannot obtain the required information from the prior owner or cannot certify to the accuracy of the information because it lacks the necessary information to support such a certification.”

For currently pending assignment/transfer applications and any assignment/transfer applications filed between June 23, 2010 and July 8, 2010, the Public Notice states that the FCC will require the seller to file ownership reports on or before the July 8, 2010 filing deadline as a condition of grant of those pending applications. Specifically, the assignor/transferor must file the new Form 323 either: (i) on or before consummation of the assignment/transfer or (ii) by July 8, 2010, whichever is earlier. Additional information regarding how to complete the new Form 323 can be found at the FCC Media Bureau website, http://www.fcc.gov/form323, which includes a “Frequently Asked Questions” section.

Authors: Christine Nicolaides Kearns, Karen-Faye McTavish, Kristen E. Baker Pillsbury Winthrop Shaw Pittman

6/21/2010

In an economic environment where students are often willing, and, in fact eager, to intern for for-profit companies for the experience alone, many companies are, for good reason, interested in considering this option. It is important, however, to proceed with extreme caution.

Following press reports that the U.S. Department of Labor (“DOL”) planned to step up enforcement against for-profit businesses that illegally use unpaid interns,¹ the Department’s Wage and Hour Division recently offered guidance in the form of an April 2010 fact sheet to employers on maintaining a compliant internship program.

In general, the DOL utilizes a six-factor test for determining whether an individual may be classified as a “trainee” or intern who is not covered by the Fair Labor Standards Act (“FLSA”),² the federal law establishing the minimum wage for work performed by “employees.” Please note that the wage laws of the particular state in which an individual will be working must also be carefully consulted prior to classifying an individual as a trainee or intern for wage payment purposes. It its recent guidance, the DOL explains that “[i]internships in the “for-profit” private sector will most often be viewed as employment,” unless all six of the following DOL “trainee” test criteria are met:

1. The internship, even though it includes actual operation of the facilities of the employer, is similar to training which would be given in an educational environment;
2. The internship experience is for the benefit of the intern;
3. The intern does not displace regular employees, but works under close supervision of existing staff;
4. The employer that provides the training derives no immediate advantage from the activities of the intern; and on occasion its operations may actually be impeded;
5. The intern is not necessarily entitled to a job at the conclusion of the internship; and
6. The employer and the intern understand that the intern is not entitled to wages for the time spent in the internship.

Additionally, the new fact sheet provides greater guidance on several factors of the “trainee” test. Although it does not explicitly address the fourth criterion—the most problematic of the six—its discussion of the first and second criteria shed light on what the DOL considers to be a benefit or advantage to the employer:

“The more the internship provides the individual with skills that can be used in multiple employment settings, as opposed to skills particular to one employer’s operation, the more likely the intern would be viewed as receiving training. Under these circumstances the intern does not perform the routine work of the business on a regular and recurring basis, and the business is not dependent upon the work of the intern. On the other hand, if the interns are engaged in the operations of the employer or are performing productive work (for example, filing, performing other clerical work, or assisting customers), then the fact that they may be receiving some benefits in the form of a new skill or improved work habits will not exclude them from the FLSA’s minimum wage and overtime requirements because the employer benefits from the interns’ work.”

The fact sheet also emphasizes the importance of structuring the internship around a classroom or academic setting, such that “the internship [is] viewed as an extension of the individual’s educational experience (this often occurs where a college or university exercises oversight over the internship program and provides educational credit).”

Finally, the fact sheet warns that if an employer uses interns as “substitutes” for its regular employees or to “augment” its existing workforce, such interns should be paid. In other words, if the employer would have hired additional individuals or required existing staff to work additional hours had the intern not been there, then the intern should be considered an employee under the FLSA. The fact sheet explains, “[c]onversely, if the employer is providing job shadowing opportunities that allow an intern to learn certain functions under the close and constant supervision of regular employees, but the intern performs no or minimal work, the activity is more likely to be viewed as a bona fide education experience.”

It should be noted that the implications of classifying an individual as a “trainee” or intern, rather than an “employee,” extend beyond the wage and hour laws. Because “trainees” or interns are not considered “employees” of a business, they are also not protected under workplace discrimination and harassment statutes, such as the Civil Rights Act and the Americans with Disability Act.³

Accordingly, in states that do not have wage laws that apply that are more stringent than the FLSA requirement, we generally suggest that clients take the following steps with respect to unpaid internships⁴:

• Provide a written offer letter to the student intern, stating that (a) the internship is unpaid; and (b) that a job is not guaranteed upon completion of the training or completion of the person’s schooling. And act accordingly. The DOL has warned that “even when such an agreement [that internship is unpaid and intern is not entitled to a job at the conclusion of it] exists, hiring workers who finish the training program is considered in determining whether an employment relationship exists, and frequently hiring such workers suggests that the workers are not trainees.”⁵
• When publicizing the internship, state that applicants who will receive college credit are preferred. If college credit is not available, seek to receive written documentation from the student intern’s school stating that the internship is approved and/or sponsored by the school as educationally relevant.
• Create a formal internship program with scheduled start and end dates. As part of the formal program, schedule presentations in which leaders from different parts of the company speak to student interns about their job duties, implement a mentoring program, and offer generous instruction and constructive feedback on student interns’ work product.
• Emphasize and put into practice the training and close supervisory characteristics of the internship program. Expend company resources to provide adequate training to the intern on general practices, so the intern will be well-equipped to use his or her skills in multiple employment settings.

1. Steven Greenhouse, The Unpaid Intern, Legal or Not, NY TIMES, April 2, 2010.
2. Please note that the DOL’s six-factor test only applies to internships at for-profit, private-sector businesses. The DOL has held: “[i]ndividuals who volunteer or donate their services, usually on a part-time basis, for public service, religious, or humanitarian objectives, not as employees and without contemplation of pay, are not considered employees of the religious, charitable, and similar not-for-profit organizations which receive their services.” DOL Opinion Letter, 1998 DOLWH LEXIS 83 (September 28, 1998).
3. See, e.g., Kathryn Anne Edwards, Alexander Hertel-Fernandez, Not-so-Equal Protection, Reforming the Regulation of Student Internships, ECONOMIC POLICY INSTITUTE POLICY MEMORANDUM #160, April 5, 2010, at 1.
4. Some states employ more strict requirements in determining whether an individual may be considered an intern and, thus, be exempt from federal and state wage and hour laws. For example, California’s Division of Labor Standards Enforcement (“DLSE”) has historically required that for an individual to be considered an intern, his or her training “must be an essential part of an established course of an accredited school or of an institution approved by a public agency to provide training for licensure or to qualify for a skilled vocation or profession.” DLSE Enforcement Policies and Interpretations Manual § 46.6.6 (2002). The Division also advises that the internship program not be for the benefit of any one employer and that the train¬ing be supervised by the school or a disinterested agency. Id. In an April 2010 opinion letter, DLSE Acting Chief Counsel David Balter applied the DOL’s six-factor test in determining that an internship program, although not directly administered by a vocational or educational institution, was run in a “sufficiently similar” manner and accordingly, among other reasons, was exempt from the state’s minimum wage law. DLSE OL 2010.04.07. We recommend you consult counsel to find out if your state applies more strict requirements.
5. DOL Training and Employment Guidance Letter No. 12-09, at p. 9 (January 29, 2010).

An Advisory from the law firm of Pillsbury Winthrop Shaw Pittman

by Lauren Lynch Flick and Scott R. Flick

The FCC’s Media Bureau has announced that a new version of the Biennial Ownership Report Form for commercial broadcast stations, FCC Form 323, will be available on its website as of April 9, 2010. All commercial broadcast station owners must file their biennial ownership reports using the new form by July 8, 2010. However, the data used to complete the form must be accurate as of November 1, 2009.

The FCC originally announced its intent to implement a new version of the Form 323 in an Order released in May 2009 as part of its Promoting Diversification in the Broadcasting Services proceeding. The revision required, among other things, that each holder of a direct or indirect attributable interest in a licensee secure an FCC-issued Federal Registration Number (“FRN”). The revision also mandated that information regarding attributable interest holders and their other broadcast interests be reported repeatedly and in a precisely structured manner. As a result, the number of reports and the time to complete each report increased dramatically for many broadcasters with the ultimate result that the FCC’s electronic filing system ground to a near halt and did not reliably save information entered into it. Based on these technical difficulties, the FCC stayed the filing obligation until it could improve the functioning of the form to account for these difficulties.

The FCC sent its revisions to the form to the Office of Management and Budget (“OMB”) for approval on March 25, and OMB approved the modified form on March 26. The revised form uses a new XML Spreadsheet template that will allow information to be entered into the spreadsheet and then uploaded to the form, thereby reducing the time and effort needed to enter the data. The spreadsheet must be downloaded from the FCC form and comes with detailed instructions regarding the proper use of the XML Spreadsheet. Of particular note are the following:

The XML Spreadsheet comes with 25 empty rows for data entry that contain embedded validation codes necessary for the proper functioning of the form. Any licensee needing more than 25 lines must copy and paste the original 25 lines as many times as necessary and not create new lines.

The XML Spreadsheet must be saved with an .xml extension, not the .xls or .xlsx extensions that the Excel program will assign by default. Licensees must not change or delete any data in Cell B1. Information must be entered in all capital letters. The new version of the form also retains the requirement that each attributable interest holder secure an FRN. The instructions state that where, after a good faith effort, a licensee is unable to secure an interest holder’s social security number, which is needed to  complete the FRN registration process, a button on the form will allow the licensee to secure a Special Use FRN. The instructions to the form state that the Special Use FRN can only be used for the Biennial Ownership Report filing, and not for any other filing, such as a post-consummation Ownership Report filing.

The Commission’s May 2009 Order also adopted November 1 as a new uniform reporting date for all commercial stations nationwide, regardless of the station’s license renewal filing anniversary (the deadline previously used by the FCC). Because the original November 1, 2009 filing requirement was stayed while the form was revised, the reports filed by the new July 8, 2010 deadline must still reflect the ownership data as it existed November 1, 2009.

The substantial difference in time between the new filing deadline and the time for which ownership information is being reported leads to some interesting questions. For example, where a station has been sold since November 2009, should the report be filed under the name of the new licensee or the prior licensee? If it is to be filed by the new licensee, how will the FCC deal with the fact that the new licensee may not have any personal knowledge of the prior licensee’s November 2009 ownership structure? These questions may be answered by a follow up public notice from the FCC, but if not, we will be pursuing them with the FCC’s staff.

Advisory from law firm of Pillsbury Winthrop Shaw Pittman:

by John K. Hane, Scott R. Flick, and Paul A. Cicelski

The National Broadband Plan (“NBP”) proposes immediate and sweeping steps that, if adopted, could displace many television broadcasters from their existing spectrum. Specifically, FCC staff proposes a “voluntary” surrender by some television broadcasters of their spectrum as well as repacking of the spectrum to minimize the portion dedicated to television broadcasting. An expected flood of FCC proceedings and possible surprises still to play out are likely to keep television broadcasters playing catch-up. The growth of both broadband and broadcasting are not necessarily incompatible goals if the proper mechanisms are put in place. However, the current version of the NBP places the broadcast industry in a defensive position by assuming that broadband can only grow by displacing television broadcasters.

Introduction

Details of the NBP, released yesterday, have been widely reported. This Alert summarizes the highlights, but focuses on what the NBP means for television broadcasters and what is likely to happen next. A more detailed analysis of the reallocations proposed by the FCC will be discussed in a separate Pillsbury Client Advisory.

Highlights

The NBP proposes a fast-track rulemaking process that will focus on five steps for reducing the spectrum used for television broadcasting. The FCC reportedly will circulate a draft working paper soon, leading to one or more notices of proposed rule making relating to these steps. The proceedings would address:

• Shrinking the service areas of television stations to reduce spectrum usage and facilitate aggressive repacking of broadcast licenses.
• Establishing rules for two stations to share one 6 MHz channel. These rules would apply to both voluntary and forced sharing arrangements.
• Setting rules for an auction of broadcast spectrum by 2012 or 2013, with band clearing by 2015.
• Exploring technical, policy and other options to reclaim broadcast spectrum if service area shrinkage, voluntary give-backs, and repacking do not free up the desired quantity of spectrum for wireless broadband.
• Taking other steps to encourage efficiency of spectrum usage in the television band, including spectrum fees, digital conversion of LPTV stations, and rule changes to  improve television broadcast service in the VHF bands, which will need to accommodate many of the re-packed stations.

The FCC’s Message: The Commission Does Not Need Congressional Authority to

Undertake Wholesale Restructuring and Reduction of the Television Broadcast Service

The Broadband Task Force has previously expressed frustration with broadcasters’ generally cool reception to the prospect of turning in spectrum for a share of auction proceeds. The tone and substance of the NBP reflect the task force’s response to that coolness. In the text and the subtext, the NBP takes the position that the FCC does not need congressional authority to shrink service areas, reduce licenses to less than 6 MHz, force channel sharing, require broadcasters to adopt costly changes to their technical facilities or impose financially damaging spectrum fees.

Whether or not the FCC chooses to attempt these steps and whether or not they are politically viable, the subtext is that the FCC believes it already has the necessary tools at its disposal and may be prepared to use them.

What Happens Next?

Expect to see many rule making proceedings launched and hearings scheduled in the coming weeks and months. The deadlines will be short and the issues will be challenging. It is likely that broadcasters will face pressure from other sources too, both from inside the Administration and from some in Congress. Reallocation proponents have already drafted proposed legislation to advance their cause, and their allies in the House and Senate will circulate and introduce bills to that end. Many members of Congress are skeptical of a broadcast reallocation, particularly given that Congress is currently considering legislation that would require the Federal government, as a threshold matter, to determine what spectrum is currently being used and the efficiency of that usage.

The FCC has created extensive models to analyze various reallocation scenarios. The models have not been made available to broadcasters, but the NBP indicates that summaries of the results will be released at a later date. Those models will reveal the extent of service area reductions and other technical changes that the NBP anticipates. The models will show significant reductions in broadcast spectrum usage in the dozen or so largest markets, but the ripple effects will probably extend to most, if not all, markets nationwide. The models will probably show more stations packed into the VHF bands and most or all stations above Channel 30 being packed into the lower UHF and the VHF bands.

Stations already in the VHF band or in the lower UHF bands may not be immune from these proceedings. Channel changes, reduced service areas, or other adverse factors may come into play for all stations in order to accommodate band clearing.

We recommend that broadcasters obtain and analyze these models at the first opportunity to assess the likely impact upon their stations. More generally, broadcasters need allies at the FCC and in Congress, and allies include voting members and influential staff members.

Broadcast trade associations are ramping up for the broader questions being raised in these proceedings, but each television station licensee, with the assistance of their engineering and regulatory advisors, needs to make its own assessment of the likely impact on it of the various approaches the FCC is considering. In that regard, this process will be similar to navigating the DTV transition, where stations have to keep an eye on both the big picture changes as well as each station’s individual legal and technical situation.

The idea of an upside for individual stations from such spectrum reallocation seems unlikely, even for those inclined to “sell” their spectrum, given the number of ways such auction proceeds would need to be divided (assuming Congress allows the licensee any share of auction proceeds at all). Overall, some of the NBP’s recommendations represent a huge negative for the broadcast industry. However, even while asserting that it will implement some of its stated goals by regulatory force, the Broadband Task Force has acknowledged that it needs the cooperation of broadcasters to achieve the best results for all. If substantial reduction in broadcast service nationwide is a topic of credible debate, then substantial reform of broadcast regulations should be on the table as well.

Good news for those of you who participate in our Association’s Alternative Broadcast Inspection Program.  As a result of the efforts of the National Alliance of State Broadcasters Associations (“NASBA”), of which your Association is an active member, I am pleased to report on two recent decisions of the FCC’s Media Bureau, one relating to radio and the other to television, that significantly expands the benefits of successfully participating in your Association’s ABIP Program.  In the radio case, the Audio Division awarded a station a significant “downward adjustment” in a fine for a public inspection file violation (that the licensee disclosed to the Commission in its application for renewal of license) due to the station’s successful participation in the Virginia Association of Broadcasters’ ABIP Program.  In the television case, the Video Division relied upon “the licensee’s responsive efforts and participation in a review and certification by the Iowa Broadcasters Association as to its public file compliance” in concluding that the petitioner had not raised an issue with respect to a violation of “any specific FCC rule or requirement.”  NASBA’s Counsel, Dick Zaragoza, recommends that stations which have disclosed, or may be required to disclose in the future, public inspection violations to the FCC should consult with their communications counsel to determine the applicability of these new decisions to their circumstances.   If you currently hold a Certificate of Compliance under our ABIP Program, I urge you to renew it.  If you have not participated in our ABIP Program, I urge you to give serious consideration to doing so by signing up today.

The following is information supplied to us by our attorneys at the law firm of Pillsbury Winthrop Shaw Pittman.

Here is a listing of the annual performance “tax” fees which would be set by statute, as well as a hypothetical “formula” for calculating fees assuming (i) that a commercial music station’s annual gross revenues are $1,250,000 or more, and (ii) that the Copyright Royalty Board (“CRB”) uses for the performance “tax” for over-the-air commercial music radio the same methodology that it uses for setting annual digital “streaming” fees.

Statutory Performance Royalty “Tax” Fees Based on Pending Federal Legislation

If a commercial music radio station has annual gross revenues between $1 and $99,999, the station’s annual performance tax would be $500.

If a commercial music radio station has annual gross revenues between $100,000 and $499,999, the station’s annual performance tax would be $2,500.

If a commercial music radio station has annual gross revenues between $500,000 and $1,249,999, the station’s annual performance tax would be $5,000.

If a commercial music radio station has annual gross revenues of $1,250,000 or more, see below the hypothetical “formula” for computing the fee.

If a noncommercial, public broadcasting music radio station has annual gross revenues between $1 and $99,999, the station’s annual performance tax would be $500.

If the noncommercial, public broadcasting music radio station has $100,000 or more in annual gross revenues, the station’s annual performance tax would be $1,000.

If the music station had less than $5,000,000 in gross revenues over the most recent four full calendar quarters, the deadline for the payment of the performance tax would be delayed for a period of three years from enactment of the legislation.

If the music station had $5,000,000 or more in gross revenues over the most recent four full calendar quarters, the deadline for the payment of the performance tax would be delayed one year from enactment of the legislation.

Hypothetical “Formula” for Setting Performance Royalty “Tax” Fees Based CRB “Streaming” Methodology

The CRB uses a formula for establishing performance royalty fees for the digital streaming of music.  If the performance tax legislation were to become law and if the CRB were to apply the same “formula” to radio stations, this is how a commercial radio station, which has annual gross revenues of $1,250,000 or more, could calculate the annual fee that it would have to pay to the SoundExchange for distribution to the labels and performers: $0.0016 multiplied by the station’s average quarter hour audience of 12-plus listeners (persons not ratings) Monday-Sunday, Midnight to 11:45 P.M., using the station’s most recent two book average of the Fall and Spring Arbitron books, multiplied by the number of sound recordings typically aired per hour by the station, multiplied by 24 hours in a day, and finally multiplied by 365 days per year.

The “$0.0016″ figure is based upon the percentage for 2010 negotiated by the NAB last year which is intended to secure a price break for stations engaged in streaming, and then allow gradual growth over the length of the agreement.  For stations wishing to use the hypothetical “formula” to calculate performance tax fees for future years, the percentages negotiated by NAB are as follows: 2011 – $0.0017; 2012 – $0.0020; 2013 – $0.0022; 2014 – $0.0023; and 2015 – $0.0025.

From the law firm of Pillsbury Winthrop Shaw Pittman

2010 Political Broadcasting Advisory

The FCC released an Order announcing that, due to technical difficulties, it was temporarily suspending the use of the new FCC Form 323 and, as a consequence, was postponing the January 11, 2010 deadline for the filing of Biennial Ownership Reports for commercial broadcast licensees.  The Commission stated that it would announce the reactivation of the new form and the new filing deadline in a subsequent Public Notice.  The Order states that the Commission “will temporarily suspend the ability to start a new biennial Form 323 during this interim suspension period but will allow filers to complete and file forms that they have already started should they wish to do so.”  The Order also states that the new filing deadline will be at least  90 days from the date that the new form is made available for new biennial filings.

As previously reported, on December 9, 2009, the Commission released the electronic version of the new FCC Form 323 in CDBS.  Over the last two weeks, the Commission has fielded numerous inquiries prompted by complaints of technical problems with the new FCC Form 323.  As a consequence, the Commission has decided to suspend use of the new FCC Form 323 in an effort to resolve such technical issues.   

One of the technical problems that has been encountered by many practitioners is the inexplicable loss of enormous amounts of data that had been uploaded onto the form, notwithstanding the fact that such data had been “saved” during the uploading process.  Accordingly, it is hoped that this type of problem will be remedied before the form goes “live” again. 

We will provide updates regarding the status of the new FCC Form 323 as developments occur.