Vol. 5, Issue 1, August 2005

Welcome Pam Cooper!

For some of you, this is old news, but it is good news worth repeating. I am pleased and feel very fortunate to announce that Pamela C. (“Pam”) Cooper has joined the firm in an “of counsel” capacity.

Pam and I have been friends and professional colleagues for more than a decade and I have always admired her work, her attitude towards clients, and the things she contributes to professional and personal activities. She has over 19 years of experience assisting clients with broadcast regulatory matters before the FCC and the courts. She is also a seasoned transactional attorney, with extensive experience in negotiating and drafting purchase and sale agreements, interim operating agreements, and financing documents for publicly and privately held mass media and common carrier companies.

I first met Pam when she was a co-chair of the Young Lawyers Committee of the Federal Communications Bar Association (“FCBA”). Since then, she has co-chaired the FCBA’s Membership and Publicity Committee and has been instrumental in assisting the FCBA’s Foundation by organizing its annual gift drive around the holidays.

I am confident that she will be a wonderful addition to the firm, and I hope you will welcome her. You can reach Pam at the main office number (202-216-5798) and by e-mail at cooperlaw@cox.net.

November 2005 FM Auction

We have received several phone calls from people interested in participating in the November FM auction. All of the callers wanted to know what to do next.

First, look through the list of the 172 allotments that will be up for auction in November and decide which ones interest you. (The list is available at www.cinnamonlaw.com or you can e-mail us and we will send a copy). Some of the allotments will look familiar because they are allotments that either had no bids in the 2004 FM auction or the high bidders defaulted on the post-auction payments.
Remember that this is a “buyer beware” auction. The FCC does not represent or warrant anything about these allocations. Therefore, the next step we would suggest is contact your consulting engineer and ask them to do an analysis of the coverage area, the area to locate the transmitter site, and a general check to make sure the station will adequately cover the area that you want it to cover.

The important dates to remember for this auction are

7/27/2005 – Pre-auction seminar
8/12/2005 – FCC Form 175 application filing window for the auction CLOSES!
9/30/2005 – Upfront payments deadline
10/28/2005 – Mock Auction
11/2/2005 – Auction starts

The schedules of the engineers we have contacted are filing up, so if you are interested in any of the allotments don’t delay in contacting someone to do your engineering analysis.

FCC Regulatory Fees to Increase

The FCC has released its schedule of annual regulatory fees, with fees for all AM and FM stations going up. Usually, FCC annual regulatory fees are due between mid-August and mid-September. The Commission has not yet set the deadline for this year’s payment, but we will notify you with a special alert as soon as the due dates are known.

As in the past, even if the payment is only one day late, a 25% late fee will be assessed.

Following the close of last year’s window, the FCC issued a large
number of erroneous delinquency notices, claiming licenses had not paid fees, when in fact, the licensees had paid. If you received one of those letters, and have not resolved the issue with the FCC, you should do so before the new window opens.

As always, if you have any questions, or need assistance filing regulatory fees, please call.

EEO Audits Continue

Last month, the FCC sent Equal Employment Opportunity (EEO) audit letters to nearly 200 randomly selected broadcasters and multi-channel video programming distributors. This is the FCC’s second round of audits to determine licensee compliance with its EEO rules, which require that the FCC randomly audit approximately five percent of all broadcast and MVPDs annually.

Audits can be time-consuming and costly. Should your station receive an audit letter during a future audit, please contact us so that we may assist you in preparing a thorough response. We would also be happy to review your EEO programs at any time in advance of the receipt of an audit request to be sure that your operation is in compliance.

Payola Reminder

Federal Law requires that broadcasters disclose the receipt of payments, services or other valuable consideration in exchange for airing program material on a broadcast station. This rule applies to licensees, their employees, program producers, program suppliers and anyone else that has received consideration in exchange for the broadcast of program material.

All radio and television licensees must explicitly disclose the fact of and identity of the sponsor who paid or promised to pay for the program material at the time of the broadcast unless mention of the product or service clearly indicates sponsorship. To assist licensees, the FCC has created a Consumer Fact Sheet on the Payola Rules, a copy of which is available on our website, or we can send or fax a copy to you upon request.

If you have questions concerning compliance with the payola rules, please give us a call.

Licensees Must Follow Their Contest Rules Carefully

Many of you have heard about the Kentucky lawsuit filed against a Cumulus station after the station conducted a contest where the prize was not described fully or honestly. According to the suit papers, the DJ claimed the winner would receive “a hundred grand.” The winner thought that meant $100,000. The station awarded her a single chocolate “100 GRAND” candy bar.

Another listener sued a California station when she received a toy radio controlled Hummer, instead of the full-size vehicle. The lawsuits and bad PR should be sufficient to keep operators mindful of the need to be 100% accurate in contest rules and prize descriptions. However, if you need an additional reason, remember that once the civil suit is settled, the FCC is likely to come knocking.

The Enforcement Bureau recently issued a Notice of Apparent Liability (“NAL”) in the amount of $4,000, against a broadcaster for allegedly failing to follow its posted rules in conducting a sponsored contest. In a letter to Capstar TX Limited Partnership, the Bureau held that the licensee had violated Section 73.1216 of the rules by overstating the value of the prize package to be awarded to the winner of its “I Do Island” contest by approximately $10,000. By not making good on the difference immediately, the licensee ended up paying the listener $5,000 in cash to drop the FCC complaint, then paid the $4,000 fine and had to run the FCC gauntlet, incurring attorney and other fees.

As you can see, it’s best to get your contest and prize descriptions EXACTLY right the first time!

Finality May Be Worth Waiting For

We often counsel clients to consider carefully the risks associated with closing on the purchase or sale of broadcast stations prior to the FCC’s grant of its approval becoming final. It is only after finality, traditionally defined in agreements as no longer subject to timely objection or review by the Commission on its own motion, that a grant cannot be overturned or rescinded. Although it does not happen often, the FCC has rescinded the grant of a transfer or assignment application prior to finality, and if closing had taken place prior to finality, the unwinding process can be ugly.

Last month, the FCC rescinded the grant of an assignment application that had been consummated by the parties less than three weeks before. In the case of Station KOWH(TV) the parties had completed the transaction and filed a consummation notice with the FCC. However, the parties were involved in a separate state legal action where statements were made by one of the parties during a deposition that were inconsistent with representations made by the assignee in the FCC assignment application. These inconsistencies were brought to the Commission’s attention in a petition for reconsideration and the FCC deemed them worthy to investigate. As a result, the grant has been rescinded pending the outcome of the petition and the parties are left in a very untenable position with regard to ownership of the station.

In many cases, closing prior to finality where no objection has been filed at the initial public notice stage, is a safe move. However, there are occasions when objectors come in ‘after the fact’ and the FCC is compelled to investigate. The bottom line: please discuss the option of closing prior to finality with us in detail so that the potential risks can be evaluated.

This newsletter is intended to be for informational use only. Readers should not act upon the information presented here without seeking professional legal counseling to address the facts and circumstances specific to them. The transmission and/or receipt of this newsletter does not create an attorney-client relationship.

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