Memorandum to Clients
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Memorandum to Clients November, 2004 News and Analysis of Recent Events in the Field of Communications No. 04-11 FCC, takin’ care of bid-ness FM Auction Action: A Recap By: R.J. Quianzon 703-812-0424 [email protected] ith 450 applicants starting to bid on the day after bids totaling close to $40 million. Former Clear Channel W Election Day, slightly more than 100 remained CEO Randy Michaels was looking good for 20 licenses, for standing two weeks later. With the end of the FCC’s first which he made unadjusted bids totaling about $13 million – open auction of FM spectrum looming in sight at press time, but don’t feel that sorry for him, because he will receive a it looked like U.S. taxpayers would be nearly $200 million 35% discount for being a “new entrant” to the broadcasting dollars to the good, in exchange for which industry. The criteria for “new entrant” they would be handing over 275 or so con- status are based upon how many TV and struction permits. The final prices for fre- The auction rules prohibit radio stations, cable companies and quencies were expected to range from bidders from discussing the newspapers an applicant owned or con- $4,000 for Kotzebue, Alaska, to $7 million auction with one another trolled on August 6, 2004. Although he for Pacific Junction, Iowa (Omaha). until several weeks after the has numerous connections and signifi- auction is over. Even cant experience in the industry, Many of the most active bidders (and most though the auction is over, Michaels owned no stations on August 6 likely winners) in the auction were no and was entitled to the $4.5 million dis- you are still prohibited from strangers to the broadcasting industry. count. Similarly, former radio execu- The smart money figured that an affiliate discussing the auction with tives Jefferey Warshaw and Michael of Marathon Media/3 Point would likely other participants. Driscoll have indicated that they will end up the winning bidder on more than claim an $8.75 million discount on their 40 licenses (15% of those at auction) with $25 million bids for 10 stations. Not a single one of the Warshaw/Driscoll winning bids was for less than $1 million, including the $7 million bid men- The Scoop Inside tioned above for Pacific Junction, Iowa. Cumulus, which took no discount, was the likely winner in a dozen markets Democracy in Action .......................2 with bids totaling about $12 million. Focus on FCC Fines ..........................3 Procedurally, the winning bidders will have until an as-yet Bureau Eliminates unannounced deadline (likely until mid-December) to pay “Denver Waiver” ......................... 4 20% of their winning bids as a down payment. Engineer- ing support and full applications for the new stations must NAB Drops Challenge to be submitted to the FCC before the end of the year. After SDARS “Local” Programming .....5 typical FCC processing and an opportunity for opponents Deadlines ......................................... 6 to file petitions against the applications, the FCC will grant construction permits to qualifying winning bidders who Content-based Renewal remit the remaining 80% of their bids. Winning bidders Challenges On the Rise .................7 will then have the standard three-year construction period Bureau Criticizes À La Carte during which to build their stations. Option for MVPC During the course of the auction, several bidders submitted Programming .............................. 8 complaints to the FCC about other bidders and their eligi- Updates on the News ..................... 9 bility to participate in the auction. In all instances the FCC FM Allotments ...............................10 (Continued on page 11) Page 2 Memorandum to Clients November, 2004 Out with old, in with the new (and the previously used) Democracy In Action The fall-out from Election 2004 By: Vincent J. Curtis 703-812-0420 [email protected] ow that the Presidential election is over, Washingtonians get to enjoy the quadrennial game of guessing who is leav- N ing, who is staying, and who will be the next person coming back in through the revolving doors of the Federal gov- ernment. We already know, for instance, that we will have a new Secretary of State, Attorney General and Secretary of Commerce (and that last change could have a significant impact on communications issues, since NTIA falls under Com- merce’s jurisdiction). And apart from the major cabinet offices, there are a series of changes both on the Hill and at the FCC which could end up changing the way broadcasters toil in the field. On the Hill, where the Republicans still control both the House and the Senate, we will have a number of scheduled changes on the Senate side due to previously- Fletcher, Heald & Hildreth established procedural rules which determine the schedule for changing committee A Professional Limited Liability chairmanships. First of all, we will have John McCain (R-Arizona) leaving as head Company of the Senate Commerce Committee, to be replaced by Senator Ted Stevens (R- Alaska). On the Democrat side, Daniel Inouye (D-Hawaii) is expected to replace 1300 N. 17th Street - 11th Floor Ernest Hollings (D-South Carolina), who retired. Arlington, Virginia 22209 Tel: (703) 812-0400 In the House, Joe Barton (R-Texas) will continue as Chair of the Energy and Com- Fax: (703) 812-0486 merce Committee, with Fred Upton (R-Michigan) as Chair of the Telecommunica- E-Mail: [email protected] Web Site: fhhlaw.com tions and Internet Sub-Committee. John Dingell (D-Michigan) will remain as the ranking Democrat of the Full Committee, with Ed Markey (D-Massachusetts) con- Supervisory Member tinuing on the Sub-Committee. Vincent J. Curtis, Jr. These changes will take place after the new Congress is sworn in in January. What Co-Editors we don’t know is whether the Republicans, because of their increased majority in Howard M. Weiss both Houses, will seek to increase their members in these Committees. Harry F. Cole At the FCC, the Republicans will remain in control of the five-member Commission. Contributing Writers Although no formal announcement has been made (and, to the contrary, the Chair- Ann Bavender, John C. Butcher, Harry F. Cole, Vincent Curtis, man has suggested that he doesn’t plan to go anywhere), a number of observers ex- Anne Goodwin Crump, Steve Lovelady, pect Chairman Michael Powell to leave in the Spring of 2005. By that time, it is an- Alison J. Miller, Lee G. Petro, ticipated that he will have moved forward for Commission vote the items which he R.J. Quianzon and Michael Richards views as important to his legacy. Memorandum to Clients is Republicans Kevin Martin and Kathleen Abernathy are expected to stay at least published on a regular basis by through the first half of 2005. Although Abernathy’s term has already expired, she Fletcher, Heald & Hildreth, P.L.C. can stay until the end of the next Congress. However, unless she is given a chance to This publication contains general replace Powell if and when he leaves as Chair, there is speculation that she will leave legal information which is not for the private sector, where she previously worked. Kevin Martin, who has strong intended to be deemed legal advice. political backing – not only did he work on the President’s campaign in 2000, but his Readers should not act upon wife works with the Vice President – may well have an inside track on the Chair- information presented herein manship after Powell leaves. However, there has been some talk about fellow Tex- without professional legal ans coming to D.C. to find seats on the FCC. It is probably too early to know exactly counseling addressing the facts and what is going to happen there. circumstances specific to them. Distribution of this publication does On the Democratic side, Jonathan Adelstein has demonstrated an impressively phoe- not create or extend an attorney- nix-like nature, arising out of the ashes to get a last minute reprieve from President client relationship. Bush apparently as part of a Hill agreement involving held-up judicial nominations. Adelstein’s initial nomination provided a long-running soap opera when it got hung- Copyright © 2004 Fletcher, Heald & Hildreth, P.L.C. up in the Senate because of political wrangling. And he was marked as a dead man All rights reserved (Continued on page 5) November, 2004 Memorandum to Clients Page 3 Indecent Programming - Ten months after the Janet Jack- underwriting acknowledgments were actually advertise- son incident aired during the Super Bowl – and two months ments. As part of the new compliance plan, the station will after CBS was fined for the incident – ABC is taking a crack conduct training courses for its employees and its at the FCC’s indecency meter. A recent Monday Night Foot- “advertisers”. In addition, the station must now run any un- ball introduction featured a nude (or so she seemed) actress derwriting acknowledgments through a multi-level internal seducing a football player into spending the first quarter of process. Noncommercial radio and television licensees must the game with her. The segment aired at 9:00 p.m. , and ensure that they strictly adhere to the FCC’s limitations shortly thereafter, ABC apologized for the stunt. on underwriting acknowledgment to avoid FCC However, FCC Chairman Powell does not enforcement actions. seem amused by the latest installment of football flesh follies. During an inter- In another NCE “advertising” decision, view, Chairman Powell expressed dis- the Commission admonished a low appointment with the broadcasting Focus on power FM station in Wisconsin for tactics and, specifically addressing the broadcasting advertising announce- Monday Night Football issue, ques- ments. Of particular interest in the tioned whether Walt Disney would be FCC Fines FCC’s decision in this case was the By: R.J.