Federal Communications Commission FCC 99-143

Before the Federal Communications Commission Washington, D.C. 20554

In the Matter of )

INDEPENDENT COMMUNICATIONS, INC.)

Licensee of Television Stations ) KTTM(TV), Huron, South Dakota and ) KTTW(TV), Sioux Falls, South Dakota )

For a Forfeiture )

MEMORANDUM OPINION AND ORDER AND FORFEITURE ORDER

Adopted: June 10, 1999 Released: June 14, 1999

By the Commission:

1. The Commission has before it for consideration a Response to a Notice of Apparent Liability (NAL) in the amount of twenty-seven thousand, five hundred dollars ($27,500) issued against Independent Communications, Inc. (ICI), licensee of stations KTTM(TV), Huron, South Dakota, and KTTW(TV), Sioux Falls, South Dakota.1 ICI seeks rescission or reduction of the forfeiture that was assessed for apparent repeated violations of Section 73.670 of the Commission©s Rules, 47 C.F.R. § 73.670, which limits the amount of commercial matter that may be aired during children©s programming.

2. By way of background, in the Children©s Television Act of 1990,2 Congress directed the Commission to adopt rules, inter alia, limiting the number of minutes of commercial matter that television stations may air during children©s programming, and to consider in its review of television license renewals the extent to which the licensee has complied with such commercial limits. Pursuant to this statutory mandate, the Commission adopted Section 73.670 of the Rules which limits the amount of commercial matter which may be aired during children©s programming to 10.5 minutes per hour on weekends and 12 minutes per hour on weekdays. Children©s Television Programming, 6 FCC Red 2111, 2118, recon. granted in part, 6 FCC Red 5093, 5098 (1991). The commercial limits became effective on January 1, 1992. Children©s Television Programming, 6 FCC Red 5529, 5530 (1991).

1 Independent Communications, Inc., 8 FCC Red 7886 (1993) (Independent NAL).

Pub. L. No. 101-437, 104 Stat. 996-1000, codified at 47 U.S.C. Sections 303a, 303b and 394 (Children©s Television Act). 9605 Federal Communications Commission FCC 99-143

3. In its license renewal applications for stations KTTM(TV) and KTTW(TV), ICI admitted that it did not comply with the limits on commercial matter in children©s programming specified in Section 73.670 of the Commission©s Rules. Specifically, ICI stated that, for an eight- month period, the stations exceeded the children©s television commercial limits on 121 occasions/ Of these 121 commercial overages, three were two minutes in duration, four were 90 seconds in duration, 44 were one minute in duration and 70 were thirty seconds in duration. ICI further stated that the stations© traffic manager believed the stations were in compliance with the children©s television commercial limits and reported such compliance to the stations© general manager at monthly meetings. According to ICI, it was when stations KTTM(TV) and KTTW(TV) engaged an outside auditor to verify their compliance with the commercial limits that they discovered that a problem with compliance existed. Following that discovery, 12 additional children©s television commercial overages occurred, which ICI attributed to inexperienced employees, the traffic director©s wedding leave, problems understanding break format changes and an overzealous sales manager. ICI asserted, however, that no overages occurred after its installation of a new traffic software/hardware system in July, 1992.

4. In Independent NAL, the Commission considered the factors set forth in Section 503(b)(2) of the Communications Act and the guidelines set forth in Policy Statement, Standards for Assessing Forfeitures, 8 FCC Red 6215 (1993), to determine the appropriate forfeiture amount for the violations reported by station KTTM(TV) and KTTW(TV). In particular, the Commission considered the number and duration of commercial overages, the period of time over which the overages occurred and whether the licensee had established an effective program to ensure compliance with the children©s television commercial limitations. Applying those factors to the case of stations KTTM(TV) and KTTW(TV), the Commission noted that the 121 commercial overages constituted an unusually high number of violations and that 51 of the overages were one minute in duration or longer. The overages occurred, moreover, over a period of approximately eight months, including two months after the licensee became aware that it was in violation of the commercial limits. Thus, the Commission determined, it was apparent that the licensee had not established an effective program to ensure compliance with the children©s television commercial limitations. Upon consideration of these factors, the Commission found that a forfeiture in the amount of $27,500 was appropriate. Id. at 7886-87.

5. ICI argues in its Response to the NAL that the proposed forfeiture should be reduced because the number of children©s television commercial overages was actually less than it originally reported in its renewal applications. ICI further contends that the proposed forfeiture should be eliminated or substantially reduced because the Commission, in specifying the amount of the forfeiture, did not take into consideration certain "downward adjustment factors" established in Policy Statement - Standards for Assessing Forfeitures, 8 FCC Red 6215 (1993). In particular, ICI asserts that: (1) it voluntarily disclosed the commercial overages; (2) it voluntarily established policies and procedures to prevent future violations; and (3) it would suffer

3 Station KTTM(TV) operates as a satellite station of station KTTW(TV), and the programming and commercial matter on both stations is identical.

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"substantial financial hardship" if it was required to pay the forfeiture.

DISCUSSION

6. In United States Telephone Ass©n. v. FCC, 28 F3rd 1232 (D.C. Cir. 1994), the U.S. Court of Appeals for the District of Columbia set aside Policy Statement, Standards for Assessing Forfeitures, 6 FCC Red 4695 (1991), recon. denied, 7 FCC Red 5339 (1992), revised. 8 FCC Red 6215 (1993), stating that the guidelines for assessing forfeitures established therein must be subject to public comment to comply with the Administrative Procedure Act. In accordance with the court©s decision, the Commission released Forfeiture Guidelines - Notice of Proposed Rulemaking in CI Docket No. 95-6, 10 FCC Red 2945 (1995). After receiving and considering comments from the public in that proceeding, the Commission adopted guidelines for assessing forfeitures. Forfeiture Guidelines - Report and Order in CI Docket No. 95-6, 12 FCC Red 17087 (1997) (Forfeiture Guidelines). Forfeiture Guidelines became effective on October 14, 1997. 62 Fed. Reg. 43474 (August 14, 1997). However, with regard to (i) all cases pending when Forfeiture Guidelines was adopted, and (ii) all cases involving "violations arising from facts that occurred before the effective date of th[at] order," forfeiture amounts are to be assessed "under the case-by-case approach in effect when.the violation occurred," in conformity with the standards set out in Section 503 of the Communications Act. Id. at 17108-17109.

7. In Independent NAL, the Commission specifically recognized that a petition for review of Policy Statement/Assessing Forfeitures was pending in the court of appeals. As mentioned supra TJ 4, the Commission considered the number and duration of commercial overages at stations KTTM(TV) and KTTW(TV), the period of time over which the overages occurred and whether the licensee had established an effective program to ensure compliance with the children©s television commercial limits. These criteria, which were developed and applied by the Commission in previous cases,4 are appropriate in analyzing violations of the children©s television commercial limits since they take into account, inter alia, "the nature, circumstances, extent, and gravity of the violation, and, with respect to the violator, the degree of culpability," as required under Section 503(b)(2)(D) of the Communications Act. Thus, as specified in Forfeiture Guidelines, the forfeiture amount in the instant case was determined in accordance with the criteria developed and applied by the Commission in previous cases, in conformity with the standards established in Section 503 of the Communications Act. See Ramar Communications, Inc. (KJTV(TV)), 12 FCC Red 20490 (MMB 1997), aff©d 9 FCC Red 1831 (MMB 1994).

8. Number and Duration of Commercial Overages. ICI states that a review of its records revealed that the total number of commercial overages was 100, rather than 121, as originally reported in its license renewal applications. Furthermore, of those 100 commercial overages, ICI maintains that two (rather than three) were two minutes in duration, three (rather than four) were 90 seconds in duration, 32 (rather than 44) were one minute in duration and 63 (rather than 70)

4 See. e.g., Koplar Communications (KPLR-TV), 8 FCC Red 7884 (1993); KXRM Partnership (KXRM-TV), 8 FCC Red 7890 (1993).

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were thirty seconds in duration. We believe, however, that 100 commercial overages is still an unusually high number of violations. In this regard, we find that a forfeiture of $27.500 for that number and duration of children©s television commercial limit violations is consistent with that assessed in roughly similar cases under the case-by-case approach and in accordance with the Section 503(b)(2) criteria described supra, U 7. For instance, hi North Carolina Broadcasting Partners (WCCB(TV)), 13 FCC Red 3450 (1997) (NCB Partners©), the licensee exceeded the commercial limits on 71 occasions from April 1, 1993, to March 31, 1995, as a result of human error and/or inadvertence. Of those 71 violations, 18 were less than 30 seconds in duration, 23 were 30 seconds or longer but less than one minute in duration, ten were one minute or longer but less than one and one-half minutes in duration, four were one and one-half minutes in duration, one was two minutes in duration, one was two and one-half minutes in duration and 14 were program-length commercials. In that case, a forfeiture of $25,000 was assessed. In Press Broadcasting Company, Inc. (WKCF(TV)), 12 FCC Red 15491 (1997) (Press Broadcasting), the licensee exceeded the children©s television commercial limits on 200 occasions from January, 1992, through May, 1995, due to its misunderstanding of the children©s television rules and policies. Of those 200 violations, four were less than 30 seconds in duration, 72 were 30 seconds or longer but less than one minute in duration, 37 were one minute or longer but less than one and one-half minutes in duration, 38 were one and one-half minutes in duration but less than two minutes in duration, 29 were two minutes or longer but less than three minutes in duration, 15 were three minutes or longer but less than four minutes in duration and five were four minutes or greater in duration. There, a forfeiture of $30.000 was assessed. Compared to NCB Partners, even when its revised figures are considered, ICI had no program-length commercials, but a significantly higher number of total violations. On the other hand, when viewed against Press Broadcasting, ICI had a significantly lower number of total violations, with proportionally more overages of shorter durations. In all three cases, the licensees offered similar explanations for their respective violations, which, in each instance, occurred over an extended period of time. Based on these considerations, we find the violations in the instant case, on balance, comparable to those in NCB Partners and Press Broadcasting, and conclude that an appropriate, comparable forfeiture is $27,500. Accordingly, the revised figures submitted by ICI reflecting a lower total number of commercial overages than it originally reported do not justify or necessitate a reduction in the forfeiture amount.

9. Voluntary Disclosure. Initially, we note that, in the Children©s Television Act, Congress not only required the establishment of limits on the amount of commercial matter that may be included in children©s television programming, but also directed that "the Commission shall, in its review of any application for renewal of a commercial . . . television broadcast license, consider the extent to which the licensee . . . has complied with such standards . . . ."5 Pursuant to this Congressional mandate, the Commission added a supplement to FCC Form 303- S, Application for Renewal of License, directing the applicant to: (i) state whether or not it had complied with the children©s television commercial limits; and (ii) if it had not so complied, submit an exhibit to the renewal application listing "each segment of programming, 5 minutes

5 47 U.S.C. Section 303b.

9608 Federal Communications Commission FCC 99-143 or more in duration, designed for children 12 years old and under and broadcast during the license period which contained commercial matter in excess of the limits" (emphasis added), including "the length of the segment, the amount of commercial matter contained therein, and an explanation of why the limits were exceeded." Supplement to FCC Form 303-S, Application for Renewal of License, Question 9(b) and (c). Section 73.3514 of the Commission©s Rules, 47 C.F.R. § 73.3514, provides that "[e]ach application shall include all information called for by the particular form on which the application is required to be filed . . . ." Section 1.17 of the Commission©s Rules, 47 C.F.R. § 1.17, provides that "[n]o licensee, permittee or applicant shall ... in any application . . . submitted to the Commission, make any material misrepresentation or willful material omission bearing on any matter within the jurisdiction of the Commission."

10. Failure to provide the information called for in the renewal application, or providing incomplete or incorrect information, could have resulted in an additional forfeiture against ICI for violation of Section 1.17 of the Commission©s Rules. Cf, David A. Ringer, 8 FCC Red 7037 (1993). In addition, failure to disclose the occurrence of violations of the children©s television commercial limitations in response to Question 9(b) and (c) in the renewal application, or providing incomplete or incorrect information, could raise a serious question as to whether the applicant possesses the requisite qualifications to remain a Commission licensee. In view of the foregoing, Id©s provision of information regarding the nature and extent of its noncompliance with the children©s television commercial limits, which it was explicitly required to provide pursuant to specific questions in the renewal application, cannot be said to have been "voluntary" and does not justify a reduction or elimination of the assessed forfeiture.

11. Compliance Program. Similarly, Id©s assertion that it "voluntarily" established policies and procedures to prevent future violations does not justify or necessitate a reduction or elimination of the forfeiture. Licensees of this Commission are legally required to comply with our rules and policies. When the Commission delayed the effective date of Section 73.670 from October 1, 1991, until January 1, 1992, we stated that "giving the additional time to broadcasters and cable operators before compliance with the commercial limits is required will have the effect of enabling broadcasters and cable operators to hone their plans to ensure compliance . . . ." Children©s Television Programming, 6 FCC Red 5529, 5530 n. 10 (1991). During this additional period, ICI apparently failed to develop a compliance plan. The fact that ICI implemented a plan to prevent future violations in July 1992, after discovering a pattern of 100 commercial overages, is not the kind of measure we believe warrants reduction or elimination of the forfeiture. See International Broadcasting Corp., 19 FCC 2d 793, 794 (1969).

12. Financial Hardship. Finally, ICI cites the provision in § 503(b)(2)(D) of the Communications Act, as amended, 47 U.S.C. § 503(b)(2)(D), which requires the Commission to consider financial ability to pay in determining the amount of a forfeiture, and states that payment of $27,500 would impose a substantial financial hardship on the licensee. In support of this assertion, ICI claims that the stations are not major market stations, and submits financial data which reflects substantial operating losses incurred from 1990 through 1993. Accordingly, ICI requests the Commission to substantially reduce or eliminate the forfeiture.

9609 Federal Communications Commission FCC 99-143

13. In analyzing a company©s financial condition for forfeiture purposes, the Commission has previously found gross revenues to be "a very useful yardstick" and, generally, the best indicator of a licensee©s ability to pay a forfeiture. PJB Communications of Virginia, Inc., 7 FCC Fled 2088, 2089 (1992) (PJB Communications). The Commission has recognized that other financial indicators, such as net losses, may be relevant in some cases. Id. However, the Commission has also stated that "[i]f gross revenues are sufficiently great... the mere fact that a business is operating at a loss does not by itself mean that it cannot afford to pay a forfeiture." Id.

14. Our review of the financial data filed by ICI indicates that, although the company shows a net loss of $520,667 for the fiscal year ending March 31, 1993 (FY 1993), its gross revenue was $516,147.6 Nowhere in its Response to the NAL or attendant financial submission does ICI state that the $27,500 forfeiture would threaten its ability to continue to provide service to the public. Given these considerations and the fact that ICI has provided the Commission with no other evidence of financial difficulty, we do not believe that eliminating or reducing the $27,500 forfeiture is warranted. See PJB Communications, 1 FCC Red 2088; see also Delta Radio, Inc. (WOHT(FM)), DA 98-1676 (released Aug. 24, 1998) (forfeiture reduced based on licensee©s showing that licensee operates, at a loss and on licensee©s other evidence of financial difficulty). In addition, while the $27,500 forfeiture at issue here constitutes a slightly higher percentage of the licensee©s net gross revenue than that approved in previous cases, we do not find it excessive under the circumstances before us.7 In view of the foregoing, we believe a forfeiture in the amount of $27,500 is fully justified and appropriate in light of the high number and type of violations reported by stations KTTW(TV) and KTTM(TV).

15. If ICI wishes to arrange an installment payment plan for this forfeiture, it may address a request to:

Regina Dorsey, Chief Credit and Debt Management Center Financial Operations Division Office of Managing Director Federal Communications Commission 445 12th Street, SW Washington, DC 20554

6 The financial data filed by ICI consists of federal income tax returns and the company©s balance sheets and income statements.

7 See, e.g., PJB Communications, 7 FCC Red 2088,2089 (finding that forfeitures of $5,000 and $3,000 assessed against two jointly owned and operated paging companies were not excessive because the total amount of forfeiture, $8,000, represented 2.02 percent of the companies© combined gross revenues of $395,469); A/ton Communications Corp., 7 FCC Red 6741 (Com. Car. Bur. 1992) ($6,000 forfeiture representing approximately 3.91 percent of 1990 gross revenues not found to be excessive).

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16. Accordingly, IT IS ORDERED, THAT Independent Communications, Inc/s request that the forfeiture assessed in Independent Communications, Inc., 8 FCC Red 7886 (1993), be reduced or eliminated, IS DENIED.

17. IT IS FURTHER ORDERED, THAT, pursuant to Section 503(b) of the Communications Act of 1934, as amended, 47 U.S.C. § 503(b), Independent Communications, Inc., licensee of television stations KTTM(TV), Huron, South Dakota, and KTTW(TV), Sioux Falls, South Dakota, FORFEIT to the United States the sum of twenty seven thousand, five hundred dollars ($27,500) for repeated violations of Section 73.670 of the Commission©s Rules, 47 C.F.R. § 73.670. Payment of the forfeiture may be made by mailing to the Commission a check or similar instrument payable to the Federal Communications Commission at the address indicated in the attachment to this Memorandum Opinion and Order.

18. IT IS FURTHER ORDERED, THAT the Mass Media Bureau send by Certified Mail - Return Receipt Requested - a copy of this Memorandum Opinion and Order to Independent Communications, Inc.

FEDERAL COMMUNICATIONS COMMISSION

Magalie Roman Salas Secretary

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