An Arcane Parlor Game: FCC Proposing to Close Loopholes and Halt Abuses of Local Radio Distribution

June 9, 2009

FCC Proposing to Close Loopholes and Halt Abuses of Local Radio Distribution

By Jade Meshesha

In an exciting Notice of Proposed Rulemaking, the FCC has finally recognized the systematic abuse of its policies by large corporations and has proposed changes that will protect small rural community stations. Will they really solve the problems that have finally been recognized, or will these proposed changes create similar loopholes that larger corporations will still be able to exploit in the name of localism?

We need your feedback!  Please send comments by July 13, 2009.

In an April 20 Notice of Proposed Rulemaking, the FCC proposed changes that could promote rural radio by revamping the way FM stations are given out by the FCC. The FCC intends to reform the section 307(b) priorities. The 307(b) rule aims to give preference to new radio stations in rural areas, but it has been used by crafty companies to move into larger markets at the cost of small towns.  Decades of regulatory decisions have resulted in a situation that even FCC chairman Michael Copps calls an “arcane parlor game that only industry insiders know how to play.” Since a 1989 rule change, many hometown FM stations have been bought by large broadcasters, who have then moved them into larger urban markets.  This process was made even easier and quicker by a rule change in 2007 that “streamlined” move-ins.  So, is the FCC really solving the problems that it has finally recognized? Or will these proposed changes create similar loopholes that larger corporations will still be able to exploit in the name of rural radio?

What is 307(b)?

Section 307(b) of the 1934 Communications Act empowers the FCC to ensure “fair, efficient, and equitable distribution” amongst the “States and communities,” but has been routinely gamed by broadcasters under the guise of local priority to gain larger listening bases in urban population centers. How do these sneaky rascals do they get away with this? Well, in 1982, the Commission set up a list of four priorities to determine how to allot stations in a way that would best satisfy section 307(b). The goal was to give preference to stations that would be broadcast in or to communities with the least radio service--which tend to be located in small rural areas.

The first and highest priority is for stations which would provide the first radio station that can be heard in the area (in FCC lingo, “full time aural/reception service," or "white area”). Think somewhere in a remote part of Alaska, where you turn on the radio and actually can not hear a single station. The second priority goes to groups that can prove they will be the second station that can be heard in the area (in FCC lingo, “provide a second full time reception service," "or gray area”). Because you can hear at least a few stations in most of the country these days, these two priorities are rarely used. Many new station proposals are assessed under Priority 3 (first local transmission service). This means that the transmitter of the proposed station is located in a town that does not have any other towers in it. The theory is that if a transmitter is located in a town, it can be used as the voice of that town, as opposed to the stations that you can hear but are actually coming from elsewhere. Priority 3 is the priority where most of the action is, and where most of the abuse takes place. The final factor is Priority 4 (which is a catch-all for “other public interest matters”).

How has 307(b) been abused?

While such priorities set out by the FCC seem to ensure fair radio station distribution (how can it be a bad thing to prioritize new local stations?), many companies have used these preferences to win radio frequencies by temporarily claiming the underserved area, using it as a backdoor to nearby lucrative urban markets. Often, the allotment process will go like this: a station will decide that it wants to broadcast to an urbanized area with a high population that is already saturated with radio signals. So it will find an adjacent suburban or rural area which either recieves no radio service at all (which is rare) or which does not have a local transmission service (a station operating from that community). This area is known as its proposed “community of license." If that community has no station, the FCC will grant the license to give the community its first local outlet (on the basis of Priority 3).

Another scenario involves Priority 4 (public interest). Because the Commission tends to define “public interest” as the net largest population served, the stations that win out are those that will cover a large portion of the nearby urban area. This generally means that when there are competing applications, whichever station that will be located in the small community but whose broadcasting signal will also reach the largest population is favored during the bidding process. The problem with this approach is that population concerns alone do not ensure that the public interest is served. Giving preference to applicants whose signal will reach the most people is only fair when such a station, the first local outlet of a community, is actually going to serve its community.

Think about it like this: Howard Stern has a huge listener base. Would it be providing a public service to expand that listener base? The more listeners served, the better...right? Not always. Looking at it more broadly, if a station intends to broadcast to the nearby urbanized area, then that market share will probably influence the programming, turning the focus away from the underserved community. While the FCC shouldn't grant licenses based on content, they do need to look into better distinctions for determining what best serves the public interest, and ensure that stations actually serve their stated community of license.

Another major problem is community of license changes. Currently, stations can easily apply to change their community of license by using a minor change application. Once relocated, these stations want nothing to do with the local communities that they used to get a license in the first place. Often the community of license makes up less than 10% of the station's total audience. For about half of all move-ins, the community of license is less than 1% of the station's covered audience. How likely is it that a station will pay attention to such a small fraction of its listeners? There's no incentive or market pressure for them to do so, and that community is again left without a local voice (even while technically having their own station!).

With the FCC finally recognizing these problems, what are they proposing to do about it ?

The Proposed Rule Changes

The FCC is proposing changes to the 307(b) preferences that determine who gets priority for new station licenses. Here are the proposed new rules:

-When a proposal would cover at least 50% of an urbanized area, the Priority 3 preference would be eliminated. Instead, such a proposal will be treated as a proposal for that urbanized area, rather than for the station-less proposed community of license.

-Stations that would provide 3rd, 4th, or 5th radio service to a “substantial number of listeners” would receive an “underserved listeners” priority, co-equal to priorities 2 and 3. This would encourage more radio in rural areas, even if the proposed stations are not local.

-An absolute ban on any community of license changes (when stations migrate to a different community) that would remove sole local transmission or that will create white or gray areas (areas with little or no radio coverage).

Closing the Loopholes?

These measures are major steps in the right direction, making the bidding process fair by requiring stations to apply for the actual communities they intend to serve.  However, we're not sure if they actually go far enough to address the problem.  Large radio broadcasters are clever and will find a way to get around such restrictions if there is any wiggle room, so these rule changes should be airtight; we don't want to find ourselves in the current situation again. The proposed modification to Priority 3 (which will treat applications that will broadcast to a majority of an urban area as applications to that urban area, not the suburb where they are proposing to locate their transmitter) may be particularly problematic. What's stopping a station from playing around with their equipment and making it so they broadcast to, say, 49% of that area?  And even if they do end up broadcasting to a much smaller proportion of a city in order to get a Priority 3 preference, there are still many instances where the community of license will still comprise a small proportion of overall listeners. Again, a station would have no incentive to cater to its own community.

To think through the consequences of this proposed rule change, let's look at some specific numbers. Let's say there is a community of 5,000 people without a local transmission service on the edge of a major city of 5 million inhabitants.  Under these new FCC guidelines, a station would still receive the Priority 3 preference if its signal covered less than half of the urban area. The population of its community of license would be 5,000, and let's say it decides to broadcast to 49% of the city, just to stay within the guidelines, that would add a population of approximately 2.5 million.  But suppose the proposed station will broadcast to just 10% of the city, that would be reasonable, right? No. Just 10% of that area is 500,000 people, making the smaller community of license a mere 1% of the stations total listeners. It's obvious to us that this needs to be revised further- we invite suggestions, comments, or thoughts from you about what can be done. We don't want an outright ban on local stations' signals from reaching nearby audiences, but there must be a way to eliminate the possibility of having the population of a large urban area from dominating the listener base of a supposed local community station. We also welcome changes that will ban move-ins which create white or gray areas.

Tribal Radio

Another important issue addressed in this Notice is a proposal to create a Native American and Alaskan Native Tribal preference. The Commission believes that it would be in the public interest to provide federally recognized tribes with section a 307(b) priority, between Priority 1 and co-equal to Priorities 2 and 3, in FM allotments, AM filing window applications, and NCE filing window applications. This would address issues of sovereignty and expand broadcast radio to populations which have largely been ignored. The Commission seeks comment on the following qualifying criteria for Tribal preference:

-A federally recognized Tribe or consortium, or an entity that is at least 70% owned by members of a Tribe or Tribes

-At least 50% of the principal community contour must cover Tribal lands

-The proposed station must provide at least first local transmission service to the proposed community of license (Priority 3), which must be Tribal lands

In order to prohibit any change in ownership, a license granted due to a Tribal preference would be subject to a four year holding period (with on air operation). The Commission is requesting comments on the compositional requirements (such as percentage), the geographic component, and ways to more highly prioritize Tribes. The Commission also points out that this proposal may raise constitutional issues and may be deemed racial classification, subject to strict judicial scrutiny. We encourage anyone with an interest in sovereignty issues to offer ideas as there are internal issues (such as determining who is actually part of a tribe) that the FCC does not have expertise to work out itself. Also, that this preference does not seem to include indigenous peoples in Hawaii, Puerto Rico, and Guam is troubling, considering that those areas have significant Native populations.

What do you think?

Prometheus is excited about this NPRM and the FCC's willingness to finally address the well documented abuse that has robbed countless small communities of their means of self-expression. While there needs to be more done to safeguard localism, overall, these important changes would expand station opportunities for populations that have largely been ignored, including rural communities as well as Native American groups. However, there are still loopholes that will need to be tightened before any real progress can be made, namely refining the Priority 3 modifications. We believe that giving Native Americans priority as part of 307(b) is a big step in looking beyond underserved areas to underserved populations, and we hope (judicial scrutiny notwithstanding) that the Commission further investigates the use of 307(b) to prioritize these groups.

Comments are due July 13, 2009 for this Notice, so we encourage you to suggest improvements to these proposed rules. As we here at Prometheus draft our response to the FCC, we would like to hear your input! As always, we also encourage those who care about low power radio to coment directly to the FCC. You can do so at http://www.fcc.gov/cg/ecfs. Follow the instructions for submitting coments (this issue is MB Docket 09-52).