Yesterday, with vocal support from fellow Commissioner Brendan Carr, FCC Chairman Ajit Pai released a draft Declaratory Ruling and Notice of Proposed Rulemaking (“DR” and “NPRM”) to promote the use of broadcast spectrum for internet services (referred to by the FCC as “Broadcast Internet”). The full, five-member Commission will vote on adoption of the DR and NPRM at the agency’s next monthly public meeting on Tuesday, June 9.

The draft DR and NPRM are prompted by the transition to ATSC 3.0, since the spectral efficiency of the new IP-based standard will broaden the possible uses for one station’s six megahertz channel while still enabling that station to provide an over-the-air programming stream. The draft proposes that the rules governing a broadcaster’s “ancillary and supplementary services” should be updated to enable broadcasters to take advantage of the many non-broadcasting capabilities inherent in ATSC 3.0, such as IP-based services that could be part of the transition to 5G, while also continuing to deliver a quality broadcast signal to their communities.

The DR also would clarify that the media ownership rules do not apply to the lease of spectrum to provide Broadcast Internet services. In the NPRM, the FCC would seek comment on the types of internet services that could be offered using broadcast spectrum and whether any changes are necessary to the Commission’s existing rules regarding ancillary and supplementary services, including fees for those services.

The DR. The FCC would use the DR to clarify that the lease of broadcast television spectrum to a third party, including another broadcaster in the same market, for the provision of ancillary and supplementary services under Section 73.624(c) does not result in attribution under the media ownership rules or any other requirements related to television station attribution (e.g., filing ownership reports). The draft DR concludes that this is appropriate, as the media ownership rules are intended to promote diversity, localism, and competition in broadcast services, but ancillary and supplementary services are defined to exclude broadcast services.

The draft DR posits various ways that spectrum leasing could be adopted: “For instance, a single entity could use this leasing mechanism to acquire the rights to offer Broadcast Internet services on multiple broadcast channels in the same market. And that same entity could put together a nationwide footprint for the provision of Broadcast Internet services.”

The draft DR also clarifies that licensees entering into spectrum leases still would bear the responsibility to retain ultimate control over their spectrum and ensure compliance with the FCC’s broadcast regulations. Specifically:

  • The term of any spectrum lease should not exceed the duration of the station’s broadcast license, though renewal is permitted;
  • The broadcaster must continue to provide at least one SD over-the-air video program signal at no charge to viewers (in accordance with Section 73.624(b)) and remain in compliance with all other applicable FCC rules; and
  • The broadcaster is responsible for any misuse of its spectrum by a lessee in violation of any applicable law or FCC rule.

The NPRM. In the draft NPRM, the Commission would seek to learn more about the types of Broadcast Internet services that are likely to be provided, and would ask whether certain changes are necessary to the ancillary and supplementary services rule.

Previous filings in the ATSC 3.0 docket from 2018 have noted that broadcast spectrum could be used to support autonomous vehicle operation through system updates, pre-position popular content (e.g., movies or video games) to help reduce network congestion, provide supplemental information to telemedicine patients, and provide operational support for IoT devices and smart meters, among other uses. The draft NPRM asks what other types of services are likely to be provided, to what extent they will be utilized as a complement to the 5G network, and whether there are any rule changes the FCC should consider to promote such services. Of note, the draft NPRM also tentatively concludes that NCE broadcasters are permitted to offer Broadcast Internet services, and seeks comment on what services these stations are likely to provide.

The current ancillary and supplementary services rule requires broadcasters to pay a fee to the U.S. Treasury if they provide ancillary and supplementary services that require a subscription fee, or for which the broadcaster receives compensation from a third party in return for transmitting material provided by that third party. The concept of the ancillary and supplementary services fee is required by the Telecommunications Act of 1996, so the Commission cannot eliminate it. However, the FCC seeks comment on whether it should modify its means of calculating the fee, and whether the fee should be set at zero. When the FCC last addressed the fee in 1998, it determined that it would assess fees on all gross revenue—both subscription and advertising revenue—from all ancillary and supplementary services for which viewers must pay subscription fees. The FCC received very little comment on non-subscription services at the time, and so concluded that it would determine whether a non-subscription ancillary or supplementary service was feeable solely based on the statutory criteria, until further information was available.

The Commission would now seek this further information, and any input on how fees for subscription and non-subscription ancillary and supplementary services should be assessed. The NPRM would tentatively conclude that where a broadcaster receives compensation from an unaffiliated third party, such as a spectrum lessee, in return for airing material by that third party that the fee should be calculated based on the gross revenue received by the broadcaster, without regard to the gross revenue of the spectrum lessee.

Finally, the Commission’s current rules state that a licensee may provide ancillary and supplementary services so long as they do not derogate their station’s signal, and as long as the services are subject to FCC regulations applicable to analogous services. The draft NPRM tentatively concludes that the determination of whether a station’s signal has been derogated should continue to be evaluated by whether it provides at least one SD over-the-air video program signal at no charge. The FCC previously has not provided guidance on the standard for evaluating analogous services, and asks for comment on whether to do so now, in particular inquiring as to what services broadcasters may offer to consumers that could be deemed “analogous” to services currently regulated by the Commission.

Next steps. The FCC will vote on the DR and NPRM at its June open meeting, scheduled for Tuesday, June 9. Comments on the NPRM will be due 30 days after it is published in the Federal Register.

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Photo of Gerard J. Waldron Gerard J. Waldron

Gerry Waldron represents communications, media, and technology clients before the Federal Communications Commission and Congress, and in commercial transactions. Mr. Waldron served as chair of the firm’s Communications and Media Practice Group from 1998 to 2008. Prior to joining Covington, Mr. Waldron served…

Gerry Waldron represents communications, media, and technology clients before the Federal Communications Commission and Congress, and in commercial transactions. Mr. Waldron served as chair of the firm’s Communications and Media Practice Group from 1998 to 2008. Prior to joining Covington, Mr. Waldron served as the senior counsel on the House Subcommittee on Telecommunications. During his work for Congress, he was deeply involved in the drafting of the 1993 Spectrum Auction legislation, the 1992 Cable Act, the Telephone Consumer Protection Act (TCPA), CALEA, and key provisions that became part of the 1996 Telecommunications Act.

Mr. Waldron’s practice includes working closely on strategic and regulatory issues with leading IT companies, high-quality content providers in the broadcasting and sports industries, telephone and cable companies on FCC proceedings, spectrum entrepreneurs, purchasers of telecommunications services, and companies across an array of industries facing privacy, TCPA and online content, gaming, and online gambling and sports betting-related issues.

Mr. Waldron has testified on communications and Internet issues before the FCC, U.S. House of Representatives Energy & Commerce Committee, the House Judiciary Committee, the Maryland Public Utility Commission, and the Nevada Gaming Commission.

Photo of Kurt Wimmer Kurt Wimmer

Kurt Wimmer is a partner concentrating in privacy, data protection and technology law.  He advises national and multinational companies on privacy, data security and technology issues, particularly in connection with online and mobile media, targeted advertising, and monetization strategies.  Mr. Wimmer is rated…

Kurt Wimmer is a partner concentrating in privacy, data protection and technology law.  He advises national and multinational companies on privacy, data security and technology issues, particularly in connection with online and mobile media, targeted advertising, and monetization strategies.  Mr. Wimmer is rated in the first tier by Legal 500, designated as a national leader in Chambers USA, and is included in Best Lawyers in America in four categories.  He represents companies and associations on public policy matters before the FTC, FCC, Congress and state attorneys general, as well as in privacy assessments and policies, strategic content ventures, copyright protection and strategy, content liability advice, and international matters.

Photo of Jennifer Johnson Jennifer Johnson

Jennifer Johnson is a partner specializing in communications, media and technology matters who serves as co-chair of Covington’s global and multi-disciplinary Internet of Things (IoT) group. She represents and advises content distributors, broadcast companies, trade associations, and other media and technology entities on…

Jennifer Johnson is a partner specializing in communications, media and technology matters who serves as co-chair of Covington’s global and multi-disciplinary Internet of Things (IoT) group. She represents and advises content distributors, broadcast companies, trade associations, and other media and technology entities on a wide range of issues. Jennifer has more than two decades of experience advising clients in the communications, media and technology sectors, and has served as a co-chair for these practices for more than 15 years. On IoT issues, she collaborates with Covington’s global, multi-disciplinary team to assist companies navigating the complex statutory and regulatory constructs surrounding this evolving area, including legal issues with respect to connected and autonomous vehicles, internet connected devices, smart ecosystems, and other IoT products and services.

Jennifer assists clients in developing and pursuing strategic business and policy objectives before the Federal Communications Commission (FCC) and Congress and through transactions and other business arrangements. She regularly advises clients on FCC regulatory matters and advocates frequently before the FCC. Jennifer has extensive experience negotiating content acquisition and distribution agreements for media and technology companies, including program distribution agreements with cable, satellite, and telco companies, network affiliation and other program rights agreements for television companies, and agreements providing for the aggregation and distribution of content on over-the-top app-based platforms. She also assists investment clients in structuring, evaluating, and pursuing potential investments in media and technology companies.