FCC Proposes Rules for Distributing Repack Funds to LPTV, TV Translator, and FM Stations; Part I: LPTV and TV Translators
Back in March 2018, Congress passed the Reimbursement Expansion Act (REA), which allocated additional funds to be used to reimburse broadcasters involuntarily affected by the post-incentive auction repacking of television stations. In addition to providing additional money for full-power and Class A stations, the REA for the first time expanded the universe of stations eligible to receive reimbursements to include LPTV and TV translator stations, as well as FM radio stations, and directed the Commission to adopt rules governing the details of how the reimbursement program would work for these stations. The Commission has now adopted a Notice of Proposed Rulemaking detailing how it intends to parcel out those funds. While the Commission notes that its proposed procedures to request reimbursement are "substantially similar" to those that have applied to full-power stations, there are some important differences, especially in the types of stations and expenses that will be eligible for reimbursement.
In the REA, Congress allocated a total of an additional $1 billion, with $600 million for fiscal year 2018 and an additional $400 million in 2019. While the majority of these funds are reserved for full-power and Class A stations subject to repacking, the REA did authorize the Commission to award, in fiscal year 2018, up to $150 million to LPTV and TV translators, and up to $50 million for FM stations, along with $50 million for the Commission's own consumer education efforts. For fiscal year 2019, the REA did not provide any specific allocations of the $400 million total, and in the NPRM, the Commission requests comment on whether it has the authority to award any of these funds to LPTV, TV translator, and FM stations, and, if so, how it should allocate those funds.
In the NPRM, the Commission proposed rules governing which stations are eligible for reimbursement, and what kinds of expenses can be reimbursed, as well as the procedures eligible stations must use to receive funds. Because the proposed rules on eligibility for LPTV and TV translators differ from those for FM stations, we will be posting two separate articles - one addressing the LPTV and TV Translator rules and one on the FM rules which will be posted tomorrow.
1.Eligible Stations
The NPRM proposes to limit the universe of LPTV and TV translator stations eligible to receive reimbursements to those that receive a construction permit resulting from an application during the recently-closed Special Displacement Window. Because their applications were treated as if they had been filed during the window, the NPRM proposes including those stations who were subject to displacement before that window opened and filed early displacement applications (with appropriate waivers). The NPRM further proposes that eligibility be limited not just to those stations that filed during the window, but to those whose displacement applications have been granted, although it seeks comment on whether this should include stations whose initial displacement applications are dismissed, but who are later able to re-file for displacement relief and obtain a grant, as long as they had originally been eligible to file in the initial the Special Displacement Window.
Eligible stations also must have been operating pursuant to a license (or a pending covering license application) for at least nine of the 12 months prior to April 13, 2017. For purposes of this determination, the Commission proposes to consider a station to have been "operating" as long as it was broadcasting at least two hours per day and 28 hours per week; a standard it incorporates from the minimum operating schedule requirements applicable to full-power television stations and one that has already generated concern among many LPTV operators.
The NPRM further proposes that digital replacement translators, assuming they meet other eligibility criteria, will be able to apply for reimbursements. The Commission takes pains to note, however, that Class A stations, which are already eligible for reimbursement under the existing program, will not be able to apply for funds allocated to LPTV and TV translator stations.
2. Eligible Costs
Under the REA, the Commission was authorized to reimburse costs "reasonably incurred" as a result of the repack. In the NPRM, the Commission proposes to reimburse costs incurred as a result of the displacement of LPTV and translator stations by full power and Class A station's initial post-auction applications, but requests comment on whether displacements caused by post-auction facilities improvement ("maximization") applications should also be reimbursed. Because maximizations were not required in the repack, the NPRM asks whether those costs can be reasonably attributed to the repack, and hence qualify for reimbursement.
For displaced LPTV and translator stations, the NPRM proposes to reimburse eligible stations' costs actually incurred in building out approved displacement facilities. Both hard (e.g., equipment) and soft (e.g., legal and engineering fees) costs would be reimbursable, but in the event that the reimbursement find is not sufficient to cover all costs, hard costs would be prioritized. No reimbursements would be provided to cover lost revenues or upgrades to equipment, a restriction also applied to full power and Class A station reimbursements and one that will likely come into play because most, if not all, new transmitters will have ATSC 3.0 capability and other upgraded features that were not present in the equipment that they replace. (Note that this does not prohibit stations from purchasing upgraded equipment - it only limits their reimbursement to the cost of replacement equipment. Any additional costs must be borne by the licensee). Also like full power and Class A stations, LPTV and TV translator stations would be encouraged to reuse existing equipment and would need to justify any new equipment purchases. Unlike full power and Class A stations, LPTV and translator stations would not be able to receive reimbursement for interim facilities, based on the Commission's conclusions that such facilities would largely not be necessary for LPTV and translator stations (a conclusion that appears to ignore stations displaced by 600 MHz auction winners that must abandon their licensed channel before they can move to a new channel that will not become available until full power and Class A stations in their market implement their own transition to new channels).
Under the NPRM, only costs incurred after January 1, 2017 would be reimbursable. Costs incurred in reaching an agreement in the upcoming settlement window for mutually exclusive applications would not be reimbursable (although costs to build out amended proposals approved pursuant to a settlement would be), nor would any costs arising from an auction, if required to resolve any mutual exclusivity.
Finally, recognizing that some LPTV and translator stations have received, or will receive, funds from T-Mobile and other wireless licensees causing displacements, or through other sources such as state grants, the NPRM requests comment on whether such stations still should be eligible to receive reimbursement from the FCC. The Commission also requests comment on whether stations eligible to receive funds from such sources should be required to pursue those funds before being eligible for reimbursement from the Commission, both to avoid the possibility of duplicative payments for the same expenses and to force licensees to obtain money from other sources before dipping into federal funds.
3. Reimbursement Procedures
In the NPRM, the Commission also proposes to adopt reimbursement procedures for LPTV and TV translator stations similar to those applied to full power and Class A television stations. These procedures would require that all stations believing they are, or will be, eligible to receive funds file an Eligibility Certification using the FCC's online LMS system. These Eligibility Certifications will document that the applicable station is, in fact, eligible for reimbursement. LPTV and TV translator stations would be required to prove that they were on-air during the required time frame by documenting its programming aired, providing power bills, or other means.
Licensees seeking reimbursement will also be required to file an initial Reimbursement Form identifying their existing broadcasting equipment, along with the types of costs they expect to incur and for which they will seek reimbursement. The Commission proposes creating a new catalogue of approved cost amounts to apply to LPTV and TV translator stations, as was done for full power and Class A stations, and incorporating that catalogue into the revised Reimbursement Form. Because many licensees will have incurred significant actual costs by the time the FCC adopts and releases these reimbursement forms, the NPRM suggests that licensees may submit actual costs where applicable instead of estimated costs.
Once all Eligibility Certifications and initial Reimbursement Forms have been submitted and reviewed by the Media Bureau, the Commission plans to issue an initial allocation to each eligible licensee. In the NPRM, the Commission requests comment on whether this allocation should be based on a percentage of anticipated and approved costs (as it was for television stations), or on some other calculation, such as a fixed allocation amount for licensees facing similar circumstances. In the event the total amount of reimbursement funds is not sufficient to fulfill all requests, the Commission proposes delegating to the Media Bureau the task of determining what costs should be prioritized. The NPRM suggests that hard costs will be prioritized over soft costs such as project management fees, but requests comment on the priority guidelines the Commission should direct the Media Bureau to apply, if any.
Once allocations are made, licensees will be entitled to draw down on those allocations by submitting documentation of actual incurred costs. As with full power and Class A stations, this will be done by updating a licensee's Reimbursement Request form. Prior to receiving any reimbursements, eligible licensees will also need to file confidential information about their destination bank account for payments, using the FCC Form 1876 and the CORES Incentive Auction Financial Module.
Once a licensee's final payment is made, which is supposed to occur by November 13, 2020, but may be extended until no later than July 3, 2023, the NPRM proposes requiring that licensees to retain relevant documentation for a period of 10 years. To attempt to prevent fraud, waste, and abuse, the Commission also, as it has done with television licensees, reserves the right to audit licensees who have requested and received reimbursement funds.
Comments
The LPTV and TV translator reimbursement program will clearly be very important to affected licensees, and anyone impacted by these rules may want to consider submitting comments on the NPRM. Comments will be due 30 days after the NPRM is published in the Federal Register, with Reply Comments due an additional 30 days after that. The REA directs the Commission to complete the rulemaking by March 23, 2019. Keep an eye on CommLawBlog.com for those specific deadlines once they are announced.
Although the Commission is attempting to move expeditiously in implementing the reimbursement program, it will likely still be some time before funds are available. Even after receiving Comments and Reply Comments, and adopting final rules, the Commission will need to finalize and receive approval from the Office of Management and Budget for the Eligibility Certifications and Reimbursement Forms before they can be filed. Those submissions will then need to be reviewed, along with the required financial information, before licensees can receive reimbursements. Nonetheless, any licensee expecting to claim reimbursement money should begin confirming their eligibility and should retain documentation of any expenses it incurs in the meantime.
Stay tuned to Part II where we'll cover what this means for FM Stations.