Don’t Take License Renewals Lightly

Renewals are already underway for radio stations and the license renewal process for television stations will begin next April for television stations in the Washington, Maryland, Virginia and West Virginia markets. The three-year renewal period will end in 2015, with license renewals for stations in Delaware and Pennsylvania. 

Given our jam-packed agenda for handling day-to-day challenges, one-to-three years from today may seem a long way off. But longtime broadcast and telecom attorney Lee Shubert, principal of the media and entertainment law firm Sciarrino & Shubert PLLC, says licensees should begin to prepare now for the renewal process.

Shubert, whose advice may be found in an article entitled “Renewals in the Mist” in the March-April issue of Financial Manager magazine, warns the renewal process can be “deceptively treacherous.” This is largely because the bulk of FCC Form 303-S, the Application for Renewal of a Broadcast Station License “consists of a series of certifications that represent a quagmire of potential liability.”

To get a sense of what he means, consider that the instructions for the renewal application consume some 30 pages of single-spaced explanation, detail and worksheets. While many pages in those instructions encompass directions for other broadcast licensees, they also contain a lot of detail — and a lot of potential exposure — for TV station licensees.

Shubert also points out that the certifications cover the entire license term of eight years. This means that stations should have adequate records to document each of the quarterly issues/programs lists in their public inspection files (PIFs) for all 32 quarters. 

Given that most of us have trouble documenting what happened last month, let alone five or more years ago, keeping public files current is one of the best ways to prepare for your station’s renewal. 

Consider…      

The renewal application will require each licensee to certify that its PIF was maintained in full compliance with the FCC rules, including the addition of quarterly lists. If a station isn’t absolutely certain whether the public file was accurately maintained, due to personnel changes or other circumstances, submitting an affirmative certification represents a potential liability. Shubert says this is particularly true if a licensee’s classic nemesis — the disgruntled former employee — comes forward to allege otherwise.

In situations where a station can’t certify the public file was maintained in accordance with FCC regulations, it will need to attach an exhibit to its license renewal application explaining the negative response. “A ‘no’ response without an accompanying exhibit potentially may result in the dismissal of the license renewal application,” Shubert warns.

Shubert also reminds us that a “no” response or candid admission that a licensee failed to strictly adhere to the commission’s rules will also almost certainly result in a fine. “The typical penalty for failing to properly maintain a station’s PIF — including the mere omission of a single quarterly issues/programs list — is $7,000 to $10,000 or more, depending on the nature of the error,” he reports.

In assisting broadcasters with the last round of license renewals, Shubert recommended that any licensee uncertain about the absolute nature of its certification response provide an affirmative response as well as an explanatory exhibit to “clarify the response in an exculpatory manner.” So far, he has found, “that approach has satisfied the FCC and avoided penalties.”

As Shubert concludes, the most important thing to avoid is a cavalier approach to license renewal certifications. “Be mindful that your station license is probably your most valuable business asset, and that it is at jeopardy during the license,” he advises.

If you want to appreciate exactly how valuable your station’s license is to your company, just imagine what your business would be worth without one. Earlier this month, Bond & Pecaro founder John Sanders told TVNewsCheck that station values are on the upswing, getting into cash flow multiples in the 9-to-12 times range. Sanders went on to say that another barometer is the state of publicly traded debt, “which 18 months ago or so, may have been trading at 30 or 40 cents on the dollar and now it’s back up pretty much trading at par, which is another way of saying the world looks at stations and thinks that they’re worth about what they say they’re worth.”

Of course, valuations are likely to be impacted by the FCC’s plans to purchase the broadcast spectrum it licenses to stations. In a recent column, TVNewsCheck’s Harry Jessell pointed out there are real concerns with the valuation formulas that would be used by the FCC for these purchases.The industry also needs to be concerned about the damage that could be caused by “repacking” the spectrum. As NAB President Gordon Smith summed it up for TVNewsCheck, “My concern is not so much with the auction as it is having sufficient prospective language in [authorizing legislation] as to repacking so our signals are not degraded, our opportunities aren’t diminished and our costs don’t go up.”

With the FCC’s spectrum purchasing plans coinciding with the license renewal window, there are even more reasons to ensure you’re fully prepared for your station’s license renewal. Given the history of special interest group involvement in the renewal process, this seems like a situation where foxes could be the ones guarding the chicken coop, or be the ones invited to enter it, or both.

Regardless of how these factors may turn out to affect your license renewal, I join Lee Shubert in encouraging you to invest in professional assistance from FCC counsel and professional consulting engineers as part of preparing your license renewal application. It truly is “the air broadcasters breathe,” as NAB and Jessell have so aptly described it.

In addition to Shubert’s column, MFM will tackle the financial and administrative implications of license renewals as part of an FCC Update session at Media Finance Focus 2011, the 51^st annual conference for MFM and its BCCA subsidiary. Moderated by Frank Jazzo, Washington counsel for several state broadcast associations and co-managing Member of Fletcher, Heald & Hildreth, the session’s panelists will include Ann Bobeck, associate general counsel for NAB; John Burgett, communications attorney with Wiley Rein; Kevin Latek, member in the communications practice group at Dow Lohnes; and former NAB SVP and general counsel Jack Goodman, from the Law Offices of Jack Goodman.

More information about the session and Media Finance Focus, which will be held at the Westin Peachtree Plaza in Atlanta from May 15-17, may be found on MFM’s website; we hope to see you there. It’s one of the best ways to ensure many happy returns on your investment in building, managing and sustaining an enterprise that’s valuable to your viewers, your advertisers, the communities you serve and your ownership.

Mary M. Collins is president & CEO of the Media Financial Management Association and its BCCA subsidiary. Her column appears in TVNewsCheck every other week. You can read her earlier columns here.