Twenty-First Century Fox 2014 Annual Report Download - page 29

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imposition of mandatory arbitration and required interim carriage in the event the broadcaster and distributor fail to
reach a carriage agreement. In March 2011, the FCC responded by initiating a rulemaking to explore changes to its
retransmission consent regulations. The FCC tentatively concluded that it does not have the power to order
mandatory arbitration or interim carriage and instead sought comment on modifications to its rules affecting
retransmission consent negotiations, including providing more guidance under the FCC’s “good faith negotiation”
standard, improving notice to consumers in advance of possible disruptions of TV station carriage and eliminating
program exclusivity rules that restrict cable and satellite operators’ ability to negotiate for alternative access to
network programming. Among other things, the FCC sought comment on whether it should be a per se violation of
“good faith negotiation” requirements for a station to agree to give its network the right to approve retransmission
consent agreements or to comply with such an approval requirement in the network affiliation agreement. In March
2014, the FCC adopted limited changes to its retransmission consent rules to prohibit a television broadcast station
ranked among the top four stations (as measured by audience share) from negotiating retransmission consent jointly
with another top four station in the same geographic market if the stations are not commonly owned. The FCC also
called for further comment on whether to eliminate the program exclusivity rules. The broadcast industry, including
Fox Entertainment Group and Fox Television Stations, has filed comments opposing broader changes to the current
retransmission consent regime. It is not possible to predict the timing or outcome of the rulemaking or its effect on
the Company.
Legislation enacted in 1990 limits the amount of commercial matter that may be broadcast during
programming designed for children 12 years of age and younger. In addition, under FCC license renewal processing
guidelines, television stations are generally required to broadcast a minimum of three hours per week of
programming, which, among other requirements, must serve, as a “significant purpose,” the educational and
informational needs of children 16 years of age and under. A television station found not to have complied with the
programming requirements or commercial limitations could face sanctions, including monetary fines and the
possible non-renewal of its license.
FCC rules prohibit the broadcast by television and radio stations of indecent or profane material between the
hours of 6:00 a.m. and 10:00 p.m. Beginning in March 2004, the FCC implemented a new policy regarding this
prohibition and generally stepped up its enforcement of indecency violations. Under the new policy, the single use
of certain forbidden expletives, or variations of those expletives, were deemed “indecent” and “profane.” The FCC
also warned broadcasters that serious multiple violations of the indecency prohibition could lead to license
revocation proceedings, and that fines could be imposed for each incident in a single broadcast. Under the new FCC
policy, both complaints about indecency and FCC enforcement actions have increased, and several complaints
alleging the broadcast of alleged indecent or profane material by Fox Television Stations are pending at the FCC. As
of June 2006, the law authorizes the FCC to impose fines of up to $325,000 per incident for violation of the
prohibition against indecent and profane broadcasts.
On March 15, 2006, the FCC determined that the 2002 and 2003 Billboard Music Awards programs, both live
broadcasts on FOX, violated the prohibitions against indecent and profane broadcasts because they contained
isolated uses of the forbidden expletives. On June 21, 2012, the Supreme Court decided that the FCC failed to give
FOX fair notice that the isolated use of expletives could violate the indecency prohibition and therefore the
Commission’s standards as applied to the broadcasts in question were unconstitutionally vague. The Court vacated
the violations for the Billboard Music Awards broadcasts. On April 1, 2013, the FCC announced it had reduced the
backlog of pending indecency complaints and would focus its enforcement on “egregious” cases. The FCC also
sought public comment on whether its indecency policies should be altered in light of the Supreme Court’s decision.
It is not possible to predict the outcome of the FCC’s inquiry or how it will enforce its indecency rules in the future.
On February 22, 2008, the FCC issued an order imposing forfeitures of $7,000 each on 13 FOX Affiliates,
including five stations owned and operated by the Company, on the grounds that an April 7, 2003 episode of the
program Married by America violated the prohibition against indecent broadcasts. On April 4, 2008, the United
States commenced an action in federal district court in the District of Columbia against the five Company-owned
stations to collect the forfeitures imposed by the FCC. In 2012, the government voluntarily dismissed this collection
action. The Company subsequently petitioned the FCC to vacate the forfeitures against the Company and other FOX
stations that had been found to have violated the indecency prohibition. The petition remains pending and it is not
possible to predict the timing or outcome of FCC action.