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The National Association of Broadcasters says it’s long been a mystery how and why the Federal Communications Commission calculates how much in annual fees broadcasters will pay. But this year it said that “checkered history” is especially frustrating since the FCC offers little or no explanation for why it proposes to raise what radio stations fork over by an average of 18-20%. “What morsels of information the Commission has provided are left unexplained and, if anything, appear to contradict other publicly available Commission data,” the NAB said. It means that as broadcasters are asked to offer their comments on what the trade group said amounts to an annual tax, without more clarity from the FCC the comment process is “virtually worthless.”

In a letter to the Commission last month, the NAB urged regulators to release more background on how they came up with this year’s fee schedule. But no such data was made public.

As Inside Radio has been reporting, under the FCC’s proposed menu of fees, most stations would see a double-digit increase in what they’d have to pay to the FCC. For the biggest FMs in the largest markets, the annual fee would jump to $22,650 compared to $18,880 last year. On the AM dial the FCC has taken a similar approach, proposing the biggest AMs see their annual fee go up to $17,950 from last year’s $15,050.

The NAB calls the proposed hike in radio fees “disproportionate,” considering the increase it’s asking from radio is roughly four-times the rate of growth for the agency’s overall budget. It said the Notice of Proposed Rulemaking seems to suggest there are fewer radio stations licensed, despite the FCC’s own data showing just the opposite is true. “The NPRM provides no coherent explanation for the steep and disproportionate increase directed to radio licensees,” the NAB said in comments filed with the agency.

Left with few specifics, the NAB instead said the FCC should reconsider how it collects regulatory fees more fundamentally. It proposes the agency go after “regulatory free riders” that benefit from the FCC’s framework without ever contributing toward the agency’s funding. It specifically mentions such tech industry heavyweights as Facebook, Amazon, Apple, Microsoft, Qualcomm, Cisco and Intel. “As it stands now, radio and TV stations, among others, are paying for the FCC staff to handle this work,” it said. By expanding the base of contributors, the NAB thinks the Commission can “significantly lower” the regulatory fees currently paid by some licensees.

The state broadcaster associations have also come out slamming the annual proposal. In joint comments filed by all 50 state broadcast groups, the associations say they too have concluded the FCC data calculating the fees includes “a serious error” that resulted in “artificially inflated fees” for radio stations. While it can’t be certain—agreeing with the NAB that the FCC’s fee-setting rationale is a “black box”—the state associations suggest the agency used the wrong number of radio stations when it was determining how much each outlet would pay. By their analysis, the associations say the difference totaled about 17%—or roughly the amount of the increase the FCC is seeking from stations.

“These errors and inconsistencies appear to force commercial radio and television stations to bear the entire cost of the Commission’s regulation of fee-exempt broadcast stations, while also burdening them with a substantial portion of the cost of regulating fee-exempt entities in non-broadcast fee categories,” the associations said in their joint filing.

Waiver For Incubated Stations?

The FCC in 2017 doubled the threshold for the so-called “de minimis rule” to $1,000—that’s the amount under which a company need not pay a regulatory fee if it falls below the figure. The theory is that the cost of processing small payments results in a net loss to the U.S. Treasury. That $1,000 trigger would remain in place again in 2019 under its proposal. But as the agency’s radio incubator program gets off the ground, there’s a push to also exempt those stations from paying an annual fee.

The National Association of Black Owned Broadcasters (NABOB) and the Multicultural Media, Telecom and Internet Council (MMTC) said new entrants and small broadcasters often face “significant difficulties” in raising the money they need to remain competitive. “Additional financial obligations, such as regulatory fees, may render it more difficult for incubated entities to thrive under the program,” they wrote in a joint filing. NABOB and MMTC propose the Commission exempt incubated stations from the annual fee requirement for the full eight-year license term in which their three-year incubator period is included. For the biggest FMs in the largest cities that could mean as much as $181,200 in additional capital to help them get on their feet.

The Commission is giving broadcasters until June 24 to file their reply comments in the proceeding. By late summer it’s likely to adopt the final order and the fees will be due on or before October 1.