Web Broker Ad Sales Shouldn’t Affect Political Rates, FCC Told
Broadcasters asked the FCC to clarify that sales of ads in bulk through third-party websites (CD July 9 p11) shouldn’t be reflected in the rates that radio and TV stations offer to federal candidates. NAB, 47 state broadcast associations, Gannett, Media General and other companies said three decades of FCC precedent mean that ads sold through nonbroadcast networks should not be subject to the lowest unit charges (LUC). At stake is whether broadcasters must directly offer politicians rates that could be even lower for airtime, because the Internet auction sites offer advertisers lower prices than they could get if they bought commercials from individual stations. Also at stake is the development of what many FCC filings referred to as “nascent” industry of Google’s dMarc Broadcasting, Bid4Spots, SoftWave Media Exchange and others that sell unwanted airtime.
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The commission should apply current ad rules to Internet brokers so broadcasters can avoid having to use those ad rates in LUC calculations, said filings from broadcasters submitted as part of an FCC request for comments on the subject. Since passage of the Federal Election Campaign Act in 1971, candidates have been able to get ad rates from broadcasters and cable operators similar to those given to a “'most favored advertiser,'” said NAB. In 1975, the commission said LUCs did not need to take into account deals in which a national organization coordinates ad sales for a group of stations, according to NAB. One year later, the FCC said that ad transactions through “unwired networks” were exempt from LUC calculations. “Advertising sold online is purchased at rates unavailable to even the most favored commercial advertiser who seeks to purchase time directly from the station,” said NAB. “Internet sales programs provide stations an opportunity to sell remnant inventory to advertisers whom they may not be able to attract on an individual station basis.”
A coalition of 47 state broadcast lobbying groups urged the FCC to act quickly, before the 2008 presidential campaign heats up further. With the earliest presidential primaries slated for January, politicians will be able to get LUCs starting in December, said the broadcasters. Without quick action, “this matter has the potential of becoming a major regulatory headache for stations, political candidates and the companies,” said the state groups. “The cost to any station that ‘gets it wrong’ can be disastrous, not only in terms of FCC fines, but also in the chaos caused to day-to-day operations.” In a joint filing Monday, Allbritton, Gannett, Media General and Meredith noted that the commission has found that both ad sales by both “'wired'” and “'unwired'” networks did not affect LUC rates. Such exemptions also applied to groups of cable systems, said the broadcasters. They said the FCC shouldn’t “rush to regulate a new business model.”
Indeed, Google began its dMarc ad auction service only in 2006, said a filing by the Internet search company. Google is among the few websites brokering radio ads, said Stanford Group analyst Clay Moran. His brother Fred Moran, also of Stanford, estimated that less than $100 million in radio ads were sold via Google and other brokers in 2006, compared to total radio ad sales of $20 billion. “It’s a tiny business at this point,” said Fred Moran. “That industry is just emerging.” Revenue at Bid4Spots more than quadrupled last year from 2005 and is on track to rise by a similar percentage this year, said President David Newmark. Politicians have used Bid4Spots to buy ads, and radio stations use the company to sell ads shortly before they air, he added. Should the FCC find against broadcasters, they could raise their minimum bid prices to be no less than their current LUCs, said Newmark.
Brokers emphasized their services don’t let advertisers buy spots on specific stations and instead let them target cities and music formats. “Throughout the process, the interface does not display or enable requests for placement on any particular broadcast station,” said Google. It said the FCC should take quick action because the business is young. “Given the nascency and flexibility of the developing advertising aggregation and auction platform, the Commission should expeditiously provide guidance” to radio and TV stations. SoftWave compared its system to an unwired network in arguing that ads it brokers should not count toward LUC charges. Bid4Spots said the FCC should treat its product the same way it deals with other multi-station sales arrangements.
Only one filing said the FCC should apply LUCs to ads sold through websites. LUC Media Group, which buys time for Democratic candidates, said the Communications Act does not exclude such ad sales because politicians should get the lowest possible rates. “An Internet sales program is nothing more than an automated ‘fire sale,'” said the company. The FCC in 1991 ruled that such deals should be handled no differently than others, said the company. “A fire sale conducted over the Internet is no different than any other type of fire sale.”