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If you need the complete document, download the WordPerfect version or Adobe Acrobat version, if available. ***************************************************************** Before the Federal Communications Commission Washington, D.C. 20554 In the Matter of Liability of ) ) SECOND GENERATION OF IOWA, LTD. ) ) Licensee of Television Station ) KFXA(TV), Cedar Rapids, Iowa ) Facility I.D. No. 35336 ) ) for a Forfeiture ) MEMORANDUM OPINION AND ORDER AND FORFEITURE ORDER Adopted: May 31, 2000 Released: June 1, 2000 By the Chief, Mass Media Bureau: 1. The Commission, by the Chief, Mass Media Bureau, acting pursuant to authority delegated by Section 0.283 of the Commission's Rules, 47 C.F.R.  0.283, has before it for consideration the following documents: (1) a Notice of Apparent Liability for forfeiture in the amount of seven thousand, five hundred dollars ($7,500) issued against Second Generation of Iowa, Ltd. (Second Generation), licensee of station KFXA(TV), Cedar Rapids, Iowa, in Second Generation of Iowa, Ltd. (KFXA(TV)), 13 FCC Rcd 3055 (MMB 1998) (KFXA(TV) NAL); and (2) Second Generation's Petition for Reconsideration requesting rescission or reduction of the forfeiture (Petition). The forfeiture was assessed for station KFXA(TV)'s apparent repeated violation of Section 73.670 of the Commission's Rules, 47 C.F.R.  73.670, which limits the amount of commercial matter that may be aired during children's television programming. 2. In KFXA NAL, we found that station KFXA(TV)'s record of exceeding the Commission's commercial limits on three occasions during the last license term constituted a repeated violation of Section 73.670 of the Commission's Rules. Accordingly, pursuant to Section 503(b) of the Communications Act of 1934, as amended, 47 U.S.C.  503(b), Second Generation was advised of its apparent liability for forfeiture in the amount of $7,500. That amount was reached after consideration of the factors set forth in Section 503(b)(2) of the Communications Act, and, in particular, the five criteria consisting of: (1) the number of instances of commercial overages; (2) the length of each overage; (3) the period of time over which the overages occurred; (4) whether or not the licensee established an effective program to ensure compliance; and (5) the specific reasons that the licensee gave for the overages. We applied these criteria to the facts of station KFXA(TV)'s case, considering the violations reported by Second Generation, namely three program-length commercials, the category of violations over which Congress expressed particular concern because young children often have difficulty distinguishing between commercials and programs. Based on the number and type of violations, which occurred over a four-day period, we concluded that children had been subjected to commercial matter greatly in excess of the limits contemplated by Congress when it enacted the Children's Television Act of 1990. We also noted the Commission's statement made at the time it delayed the effective date of Section 73.670 of the Rules from October 1, 1991, until January 1, 1992, that "giving the additional time to broadcasters and cable operators before compliance with the commercial limits is required will have the effect of enabling broadcasters and cable operators to hone their plans to ensure compliance . . . ." In doing so, we rejected inadvertent error, the reason Second Generation gave to explain the program-length commercials, as a basis for excusing station KFXA(TV)'s violations of the commercial limits. We added that, though station KFXA(TV) implemented procedures to prevent future violations of the children's television commercial limitations, this did not relieve Second Generation of liability for the violations which had occurred. 3. In its Petition, Second Generation contends that the amount of the forfeiture assessed in KFXA(TV) is excessive when compared to the nature of the violations and the size of the forfeitures the Commission has imposed in other cases. Upon such comparison, Second Generation argues, "it is clear that the Commission has given no meaningful consideration" to the factors set forth in Section 503 of the Communications Act, particularly whether or not the licensee had established an effective program to ensure compliance. In this regard, Second Generation maintains that, though initially not perfect, station KFXA(TV)'s procedures enabled the quick discovery of the error which caused the three program-length commercials, and criticizes us for failing to mention this in KFXA NAL. Second Generation also criticizes us for failing to mention that, once the error was discovered, station KFXA(TV) adopted additional, more stringent screening procedures which effectively prevented any further violations. In contrast, Second Generation asserts, in the cases it cites supra n. 4, the licensees had no procedures to protect against commercial overages and, in some instances, failed to take effective actions to prevent further violations. Accordingly, Second Generation submits that the "alacrity" by which station KFXA(TV) acted and the effectiveness of its additional measures are "mitigating factors which, when properly weighed, should reduce the penalty for the violation to a mere admoition [sic]." 4. Second Generation also argues that the characterization of station KFXA(TV)'s violations as "repeated" and "substantial" does not fit the facts. Technically, Second Generation concedes, the fact that program-length commercials occurred on three occasions constitutes a repeated violation. Nevertheless, Second Generation opines, more salient are the following facts: that all three violations involved a single commercial and occurred over a very short period of time, and that prompt, effective measures were taken to ensure that the violation would not be repeated in the future. Along this line, Second Generation maintains, the Commission has found a violation of the commercial limits to be repeated when there had been a large number of commercial overages, and only moderately higher forfeitures have been imposed in other cases involving "much more numerous and long lasting violations." For these reasons, Second Generation believes that station KFXA(TV)'s violations were "minor," not "substantial," and, therefore, warrant a minor sanction rather than a substantial fine. 5. Finally, Second Generation says that it "does not claim that it is 'financially unable' to pay a $7,500 forfeiture," but avers that the imposition of any forfeiture would have a serious adverse impact on station KFXA(TV)'s ability to serve the public interest because the station has suffered continuing losses. In support, Second Generation provides unaudited financial statements, asserting that station KFXA(TV) lost $1,422,496 in 1996, and $1,460,673 in 1997. Second Generation adds that, at the time it acquired station KFXA(TV) in 1995, the station had been dark for an extended period of time and its former licensee was on the brink of bankruptcy. Furthermore, in order to make station KFXA(TV) competitive and economically viable, Second Generation claims to have invested substantial sums in marketing, programming, promotions and improving the station's facilities. For all of these reasons, Second Generation concludes that the forfeiture assessed in KFXA NAL should be reconsidered and rescinded, and that no more than an admonition or, at most, a nominal fine should be imposed. DISCUSSION 6. Preliminarily, we note that Section 503 of the Communications Act affords the Commission a great deal of discretion in determining forfeiture amounts based upon all of the circumstances of each individual case. Given that discretion, we disagree with Second Generation's claim that the assessment of a $7,500 forfeiture against it is excessive in light of the amount of the forfeitures assessed in other cases, and we reject Second Generation's attempt to make a violation- by-violation comparison with those cases. In determining the forfeiture against Second Generation, we considered the factors set forth in Section 503 of the Communications Act, and compared the actions of Second Generation with the actions of licensees involved in similar cases. We did not assess a separate forfeiture amount for each violation, nor can Second Generation's actions be dissected in such a manner. Rather, we concluded that, as a whole, the facts of this case and relevant case law supported a $7,500 forfeiture against Second Generation. In this regard, the forfeiture at issue here is consistent with that imposed in a very similar case. In LeSea Broadcasting Corp. (WHKE(TV)), 10 FCC Rcd 4977 (MMB 1995) (LeSea Broadcasting), which we referred to in KFXA(TV) NAL, we assessed a $7,500 forfeiture for three program-length commercials which occurred over a period of approximately two months. The licensee in LeSea Broadcasting attributed its violations to human error, and indicated that its station's compliance procedures were modified and/or its personnel was instructed to prevent recurrence. Compared to the station in LeSea Broadcasting, station KFXA(TV) reported the same number and type of violations. In addition, Second Generation and the licensee in LeSea Broadcasting gave essentially the same reasons to explain their respective violations, which in both cases occurred over a short period of time. We stated in each case, moreover, that though the licensee may have implemented a plan or policies to prevent future violations, that did not relieve it of liability for the violations which had occurred. Having thus considered the Section 503 factors, as well as the similarities between their application in this case and in LeSea Broadcasting, where a $7,500 forfeiture was imposed, it was both appropriate and within our discretion to assess a comparable forfeiture in the amount of $7,500 against Second Generation. Accordingly, Second Generation's assertion that the forfeiture assessed in KFXA NAL should be rescinded and replaced with a letter of admonition, is without merit and shall be denied. 7. Also with respect to its excessive forfeiture argument, Second Generation's Petition apparently misconceives the seriousness with which the Commission has consistently considered and treated program-length commercials. When the Commission adopted its children's television commercial rules and policies pursuant to the Children's Television Act of 1990, the Commission specifically provided that, where a program is determined to be a program-length commercial, the entire program "would count toward the statutory commercial limits." In Children's Television Programming, the Commission made it abundantly clear that, independent of their duration, program-length commercials, by their very nature, are extremely serious, and that its program-length commercial policy "directly addresses a fundamental regulatory concern, that children who have difficulty enough distinguishing program content from unrelated commercial matter, not be all the more confused by a show that interweaves program content and commercial matter." To this end, in numerous cases assessing forfeitures for violations of the children's television commercial limits, the Commission has stated that, "Congress was particularly concerned about program-length commercials because young children often have difficulty distinguishing between commercials and programs." In accordance with this policy of treating program-length commercials as extremely serious violations of the children's television commercial limitations, the Commission has routinely assessed higher forfeitures for program-length commercials than for a significantly greater number of conventional overages. Therefore, we find our consideration of station KFXA(TV)'s three program-length commercials as substantial violations to be consistent with Commission policy and precedent. 8. Likewise, we affirm our determination that station KFXA(TV)'s three program-length commercials constituted a repeated violation of Section 73.670 of the Commission's Rules. Clearly, station KFXA(TV) repeatedly violated the commercial limits, as a program-length commercial occurred on more than one occasion. In fact, Second Generation concedes that the violations were "technically" repeated, but suggests that a violation be deemed "repeated" only in those cases involving a large number of commercial overages. We decline to adopt such an approach here, and note that the Commission has consistently found a repeated violation of the commercial limits in cases where a licensee reports more than one conventional overage or program-length commercial. 9. Finally, with respect to financial hardship, we note that the Commission has previously considered a licensee's financial inability to pay as a basis for reducing a forfeiture. Here, you do not claim financial inability to pay a forfeiture, but assert that station KFXA(TV) has suffered continuing losses. However, in analyzing a company's financial condition for forfeiture purposes, the Commission has stated that "[if] gross revenues are sufficiently great . . . the mere fact that a business is operating at a loss does not by itself mean that it cannot afford to pay a forfeiture." PJB Communications of Virginia, Inc., 7 FCC Rcd 2088, 2089 (1992). Our review of the financial data filed by Second Generation indicates that, although the company shows losses of $1,460,673 in 1997, its gross revenue was $3,716,348. We find this gross revenue sufficiently great to accommodate payment of the forfeiture assessed against station KFXA(TV), which, at $7,500, is the lowest forfeiture amount assessed for violations of the children's television commercial limits. Therefore, given the totality of the facts and circumstances before us, we do not believe that eliminating or reducing the $7,500 forfeiture is warranted. 10. Accordingly, IT IS ORDERED THAT the Petition for Reconsideration filed by Second Generation of Iowa, Ltd., requesting that the forfeiture assessed in Second Generation of Iowa, Ltd. (KFXA(TV)), 13 FCC Rcd 3055 (MMB 1998), be reduced or eliminated, IS DENIED. 11. IT IS FURTHER ORDERED THAT, pursuant to Section 503(b) of the Communications Act of 1934, as amended, 47 U.S.C.  503(b), Second Generation of Iowa, Ltd., licensee of television station KFXA(TV), Cedar Rapids, Iowa, FORFEIT to the United States the sum of seven thousand, five hundred dollars ($7,500) for repeated violations of Section 73.670 of the Commission's Rules, 47 C.F.R.  73.670. Payment of the forfeiture may be made by mailing to the Commission a check or similar instrument payable to the Federal Communications Commission. With regard to this forfeiture proceeding, Second Generation of Iowa, Ltd., may take any of the actions set forth in Section 1.80 of the Commission's Rules, 47 C.F.R.  1.80, as summarized in the attachment to this Memorandum Opinion and Order. FEDERAL COMMUNICATIONS COMMISSION Roy J. Stewart Chief, Mass Media Bureau cc: David Tillotson, Esq.