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The Basics Of Lowest Unit Charge

The 2020 general election promises to be one of the most consequential in modern U.S. history. The Lowest Unit Charge (LUC) period begins Friday, September 4, 2020. With the flood of calls coming in to clarify LUC issues, it might be a good time to take a breath and review the basics of LUC.  

The LUC rules are complex and subject to varying interpretations, not all of which are entirely clear.  The basic point to remember is this – the political advertiser must be treated no worse than a station’s “most favored advertiser” without regard to the quantity of advertising purchased.  Thus, even though the political advertiser may be buying only a few spots over a relatively short period of time, the candidate must be treated as though he or she had been the station’s best advertiser to whom quantity discounts may have been provided.

To qualify for lowest unit rates, a Federal candidate must provide the broadcaster with a written certification that the candidate will comply with the notice requirements of the Bipartisan Campaign Reform Act (BCRA).  That certification must be provided at the time a use containing a direct reference to another candidate for the same office is purchased.

Classes of Time

 In the past, the Commission recognized limited classifications of broadcast time.  As selling practices in the industry continue to evolve, the Commission permits stations to have numerous classifications, so long as the differences between them are genuine and are clearly defined.

First, some definitions as the Commission has adopted them:

  • Fixed or fixed position – a spot that will be guaranteed to run on a particular date at a specified time.
  • Rotation – a spot which is to run within a specified portion of the broadcast day.
  • Run-of-schedule – a preemptible spot that may be scheduled at any time at the discretion of the station and may be preempted without prior notice to the advertiser.
  • Non-preemptible – a spot that is not subject to preemption during any particular daypart, program or time period. In contrast to a fixed or fixed position spot, a non-preemptible spot may run any time during the designated program, daypart or time period.
  • Preemptible with notice – a spot that may be preempted only after notice is provided to the advertiser by a specific time, for example one week before airing. Frequently, the advertiser will be given the opportunity to pay a higher rate in order to avoid preemption.

 Previously the Commission had treated all classes of immediately preemptible time as the same.  It now recognizes that many stations use a “yield maximization” system or “grid card” and that treating all such classes of time the same is not what Congress envisioned when it enacted Section 315 of the Communications Act.  The Commission also recognizes that commercial advertisers may be willing to take a “significant prospective risk of non-clearance” and accordingly pay less, a risk that a political advertiser might not be so willing to accept.

The Commission will permit stations to establish and define their own reasonable classes of immediately preemptible time.  These separate classifications, however, may not be based solely on price or the identity of the advertiser.  There must be some demonstrable benefit to the advertiser as well as a different obligation upon the station in each classification of time such as varying levels of preemption protection, scheduling flexibility or make good benefits.  There can only be a single class of preemptible time, however, where a station sells by auction so that any spot can be preempted by an advertiser who offers a higher price.  A station may establish separate classes of immediately preemptible time if it discloses a specific price (or limited price ranges) as well as the estimated probability that a spot at each price level will run.  Each classification of time must be disclosed to all candidates.  Candidates may file complaints challenging classifications viewed as manipulative or discriminatory with the Commission.

 The same policy will also apply to time that is preemptible with notice.  Stations may establish separate classes of time with varying periods of notice (one day, two days, one week, one month, etc.).  These classifications must also be clearly defined, fully disclosed and made available to all candidates.

A station generally may not steer a candidate to non-preemptible time by stating that preemptible time is sold out.  Preemptible time can be sold out only if its preemptible spots may be bumped by spots purchased at a fixed rate or by a higher class of immediately preemptible time.  Preemptible time may also be considered sold out if, as a matter of normal business practice, the station limits the number of spots sold in each class of preemptible time.  These practices must be followed throughout the year and cannot be restricted to political periods, unless changes are made for bona fide business purposes.

Rotations

Many stations use various forms of rotators to sell preemptible time.  The Commission recognizes distinctly different rotations as separate periods of time for calculating the lowest unit charge even if rotators overlap.  The reasonableness of a station’s classifications, will generally be based on their consistency with the station’s normal selling practices and upon objective criteria such as varying audience size or demographics which warrant differences in their prices.  A station must disclose to candidates either all of its rotations or a complete summary of its procedures for identifying all possible rotations that can be purchased.

The Commission also recognizes that prices may vary from week to week and even day to day.  Stations may calculate the lowest unit charge solely on the basis of spots that ran during the relevant 24-hour period, even if some of the spots were the result of contracts that are in effect over the course of several weekly rotations. 

Package Plans, Volume Discounts and Bonus Spots

 Package plans or bonus spots are not considered a separate classification of time.  All rates and bonuses offered to commercial advertisers in packages must be included in lowest unit charge calculations.  This includes all packages and bonus spots, whether individually negotiated or available to every advertiser.  When the package is simply a volume discount within a single class of spot, then the unit rate for each spot within the package is the package price divided by the number of spots.  When a package contains spots in more than one class or time period, though, a licensee may allocate the package price among the spots in each class or time period.  Otherwise, the rotation may result in establishing a new lowest unit rate for other classes of time within the rotation.

This is but a basic review of some of the essential elements of the Lowest Unit Charge concept.  These issues can be complex and difficult and often require consultation with your communications law firm.  This is an area where an ounce of prevention can avoid a pound of cure.