Underwriting Compliance Guide: 2. Underwriting Basics

2.      Underwriting Basics

            a.         Underwriting vs. advertising

The key difference between underwriting acknowledgements on an NCE station and advertising on a commercial radio station is that while both underwriting and advertising announcements identify the name of a for-profit business and perhaps their address and phone number, advertising also includes additional “value added” statements that not only say what the business is but why the listener should patronize that business.  Station start-up specialist Donna DiBianco, in her trainings has put it in a great way.  If you take a common business card, it will include the name of the business, the address, the phone number and possibly a URL or e-mail address.  That business card should be your starting point.  From there, you can very slowly work outward to add to the copy assuring that anything added is solely identification and does not cross the line into any kind of promotion. 

Here’s a very basic chart of what could be considered identification and what may be considered promotion (this list is not all inclusive):

Identification – Allowed on NCE

Promotion – Not allowed on NCE
  • Business name
  • Address
  • Telephone number
  • Website URL
  • Email address
  • A brief non-promotional description of the business (may include a short list of services or brands).
  • Legally required disclosures (“member, FDIC”).
  • Saying something is the biggest, the best, the oldest, the most, the largest, etc.
  • Statements that encourage the listener to patronize, visit, call or take other actions to support the business.
  • Putting ideas in the listener’s head.
  • Information about prices (including “free”), discounts, interest rates, etc.
  • Longer descriptions of a businesses’ products or services including long lists of products, services or benefits.
  • Interaction between two actors, skits, testimonials, background music, sound effects, jingles, etc.
  • The representative of the business “speaking” to the listeners instead of the station voice speaking.  Remember, it is the station thanking the underwriter, not a "purchase of time".  

            b.         Why would a business want to underwrite?

LPFM stations have an opportunity to provide their community with very unique and compelling programming that reaches to those living in the community and gets the community involved.  There are many LPFM stations that are currently operating are providing this type of unique service that is not provided by the “bigger” radio stations.  In these cases, there are businesses that will want to be associated with the LPFM station and the acknowledgement should reflect that special relationship between the underwriting business and the station. 

Relationships between LPFM stations and supporting businesses should last long term and not just during the big half-off sale on mattresses.  A good management of that relationship tied with a station being responsive to the community will help in the longevity of that support.

            c.         Messages on behalf of not-for-profit entities

An LPFM station may receive underwriting and a request to carry a message from a not-for-profit entity.  Section 399B of the Communications Act defines advertising as promotional messages from for-profit entities.  Non-profit entities are not subject to the restrictions on content.  This means when a station receives consideration from a bona-fide non-profit corporation, promotional material such as prices, calls-to-action, etc. are permitted.

It is my strong recommendation that LPFM stations handle not-for-profit entities the same as for-profit entities.  The primary reason is that it will leave a false expectation to future for-profit entities desiring to support the station.  This will avoid the uncomfortable situation where the for-profit entity inquires why a station is running promotional advertising for a non-profit, but they can’t do the same for their for-profit entity.  This will also keep a single policy for writing copy.

If the management or board of an LPFM station decides to permit promotional underwriting messages from not-for-profit entities, I recommend that first, you assure that the organization is truly not-for-profit.  Look for the entity on your state’s corporation search site to assure that they truly are a not-for-profit entity and that they are in good standing with the state.  If the organization provides proof of 501(c) status with the Internal Revenue Service, that is also acceptable.  LPFM stations that accept such promotional messages from not-for-profits should maintain a station file that includes copies of the advertising copy and evidence of the not-for-profit corporate status with the state or an IRS letter indicating non-profit status.  I would suggest that you maintain this until after the next license renewal cycle.  This will allow stations that may receive an Informal Objection or Petition to Deny during the renewal process evidence that the entity that the promotional message was for is a bona fide not-for-profit entity.    I note that this is not an FCC requirement, but it is a good defense if an objector calls your station out.

            d.         Consideration is more than just cash

Its important that station staff realizes that “consideration” is more than just cash payments.  Consideration is anything of value that is received by the station.  This can include things like:

  • concert tickets
  • “swag”
  • promotional CDs, records and tapes
  • gift cards
  • donations of equipment and software
  • online services (web hosting, streaming, phone services, etc.)
  • non-tangible services (such as site rent, printing, studio rental)
  • human services (manual labor, administrative services, etc.)

In these cases, any message that acknowledges a for-profit entity must conform to the FCC’s underwriting acknowledgement policy in the same manner as if they were to make a cash donation to the station.

DISCLAIMER: THIS MANUAL WAS NOT WRITTEN BY AN ATTORNEY AND THEREFORE SHOULD NOT BE CONSTRUED AS LEGAL ADVICE.  REC NETWORKS IS NOT RESPONSIBLE FOR ANY CONSEQUENTIAL DAMAGES THAT MAY ARISE FROM THE USE OF THIS MANUAL.  THIS GUIDE IS BASED ON 20 YEARS OF KNOWLEDGE OF THE NON-COMMERCIAL (INCLUDING LPFM) BROADCAST SERVICE.