D.C. Circuit Rebuffs SoundExchange in CRB Appeal of SDARS/PSS Royalty Rates

But Sirius XM, which succeeded before the CRB, may not be happy that its victory was upheld.

When it comes to setting copyright royalty rates, the Copyright Royalty Board (CRB) enjoys considerable leeway. Just ask the U.S. Court of Appeals for the District of Columbia Circuit.

In an across-the-board victory for the CRB, the Court has upheld the CRB’s final 2013 ruling determining royalty rates for the Satellite Digital Audio Radio Service (SDARS, a service with only one operator, Sirius XM) and Pre-existing Subscription Services (PSS) (e.g., the appellant in this case, Music Choice). While the particular rates at issue in the appeal are probably not of much direct interest to most of our readers, a couple of aspects of the Court’s opinion could come into play when the CRB eventually resolves “Webcasting IV”. That’s the proceeding that will establish rates and terms for webcasting by radio stations and other non-interactive services for the years 2016-2020.

First, there’s the question of how the CRB reaches a particular royalty rate. If the affected parties (i.e., service providers and copyright owners) can’t come to mutually agreeable terms, the question goes to the CRB, which conducts a trial-type proceeding. The interested parties propose rates, or rate ranges, and then offer evidence to support their respective proposals. Each side gets to challenge the other’s evidence. In the end, the CRB reviews all the evidence and comes up with rates to apply over the coming five-year term.

For the period ending 2012, Sirius XM was paying 8% of its gross revenues under the then-operative CRB rates; the corresponding rate for PSS operators was 7.5% of gross revenues. SoundExchange, representing copyright holders, wanted both numbers to go up … a lot. It proposed that SDARS rates jump to 12% in 2013 and then continue to climb to 20% by 2017. SoundExchange had even more extravagant ideas for PSS rates: in its view the current rate should be doubled to 15% for 2013 and then proceed upward to a whopping 45% of gross revenues in 2017. Not surprisingly, Sirius XM and Music Choice disagreed. Both wanted their respective rates to be reduced below 2012 levels: Sirius XM was thinking of SDARS rates down in the 5%-7% range, and Music Choice was thinking even smaller, proposing 2.6% on the PSS side.

Faced with the wide gulf between the various proposals, the CRB reviewed the evidence and concluded that the SDARS rate should start at 9% in 2013 and then proceed upward in annual 0.5%  steps until it reaches 11% in 2017. On the PSS side, the CRB concluded that the 2013 rate should be 8%, rising to 8.5% for 2014-2017. In taking this route, the CRB rejected both sets of proposed rates and instead opted to use the current 2012 rates as “guideposts” for future rates. In the SDARS context, it also looked at its own deliberations in the previous rate setting proceeding (covering 2005-2012), in which the CRB had concluded that 13% was an upper limit for SDARS rates. 

Needless to say, SoundExchange wasn’t pleased on either the SDARS or the PSS front, and Music Choice was none too pleased, either. (Sirius XM appears to have been OK with the CRB’s SDARS rates.) Both SoundExchange and Music Choice challenged the CRB both on its reliance supposedly outdated “guideposts” and on its refusal to accept the parties’ proposals. The Court, however, had no problem with the CRB’s approach. As the Court saw it, the CRB is entitled to a boatload of deference when it comes to rate-setting, and the CRB’s approach in this proceeding was well within the bounds of the discretion accorded it by Congress.

This is important to keep in mind when it comes to Webcasting IV. While we can expect SoundExchange to propose significant increases in rates there, it should be comforting to know that: (a) the CRB does have a history of preferring more gradual step-ups tied at least in part to existing rates; and (b) the Court is fine with that approach. In other words, if the CRB in Webcasting IV finds itself in the same situation as in the SDARS/PSS proceeding, with wildly varying proposed rates, the CRB may very well take a more measured, split-the-baby course. And if it does so, there’s a reasonably good chance that it will be upheld.

The second interesting point involved the definition of “gross revenues”. Obviously, that term – the second half of the rate calculation – is as important as the percentages to be applied. And since the dispute about that definition involved (among other things) questions relating to pre-1972 sound recordings – a hot issue of late, as CommLawBlog readers know – the Court’s decision deserves attention.

The CRB had agreed to let Sirius XM deduct from its “gross revenues” revenue attributable to the performance of pre-1972 sound recordings because, as we all know by now, there is no federal public performance copyright protection for such recordings. In response, SoundExchange claimed that that deduction amounted to “double deducting”. Since, unlike the feds, some states do provide performance copyright protection for pre-1972 recordings, SoundExchange offered two alternative analyses. In states which do not offer such protection, according to SoundExchange, the CRB’s established benchmark rates already reflect the “diminished value” of these recordings, which means that a CRB-approved deduction would be a double-dip. And in the other states, there is no need for any such deduction, at least as SoundExchange sees it.

The Court wasn’t buying any of it. It agreed with the CRB that there was plenty of evidence indicating that the benchmark rates do not already reflect the value of pre-1972 recordings. And the Court also concluded that there’s nothing in the Copyright Act concerning the effect of state-imposed copyright protection, so that factor need not be considered by the CRB in its rate-setting.

In the course of this discussion, the D.C. Circuit noted (in agreement with the CRB) that there is no federal copyright protection for pre-1972 sound recordings. While that may be reassuring on some level, it is no cause for celebration: as I have reported, three courts in California and New York have indicated that state laws creating certain copyright protection for these pre-1972 sound recordings extend to the public performance right. (In all three of those suits Sirius XM was the loser.) It’s at least possible that the D.C. Circuit’s ruling prominent reminder of the non-existence of federal protection might hasten similar lawsuits at the state level – with similar results. It might even spawn a movement to legislatively expand state law protection for pre-1972 sound recordings. Or it might give rise to efforts to work a legislative fix at the federal level – and who knows what Congress might also choose to include (hint, hint: other Performance Rights?).

And if any (or all) of those circumstances do unfold, that could be bad news for Sirius XM, which has thus far enjoyed a largely royalty-free ride when it comes to pre-1972 recordings. So, even though it was the only party that didn’t disagree with the CRB’s ruling, Sirius XM’s victory on the issue of how to calculate gross revenues could turn out to be pyrrhic for Sirius XM and unfortunate for others.

Aereo Armageddon Ahead?

Warring parties agree on one thing: the Supreme Court should intervene ASAP – but will the Supremes agree to take the case now?

The Aereo War rages on, fought (like most wars) on several fronts, but always with an eye toward that epic battle destined to change the face of the conflict entirely. Yorktown. Waterloo. Gettysburg. Normandy.

Possibly soon to be added to that list: Washington, likely site of the Aereo Armageddon. More specifically, One First Street, N.E. – where the U.S. Supreme Court sits.

And it could happen sooner than many expected. That’s because the major broadcast networks, having lost their bids to shut Aereo down in New York and Boston, have sought Supreme Court review of the New York decision. And, in an interesting gambit, Aereo has taken the unusual step of agreeing with its adversaries. Aereo says that the Supreme Court should take the case. While that is no guarantee that the Court will agree that the issues are now ripe for resolution at the highest level, such unanimity among the parties certainly doesn’t hurt.

Before we get ahead of ourselves, a bit of history.

Aereo, of course, is the innovative service that captures over-the-air broadcast signals with dime-sized antennas and then makes those signals available to subscribers via the Internet device(s) of their choice. Aereo does this without the consent of, or any royalty payments to, the broadcasters whose signals are re-transmitted. Broadcasters feel Aereo’s service constitutes a “public performance” of content inconsistent with the broadcasters’ exclusive rights under the Copyright Act. (You can find lots of reporting on Aereo’s litigation here.)

Aereo began operating in March 2012 in New York. The major broadcast networks promptly filed a lawsuit in the U.S. District Court for the Southern District of New York alleging copyright infringement. They also asked the court to preliminarily enjoin Aereo from operating during the pendency of the trial. Judge Alison Nathan, the presiding judge, denied that request. Her ruling was upheld, 2-1, by a three-judge panel of the United States Court of Appeals for the Second Circuit; the full Second Circuit sitting en banc  declined to review the matter. So Judge Alison’s denial of the preliminary injunction remains in place and Aereo has continued operating in New York. Technically, the Second Circuit’s affirmance of her order is what is now knocking on the Supreme Court’s door.

But that’s just one front in the Aereo War.

Aereo has since commenced service in Boston, Atlanta, Salt Lake City, Miami and Houston.

It has been sued by broadcasters in Boston (in July 2013) and Utah (twice, in October 2013). Aereo has tried – so far unsuccessfully – to narrow the battlefield by asking the judges in Boston and Utah to transfer their respective cases back to the seemingly Aereo-friendly courtroom of Judge Nathan in New York. The Boston judge denied that request; the Utah court has not yet acted on the request pending before it.

The denial of the Boston transfer motion was not really a loss for Aereo, though. The Boston judge, following the path blazed by Judge Nathan in New York, denied the broadcaster-plaintiff’s request for a preliminary injunction, leaving Aereo up and running there. (A similar request filed in Utah has yet to be ruled on.) An appeal of the Boston ruling has recently been filed with the First Circuit.

So far, so good for Aereo. It’s 2-0 in the district courts and 1-0 on appeal in the Second Circuit.

But Aereo has a doppelganger of sorts. Shortly after Aereo appeared on the scene, a company called FilmOn X (née  “Aereokiller”) began offering a service similar to Aereo’s in Los Angeles. (Some might say that FilmOn X is a copycat of Aereo – dime-sized antennas and all – but FilmOn X claims that its technology is actually superior to Aereo’s.)

FilmOn X was sued by broadcasters in Los Angeles in 2012 and again in Washington, D.C., where it began operating in 2013. In the former case, Judge George Wu of the U.S. District Court for the Central District of California agreed with the broadcaster-plaintiffs and granted their motion for preliminary injunction, thereby ordering FilmOn X to stop operating in L.A. Judge Wu’s order is currently on appeal to the Ninth Circuit, which heard oral argument in late August, 2013, but has yet to issue a decision.

Meanwhile, in Washington, U.S. District Judge Rosemary M. Collyer also preliminarily enjoined FilmOn X from operating for the time being. But she went further than Judge Wu in L.A. and barred FilmOn X from operating anywhere in the country other than the states within the Second Circuit’s jurisdiction (i.e., New York, Connecticut and Vermont). She carved the Second Circuit out in deference to the Aereo decision. An appeal filed by FilmOn X with the D.C. Circuit is in its early stages.

So unlike Aereo, FilmOn X isn’t doing so well: 0-2 in the district courts.

Where does that leave us? Five distinct lawsuits in five different venues, producing (so far) four distinct District Court rulings: the defendant streaming service avoids preliminary injunctions in New York and Boston, but gets enjoined in L.A. and D.C., with the D.C. judge upping the ante by extending the injunction almost nationwide. On the appellate side, only one U.S. Court of Appeals – the Second – has yet weighed in, but a decision out of the Ninth Circuit could come out any time now, and appeals have been started in the First and D.C. Circuits as well.

Which brings us to Supreme Court. 

Ordinarily, the Court is reluctant to agree to review a case unless it reflects a “circuit split”, that is, a situation in which inconsistent decisions have been reached at the Court of Appeals stage. In such a circumstance, the Supremes can step in a resolve the inconsistency and restore uniformity to the law. Here, even though only one Court of Appeals – the Second – has technically taken a position, the divergent decisions reached thus far in the various venues do seem to reflect a pretty clear split. That’s one of the primary reasons that the broadcasters in the Second Circuit case have petitioned the Supreme Court to review the Second Circuit’s ruling in favor of Aereo.

In their petition (full legal name: “petition for writ of certiorari”), the broadcasters home in on the dangers presented by the Second Circuit’s decision. They argue that the Court’s intervention is “urgently needed” both because: (a) Aereo’s business model is built on the unauthorized for-profit exploitation of others’ copyrighted works, a practice for which the Supremes have historically shown little tolerance; and (b) the “viability of over-the-air broadcast television” is threatened. 

The detailed substantive arguments largely track those advanced by the broadcasters in the lower courts, arguments that were accepted by Judge Denny Chin (a Second Circuit judge who strongly disagreed with his colleagues) and the District Courts in the L.A. and D.C. FilmOn X cases. To summarize briefly: The Copyright Act gives the copyright holder the exclusive right to make “public performances” of their copyrighted works. The Act’s definition of “public performance”, and Congress’s intent underlying that language, are clear: “performance” refers to the copyrighted broadcast program. 

That definition was enacted by Congress in direct response to the Supreme Court’s decision in the Fortnightly case in which the Court said that cable television systems were not engaged in separate performances when retransmitting broadcast programming. The key is not, as the Second Circuit believes, how many people can receive a particular transmission of a broadcast; rather, the crucial question is how many can receive the broadcast itself. In essence, the Second Circuit has confused “transmission” with “performance”. 

These are not clear-cut semantic distinctions. Clarifying the confusion will be the Supreme Court’s main task.

The broadcasters also argue that the Second Circuit’s misreading of the Copyright Act will cause the broadcast industry significant harm. It is a “direct assault” on a “well-established and statutorily protected” business model. As the broadcasters note, Aereo – emboldened by the Second Circuit decision – has already expanded to several other cities, with plans to enter 20 more in 2013 alone. And presumably in response, major cable and satellite companies appear to have altered their business practices with regard to retransmission consent. That poses a clear financial threat to broadcasters. And beyond retransmission consent, there is also a danger to the broadcasters’ ratings which underpin advertising rates: the Nielsen ratings system will not reflect Aereo viewers.

So will the Court grant the broadcasters’ petition? 

When I first sat down to write this post, I didn’t think so. The Supremes are notoriously reluctant to decide an issue – especially a difficult one – until they have to. (Recent example: The current court reviewed the FCC’s indecency rules not once, but twice, in a matter of three years but they still declined to decide whether those rules violate of the First Amendment.) 

Plus, there are a lot of potential “outs” regarding this case: the Ninth Circuit and the D.C. Circuit could side with their Second Circuit confrères and reverse the L.A. and D.C. district court rulings, effectively undermining any notion of a circuit split.  Perhaps more importantly, all these cases – even the Second Circuit case – are still in their infancy. They involve only motions for preliminary injunction at this point. That means that no trial has yet occurred in any of the cases, so no court has yet compiled a full evidentiary record on which the Supreme Court may confidently rely.

So I was figuring the broadcasters’ petition would be denied.

But then Aereo, in response to the broadcasters’ petition, urged the Justices to take the case. 

Ordinarily, parties in Aereo’s position, having won in the lower court, are not inclined to risk taking points off the board like that. When you think about it, though, Aereo’s move makes perfect sense because Aereo has at least a couple of reasons for wanting to accelerate this case to closure now.

First, the broadcasters are obviously willing to litigate their arguments anywhere and everywhere possible, which gives rise to the prospect of extended litigation in courts across the country. That imposes a direct financial burden on Aereo, and also creates uncertainty that “undermines Aereo’s efforts to expand its footprint and further develop its business.”

Second, the factual record now in front of the Supremes is the factual record that led the Second Circuit to come down on Aereo’s side. The record in the L.A. and D.C. cases didn’t work so well for Aereo’s counterpart there, FilmOn X. Why wait around and risk having other facts crop up that might not be helpful to Aereo?

Third, technology changes fast. While the Supreme Court might traditionally be inclined to sit back and wait to see how things shake out over the long haul, that approach doesn’t work as well in an age of rapid technological development. Parties in high tech industries often cannot as a practical matter wait three years to determine whether every new technology is legal or not. 

And while Aereo’s decision to support Supreme Court review now rather than later may be motivated more by Aereo’s own strategic self interest than by altruism, it caused me to do a 180 – I think it’s very likely the Court could take this case, possibly as early as mid-January (which might get us a decision on the merits by July, if everything falls into place just right).

Cablevision apparently thinks so too.  I’m deducing that from a “white paper” it released entitled “Aereo and the Public Performance Right”.

Cablevision essentially channels Marshall McLuhan in Annie Hall, slamming people who think, wrongly, that they fully grasp another’s theories. Here, Aereo’s legal theory derives largely, if not entirely, from the Second Circuit’s 2008 decision in Cablevision (which involved the copyright implications of Cablevision’s Remote DVR service), so Cablevision may rightly claim some parental rights to the theory underlying that decision. Cablevision’s White Paper reads something like a paraphrase of McLuhan (reading Woody Allen’s script): “We’ve read what you were arguing! You know nothing of our work! How you were able to transmit anything is totally amazing!”

The White Paper tries to put distance between the Cablevision case and Aereo’s. That’s not surprising.  Cablevision stands to lose a lot no matter which side ultimately wins before the Supreme Court. If Aereo wins, Cablevision, the cable company, will have a new competitor. If the broadcasters win, Cablevision’s ability to innovate could greatly be curtailed; its current Remote DVR service, blessed at this point only by the Second Circuit, could be shut down.

Cablevision argues the broadcasters’ interpretation of the Copyright Act is wrong. The broadcasters try to differentiate between a “performance” and a “transmission” but those are actually the same thing, in Cablevision’s view, so the broadcasters are wrong and should lose. 

But, Cablevision says, Aereo is wrong, too. Aereo’s service is completely unlike Cablevision’s Remote DVR service (and most cloud services available today) because Aereo’s hard drive copies are not even lawful in the first place: “Subscribers have no fair use right to make copies merely so they can receive programming over an unlicensed television delivery service”. This is something many have wondered as well: yes, Aereo is simply taking over-the-air signals with an antenna like anyone else could and yes, Aereo is simply helping its subscribers play that content back via an Internet device, but is it legal to combine the two?

We can expect to see the arguments set out in the White Paper show up in an amicus brief from Cablevision when the Aereo case ultimately gets to the Supreme Court. In which case we will have three key players, each weighing in with its view of the law, with just one thing in common: each of the three players – Aereo, broadcasters, Cablevision – is convinced that the other two are wrong, so it’s time for the Supreme Court to decide who is right. 

I agree.

AereoKiller Cuffed Nationwide

U.S. District Judge in D.C. enjoins Aereo-like service everywhere but the Second Circuit.

Score a big one for the broadcasters! A federal district judge in the District of Columbia has enjoined FilmOn X (that would be the folks formerly known as “Aereokiller” who operated at “BarryDriller.com”) from operating its dime-sized wannabe-MVPD service, much like a judge did in Los Angeles late last year.

But get this – the D.C. judge went way further than the L.A. judge by extending the injunction NATIONWIDE (except for New York, Vermont and Connecticut).

To say that this complicates matters in the overall Aereo/Aereokiller universe would be an understatement.

First things first. The latest decision was issued by Judge Rosemary M. Collyer, of the U.S. District Court for the District of Columbia. FilmOn X had cranked up its service in the D.C. area last spring, which prompted D.C. broadcasters to ask the D.C. federal court to shut it down – essentially the same scenario that had already played out in New York (with Aereo’s similar service) and L.A. (where FilmOn X, but not Aereo, was the defendant). As our readers already know, the Second Circuit judges in NYC declined to enjoin Aereo’s operation, but a U.S District Judge in the Ninth Circuit in L.A. did enjoin FilmOn X. (We’re still awaiting a decision from the three-judge panel of the Ninth Circuit reviewing that latter decision.)

Both the NYC and L.A. decisions were based on the same facts and underlying precedent presented to Judge Collyer, so she had two flatly inconsistent model approaches (in her words, “a binary choice”) that she could use as guidance. She opted to go West Coast, but with a couple of twists.

First, instead of simply citing Judge Wu’s decision in the initial FilmOn X case and chiming in “me too”, Judge Collyer undertook her own detailed analysis of the Copyright Act and its legislative history. Her conclusion: the FilmOn X operation clearly infringes the plaintiffs’ copyrights. In so doing, she tipped her hat to Judge Chin’s dissents in the Second Circuit litigation and Judge Wu’s analysis in the L.A. case. But she went further than either of those by (among other things) directly challenging the claim that the Aereo/FilmOn X mini-antenna approach creates a cute little “one-to-one relationship” between a single mini-antenna and a single viewer/subscriber. Characterizing that as a “charitable description”, Judge Collyer offered a far more critical assessment:

[W]hile each user may have an assigned antenna and hard-drive directory temporarily, the mini-antennas are networked together so that a single tuner server and router, video encoder, and distribution endpoint can communicate with them all. The television signal is captured by FilmOn X and passes through FilmOn X’s single electronic transmission process of aggregating servers and electronic equipment. This system, through which any member of the public who clicks on the link for the video feed, is hardly akin to an individual user stringing up a television antenna on the roof.

Her take on the technology skewered the Aereo/FilmOn X theory of the case.

Not stopping there, she also found considerable support in the Copyright Act for the notion that Congress intended to extend copyright protection to transmissions through “all kinds of equipment”, including the innovative mini-antennas deployed by FilmOn X.

Having determined that the broadcaster plaintiffs are likely to win on the merits of the case and would suffer irreparable harm if FilmOn X is permitted to continue its operation pending the trial of the case, Judge Collyer had no problem concluding that an injunction should be issued.

But then came the next twist.

The injunction would be effective not just in D.C., but rather NATIONWIDE, with the limited exception of states within the Second Circuit’s jurisdiction – i.e., New York, Vermont and Connecticut. That limited carve-out was a matter of “comity” in recognition of the fact that the Second Circuit has thus far declined to enjoin Aereo from operation there. But since there is no precedent in any other circuit contrary to Collyer’s decision, she figured that the Copyright Act “commands a nationwide injunction”, so she could and should enjoin FilmOn X everywhere but the Second Circuit.

So how does this affect the overall battlefield?

First, Collyer’s decision will almost certainly be appealed to the D.C. Circuit, but even if it is, we probably won’t see a Circuit decision for a year at least. So her injunction will likely remain in effect for the foreseeable future. That means that FilmOn X’s operations will be in check for the time being everywhere but in the Second Circuit.

Second, Collyer’s decision should buoy the spirits of broadcasters everywhere outside the Second Circuit, all of whom are facing the continuing roll-out of Aereo’s service. While Aereo is not itself subject to Judge Collyer’s injunction (since Aereo is not a party to that proceeding), the fact that an Aereo-like system has been enjoined from operation nationwide may prompt other judges in other circuits to similarly enjoin Aereo. There’s already a parallel copyright infringement suit pending in U.S. District Court in Boston (that would be in the First Circuit); the broadcast plaintiff there has already requested an injunction. (A hearing on the broadcaster’s motion is currently scheduled for September 18.) And Aereo is now up and running in Atlanta and Utah as well, so we won’t be surprised to see new lawsuits filed there (for readers keeping score, those would be in the Eleventh and Tenth Circuits, respectively.)

Third, the likelihood of a “circuit split” – and consequent Supreme Court review – has increased. Yes, we’re still waiting to hear what the Ninth Circuit will do in its review of Judge Wu’s FilmOn X decision and no, we won’t know for a while where the D.C. Circuit stands, but having yet another federal judge weigh in against FilmOn X clearly adds heft to the anti-Second Circuit position. That’s especially true to the extent that the nationwide scope of Collyer’s injunction may induce other courts to adopt her approach with respect to Aereo.

So while the seemingly inexorable roll-out of Aereo’s service may have dispirited broadcasters, the cavalry may just have arrived, thanks to Judge Collyer. The next few months should prove interesting. Check back here for updates.

Filing Deadline for 2013 Biennial Form 323 Extended Already!

Yikes, time is just screaming past us. Has it really been two years since the last biennial Ownership Report (FCC Form 323) was filed? Apparently so – and we know this because the FCC, apparently looking to get a jump on things, has already extended the deadline for the next biennial Form 323. In an order issued on its own motion (i.e., nobody even had to ask), the Media Bureau has announced that the 2013 biennial Ownership Reports will be due no later than December 2, 2013. (That’s a month later than the original deadline.)

The Commission provided a similar one-month extension the last time around, back in 2011.

These biennial reports must be filed by all commercial full-power AM, FM, TV, and LPTV stations (including Class A stations), as well as any entities that happen to have attributable interests in any such stations. While the deadline for filing has moved, the “as of” date – that is, the date as of which the information in the report must be accurate – has not moved. So this year’s Ownership Reports must reflect the reporting entity’s information as of October 1, 2013.

The Commission still has taken no action in the rulemaking proceeding it kicked off last New Year’s Eve. You may recall that, in that Sixth Notice of Proposed Rulemaking, the Commission proposed ditching the “special use FRN” (SUFRN) that has been a feature of the biennial Form 323 since late 2009. (The SUFRN has an interesting history, which you can read about here (and in the earlier links you’ll find there). It’s a device that permits some reporting individuals to avoid having to cough up their Social Security Numbers in order to get an official FCC Registration Number (FRN) to include in the Ownership Report.) The Bureau’s order doesn’t mention SUFRNs, which is par for the course. But since the Commission has not adopted that proposal, it seems at this point that it’s a reasonable bet that the SUFRN will still be available for 2013 Form 323 filers. You can never be too sure, though, so it would probably be prudent to check back here periodically between now and then.

GAO Report: In Wake of Successful Hack of FCC Computer Systems, $10 Million Fix Ineffective

Gee, do we really want to entrust our social security numbers to the FCC?

Did you know that, in September, 2011, the FCC was the victim of “a security breach on its agency network”? 

Neither did we. 

The precise nature and extent of the breach hasn’t been made public (as far as we can tell), but it must have been impressive. Did you also know that, in reaction to that breach, within a couple of months the FCC had wangled out of the Office of Management and Budget a cool $10 million to undertake an immediate “Enhanced Secured Network” (ESN) Project to improve its computer security against such cyber attacks? 

Neither did we.

And did you also know that the General Accountability Office (GAO), called in to assess the manner in which the FCC implemented its ESN Project, concluded that the FCC messed up? In particular, according to the GAO, the Commission “did not effectively implement or securely configure key security tools and devices to protect these users and its information against cyber attacks.” And did you know that, as a result, again according to the GAO, the Commission continues to face “an unnecessary risk that individuals could gain unauthorized access to its sensitive systems and information”? 

Neither did we.

This is all spelled out – circumspectly, to be sure, presumably so as not to reveal too much about the FCC’s vulnerabilities – in a GAO report sent to Congress on January 25, 2013. The report was not publicly announced until last week.

The fact that the FCC’s computer systems have been compromised is bad enough. The fact that the FCC, apparently acting in haste, cut a few too many corners in its effort to lock up the barn door after the horse had taken a hike is even more troublesome.

But what is especially galling – to this blogger, at least – is the fact that, while all that has been going on, the Commission has proposed to force a large universe of individuals to trust the FCC with their social security numbers. And in so doing, the Commission hasn’t bothered to mention that the computer systems on which those numbers would presumably be maintained have already been shown to be vulnerable to hackers.

As we reported last month, the Commission is considering the elimination of the Special Use FRN in connection with broadcast Ownership Reports (FCC Forms 323 and 323-E). If adopted, that elimination would mean that all attributable interest holders of all full-service broadcast stations (as well as LPTV and Class A TV stations) would have to cough up their social security numbers to the Commission in order to obtain an FCC Registration Number (FRN), which would have to be included in all Ownership Reports. Comments on that proposal are currently due to be filed on February 14.

The FCC’s seeming reticence relative to the fact that it suffered an apparently successful cyber attack 18 months ago, and that its efforts to fix the problem in the meantime have apparently been less than successful, is understandable, if regrettable (and also curiously contrary to this Commission’s professions of “transparency”).

But it seems extraordinarily inappropriate for the Commission, knowing of those vulnerabilities, to then propose that a huge number of folks must provide to the FCC the crown jewels of their identity, their social security numbers. In so doing, shouldn’t the Commission, at a bare minimum, have alerted us all to the fact that not only are their computers possibly vulnerable (we all know that that’s an unfortunate fact of modern-day life), but that their computers had already been successfully attacked? Oh yeah, and mightn’t it have been a good idea to spread the word that GAO had been called in to see whether the problem had been fixed? And once GAO concluded that, um, the problem hadn’t been fixed, don’t you think the FCC might have at least had some second thoughts about persisting in its proposed insistence on the submission of social security number-based FRNs?

Before you answer those questions, consider this. In 2009, when the FCC first proposed to require the submission of SSN-based FRNs for all attributable interest holders, a number of parties objected, pointing out (among other things) that such submission would increase the risk of identity theft. The Commission’s response? We quote it verbatim:

While identity theft is a serious matter, none of the comments identify a single instance of a security breach with respect to the Commission’s CORES system. Indeed, their claims are purely speculative. The FCC has a robust security architecture in place for CORES that exceeds Federal guidelines and recommendations and has deployed strict operational controls in compliance with NIST guidance. The servers are located in secured locations with strict access control. Logically, the databases are located behind several firewalls that protect the data from the Internet and the general FCC user population. All servers and communications are monitored both by automated tools and systems as well as operational procedures. The CORES application uses separate roles for various user classes, and administrative access is only permitted from limited set of known internal workstations. All transmission of non-public data is encrypted.

(You can find the entire FCC response on the OMB website. It’s the “Supplementary Document”, uploaded on 10/16/09 and titled “Response Letter to OMB on Comments Received”.)

So, according to the FCC, the notion that its oh-so-secure computer systems might be compromised was, at most, far-fetched speculation. 


We now know that that speculation was not at all far-fetched. That being the case, the Commission may want to re-think its proposed abandonment of the Special Use FRN. And anyone who, in response to the proposal to deep-six the SUFRN, expresses concern about data security should be sure to cite to the GAO report. That way, the Commission can’t claim that such concerns are merely speculative.

Form 323 - Kissing the SUFRN Good-bye?

FCC proposal would abandon “special use FRNs” in Ownership Reports, require social security number-based FRNs instead . . . for noncommercial licensees, too!

If you’ve got an “attributable interest” in a broadcast licensee, you might want to make sure that you’ve got your social security number (SSN) handy. The FCC is trying – again – to insist that all attributable interest holders provide SSN-based FCC registration numbers (FRNs) when the time comes to file biennial Ownership Reports on FCC Forms 323 (for commercial licensees) and 323-E (for noncommercial licensees). 

In a Sixth Further Notice of Proposed Rulemaking (6th FNPRM) the Commission has proposed deep-sixing the “special use FRN” (SUFRN, as in “SUFRN succotash”) alternative that has been available since the July, 2010 filing of the biennial Form 323. The Commission has also proposed expanding the SSN-based FRN requirement to Form 323-E for noncoms, which would meant that folks on the controlling boards of NCE stations would have to get SSN-based FRNs. And the Commission has also renewed a proposal first bandied about in the Fifth Further Notice of Proposed Rulemaking (5th FNPRM) back in 2009. (In the nearly four years since the 5th FNPRM, that proposal – which would expand the FRN reporting requirement even more – apparently never made it to the Federal Register . . . until now!)

So long, SUFRN?

The history of the FCC’s efforts to require the reporting of SSN-based FRNs by all attributable interest holders in commercial licensees makes for fascinating reading. Unfortunately, the summary of those efforts as set out in the 6th FNPRM is not entirely accurate; it misses a lot of important details concerning the provenance of SUFRNs, a device made available for those not interested in providing their SSNs to the FCC. If you need to brush up on things, let us refer you to our fine collection of posts on the topic. (Note: when you click on the link, the posts – about a couple dozen – will appear in reverse chronological order, so be sure to scroll down to the May, 2009 entries before you start reading.) For a quick synopsis, check out this post, and for a good chuckle, check out this one.

In a nutshell, back in 2009 the FCC tried to insist that all attributable interest holders in commercial broadcast licensees would have to provide SSN-based FRNs. The universe of “attributable interest holders” is vast; it includes all general and many limited partnership interests, all members of LLC licensees, holders of five percent or more of a corporate licensee’s stock, and all officers and directors of a licensee. But wait, there’s more. That universe also includes individuals and entities who hold indirect interests in broadcast licensees, i.e., through intermediate holding companies. (Possibly helpful illustration: if Corporation A happens to own a 20 percent ownership interest in a corporate licensee, then all of Corporation A’s officers, directors and 25 percent or greater shareholders would be deemed to hold attributable interests in the licensee.)

Prior to 2009, a licensee had generally been responsible for, at most, its own FRN. But with the revised Form 323 introduced in 2009, that changed dramatically. Suddenly – and we do mean suddenly, since the Commission sprang the revised form on the broadcast industry in mid-August, 2009, without having made it available for public review beforehand – commercial broadcasters would have to obtain and report SSN-based FRNs not only for the licensees themselves, but also for all their attributable interest-holders. That would impose a substantial burden on many, possibly most, licensees. It also gave rise to legitimate privacy concerns. In this day and age of identity theft, we are all taught not to hand out our SSNs unnecessarily.

Not surprisingly, considerable opposition to the mandatory reporting of SSN-based FRNs arose, despite the fact that the Commission seemed bent on minimizing the opportunity for any public comment. Faced with serious resistance, the Commission initially (in December, 2009) announced that SUFRNs could be used by licensees to report interest holders for whom the licensee could not obtain SSN-based FRNs as of the deadline for filing the Ownership Report. But the licensee would still be obligated to obtain and report SSN-based FRNs for all its attributable interest holders.

Fletcher Heald, joined by a number of state broadcast associations, took that requirement to court. The day our petition was filed, the FCC announced that it was postponing the then-imminent Ownership Report deadline indefinitely. Coincidence? You make the call.

By May, 2010, the requirement was still with us, and the new filing deadline was fast approaching. Back to court we went. This time the court ordered the Commission to respond to our petition. Two days after that order came down, the FCC revised Form 323. Coincidence? You make the call. In so doing, the Commission didn’t bother to tell anybody other than the Office of Management and Budget, which rubber-stamped the change.  

The Commission then paraded into court, pointing to its revised form without mentioning to the court that the ink was still wet on the revised version. The court eventually denied our petition, but only based on the revised version of the form, which the court interpreted to say that no individual attributable interest holder would be required to submit an SSN-based FRN if he/she preferred not to. So even though our petition was technically “denied”, we had largely achieved the result we wanted.

The biennial Form 323 filings went in in 2010 and 2011 (yes, it really was “biennial”, since the 2010 report related back to 2009) without apparent problems. But now, with the 6th FNPRM, the Commission is proposing to eliminate the SUFRN option.

Why? It’s not entirely clear. The Commission speaks generally about the need to “facilitate long-term comparative studies” of broadcast “ownership”. It sees SSN-based FRNs as “essential to providing the kind of searchable and manipulable database needed to support accurate and reliable studies of ownership trends.” And now we learn that, apparently, the “fundamental objective” of the biennial Ownership Report is to “track trends in media ownership”.

As far as we know, the FCC’s interest in studying “ownership trends” is of extremely recent vintage, as is the notion that that activity is the “fundamental objective” of Ownership Reports. But even if we indulge the Commission on this point for the moment, serious questions remain about the proposal to toss the SUFRN option.

For example, the Commission seems to think that reliance on an SSN-based system will assure greater accuracy than any alternative. But that assumes that everyone obtaining an SSN-based FRN provides accurate input. That’s not necessarily a given: the potential for inadvertent slip-ups always exists, as does the possibility that folks who prefer not to provide their SSN might intentionally mis-enter it in the CORES system. How can the FCC police against that? Also, if you’re familiar with CORES, you know that it’s possible to get an FRN without entering an SSN at all. For example, you can simply indicate that you have applied for an SSN (the assumption being that you haven’t yet received it), and bingo, you can get yourself an official FRN without an underlying SSN. (In a footnote to the 6th FNPRM, the FCC itself acknowledges that the CORES FRN system can be circumvented and requires accurate input from users.)

So the FCC’s insistence on the virtues of an SSN-based approach to FRNs seems a bit over-stated.

So, too, does the Commission’s insistence on getting data from all attributable interest-holders. While rounding up that universe of respondents will for sure provide an incredibly comprehensive snapshot of essentially all participants in the broadcast industry, is that really necessary? What difference does it make if Joe and Loretta Six-Pack happen to own a five percent, or even ten percent, interest in their brother-in-law’s station down the block? Who cares if, strictly for purposes of convenience (e.g., for signing the occasional corporate document for regulatory purposes), a broadcast president/CEO has appointed one of her office staff to serve as “Assistant Secretary” of the licensee corporation? If the FCC’s goal is to chart and monitor the major veins and arteries of the broadcast industry, why bother scanning down to the capillary level, especially when that imposes a substantial burden on the scannees?

And let’s not forget the legitimate privacy concerns of everyone who would have to get an SSN-based FRN. One’s SSN is normally viewed as among the crown jewels of one’s array of personal identifying information. We are frequently encouraged not to provide our SSN unnecessarily.

The FCC initially began collecting SSNs only from those who “do business with” the Commission, as a mechanism to facilitate debt collection. While that might be a valid basis for SSN collection, does it have anything at all to do with Joe and Loretta Six-Pack or the Assistant Secretary who happens to hold a corporate officership simply for convenience purposes? The Commission can’t claim with a straight face that it might try to go after such bit players for regulatory obligations incurred by the licensee.

BTW, if you’re not sure how serious the FCC is about enforcing an SSN-based FRN requirement, check this out. According to the 6th FNPRM, if an attributable interest holder is unwilling to provide an SSN-based FRN for inclusion in an Ownership Report, the Commission will apparently expect the licensee to “report the recalcitrant attributable interest holder” so that the FCC can “use its enforcement authority to impose a forfeiture against such individuals”.   Translation (cue sinister music, lower lights menacingly): “We have our ways to get the information we want. Bwahahahaha.” Exactly how such individual forfeitures could be justified is unclear, since (as the FCC admits), its rules don’t currently require attributable interest holders to have FRNs at all. We’re guessing that that wouldn’t stand in the FCC’s way, though, at least until the matter got to court.

In summary, the FCC appears still to be wedded to the SSN-based FRN reporting requirement that it attempted to foist on the broadcast industry in 2009. That initial attempt was foiled, thanks primarily to the fact that the Commission ignored a number of obvious procedural niceties in its headlong rush to impose the requirement. But now, more than three years later, the Commission is taking a more deliberative approach presumably designed to avoid the problems it ran into the last time around. 

While we may all agree that the Commission’s proposal is flawed in a lot of ways, we must face the fact that, unless somebody comes up with an acceptable alternative, the FCC seems bound and determined to toss out the SUFRN option and to insist on SSN-based FRNs from all attributable interest-holders of each licensee. So now’s the time to put your thinking caps on. It’s hard to imagine that a suitable alternative can’t be devised, even if the FCC seems resistant to that notion. Here’s hoping that comments in response to the 6th FNPRM will provide such alternatives.

Non-coms in the FRN cross-hairs?

Also out for comment in the 6th FNPRM is a proposal that the SSN-based FRN reporting requirement be extended to attributable interest holders in noncommercial licensees. The NCE universe dodged this particular bullet back in 2009, although the issue was then teed up in a Fourth Further Notice of Proposed Rulemaking (4th FNPRM). The Commission is now soliciting more comments on it – even though, in response to the 4th FNPRM members of the public broadcasting community severely criticized it. 

Other proposals

Additionally, in the 6th FNPRM the Commission suggests that the biennial ownership reporting requirement be expanded to include entities and individuals whose interests are not otherwise attributable. If their non-attributability arises from either (a) the single majority shareholder exemption or (b) the exemption for interests held in “eligible entities” subject to a higher EDP threshold, then that non-attributabiltiy would go away under the FCC’s proposal.  (This proposal first saw the light of day back in 2009, but has not been actively pursued, until now.)

The Commission is also suggesting that the filing date for biennial Ownership Reports should be shifted back a month, to December 1 (although the “as of” date would remain October 1). The Commission probably thinks that giving broadcasters an extra 30 days to prepare their reports is doing them a favor, but hold on there. December 1 arrives immediately after the Thanksgiving holiday, and coincides with multiple other filing deadlines. Why not pick a date – July 1, for instance – that would not be similarly encumbered. Further, it’s not uncommon for broadcast transactions to be timed to close as of the December 31 of any given year. That being the case, ownership data accurate as of October 1 would often be inaccurate a mere 90 days later. For that reason a mid-year reporting deadline (again, July 1 springs to mind) might be preferable all around.

In any event, the 6th FNPRM has been published in the Federal Register, as a result of which the deadlines for comments have been established. Comments on the various proposals are due to be filed by February 14, 2013 (Happy Valentine’s Day!), and reply comments are due by March 1.

Another Day, Another Online Public File Demonstration

 After fits and starts – and an 80-minute delay – FCC’s second online demonstration of its new electronic public file system for TV stations finally got off the ground late yesterday afternoon. And for those of you who gave up when the Commission couldn’t get the audio to work for more than an hour, take heart – they’ve scheduled yet another demo for today – AUGUST 1 – at 12 Noon (ET).  (The link is to the FCC's "events" webpage.  As of 9:00 a.m. today that page had not yet been updated to include a sign-in option for today's meeting.)

If you haven’t yet taken a look at the system the FCC has come up with, these demonstrations give you a very useful glimpse. Additionally, as of yesterday (July 31), the upload site is live for preview/test purposes – although the usefulness of visiting it today (i.e., the day before the online public file rule takes effect) may be limited if you haven’t had at least the basic introduction the demos provide.

The good news is that the system isn’t CDBS. To the contrary, the interface that the uploading station sees appears to be cleanly and logically laid out, with conventional buttons and options that – if they work – should make uploading reasonably simple. CommLawBlog gives a big thumbs up to the design.  Kudos to Greg Elin, who reportedly headed up the design team and who was the principal presenter during the demonstration. (I did, however, have occasion to observe that the depiction of the station’s service area on the sample screen the FCC showed us looked disturbingly like a drawing of a breast. Good thing that image isn’t going to be broadcast . . .)

As to the way the system will function in the real world, we here at CommLawBlog are cautiously optimistic. It looks like it should work.

But without having had the opportunity to test drive it at all, we’re not yet prepared to take a position. And there’s reason to suspect that the FCC may not have been completely thorough and thoughtful in all respects.

Bear in mind, the 80-minute delay in the start of yesterday’s session was caused by the apparent inability of the FCC – that would be (Irony Alert!) the Federal Communications Commission – to get its phone bridge to work. That alone doesn’t inspire confidence. And, according to a message typed on the online video feed early during the delay period, that inability in turn arose because more than 700 people were logged onto the phone bridge. 

Um, what did the FCC expect? Its new public file system is going to be a necessary part of the lives of thousands of TV stations starting tomorrow, and yesterday afternoon’s demonstration was for most of those stations the first time that they would have a chance to check out the system. (Yes, I know that there was a demonstration on July 17 – but the online feed of that show reportedly didn’t provide adequate access. And yes, I know that there was a second demonstration on Monday morning, July 30, at 9:00 – but since that demo wasn’t announced until late on the preceding Friday afternoon, the Commission couldn’t reasonably have expected a huge turnout. That left yesterday’s show, so the FCC could and should have expected a throng.)

Additionally, it was apparent during the demonstration that the system is still a work-in-progress in a number of respects. Some functions aren’t yet working, some aren’t working with pre-Version 7 versions of Internet Explorer, etc. While this is to be expected in any complex system like this one, you’d think that, before the Commission forces thousands of broadcast stations to use the system, the Commission would have tried to work out more of the bugs.

And one more cause for hesitation: while the Commission folks indicated that help would be available online and by phone once the system kicks in, it looks like their expectation is that most users will familiarize themselves with the system by reading through an extensive – and apparently to-be-regularly-updated – FAQ page. For sure, FAQ’s are a well-established feature of the Internet environment, but it’s not clear that, as a federal administrative agency imposing affirmative obligations on thousands of regulatees, the FCC can appropriately rely on something as informal as an FAQ page to instruct those regulatees how to meet those obligations.

So the preliminary bottom line is: the system looks very sharp (“neato” was one oddly anachronistic descriptive reportedly submitted by an attendee of yesterday’s demo) and may prove user-friendly. Certainly it appears to have been designed in large measure with the uploading station in mind. That’s a great comfort (particularly for those of us who have wrestled with CDBS for years).

But this is a lot like buying a car. The new model always looks great in the ads and great in the showroom. It probably also feels great to drive when you take it for a test spin under the watchful eye of the dealer in the passenger seat. But the real questions don’t usually pop up until you’ve brought it home and driven it in all kinds of conditions -- and your 16-year-old student driver and your 85-year-old parent have also tried to drive it (because, bear in mind, most licensees will likely be relying on station staff to handle most, if not all, uploading to the system).

So rather than give the FCC’s new system any final thumbs up (or thumbs down), let’s reserve judgment until we’ve all had a chance to use it in everyday, real-world situations. 

For those of you who have not yet sat in on one of the FCC’s demonstrations, we strongly recommend that you take the time to do so at Noon (ET) today, August 1.

Online TV Public File Demonstration Yields New Information; Not-Yet-Effective Rule Already Waived

With the August 2 effective date of the online TV public file rule just a couple of days away, more information about the FCC’s system is bubbling to the surface.

As we reported on Friday, this morning (Monday, July 30) the FCC presented another demonstration of its online TV public file system.  Peter Tannenwald, who attended the July 17 demonstration at the Commission, sat in on this one, too.  Good thing he did, since today’s show provided more details about the operation of the public file system than had previously been made generally available.  Below you’ll find a list of some of the more salient take-home points Peter took home.

Also, even though the revised public file rule still hasn’t technically taken effect, the FCC has already waived the political posting requirement (probably the most time-consuming part) for one station. Read on for details about that development.

Helpful stuff to know (from the FCC’s 7/30/12 online presentation, as gleaned by Dr. Tannenwald):

To access the system, you’ll need to start with the FCC Registration Number (FRN) for the licensee of the station whose file is being uploaded.  (That point was made in the July 17 session, too.)  Each licensee may use only one FRN to access the upload system, although a company with different licensee subsidiaries may have a separate FRN for each sub. To permit multi-station owners to control access to their various stations’ separate account for uploading purposes, such owners will be able to assign different passwords to their different stations’ accounts. (That way personnel at Station WAAA can be prevented from inadvertently uploading information to commonly-owned-but-separately-operated Station WZZZ’s public file.) The FCC will assign the initial password, but anyone with the master FRN password for that licensee may then go online and change public file passwords for upload access.  [Blogmeister’s Update: Since this item was originally posted, we have been informally advised that the FCC’s system will automatically assign a separate upload access password for each station. If the licensee wishes to change that password, it can do so – but the system itself will create the new password. Ideally, the Commission will formalize all of this at some point.]

The public file system allows stations to use Dropbox and other similar non-FCC online cloud storage systems to gather documents before uploading them to the FCC’s system. If you want to use Dropbox, you will have to (a) create a separate Dropbox folder and then (b) download an app that allows exchange of documents between the FCC and that one Dropbox folder.  But watch your step – the drag and drop function from your computer or Dropbox onto the FCC’s website works well with many browsers but apparently has some problems (which the FCC is working to fix) with the most popular browser, Internet Explorer, especially versions 7 and older.

To upload materials to a station’s online file, stations will use the URL http://stationaccess.fcc.gov.  (We just tried and it’s not an active site as of July 30, 2012.)  To review a station’s online public file, members of the public will go to http://public-inspection-file.stations.fcc.gov.  (Also not yet active, as far as we can tell.)

Most of us are used to converting documents to .PDF format for submission to the FCC – mainly because the CDBS electronic filing system accepts only .PDFs and the ECFS system for filing rulemaking comments converts incoming documents to .PDF. The public file upload process, however, is different. Documents headed for the online public file must be uploaded in their native format, whatever it may be (e.g., MS-Word, Excel, WordPerfect).  FCC will take care of converting to word-searchable .PDF format.  If the document to be uploaded was initially created in .PDF, it may be uploaded that way – but it should be in searchable .PDFform. (Cautionary note: many .PDF writer programs do not create searchable .PDFs as a default. Check you’re your IT folks if you have any questions on this front.)

The station profile on the FCC’s website now includes the main studio address.  Remember that a main studio must as a general rule be staffed by at least two employees (one of them management-level) during the normal 40-hour business week. With the main studio address posted on the Internet, FCC inspectors (and others) will have no problem locating the studio for inspection purposes.

The Commission is advising that stations should probably keep back-ups of the documents they upload, just in case.  But stations do not have to maintain copies of uploaded materials at the station for the public to inspect – once the materials have been uploaded to the FCC’s online system, the station’s obligation to make those materials available to the public has been satisfied.  But remember that an on-site public file is still required for letters/communications from the general public for all TV/Class A stations, old political file documents for all TV/Class A stations, and newly-created political file documents for all TV/Class A stations except for affiliates of the Top Four networks in the Top 50 markets. Stations may voluntarily upload political file documents to reduce their on-site paper obligations. However, letters/communications from the public should not be uploaded because of privacy concerns (including especially the provisions of the Children’s Online Privacy Protection Act (COPPA)).

The FCC is not requiring stations to provide a computer terminal to allow the public to go to the FCC’s website.  Staff at today’s session recommended that stations post the URL of the FCC’s public file website on their own station websites.  Whether or not that recommendation can turn into a formal requirement isn’t clear (since it may not have been specifically addressed in the rulemaking proceeding leading up to the adoption of the online system).  But it is clear that the FCC wouldn’t object if those URLs were to get included on stations’ websites.

Important final advisory: The online public file system is still on track to go live on Wednesday, August 1, the day before the online filing requirement becomes effective.

The Commission is planning to provide another demonstration of the system tomorrow, July 31 at 4:00 p.m.  Given the additional information which has come to light since the July 17 demonstration, we’d treat tomorrow’s demonstration as Must See.   This is not conventional webinar. A special platform is used to display a computer desktop that is manipulated by the FCC. Audio is available only by telephone. Access information is available at www.fcc.gov/events/demonstrations-online-public-inspection-file-interface.  The FCC warns that “[p]arties must join the call before the scheduled start time.” Last-minute registration and dial-in were possible today, but there were only 190 participants on the line (possibly because of the late notice provided by the Commission). We don’t know when or if the capacity of the FCC’s telephone bridge might be filled.

Media Bureau waives political file uploading requirement

Even before the new online public file requirement could take effect, it’s been waived!  In a Memorandum Opinion and Order, the Bureau released three days before the effective date, the Bureau has let Station WHAG-TV, Hagerstown, Maryland off the hook as far as uploading any new political file materials goes.

As diligent readers will recall, the online public file rule requires that Top Four networks affiliates in the Top 50 markets must begin uploading all newly-created political materials starting August 2.  WHAG-TV is an NBC affiliate in the Washington, D.C. DMA, which is Market No. 8.  So WHAG-TV was directly in the crosshairs of the rule.

Hold on there, said the station.  It’s not the primary NBC affiliate in the DC market.  That distinction goes to WRC-TV, the NBC O&O in Washington.  In fact, WHAG-TV’s assignment to the DC market is really a matter of “happenstance”.  That’s because, back when Arbitron designated TV markets, Hagerstown was its own market and, trust us, it wasn’t in the Top 50.  (Actually, it was Market 192.)  When Arbitron got out of the TV market designation business around 1996 and the FCC shifted to Nielsen-prepared DMA rankings, Hagerstown got lumped into the DC market and so, too, did WHAG-TV.

But even when that happened, WHAG-TV didn’t embrace its new DMA home.  In 1998 it argued successfully that it shouldn’t be classified as being in any of the Top 100 markets for regulatory fee purposes – and the Commission agreed, possibly on the basis of the Television and Cable Factbook 1997.  The Factbook indicated that the number of DMA television households served by WHAG was “equivalent [to] a remaining market station.”  (WHAG also helpfully observed that, where each of the TV stations licensed to Washington, D.C. proper serve over 2.3 million households, WHAG serves less than a quarter of that number in the DC DMA.)

The Bureau agreed that WHAG really does serve a smaller market and that holding it to the requirements for Big Market stations would run contrary to the fact that the FCC had decided to exempt small market stations from the initial political file upload chore.  Accordingly, waiver granted, and the folks at WHAG are doubtless breathing a bit easier.  (But the waiver applies only to the obligation to upload newly-created political file materials; the station will still be on the hook to upload other, non-political materials.)

Update: More Demonstrations of Online TV Public File System Announced

Late Friday afternoon notice announces early Monday morning demo (and another demo the following day)

Yesterday afternoon we reported that the U.S. Court of Appeals for the D.C. Circuit had denied the NAB’s request to stay the effective date of the revised online TV public file rule. That action clears the way for the rule to kick in on August 2, 2012. We predicted that the FCC would in short order be issuing a public notice alerting affected licensees of exactly how they’re supposed to comply once the effective date rolls around.

And sure enough, at about 3:30 p.m. on Friday, July 27, we received a notice from the Commission.  Yay! But wait – it’s not the notice we expected. Darn.

The Friday afternoon notice simply advises that the Commission is going to be conducting two online “screensharing” demonstrations of the public file system that it has developed. The demonstrations will “cover the material presented during the July 17, 2012 demonstration”, according to the notice. (The July 17 demonstration was conducted at the FCC’s headquarters; while it was supposedly also available to online viewers, several published reports indicated that online viewers encountered considerable difficulties when they tried to watch.)

In other words, this notice does not announce the official kick-off of the new rule, nor does it purport to give us all the precise chapter and verse for assuring compliance with the new rule. It’s a pretty good bet that such a notice is indeed in the works. We’ll keep our eye out for it and get word posted here as soon as it’s available.

Meanwhile, as to the upcoming demonstrations.

They’re scheduled for Monday, July 30 at 9:00 a.m. and Tuesday, July 31 at 4:00 p.m. (We’re guessing that the times are ET, but the notice doesn’t actually specify that.) The notice provides information for accessing the show – but be alert: the audio for the demos is by teleconference, and the notice emphatically instructs that “[p]arties must join the call before the scheduled start time.”

Our colleague Peter Tannenwald attended the July17 demonstration and reported favorably about the FCC’s system. Since it appears that that system is indeed going to be with us for a while, it’s a good idea to get as familiar as possible with it. The online demos are probably a good place to start. And while the new rule applies only to TV stations for now, the smart money figures that it’s just a matter of time before the FCC expands it to include radio stations as well. With that in mind, radio licensees might want to take advantage of this opportunity to see what is likely in store for them.

One final observation. The timing of the notice concerning the demonstrations is puzzling. Why issue this late on a Friday afternoon in order to announce a demonstration occurring at 9:00 a.m. the following Monday? We happened to receive the notice because we subscribe to a service that delivers FCC releases as they get issued. But we suspect that the vast majority of broadcasters don’t enjoy that luxury. And the late release of the notice assured that it would not be included in the Friday afternoon editions of most trade journals. So while it’s nice that the FCC is apparently trying to introduce us all to its spiffy new online filing system (even if that introduction is occurring just a couple of days before we’re all supposed to be using that system officially), the Commission might want to work on its scheduling skills a bit. 

Perhaps the Commission was counting on CommLawBlog to get the word out. In that case, mission accomplished.

Update: Court Denies NAB Request for Stay of Online TV Public File Rule

It looks like, barring some unanticipated last-minute development, the FCC’s online public file rule for TV stations will take effect on August 2, 2012The U.S. Court of Appeals for the D.C. Circuit has denied the NAB’s effort to get that effective date stayed.

The court’s order – totaling two sentences (not including a citation to a couple of case precedents) – is short and to the point. The NAB’s petition was denied because the NAB had not, in the court’s view, “satisfied the stringent requirements for a stay pending court review.”

With the court’s action, we can probably look forward to a public notice from the FCC very soon, describing the process for uploading materials to the online public file system the Commission has developed. Check back here for updates.

TV Public File Update: The NAB Replies

 Those of you who have been following the NAB’s efforts to get the U.S. Court of Appeals for the D.C. Circuit to stay the effectiveness of the TV online public file rule should be interested in the NAB’s reply. Our favorite NAB line, in response to the FCC’s claim that the revised public file rule increases competition: “Allowing some poker players to peek at their opponents’ hands does not make the poker game more competitive; it makes it unfair.”

This closes out the pleading cycle with respect to the NAB’s stay request and tees up the matter for resolution by the court. Since the effective date at issue (that would be August 2, 2012) is only about a week away, look for a quick decision by the court.

TV Public File Update: FCC Opposes NAB Stay Request, Gets Support from Six Intervenors

 Just in time to slip into the tote along with your sunscreen, towel and iPod, so you’ll have something to read at the beach over the weekend – here’s the FCC’s opposition to the NAB’s motion for stay of the online TV public file rule. We doubt you’ll find any unexpected plot twists here (particularly since the Media Bureau already told the NAB how the Bureau feels about the NAB’s arguments), but you never know. The NAB has until July 24 to reply to the Commission’s opposition, and then we all sit around waiting for the court to act.

And if you’re keeping a scorecard in the NAB’s appeal of the online TV public file rule, be sure to add the following names to the line-up on the FCC’s side: Benton Foundation, Campaign Legal Center, Common Cause, Free Press, New America Foundation and Office of Communication of the United Church of Christ, Inc. All six have been granted “intervenor” status by the D.C. Circuit. This means that they are now official parties to the case, and will be permitted to brief the issues, but only in a single, joint brief (unless they can convince the court that multiple intervenor briefs are warranted). Apparently eager to wield their brief-filing powers, the Intervenors have already warmed up by filing their own opposition to the NAB’s stay motion. Intervenors are also theoretically able to offer oral argument, although the likelihood that any intervenor will in fact get to present oral argument when the appeal finally gets to that point -- probably sometime early next year -- is probably very, very small.

The court’s order granting the intervention motions reminds anyone who might want to intervene on the NAB’s side that they have until August 2, 2012 to get their motions in. Failure to seek intervenor status by that deadline could leave you on the outside looking in when it comes time to file briefs.

Update: NAB Asks Court to Stay Effective Date of Revised TV Public File Rule

With August 2 effective date looming, NAB looks to court for relief.

Things continue to percolate on the TV public file front. Remember last week, when we predicted that the NAB would eventually be asking the U.S. Court of Appeals for the D.C. Circuit to stay the FCC’s seemingly irresistible juggernaut toward implementing the new public file rule as of August 2? Boo-yah!! That’s just what the NAB has done.

The FCC has not yet acted on the NAB’s stay request that the NAB filed with the FCC last week. But time’s a-wastin’, and last week’s filing with the Commission wasn’t going anywhere anyway. In fact, it was likely filed primarily so that the NAB could tell the court that the agency had been given its own opportunity to stay the case. That’s because the courts tend to be reluctant to weigh in on such things if the agency in question hasn’t been given first shot at addressing the issues.

Last week’s stay request, addressed to the Commission, served precisely that purpose. Having waited a decent interval and received no response from the FCC, the NAB was in a position to represent to the court (as it does on Page One of its stay motion) that the Commission had its chance.

Next up – the FCC’s opposition. As required by the court’s rules, before filing its stay request with the court, the NAB advised the FCC that that request was about to be filed and asked whether the FCC planned to oppose it. Answer (and here’s a surprise): The FCC will be filing an opposition.

Stays are notoriously difficult to obtain, either from the FCC or from the courts. A party seeking a stay must normally demonstrate, among other things, that it will suffer irreparable harm if the stay is not granted. That’s a rough showing to make. We suspect that that issue will be a focal point of back-and-forth arguments in the coming weeks.

Check back here for updates.

Form 323 - The Fun Begins Again

Media Bureau announces opening of 2011 Ownership Report season, but leaves out some information that many might find useful

The Media Bureau has reminded commercial broadcasters that their biennial Ownership Reports (Form 323) are due to be filed by December 1, 2011 – and that the opportunity to start filing them opens up October 1, 2011.

But the Bureau’s public notice doesn’t mention some information we kind of hoped they might, since we reminded them of it just a couple of weeks ago. Seeing as how the Commission seems less than clear about what it told the U.S. Court of Appeals for the D.C. Circuit just last year, let us help out here.

The question: Is it really true that anybody and everybody with any attributable interest in a reporting licensee must be identified, in the report, by a Social Security Number-based FCC Registration Number?

Short answer: No.

Longer answer: No, individuals with attributable interests may submit a non-SSN-based FRN – dubbed a “Special Use FRN” (we refer to it as a SUFRN) – under some circumstances. Just what those circumstances are remains a bit fuzzy, since the latest public notice fails to mention an important exchange between the Commission and the D.C. Circuit which shed considerable light on this very point.

First, a brief intro to the SUFRN.  The SUFRN option is not reflected in the instructions to Form 323 or in the form itself . . . BUT, if you get deep into completing the form, you get to the FRN question, which simply requires you to insert an FRN for each attributable interest holder. Immediately under the blank where you’re supposed to insert that FRN, the form reads: “If Respondent is unable to provide an FRN for an individual attributable interest holder reported in this listing, press above button”.

And sure enough, there’s a button labeled “Special Use FRN”. If you push that button, you get a pop-up message that instructs that you don’t need to use an SSN-based FRN. However, according to the pop-up message, eligibility to use a SUFRN arises only “if, after diligent and good faith efforts, Respondent is unable to obtain, and/or does not have permission to use, a Social Security Number in order to generate an FRN for any specific individual whose FRN must be reported on Form 323.”

The pop-up message thus limits use of an SUFRN to situations in which the respondent has made “diligent and good faith efforts” to obtain SSN-based FRNs but has been “unable to obtain, and/or does not have permission to use” such FRNs.

Omitted from the form, the pop-up message, and the FAQs found on the Bureau’s website dedicated to All Things Form 323 is the fact that respondents “are not required to provide SSN-based FRNs . . . if they object to the submission of their Social Security Numbers.” Nor does the Bureau acknowledge that “no individual attributable interest holder will be required to submit Social Security number to obtain an FRN” in order to respond to Form 323. 

But that’s precisely what the Commission and the D.C. Circuit worked out in June-July, 2010.

There’s a fair amount of backstory here. You can catch up with it by reading this series of posts chronicling L’Affaire Form 323 from 2009-2010. You can also read the Emergency Petition we filed with the Commission on September 14, 2011.   If you don’t feel like reading the entire history of the matter – entertaining though it may be – and would prefer to cut to the chase, here are direct links to the FCC’s pleading to the Court and the Court’s response.

The bottom line is that, with respect to use of SUFRNs, the Commission made a very specific representation to the Court and the Court expressly relied on that representation. According to the FCC, respondents “are not required to provide SSN-based FRNs . . . if they object to the submission of their Social Security Numbers.” And according to the Court, “no individual attributable interest holder will be required to submit Social Security number to obtain an FRN” in order to respond to Form 323.

We think that all Form 323 filers are entitled to know that. For some reason, the Commission seems unenthusiastic about that prospect.

As we read all this, inability to obtain an SSN-based FRN – which is what Form 323 suggests is a prerequisite to hitting the SUFRN button in the first place – appears to be immaterial. Ditto for making “diligent and good faith efforts” to get hold of SSN-based FRNs – a duty imposed by the pop-up message when you hit the “Special Use FRN” button. The Commission appears to have told the Court in no uncertain terms that no individual attributable interest holder has to file an SSN-based FRN is he/she objects to doing so. Period.  If the Commission disagrees with our interpretation, it might want to say so.

Another, less prominent, aspect of the SSN-based FRN question involves changes made to the form back in December, 2009, which have since been quietly tweaked. In December, 2009, the SUFRN pop-up message (as well as a public notice issued on December 4, 2009) insisted that reliance on a SUFRN for purposes of getting an Ownership Report on file by the then-operative deadline was only an interim measure. Respondents remained under an “ultimate duty to obtain a fully compliant FRN” for all folks identified in Form 323. According to the December 4, 2009 public notice, the Commission expected all filers relying on SUFRNs to “update their filed ownership reports with fully compliant FRNs when these are obtained.”

The language about some “ultimate duty” to update after the fact was deleted from the pop-up message by the Commission in March, 2010.  You may not have noticed that, since the deletion was effected without explanation or public notice from the Commission. The FCC did ask OMB for permission for the deletion, but in so doing merely characterized the change as “non-substantive”, without offering any rationale. Since the Commission didn’t bother to tell anybody about this change, much less explain it, there was no reason to believe that the concept of some continuing “ultimate duty” did not remain in place.

We mentioned this in our Emergency Petition, and the Commission appears to have taken our comments on this point to heart . . . sort of. On September 28, 2011 – that would be just a couple of weeks after we filed the Emergency Petition, and a mere three days before the form was to go “live” for the 2011 biennial filings – the Commission quietly asked OMB to authorize yet another tweak to the language in the pop-up message, and OMB obliged. Now, stuck on at the end of the pop-up message is the following sentence: “The guidance provided on Special Use FRNs in the Media Bureau’s December 4, 2009 Public Notice (DA 09-2539) has been superseded as discussed herein.”

“As discussed herein”? The problem is that there is no obvious discussion in the pop-up message (or on the FCC’s website) referring back to the December, 2009 public notice, so anyone reading that newly-added sentence wlll be hard-pressed to know what it’s supposed to mean. Our guess is that the Commission is backing away from the notion of some “ultimate duty” to follow-up with SSN-based FRNs for everybody, but the Commission sure hasn’t said that expressly. By contrast, the Commission was very explicit in imposing that duty back in December, 2009 – so if it wants now to countermand that earlier instruction, you’d think that the Commission could do so with similar clarity.

Unfortunately, the Commission appears still to be trying to shore up the multiple weaknesses in its Form 323 in a piecemeal, less-than-public way. The history of Form 323 since 2009 has not been a particularly happy one, and the most recent developments don’t suggest much improvement. With the filing window opening on October 1, the Commission has apparently not focused on problems with the form that were identified, and should have been fixed, more than a year ago. The last-minute addition of unilluminating language in the pop-up message does not suggest that the Commission has taken the time to think through the form carefully. Indeed, the manner in which that last-minute addition was submitted to OMB suggests less than careful and thoughtful preparation:

(This is a screen grab, taken from the OMB website, of a portion of the request for OMB approval submitted by the FCC on September 28, 2011.)

Maybe we’re missing something here, but a hand-written change to a form which is supposed to go “live” within a couple of days doesn’t suggest that the folks in charge of that form have the best handle on it. That’s too bad, since it’s a form that all commercial broadcasters are required to file. We had hoped that the efforts we made in 2009-2010 would have assisted the Commission to get its Form 323 act together by now. We may just have to keep trying.

Form 323 Deadline Extended to December 1, 2011

In apparent memory lapse, Commission fails to mention last-minute effective elimination of all-encompassing SSN-based FRN requirement

Has it really been two years already? 

The Commission has announced that the time has come for the next round of biennial Ownership Reports (Form 323) for commercial broadcasters. And get this, the initial public notice about the upcoming deadline for filing pushes that deadline back a month, to December 1, 2011.

Note that the last round of Form 323s was filed in July, 2010, which (contrary to the whole “biennial” aspect of things) isn’t really a full two years ago. But as long-time readers may recall, that initial round was originally scheduled for the fall of 2009, but got postponed several times. (You can read a collection of our posts about the FCC’s 2009-2010 Form 323 travails here.) 

Form 323 requires all commercial licensees to file reports by a uniform nationwide deadline, once every two years.  The next reports were to be due November 1, 2011, reflecting ownership data as of October 1, 2011.  Apparently responding to concerns that one month is not enough time to compile data and submit a report, the FCC has extended this year’s filing deadline to December 1, 2011.  This is a one-time extension and does not apply to reports due in 2013 and subsequent years (at least for now). 

The ownership information to be reported must still reflect the reporting entity’s relevant information as it stands of October 1, 2011.   Reports may be filed any time between October 1 and December 1; they must be filed electronically on Form 323, using the FCC’s electronic CDBS system.  A filing fee must be paid at the time of filing.

The Commission’s terse notice doesn’t get into the nitty-gritty specifics of Form 323, but merely refers interested readers to the form’s instructions and to the FAQ page about the form on the Commission’s website. Heads up for some clarifications, though, since neither the form itself nor the FAQ page addresses an important change that the Commission committed to back in late June, 2010.

The change involved the question of including separate FCC Registration Numbers (FRNs) for each individual and entity reflected in each report, whether or not that individual or entity was in fact the licensee or even in a position to wield anything akin to control of the licensee. 

We won’t bore you with the details of the back-and-forth we had with the Commission on that touchy point – you can read all about it in our previous blogs on the subject. All you – and apparently, the folks at the Commission – need to recall is that we here at FHH (on behalf of ourselves and a number of clients) asked the U.S. Court of Appeals for the D.C. Circuit to tell the FCC that the Commission could not lawfully impose the FRN requirement as that requirement had been described up to that point. The Commission fussed a bunch, delayed the filing deadline to give it a chance to tweak things, but eventually tried to stick to its FRN guns. We went back to the Court. The Court ordered the FCC to respond to our arguments.

A funny thing happened at that point. After it was ordered to respond but before it did so, the Commission revised the FRN language in Form 323. It then explained to the Court that the form, as revised, made it “clear” that “users are not required to provide SSN-based FRNs for the July 8 filing if they object to the submission of their Social Security Numbers”. (Note that that gloss on the revised form might not have been 100% consistent with the language of the revision, at least in the minds of some folks, but that’s the way the FCC explained it to the Court.) The Court, in turn, interpreted the FCC’s statement to say that “no individual attributable interest holder will be required to submit a Social Security number to obtain an FRN [i.e., FCC Registration Number] for the July 8, 2010, biennial filing deadline or for any imminent non-biennial filing of Form 323.” And, based on that interpretation, the Court denied our petition.

None of that history is reflected in the form’s instructions or on the FAQ page, at least as of today (August 23, 2011). But the fact of the matter is that, in its explanation to the Court, the Commission clearly indicated that nobody would be required to submit a Social Security Number-based FRN if he/she objects to such submissions, regardless of the basis for any such objection. To the extent that the form’s instructions and the FAQ may seem to say otherwise, those indications can and should be disregarded (unless, of course, the Commission is inclined to schlep down to the Court again to explain why what it told the Court in 2010 should no longer apply 2011).

Keep an eye out – particularly here on www.CommLawBlog.com – for any further wrinkles that might pop up on this front in coming months.

Remember that the filing requirement applies to full power TV, commercial radio, and all Class A and low power TV stations, but not TV or FM translators or low power FM stations.  Noncommercial educational AM, FM, and TV stations must file biennial reports, but they use FCC Form 323-E and must file on staggered dates corresponding to the state where they are licensed rather than the uniform nationwide date that applies to commercial stations.

Form 323: SSN Disclosure Requirement Largely Written Out Of Form In Last-Minute Revision

Court ruling on Fletcher Heald mandamus petition confirms elimination of need for new SSN-based FRNs to complete revised Ownership Report

Last week we reported that the U.S. Court of Appeals for the D.C. Circuit had denied our mandamus petition, and that the July 8 deadline for biennial Ownership Reports (FCC Form 323) would remain in effect. What with the last-minute nature of the Court’s order and the consequent need to wrap up a bunch of 323’s by the deadline (not to mention various other distracting obligations), we didn’t highlight perhaps the most important aspect of the order: the Court effectively confirmed that nobody needs to provide his/her Social Security Number (SSN) for a new FRN in order to file ANY Ownership Report – biennial or otherwise – until further notice.

According to the Court, the FCC has taken the position that “no individual attributable interest holder will be required to submit a Social Security number to obtain an FRN [i.e., FCC Registration Number] for the July 8, 2010, biennial filing deadline or for any imminent non-biennial filing of Form 323.” And since the Court’s denial of our mandamus petition was based on the FCC’s stated position, it appears extremely doubtful that the FCC will be moving off that position soon.

As a result, any person holding an attributable interest in a commercial broadcast licensee – i.e., any person who would have to be reported on Form 323 – who has not already submitted his/her SSN to the FCC in order to obtain an FRN need not do so. This is a significant development, and a significant retreat on the part of the Commission.

Here’s a step-by-step chronology of the rise and fall of the FRN requirement.

Behind closed doors

Back in May, 2009, the Commission announced that Form 323 would be revised. But at that time the Commission said absolutely nothing about requiring individual attributable interest holders to cough up their SSNs part of that process. Likewise, when the Media Bureau announced, in June, 2009, that it had revised the form, it didn’t mention any SSN requirement; to the contrary, the Bureau specifically said that the revised form did not give rise to any need for confidentiality and did not raise any privacy concerns. (Even though the Bureau solicited public comments on its revised form, it elected not to make the revised form available for review, which made it difficult – no, wait, make that impossible – to comment on the draft form.)

From behind a cloud of denial, the revised form appears

In August, the Bureau shipped its revised Form 323 over to the Office of Management and Budget (OMB) for its approval. In so doing, the Bureau – or maybe it was the Commission itself (it’s impossible to tell exactly who sent the item over to OMB) – again expressly claimed that its handiwork did not present anything to worry about from a confidentiality or privacy perspective. But OMB posted the revised form for all to see, finally. Lo and behold, the revised form required that every attributable interest holder listed in any Form 323 be identified by his/her own SSN-based FCC Registration Number (FRN). In other words, in order to complete the form, licensees would have to force their various attributable interest holder to obtain their own FRNs, and that in turn would require those interest holders to hand over their SSNs to the FCC.

Accompanying the form was a “supporting statement” which again asserted that the revised form did not involve privacy or confidentiality issues.

A number of broadcast-related parties pointed out to OMB that, au contraire, the SSN/FRN requirement did indeed implicate serious privacy/confidentiality considerations . . . and oh, by the way, the FCC had never given anybody the opportunity to comment on that requirement in the first place. A month later, a “revised supporting statement” was submitted – presumably by the Commission, although it was unsigned and otherwise unattributed – in which the obvious privacy/confidentiality concerns were finally acknowledged.

In a separate response to the various comments, an official in the FCC’s Office of Managing Director claimed that the SSN-based FRN requirement was a “vital mechanism for data quality assurance”. In essence, the Commission was moving full speed ahead with its revised form, FRN requirement and all.

The FCC blinks once, or maybe twice

Despite the problematic record underlying the revised form, OMB approved it in October, 2009, and the Bureau promptly announced that the new form would have to be filed by December 15. In November, Fletcher Heald asked the Commission to stay the implementation of the form, noting (among other things) that an impressive number of shortcomings in the development of the revised form precluded its implementation. The Commission ignored our pleading, but a week or two later postponed the filing deadline into January

In early December, the Commission made the revised form available for folks to fill in., at least for a while. But it also revealed a further change relating to the FRN requirement. Now parties could avoid disclosing SSN-based FRNs, but only after the licensee had made good faith, diligent efforts to obtain all necessary FRNs. If they had done so but still were unable to come up with the FRNs, respondents could use randomly-generated “special use FRNs” (SUFRN) as a temporary expedient – emphasis on the word “temporary”. According to the revised instructions, use of a SUFRN did not relieve the respondent of its “ultimate duty” to hunt down “fully compliant” FRNs for all concerned. And the SUFRN was not available for non-biennial Ownership Reports (such as those filed by assignees or transferees after the consummation of their acquisition of licenses).

So the SUFRN option in fact did nothing to eliminate the FRN obligation.

In late December, with the January deadline fast approaching, Fletcher Heald – joined by ten state broadcasting associations – asked the D.C. Circuit to intercede. Several hours after that request was filed, the FCC announced that it was indefinitely postponing the filing of the revised form, giving rise to cautious optimism that the FCC might be re-thinking the FRN requirement. (Apparently as a result of the indefinite postponement, three months later the Court denied Fletcher Heald’s December request.)

It’s baaaack.

In early April, it became clear that any optimism, cautious or otherwise, was unfounded. The Bureau announced that the revised Form 323 was back on the calendar. New due date: July 8. The announcement said nothing about the FRN question. But careful review of the FRN question on the form revealed new language. Gone was the admonition that respondents had some “ultimate duty” to chase down SSN-based FRNs for all their attributable interest holders. Instead, the form now provided that

[r]espondents who use a non-SSN based “Special Use FRN” will be deemed fully compliant with the Form 323 filing obligation for purposes of this initial filing and the lack of SSN-based FRNs in response to Question 3(a) will not subject Respondents to enforcement action.

The Commission did not provide any public notice announcing, much less explaining, this change.

The Court steps in

Fletcher Heald, along with several state associations and a number of broadcast licensees, headed back to court with a second mandamus petition. With the new deadline just weeks away, on June 14 the Court ordered the FCC to respond to our arguments by June 21 (later extended to June 23). 

Here’s where things got interesting.

On June 17, the FCC sent OMB yet another revision to the form, changing the instructions to the FRN question further:

Old language: An SUFRN could be used “[i]If, after using diligent and good-faith efforts, Respondent is unable to obtain a Social Security Number”.

New language: An SUFRN may be used “[i]f, after using diligent and good-faith efforts, Respondent is unable to obtain, and/or does not have permission to use, a Social Security Number in order to generate an FRN”. (emphasis added)

In other words, if a respondent had somebody’s SSN and could theoretically have signed that person up for his/her own FRN, the respondent was not obligated to do so if the individual had not given his/her permission. Obviously, the Commission was moving away from its original notion that all respondents had an unavailable “ultimate duty” to nail down SSN-based FRNs for all attributable interest holders.

Additionally, the new instruction made the SUFRN option available not only for the biennial Ownership Report, but also for all other non-biennial uses of the Form 323.

OMB approved that new language on June 21, and on June 23 the Commission relied on the newly-relaxed instructions in responding to FHH’s arguments. The Commission didn’t bother to issue any public notice announcing its revised instructions. More surprisingly, in its response to the Court the Commission also didn’t bother to alert the Court that the language on which the FCC was relying was brand-spanking new – and that that language had been concocted only after the Court had ordered the Commission to respond.

What the Commission did do in its response to the Court was to provide its own gloss on the revised instruction. According to the Commission’s response, that revision makes it “clear” that

users are not required to provide SSN-based FRNs for the July 8 filing if they object to the submission of their Social Security Numbers.

To some, that gloss might go somewhat beyond the precise language of the latest revised instruction. But that’s what the FCC told the Court.

The Court then interpreted the Commission’s gloss to mean that “no individual attributable interest holder will be required to submit a Social Security number to obtain an FRN [i.e., FCC Registration Number] for the July 8, 2010, biennial filing deadline or for any imminent non-biennial filing of Form 323.” And, based on that interpretation, the Court denied our second mandamus petition.

Call us crazy, but we’re prepared to declare a significant (although not yet total) victory here. Yes, the mandamus petition was “denied”, but only because the Commission backed off the FRN requirement. And since the Court clearly identified that retreat as the basis for the Court’s decision, any attempt by the Commission to re-impose its previous, unrelaxed standard would open the door for another mandamus action. In other words, a major flaw in the revised report has been corrected, at least temporarily, as a result of our efforts.

Unfortunately, the last-minute timing of the FCC’s response and the Court’s action kept these developments out of the public eye just as the July 8 deadline rolled around. As a result, it’s likely that a number of folks who might not otherwise have provided their SSNs did so under the misimpression that they had to. Next time, they might want to check out CommLawBlog first.


Is the relaxation – or effective elimination – of the SSN-based FRN requirement permanent? Who knows? Since the FCC has never bothered to explain precisely why such FRNs are supposedly essential, it’s hard to say whether the FCC could justify such a requirement (although many strongly doubt it). And the longer the Commission relies on SUFRNs, the harder it will be to justify any claim that there is no adequate substitute for SSN-based FRNs. 

But the Commission clung tightly to the requirement in the face of strong arguments, and relented only when forced by the Court to try to explain its position. That suggests that we may not have seen the last of the SSN-based FRN requirement. We’ll keep our eyes out for further developments – check back here for updates.

And before signing off, let’s hear it for the folks who stood up with us at the D.C. Circuit in one or both of the mandamus petitions: The Alabama Broadcasters Association, the Alaska Broadcasters Association, the Arkansas Broadcasters Association, the Kentucky Broadcasters Association, the Louisiana Association of Broadcasters, the Mississippi Association of Broadcasters, the New Mexico Broadcasters Association, the Puerto Rico Radio Broadcasters Association, the South Carolina Broadcasters Association, the Tennessee Association of Broadcasters, Hubbard Broadcasting, Inc., Salem Communications Corp. and Spring Arbor University. We appreciate the support they provided and the confidence they showed in us.

Form 323: The Court Weighs In

We’ve received many calls over the last week or so asking whether the D.C. Circuit had issued any decision with respect to our mandamus petition about the revised Form 323. The answer has been “no” – until, that is, today, when the Court issued a very brief order, which you can read here, denying the petition.  As a result, Thursday's deadline remains in effect. 

Form 323: Point/Counterpoint

FCC opposes mandamus petition, petitioners reply.

Following our June 15 post reporting that the U.S. Court of Appeals had ordered the FCC to respond to our mandamus petition relative to the revised Form 323, we have received a number of requests for updates on that front. Here’s the scoop.

Apparently as a result of a glitch in the court’s electronic filing process, the FCC reportedly didn’t receive a copy of the court’s order on June 14, when it was issued. The Commission told the court that the Commission learned of the order only through the trade press on June 16. (And the trade press presumably found out about the order from our post.) The FCC asked for, and was granted, a two-day extension of its response time.

On the extended deadline (that would be June 23) the Commission filed its Opposition, which you can read here. Anyone who has followed the Form 323 festivities will find that it makes for most interesting reading.

The petitioners, led by Fletcher Heald, have filed a reply to the FCC’s Opposition. You can read our reply here.

The matter is now teed up for the court’s consideration. Given the tight time limits the court imposed on both the FCC and the petitioners with respect to this latest round of pleadings, we suspect that the court is aware that the July 8 deadline for filing biennial ownership reports on the revised Form 323 is fast approaching. Check back here for further developments.

Form 323 Update: FCC Has Some 'Splaining To Do

Court gives Commission seven days to respond to charges about irregularities in the way revised ownership report was developed.

With the July 8 deadline for filing commercial ownership reports fast approaching, we have a new development to report: the U.S. Court of Appeals for the D.C. Circuit has ordered the FCC to respond to claims that the revised Form 323 filing requirements – and particularly the requirement that all “attributable” principals provide their social security numbers (SSNs) – were not imposed lawfully. While it’s impossible to predict what the Court will ultimately do, the fact that it has asked the FCC for its side of the story suggests a level of judicial interest which should be of concern to the Commission.

The Court’s involvement was sought by Fletcher Heald, together with a number of state broadcast associations and broadcasters. In May they filed a petition for writ of mandamus asking the Court to step in to compel the Commission to comply with required procedures before forcing anybody and everybody with any “attributable” interest to cough up their SSNs to the agency.

We have been following the problematic history of the FCC’s efforts to revise its ownership report (Form 323) for commercial broadcasters for more than a year. Any readers new to the situation can catch up by taking a romp through our past Form 323 posts here.

A petition for mandamus is what the Court terms an “extraordinary” request in which the petitioner asks the Court to force the agency to comply with statutory requirements which the agency appears to be ignoring. Unlike the more conventional appellate process – which routinely contemplates that the FCC must make its case in a responsive brief before the Court will act one way or the other – the mandamus process does not guarantee any response from the FCC. To the contrary, the Court can, and often does, simply deny or dismiss a petition for mandamus with a two or three sentence order without bothering the Commission at all.

But the Court’s rules provide that a petition for mandamus will not be granted unless the agency is given an opportunity to respond. That’s one reason the Court’s order directing the FCC to respond to the FHH et al. petition is of more than passing interest. Throw in the fact that the Court’s order gives the FCC a mere seven days in which to respond, and that interest grows: such an abbreviated response deadline at least suggests that the Court may be looking to assemble a complete record and act on the petition in advance of the fast-approaching due date (currently July 8) for filing reports on the revised Form 323.

By our reckoning, the FCC’s response to the Court’s order will mark the first time that the Commission will have had to address, in a formal presentation, the unusual – and, in the view of a number of observers, unlawful – approach by which it has tried to force all “attributable” principals to give the FCC their SSNs. Anyone who has been following this story will want to check back here next week to see what the FCC has to say.

Cable Programming Exclusivity Ban Survives Appeal . . . But For How Long?

Split D.C. Circuit panel sidesteps First Amendment argument, upholds FCC prohibition . . . THIS time

The U.S. Court of Appeals for the D.C. Circuit has affirmed the 2007 extension of the Commission’s prohibition against exclusivity arrangements between cable operators and cable-affiliated programming networks. But the likelihood of that prohibition staying on the shelves beyond its current sell-by date (i.e., 2012) is dubious.

For more than 15 years the FCC has prohibited exclusive contracts between cable operators and cable-affiliated programming networks. The prohibition was triggered by the Cable Act of 1992, which reflected Congressional concern about cable’s monopolistic position in the realm of multichannel video programming distributors (MVPDs). But Congress was not inclined to let the FCC engrave the prohibition in stone. Au contraire, Congress included a sunset provision essentially causing the ban to go away automatically in 10 years unless the FCC made an affirmative finding that the prohibition continued to be necessary to protect competition and diversity. In 2002 the Commission made such a finding, leaving the prohibition on the books for another five years. And in 2007, when that extension ran out, the Commission renewed it for another five years.

That’s when Cablevision and Comcast, two of the biggest MVPDs, asked the Circuit to review the ban. In their view, the increasingly competitive MVPD market – now populated by such nouveaux arrivés as satellite TV providers DirecTV and Dish, not to mention telephone companies using their networks to deliver more than phone service – undercut the concerns that gave rise to the ban back in the days of the first President Bush.

By a 2-1 decision, the Circuit panel upheld the FCC. But in so doing, it gave the cable petitioners reason to believe that the prohibition won’t be around a whole lot longer.

The majority opinion, written by Judge David Sentelle (with Judge Thomas Griffith joining him), relied on a standard statutory analysis of the FCC’s decision, an approach in which the Court accords a boatload of deference to the agency. As usually happens when the Court takes that deferential tack, the FCC got the benefit of the doubt: the majority held that the Commission was not unreasonable in its conclusion that the prohibition is still justified, even though a different panel of the Court had held, in an unrelated case decided last August, that “[c]able operators [ . . . ] no longer have the bottleneck power over programming that concerned the Congress in 1992.” (We blogged about that case, which involves the FCC’s ownership caps, here.)

But the victory may not comfort the Commission (or others supporting the prohibition) much.  The majority wrapped up its opinion by observing that “[w]e expect that if the [MVPD] market continues to evolve at such a rapid pace, the Commission will soon be able to conclude that the exclusivity prohibition is no longer necessary to preserve and protect competition and diversity in the distribution of video programming.”  In other words, while the Court was willing to give the FCC a pass this time around, the Commission shouldn’t necessarily count on similar treatment the next time around.

An interesting aspect of the majority opinion is that it rejected the cable petitioners’ claims that, rather than the lenient, deferential statutory standard of review invoked by the majority, a more rigorous, less-agency-friendly First Amendment standard should apply because the cable operators’ First Amendment rights were (according to the petitioners, at least) at stake. The majority declined to consider any First Amendment arguments because, according to Sentelle, the cable guys didn’t raise them. 

That was news to Judge Brett Kavanaugh, whose 29-page dissent – not quite twice as long as the majority opinion – relied heavily on First Amendment analysis to reach the conclusion that the FCC’s prohibition is unconstitutional.  In the majority’s view, the cable petitioners never squarely argued that theirs was a First Amendment attack, and (according to the majority) the Court should not be in the business of deciding issues of constitutionality which the petitioner did not “set forth as an issue in the case and to which it refers only obliquely.”  [Important practice tip: If you plan to argue a constitutional issue, be sure to refer to the Constitution in your Statement of Issues.]  In fairness, while Kavanaugh makes a big effort to “tease out” (in Sentelle’s words) enough constitutional references in the petitioner’s briefs to cobble together an argument, it does appear that the cable guys declined to present the constitutional issue as such.

For their part, while the cable petitioners may take considerable comfort from Judge Kavanaugh’s  constitutional analysis, even he had to acknowledge that “the First Amendment rights of a Cablevision or ESPN do not tug at the free speech heartstrings in the same way as the iconic political protester who lies at the core of the First Amendment.”  Ouch.

Next stop? The ball is in Cablevision/Comcast’s court. They could sit back and wait for the current extension to expire (in 2012) and see what the FCC does. Or they could continue their litigation by seeking either: (a) reconsideration by the Sentelle/Griffith/Kavanaugh panel; or (b) rehearing en banc by the full D.C. Circuit; or (c) review by the Supreme Court. 

The odds of success in pursuing any of those options tend to be long against the guy seeking review. However, consider these facts. First, the cable petitioners have the advantage of a very thoughtful dissent on their side, reflecting at least one judge’s approval of their First Amendment arguments.  That might be helpful in persuading Kavanuagh’s colleagues that those arguments have merit.  Second, another panel of the Circuit did issue that decision on the cable ownership caps just last August, containing language that could easily be viewed as inconsistent with (or at least in strong tension with) the more recent ruling.  The full Circuit might be inclined to look at that aspect to confirm that the Court’s rulings are not heading in opposite directions.  And if cable’s goal is really to get the Supreme Court to revisit the issue of cable’s First Amendment rights – an issue last decided  there more than a decade ago, by a slim 5-4 vote – Cablevision and/or Comcast may figure that the Supremes might want to take a look (particularly in view of Judge Kavanaugh’s dissent).

Even if the cable petitioners pursue their litigation successfully, though, it’s possible that that litigation won’t be resolved until 2011 or even 2012. And at that point, the prohibition against exclusivity will be expiring anyway . . . unless the Commission decides otherwise. 

[Department of Credit-where-credit-is-due: FHH’s own Paul Feldman represented the Broadband Service Providers Association as an amicus on the FCC’s side before the Circuit in this case.]

Court Kiboshes Cable Cap

The subscriber cap which the Commission adopted in 2007 to keep cable companies from acquiring too much control of program delivery mechanisms is officially toast. The U.S. Court of Appeals for the D.C. Circuit declared the cap arbitrary and capricious and vacated it on August 28. Since the same Court had sent the same cap back to the agency for further consideration in 2001, this should be no big surprise – especially since the Commission’s 2007 explanation for the cap failed to address questions which the Court had told the Commission to consider.

Way back in 1992, Congress directed the Commission to fashion rules that would prevent any cable operator (or group of cable operators) from unfairly impeding the flow of programming to the consumer. In response, the Commission reached into its magic hat, intoned a couple of cryptic mathematic incantations, and – presto – announced that it had concluded that no single cable operator should be permitted to serve more than 30% of all subscribers. That was in 1993.

Since then, the Commission has twice changed the mystical mathematic formula supposedly used to calculate the subscriber cap, but both times the new formulae have miraculously led back to the same 30% cap. What a coincidence!

The Court had occasion to review the FCC’s first revised approach back in 2001, at which point the Court expressed concern that the Commission hadn’t adequately addressed all relevant considerations – including, in particular, the increase in direct satellite broadcast (DBS) subscribership. (The Court at that point also questioned the constitutionality of the cap, but since the matter was being shipped back to the FCC for further deliberation, no final determination was made on that score.) In 1992, DBS had accounted for a minuscule share of video subscribers (in the Court’s words, DBS providers were “bit players” then). In the intervening years DBS has expanded considerably – today, it accounts for one-third of all subscribers.   Unsatisfied with the FCC’s initial revised approach, in 2001 the Court shipped the matter back to the Commission for further consideration. The Court specifically directed the agency to consider the effect of DBS on the ability of cable operators to “determine the economic fate” of programming networks.

The Commission dutifully took the case back. In 2008, after several years of proceedings, the Commission again reached into its magic hat, again intoned some mathematical incantations, and, lo and behold, again came up with a 30% cap!

Representatives of the cable industry again brought the matter back to the Court. And again the Court wasn’t satisfied with the Commission’s analysis. So much so, in fact, that in its August 28 opinion, the Court vacated the 30% cap, declaring it to be arbitrary and capricious. As a result, for all practical purposes, the cap no longer exists.

The Commission tried to justify its failure to figure in the competitive impact of DBS by observing that it would be difficult to do so. That argument went nowhere with the Court. Referring to the Commission’s “dereliction” as “particularly egregious”, the Court concluded that the FCC “either cannot or will not fully incorporate the competitive impact of DBS and fiber optic companies” into its calculations. Since the Court had specifically instructed the Commission, back in 2001, to consider DBS impact, the agency’s failure to do so appears to have been especially galling to the Court.

The FCC 2007 decision to cling, rigor mortis-like, to the 30% cap was reached on a 3-2 vote, with the two then-Republican Commissioners (McDowell and Tate) dissenting. It will be very interesting to see how the new Democratic Commission reacts to the Court’s stinging rebuke.

Court OKs Intermodal Number Portability Order

Court chides FCC for delay on intercarrier compensation proceeding.

Swatting aside claims that the FCC had, again, violated the Regulatory Flexibility Act (RFA), the U.S. Court of Appeals for the D.C. Circuit has upheld the Commission’s Intermodal Number Portability order. That order was initially adopted by the agency in 2003, but then set aside by the Court in 2005 because of RFA problems. A couple of  years later, the Commission finally got around to addressing those RFA problems, and the Court has now approved that second effort.

But in so doing, the Court has signaled its impatience with the FCC’s slow-motion deliberations in the related intercarrier compensation (ICC) proceeding.

The RFA is a legacy of the Reagan era. It requires federal agencies to analyze the impact of new rules on small businesses.   The theory is that, by forcing an agency to review and articulate the impact of its rules on the Little Guys, the RFA may prevent, or at least discourage, unnecessarily burdensome regulations.

As a practical matter, though, the RFA provides little help in most situations. The agency is ordinarily accorded substantial deference by the courts. That’s even truer when it comes to compliance with the RFA’s requirements, which the D.C. Circuit has characterized as “purely procedural” – and by that the court seems to mean that, as long as the FCC jumps through the limited number of hoops set out in the RFA, the FCC can expect to insulate itself from pretty much any RFA-based appeal. (While the Court did send the 2003 number portability order back to the Commission on RFA grounds, that was because the FCC had declined to perform any RFA analysis at all. The FCC said it thought that its 2003 order was exempt from the RFA. Nice try.) 

In its most recent decision reviewing the FCC’s three-years-in-the-making RFA analysis, the Court had no trouble concluding that that analysis passed muster. The Court confirmed that the FCC touched all the bases required by the statute, and that its analysis was neither arbitrary nor capricious. So even though small carriers will be subjected to significantly increased costs as a result of the number portability system imposed by the Commission – a result which the RFA was intended to discourage, if possible – that system has now survived judicial review.

Having won this one, the Commission may be emboldened to increase the regulatory load on wireline carriers. On May 13, the FCC is scheduled to consider a possible reduction in the maximum allowable time for porting numbers – a reduction which would likely be burdensome for wireline carriers. Since the Court did not have any problem with the new burdens imposed by its prior intermodal number portability requirements, the Commission may reasonably figure that similar, or even greater, burdens can be heaped on without fear of reversal. We will likely see that come into play shortly.

But the Court didn’t let the Commission off scot free. In rejecting the argument that porting imposes disproportionate transport costs on small carriers, the Court explicitly relied on the FCC’s assurances that it will be addressing transport costs more broadly in the long-pending ICC proceeding.  This may put some heat on the FCC to get that proceeding going again, particularly because the Court pointedly observed that “[w]e assume the Commission will complete its work [on ICC] soon. If not, an appropriate party may of course file a petition for mandamus.”  Essentially, the Court was inviting parties to seek “mandamus”, i.e., a special writ by which parties may seek relief from “unreasonable delay” by an agency. Such an invitation is music to the ears of parties who would otherwise have to cool their heels, waiting for years for the FCC to act. As recently as 2008, a party sought and obtained from this very Court, an order requiring the FCC to rule on ICC for ISP-bound traffic.

So while the FCC may currently lack the set of permanent Commissioners needed to properly address the ICC proceeding (a proceeding that has dragged on for over eight years already), the Court has clearly signaled that it is running out of patience. Optimists might figure that the FCC may feel the need to take up the ICC proceeding even before the new Commissioners are seated.  However, if history is any predictor, we suspect that the FCC will have to be further pushed into action, kicking and screaming.