CommLawBlog : Broadcast & Communications Lawyers & Attorneys : Fletcher Heald & Hildreth Law Firm : Telecommunications, FCC Regulation, Communications Act

Normally you go to the Court of Appeals only after the agency has taken some action which the Court can then review. But in certain extraordinary circumstances, the Court is authorized to step in even absent agency action, to make sure that the Commission is doing what it’s required by Congress to do. The revised Form 323 requires the submission of social security number (SSN)-based FRNs for every individual having an attributable interest/position in connection with any commercial broadcast licensee. As we see it, the FCC’s efforts to steamroll that requirement into place have fallen demonstrably short of Congressionally-imposed criteria, even though affected broadcasters have no conventional way to secure judicial review before they are required to comply – a situation perfectly suited for the “extraordinary writ” process.

So away we went to Court, asking it to stay the implementation of the new form. Since, when we filed the petition, the deadline was still January 11, we asked the Court to treat this as an “emergency” situation, the goal being a ruling by January 4, i.e., a week ahead of the January 11 deadline.

Meanwhile, back at the FCC, representatives from a number of law firms had met with Bureau staffers on Friday, December 18, to demonstrate to the staff that the new Form 323 was, as a purely practical matter, a nightmare. The group served up multiple horror stories of cumbersome on-line processes, system timeouts and losses of “saved” data, all of which contributed to massive amounts of time spent completing the form. (How massive? The group told of cases, involving “moderately complex” ownership structures, where the completion of a single form took 500 to 800 hours. 800 hours? Wrap your mind around that. That’s the equivalent of 20 40-hour weeks – about five months – all dedicated 100% to the completion of a single form. Where’s the Paperwork Reduction Act when you really need it?)

Following the meeting, the group – ably led by Wiley Rein’s Kathleen Kirby, who deserves big props for leading the charge – followed up with a letter requesting an extension of the January 11 deadline as well as various mechanical modifications to the form to alleviate the problems that have been encountered. The letter focused exclusively on the mechanics of the form; it made no reference to the more fundamental legal questions that FHH had raised and the FCC had declined to address.

The Bureau, apparently convinced that their form does have glitches and hiccups, agreed in the Order released on the afternoon of December 23 to suspend the January 11 deadline for biennial Ownership Reports. The suspension is indefinite, and is intended to allow the staff to “investigate what changes can be made” to get the form to work more efficiently without compromising the “completeness, quality, usefulness and aggregability of the data.” The Order provides that, once the dents have been knocked out of the revised form, the FCC will announce a new deadline which will be at least 90 days from the date the New(er) and (More) Improved form is made available.

Note, though, that the form, flawed as it is, is still required to be completed and filed in non-biennial reporting circumstances. Those include consummation reports relative to assignments or transfers of control. (Check out Section 73.3615 if you have any doubts.) But if the form as it currently stands is problematic, why use it at all? That’s just one more question the Commission has declined to answer. 

Also, note that, when the biennial form is eventually filed, it will (according to the Bureau’s Order) still have to reflect ownership as of November 1, 2009. That means that, if the new form were to become available on, say, February 1 (that’s just an optimistic guess on our part), reports would be due 90 days later, i.e., by (let’s see, 30 days hath September . . .) May 3, the first business day in May. That’s six months after November 1. While many licensees may not have changed during that time, it’s reasonable to assume that a significant number will have changed – meaning that those changed licensees will be reporting outdated information likely relating to entities or individuals with which the reporting licensees have no connection at all. That is not a recipe for complete and accurate data collection.

Be that as it may, the deadline for filing biennial reports on the revised Form 323 has now been suspended indefinitely. 

But hold on – what does that suspension do to the Petition filed with the Court?  Well you might ask. With the January 11 deadline gone, the immediate threat to all commercial broadcasters was obviously removed. But the deadline suspension does nothing to cure the underlying unlawfulness of the new SSN-based FRN reporting requirement. And notwithstanding the suspension, non-biennial Ownership Reports must still be filed on the new form, with the unlawful SSN-based FRN requirement. And the FCC continues to show no inclination to address, much less resolve, the issues which FHH has raised about that unlawfulness.

In other words, the suspension does absolutely nothing to correct what we believe to be the more fundamental flaws in the new form. (Not surprisingly, in its Order the Bureau claimed that FHH’s motion for stay, filed with the Commission in November, was rendered moot by the Order. We disagree with that example of bureaucratic wishful thinking.)

Obviously, the Bureau’s Order was a late-breaking development that the Court should know about, so within a couple of hours of the release of the Bureau’s suspension Order, we were back in Court, supplementing our Petition. In our Supplement we advised the Court of the Bureau’s Order and acknowledged that, because of the deadline suspension, there is no longer any need for “emergency” relief, i.e., a ruling by January 4. BUT we emphasized that the form is still seriously flawed, that non-biennial filers are currently being harmed by those flaws despite the suspension, and that those flaws are still not susceptible to judicial review through conventional means. In other words, while we withdrew the request for “emergency” relief, we emphasized that prompt extraordinary intervention by the Court is still called for here. Accordingly, we renewed our request that the Court consider our Petition.

With the arrival of Christmas weekend, we can all expect at least a couple of days of peace and quiet on the Form 323 front. But we should not expect that to last long. Stay tuned.

 Respondents must provide an FCC Registration Number (FRN) for all persons and entities reported in Question 3(a) of this Report. If, after using diligent and good-faith efforts, Respondent is unable to obtain a Social Security Number in order to generate an FRN for any specific individual whose FRN must be reported on Form 323, Respondent may click on the button below to generate an interim 'Special Use FRN' solely for the purposes of completing this Report. Respondents selecting this option should first read the Commission's Form 323 Frequently Asked Questions concerning the 'Special Use FRN', available at http://www.fcc.gov/bureaus/mb/industry_analysis/form323faqs.html.

NOTE: The 'Special Use FRN' generated by selecting the button may be used only to file a biennial ownership report on FCC Form 323 and may not be used for any other purpose at the FCC. Moreover, use of the 'Special Use FRN' does not relieve Respondent of its ultimate duty to obtain a fully compliant FRN. To proceed with generating the 'Special Use FRN', select the button ('OK') below.

The take-home message here is that the Commission does not intend the Special Use FRN to be used simply because a respondent doesn’t feel like providing his/her social security number in order to get an FRN.

If you’re interested in knowing what you might find by clicking on the link providing in the FCC’s message quoted above, here’s what we found (this is the only place on the Form 323 page that refers to SUFRNs):

4. I am an attorney completing Form 323 for a client. I have made every attempt to get FRNs for all of the officers, directors, and attributable shareholders I need to report, but one of them refuses to get an FRN for himself and won’t give me the information I need to obtain one on his behalf. What do I do?

As a rule, all filers must provide an FCC Registration Number (FRN) for all persons and entities reported on Form 323. If, however, after using diligent and good-faith efforts, you are unable to obtain an FRN for any specific individual required to be reported on Form 323, the electronic form contains a mechanism for generating an interim “Special Use FRN” solely for the purposes of completing the form. The “Special Use FRN” may be used only to file a biennial ownership report on FCC Form 323 and may not be used for any other purpose at the FCC.

We remind individuals who must be reported on the form that they have the option of obtaining their own FRN directly from the CORES system, obviating the need to disclose their SSNs to anyone other than the Commission. We encourage individuals to provide FRNs to filers to alleviate any concerns they may have about disclosing their SSNs to filing entities. We note that Special Use FRNs are an interim measure to ease the transition to use of the revised form. Use of the “Special Use FRN” does not relieve a filer of its ultimate duty to obtain a fully compliant FRN. We expect filers using Special Use FRNs to update their filed ownership reports with fully compliant FRNs when these are obtained. (Added: 12/4/2009)

Curiously, that second paragraph seems to suggest that, in the Commission’s view, respondents may be more reluctant to provide the SSNs to people (say, their lawyers) other than the Commission, the implicit message being that everybody should be way comfortable in giving up their sensitive personal information (like SSNs) to the FCC. That’s an interesting notion, the validity of which we might be better able to gauge had the Commission ever bothered to disclose the FRN requirement to the public and seek comment on it.

In its public notice, the Bureau advises that the new form still requires the inclusion of FRNs for each individual, BUT it also includes a mechanism for generating a “Special Use FRN” (“SUFRN”, as in “SUFRN’ SUCCOTASH”) for the purpose of getting the Form 323 on file when a real FRN is not available. The “SUFRN” can be used only for filing Form 323 (and not for any other FCC purpose). While the public notice indicates that “instructions on how to obtain a [SUFRN] are on” the FCC’s Form 323 webpage, we couldn’t find any such instructions, although (for what it’s worth) Question 4 of the FAQs there does mention that “the electronic form [Form 323] contains a mechanism for generating an interim “SUFRN” solely for the purposes of completing the form”.

You might think that the Commission’s willingness to accept a SUFRN in lieu of a social-security-number-based FRN indicates that the Commission has recognized (a) the legitimate concern that many have expressed about coughing up their SSNs and (b) the fact that some alternative(s) to SSN-based FRNs should be available to do the trick.

You would, of course, be wrong.

The public notice makes clear in no uncertain terms that every individual who shows up as “attributable” in a Form 323 will still have to have a f’real (i.e.¸SSN-based) FRN, and that the SUFRN is just a temporary stopgap “to ease the transition to use of the revised form”. According to the notice, the Commission still “expect[s] filers using Special Use FRNs to update their filed ownership reports with fully compliant FRNs when these are obtained.”

So the Commission is sticking to its guns and insisting on SSN-based FRNs from one and all, even though an alternative – the SUFRN – appears to be readily available as a non-SSN-based alternative. It seems that the SUFRN is just a device by which the Commission hopes to create the impression that you can get your Form 323 filed without disclosing your social security number, perhaps in an attempt to take the wind out of the sails of those who oppose the revised form as unduly intrusive because of the SSN/FRN requirement. But that impression would be a misimpression, since the notice makes stunningly clear that SSN-based FRNs really are de rigueur.

So the public notice does not appear to cure any of the defects which we have previously noted with the Commission’s process for revising Form 323, and it may put the Commission in a worse position than it was in before. We shall have to wait and see how events continue to unfold.

The Privacy Act includes another, separate, 30-day waiting period. Section 552a(e)(11) of the Act appears to prohibit any agency from publishing or disclosing any information in a newly-established or newly-revised system of records until the agency has provided a 30-day public notice period, commencing with Federal Register publication of the SORN. As all you CDBS aficionados know, once an ownership report is submitted and the fee paid, the information in that report is available for all (well, for anybody with Internet access, at least) to see in CDBS the next day. In Privacy Act parlance, that accessibility constitutes a “routine use” of the information filed on the ownership report.

The FCC did not request a waiver of this 30-day period, probably because no waiver is permitted.  According to an OMB circular cited by the Commission in its request for waiver of the usual 40-day deadline:

OMB cannot waive time periods specifically established by the [Privacy] Act such as the 30 days notice and comment period required for the adoption of a routine use proposal pursuant to Section (b)(3) of the Act. [emphasis added]

Now we’re not Privacy Act experts, but it sure seems pretty clear from OMB’s language there that the Commission may be prohibited from making public any information filed on the new ownership reports until after the expiration of this 30-day waiting period. Based on the November 19 publication date of the FCC’s SORN, that period would expire on Monday, December 21.

So, even if the Commission persists in requiring the new ownership reports to be filed by December 15, it might need to figure out a way to prevent those reports from becoming public until at least December 22. Can this be done? We have our doubts, but stay tuned to www.commlawblog.com for updates.

To get an FRN, an individual has to provide to the FCC his/her social security number, while entities like corporations have to cough up their equally sensitive taxpayer identification numbers. There is considerable, and understandable, reluctance to do that in this day and age of identity theft and Internet security issues – especially when the new requirement extends to each and every lowly officer (think Assistant Secretary, etc.) and pretty much anybody with as little as a 5% ownership interest.  (You don’t have to take our word about the dangers of the Internet – just ask Chairman Genachowski, who last month joined with the Chairman of the FTC to “encourage the public to take safeguards to protect themselves, their privacy , and their personal information online”.) 

What’s more, the inclusion of individual FRNs as part of the revised Ownership Report process was never disclosed to the public by the FCC in a way which allowed for public input. In fact, the FCC didn’t even acknowledge, much less address, any privacy concerns until they were raised by a number of parties before the OMB. Au contraire, when the FCC initially sent its draft form to OMB in August, it specifically – and incorrectly – said that the form did “not affect individuals or households” or create any “impacts under the Privacy Act”. 

And even when, in October, the Commission finally conceded that, gee, the form would contain personally identifiable information and that, gosh, privacy might be something to think about here, it still didn’t implement the full range of steps ordinarily mandated by privacy laws. Instead, the Commission said that it would get right on those steps for sure, even though it planned to require use of the new form before all the privacy hoops had been jumped through.  (Check it out at page 7 of the FCC’s October 6 letter to OMB.)

In view of all of these considerations, it seems to us at FHH that the appropriate thing for the Commission to do is to stop, take a deep breath, and work on developing an Ownership Report system that addresses all important issues in a procedurally proper manner. And in the meantime, it should hold off on requiring the filing of Form 323.

Check back to www.CommLawBlog.com for updates on continuing developments in the Form 323 situation.

The FCC would like to take steps to increase minority and female broadcast ownership, but government agencies are very limited (by the Equal Protection Clause of the Constitution, for openers) from engaging in race/gender-based decision-making. A 1995 Supreme Court case (Adarand v. Pena) gives agencies some very limited leeway on that score, but the agency must have a solid evidentiary justification. The Commission has decided that the ownership information which it has historically collected won’t do the trick. The solution? Upgrade the FCC’s ownership database by changing Form 323 (and its noncommercial sibling, Form 323-E) and the underlying reporting process.

But rather than get its own hands all dirty in the form-revision process, the Commission dumped that chore onto the Media Bureau. The Bureau duly closed the doors, pulled the shades and threw together a revised form without bothering to let anybody out in the real world know exactly what changes the Bureau had in mind. The form the Bureau ultimately cooked up was then shipped over to OMB for its review in August, before anyone in the public could take a peek. When OMB quietly posted the form on its website, lo and behold – the form contained a number of surprises. (The NAB, which had also filed a petition for reconsideration with the Commission, thereupon did an admirable job letting OMB know about the problems with the new form, as did a handful of other groups.)

A central element of the revised reporting requirement was the shift to a single filing deadline for all commercial broadcasters. Traditionally, biennial ownership reports have been due on the anniversary of each station’s renewal application. No longer. As announced by the Commission last May, the new drill calls for everybody to file their respective reports on November 1 (reflecting data accurate as of the previous October 1) . . . starting this November 1. As that magical date approached, however, the Commission had a problem. It couldn’t use the new form until OMB approved it, and as we rounded the turn and headed into October, that approval was still MIA.  So earlier this month the Commission announced that the November 1 deadline was no longer operative this year (although November 1 will be the deadline in future years). Instead, the FCC would wait for OMB approval and then let us all know when to file.

But then, on October 16, the Commission released its decision on the NAB petition for reconsideration. While it denied that petition in part, it also purported to grant the petition in part. The NAB had objected to the new requirement that sole proprietorships file biennially. The Commission rejected that argument. But the NAB had also pointed out that another new provision – requiring the reporting of certain non-attributable interests previously not subject to the reporting requirement – had not even been hinted at in any notice of proposed rulemaking or responsive comments. Under the Administrative Procedure Act, agencies aren’t supposed to surprise us all like that, a point which the NAB made convincingly. And sure enough, the FCC had to agree. So the Commission said that it was deleting that aspect of the new form. 

Score one for the NAB, right?

Not exactly. Having “granted” the NAB’s petition in one breath, in the very next breath the Commission decided that it would invite public comment on the proposed reporting requirement for certain non-attributable interests, thereby effectively side-stepping the basis for the NAB’s objection. In other words, any victory the NAB may have enjoyed is likely to be short-lived: we can reasonably expect that, when the dust finally settles on this latest detour, that particular reporting requirement will have been re-inserted into the form.

Still, didn’t this last-minute shift in gears – which would require further revision of the draft form sitting over at OMB – mean that any OMB approval would likely be postponed further? You might have thought that, but then, on October 19, OMB went ahead and approved the form anyway. The Commission has slipped OMB the word that the requirement to report non-attributable interests was being deleted, and OMB proceeded to approve the form with that stipulation.

So here’s where things seem to stand, at least for the moment. The Media Bureau’s draft form has been approved by OMB, minus the provision for reporting non-attributable interests. You can find a copy of the revised and (we think) approved form here - yes, we know that it says "not approved by OMB" in the upper-right hand corner, but the file name as it appears on the OMB website is "FCC Form 323 Post-Reconsideration Version (Final).doc". (But don’t forget that the FCC is considering reinserting the requirement to report non-attributables, and it seems pretty clear that we’ll be seeing that provision back in the form before long.) The requirement that everyone with an attributable interest be identified in Form 323 with his/her/its FCC Registration Number (FRN) is still in there – which means that the FCC will likely be seeing a long line forming on CORES as previous FRN-less folks queue up, SSNs and TINs in hand, to lay claim to their own new FRNs so that they can duly report them in Form 323.

When will the new Form 323 be required to be filed? That’s the big question, and it won’t be answered until the FCC issues a public notice. A number of observers are guessing that December 1 is a likely pick, but who knows? (Anyone who would like to join in a pool to guess the 323 deadline should feel free to submit their guesses in comments to this post.) We’ll let you know when the notice comes out.

So for the time being we can sit back and await OMB action. If OMB approves the revised form, the FCC will issue a public notice to that effect. In that notice the Commission will announce the new due date. (If OMB declines to approve the revised form, it is not clear exactly what will happen – but whatever it is, the FCC will presumably clue us all in with a public notice.)

Note that, for some reason, the Commission appears absolutely wedded to the notion that biennial Form 323s must be filed on November 1. The Bureau’s announcement of the extension specifies that, regardless of when the deadline ultimately falls this year, all biennial report filings in future years will be due November 1 (again with information current as of October 1).

Check back with www.commlawblog.com for further updates as events develop.

As we reported back in May, the Commission’s Report and Order provided, at most, some very general guidelines about what the new Form 323 should look like. It left it to the Bureau to fill in the details. 

Last week we finally got a look at what the Bureau has come up with.

A copy of the Bureau’s proposed form can be found here. Check it out, and if you have any thoughts about it, feel free to let the folks at the Office of Management and Budget (OMB) know – you have until September 10 to get your comments in.

The fact that we’re all just getting a last minute crack at the Bureau’s handiwork is unfortunate – and may be contrary to the rules. Since the ownership report is an “information collection” subject to the Paperwork Reduction Act, the Commission is supposed to solicit comments on it before sending the proposal out for separate review by OMB. While the FCC did technically invite comments back in June, that opportunity was somewhat – how can we say this delicately? – less than useful, being as how the form about which comment was being sought was not available for anybody to review.

The June notice described the proposed changes in the form as follows, without further elaboration or illustration:

The instructions have been revised to state the Commission’s revised Biennial filing requirements adopted in the 323 Order. The instructions and questions in all sections of the form have been significantly revised.  Many questions on the form have been reworked or reordered in order to (1) clarify the information sought in the form; (2) simplify completion of the form by giving respondents menu-style or checkbox-style options to select rather than requiring respondents to submit a separate narrative exhibit; and (3) make the data collected on the form more adaptable for use in database programs used to prepare economic and policy.

But now the form has surfaced – although without much of a noticeable splash – and we can all take a look. 

Perhaps the most striking change – a change not mentioned by the FCC in any of its various notices – is that the proposed form would require that every person or entity holding an “attributable” interest must have his/her/its own separate and distinct FCC Registration Number (FRN) which must in turn be reported in the new Ownership Report form. Those with “attributable interests” include officers, directors, 5% or greater shareholders and individuals or entities whose interests exceed certain levels under the Commission’s “equity-debt-plus” standards.

This means that lots and lots and lots of people, and entities, will now have to sign up for their own FRNs, which in turn means that they will have to provide the FCC with their social security number, employer ID number or taxpayer ID number. To be sure, the revised Ownership Report itself does not call for SSN/EIN/TIN disclosure, but in order to get an FRN in the first place, you have to cough up one of those ID numbers to the FCC (through the CORES system for doling out FRNs).

It is not hard to imagine the very considerable practical problems that the new FRN reporting will create. The overall number of FRNs issued by the Commission is likely to balloon exponentially. After all, a corporate licensee at this point generally requires only its own FRN. Under the new regimen, each of that licensee’s officers and directors and attributable interest- holders will have to have his/her/its own FRN. And if any attributable – and, therefore, reportable – interest holder is, in turn, a corporation (or other business entity), it too will have to provide FRNs not only for itself but also for its officers, directors and attributable interests holders. And so forth down the line. Oh, and don’t forget that the Commission has also expanded the universe of services subject to ownership reporting requirements to include LPTV and Class A folks – thereby further jacking up the number of attributable interest-holders who will be filing reports.

So the FCC will suddenly become a repository of a vast trove of sensitive information – SSNs, EINs, TINs – which it has not previously held. In view of the ever-present, and increasing, threat of identity theft, one would think that Federal agencies would be reluctant to collect such data. Additionally, reporting entities – licensees and their various officers, directors, etc. – will have to keep track of the multiple FRNs they are required to include in their reports. To some degree it is already a headache keeping track of multiple FRNs (and associated passwords) – that problem will only get worse when the number of reportable FRNs skyrockets. 

Plus, the new form requires that all FRN information be “consistent” among all reports. That is, if an individual or entity listed in one report shows a particular FRN, then that same FRN should be used in all other reports in which that individual or entity happens to be listed. The new form advises that respondents should be sure to “coordinate with each other” to ensure consistency. The unstated problem here is that, historically, the FCC has not limited FRNs on a one-to-a-customer basis. As a result, any individual or entity might have a bunch of different FRNs. In order to achieve the “consistency” mandated by the new form, respondents will have to take pains to use the correct FRNs, and will also have to hope that all other respondents do likewise.

Curiously, the Commission appears not to have recognized the likely impact of this change. Check out the FCC’s defense of its new form, as presented to OMB. Nary a word about the new requirement to report FRNs for every attributable interest-holder. In fact, the FCC blithely concludes that “[t]here is no need for confidentiality with [the revised Form 323]” and the revised form “does not address any private matters of a sensitive nature”. While it is true that Form 323 itself does not require confidential or sensitive information, the new FRN-reporting requirement will nevertheless compel the submission of boatloads of SSNs, EINs and TINs (through the CORES registration system), all of which would normally be viewed as confidential or sensitive.

With the exception of the FRN aspect, the proposed form contains few other surprises. Still, since the form is now designed to provide conclusive documentation of the precise level of minority ownership in broadcasting, it does seem a bit odd that respondents can choose “two or more races” as an option, without identifying which races are involved – won’t that affect the data? 

And the Commission’s racial definitions still suffer from problems inherent in such governmental efforts at population compartmentalization. For example, “Asian” is re-defined to include only those “having origins in the original peoples of the “Far East, Southeast Asia or the Indian Subcontinent” – hey, we thought Asia started at the Urals, and what about all that “Siberia” thing? “African” similarly now means “not really all of Africa” – since it appears to exclude those “having origins in any of the original peoples of . . . North Africa”. And what, exactly, does “having origins in any of the original peoples” mean, anyway? How far back, and how deeply, can or must respondents go to answer that?

While the Commission fails to address any of these practical problems in its OMB defense, it does provide some laughably incomprehensible “estimates” of the “burdens” that the revised form will impose on the private and governmental sectors. For example, with no explanation, the Commission speculates that it will take between 1.5 and 2.5 hours to complete the revised Form 323. (Check it out for yourself: go to Supporting Statement OMB 3060-0010 (August 2009).doc  and take a look at Paragraphs 12-14 on pages 8-9.)  In our experience, that’s way over for the simplest situations (e.g., a single-owner licensee with only one station), but probably unreasonably low for more complex situations (e.g., multi-tiered ownership structures). 

But wait, the 1.5/2.5 hour estimates do not appear to involve attorney prep time; rather, it appears that those estimates relate only to the amount of time the reporting entity would itself have to devote to preparation of the report. The Commission next figures that attorneys would likely be involved as well, and it speculates (in Paragraph 13) that each report would require eight hours of attorney time – probably on the high side, at least for relatively straightforward reports – at a billable rate of $200/hour (good luck with that).

The unreliability of the FCC's figures is underscored by the fact that it doesn't even get its own filing fees correct.  At Paragraph 13 it refers to a filing fee of $55 per biennial report.  Call us crazy, but we could have sworn the 2009 Fee Guide sets that fee at $60 a pop, the same level it's been at since at least 2008, and maybe even since 2006.

Finally, the fun continues with the Commission’s estimate of the “cost to the federal government”. According to the FCC, a GS-11 staffer will require two hours to “process” each report. But the reports are being filed electronically by the licensees. No staff involvement likely there. And it has long been our impression that, except in unusual situations, Ownership Reports go largely unreviewed by the Commission once they are submitted. Where, then, does the two hours of “processing” time come from? Ideally, OMB will be able to sort all this out.

The revised form, and the accompanying report to OMB, do make for interesting, if not enlightening, reading. Since all full-service radio, TV, LPTV and Class A broadcasters will be having to complete the form biennially, it would be a good idea for everybody to check it over now, while it’s still in draft form. You have until September 10 to chip in your two cents’ worth about the form at OMB. After that, opportunities to get the form changed will be few and far between.

Comments are due by June 26, and reply comments by July 13.

Additionally, if you would like to comment on the PRA aspects of both the proposed NCE rules and the already-adopted-but-not-yet-effective commercial rules, you may do so until July 27. Note that the opportunity to comment on the adopted rules is not highlighted by any means in the Federal Register. That is, it isn’t mentioned in the “Dates” section which appears prominently toward the beginning of the item; rather, it’s kind of, well, buried in the middle of the fourth page of teeny-tiny, single-space Federal Register type. While that seems a pretty unenthusiastic way to invite comments, we’re sure that the invitation is nonetheless sincere and that your PRA comments will be welcomed with open arms (and equally open minds) at the Commission.

The specific PRA questions you are invited to comment on are: (a) Whether the proposed collection of information is necessary for the proper performance of the functions of the Commission, including whether the information shall have practical utility; (b) the accuracy of the Commission’s burden estimates; (c) ways to enhance the quality, utility, and clarity of the information collected; and (d) ways to minimize the burden of the collection of information on the respondents, including the use of automated collection techniques or other forms of information technology.

As to the “Commission’s burden estimates” on which comment is invited, we’re not sure what those particular estimates might be. There do not appear to be any specific, quantified estimates of anticipated “burdens” set out in either of the Federal Register items. That may make it difficult to comment on such estimates. So if you are inclined to file comments, good luck.

First, the method for determining attributable interests to demonstrate compliance with the FCC’s multiple ownership rules has been revised to conform to the Diversity Order’s modified treatment of “eligible entities” for equity-debt-plus (EDP) purposes.  (“Eligible entities” are, of course, entities that qualify as small businesses under the standards adopted by the Small Business Administration (SBA).)  Under EDP, an entity may be tagged with an attributable interest in a broadcast licensee even if it is not technically an owner. That historically occurred when the non-owner was (a) either a significant program supplier or an attributable owner of another same-market station holder and (b) held a 33% or greater equity and/or debt position in the licensee – when those factors coincided, the non-owner’s interest was deemed “attributable”. But in the Diversity Order, the FCC relaxed that rule to allow up to 50% equity and/or debt interest in an “eligible entity” licensee or a debt interest alone (no equity) of up to 80% of the asset value of a station. The new forms include instructions about these new limits and a question regarding whether the applicant is claiming status as an “eligible entity”.

In addition, the assignment and change of control applications (Forms 314, 315 and 345) now require a certification concerning compliance with the FCC’s anti-discrimination rules in connection with the transaction for which approval is being sought. In the Diversity Order, the Commission adopted a new rule (47 CFR Section 73.2090) banning discrimination on the basis of race, color, religion, national origin or sex in the sale of commercial broadcast stations. 

In the revised Forms 314 and 345, the assigning/transferring party is required to certify that it (or any other party to the application) did not violate this rule in connection with the transaction for which it is applying for the FCC’s consent. In the revised 315, that certification obligation falls to the licensee/permittee (as opposed to either the transferor or transferee).  Since the certification requirement applies only to commercial stations, applications involving noncommercial stations include an “N/A” box. If a commercial station applicant cannot certify that it did not violate that rule, it must attach exhibits to the application disclosing the persons and matters involved, and an explanation why such non-compliance should not impede grant by the FCC of the application. 

Finally, the assignment and change of control forms for full service stations (Forms 314 and 315) now ask whether the proposed transaction involves a radio station that is a part of a non-compliant grandfathered cluster of stations. If the answer is yes, the buyer must then certify that, within 12 months of the consummation of the transaction, it will bring itself into compliance by divesting station(s) as necessary either to an “eligible entity” or to an irrevocable trust that will in turn assign the station(s) to an “eligible entity”. The Diversity Order expanded the ability to deal off grandfathered station clusters to any buyer (such sales had previously been limited to eligible entities), subject to certain limitations. 

Applicants who check the “yes” box for this question must submit a form of an irrevocable trust agreement providing for the assignment of the license(s) to an eligible entity. (Note that the application requires submission of such a form of agreement even if the proposed buyer indicates that it intends to divest the excess station(s) to an eligible entity, rather than to an irrevocable trust for later assignment to an eligible entity. This may be an oversight on the Commission’s part that will be corrected eventually. For the time being, though, the application requires submission of the irrevocable trust form in either case.)

The new forms have been loaded into CDBS and are currently available for use. In fact, you’ve got to use them.  It’s not clear what happens if you started to complete one of the revised forms on CDBS prior to May 21 – it’s possible that, in that situation, you will have to copy over all the information onto a new version of the form. But if you start the filling-in process as of May 21, you should not have any problems.

If you run into any problems with the new forms, please feel free to contact us for guidance.

As a result, there’s little in the way of hard news to report. Perhaps the most important factoid to be gleaned from the R&O is that the filing deadlines for ownership reports between now and November 1 apparently remain in place. When the Commission announced that it was abandoning the staggered filing approach which has been in place for years and replacing it with a single November 1 deadline for all ownership reports, folks whose reports are currently due on June 1, August 1 and October 1 justifiably wondered whether they were going to be forced to file on those dates, and then again on November 1. The answer is that it does in fact look that way. The R&O is silent about any interim relief for licensees with June, August and October filing dates, so it looks like you all will be having to file two sets of ownership reports this year.

If, that is, the Bureau manages to get things together in time for the November 1 deadline.

This is not a criticism of the Bureau, which would ordinarily have the experience and the expertise to handle this kind of chore. The problem is that the Commission has heaped a lot of stuff on the Bureau’s plate all at once, with very little time in which to process it all. 

If the Commission wanted the staff just to tweak the existing form a bit, that would probably not be any problem at all. But the Commission wants the new form set up “so that ownership data is incorporated into the database, is searchable, and can be aggregated and cross-referenced electronically.” That means, among other things, that the use of attachments will probably be history. Attachments have provided respondents a convenient way of presenting their own particular ownership information in narrative, or chart, or table, or some other, form. But the information in attachments (normally filed as PDFs) can’t be fed automatically into a searchable database, so the odds are that we’ll be kissing attachments good-bye. Accordingly, the form will have to be adjusted to permit the inclusion of information that would otherwise have been in those attachments.

Additionally, the new forms will have to be adjusted to encompass the expanded ranks of respondents. LPTV and Class A TV licensees will all be reporting for the first time, as will a number of parties who were previously exempt from reporting.

And the system will have to be set up to include “verification and review functions” and preclude the filing of incomplete or inaccurate data.

And once the system is set to go, it will have to be blessed by the Office of Management and Budget.

And all this has to be ready to go sufficiently in advance of November 1 – less than six months from now – to permit thousands of respondents to hop on line, fill out their respective forms, and submit them.

Anything is possible, and the Media Bureau staff are among the most competent folks around, so we can keep our fingers crossed. But it still seems like a pretty tall order.

And did we mention the post-filing audit process? In the R&O the Commission directs the Bureau “to conduct audits on a random basis to ensure the accuracy of the Ownership Reports”. While we can all applaud a desire for maximum accuracy, let’s think about this for a minute. Recall that the revision of the ownership reporting system is being undertaken to provide the Commission with supposedly more accurate statistics concerning minority and female ownership. The audit provision, then, is presumably intended to permit the Commission to double-check the accuracy of claimed minority and female ownership. 

But how is that double-check going to work? What is it going to look at? If a respondent claims that certain of its owners or principals are women or minorities, how could the Commission expect the respondent to “prove” the accuracy of that claim? In particular, assuming that the FCC comes up with a suitable definition of “minority” for these purposes, will each respondent (in the initial report or any follow-up audit) be expected to provide some demonstration that its claimed “minority” participants really are “minorities”? How deeply does the Commission intend to delve into such potentially delicate inquiries?

For example, how will a party claiming to be “of Spanish Culture” (a “minority” category specified in the current Form 323 instructions) be expected to support that claim? [Historical note: Back in 1981, the FCC decided that a Polish-born applicant named Liberman qualified as “Hispanic” for purposes of the FCC’s minority ownership policies after the applicant attested (among other things) that he was descended from Spanish Jews who had been expelled from Spain in 1492.]

The current form also refers to “person[s] having origin in” any of certain broad ethnic or racial categories (e.g., the “original peoples of North and South America”, or “the black racial groups of Africa”, or the “original peoples of the Far East, Southeast Asia or the Indian Subcontinent”). But what does “having origin in” mean, anyway? How much “origin” is necessary? How far back? The Commission has yet to say.

There are other, similar, unanswered questions, but you get the point.

Racial or ethnic categorization is always a very dicey activity. It is even more so when undertaken by the government – after all, the Constitution generally prohibits governmental discrimination based on such categorizations. Since the Commission seems ready to embark on a race/ethnicity/gender-based regulatory program, it will have to be very clear how it is defining these essential terms. 

In the meantime, we wish the Bureau good luck in meeting this latest challenge.

On the NCE side, the Commission has proposed that NCE licensees be compelled to include “gender and racial/ethnic” information in their ownership reports. Additionally, LPFM licensees, historically exempt from ownership reporting, would lose that exemption. Recognizing that many NCE stations are licensed to non-profit, non-stock organizations that don’t entail the conventional notion of “ownership”, the Commission acknowledges that it will have to come up with a workable definition of “ownership” in the NCE context.

The Commission’s goal underlying these changes is clear: the agency wants to “be able to more accurately assess and effectively promote diversity of ownership in the broadcast industry.” According to Acting Chairman Copps, the state of broadcast ownership is “shameful” because the media “are still deficient when it comes to reflecting the diversity of America.” And that “shameful state of affairs” will “continue until more women and minorities actually own stations and set their own policies.” His sentiments were echoed by Commissioner Adelstein. In a considerably more restrained statement, Commissioner McDowell expressed cautious support for the concept of obtaining “more precise and reliable” ownership statistics while making clear that he did “not entirely agree with every word” in the Commission’s order.

The push for increased racial/ethnic/gender “diversity” in broadcast ownership re-opens multiple cans of worms that have been largely untouched for 15-20 years.

In the late 1970s, the Commission – in language remarkably similar to that of Copps and Adelstein – expressed concern about the “underrepresentation” of women and minorities in the ranks of broadcast owners. A number of policies were adopted to spur increases minority/female ownership. The efficacy of those policies was, however, questioned and questionable. Entities claiming to be owned or controlled by “minorities” or females often turned out, upon closer inspection, to be shams created by people who would not themselves have been eligible. And even when legitimately qualified entities obtained broadcast authorizations, the FCC did not – and probably could not – compel them to retain those authorizations in perpetuity: once a “minority” or female got a station, nothing stopped that person from selling it. So unless the Commission were prepared to restrict the alienability of particular licenses – i.e., defining them somehow as “minority” or “female” licenses which could not be owned by non-minorities or men – the best the Commission could hope for would be to facilitate the entry, but not the permanent installation, of some “minorities” and women into broadcast ownership.

The issue of race-based (and, secondarily, gender-based) governmental decision-making is among the most constitutionally sensitive issues imaginable. As a general rule, the Constitution forbids the government from discriminating among citizens on the basis of race – a principle established with inspirational clarity in Brown v. Board of Education. In his presentation to the Supreme Court on behalf of the petitioners in that case, Thurgood Marshall (then still in private practice) argued that “race is a constitutional irrelevancy”. In other words, the Constitution dictates that, in the design and implementation of its policies, the government must be color-blind. Any regulatory scheme that demands racial/ethnic information (such as the new ownership reporting requirements) – and especially any regulatory scheme that would limit governmental approvals based, at least in part, on the racial/ethnic composition of applicants  (as Copps’s statement suggests he, at least, has in mind) – must be approached with the utmost caution.

If the Commission is going to adopt some race/ethnic/gender-based system of regulation of broadcast ownership, it will have to confront thorny issues, from the practical to the conceptual. Practically speaking, for example, how is the term “minority” (or whatever other equivalent qualifying terms the Commission may use) to be defined? This has never been an idle question, and as the number of multi-racial individuals in our society increases, it will become increasingly difficult to answer. And while some may justify race-based regulation as necessary to address a perceived problem of “underrepresentation”, what exactly does “underrepresentation” mean? If the government is setting out to eliminate “underrepresentation”, how will the government know that its job has been completed?

Conceptually, the Commission will have to look long and hard at the concept of “diversity” which, according to Copps and Adelstein (and other proponents of race/ethnic/gender-based regulations), is a matter of urgent concern. What do they mean by “diversity”? How is it defined?   How can a governmental agency identify it? How can a governmental agency determine what level of “diversity” is “enough”? And, perhaps most importantly, how does that governmental agency propose to monitor and maintain the level of “diversity” which it believes desirable?

An obvious potential problem here is that regulation in the name of “diversity” is likely to immerse the Commission ultimately in content regulation. And that raises a whole separate universe of constitutional questions involving the First Amendment.

Two decades ago, a Jonathan Swift-like “modest proposal”  was advanced. If the Commission really wants to assure “diversity” without running afoul of any constitutional questions, it can do so easily. All it has to do is to limit to one and one only the number of broadcast licenses that any individual can hold an interest in, directly or through any type of business organization or relationship. One station – no more, no less. By doing that, the Commission would automatically and irrefutably achieve the goal of absolutely maximizing broadcast diversity, and without having to address and resolve any thorny constitutional questions.

The Commission is not likely to adopt that approach. But at some point it should consider why any alternative it might propose is preferable to that approach.

One other potentially important consideration: the Commission that adopted the new ownership reporting requirement is most certainly not the Commission that will be in place several years from now. The current Commission consists of only three individuals, one of whom (Adelstein) is already on his way out the door. With three new members yet to take their seats (and possibly more), it’s very hard to say with any confidence where this journey will finally lead.

So strap yourselves in for an interesting ride over the next couple of years.