We recently reported on the FCC’s proposal to revise its broadcast ownership reporting requirements to permit all attributable interest holders to utilize a “Restricted Use FCC Registration Number” (RUFRN) in connection with both commercial and noncommercial broadcast ownership reports (FCC Forms 323 and 323-E, respectively). The RUFRN would largely replace the Special Use FRN which the Commission invented in 2009-2010 when its initial plan – which would have required all individuals listed in commercial ownership reports to identify themselves with Social Security Number-based FRNs – ran into some rough sledding. The Notice of Proposed Rulemaking has now been published in the Federal Register, which triggers the deadlines for comments and replies. If you are itching to file comments, you’ve got until March 30, 2015; replies may be filed by April 13. Comments and replies may be filed through the FCC’s ECFS online filing system; refer to Proceeding Nos. 07-294 and 10-234.
Another ownership reporting cycle, another acronym: the FCC continues to struggle to devise an ownership reporting mechanism that will give the Commission what it wants.
The Commission has once again waded into the muck of how individual interest holders listed in broadcast ownership reports should be required to identify themselves. Six years after a failed effort to require all such interest holders to provide social security number-based FCC Registration Numbers (FRNs), five years (and three full ownership reporting cycles) after implementing an alternative ID approach based on “Special Use FRNs” (SUFRNs), and two years after proposing to scrap SUFRNs altogether, the Commission is now proposing to require use of something it calls a “Restricted Use FRN” (RUFRN). To get an RUFRN, an individual would have to provide his or her name, residence address, date of birth and the last four digits of his/her social security number (SSN).
For readers who missed the initial rounds of this long-running matter (and who aren’t inclined to read through our archives explaining it all – like here, here, here and here, for openers), some background. In 2009, at the Commission’s direction, the Media Bureau attempted to revise its commercial broadcast ownership reports (Form 323). One goal of the revision was to insure that every individual interest holder identify himself or herself with an FRN – which would have required that each such interest holder provide the FCC with his or her personal SSN. That proposal met with significant opposition arising not only from security concerns but also from the inappropriate and less-than-transparent manner in which the Bureau attempted to make the change.
The Commission responded by allowing individuals to obtain an SUFRN in lieu of a full SSN-backed FRN (a so-called “CORES FRN” obtained through the Commission Registration System, a/k/a CORES). After additional litigation which succeeded in clarifying important aspects of the use of the SUFRN, the revised Form 323 featuring the SUFRN function was deployed in mid-2010. It has been used for three rounds of biennial Ownership Reports, in 2010 (postponed from 2009), 2011 and 2013.
In imposing the FRN/SUFRN reporting requirement, the FCC was hoping to develop a comprehensive, reliable, searchable database reflecting the identities of everybody who holds an attributable interest in any commercial broadcast station. The Commission sees such a database as critical to measuring diversity in ownership and ultimately in supporting any regulations designed to increase that diversity.
Now, however, after three biennial reporting cycles, the Commission has determined that use of SUFRNs may be undermining the usefulness of the information being obtained from its ownership reports.
In a new Notice of Proposed Rulemaking (NPRM, although technically its title is “Second Further Notice of Proposed Rulemaking and Seventh Further Notice of Proposed Rulemaking”, for those keeping count), the Commission proposes to abandon (or at least sharply curtail) use of the SUFRN and replace it with the RUFRN.
According to the Commission, since SUFRNs first became available at least 25 percent of individuals have used them. Moreover, some individuals have obtained multiple SUFRNs while some SUFRNs have been used in connection with multiple persons. As a result, the Commission concludes that it “cannot confidently determine” how many individuals are in fact using SUFRNs. And regardless of the precise number of SUFRN users, the Commission believes that that number is high enough to undermine the utility of the information collected in ownership reports. To enhance its data collection efforts (or at the least to expand its acronym collection efforts), the Commission now proposes the RUFRN.
Historically, an SUFRN was assigned within the Form 323 itself, and its use has theoretically been limited to that form. By contrast, the RUFRN would be obtained through the separate CORES system in the same manner as a “traditional” CORES FRN. Unlike a CORES FRN, which requires disclosure of the individual’s SSN, the RUFRN would be obtained by submitting an individual’s address, birth date, and only the last four digits of their SSN. An individual’s RUFRN would then consistently be used by that individual any time he or she appears in a broadcast station’s ownership report. The RUFRN would be available only to individuals, not to entities, and (like the SUFRN) could be used only for the purpose of completing ownership reports.
To avoid duplication, CORES would be revised to check the information submitted to ensure that no individual is allowed to obtain multiple FRNs (whether CORES FRNs or RUFRNs). The Commission tentatively concludes that use of the RUFRN would provide reasonable assurance that individuals are uniquely identified across all ownership reports in which they appear, but requests comment on this. The Commission also concludes that use of a consistent identifier by each individual will improve the quality of the data collected in ownership reports by making it easier to identify and correct errors, as well as to track individuals across multiple reports.
In the NPRM, the Commission acknowledges that a parallel proceeding is already underway looking to revise the CORES system itself. That system, in place for more than a decade, has historically allowed individuals to obtain more than one FRN for a given SSN, and even permits assignment of FRNs without any SSN at all. While the use of SUFRNs may have undermined the Commission’s ability to develop a reliable database of broadcast ownership interests, the design of the CORES FRN system itself may have posed an even greater problem on that front. In any event, the Commission’s efforts to revise CORES will proceed on a parallel track regardless of the ultimate fate of the RUFRN proposal.
While the Commission blames the SUFRN for many of its problems in achieving the reliable database it had hoped for, the FCC also candidly acknowledges multiple times in the NPRM that many of its data problems stem from the “complexity of the information required to accurately file” Form 323. But the Commission also optimistically concludes that use of the RUFRN may enable “burden-reducing form modification”. Specifically, the NPRM notes that commenters in other proceedings have requested that the Commission eliminate the obligation to disclose, in each Form 323,all the other attributable interests held by each attributable interest holder listed in the form. So elimination of that requirement would, at least theoretically, simplify Form 323 and, also theoretically, improve the reliability of the data collected on that form. But such elimination would require an ability to consistently identify individuals across all filed ownership reports – which is the Commission’s intended goal for RUFRNs.
Even if the RUFRN were to be adopted, the SUFRN might still be retained for limited purposes. In particular, the Commission asks whether the SUFRN should be available to individuals who simply refuse to provide their identifying information. Under the current SUFRN system, filers are required to use “reasonable and good faith” efforts to obtain from each individual interest holder the information required to obtain a CORES FRN before obtaining a SUFRN. The NPRM asks whether, if any use of a SUFRN is retained, substantiation of such efforts should be required, or if other steps should be required to encourage all interest holders to provide the information necessary to obtain a CORES FRN or RUFRN. Whether or not such a requirement would be consistent with the FCC’s assurance to the Court of Appeals back in 2010 that no one would be required to submit a social security number to obtain an FRN for Form 323 purposes is unclear.
The NPRM also addresses use of the RUFRN in non-commercial ownership reports (Form 323-E). In a separate proceeding the Commission is considering the possible overhaul of that form, an overhaul that could impose the same type of unique identification of all individuals listed in the form as is used in commercial ownership report forms. In the NPRM, the FCC asks whether the proposed RUFRN system should be applied to non-commercial reports in the event that those reports are modified (in the separate proceeding) to mirror commercial ownership reports in the information they collect. The NPRM requests comment on whether any different concerns would be raised by applying the RUFRN to non-commercial ownership reporting.
Asserting, as it has in the past, that its CORES system is highly secure and well protected from any possible security breach, the Commission also requests comment on any data security concerns raised by the RUFRN proposal, including whether the specific information required to obtain a RUFRN reduces concerns over any security breach or potentially raises any new concerns. (Although the Commission claims to have learned from the experience, its confidence in the security of its data systems may be a tad over-optimistic in view of the fact that the FCC was apparently hacked in a less-than-highly-publicized incident back in 2011.) The Commission tentatively concludes that the RUFRN proposal would not violate the Privacy Act, but also requests comment on this conclusion.
Broadcasters should be aware that, If the Commission adopts these proposals, SUFRNs may become a thing of the past. If that were to happen, it may require significant effort on the part of reporting licensees to cajole reluctant interest holders to provide their information to the Commission. With the next round of biennial ownership for commercial stations due later this year, broadcasters would do well to focus on these matters now. It’s not clear that the FCC can or will act so fast as to eliminate SUFRNs before the next round of Form 323s is due, but that possibility at least exists.
The comment deadlines for the new RUFRN proposal have not yet been announced. Anyone interested in letting the Commission know their thoughts should check back here for updates.
The FCC has announced that, as of October 1, commercial broadcasters will be able to file their 2013 biennial Ownership Reports (FCC Form 323). These reports are technically not due until December 2. Still, we should all bear in mind that
(a) ALL attributable interest holders in ALL commercial licensees must file biennial reports, which means that the load on CDBS will increase substantially (yes, you have to use CDBS; no paper filings will be accepted); (b) December 2 happens to fall shortly after the Thanksgiving holiday and shortly before the big and often distracting year end holidays (Christmas, Hanukkah, Kwanzaa, New Year’s); and (c) a number of licensees will also be having to file renewal applications on or before December 2. All of those are pretty good reasons to get ahead of the curve and file your 323’s sooner rather than later
The information to be reported must reflect things as of October 1, 2013. In other words, even if a station changes hands or new officers, directors, shareholders or other attributable interest holders are brought into the mix between October 1 and when you end up filing the Ownership Report, your biennial report must show the station’s ownership as it was as of October 1.
This year reporting parties will still be able to use Special Use FRNs (SUFRN). (If you’re fuzzy on the whole SUFRN thing, check out this earlier post on the topic.) While the instructions on current version of Form 323 are surprisingly silent about that option – in fact, the instructions say nothing at all about SUFRNs – the Commission has updated its online Form 323 FAQs to provide information on SUFRN use.
One quirk of the Form 323 which is not mentioned on the FAQ page does happen to pop up on a different FCC webpage titled “Most Common Form 323 Filing Errors”.
As has been the case in the past, the form is set up to recognize only whole numbers when it comes to voting interests. While the form itself does not appear to provide any instructions on this point, the FCC’s “Most Common Errors” webpage helpfully instructs that the “Biennial form will not accept decimal placements. Please round to the nearest whole number.” That page then refers the reader to the FAQ page for more information on how to report voting interests, but we were unable (at least as of September 28) to find any guidance there about how the rounding process is supposed to be done.
The issue of rounding is not inconsequential. Some licensees are structured so that one owner holds less – sometimes barely less – than 50% of the licensee precisely so that that owner does not wield “control” as it is conventionally measured (i.e., 50% or greater voting ownership). If that non-controlling owner happens to own a 49.9% interest, ordinary rounding would take that interest up to 50%, thereby ostensibly reflecting a controlling interest that she or he presumably does not in fact hold. Perhaps the Commission will update its FAQs (and the Form 323 itself) to clarify how it expects licensee to address this problem.
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.
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.
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.
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.
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.
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.
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.)
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.
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.
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.
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.
Bureau announces July 8, 2010 deadline for filing November 1, 2009 information
It’s official!! The Media Bureau has announced that, as of April 9, 2010, the revised Form 323 to be used by commercial broadcasters for their biennial Ownership Reports is available for use. Disappointingly (but, given its track record in this matter, not surprisingly), the Bureau’s public notice does not bother to address any of the serious problems that have plagued its efforts to revise the form. Instead, the notice imposes a deadline of July 8, 2010, for the completion and submission of biennial Ownership Reports for all commercial broadcast licensees. Oh, and it also reminds us that the information to be submitted on that report must reflect the reporting licensee’s ownership as of November 1, 2009.
The Bureau encourages everybody to file “as early as possible”.
Spreadsheet uploads apparently approved, SSN-based FRNs still required
You’ll never guess what snuck onto the OMB website a week or two ago – some more changes to the draft Ownership Report (FCC Form 323) for commercial broadcasters. Who knew? (The answer to that question appears to be as few people as possible, at least if the Commission had anything to say about it.)
The FCC’s OMB filing presumably signals a renewed agency interest in implementing modified reporting requirements. Readers may recall that that interest first popped up in late 2008, in connection with the Commission’s efforts to encourage greater diversity of broadcast ownership. That led to a Dilbert-like series of developments as the Commission (in the role of the pointy-headed boss) gave the Media Bureau (in the role of Dilbert) a hopelessly vague set of directions and a totally unreasonable deadline by which to get the job done.
Of course, things didn’t work out so well, as the Bureau encountered multiple practical problems and considerable resistance from various quarters. The November 1 deadline initially specified by the Commission slipped back into December, then into January, and then just before Christmas the whole project was put on indefinite hold. (Need a refresher on all this? Check out our collection of reports on the Form 323 fiasco here.)
Since December we have heard nary a word from anybody at the Commission about Ownership Reports, even though the Bureau was supposedly working to address numerous problems which had been identified by folks who tested the December version of the form. In view of the difficulties encountered by the Bureau last Fall, you might have thought that this time around the Bureau might ask for some additional public input on the changes to the form. You would, unfortunately, be mistaken.
The Commission’s most recent changes to the form simplify things in one area but leave other previously-identified problems untreated.
On the upside, the latest iteration of Form 323 includes the ability to upload spreadsheet documents. This should eliminate, or at least dramatically reduce, much of the soul-killing input drudgery that the original version of the form required.
On the downside, it appears that the social security number (SSN) based FCC Registration Number (FRN) requirement is still with us. We know this because the draft form available on the OMB website continues to require SSN-based FRNs for all attributable principals.
Over and above that, one of the recently-submitted changes involves revised language in the explanatory “pop-up” box that provides information about “Special Use FRNs” (SUFRNs). The change is not especially helpful.
As was the case last Fall, the revised form permits reliance on a SUFRNs when, after good faith efforts, a responding licensee is unable to ascertain the SSN-based FRN for one or more of its attributable principals. (Did we mention that the SUFRN option is available only in biennial reports, but no other Ownership Reports?) The “pop-up” box first alerts the reader to the SUFRN option, admonishing anybody who plans to rely on that option to read the FCC’s “Frequently Asked Questions” about Form 323 on the Commission’s website.
The changed language consists of a sentence in a “note” which appears in the “pop-up” box. According to what the FCC told OMB, the changed language “is necessary to clarify necessary information to the public. The new FRN pop up language is much clearer and easier to understand by the public.”
You be the judge.
Here’s the sentence as it originally appeared in the “pop-up” note:
Moreover, use of the ‘Special Use FRN’ does not relieve Respondent of its ultimate duty to obtain a fully compliant FRN.
Now here’s the sentence as revised in the “pop-up” note uploaded onto the OMB website on March 25, 2010:
Respondents 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 newer formulation certainly seems less threatening than its predecessor, until you realize that the FAQ on the FCC website – the one that the “pop-up” instructs you to read – still includes precisely the same language as the earlier version of the sentence. That being the case, how does the new sentence change anything at all – other, possibly, than to confuse matters? (Interesting factoid: In its OMB submission, the FCC characterizes this and the other changes to the form as “non-substantive” – so presumably the Commission really didn’t mean for its new language to change anything.)
While the latest revisions to the Form 323 may address some of the mechanical problems with the Form (e.g., bulk uploading of spreadsheet data), they do nothing to address the substantive problems with the form which have been brought to the Bureau’s attention several times already.
More importantly, the hush-hush manner in which the Commission continues to operate aggravates, rather than allays, the serious procedural flaws that FHH raised last fall. The Commission has consistently failed to provide the notice and comment opportunities mandated by the Administrative Procedure Act with respect to its proposed overhaul of Form 323. This is ironic, given the fact that the Commission routinely trumpets the supposed “transparency” of its operations. The fact of the matter is that the revision of Form 323 has been anything but transparent.
One more odd aspect of the Commission’s Form 323: it appears (from the materials currently on file at OMB) that the FCC is continuing to insist that the first biennial Ownership Report to be filed on the revised form must show ownership information as of November 1, 2009. But that means that the next biennial reports will be guaranteed to be more than eight months out of date from the get-go – even though the Bureau has repeatedly expressed its desire to ensure the accuracy of the data collected. As the Bureau left things last December, the initial biennial Ownership Report won’t be due until 90 days after the revised form is released by the Commission. So even if the Commission were somehow to have made the new Form available by April 1 (which it didn’t), reports would not be due until July 1. Forcing licensees to report November 1 ownership data on the following July 1 (or later) doesn’t really seem like the best way to ensure accurate and reliable data.
According to the Bureau’s last Form 323 public notice (from December, 2009), the new deadline for filing will be at least 90 days from the date that the new form is made available for biennial filings. So even though the OMB appears to have approved the most recent changes, the 90-day clock has not yet started to run. However, that could happen any day now – unless the Bureau has still more changes up its sleeve – so check back here for updates.
In any event, it appears that (a) the FCC is once again paying some attention to the Form 323, but (b) it has not learned anything from the failure of its previous attempts to revise the Form without any public input. The next couple of laps in this long-distance race should be interesting.
FHH, State Associations head to court; Bureau indicates that revised form may impose “unanticipated” practical burdens on filers
Two days before Christmas, and all was neither calm nor bright for Form 323 at the FCC. On December 23 the agency’s troubled efforts to launch its revised Form 323 – the Ownership Report for commercial broadcasters – got more troubled on a couple of fronts. In the morning, FHH, together with ten state broadcaster associations, asked the U.S. Court of Appeals for the D.C. Circuit to stay the implementation of the form pending Court review of the new burdens that form imposes. And hours later, the Media Bureau issued an order postponing indefinitely the deadline for filing biennial (but not other, non-biennial) Ownership Reports on the new form in order to fix mechanical problems that have cropped up with the form. While the two events were not directly related to one another, they both shone a glaring and none too favorable light on the FCC’s six-month (and counting) campaign to impose, without notice or comment, new and intrusive reporting obligations on commercial broadcasters.
We have already chronicled the history of, and major league flaws underlying, that campaign in considerable detail. Need a refresher? Click here and start reading. When last we checked in on things a couple of weeks ago, the FCC had finally taken the wraps off its revised form six months after first announcing in the Federal Register that the new form had been designed. (The FCC has never explained its reluctance to let us all kick the tires on the new form before having to drive it off the lot.) While the Commission had initially mandated in May, 2009, that the revised form would have to be filed by all commercial broadcast licensees by November 1 (reflecting their ownership as of October 1), that date had slipped to December 15, and then to January 11 (with the October 1 “as of” date moving to November 1).
Meanwhile, in November FHH had filed, with the Commission, a motion to stay the implementation of the new form, and then a separate “Petition for Reconsideration or Such Alternative Relief As May Be Appropriate”.
With the January 11 deadline closing in fast and no sign at all that the FCC was giving any serious consideration to the issues which FHH’s pleadings raised, FHH headed to court, along with the broadcaster associations from Alabama, Alaska, Arkansas, Kentucky, Louisiana, Mississippi, New Mexico, Puerto Rico, South Carolina and Tennessee.
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.
Dim the lights! Drum roll, please! Curtains! Cue the musicians . . . and . . . theme song (“Here it comes, Form 323, Here it comes, our ideal . . .”).
On December 8, the new Ownership Report form for commercial broadcasters was at long last made available for review on the FCC’s website. The unveiling was decidedly downbeat, at least as far as the Commission was concerned: it merely posted a new "headline" on the front page of its website, with a link to the public notice which it had issued four days earlier.
You can check out the new form on CDBS right now. Word is that it would be a good idea to do so, and maybe give it a test drive, because it may have some minor practical quirks that could take some getting used to.
As the Commission announced on December 4, they have provided a temporary work-around, for folks who are unable to get all the FRNs they might need to complete the form by January 11. The emphasis here is definitely on “temporary”: when you click on the “Special Use FRN” button, CDBS flashes up this helpful reminder:
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.
January 11, 2010 deadline still effective
Breaking a long silence, the Media Bureau has at last announced that the revised Ownership Report (Form 323) for commercial broadcasters should be available for review on line at the FCC’s website sometime in the next five days. Since the Bureau (and, presumably, the Commission) is sticking with the previously announced January 11, 2010, deadline for all commercial broadcasters (including LPTVs and Class A TVs) to file that form, it might have been nice for them to make the form available by October 1 (when it was first promised), or by November 16 (the next target date), or by sometime the week of November 16 (when the date slid again), or by now. But what the heck – it looks like December 9 (or maybe sooner) is the date that All Will Be Revealed.
The public notice announcing the impending revelation of the revised form also promises that the Commission will convene an “instructional workshop” on the revised form on December 9 at 2:00 p.m. in the Commission meeting room. (Can’t make it to D.C. for the festivities? No problem – the workshop will be broadcast live on the Internet at www.fcc.gov/live.)
Frequenters of our blog may be asking themselves: “Will we still have to include FRNs for each of our individual ‘attributable interest holders’?” After all, as we pointed out to the Commission in both a motion for stay and a petition for reconsideration, imposition of that particular requirement raises a number of very difficult – some might say insurmountable – legal problems.
Apparently the Commission got the memo, but didn’t read it all the way through.
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.