Ownership reports would require ALL attributable interest-holders to have (and report) their own FRNs; OMB comment period closes September 10

Remember last May, when the Commission issued its Report and Order about biennial Ownership Reports? Sure you do. Do you remember when it dumped onto the Media Bureau the chore of designing a new Ownership Report form (FCC Form 323)? Of course.

And do you remember how that new form would require anyone and everyone with any attributable interest in a broadcast licensee to be identified by his/her/its own separate and distinct FCC Registration Number? 

Ummm, neither do we – because the Report and Order didn’t say anything about that.

But the Media Bureau’s draft form – new, improved, hot-off-the-presses and just shipped over to OMB for approval – would impose just such a requirement.

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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