PRA notice suggests low-ball estimate, but what about, um, the 10 hours of outside attorney time the FCC told OMB about six months ago?

Back in January the Commission announced its most recent overhaul of the biennial Ownership Reports that commercial and noncommercial broadcasters are required to file using, respectively, Forms 323 and 323-E. As we reported back then, thanks to our old friend, the hilariously named Paperwork Reduction Act, the revised forms can’t be implemented until the Office of Management and Budget has vetted them. That vetting process has started, so anyone concerned about the burdens the revised forms would impose has the chance to voice those concerns.

In view of the FCC’s estimates of those burdens, it might be a good idea for folks who have actually filled out Ownership Reports to provide the Commission (and OMB) a reality check.

First, some procedural background. The PRA provides two opportunities for public comment about proposed “information collections”. First, interested folks have a 60-day period during which they can vent at the FCC about the proposals. Then the FCC bundles up whatever comments may have rolled in the door, slaps an explanatory cover memo on the package, and ships it over to OMB. OMB then opens a new 30-day comment period during which further (or repeated) venting can occur. Comments can address, among other things:

Whether the proposed [information collection] is necessary for the proposed performance of the functions of the Commission, including whether the information shall have practical utility; the accuracy of the Commission’s burden estimate; … ways to minimize the burden of the [information collection]; and ways to further reduce the … burden on small business concerns with fewer than 25 employees.

With two recent notices in the Federal Register (one each for Form 323 and Form 323-E), the process has begun: the first round of PRA comments on the revised Ownership Report forms may be filed with the Commission by September 19, 2016. You may want to think about chipping in your two cents’ worth.

Draft versions of the revised forms were included as appendices to the Commission’s decision last January. That’s a good place to start if you’re thinking about submitting comments.

Among the most significant revisions on the table is the introduction of “Restricted Use FRNs” (RUFRNs). Recall that, back in 2009, the Commission initially announced that every company and/or individual identified as holding an “attributable” ownership interest or position in a commercial broadcast licensee would have to obtain his/her/its own FRN and include that FRN in Form 323. For a variety of reasons – not the least being that getting individual FRNs would require disclosure to the FCC of Social Security Numbers (SSNs), about which a number of folks were unhappy – that led to litigation. As a result of that litigation, the Commission backed off the blanket FRN requirement. It created a “Special Use FRN” (SUFRNs) which could be obtained without providing SSNs. The SUFRN system has been in place since 2010, i.e., through three biennial filing cycles.

The Commission now wants to move away from reliance on SUFRNs, replacing them with RUFRNs, which will require the provision of, among other information, only the final four digits of a respondent’s SSN. The theory is that that reduced level of disclosure will be more palatable to respondents.

A corollary revision this time around requires individual attributable interest/position holders in noncommercial licensees to provide their own FRNs or RUFRNs in Form 323-E. That provision has been controversial, to say the least, with noncommercial licensees concerned about their ability to obtain FRNs – or even RUFRNs – from all members of their governing boards. (A number of noncommercial licensees have sought reconsideration on that point; their petitions are currently pending at the FCC as the FCC pushes ahead with the forms.)

The reason for the Commission’s dive into the granular: it wants to develop reliable statistical data relative to minority and female ownership in broadcasting – likely to try to justify policies aimed at increasing minority/female representation in the ownership ranks.

While the FCC has convinced itself that it really, really needs to be able to keep track of each “attributable” individual, reasonable minds might differ on that point. After all, attributable ownership interests may amount to as little as 5% of a licensee, a level not likely to make a decisional difference in a licensee’s activities. Attributable positions include any officer, e.g, Secretaries, Assistant Secretaries, Assistant Treasurers, Executive Vice Presidents, again not roles that routinely call the corporate shots. How exactly will being able to keep track of such minor players advance the Commission’s regulatory functions?

While OMB is not known for its willingness to second-guess the FCC on such policy matters, the PRA is intended to afford affected regulatees the opportunity to argue that the burden the FCC’s proposal would impose on them would be excessive, contrary to the FCC’s own estimates.

And about those estimates.

To get an RUFRN, an individual will have to access the FCC’s CORES system and provide personally identifiable information, including (as noted) the last four digits of his/her SSN. As the FCC sees it, this will be a one-time-only process that should take only a couple of minutes at most.

But that assumes that each individual attributable principal will be gung-ho to take care of the sign-up. It’s entirely possible, if not likely, that for many low-level broadcast participants, getting an RUFRN won’t be an especially high priority. And it’s also entirely possible, if not likely, that even some higher-level folks will take a fair amount of persuading before they are willing to dump their name, address and even partial SSN into the FCC’s database.

And once RUFRNs have been obtained, the responding licensee will have to be sure to collect an RUFRN (or full-fledged FRN) from each and every attributable individual or entity listed in its Ownership Report. If any individual chooses not to get an RUFRN or FRN, the licensee will have to warn that individual that refusal to do so could result in “enforcement action against the filer and/or the recalcitrant individual”. Since (thanks to the SUFRN option which the Commission is trying to phase out) licensees have not had to deal with this extensive reporting obligation, there’s no telling how hard it will be. But as a practical matter, there is reason to believe that it may not be easy. In any event, it’s doubtful that it will entail only a negligible amount of time and effort.

Which brings us to the FCC’s specific “burden estimates”.

In its invitation for public comment the Commission is required to calculate, and publicize, an estimate of the burden the revised information collection is anticipated to impose on the public. In the Form 323 notice, the FCC pegs that burden as follows:

  • Number of Respondents: 4,340 respondents; 4,340 responses
  • Estimate Time per Response: 1.5 to 2.5 hours
  • Total Annual Burden: 9,620 hours
  • Total Annual Cost: $ 10,093,220

For the noncommercial Form 323-E, the FCC’s figures are:

  • Number of Respondents: 2,636 respondents; 2,636 responses
  • Estimate Time per Response: 1 to 1.5 hours
  • Total Annual Burden: 3,867 hours
  • Total Annual Cost: $ 2,319,900

How the FCC arrived at these numbers is not indicated. It’s possible that they are the product of a random number generator, as far as we can tell. Consider this.

The “number of respondents” appears to refer to everybody who has to file an Ownership Report, i.e., at a minimum, the licensee of every commercial and noncommercial AM, FM or TV station and every Class A TV and LPTV station. As of the end of June, 2016, there were just under 20,000 such stations. According to the FCC’s “estimates”, though, only 8,207 respondents would be filing (i.e., 4,340 commercial respondents and 2,636 on the noncommercial side). While, obviously, there are likely fewer licensees than the total number of stations (thanks to multiple owners), the FCC’s estimate seems low.

To be sure, as part of its latest changes the FCC has streamlined the reporting requirements for licensee subsidiaries of a common parent company. Historically, a parent had to file a separate report for each of its subsidiaries, even though that provided the FCC only largely duplicative information. Now a parent may include multiple subsidiaries in a single report. That should reduce the total number of reports to be filed to some degree – but the FCC’s estimate still seem low, especially in view of the fact that Ownership Reports must be filed not only by the licensee, but also by any entity that happens to hold an attributable interest in the licensee. Trust, us, there are a lot of those, which seriously undermines the FCC’s estimate.

At least two other considerations undermine it even further.

First, wild card searches on CDBS indicate that, during 2014-2015, more than 100,000 Forms 323 were filed and more than 9,000 Forms 323-E were filed. Dividing those figures by two – to get an average annual number for the two-year reporting cycle – you come up with some 50,000 reports on the commercial side, and more than 4,500 on the noncommercial side, both considerably higher than the FCC’s estimates.

And second, a quick look at previous estimates the FCC has provided to OMB reveals that the Commission has routinely advised OMB that it expects 9,250 responses to the Form 323 requirement. (Historically, the estimate for noncommercial Form 323-E responses has been generally stable at 2,636.) Those estimates are considerably lower than the numbers of forms actually filed as reflected in CDBS.

So the FCC’s current estimate of the total number of anticipated responses may not be entirely valid.

And then there’s the estimated time per response. It’s not clear why the Commission figures that it will take commercial respondents longer to prepare their Form 323 than it will for noncommercial respondents to prepare Form 323-E. After all, noncommercial licensees have not previously had to deal with FRNs, RUFRNs or SUFRNs. That additional requirement will almost certainly slow the process down.

Back to the FCC’s numbers. The estimated “per response” time ranges – 1.5-2.5 hours for Form 323, 1-1.5 hours for Form 323-E – don’t exactly match up with the FCC’s other numbers. For Form 323, the Commission estimates a “total annual burden” of 9,620 hours; since that presumably reflects the total number of hours that all respondents would rack up, dividing 9,620 by 4,340 should give us the overall estimate of hours per response, i.e., 2.2 hours. While that’s within the FCC’s estimated range, it’s on the high side of that range. The noncommercial numbers work out similarly: estimated total annual burden (3,867 hours) divided by total respondents (2,636) figures out to about 1.5 hours per response, again at the high end of the FCC’s estimated range.

But just last February, the Commission sought OMB approval of the yet-to-be-revised Form 323. Then it estimated that the 9,250 total responses would entail a burden of 38,125 hours, or 4.1 hours per response on average. And that was for “in-house” efforts only – it did not include an estimated 10 hours of outside attorney time that would have to be devoted to each response. (The 10-hour figure was not mentioned in any published document; it was mentioned, only in passing in an FCC memo – available at the link at this OMB site – that appears to have been available only if you knew to dig deep enough into the OMB website.) There is no reason to believe that that additional attorney time would not be required for the revised version of Form 323 – but no mention of that time (or expense) is included in the FCC’s current notice.

As for noncommercial reports, the Commission’s 2013 “burden per response” estimate (available by clicking on the link at this OMB site) was one hour (i.e., 2,636 hours for 2,636 responses). But, again, that was for “in-house” work only, and did not include an additional two hours of outside attorney assistance per report – outside attorney time that, again, was not widely publicized. (No explanation for why the 323 might require five times the amount of attorney time as a 323-E.)

So while the FCC’s current invitations for comments obviously low-ball the estimated “burden per response”, even the FCC’s own representations to OMB in the past strongly suggest that those low-ball figures are unrealistic. Indeed, if it really does take more than four hours of “in-house” work and 10 hours of outside attorney time to prepare one biennial Form 323, that’s at least 14 hours, more than five times the FCC’s current highest estimate.

Historically, the OMB’s PRA review of FCC information collections has seemed at times to be nothing but a charade that results in a largely meaningless rubberstamp: as long as the FCC puts some numbers down on a page, OMB seems willing to accept them regardless. At least theoretically, the PRA process is in place to permit those affected by governmental requirements to question whether the burden imposed by those requirements is justified. But that process can work properly only if the public is provided legitimate figures to begin with, and only if OMB is prepared to analyze the government’s proffered figures critically. It is far from clear that the FCC’s notices inviting comment on the new Forms 323 and 323-E provide anything close to legitimate numbers. It will be interesting to see how OMB reacts.

Again, interested parties may submit comments to the FCC by September 19, 2016. A second opportunity comment directly to OMB will follow, but anyone considering participation at this would be well-advised to start the process at the FCC.