FCC Order on Biennial Ownership Requirements – All Broadcasters, Commercial and Noncommercial, Need to Start Collecting Information from Attributable Owners and Directors for Next Year’s Filing

In an order released last month which has not received much attention, the FCC clarified its requirements for the filing of Biennial Ownership Reports. Much of the order deals with fixes to the report itself that will, for the most part, make the completion of the report administratively easier in terms of the physical data that needs to be entered into the form. However, certain new information-collection requirements call for broadcasters – both commercial and noncommercial – to start gathering information now from their attributable owners, including members of their governing boards, in order to enable the completion of the forms when they are next due to be filed, on December 1, 2017. We earlier wrote here about the FCC’s proposals in this proceeding (including the dazzling use of acronyms for various kinds of identification numbers assigned to attributable owners).

One of the principal purposes of the Biennial Ownership Reports is to gather information about the ownership and control of broadcast stations that will allow the FCC to slice and dice that information to use it to make decisions about issues like minority ownership in broadcasting and the concentration of broadcast ownership and control. Thus, the Biennial Reports gather information about race and gender of those with attributable interests in broadcast stations, and also about the interests those interest holders have in other stations. As we have written before, there have been complaints from some who have tried to analyze the information collected in the Biennial Reports that the data cannot be easily manipulated, particularly to track the ownership and control of individuals across multiple companies. Partially, this was attributed by the FCC to the failure of applicants to be able to get from all of their attributable owners information necessary to obtain an FRN (FCC Registration Number). That FRN was to be used to uniquely identify each holder of an attributable interest and track those individuals or entities through all of their media interests. In the past, there had been concerns that some interest holders were reluctant to provide the information necessary to get an FRN. The FCC has tried to remedy some of those concerns, and backed up their remedy with a suggestion that they will sanction interest holders who fail to provide the required information.

To get an FRN, the needed information includes Social Security Numbers (“SSNs”) for individuals, and Taxpayer ID numbers for other entities. For individuals who did not provide a licensee with the necessary information, the FCC in the past allowed a licensee to obtain a “Special Use FRN” (SUFRN) so that the licensee could complete the reports. An SUFRN was just a random number assigned to the individual interest holder. While such interest holders were supposed to use the same SUFRN in connection with all of their interests, the FCC found that in fact individual interest holders ended up using multiple SUFRNs, and some licensees listed multiple attributable owners under the same SUFRN. Thus, in the recent decision, the FCC decided that SUFRNs will no longer be allowed (except in very rare cases described below). Thus, all broadcasters, commercial and noncommercial, need to keep in mind that they will need more detailed information about their attributable owners by December 1, 2017 when the next uniform Biennial Ownership Report filing deadline will be upon us.

When the FCC first adopted the requirement for FRNs for all attributable owners, some expressed concerns about security and the fear that investors and directors would not be willing to provide their SSNs to licensees or directly to the FCC to get that required number. While the FCC has insisted that their information systems are secure and that SSNs will not be revealed to the public, the Commission nevertheless decided that they would allow attributable owners to get FRNs without providing their entire Social Security Number. However, these individuals will need to provide other information to get what the Commission is calling a “Restricted Use FRN” (RUFRN). To get a RUFRN, an applicant must provide, for an individual, the individual’s name, residence address, date of birth, and the last four digits of their Social Security Number. That unique RUFRN would be used by the attributable owner in connection with all of their broadcast interests. By getting this information about the owner, the FCC believes that they assure that a RUFRN will identify a unique individual across all of that individual’s interests even without the full SSN.

What happens if an attributable owner does not want to provide even the information necessary for a RUFRN? The licensee can still get an SUFRN in order to file its Ownership Report, but the FCC suggests that it will take action through fines or other penalties against anyone who holds an attributable interest in a broadcast station who will not provide the necessary information. In order to use the SUFRN and avoid liability itself, the licensee needs to certify that it made a request of the attributable party, and warned the party of its potential liability if that party does not provide enough information to get the SUFRN, and yet the party still refused to provide the information necessary to receive the RUFRN. Thus, in effect, to save itself from liability, the licensee is turning in the individual who has an interest in the company for potential enforcement actions by the FCC.

Given the penalties that may be associated with holders of attributable interests not getting an FRN or SUFRN, licensees should start contacting their officers, directors and owners now to make sure that there won’t be any issues in the fall of 2017 when these Biennial Ownership Reports will be filed. This requirement will apply to both commercial and noncommercial licensees. While noncommercial licensees have in the past been exempt from filing on the nationwide deadline with the Biennial Ownership Reports that include the FRN obligations and which report on the race and gender of attributable owners, that exemption will go away when these new rules become effective. So, come December 1, 2017, noncommercial as well as commercial broadcasters will need to file these reports. I have been told that, for the time being, noncommercial stations should continue to file Biennial Reports on the even anniversaries of the filing of their license renewal applications, as currently required, but that, come December 1, 2017, all stations, commercial and noncommercial, will be subject to the same filing deadline (reporting their attributable owners as of October 1, 2017).

In discussing the filing of these reports by noncommercial broadcasters, the FCC dismissed concerns that nonprofit entities would have trouble getting information from directors, who may include political appointees, prominent business people or volunteers with no other connection with broadcasting but for their board seat. The fear is that this may be particularly true for stations licensed to bigger institutions, such as universities or similar organizations, where the radio or TV station may be something rarely if ever thought about by members of the Board of Trustees of the organization. But, under the FCC’s formulation of control of noncommercial entities (see our article here), members of such Boards are deemed to be the attributable interest holders for such entities. Thus, the FCC said that these individuals have the actual control over the broadcast stations, whether they exercise it on a routine basis or not, and need to be reported.

Some members of boards of noncommercial entities, and even of boards of commercial entities where broadcasting is but one of the company’s many lines of business, may not be aware of these rules. Fr some, the need to either provide a Social Security Number or a part of one along with significant other information may be a concern. Thus, broadcasters should start to prepare their attributable owners for this requirement now, so that the matter does not become an issue next year. Especially new directors and other individuals who become attributable, should be alerted so that they know what they are getting into when they agree to take their board seat or other attributable role with the company. One more thing for broadcasters to be considering….