Posted on December 5, 2009 by David Oxenford

New Form 323 Ownership Report Expected to be Ready This Week - And FCC Provides for Temporary FRN Without Social Security Number

The new FCC Form 323 Ownership Report is expected to be available in the FCC's CDBS electronic filing database by Wednesday, December 9, according to a Public Notice released by the FCC yesterday - so that commercial broadcasters should have a month to prepare the form in time for the January 11 filing deadline.  As we've written before, the form and filing deadline have been much delayed as the Commission struggled to work out kinks in its electronic filing process.  In the Public Notice issued yesterday, the Commission also announced that stations can file their ownership reports on the new form even if each attributable owner of the company has not yet received an FCC Registration Number (an "FRN"), which requires the provision of a Social Security Number (for individuals) or a Taxpayer ID Number (for business entities).  Seemingly, the FCC has recognized that there has been much consternation among shareholders, officers and directors of broadcast companies about providing their Social Security Numbers to companies in which they have interests to in turn be provided to the FCC so that an FRN can be obtained.  So that licensees can have more time to deal with these issues, the provision for a temporary FRN has been adopted.  The FCC Public Notice also indicates that the FCC will host a workshop on December 9 at 2 PM Eastern time to help the public with issues as to the filing of this report.

The Social Security Number issue has perhaps created the most concern about this new form.  While the allowance for the temporary FRN will take some immediate pressure off broadcasters, these temporary numbers should not be viewed as a permanent reprieve from obtaining FRNs from all attributable owners.  The Commission in the revised Questions and Answers on the Form 323 makes clear, the temporary FRN for those holders of attributable interests in broadcast stations is a temporary measure.  Licensees are cautioned that they should use their best efforts to obtain these numbers (or to have the attributable owners, on their own, register for the FRN).  Even if that cannot be accomplished by the January 11 deadline, the licensee has an obligation to keep trying and to amend its filing when it finally obtains the required information as to the permanent FRN of each person or entity holding an attributable interest in the company .  The FCC seems to leave the door open to enforcement actions if a licensee does not obtain that information in a reasonable (though not defined) period of time.

While the Social Security Number ("SSN") issue has created a great deal of consternation to many shareholders, officers and directors, one broadcaster recently expressed to me his dismay at the concern.  After all, he pointed out, the SSN is a number assigned by the Federal government, and used for all sorts of government forms and applications (like when you file your tax return).  Here, the FCC - another Federal government agency - is asking for this information just like so many of its sister agencies.  As the SSN will not be made public by the FCC - it will only be used by the FCC internally to assign the FRN - the provision of this information should not be significantly different than filing this number with other government agencies, assuming that the FCC adopts security standards to keep this information confidential (a question about whether such standards have been adopted was raised by one law firm that has asked the Commission to delay the filing obligation).  With the reminder that attributable owners can themselves obtain the FRN and provide that to any licensee in which they have an interest (i.e. they do not need to provide their SSN number to the licensee), that should help to allay some fears.

It would also seem that most licensees will have Social Security Numbers for its shareholders and officers as if, for no other reason, that information is needed when paying dividends or salaries to these individuals.  We've noticed particular concerns about this issue in the case of nonprofit companies that hold commercial FCC licenses - perhaps as the Board members of these companies do not have a financial interest in the companies and did not anticipate the need to provide this sort of information to the companies in which they are involved.  While the current Form 323 obligation applies only to commercial stations, the Commission is considering extending the obligation to noncommercial licensees (see our post here).  The SSN issue may well be even more acute if and when these noncommercial licensees are brought within the scope of these new rules. 

In any event, it appears that the January 11 filing deadline for the new ownership report for commercial stations will hold - so be ready!
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Posted on August 4, 2007 by David Oxenford

FCC Proposes Multiple Ownership Exceptions to Foster Minority Ownership

In a Further Notice of Proposed Rulemaking, the FCC last week asked for public comment on a series of initiatives to promote the ownership of broadcast stations by minorities and other Socially Disadvantaged Businesses ("SDBs").  These proposals, which include the potential for the sale without requiring any divestitures of clusters of radio stations which exceed the multiple ownership rules now in effect, and the potential for investors to invest in stations controlled by SDBs, even if such investment would otherwise violate the existing multiple ownership rules.  The Further Notice was issued in response to a petition filed over a year ago by the Minority Media Telecommunications Council, which asked for a withdrawal of the FCC's Notice of Proposed Rulemaking on the Multiple Ownership Rules (which we summarized here) because that Notice did not address the promotion of minority ownership of broadcast stations.  MMTC claimed that the Third Circuit's remand of the 2003 Multiple Ownership decision mandated that consideration.  Comments on the Further Notice, which will be resolved as part of the current multiple ownership proceeding, are due on October 1, and replies on October 15. 

The Notice raises a number of suggestions for regulatory changes to foster the ownership of broadcast stations by minority owners and other SDBs.  In addition to allowing the transfer of grandfathered radio clusters that no longer comply with the multiple ownership rules, these include specific proposals that would accomplish the following:

  • Allowing investment by exiting broadcasters and others with attributable media interests into companies controlled by minorities without the investment being counted against the ownership holdings of the investing company
  • Allowing minority groups to purchase unbuilt construction permits, and get sufficient time to construct those stations, even if the construction permit is otherwise to expire as it has been outstanding and unbuilt for over three years
  • Granting some non-minority owned companies waivers to exceed the multiple ownership limits if they sell stations to SDBs (including a proposal to create tradable credits for creating minority-owned stations)
  • Allowing for the waiver of the alien ownership limits if the investment by foreign companies would assist a minority-owned company in getting into the broadcast business.
  • Revival of the policies permitting minority distress sales (where a broadcaster against whom there were issues pending which could lead to a revocation of a license could sell their station to a minority group and avoid the revocation proceeding) and minority tax credits  (where a broadcaster who sells to a minority group could defer gains on sale if the money was reinvested into any broadcast company in the future)

Some of these proposals could be implemented by the FCC, while others (like the tax certificate) would require Congressional actions.  Many would benefit all broadcasters - as they could allow investments in companies beyond the multiple ownership limits, or the rescuing of distressed properties or construction permits when unexpected issues arise.  However, there are also some proposals that might be of some concern to broadcasters, for instance requiring a certification that there was no discrimination in the sale of a station - as additional certifications always raise questions about what was meant, and whether or not some conduct may be misconstrued and lead to a fight over whether or not the certification was accurately made.  Similarly, the notice mentions a proposal for strict enforcement of the ownership limits.  That proposal could again lead to disputes over whether or not a broadcaster has violated the rules.  When JSAs and LMAs first arose, there were disputes over whether or not they were permissible.  These are still occasionally cases where there are questions of whether or not some business arrangement between competing stations goes too far under the rules.  This proposal would have to be carefully implemented to avoid punishment that are too strict for violations that may not be clear under the rules.

The Commission has also asked for comment on who would qualify to take advantage of any programs that may be adopted as a result of this proceeding.  Some of the proposals talk of minorities as being the beneficiaries, and others of Socially Disadvantaged Businesses. However, there are constitutional issues that can arise if these programs are made available only to minorities, thus it is possible that a broader category of SDBs could overcome any such issues.  However, it would then be necessary to define an SDB.  Would that include any small business under the guidelines established by the Small Business Administration, or are there some other definitions that should be established?

The proposals also call on broadcasters, the FCC and other groups interested in the broadcast industry to take more efforts to educate and encourage potential new entrants into the business, and to help ease their access to financing so that they can enter the industry.  All of these important issues will be addressed as part of the on-going multiple ownership proceeding, based on the comments filed in response to this notice.  As all stand to benefit from these proposals, broadcasters should review them carefully, and file appropriate comments.
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