Rules On New Ownership Reports Released - Including Proposals for Information from Noncommercial Broadcasters

The full text of the FCC's revisions to its ownership report filing process was released last week.  The new rules will require that all commercial stations (including LPTV stations) file an updated Form 323 on November 1 every other year - starting in 2009.  The Order does not add much to the summary that we provided when the decision was first announced, though it does make clear that the electronic form will be revised to no longer allow for PDF attachments, instead requiring that all information be provided on the electronic form itself, so that it can be more easily searched.  With complex ownership structures, which are sometimes not easily explained in the confines of an FCC form, this may create some difficulties.  The Order did not seem to freeze the obligations for the filing of Form 323 Ownership Reports on the old version of the form on the current schedule while the new form is being created and approved by the Office of Management and Budget under the Paperwork Reduction Act, so stations in states with June 1 deadlines for their biennial reports should continue their preparation (see our Advisory on the the reports that are due on June 1 for radio stations in Arizona, District of Columbia, Idaho, Maryland, Nevada, New Mexico, Utah, Virginia, West Virginia and Wyoming, and television stations in Michigan and Ohio).

The Order also asked for further comment on the Ownership Report requirements for noncommercial licensees, including LPFM stations.  The Commission asks not only for comments on whether noncommercial operators should be required to file their reports on the same two year cycle as commercial broadcasters, but also for comments on what information should be required from these operators.  As noted by the FCC, the question of who controls a noncommercial station is often not an easy one - as there are varying degrees of control and oversight of station operations at many of the institutions that hold noncommercial licenses.  As noted by the FCC, there has been a Notice of Inquiry into noncommercial broadcast station ownership pending since 1989, trying to set out when there is a transfer of control of such entities that needs prior FCC approval.  Noncommercial stations have been operating under the interim policy set forth in that Notice for almost 20 years.  While the Commission does not seemingly ask for any change in the interim policy at this point, by gathering information about what ownership information should be reported on the new ownership report for a noncommercial entity, a resolution of that long-pending proceeding could potentially be in the works.

Comments on the noncommercial aspects of this proceeding are due 30 days after this Order is published in the Federal Register, with Reply comments due 15 days later.  Noncommercial entities concerned about the information that will be required on these ownership reports should now be preparing to file their thoughts and concerns on these proposals.

Fines for Broadcast Ownership Issues - Remember to File Biennial Ownership Reports and to Seek FCC Approval Before a Transfer of Control

The FCC this week issued fines to two broadcasters for issues in connection with the ownership of their stations - in one case the fine was issued simply because the broadcaster did timely not file three consecutive FCC Form 323 Biennial Ownership Reports .  In the second case, the fine was for not requesting FCC approval for a transfer of control of the licensee of the broadcast station.  These cases serve as a reminder that broadcast ownership is closely regulated by the FCC, that broadcasters need to report that ownership once every two years as required by the rules, and to seek approval before any change in control of any company that holds an FCC license.

The station that failed to file the three ownership reports was fined $6000.  As disclosed on the licensee's license renewal application, the licensee had not filed 2001 and 2003 ownership reports at all, and filed the 2005 report late and did not put it in the station's public inspection file.  Biennial Ownership Reports on FCC Form 323 must be filed by the licensees of AM, FM and TV station licensees once every two years, on the anniversary date of the filing of their license renewal applications by all licensees except where the licensee is an individual or a general partnership of natural persons (as opposed to a partnership that contains corporations or other business entities as partners).  We regularly send reminders to our clients about the filing of ownership reports.  For more details on the requirements for the biennial filing, see our advisory for reports that were due on August 1 here, and see our schedule of broadcast filing dates for the remainder of 2008 to see if your station has a biennial filing deadline this year). 

In the second case, the FCC entered into a consent decree with a licensee which had sold stock resulting in a transfer of control of the licensee company without seeking and receiving prior FCC approval.  The consent decree required that the licensee pay $5000 to the government, and adopt a compliance policy, reviewing its compliance status every 6 months using the Broadcast Self-Inspection Checklist put out by the FCC so that broadcasters can assess their own compliance with FCC rules, and report to the FCC on the results of those self-inspections every year for three years.

Transfers of control (to the FCC, a "transfer of control is a change in control where the licensee remains the same, such as a sale of stock in a licensee corporation, while a sale of a station from one company to another is referred to as an "assignment of license") can be "pro forma," meaning that they result in no real change in control of the licensee.  For instance, if a licensee corporation is owned by an individual, and the individual decides for tax or estate planning purposes to put his stock into a trust he controls or into another corporation that he controls, the individual still controls the licensee but in a different manner.  As only the form of control has been changed, approval for this transaction can be sought on an FCC Form 316 application, which can be approved very quickly - sometimes in a matter of days from its receipt by the FCC's processors.  Pro-forma assignment of licenses (e.g. from one corporation to another corporation owned by the same parties) are also approved through the filing of Form 316.

A transfer of control where actual control changes must be sought on FCC Form 315, e.g. where a majority of the stock of a licensee is sold from one person to another.  Notice of the filing of that form must be released on an FCC public notice, and the public has 30 days from the release of that public notice to comment on the application before the application can be granted.  All in all, FCC approval of such an application usually takes at least 45 days, and sometimes longer.  An assignment of license from one company to an unrelated company is filed on FCC Form 314, and processed in the same way as a Form 315.

As these cases remind you, remember to follow the ownership rules and file the required FCC forms to stay out of trouble with the FCC.