FCC Releases Two Reports and Orders on Foreign Ownership Rules and Foreign Adversary Attestation and Disclosure Requirements

At its January Open Meeting, the FCC adopted two items related to foreign ownership that will likely impact broadcasters: (1) a Report and Order that will require certain broadcast licensees (among other FCC regulated licensees) to file attestations regarding whether their ownership structure involves “Foreign Adversary Control” and (2) a Report and Order codifying its existing Section 310(b) Declaratory Ruling procedures.   The specifics of each are explained below.

 FOREIGN ADVERSARY CONTROL

The FCC adopted a Report and Order (“Foreign Adversary R&O”) that “adopt[ed] new attestation and disclosure requirements” for holders of certain FCC licenses, authorizations, and approvals, including broadcast licenses and permits (“Regulatees”).  More specifically, the FCC categorized each type of license and permit into schedule, A, B, or C.  Depending on (1) which schedule their license is in and (2) whether the broadcaster has “Foreign Adversary Control”, i.e. has individuals or entities in their ownership structure that are from specific countries identified below, broadcasters will be required to report certain ownership information into a new portal.  The new portal has not yet been established and the filing date has not been set, but we will be monitoring and let you know when the initial attestations, described below, are due.

Foreign Adversary: The FCC has applied the term “foreign adversary” to individuals, entities, or organizations located in or from: (i) “The People’s Republic of China, including the Hong Kong Special Administrative Region and the Macau Special Administrative Region”; (ii) the “Republic of Cuba”; (iii) the “Islamic Republic of Iran”; (iv) the “Democratic People’s Republic of Korea”; (v) the “Russian Federation”; and (vi) “Venezuelan politician Nicolás Maduro.”

Three Schedules of Licenses: The FCC has created three schedules and assigned licenses/authorizations to each schedule based upon the FCC’s determination of risk to national security.

• Schedule A – The FCC assigns a majority of licenses to Schedule A, including the following non-exhaustive list:
  1. Television, AM, FM, and other broadcast licensees with six or more full-time employees;
  2. Broadcasters that lease time under the FCC’s foreign sponsorship identification rules to entities or individuals in a foreign adversary country;
  3. International broadcast station licensees with six or more full-time employees;
  4. Section 325(c) authorization holders with six or more full-time employees;
  5. Earth Station licensees; and
  6. Section 310(b) Declaratory Ruling grantees (see below for more information).

• Schedule B – The FCC includes the following types of licenses in Schedule B (this is not an exhaustive list):
  1. Television, AM, FM, and other broadcast licensees with fewer than six full-time employees;
  2. International broadcast station licensees with fewer than six full-time employees;
  3. Section 325(c) authorization holders with fewer than six full-time employees;
  4. Certain wireless licenses that broadcasters might rely on for station operations; and
  5. Mandatory Antenna Structure Registration holders.

• Schedule C – Licenses not assigned to Schedules A and B are assigned to Schedule C, such as (this is not an exhaustive list): Amateur Radio Service licensees; voluntary antenna structure registrations; and Ship and Aircraft licensees.

Filing Requirements: The FCC established the following requirements:

• Schedule A licensees are required to file attestations stating whether they are or are not subject to Foreign Adversary Control.  Even if they do not have Foreign Adversary Ownership, Schedule A licensees must file an attestation with the Commission stating that they do not have Foreign Adversary Control.  If they do have Foreign Adversary Control, the licensee must file an attestation stating they have Foreign Adversary Control and also provide the “Additional Disclosures” explained below.
• Schedule B licensees are required to file an attestation if they are subject to Foreign Adversary Control.  If they do not have Foreign Adversary Control, Schedule B license need not file an attestation.  If they do have Foreign Adversary Control, the licensee must then also provide the “Additional Disclosures” explained below.
  1. NOTE: If a licensee has both Schedule B and Schedule A licensees (e.g. a Broadcaster that has fewer than six full-time employees but also has a mandatory Antenna Structure Registration or Earth Station authorization), they are required to comply with the Schedule A requirements.
• Schedule C licensees are not required to file anything; they are exempt.

Additional Disclosures – Any Schedule A, B, or C Regulatee that attests it is “owned by, controlled by, or subject to the jurisdiction or direction of a foreign adversary” will be required to “disclose to the Commission all 5% or greater direct or indirect equity and/or voting interests held in the Regulatee, as well as several other disclosures.”

Applicability – Following the deadline for initial attestations, the FCC requires Regulates to file a new attestation, and additional disclosures as necessary.  This would include circumstances where a Regulatee becomes subject to Foreign Adversary Control, is no longer subject to Foreign Adversary Control, or applies for a new Covered Authorization, among others.  The timing of when a new report must be made is based upon the event.

Method of Filing:

• New Reporting System – The FCC will create a new, consolidated reporting system, the Foreign Adversary Control System (FACS), and require all Regulatees with a reporting obligation to make their attestations and submit further required information within the FACS.  The Office of Economics and Analytics (OEA) and the Public Safety and Homeland Security Bureau (PSHSB) are delegated authority to establish this new system and publish necessary information, such as system availability, instructions, or user guides.
• Deadline –
  1. Non-small Regulatees are required to file their initial attestations and disclosures 60 days after the public notice announcing the launch of FACS.
  2. Small Regulatees, i.e., those entities that meet the definition of a small business for the purposes of the Regulatory Flexibility Act of 1980, must file their initial attestations and disclosures 120 days after the public notice announcing the launch of FACS.  Wireless carriers with 1,500 or fewer employees are classified as small by the Small Business Administration for these purposes.
• Publication of Data – The attestations and additional disclosures will be made available to the public.

Enforcement: Filing late, nonresponsive, incomplete, or inaccurate attestations or disclosures can result in enforcement action, including license or authorization revocations.  The FCC established a streamlined revocation process for instances where a Regulatee fails to comply with the Foreign Adversary Control reporting requirements.

We will continue to monitor this situation and let you know when the filing deadlines are established.

SECTION 310(b) PETITIONS FOR DECLARATORY RULING

 The FCC also adopted a Report and Order that streamlined and clarified the foreign ownership rules for broadcasters and other FCC licensees that file Petitions for Declaratory Ruling under Section 310(b) of the Communications Act.  Section 310(b) Petitions for Declaratory Ruling are filed by entities that have foreign ownership in excess of the limits set forth in the Communications Act seeking approval to hold certain FCC regulated licenses, including broadcast licenses.  In this Report and Order, the FCC codified various of its existing Section 310(b) declaratory rulings practices and explained (1) how these rules affect the processing of broadcast license applications and (2) how they apply to non-commercial, education and low power FM stations.

The Report and Order will only apply to new petitions filed after the effective date of the Report and Order.

Please Contact Us if you have any questions,