Have a Federal Registration Number? Better Update It Now

Let’s state the obvious.  The FCC’s use of mandatory Federal Registration Numbers was a bad idea from the start.  It became monumentally worse today, when the FCC quietly announced that anyone whose Federal Registration Number contact information isn’t updated within 10 business days is subject to a $1,000 per day fine until it is updated, up to the current statutory maximum of $628,305.

Our story begins on December 3, 2001, when the FCC began requiring that all applications and fee payments to the FCC use a Federal Registration Number (FRN) so that it could better track payments to the FCC:

The collection of regulatory and application fees, auction payments, auction loan payments, and other monies due to the United States must be processed expeditiously and recorded properly.  We tentatively conclude that the FRN will provide us with an improved mechanism for properly recording and tracking payments made to the Commission.

The FCC explained the new requirement in an FAQ:

Why must I register with the FCC?

Effective Dec. 3, 2001, all applications and remittance must use an FRN.  Registering via the FCC Registration site is how you provide the FCC with basic information.  Each individual or organization doing business with the FCC is required to provide and maintain current official contact information.  The contact information you provide will be used to communicate important FCC-related information to you.

So FRNs got their nose under the tent as a financial tracking mechanism for those “doing business with the FCC.”  If a licensee needed to file an application or pay a fee, it needed an FRN to do so.  Where things started going off the rails was in 2009, when the FCC forgot about the “doing business” part.  In revising Form 323, the Biennial Ownership Report form for broadcasters, it announced:

The revised Form 323 requires that individuals and entities reported on the form obtain and provide an FCC Registration Number (FRN). Obtaining an FRN requires submission of a Taxpayer ID Number (a Social Security Number, or SSN, for individuals and an Employer ID Number, or EIN, for entities).

As a result, not just the licensee, but every entity in its chain of ownership up to and including the ultimate parent company, every officer and director of each one of those entities, and every 5% or greater shareholder in those entities, suddenly needed to have an FRN merely so the licensee could meet its obligation to file an Ownership Report every two years and after transactions.  To get those FRNs, these entities and individuals, many of whom had never had any contact with the FCC, needed to navigate the FCC’s clunky filing systems and provide their social security number to the FCC at a time when identity theft was skyrocketing and even the Pentagon had been hacked.

The broadcast communications bar rose as one, decrying such a terrible idea and the many complications it would cause for no apparent benefit.  I was at the seminal meeting with the FCC where we ran through the long list of problems with the concept, including that individuals with no prior contact with the FCC were going to be challenged in navigating the registration system, didn’t want to give their social security number to the FCC (or anyone for that matter, including the broadcast company’s lawyer to register on their behalf), and did not have FCC counsel since they were not the broadcast company with the filing obligation.  In addition, while a broadcast company arguably had some (but not unlimited) influence over its officers and directors to ensure they obtained an FRN, they had no such influence over the 5% or greater shareholders that also needed to be listed in the reports.

The FCC’s response in that meeting was that it can’t be that bad, since big telecom companies had already been living with such a requirement, and FRNs were necessary because the FCC needed to be able to tell whether two people with the same name were the same person.  When the communications lawyers in the room noted that the Ownership Report already required the reporting of each individual’s address, nationality, and relationship to the filer, the FCC responded that there was still the situation where two people had the same address, had the same name, and one didn’t include “Jr.” in their name.  So to solve for that extreme edge case, most every person connected to a broadcaster has had to hand over their social security number and obtain an FRN ever since.

It turned out to be an even worse idea in practice.  The filing of thousands of Ownership Reports and other documents have been delayed because of FRN problems, including hours spent begging your client to get that last director or shareholder to provide enough information to get them an FRN, or because the FRN provided isn’t being accepted by the FCC’s systems for some reason.  Trying to navigate these roadblocks, many parties end up with multiple FRNs.  The lawyer sets up an FRN for the licensee in order to make its filings.  The licensee’s accountant trying to pay its regulatory fees ends up setting up a new FRN rather than asking the lawyer for the existing FRN.  The station’s engineer sets up yet another FRN because he or she needs to make a deadline filing and is blocked because they aren’t associated with the licensee’s existing FRN in the FCC’s systems.

A party may not ever realize they have multiple FRNs until they try to make a filing or pay a fee and find that the FRN they have in hand is different than the FRN that particular FCC system is expecting to see and therefore blocks the filing.  Even worse, often the employee that set up the FRN has left the company, and no one is able to access it to make a filing or payment with the FCC.  Where a licensee becomes aware it has multiple FRNs, or a person that has left the broadcast community wants to cancel its FRN rather than update it for the rest of their life, the FCC has not provided an obvious method of cancelling it.  Even if it had, licensees would be hesitant to cancel “extra” FRNs since they can’t be sure they won’t need that FRN for whatever FCC system that FRN was previously used to access.  The problem is compounded because applicants often apply for a new FRN when they can’t get the old one to work when making a filing or payment.

Nor is there much assistance for the FCC-inexperienced.  The FCC has published over 200 Compliance Guides for Small Businesses on a variety of topics, but not one on FRNs.  Making matters worse is the complicated two-step process a party must now go through to access its FRN and update the information.  When the FRN was originally introduced, a person established a password for the FRN and could simply sign in with it to update the information.  In the FCC’s efforts to enhance security, it has established a new system in which the person must first create a personal account using their own email and set up a personal password associated with that account.  Then, their personal account must be linked to the FRN by an Administrator who can grant them different levels of permission to view, manage or administer the FRN.  As a result, a person may, despite their best efforts, be unable to access and update their own FRN, particularly where the FRN Administrator (often a communications lawyer) has retired or otherwise left the company.

So don’t get a communications lawyer started on the subject of FRNs at a cocktail party; you will never get back to the bar for a second drink.

The only saving grace was that while FRNs created added headaches, friction, and delays in interacting with the FCC, they at least weren’t the subject of many enforcement actions.  They were a procedural hurdle to everything; not a fine waiting to happen.

That changed today when the FCC quietly announced in a Robocall Mitigation Database proceeding that it had received approval from the Office of Management and Budget (OMB) to require every holder of an FRN to update its FRN information within ten business days of a change or face a $1,000 a day fine.  The underlying Order was actually adopted in the waning days of the Biden Administration, but took over a year to obtain OMB approval under the Paperwork Reduction Act.  That delay is actually surprising, since the FCC in its analysis did not even mention the impact on FRN holders other than telecom “providers” involved in robocall matters, and vastly understated the burden imposed:

In [making these changes], we align section 1.8002 with section 64.6305 of the Commission’s rules, which requires providers to update submissions to the Database within 10 business days of any changes to required content.  Consistent with our view stated in the Notice that such a rule would impose no significant costs on CORES users or present any significant countervailing burdens, no commenters opposed our proposal.

Hidden in a robocall proceeding, the requirement slipped by most of the broadcast community until today’s Federal Register announcement.  Notably, the FCC’s Public Notice announcing the Order a year ago gave no hint of the impact on anyone but robocallers:

“Companies using America’s phone networks must be actively involved in protecting consumers from scammers,” said FCC Chairwoman Jessica Rosenworcel. “We are tightening our rules to ensure voice service providers know their responsibilities and help stop junk robocalls….  The Report and Order increases accountability by requiring timely updates to company information, and instituting base fines of $10,000 for submitting false or inaccurate information, and $1,000 for failure to keep information current.

It makes sense that those involved in propagating robocalls need to keep their contact information up to date in case the FCC needs to reach out in a crisis, and that some robocallers might be incentivized to make themselves hard to reach, hence the need to fine those that “forget” to update their FRN information.  None of that logic applies to retired broadcast officers and directors, minority shareholders that have moved on (and those that haven’t), or board members of a nonprofit operating a noncommercial radio station who obtained an FRN before the FCC acknowledged FRNs were too burdensome for volunteers.  Once again, the FCC has incentivized both individuals and investors to stay far away from broadcasting lest they face financial penalties for inadvertence.

All because two people in the same household might have the same name.