Earlier this week, the FCC released a Second Report and Order revising and expanding requirements to identify and disclose whether any “leased” broadcast program is sponsored by an agent of a foreign government.  The new order followed a decision in 2022 by the U.S. Court of Appeals for the D.C. Circuit to strike down a component of the original rule adopted by the FCC.  The new rule was adopted on a 3-to-2 vote, with the FCC’s two Republican members dissenting.  While the FCC has underscored that these rules are intended to provide broadcasters with flexible and simple options for compliance, failure to comply with these new information gathering and retention requirements could lead to enforcement action, including monetary forfeitures. 

Background

In 2021, the FCC adopted new sponsorship identification rules for foreign-government provided programming.  The FCC explained that it adopted these rules to “ensure that the public is informed when airtime has been purchased in an effort to persuade audiences . . . [so] that audiences can distinguish between paid content and material chosen by the broadcaster itself.”

These rules apply to any material aired pursuant to the “lease” of time on a broadcast station that has been sponsored by any foreign government, political party, or agent thereof, or any U.S.-based foreign media outlet (as well as to any political programming if it is furnished for free by a foreign source as an inducement to air the content).  The rules also include a “reasonable diligence” requirement that require broadcasters to make certain inquiries in order to ascertain whether the sponsor of programming is foreign.

Representatives of commercial broadcasters challenged that rule and, in July 2022, the U.S. Court of Appeals for the D.C. Circuit issued an opinion vacating one element of the reasonable diligence requirement.  Specifically, the D.C. Circuit held that section 317 of the Communications Act of 1934, as amended, does not confer on the FCC the authority to require that broadcasters undertake an independent verification of the identity of the sponsor of programming subject to the rules by searching two government-run databases for the sponsor’s name.  The D.C. Circuit’s opinion did not disturb the remainder of the new sponsorship identification rules.

Restoring the Independent Verification Requirement

In response to the D.C. Circuit’s vacatur, in October 2022 the FCC adopted a Second Notice of Proposed Rulemaking that sought “to fortify the rules in the wake of the court’s decision.”  This week’s Second Report and Order enacted revised alternatives to the independent verification requirement intended to avoid the statutory authority issues identified in the D.C. Circuit’s opinion.

The revised rules require broadcasters to take one of two actions in lieu of the independent verification requirement.  Broadcasters must either:

Broadcasters are required to retain documentation demonstrating compliance with the reasonable diligence requirement for the duration of the station’s license term, or one year, whichever is longer.  The FCC is not requiring that broadcasters make this information available in their public files.  Stations may elect to retain the documentation in their public files, or in internal files, but must be able to provide the documentation to the FCC promptly upon request.

Clarifying the Scope of the Rule

The FCC also used this Second Report and Order to clarify that the foreign sponsorship identification rules do not apply to broadcast matter advertising commercial products or services (i.e., ads subject to section 73.1212(f) of the FCC’s rules), nor political candidate advertisements.  Conversely, the rules do apply to political issue advertisements and paid public service announcements, religious programming, and locally produced and distributed programming, despite arguments that each should be exempt.  Republican Commissioners Carr and Simington both took issue with these decisions, arguing that they amounted to a redefinition of the term “lease” as it was understood at the time of the adoption of the initial rules without adequate notice to affected parties. 

* * * * *

The Second Report and Order technically will be effective 30 days following its publication in the Federal Register, but certain of the revisions to the rule – in particular, the requirement around the new information required to be obtained from the “lessee” of the programming in question – first must obtain approval by the Office of Management of Budget pursuant to the Paperwork Reduction Act.  The Media Bureau will announce the effective date of these elements of the rule at a later date.

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Photo of Matthew DelNero Matthew DelNero

Matt DelNero provides expert regulatory counsel to companies of all sizes in the telecommunications, technology and media sectors. As a former senior official with the FCC and longtime private practitioner, Matt helps clients achieve their goals and navigate complex regulatory and public policy…

Matt DelNero provides expert regulatory counsel to companies of all sizes in the telecommunications, technology and media sectors. As a former senior official with the FCC and longtime private practitioner, Matt helps clients achieve their goals and navigate complex regulatory and public policy challenges.

Matt serves as co-chair of Covington’s Technology & Communications Regulation (“TechComm”) Practice Group and co-chair of the firm’s Diversity & Inclusion initiative.

Matt advises clients on the full range of issues impacting telecommunications, technology and media providers today, including:

  • Structuring and securing FCC and other regulatory approvals for media and telecommunications transactions.
  • Conducting regulatory due diligence for transactions in the telecommunications, media, and technology sectors.
  • Obtaining approval for foreign investment in broadcasters and telecommunications providers.
  • Universal Service Fund (USF) programs, including the FCC’s Rural Digital Opportunities Fund (RDOF).
  • FCC enforcement actions and inquiries.
  • Online video accessibility, including under the Communications and Video Accessibility Act (CVAA) and Americans with Disabilities Act (ADA).
  • Equipment authorizations for IoT and other devices.
  • Spectrum policy and auctions, including for 5G.
  • Privacy and data protection, with a focus on telecommunications and broadband providers.

Matt also maintains an active pro bono practice representing LGBTQ+ asylum seekers, as well as veterans petitioning for discharge upgrades—including discharges under ‘Don’t Ask, Don’t Tell’ and predecessor policies that targeted LGBTQ+ servicemembers.

Prior to rejoining Covington in January 2017, Matt served as Chief of the FCC’s Wireline Competition Bureau. He played a leading role in development of policies around net neutrality, broadband privacy, and broadband deployment and affordability under the federal Universal Service Fund (USF).

Chambers USA has recognized Matt as a “go-to attorney for complex matters before the FCC and other federal agencies, drawing on impressive former government experience.”

Photo of John Cobb John Cobb

John Cobb is an associate in the firm’s Washington, DC office and a member of the Technology and Communications Regulation Practice Group. Prior to joining Covington, John served as the Legal Advisor to the FCC’s Broadband Data Task Force where he provided legal…

John Cobb is an associate in the firm’s Washington, DC office and a member of the Technology and Communications Regulation Practice Group. Prior to joining Covington, John served as the Legal Advisor to the FCC’s Broadband Data Task Force where he provided legal guidance to the Task Force on matters related to implementation of the Broadband DATA Act and the FCC’s Broadband Data Collection. Before that, John served as an Honors Attorney in the Policy Division of the FCC’s Media Bureau where he worked on matters affecting the media industry, including multiple administrative rulemakings in the Modernization of Media Regulation Initiative.