AM Cross-Service FM Translators - Round 3 - July 26th - August 2nd - Start Your Engines

Kicking off the first summer month of 2017, on June 1st the FCC released the much-anticipated the third round in new FM translators for AM stations. The first of two new FM cross-service translator auction filing windows were announced for July 26th through August 2nd.

The Window

Beginning July 26th, licensees of Class C and D AM stations - those having the least power and/or the most limited (or nonexistent) nighttime service will be eligible to file for a new FM translator, provided that the station for which they file did not participate in either of the 2016 - 250-mile move-in application windows. Since these applications will be for totally new translators, the Commission has had to establish a procedure for resolution of mutually exclusive applications, and it chose to use its well established auction process. Before resorting to an auction, however, mutually exclusive applicants will have an opportunity to negotiate and settle their conflicting applications. Given the expectation that there may be a substantial amount of mutual exclusivity, it is important to pay close attention to the new conditions involved with these applications.

Who Can File - Watch Out

First, note that the filing opportunity is expressly limited to eligible AM permittees and licensees. Each eligible AM licensee/permittee may propose one, and only one, cross-service FM translator to provide fill-in service for a particular AM station. As a reminder, stations that obtained a translator in one of the 250-mile move-in waiver windows are precluded from participation. An AM station with an existing FM translator obtained in any other way may file in this window for another new FM cross service translator. But, this FM translator application window may be used only to obtain an FM translator to rebroadcast permanently the specific, proposed AM primary station specified in the FCC application. The license may not be assigned or transferred, except in conjunction with the primary AM station it rebroadcasts and with which it is commonly owned.

Accordingly, it is critical that the FCC 349 application form be filed by whoever is the licensee or permittee of the AM station it will rebroadcast at the time of the application. Even where there is a proposal to purchase the station and the buyer is purchasing it upon the understanding that an FM translator application will be or has been filed in this window, the applicant must be the station licensee or permittee.

An Auction Application, Too?

That raises an intriguing and potentially troublesome issue. Along with the construction permit application on FCC Form 349, each applicant must also file an FCC Form 175 to participate in the auction should that become necessary to decide mutual exclusivity. That form also may be filed only by an AM permittee or licensee and it must be filed in the window at a time when it is not even known whether an auction will be required. Meanwhile, a buyer may not be able to close before August 2nd, and the seller -- the licensee during the window -- would not be the licensee during the auction. This is a situation that would seem ripe for a waiver or exception, but the notice does not anticipate it. The Commission did allow a different waiver of its rules, though. The prohibition against filing more than one Form 175 auction application by multiple entities with any of the same controlling interests was waived.

Accordingly, unless and until this issue is resolved, AM station transactions involving an FM translator application in this window, or based on the hope of an FM translator in this window, should be closed as soon as possible so that the buyer can participate, or they may be in a state of limbo and ultimately threatened by the restrictions on the Form 175.

Remember, too, there is no first come, first served/first-to-file preference in these new translator windows. Under these conditions, it is important to carefully analyze the spectrum opportunities in your market and carefully engineer to avoid mutual exclusivity whenever possible.

Bidding Credits

There will be a period following the filing of the FCC Form 349 construction permit applications during which applicants may negotiate a settlement to their mutual exclusivity. If those discussions do not produce a settlement, the applications will proceed to auction. In the auction, the Commission will continue its policy of providing a new entrant bidding credit for broadcast applicants with no, or very few other media interests. Since the mid 1970s, AM radio has been an avenue for entry and new radio ownership. Thus, this could be a very attractive opportunity for anyone new to or recently entering broadcasting, or with very few radio interests.

Deal in the Works?

What if your deal is in the works? You're negotiating your AM station acquisition now, or maybe you've just filed an assignment application. Who should file? Remember, unless the Commission changes its policy, it is critical that the FCC 349 application form be filed by whoever is the licensee or permittee of the AM station at the time of the application. And since Form 175 applications to participate in an auction cannot be transferred, the filer must still be the licensee at the time that an auction may be required. So, if you have a deal in the works, you should consider closing quickly in order to be eligible by the filing deadline. But be careful. If you're considering an early closing, be sure to discuss with your counsel the risks of a close before finality occurs.

Only once has the Commission allowed an exception to the no-transfer policy for an auction application. In formulating the rules for the recently concluded television reverse auction, it permitted an assignment or transfer of control of an applicant, provided that the application for assignment of transfer (1) was accepted for filing as of the deadline to submit the application to participate in the auction, and (2) included an express representation that the party that will hold the license(s) upon consummation agrees to be bound by the original applicant's actions in the auction. That would be an easy condition to apply for translator applicants, but so far, it has not been.

Settlement is the Best Option

The Commission will allow applicants to continue negotiating, discussing or communicating with respect to settlement agreements following the Form 175 filing deadline, provided that the negotiations do not relate to either the construction permits being auctioned or to bids or bidding strategies or post auction market structure. And of course, any new agreements are subject to the same disclosure obligations as required before the auction deadline.

So the starting gate has been defined, and the most important thing to do at this point is to get your engineering analysis started and develop a strategy for applying for the best FM frequency that will survive and not be subject to competing applications.

This column is provided for general information purposes only and should not be relied upon as legal advice pertaining to any specific factual situation. Legal decisions should be made only after proper consultation with a legal professional of your choosing.