The Dream Could Come True: Bid For Your Own Radio Station In Auction #109

The FCC will soon open the application process for Auction #109 AM and FM radio station construction permits. Auction #109 will offer four AM and 136 FM construction permits as listed in Attachment A. The construction permits to be auctioned are for new FM allotments. The AMs are four previously licensed AM stations, listed in the table below, the license renewals of which were dismissed with prejudice in a hearing before the Commission’s Administrative Law Judge and the call signs deleted.

Those wishing to participate in this auction must:

• Submit a short-form application (FCC Form 175) electronically prior to 12:00 noon 6:00 p.m. ET, May 11, 2021. The Short-Form Application filing window will open on April 28, 2021 at 12:00 noon Eastern Time (ET)
• Submit a sufficient upfront payment by wire transfer by 6:00 p.m. ET, June 16, 2021.
• Prepare to begin bidding when the auction begins on July 27, 2021

Here are some other important links/dates: · An online Auction Tutorial is now available here: Auction 109 Tutorial

• There will be a Mock Auction on July 23, 2021
• The Auction Bidding Begins July 27, 2021

New Entrant Credits

The FCC affords limited bidding credits to “new entrants.” The size of a New Entrant Bidding Credit depends upon the number of ownership interests in other media of mass communications that are attributable to the bidder-entity and its attributable interest-holders:

• A 35% bidding credit will be given to a winning bidder if it, and/or any individual or entity with an attributable interest in the winning bidder, has no attributable interest in any other medium of mass communications.
• A 25% bidding credit will be given to a winning bidder if it, and/or any individual or entity with an attributable interest in the winning bidder, has an attributable interest in no more than three mass media facilities, none of which serve the same area as the proposed broadcast station.

Thus, those qualifying for one of these credits will find themselves bidding with “cheaper money.”

Once the short-form filings are submitted, they will be reviewed by the Commission staff for sufficiency. The FCC will issue an announcement of the applicants determined to be “eligible bidders”. Then they must each submit an “upfront payment” by June 16. Then, the Commission will issue a list of “Qualified Bidders,” conduct a mock auction so that bidders or their designated representatives can practice electronic bidding in the FCC’s internet-based bidding system, and then the actual auction will commence on July 27, 2021.

Bidding Procedures:

Here is a summary of the typical relevant bidding procedures. An applicant must select on its FCC Form 175 the construction permit or permits, from the list of available permits, on which it wants to bid. A bidder can specify the markets in which it is interested or may specify the entire list. However, its bidding eligibility will be limited to the markets it lists on its short form application. An applicant must make an upfront payment sufficient to obtain bidding eligibility on the construction permits on which it will bid.

In addition, each permit is assigned a “bidding unit” amount, which serves both as the opening bid for that permit as well as the amount of the upfront payment that must be submitted in order for a bidder to be eligible to bid for that permit. In other words, if a bidder submits $80,000 as its upfront payment, then its collective bidding in each round would be limited to permits having no more than $80,000 worth of bidding units.

Keeping with past practice, the auction will be a simultaneous multiple round auction. That means that bids will be placed on all CPs at the same time. The Commission generally starts with two rounds a day. Based on experience, the number of rounds should increase quickly to four a day and then up to six or even eight rounds a day. The Commission will conduct this auction over the Internet using the FCC auction bidding system. Qualified bidders are permitted to bid electronically via the Internet or by telephone using the telephonic bidding option. All telephone calls are recorded.

In the opening round, the only acceptable bid for each permit will be for the minimum amount. That means that everyone will be tied. The Commission will assign a random number to each bid. The bid with the highest random number will be deemed the high bidder. This tie-breaking strategy will be employed in all rounds.

Activity Rule

To ensure that the auction closes within a reasonable period of time, an activity rule requires bidders to bid actively throughout the auction, rather than wait until late in the auction before participating. For purposes of the activity rule, the FCC auction bidding system calculates a bidder’s activity in a round as the sum of the bidding units associated with any construction permits upon which it places bids during the current round and the bidding units associated with any construction permits for which it holds provisionally winning bids.

This will be a single-stage auction. To maintain current bidding eligibility a bidder must be active on 100% of its bidding eligibility. If the activity rule is met, then the bidder’s eligibility does not change in the next round.

Bid Amounts

In each round, a qualified bidder will be able to place a bid on a given construction permit in any of up to eight different amounts: the minimum acceptable bid amount or one of the additional bid amounts, provided the bidders has sufficient eligibility to place a bid on the particular construction permit. Auction 109 will begin with a minimum acceptable bid increment percentage of 10% and an additional bid increment percentage of 5%.

Auction Stages

Auction 109 will be conducted in at least two stages. Under this approach, a bidder desiring to maintain its current bidding eligibility will be required to be active on construction permits representing at least 80% of its current eligibility during each round of Stage One, and on at least 95% of its current bidding eligibility in Stage Two. Failure to maintain the required activity level will result in the use of an activity rule waiver or, if the bidder has no activity rule waivers remaining, a reduction in the bidder’s bidding eligibility in the next round.

During the second stage of the auction, a bidder desiring to maintain its current bidding eligibility is required to be active on 95% of its current bidding eligibility. Failure to maintain the required activity level will result in the use of an activity rule waiver or, if the bidder has no activity rule waivers remaining, a reduction in the bidder’s bidding eligibility in the next round.

This is only a “taste” of the bidding rules. They are more complex than we can provide in this summary but can be mastered with a little guidance and some practice. If you would like further information, please let us know.

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.