Matinee Radio, LLC

c/o Jeffrey L. Timmons, Esq.

Jeffrey L. Timmons, P.C.

3235 Satellite Boulevard

Building 400, Suite 300

Duluth, GA 30096-8688

In re: **FM Broadcast Auction No. 37**

> New(FM), Marfa, Texas

Facility ID No. 164597 File No. BNPH-20050103AAU

> New(FM), Groveton, Texas

Facility ID No. 164596 File No. BNPH-20050103AAW

> New(FM), Albany, Texas

Facility ID No. 164214 File No. BNPH-20050103AAX

> New(FM), Goldsmith, Texas

Facility ID No. 164215 File No. BNPH-20050103AAY

> New(FM), Magdalena, New Mexico

Facility ID No. 164213 File No. BNPH-20050103AAZ

Applications for Construction Permits

Dear Counsel:

We have before us a Petition for Declaratory Ruling ("Petition") filed
by Matinee Radio, LLC ("Matinee") on February 23, 2005. Matinee was the
winning bidder for the five above-referenced FM broadcast construction
permits in FM Broadcast Auction No. 37 ("Auction No. 37"). Matinee seeks
a declaratory ruling that, for purposes of determining eligibility for
the Commission's new entrant bidding credit, an applicant's attributable
interests are to be considered only as they exist as of the Form 175
filing deadline for an auction, and that subsequent changes in
attributable interests in media of mass communications held by the
applicant or its attributable interest holders should not be considered.
We find that our new entrant bidding credit rules, as explained in prior
decisional law as well as the Auction No. 37 public notices, are
sufficiently clear, and accordingly deny Matinee's Petition.

**BACKGROUND**

Matinee claims eligibility for a 35 percent new entrant bidding credit,
because neither it nor any of its attributable interest holders held
attributable interests in any media of mass communications as of the
August 6, 2004, Auction No. 37 Form 175 filing deadline. Four days after
that deadline, a corporation comprised of Matinee interest holders
consummated a transaction to purchase a broadcast construction permit.
Matinee did not amend its Form 175 "short form" auction filing window
application to reflect this transaction. Narrowly reading part of one
Auction No. 37 public notice, Matinee insists that because its
shareholders did not consummate the purchase transaction until after
August 6, 2004, the new station cannot be attributed to Matinee's
attributable interest holders, and that it is eligible for the full 35
percent new entrant bidding credit, rather than the 25 percent bidding
credit available to those with attributable interests in three or fewer
media of mass communications.

Matinee filed its Form 175 application to participate in Auction No. 37
on August 6, 2004, the last day for filing such applications. In its
Form 175, Matinee claimed eligibility for a 35 percent new entrant
bidding credit, as neither it nor any of its attributable interest
holders had attributable interests in any media of mass
communications.[^1]

In the public notice setting forth procedures to be followed for Auction
No. 37, the Media Bureau and Wireless Telecommunications Bureau
(collectively the "Bureaus") made the following statements regarding
eligibility for the new entrant bidding credit:

> The interests of the bidder, and of any individuals or entities with
> an attributable interest in the bidder, in other media of mass
> communications shall be considered when determining a bidder's
> eligibility for the New Entrant Bidding Credit. The bidder's
> attributable interests shall be determined as of the short-form
> application (FCC Form 175) filing deadline -- August 6, 2004. Bidders
> intending to divest a media interest or make any other ownership
> changes, such as resignation of positional interests, in order to
> avoid attribution for purposes of qualifying for the New Entrant
> Bidding Credit must have consummated such divestment transactions or
> have completed such ownership changes by no later than the short-form
> filing deadline -- August 6, 2004.[^2]

Matinee is controlled by Matinee Broadcasting Corporation ("MBC"), the
sole managing member with a 51 percent voting membership interest in
Matinee. MBC is owned and controlled by four individuals, each of whom
is an officer, director, and voting shareholder of MBC: Robert Walker
("Walker"), Katy Gaffney ("Gaffney"), William M. Smith ("Smith"), and
Mark Eckenrode ("Eckenrode"). These four individuals collectively hold
the remaining 49 percent voting membership interests in Matinee. Thus,
the entities holding attributable interests in Matinee are Walker,
Gaffney, Smith, Eckenrode, and MBC. Walker and Smith are also officers,
directors, and shareholders of Palm Broadcasting Company ("Palm"). On
October 30, 2003, the Media Bureau granted an application to assign the
construction permit of KTXX(FM), Karnes City, Texas, from North American
Broadcasting Company to Palm.[^3] Palm did not consummate this
transaction until August 10, 2004, four days after the short form filing
deadline for Auction No. 37. Thus, as of August 10, 2004, individuals
with attributable interests in Matinee held an attributable interest in
a medium of mass communications.[^4]

**DISCUSSION**

Matinee, narrowly reading a single sentence of the *Auction No. 37
Procedures Public Notice*, contends that it is still entitled to claim a
35 percent new entrant bidding credit, because Palm did not consummate
the KTXX(FM) transaction until four days after the Auction No. 37 filing
deadline, and Matinee's attributable interests "shall be determined as
of the short-form application . . . filing deadline -- August 6,
2004."[^5] Matinee further argues that, to the extent that the
Commission disputes its "reasonable understanding"[^6] of this "clear
statement,"[^7] the policy is ambiguous, and thus the Commission may not
"penalize" it by reducing its bidding credit by ten percent.[^8] By
focusing only on this one sentence, however, Matinee disregards not only
settled precedent, but subsequent Auction No. 37 public notices.
Properly read in context, it can be seen that there is no ambiguity and
that Matinee's reading is in error.

A similarly narrow reading was attempted in *Liberty Productions, a
Limited Partnership* ("*Liberty*"),[^9] in which an applicant in Closed
Broadcast Auction No. 25 ("Auction No. 25") received a substantial
post-Form 175 filing deadline loan from a lender with attributable
interests in media of mass communications.[^10] In Auction No. 25, the
Bureaus released a procedures public notice containing language
substantially similar to that in the *Auction No. 37 Procedures Public
Notice*.[^11] Petitioner Liberty Productions, like Matinee, attempted to
avoid the diminishment of its bidding credit by narrowly construing this
same public notice language.[^12] The Commission rejected this
interpretation. It held that "\[t\]hat statement, read in context, does
not reflect that eligibility for the New Entrant Bidding Credit is
unaffected by subsequent ownership changes," pointing to the sentence
immediately following that statement which, like that in the *Auction
No. 37 Procedures Public Notice*, advised applicants wishing to claim
the bidding credit to divest attributable interests by the short form
filing deadline.[^13] "Read together, \[these statements\] clearly
reflect that a bidder could not qualify for, or upgrade a previously
claimed bidding credit, based upon ownership or positional changes
occurring after the short-form filing deadline."[^14] The Commission
thus held that the impact of post-Form 175 filing deadline changes that
might *diminish* a bidding credit previously claimed on Form 175 was not
expressly addressed in the procedures public notice.[^15]

The Commission in *Liberty* then held that the issue of diminished
bidding credits in Auction No. 25 was directly addressed in a later
public notice, released after the Form 175 filing deadline.
Specifically, that public notice advised bidders that "if ownership
changes result in the diminishment or loss of a New Entrant Bidding
Credit due to the attributable interests of new attributable interest
holders," the bidder claiming the credit must clearly state such
information in an amendment to its Form 175 application.[^16] The
Commission thus concluded that Liberty's bidding credit should be
reduced from 35 percent to zero.[^17] *Liberty* clearly rejected the
very interpretation of the Public Notice language upon which Matinee
relies, and clearly established that applicant changes could result "in
the diminishment or loss of the new entrant bidding credit claimed on
the Form 175 application."[^18] Accordingly, we conclude that Matinee's
argument is without merit.

Matinee's attempt to argue that *Liberty* may be "readily distinguished
from the circumstances presented here"[^19] is unavailing. Matinee
contends that, in *Liberty*, the applicant claiming the bidding credit
made ownership changes, specifically by bringing in a lender with
attributable mass media interests after the Form 175 filing deadline.
Here, argues Matinee, no new owners or even investors were brought in;
rather, Matinee's existing attributable interest holders subsequently
acquired an attributable interest. Therefore, argues Matinee, the
*Liberty* decision applies only when there are ownership or positional
changes after the Form 175 filing deadline, and thus did not put Matinee
on notice that this specific post-Form 175 filing deadline change would
reduce its claimed bidding credit.[^20] However, *Liberty* does not
stand for the narrow proposition that only certain post-Form 175 filing
window changes will result in a loss or diminishment of the new entrant
bidding credit. Rather, *Liberty* establishes that an applicant's
bidding credit status is not "frozen" as of the Form 175 filing
deadline, and can in fact be lost or diminished after the deadline.[^21]

Moreover, Matinee is both misguided and in error when it states that
neither the *Auction No. 37 Procedures Public Notice* nor "any
subsequent Commission statements" gave notice that post-Form 175 filing
deadline changes -- of any sort -- could lead to a reduction in the new
entrant bidding credit.[^22] As explained above, the Commission's policy
on post-Form 175 filing deadline bidding credit diminutions was
conclusively settled in *Liberty*. Moreover, the *Auction No. 37
Qualified Bidders Public Notice* did not limit the potential reduction
of claimed new entrant bidding credits to those applicants making
"ownership changes." Rather, that public notice clearly referred to
"*any* changes affecting eligibility for the new entrant bidding credit,
insofar as it \[sic\] results in the diminishment or loss of the new
entrant bidding credit claimed on the Form 175 application . . . ."[^23]
Further, the Bureaus stated in the *Auction No. 37 Qualified Bidders
Public Notice* that "\[c\]hanges that cause a loss of or reduction in
eligibility for a new entrant bidding credit should be reported
*immediately*,"[^24] and that, in such cases, "the Commission will make
appropriate adjustments in the new entrant bidding credit prior to the
computation of down and final payment amounts due from any affected
winning bidders."[^25]

Clearly, the consummation of a transaction wherein attributable interest
holders acquire a new attributable interest a mere four days after the
Auction No. 37 Form 175 filing deadline (and over two months before
release of the *Auction No. 37 Qualified Bidders Public Notice* and
three months prior to the auction itself) falls into the category of
"any change" that would affect eligibility for or diminishment of the
new entrant bidding credit. Just as clearly, Matinee did not file the
required amendment under Section 1.65. We are troubled by Matinee's
apparent attempt to manipulate the new entrant bidding credit rule. The
Commission has made clear that it will address such conduct on a
case-by-case basis.[^26] We find it particularly illuminating that other
Auction No. 37 bidders promptly reported changes in attributable
interests, bidding credit eligibility, and reductions in originally
claimed new entrant bidding credits.[^27] To allow Matinee to retain its
full 35 percent bidding credit despite its failure to report a similar
change would be manifestly unfair to those applicants who read,
understood, and followed the auction procedures.

We also reject Matinee's argument that, because the Commission's
pronouncements in this area were supposedly ambiguous, we may not
"penalize" it by reducing its bidding credit from 35 to 25 percent.
First, for the reasons stated above, we reject as frivolous Matinee's
contention that Commission policies in this regard are ambiguous.
Second, while Matinee cites a number of cases for the proposition that
the Commission may not "penalize" an applicant unless its rules are
completely clear, each of these cases is distinguishable from the case
before us. With one exception, each case Matinee cites involves the
actual or potential dismissal of an application, or the potential denial
of a license renewal -- situations in which an applicant or licensee
would lose its application or license.[^28] The lone exception is the
*Mercury PCS II, LLC* case,[^29] which involved a potential forfeiture
of \$650,000 for violations of the Commission's anti-collusion rules.

By way of contrast, in the instant case not only does Matinee *not* face
dismissal or denial of its application, it does not even face the
possibility of paying its full gross high bids. The "penalty" of which
Matinee complains involves, not whether Matinee receives a discount from
its gross high bids, but rather how deep a discount it receives. This is
entirely dissimilar from the types of penalties faced by the parties in
the cases Matinee cites. Here, there is no argument regarding the
acceptability or grantability of Matinee's applications. Accordingly,
*Salzer*[^30] is inapposite, and Matinee's reliance on it and similar
cases to establish alleged defects in the Commission's explication of
new entrant bidding credit policies is therefore misplaced. Under the
circumstances present here, the Commission is not subject to a
letter-perfect standard regarding the application of its bidding credit
rules.

**CONCLUSION**

We find no merit in Matinee's contentions. Matinee should have read and
understood the Auction No. 37 public notices to require that it amend
its Form 175 application to reflect the fact that its attributable
interest holders acquired an attributable interest in a medium of mass
communications four days after the August 6, 2004, filing deadline, and
that the acquisition would cause a reduction of its new entrant bidding
credit originally claimed on Form 175. We find that, given the holding
in *Liberty* that post-Form 175 filing deadline changes may cause
reductions in a claimed new entrant bidding credit, Matinee's contrary
interpretation of the Auction No. 37 public notices was not reasonable,
nor is there ambiguity as to our rules in this regard. Because we find
that those rules were clear, we find no controversy or clarification
requiring relief under Section 1.2 of the Commission's rules.[^31]

Accordingly, Matinee's Petition for Declaratory Ruling IS DENIED.
Matinee's final auction payments are subject to a 25 percent new entrant
bidding credit, rather than the 35 percent bidding credit it claims.

Sincerely,

Peter H. Doyle, Chief

Audio Division

Media Bureau

[^1]: *See* 47 C.F.R. §§ 73.5007, 73.5008.

[^2]: *Public Notice*, "Auction of FM Broadcast Construction Permits
    Scheduled for November 3, 2004 -- Notice and Filing Requirements,
    Minimum Opening Bids, Upfront Payments and Other Auction
    Procedures," 19 FCC Rcd 10570, 10584 (MB/WTB 2004) ("*Auction No. 37
    Procedures Public Notice*").

[^3]: File No. BAPH-20030826APJ.

[^4]: 47 C.F.R. § 73.5008(b).

[^5]: *See supra* note 2.

[^6]: *See*, *e.g*., Petition at 4.

[^7]: *See*, *e.g*., *id*. at 3.

[^8]: *Id*. at 6.

[^9]: 16 FCC Rcd 12061, *stay denied*, 16 FCC Rcd 18966 (2001), *aff'd
    sub nom, Biltmore Forest Broadcasting FM, Inc. v. F.C.C.*, 321 F.3d
    155 (D.C. Cir.), *cert. denied*, 540 U.S. 981 (2003).

[^10]: The lender's attributable interests were attributed to the
    borrower because of the "equity/debt plus" rule, which attributes
    the attributable interests of a lender who holds a greater than 33
    percent debt interest in an auction bidder. *See* 47 C.F.R. §
    73.5008(c). *See also* *Implementation of Section 309(j) of the
    Communications Act -- Competitive Bidding for Commercial Broadcast
    and Instructional Television Fixed Service Licenses, Memorandum
    Opinion and Order*, 14 FCC Rcd 12541 (1999).

[^11]: *See Public Notice*, "Closed Broadcast Auction -- Notice and
    Filing Requirements for Auction of AM, FM, TV, LPTV, and FM and TV
    Translator Construction Permits Scheduled for September 28, 2999 --
    Minimum Opening Bids and Other Procedural Issues," 14 FCC Rcd 10632,
    10639 (1999) ("The bidder's attributable interests shall be
    determined as of the short form (FCC Form 175) filing deadline --
    August 20, 1999.").

[^12]: 16 FCC Rcd at 12077.

[^13]: *Id*.

[^14]: *Id*.

[^15]: *Id*.

[^16]: *Id.* at 12078.

[^17]: *Liberty*, *supra* note 9, 16 FCC Rcd at 12079.

[^18]: *Public Notice*, "Auction of FM Broadcast Construction Permits --
    456 Bidders Qualified to Participate in Auction No. 37," 19 FCC Rcd
    19773, 19777 (MB/WTB 2004) ("*Auction No. 37 Qualified Bidders
    Public Notice*").

[^19]: Petition at 5.

[^20]: *Id*. at 14.

[^21]: *Liberty*, 16 FCC Rcd at 12078.

[^22]: Petition at 6.

[^23]: *Auction No. 37 Qualified Bidders Public Notice*, 19 FCC Rcd at
    19777 (emphasis added).

[^24]: *Id* (emphasis added).

[^25]: *Id*.

[^26]: *See Implementation of Section 309(j) of the Communications Act
    -- Competitive Bidding for Commercial Broadcast and Instructional
    Television Fixed Service Licenses, Memorandum Opinion and Order*, 14
    FCC Rcd 8724, 8767-68 (1999) (addressing assertion that Commission
    must establish a rule preventing applicants from divesting
    attributable interests pre-auction to qualify for the new entrant
    bidding credit, only to re-acquire them after the auction: "The
    Commission cannot . . . anticipate in advance every possible way in
    which a small number of prospective bidders may conceive to try to
    manipulate our broadcast auction rules in general and any special
    measures, such as bidding credits, in particular. Given our past
    experience with conducting auctions, we are confident that this
    number of bidders should be quite limited. Accordingly, we believe
    it appropriate to address, on a case-by-case basis, any conduct
    engaged in by auction participants with the evident intention of
    manipulating the eligibility standards for, or frustrating the
    purpose of, the new entrant bidding credit.").

[^27]: For example, applicant World Radio Link, Incorporated ("WRL")
    filed a post-Form 175 filing deadline amendment to its Form 175
    application, reporting that one of its attributable interest
    holders, after the short-form filing deadline, acquired an
    attributable interest in a medium of mass communications.
    Consequently, WRL's bidding credit eligibility was reduced from 35
    percent to 25 percent. During Auction No. 37, bidders Aurora
    Communications, Inc. ("Aurora") and RuDex Broadcasting, Limited
    ("RuDex") amended their Form 175 applications to reflect a loan
    received from a third party holding attributable interests in media
    of mass communications, subsequently losing their claimed bidding
    credits. Aurora's and RuDex's amendments were reported to other
    Auction No. 37 bidders via the Commission's auction "bulletin
    board." WRL, Aurora, and RuDex's Auction No. 37 filings may be
    accessed through the Commission's auctions Public Access Website,
    <http://auctionfiling.fcc.gov/form175/search175/index.htm>.

[^28]: *Bamford v. F.C.C.*, 535 F.2d 78 (D.C. Cir. 1976) (application
    for FM broadcast construction permit denied); *Salzer v. F.C.C.*,
    778 F.2d 869 (D.C. Cir. 1985) ("*Salzer*") (low-power television
    applications dismissed); *Maxcell Telecom Plus, Inc. v. F.C.C.*, 815
    F.2d 1551 (D.C. Cir. 1987) (cellular "fill-in" application
    dismissed); (*Satellite Broadcasting Company, Inc. v. F.C.C.*, 824
    F.3d 1 (D.C. Cir. 1987) (OFS microwave application dismissed);
    *McElroy Electronics Corp. v. F.C.C.*, 990 F.2d 1351 (D.C. Cir.
    1993) (cellular license applications dismissed); *Trinity
    Broadcasting of Florida, Inc. v. F.C.C.*, 211 F.3d 618 (D.C. Cir.
    2000) (renewal application denied); *Abundant Life, Inc.*, 12 FCC
    Rcd 11724 (1997) (FM broadcast application dismissed for failure to
    pay hearing fees); *East River Electric Power Cooperative*, 18 FCC
    Rcd 15977 (2003) (site-based SMR license applications dismissed);
    *Fox Television Stations, Inc.*, 10 FCC Rcd 8452 (1995) (potential
    denial of license renewal applications); *CBS, Inc.*, 69 F.C.C.2d
    1082 (1978) (potential designation of license renewal applications
    for hearing).

[^29]: 13 FCC Rcd 23755 (1998).

[^30]: *Salzer*, *supra* note 28, 778 F.2d at 875.

[^31]: 47 C.F.R. § 1.2.