**DA 07-1827**

Released: April 24, 2007

In Reply Refer to:

1800B3-TSN

Ruby Radio Corporation

c/o David Tillotson, Esq.

4606 Charleston Terrace, N.W.

Washington, DC 20007

Mr. Scott Powell

c/o Lee J. Peltzman, Esq.

Shainis and Peltzman, Chartered

1850 M Street, N.W.

Suite 240

Washington, DC 20036

In re: **Broadcast Auction No. 84**

**Scott Powell**

> New(AM), Elko, Nevada

Facility ID No. 161099 File No. BNP-20041029AJL

**Application for Construction Permit**

Dear Counsel:

We have before us the January 5, 2005, Petition to Deny ("Petition") the
above-noted application of Scott Powell ("Powell") for a new AM
broadcast station at Elko, Nevada.[^1] The Petition was filed by Ruby
Radio Corporation ("Ruby"), licensee of KHIX(FM), Carlin, Nevada. As
explained below, we deny Ruby's Petition, and grant Powell's
application.

Powell filed a Form 175 short-form application proposing a new AM
station at Elko during the filing window for AM Broadcast Auction No. 84
("Auction 84").[^2] Because his Elko proposal was not mutually exclusive
with any other Auction 84 applications, it was deemed a "singleton," and
Powell was directed to file a complete Form 301 long-form application
for Elko.[^3]

In its Petition, Ruby alleges that Powell's business partner, Amy
Meredith, sent Ruby's president, Ken Sutherland, an unsolicited e-mail
dated December 26, 2004, in which she purported to offer the "rights"
to, *inter alia*, Powell's yet-to-be-granted Elko permit.[^4] Ruby
argues that "well settled" Commission policy dictates that construction
permits should be granted only to qualified applicants who have a *bona
fide* intent to construct the facilities they propose and to render a
broadcast service.[^5] Ruby concludes that, because Powell's agent
offered the rights to the Elko permit shortly after the long form
application was filed (and before it was accepted for filing), Powell
has demonstrated a lack of *bona fide* intent to construct and operate
the facilities. Accordingly, Ruby urges that the application be denied.

There is no longer a flat prohibition against for-profit sale of
construction permits acquired pursuant to competitive bidding
procedures.[^6] Rejecting the traditional rationale for prohibiting such
for-profit sales of unbuilt facilities, namely, that to do so would
encourage spectrum speculation, the Commission explained:

> Our concern with spectrum speculation in an auction environment, where
> there are strict bidding and payment requirements and where the
> winning bidder has paid fair market value for an authorization, is
> minimal. We also believe that the competitive bidding process itself,
> where the permittee may be required to make a substantial front end
> payment, provides a strong impetus for timely station construction.
> Even in cases where a commercial permit is not issued pursuant to an
> auction, *e.g.*, because only one application was filed for a
> frequency and therefore the application was granted as a "singleton,"
> we believe it is appropriate to eliminate reimbursement restrictions.
> Applicants holding these permits would have been potentially subject
> to the auction process. Moreover, our concerns about speculation will
> be at a minimum where an auction fails to attract a single competing
> proposal. Even assuming that "singleton" commercial station permittees
> do not have the same impetus to build quickly in order to recoup
> auction expenditures, we believe that the automatic cancellation and
> forfeiture provisions adopted in this *Report and Order* . . . will
> provide sufficient incentives to construct authorized facilities
> promptly.[^7]

In this case, Powell appears to be offering to assign an unbuilt (and,
indeed, un-awarded) construction permit for an amount not limited to
Powell's expenses in prosecuting the application for the permit. We note
that Ruby provides no evidence that Powell has succeeded in finding a
buyer for the Elko permit. Thus, there is no evidence to contradict the
Commission's observation that anyone interested in acquiring "singleton"
facilities obtained in an open AM auction filing window would presumably
have filed a competing auction window application. Moreover, even if
Ruby is correct that Powell lacks a *bona fide* intent to construct its
proposed new AM station at Elko, and in fact fails to construct that
station, the construction permit will be canceled in three years in
accordance with our strict broadcast station construction and automatic
permit cancellation requirements.[^8]

We observe, however, that Ruby's concerns do not lack merit merely
because they arise here in an auction context. When the Commission in
*Non-Technical Streamlining* noted its "minimal" concern for the
possibility of spectrum speculation, this did not necessarily mean that
the Commission implicitly condoned such speculation. It concluded only
that such speculation was unlikely, given the risks and expenses
associated with prosecuting auction applications. As recently as two
years prior to releasing *Non-Technical Streamlining*, the Commission
re-affirmed that "\[c\]onstruction permits are granted only to qualified
applicants in reliance upon their *bona fide* intention to place the
proposed station on the air and to provide broadcast service."[^9] The
Commission went on to state that this policy was established "to
preclude the use of broadcast authorizations as a means of obtaining
financial gain without rendering the broadcast service which, alone,
justifies grant of the permits."[^10] The auction process itself is
designed to further the Commission policy of promoting rapid deployment
of broadcast service to the public.[^11] The evidence provided by Ruby,
namely, the Meredith e-mail offering two AM stations for sale before
obtaining their permits (and referencing five other full-power AM
stations and an FM translator that, presumably, were on offer as well)
could be viewed as an attempt by Powell to profit from yet-unawarded
permits without any intent to construct the facilities. However, as
noted above, Powell and Meredith's success in selling these permits is
by no means guaranteed. Thus, we think that, rather than grant Ruby's
Petition, the better course is that followed in *Silva* and *Zaragoza
and Tongier*, that is, to reserve consideration of these questions until
such time, if any, as Powell or his affiliates attempt to assign any
permits they may obtain.

Accordingly, Ruby's Petition to Deny IS DENIED. Powell's application for
a construction permit for a new AM station at Elko, Nevada IS GRANTED.

Sincerely,

Peter H. Doyle

Chief, Audio Division

Media Bureau

[^1]: File No. BNP-2004029AJL.

[^2]: *AM New Station and Major Modification Auction Filing Window;
    Minor Modification Application Freeze*, Public Notice, 18 FCC Rcd
    23016 (MB/WTB 2003).

[^3]: *AM Auction No. 84 Singleton Applications -- Media Bureau
    Announces Form 301 Application Deadline and Ten-Day Petition to Deny
    Period*, Public Notice, 19 FCC Rcd 16655 (MB 2004).

[^4]: Ruby attaches a printout of the e-mail exchange between Meredith
    and Sutherland as Exhibit "A" to the Petition.

[^5]: Petition at 2, citing *Calhoun County Broadcasting Company*,
    Memorandum Opinion and Order, 57 R.R.2d 641 (1984).

[^6]: *1998 Biennial Regulatory Review -- Streamlining of Mass Media
    Applications, Rules, and Processes*, Report and Order, 13 FCC Rcd
    23056 (1998), *recon. granted in part*, 14 FCC Rcd 17525 (1999)
    ("*Non-Technical Streamlining*").

[^7]: *Non-Technical Streamlining*, 13 FCC Rcd at 23071.

[^8]: *See* 47 C.F.R. § 73.3598.

[^9]: *TRMR, Inc.*, Memorandum Opinion and Order, 11 FCC Rcd 17081,
    17087 (1996).

[^10]: *Id*. (quoting *Assignment and Transfer of Construction Permits*,
    33 Fed. Reg. 12678 (Sept. 6, 1968)). *See also Richard R. Zaragoza,
    Esq. and John Tongier, Esq.*, Letter, 14 FCC Rcd 1732, 1742-43 (MMB
    1998) ("*Zaragoza and Tongier*") (reiterating principle that when
    reviewing assignment of a broadcast construction permit, "the terms
    of the arrangements between parties and the totality of the facts
    and underlying circumstances must be reviewed to determine whether
    the facts reflect a permittee's intention to construct the station
    or are more reflective of an up-front sale with consummation
    postponed until after the station goes on the air," citing *William
    L. Silva, Esq*., Letter, Ref. No. 1800B3-MFW (MMB July 24, 1995)
    ("*Silva*"), *review denied sub nom*. *Choctaw Broadcasting
    Corporation*, Memorandum Opinion and Order, 12 FCC Rcd 8534 (1997),
    in which the Mass Media Bureau concluded from sale documents and the
    lack of any concrete steps toward station construction that an
    assignor permittee lacked intention to construct).

[^11]: *See* 47 U.S.C. § 309(j)(3)(A). *See also Implementation of
    Section 309(j) of the Communications Act -- Competitive Bidding for
    Commercial Broadcast and Instructional Television Fixed Service
    Licenses,* First Report and Order, 13 FCC Rcd 15920, 15935 (1998),
    *on recon.* Memorandum Opinion and Order, 14 FCC Rcd 8724, *on
    further recon.* Memorandum Opinion and Order, 14 FCC Rcd 14521
    (1999).