**Before the**

**FEDERAL COMMUNICATIONS COMMISSION**

**Washington, D.C. 20554**

In re Application of )

)

MINNESOTA CHRISTIAN ) File No. BPH-19950601MA

BROADCASTERS, INC. ) Facility ID No. 76432

)

For a Construction Permit for a New FM Station )

at Pequot Lakes, Minnesota )

# MEMORANDUM OPINION AND ORDER

**Adopted: January 8, 2003** **Released: January 17, 2003**

By the Commission:

1\. Before the Commission is Carol DeLaHunt's ("DeLaHunt") Application
for Review of a decision by the Mass Media Bureau ("Bureau")[^1] denying
DeLaHunt's Petition for Reconsideration of a staff decision,[^2] which
denied DeLaHunt's Petition to Deny Minnesota Christian Broadcasters,
Inc.'s ("MCBI") application for a construction permit for a new FM
broadcast station at Pequot Lakes, Minnesota.[^3] For the reasons set
forth below, we grant in part and deny in part DeLaHunt's Application
for Review, and take this opportunity to clarify the eligibility
criteria for the broadcast auction new entrant bidding credit ("NEBC").

2\. **Background.** DeLaHunt and MCBI were the only qualified bidders in
FM Mutually Exclusive Group 66 in Closed Broadcast Auction No. 25. MCBI
placed the winning bid in the October, 1999, auction.[^4] DeLaHunt
timely filed a petition to deny MCBI's post-auction Form 301 application
for the Pequot Lakes construction permit, alleging that MCBI falsely
claimed that it was entitled to the NEBC, that MCBI was not financially
qualified, and that it falsely certified its financial
qualifications.[^5] The staff denied the petition to deny and DeLaHunt's
subsequent petition for reconsideration of that action. DeLaHunt now
seeks review.[^6]

3\. **Discussion.** *New entrant bidding credit*: The standards for
determining NEBC eligibility are set forth in Section 73.5007 of our
rules:

> A thirty-five (35) percent 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, have no attributable interest in any
> other media of mass communications, as defined in § 73.5008. A
> twenty-five (25) percent 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, have an attributable interest in no
> more than three mass media facilities. No bidding credit will be given
> if any of the commonly owned mass media facilities serve the same area
> as the proposed broadcast or secondary broadcast station, or if the
> winning bidder, and/or any individual or entity with an attributable
> interest in the winning bidder, have attributable interests in more
> than three mass media facilities. [^7]

"Media of mass communications," as defined in Section 73.5008(b),
include "an AM or FM broadcast station" and attributable interests, as
defined in Section 73.5008(c), are to be determined "in accordance with
§ 73.3555 and Note 2" to that section.[^8] At the time MCBI filed its
Form 175 application, it was the 100% owner and licensee of stations
KCFB(FM), St. Cloud, Minnesota, and KTIG(FM), Pequot Lakes, Minnesota,
both licensed as noncommercial educational ("NCE") stations. The Bureau
found MCBI eligible for the NEBC, based on subsection (f) of Section
73.3555 (Multiple Ownership), which then stated that "\[t\]his section
is not applicable to noncommercial educational FM and noncommercial
educational TV stations."[^9] The Bureau held that MCBI's interests in
the two NCE stations were not attributable for purposes of the multiple
ownership rules,[^10] and therefore were not to be counted in
determining MCBI's NEBC eligibility.

4\. Both Section 73.5007[^11] (Designated entity provisions) and Section
73.5008[^12] (Definitions applicable to designated entity provisions)
are silent as to whether interests in NCE facilities are to be
considered in making the NEBC eligibility determination, and the
Commission did not address this question in adopting these rules. The
Bureau's determination to disregard such facilities was based on its
initial reading of our rules. For the reasons set forth below, however,
we find that the rules are more properly read to mean that MCBI's 100%
interests in stations KCFB(FM) and KTIG(FM) are cognizable for purposes
of the bidding credit.

5\. Congress directed the Commission to ensure that certain parties "are
given the opportunity to participate in the provision of spectrum-based
services."[^13] The NEBC was designed in part to carry out this
mandate,[^14] as well as to promote viewpoint diversity within the
media.[^15] In the *Broadcast Auctions MO&O*, the Commission further
explained its rationale in adopting the NEBC, and clarified and amended
the eligibility standards to conform them to the long-standing broadcast
attribution standards, by which we define what constitutes a cognizable
interest in a medium of mass communication.[^16] In so doing, we
explained that these standards "are designed to promote diversity in
programming services and viewpoints for the broadcast services."[^17]
These standards were deemed appropriate to promote the goals of the NEBC
"because the interests defined as attributable under our general
multiple ownership attribution rules have already been judged to give
their holders a 'realistic potential' to affect programming or other
core functions of broadcast licensees."[^18] We concluded, therefore,
that "the interests of the winning bidder (and of any individuals or
entities with an attributable interest in the winning bidder) will be
attributable for purposes of the new entrant bidding credit *to the same
extent that such other media interests are considered attributable for
purposes of the broadcast multiple ownership rules*."[^19]

6\. This approach is codified in Sections 73.5007 and 73.5008 of the
rules.[^20] Section 73.5007(a) provides that "\[n\]o bidding credit will
be given if any of the commonly owned mass media facilities serve the
same area as the proposed broadcast or secondary broadcast facility." As
to what counts among the winning bidder\'s other media interests in
determining eligibility for a bidding credit, subsection (a) excludes
only "\[a\]ttributable interests held by a winning bidder in existing
low power television, television translator or FM translator
facilities." To be eligible for the thirty-five percent bidding credit,
MCBI must have "no attributable interest in any other media of mass
communications, as defined by section 73.5008." As noted above, "medium
of mass communications," as defined by Section 73.5008(b), includes an
AM or FM broadcast station without any indication that noncommercial
educational stations are excluded. An attributable interest in a medium
of mass communications, as defined in Section 73.5008(c), is determined
"in accordance with Section 73.3555 and Note 2." Neither Section 73.3555
nor Note 2 specifies that an otherwise attributable interest in a medium
of mass communications is disregarded under all circumstances because
the facility in question is a noncommercial educational station.[^21] At
the time of the 1999 auction at issue here, Section 73.3555(f) specified
that "\[t\]his section is not applicable to noncommercial educational FM
and noncommercial educational TV stations," meaning that various
ownership limits, such as the local radio ownership rule or the
radio-television ownership rule, do not apply to NCE stations. The
distinction between what constitutes an attributable interest and the
multiple ownership limits is even clearer under current Section
73.3555(f), providing that "\[t\]he ownership limits of this section are
not applicable to noncommercial educational FM and noncommercial
educational TV stations."[^22] Finally, with respect to the general
attribution standards, the current rule does not suggest that an NCE
station is not attributable for any purpose. Indeed, subsection (f)
specifically states that "the attribution standards set forth in the
Notes to this section will be used to determine attribution for
noncommercial educational FM and TV applicants." We therefore conclude
that the staff\'s reliance on Section 73.3555(f) was misplaced, and that
MCBI is ineligible for any bidding credit.

7\. The facts of this case confirm that it is appropriate to count NCE
stations as other media for NEBC purposes. This approach will promote
the NEBC goal of fostering entry into broadcasting by new participants.
A number of NCE licensees own dozens of full-power primary service
stations. It makes little sense to treat such licensees as "new
entrants." Under the Commission's rules a licensee may hold both NCE and
commercial broadcast authorizations. Moreover, as this case
demonstrates, certain licensees can convert a station via routine
application from commercial to NCE status. In these circumstances,
drawing distinctions between stations based on their NCE or commercial
status would undermine Congress's intent to "disseminat\[e\] licenses
among a wide variety of applicants."[^23] As noted by DeLaHunt, NCE
stations have been counted as "voices" in connection with requests for
waiver of our former (pre-1999) radio-television cross-ownership
rule,[^24] and are likewise counted in the "voice test" used in applying
the current rule.[^25] Moreover, the Commission has considered NCE
stations in determining the level of service provided to a community in
order to implement Section 307(b)[^26] and decide which communities
should receive a local broadcast service.[^27] Similarly, the Commission
included NCE service in calculating comparative coverage as part of its
former comparative hearing procedures.[^28]

8\. We thus conclude that full-service NCE stations, on both reserved
and non-reserved channels, are included among "media of mass
communications" as defined in Section 73.5008(b).[^29] We further
conclude that all interests held in full-service NCE stations, both
ownership and positional,[^30] constitute attributable interests within
the meaning of Section 73.5008(c) for purposes of determining
eligibility under Section 73.5007(a) for a new entrant bidding credit in
any broadcast or secondary broadcast service auction.

9\. We further conclude that we must apply our clarification of the NEBC
rules to MCBI's winning bid for the Pequot Lakes construction permit. In
this situation, we start with a presumption in favor of applying the
clarification, unless to do so would work a "manifest injustice."[^31]
The Commission has not had an opportunity to address this issue
previously. Thus, it cannot be said that MCBI relied on settled
Commission policy in this area. As noted above,[^32] DeLaHunt sought
clarification of this issue before the auction, plainly putting MCBI on
notice that its claimed NEBC likely would be challenged. Moreover, while
MCBI has paid its full net winning bid and the Bureau has issued a
construction permit, grant of the permit was expressly conditioned upon
timely payment of the balance of MCBI's gross winning auction bid should
we find, as we have, that MCBI is ineligible for the claimed NEBC.[^33]
We cannot say, therefore, that a "manifest injustice" will result from
requiring such payment. At the same time, the erroneous claim of a
thirty-five percent bidding credit, based on an erroneous reading of
section 73.3555(f), does not affect MCBI\'s basic qualifications, but it
must pay the balance of its gross winning bid.[^34] Since MCBI's station
KTIG(FM) is licensed to Pequot Lakes, MCBI may not claim either the full
thirty-five percent or a twenty-five percent NEBC.[^35] Accordingly, we
order that MCBI is to pay the Commission, within 90 days of the release
of this order, the sum of \$74,550, representing the difference between
MCBI's gross winning auction bid and its bid net of the claimed thirty
five percent NEBC.

10\. *Financial Qualifications*: DeLaHunt contends that MCBI is not
financially qualified, and thus falsely certified its financial
qualifications. She bases her contention on post-auction statements
attributed to MCBI principals, in which these principals allegedly
stated they were in the process of raising funds needed to make the down
payment and final payment on MCBI's winning auction bid. According to
DeLaHunt, these statements prove that MCBI was not financially
qualified, and she further argues that MCBI had a continuing duty to
update its financial certification to reveal its post-auction need for
funding. Its failure to do so, asserts DeLaHunt, constitutes a false
certification.

11\. We reject DeLaHunt's arguments. Her reliance on the reports of
MCBI's fund raising efforts is misplaced. As the Bureau explained in the
Reconsideration Decision, our sole method of enforcing a winning
bidder's financial qualifications -- both with respect to auction
participation and construction of facilities -- is to require timely
compliance with the auction payment deadlines.[^36] The Commission has
determined that it is "unlikely that bidders, who must construct their
facilities to recoup the expenditures made in obtaining their
construction permits via auction, will have the incentive to participate
in and prevail at auction if they lack the financial wherewithal to
construct their facilities."[^37] We also held that "\[i\]t is \[the bid
payment and default provisions\], rather than the original
certifications, that serve as a mechanism to discourage insincere
proposals."[^38] MCBI has, in fact, made all its required payments in a
timely fashion.[^39] This ends our inquiry as to its financial
qualifications and its allegedly false financial certification.

12\. **Conclusion.** For the foregoing reasons, DeLaHunt's Application
for Review IS GRANTED IN PART AND DENIED IN PART to the extent set forth
above. IT IS ORDERED that Minnesota Christian Broadcasters, Inc., in
order to satisfy the conditional grant of its construction permit, must
within 90 days of the release of this Order pay the Commission the sum
of \$74,550.00, representing the difference between its gross and net
winning bids for the construction permit at Pequot Lakes, Minnesota, in
Auction No. 25, File No. BPH-19950601MA. For payment instructions, MCBI
must contact the Office of Managing Director, Financial Operations,
Auctions Accounting Group.

FEDERAL COMMUNICATIONS COMMISSION

Marlene H. Dortch

Secretary

[^1]: *Letter to Ms. Carol DeLaHunt and Minnesota Christian
    Broadcasters, Inc. from Linda Blair, Chief, Audio Services Division,
    Mass Media Bureau*, Ref. No. 1800B3-TSN (Sept. 27, 2000)
    ("Reconsideration Decision").

[^2]: *Letter to Ms. Carol DeLaHunt and Minnesota Christian
    Broadcasters, Inc. from Linda Blair, Chief, Audio Services Division,
    Mass Media Bureau*, Ref. No. 1800B3-TSN (Feb. 28, 2000) ("Staff
    Decision").

[^3]: File No. BPH-19950601MA. MCBI filed Form 301 and paid the
    applicable filing fee, specifying non-reserved Channel 261A.

[^4]: *Public Notice*, "Closed Broadcast Auction No. 25 Closes; 91
    Winning Bidders in the Auction of 118 Broadcast Construction
    Permits," 14 FCC Rcd 17186, 17197 (1999).

[^5]: On September 23, 1999, three business days prior to commencement
    of the auction, DeLaHunt filed a Petition for Declaratory Ruling
    ("Declaratory Petition"), seeking a declaration that MCBI was not
    entitled to the thirty-five percent new entrant bidding credit that
    it claimed in its Form 175, Application to Participate in an FCC
    Auction. Our broadcast auction rules do not contemplate such
    pleadings being filed before or during auctions. These issues were
    raised again, and fully briefed, in DeLaHunt's Petition to Deny, and
    were addressed in the staff decision on that petition. The
    Declaratory Petition was therefore dismissed as moot. Staff Decision
    at 1 n.1.

[^6]: The deadline for petitions to deny in this proceeding was December
    13, 1999. *See Public Notice*, "Closed Broadcast Auction Winning
    Bidder Applications Accepted for Filing, Auction No. 25, Pleading
    Cycle Established," 14 FCC Rcd 20677, 20687 (1999). On March 21,
    2000, DeLaHunt filed a pleading styled "Further Petition to Deny" in
    which she presented further evidence regarding her allegations that
    MCBI was not financially qualified and falsely certified its
    financial qualifications. The Bureau dismissed this filing as
    untimely. Congress prescribed and the Commission has adopted a
    shortened period for filing petitions to deny in broadcast auctions.
    *Implementation of Section 309(j) of the Communications Act --
    Competitive Bidding for Commercial Broadcast and Instructional
    Television Fixed Service Licenses, First Report and Order
    ("Broadcast First Report and Order")*, 13 FCC Rcd 15920, 15985
    (1998) (establishing ten-day time period for petitions). DeLaHunt
    has failed to demonstrate good cause to depart from filing deadlines
    that are designed to expedite the introduction of new broadcast
    services, and in any event the arguments and evidence presented in
    this pleading were included both in her Petition for Reconsideration
    and her Application for Review. We therefore affirm the Bureau's
    dismissal of the "Further Petition to Deny."

[^7]: 47 C.F.R. § 73.5007.

[^8]: *Id.* § 73.5008(b), (c).

[^9]: *Id*. § 73.3555(f) (1999).

[^10]: DeLaHunt states that both KCFB(FM) and KTIG(FM) operate on
    "commercial frequencies" and "have previously been operated as
    commercial stations." Application for Review at 1. Commission
    records indicate that, in fact, KCFB(FM) operates on reserved
    Channel 218, and thus must be, and has been, operated as an NCE
    station. 47 C.F.R. § 73.501. KTIG(FM), operating on non-reserved
    Channel 274, was licensed as a commercial station until April 1998,
    when the Bureau granted its modification application to be licensed
    as an NCE station (File No. BMLED-19980105KC). Since the change to
    noncommercial operation was made over a year before the Auction 25
    Form 175 filing deadline, the staff properly regarded KTIG(FM) as an
    NCE station for auction purposes. *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, 1999 -- Minimum Opening Bids and Other
    Procedural Issues," 14 FCC Rcd 10632, 10639 (WTB/MMB 1999)
    (divestiture or other ownership changes to avoid attribution for new
    entrant bidding credit purposes must be accomplished by the Form 175
    filing deadline).

[^11]: 47 C.F.R. § 73.5007.

[^12]: *Id*. § 73.5008.

[^13]: 47 U.S.C. § 309(j)(4)(D).

[^14]: *Broadcast First Report and Order*, 13 FCC Rcd at 15993-96.

[^15]: *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, 8763 (1999) ("*Broadcast Auctions MO&O*").

[^16]: *Broadcast Auctions MO&O*, 14 FCC Rcd at 8761-63.

[^17]: *Id*. at 8763.

[^18]: *Id*.

[^19]: *Id*. at 8762 (emphasis added).

[^20]: 47 C.F.R. §§ 73.5007, 73.5008.

[^21]: *See* 47 C.F.R. § 73.3555(b)(2)(ii) (providing that full-power
    noncommercial TV stations are relevant in assessing a commercial
    television station\'s compliance with the local television multiple
    ownership rule).

[^22]: *Reexamination of the Comparative Standards for Noncommercial
    Educational Applicants*, 15 FCC Rcd 7386 (2000), *order clarified on
    recon.*, 16 FCC Rcd 5074 (2001), *recon. denied*, 17 FCC Rcd 13132
    (2002).

[^23]: 47 U.S.C. § 309(j)(3)(B). We note, moreover, that pursuant to
    Section 73.5007(c) (which provides that a licensee or permittee who
    utilized an NEBC to obtain its license or permit, and who acquires
    after auction an additional facility that would have nullified its
    NEBC eligibility, is not required to reimburse the U.S. Government
    for the amount of the NEBC), it is not the case that post-auction
    changes in the NCE status of broadcast stations previously
    disregarded for purposes of the bidding credit would result in
    unjust enrichment penalties.

[^24]: Under this policy, applicants in the top twenty-five television
    markets could seek waivers of the cross-ownership rule by showing
    that at least thirty separately owned, operated, and controlled
    "voices" would remain in the market post-combination. *Amendment of
    Section 73.3555 of the Commission's Rules, the Broadcast Multiple
    Ownership Rules*, 4 FCC Rcd 1741, 1750-51, *recon. granted in part
    and denied in part*, 4 FCC Rcd 6489 (1989). NCE stations were
    counted in determining the number of independent voices in the
    community. 4 FCC Rcd at 1751.

[^25]: 47 C.F.R. § 73.3555(c). *See Review of the Commission's
    Regulations Governing Television Broadcasting*, 14 FCC Rcd 12903,
    12950-51 (1999).

[^26]: 47 U.S.C. § 307(b).

[^27]: *See Valley Broadcasters, Inc.*, 5 FCC Rcd 2785, 2788 (1990).

[^28]: *Channel 32 Broadcasting Co*., 6 FCC Rcd 5188, 5188-89 (1991).

[^29]: 47 C.F.R. § 73.5008(b).

[^30]: Positional interests include officer, director, and
    investor/creditor under the Commission's "equity/debt plus"
    standard.

[^31]: *Verizon Telephone Companies v. F.C.C.*, 269 F.3d 1098, 1109
    (D.C. Cir. 2001) (citing *Clark-Cowlitz Joint Operating Agency v.
    FERC*, 826 F.2d 1074, 1081 (D.C. Cir. 1987)).

[^32]: *See* note 5.

[^33]: The condition in MCBI's construction permit, granted on March 21,
    2002, reads as follows:

    > GRANT OF THIS PERMIT IS EXPRESSLY CONDITIONED UPON THE OUTCOME OF
    > ANY APPLICATION FOR REVIEW IN CONNECTION WITH PERMITTEE'S
    > APPLICATION, AND ANY SUBSEQUENT ADMINISTRATIVE OR JUDICIAL REVIEW.
    > IF THE COMMISSION OR A COURT OF COMPETENT JURISDICTION FINALLY
    > DETERMINES THAT THE PERMITTEE IS INELIGIBLE FOR THE 35 PERCENT NEW
    > ENTRANT BIDDING CREDIT, OR IS ELIGIBLE FOR A LESSER BIDDING
    > CREDIT, THE PERMIT IS EXPRESSLY CONDITIONED UPON TIMELY PAYMENT,
    > AS DETERMINED BY THE COMMISSION, OF ANY ADDITIONAL PORTION OF ITS
    > GROSS HIGH BID DUE AS A RESULT OF THE LOST OR DIMINISHED BIDDING
    > CREDIT. FAILURE TO COMPLY WITH THIS CONDITION WILL RESULT IN THE
    > AUTOMATIC FORFEITURE OF THIS AUTHORIZATION WITHOUT FURTHER ACTION
    > BY THE COMMISSION. (Capitalization in original.)

[^34]: *See*, *e.g.*, *Liberty Productions, a Limited Partnership*, 16
    FCC Rcd 12061, 12079 (2001). *See also Baker Creek Communications,
    L.P.*, 13 FCC Rcd 18709 (WTB 1998).

[^35]: *See* 47 C.F.R. § 73.5007(a) ("No bidding credit will be given if
    any of the commonly owned mass media facilities serve the same area
    as the proposed broadcast or secondary broadcast station . . . .").

[^36]: *Broadcast First Report and Order*, 13 FCC Rcd at 15951-52,
    15956, 15989; *Abundant Life, Inc.*, 16 FCC Rcd 4972, 4973-74
    (2001).

[^37]: *Broadcast First Report and Order*, 13 FCC Rcd at 15989.

[^38]: *Id*. at 15956.

[^39]: MCBI's application was placed on a "ready-to-grant" public notice
    March 7, 2002. *Public Notice*, "FCC Announces It Is Prepared To
    Grant Broadcast Construction Permits After Final Payment Is Made,"
    17 FCC Rcd 4278 (2002). MCBI timely remitted its final payment March
    13, 2002; the staff granted the construction permit March 21, 2002,
    and the station has been assigned call letters WZFJ(FM). The public
    notice was released pursuant to our direction that henceforth
    "ready-to-grant" public notices are to be released promptly after
    staff action on a petition to deny. *Abundant Life, Inc.*, 17 FCC
    Rcd 4006, 4007 n.5 (2002). DeLaHunt filed a Petition for
    Reconsideration April 24, 2002, of our public notice announcing
    grant of the construction permit to MCBI, and dismissal of
    DeLaHunt's application. *Public Notice*, "Broadcast Actions," Report
    No. 45199 (rel. Mar. 26, 2002).