RBR+TVBR INFOCUS
WASHINGTON, D.C. — As every broadcaster knows, the sale of radio stations cannot be closed without obtaining FCC approval. Three members of the Media Bureau’s Audio Division hold the keys to the grant of radio station assignments and transfers.
Thanks to the efforts of prominent Washington-based communications law attorney Erwin Krasnow, they’ve agreed to provide RBR+TVBR an exclusive behind-the-scenes look at how the FCC processes assignment and transfer applications.
Krasnow, who serves as counsel to Garvey Schubert Barer, interviewed Assistant Chief Michael Wagner, Deputy Division Chief Lisa Scanlan, and Supervisory Analyst Annette Smith.
Questions designed to assist buyers and sellers in getting radio transactions to the Commission’s finish line at the earliest possible time were asked.
Erwin Krasnow: How long have you been reviewing assignment and transfer applications?
Michael Wagner: I have been the primary reviewer of assignment and transfer applications since Alan Schneider retired at the end of 2015. Before that, I helped review assignment/transfer applications when Alan, and before him the late, lamented Taft Snowdon, went on vacation or otherwise was out of the office.
Lisa Scanlan: Ditto here. And I am now Mike’s backup reviewer.
Annette Smith: I have been working on assignments and transfers for about 15 years now.
Erwin: Who reviews assignment and transfer applications?
Annette: We have a team of paraprofessionals, or “analysts,” who do the initial review. Staff attorneys, apart from Lisa and Michael, generally review and write dispositions of pleadings contesting assignment and transfer applications, but do not review the applications.
Erwin: How many paralegals or industry analysts review applications?
Michael: We have a team of five analysts reviewing assignment and transfer applications. Annette also pitches in and does the initial review to help with larger, complex transactions or as she is needed.
Also, [FCC attorney/advisor] Steve Svab reviews every single multiple ownership showing that’s submitted, either with assignment/transfer applications or construction permit applications. He holds the keys to BIA, the Commission’s tool for analyzing Nielsen Radio markets, and we cannot overstate his importance to the process.
Erwin: What type of review is done by the paralegals?
Michael: An excellent question. The Audio Division’s analysts do much more than simply review the applications to see if the boxes are checked and record the responses on a worksheet. They all have been at this for a while now and have become adept at their craft. It’s true they review the application to make sure that all questions have been answered, but they also check to see that the responses are accurate, that an exhibit is provided where called for, and that the exhibit actually does support the application response. They also review the contract and financing information to ensure that all elements we need – purchase price, payment method, security agreement – are in the documents. They have developed pretty sharp eyes and are pretty adept at identifying gaps and misleading submissions.
Erwin: What is the goal for action on a long-form application (FCC forms 314 and 315)?
Lisa: We try to dispose of routine, uncontested long-form applications within 45 days from the date of filing. We are required by statute to wait 30 days from the date the application is put on a Public Notice accepting it for filing, and we generally wait several days after the petition period has run just in case someone or some entity files a petition to deny or informal objection in paper form – paper-filed pleadings are still allowable! – on the 30th day.
If the application draws a petition to deny or informal objection or contains a waiver request, those bets are off, but we try to resolve petitioned applications within several months of filing.
Erwin: What about short-form or pro forma applications (FCC form 316)?
Lisa: We try to turn those around within two weeks of filing, because they do not have to wait for a 30-day public notice period to run.
Erwin: What’s different about the way that the FCC processes sales applications today than perhaps two or three years ago?
Michael: Nothing, really. The Division has been so busy that we have not had the time to reinvent any assignment/transfer processing wheels. Based on the volume of applications we process each month, we think we are handling things pretty efficiently. We have worked diligently over the past few years to greatly reduce our backlog of old cases and to speed up our processing time. The feedback we receive internally and from the public is consistent with our view that things are going pretty well. We are always open to suggestions of ways we can improve the process.
AN UPTICK IN LMA APPROVALS
Erwin: With respect to the radio station marketplace, you are certainly in a position to see the “big picture.” Do you see any trends?
Michael: One of the things we have noticed over the past several years is a significant uptick in the number of assignment applications accompanied by Time Brokerage Agreements or Local Marketing Agreements pursuant to which the proposed buyer will start programming the station prior to consummation of the transaction. LMAs always add a layer of complication to transactions and require a little more analysis to confirm the licensee retains the necessary elements of control.
Lisa: We have seen a slight increase in station transactions, particularly with the emergence of some groups that had been in bankruptcy until recently. We still see steady transaction work every week. Not huge mega-mergers anymore, although we just approved a 53-station acquisition last week, which will render that licensee a player in mid-sized markets nationwide. We saw a rash of bankruptcies concerning the major players over the past several years, but those companies emerged from bankruptcy more stable, and the bankruptcies were not, from our perspective, the result of radio stations not being profitable.
Michael: One thing we are seeing more and more, actually, are sales of AM stations with associated FM translators. The market for AM stations had been fairly flat, but the AM revitalization proceeding has at least in part reenergized that market.
Erwin: What are common mistakes made by long-form applicants and how can they be cured?
Annette: If all schedules and attachments are not included with the sale contract or APA, the parties need to list the missing schedules and provide a justification for each omission.
- If an FM Translator is being assigned along with any full-service stations on an FCC Form 314, the parties always should supply the primary station that the translator will rebroadcast.
- If an FM translator station will be rebroadcasting a new primary station after consummation – one not currently authorized, the parties need to supply a contour map showing compliance with the FM Translator coverage rules.
- If any of the full-service stations in a transaction are not in a listed Nielsen market, the parties must supply a contour-overlap analysis as part of the multiple ownership showing.
- Parties should not answer “N/A” to the Anti-Discrimination Certification unless the station involved is an NCE station.
- If there is a promissory note or other security, those documents should be included with the application; if there is no security for an installment payment, the parties should say that, because otherwise the staff will ask. As I mentioned, the staff is well-trained on this point.
Michael: If there is an LMA or TBA, the parties should supply a complete and unredacted copy of the TBA or LMA. While we are on that topic, I would like to ride my constant hobby horse: To approve a transaction involving an LMA or TBA on the Division level, we must be able to find that the licensee/seller has retained control over the station’s personnel, programming, and finances. In an effort to create a reasoned approach to that topic, we have created a short-cut road map.
If the parties include an LMA or TBA, they should ensure that the documentation addresses the following:
The document should explain who from the licensee is responsible for managerial control of the station and, if that person does not maintain a physical presence at the station, how that person exercises control.
With respect to programming, the LMA/TBA should at very least provide the licensee with the right to preempt AND reject the programmer’s offerings if, in its opinion, the public interest so warrants.
With respect to finances, the agreement should disclose the consideration for the TBA/LMA, and it should specify that the licensee retains responsibility for paying the station’s operating expenses.
Annette: If the transaction involves a Low Power FM Station, the buyer should be sure to certify that it meets the LPFM criteria and supply documentation as necessary to support the certification.
Regarding local radio multiple ownership rules showings, the most common error made by applicants when submitting an Arbitron-based market study is the failure to submit a contour overlap based market study in addition to the Arbitron study when one or more of the attributable stations is home to a particular market but is not located within the geographic boundaries of that Arbitron market.
Erwin: What about common mistakes in short-form applications?
Annette: The most common error is not supplying the documentation supporting the application: for example, if the Form 316 is for an involuntary transfer due to the death of a licensee principal, the application should contain a death certificate and some document indicating that the transferee has been appointed executor/executrix/administrator/administratrix. Make sure the documentation supports the proposal.
Also, for short-form applications proposing gradual board changes in an NCE licensee, it is very helpful to the staff to provide a simple flow chart or clear indication of when board members left and joined the board, so it is easy to see at a glance that the board changes really were gradual and not sudden.
Oh, and always answer all questions in the form.
Erwin: Out of the thousand or so applications filed in a year, approximately how many are opposed by means of an informal objection or a petition to deny?
Lisa: We would guess that about 10 to 15 are contested.
Erwin: What are the most common grounds asserted in petitions to deny and informal objections in support of a request that the FCC dismiss or deny an application?
Michael: There really are no common grounds. Allegations are all over the board, sometimes a competitor, sometimes bad blood between the parties and an objector, sometimes contractual claims, I do not think we can catalog more or less consistent strains of arguments. Petitioners or objectors can raise any argument they want to, and they do.
Erwin: How long does the filing of an objection or petition slow down the processing of an application?
Lisa: We really try to turn around petitions or objections as quickly as we can so that filing a petition or objection does not become a means, by itself, of delaying a transaction. There is some delay built into reviewing the filings and drafting the disposition but, as we mentioned earlier, we try to move contested cases within several months.
Erwin: Do you have any practical suggestions for expediting the processing of applications?
Lisa: Try to answer all the questions and make the applications as complete as possible. Don’t try to hide details, as the staff will notice. If you have problems, it is better to disclose them and explain how they shouldn’t impact the application rather than withholding information and allowing it to be raised in a petition to deny or for the staff to discover the problem on our own. Err on the side of inclusion.
Erwin: What final words of advice do you have for sellers and buyers of radio stations?
Michael: Plan your deals in advance! We are now in a new radio license renewal cycle. Starting six months before a station’s license renewal application filing deadline, we will begin adding a condition on long-form assignment/transfer authorizations that the transaction must be consummated prior to the license renewal filing deadline or the parties must wait to consummate until after we have granted the renewal application. Some of your readers probably have already seen such conditions. If the assignment or transfer application remains pending after the license renewal filing deadline, we will hold it until we have granted the station’s license renewal application. The license renewal filing deadlines are well-publicized (Sections 73.1020 and 73.3539 of the Rules), so it should be possible for licensees to negotiate their transactions keeping these guardrails in mind.
We also should mention that we are continuing our transition from the CDBS database to the LMS electronic filing system. We anticipate that the assignment and transfer of control forms will transition to LMS soon, possibly by the end of the year. We will update the public when we are prepared to go live with those changes.
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