A winning bidder for an FM construction permit in the FCC‘s Auction 98 has just seen its long-form application for the permit dismissed. The action comes after the bidder failed to make a required downpayment for the permit, and sought a waiver for the deadline.
This request was denied. Now, the bidder — The ERIE Radio Company — has no new station. And, the company has been assessed an interim default payment.
In August 2015, ERIE Radio Co. won an FM CP in Westfield, N.Y., located north of Erie, Pa., and south of Fredonia, N.Y., after ERIE timely filed its short-form application to participate in the auction (FCC Form 175) and timely submitted an upfront payment in the amount of $25,000—an action that made ERIE a qualified bidder.
ERIE’s net winning bid for the CP was $535,500.
In keeping with the Commission’s rules, the Auction 98 Closing Public Notice declared that each winning bidder was required to have enough funds to cover its down payment on deposit with the Commission on August 26, 2015. Therefore, ERIE was required to submit an additional $82,100 by the end of that day to satisfy a $107,100 downpayment obligation.
The wire transfer payment was not complete until 4:35pm Eastern on Aug. 27, 2015.
On Nov. 20, 2015, ERIE filed its “Informal Request for Extension of Time,” which sought a one-day extension of the August 26, 2015, down payment deadline—a retroactive request that would have absolved the company of its delinquency.
ERIE contends that circumstances beyond its control caused any delay in the down payment, and therefore, “special circumstances” warrant an extension. ERIE even submitted a one-sentence letter from its financial institution stating that “[d]espite our customers [sic] best efforts to wire the funds on August 26, 2015 First National Bank was unable to execute the wire until August 27, 2015.”
The FCC didn’t buy this argument, which it considered after Connoisseur Media —a competitor in the Erie, Pa., market—on Dec. 21, 2015, filed an objection to ERIE’s Request. Connoisseur argued that a bank error that delays a down payment cannot justify a waiver of the Commission’s down payment deadline.
The FCC agrees with Connoisseur, noting that ERIE failed to demonstrate good cause. It also questioned if ERIE was “financially capable of constructing and operating their systems”—a key need in Auction 98.
“ERIE presents no arguments that persuade us to depart from our well-established policy of strict enforcement of the down payment rule,” the Commission said. “Moreover, the ability to pay the final bid amount does not necessarily correspond to the winning bidder’s willingness or intent to pay. ERIE fails to recognize that winning bidders with the financial ability to pay the final bid amount could still game the auction process and shop the licenses just like winning bidders without such resources – both of which would undermine the integrity of the auction system.”
Finally, the Commission states that it has “long warned winning bidders of problems that may foreseeably arise in the wire transfer process to avoid missing the deadline for completion of required payments.”
The Commission’s rules provide that a bidder who fails to remit the required final payment for a license for which it was the high bidder is subject to a default payment.
That’s still to be determined, the FCC explained.
“Although we cannot determine ERIE’s total default payment at this time, we will assess an interim default payment owed by ERIE, amounting to 20% of its defaulted net bid for the Westfield construction permit, or $107,100,” it said.
