Before the FEDERAL COMMUNICATIONS COMMISSION Washington, D.C. 20554 In the Matter of ) ) Implementation of Section 309(j) ) MM Docket No. 97-234 of the Communications Act ) -- Competitive Bidding for Commercial ) Broadcast and Instructional Television Fixed ) Service Licenses ) ) Reexamination of the Policy ) GC Docket No. 92-52 Statement on Comparative ) Broadcast Hearings ) ) Proposals to Reform the Commission's ) GEN Docket No. 90-264 Comparative Hearing Process to ) Expedite the Resolution of Cases ) NOTICE OF PROPOSED RULEMAKING Adopted: November 25, 1997 ; Released: November 26, 1997 By the Commission: Commissioners Powell and Tristani issuing separate statements. Comment Date: January 26, 1998 Reply Comment Date: February 17, 1998 TABLE OF CONTENTS Paragraphs I. INTRODUCTION 1 II. BACKGROUND 2 III. DISCUSSION A. Overview 9 B. Proposals for Pending Broadcast Initial Licensing Proceedings 13 C. Proposed Auction Rules 1. Rules and Procedures for Pending Comparative Licensing Proceedings 23 2. Procedures for Pending Applications Not Subject to Section 309(l) 39 3. General Rules and Procedures for Auctions 46 4. Designated Entities 83 D. Auction Authority for Instructional Television Fixed Service 98 E. Proposals for Pending Broadcast Comparative Renewal Proceedings 101 IV. PROCEDURAL MATTERS 104 V. ORDERING CLAUSES 108 I. INTRODUCTION 1. On August 5, 1997, President Clinton signed the Balanced Budget Act of 1997, Pub. L. No. 105-33, 111 Stat. 251 (1997), which expanded the Commission's competitive bidding authority under section 309(j) of the Communications Act of 1934, 47 U.S.C.  309(j), to include mutually exclusive initial license applications for certain types of broadcast stations. In this Notice of Proposed Rulemaking, we propose general competitive bidding procedures for all auctionable broadcast services within the scope of amended section 309(j) except for certain digital television services. The proposed rules implement the statutory requirement set forth in section 309(j)(1) that, except for certain commercial broadcast applications filed before July 1, 1997 and for categories of broadcast service expressly exempted from the Commission's auction authority under section 309(j)(2), we must use auctions to resolve mutually exclusive applications for initial licenses for broadcast stations. We also propose to use auctions to decide among competing applications filed before July 1, 1997 for new commercial radio and television broadcast stations. We tentatively conclude that resolving the latter cases by competitive bidding procedures, rather than comparative hearings, better serves the public interest by expediting the resolution of applications, many of which have been pending for several years. We do, however, ask for comment on whether we should instead use comparative hearings for some or all of these cases. We also seek comment on whether we are required to use auctions to resolve mutually exclusive applications to provide Instructional Television Fixed Service (ITFS). Finally, we seek further comment on proposals for resolving pending comparative broadcast renewal proceedings, in light of whatever decision we make on pending pre-July 1 applications for new stations. II. BACKGROUND 2. The Commission has traditionally used comparative hearings to decide among mutually exclusive applications for new full service commercial radio and television stations. In 1965, in an effort to inject clarity and consistency into the comparative hearing process, the Commission articulated two primary objectives toward which the comparative process should be directed: (1) best practicable service to the public; and (2) maximum diffusion of control of the media of mass communications. Policy Statement on Comparative Broadcast Hearings, 1 FCC 2d 393, 394 (1965). Diversification of media control was deemed to have primary significance in the Commission's licensing scheme, followed by several factors having relevance in predicting which of several applicants offers the best practicable service: (1) "integration" of ownership and management, which presumed that an owner integrated into the station's day-to-day management would provide better service; (2) local residence; (3) the applicant's past broadcast record; (4) proposed program service; (5) efficient use of the frequency; and (6) broadcast experience based on the applicant's past activities without ownership responsibility. Additionally, following the court's decision in TV 9, Inc. v. FCC, 495 F.2d 929 (D.C. Cir. 1973), cert. denied, 419 U.S. 986 (1974), the Commission also awarded comparative credit for minority ownership and later, until reversed in court, for female ownership See Lamprecht v. FCC, 958 F.2d 382 (D.C. Cir. 1992). 3. In 1989, the Commission initiated a proceeding to explore the possibility of using random selection procedures or lotteries to award licenses for new full service radio and television stations. Amendment of the Commission's Rules to Allow the Selection from Among Competing Applicants for New AM, FM, and Television Stations by Random Selection, 4 FCC Rcd 2256 (1989), terminated, 5 FCC Rcd 4002 (1990). The Commission ultimately decided that it would focus on reforming the traditional comparative hearing process, id. at 4002  3, but it identified several problems with the process that are still of some concern today: comparative hearings can be cumbersome, costly, and delay service to the public without substantial offsetting public interest benefits in terms of selecting the "better" applicant, because the selection often turns on minimal distinctions. 4 FCC Rcd at 2256  2. 4. More recently, litigation involving the integration criterion has led to substantial delays in resolving comparative broadcast proceedings. Analysis under the integration factor involves a complex, two-step process, whereby the applicant is awarded quantitative credit reflecting the total ownership interests of those with managerial roles, which may then be enhanced by a variety of qualitative attributes, such as local ownership, broadcast experience and minority ownership. In Bechtel v. FCC, 957 F.2d 873 (D.C. Cir. 1992) (Bechtel I), the United States Court of Appeals for the District of Columbia Circuit remanded a comparative proceeding in which an unsuccessful applicant had challenged the Commission's continued reliance on the integration criterion. It directed the Commission to "demonstrate why its focus on integration is still in the public interest." Id. at 881. A similar remand was ordered in Flagstaff Broadcasting Foundation v. FCC, 979 F.2d 1566 (D.C. Cir. 1992), in which the court again directed the Commission "to confront challenges to its integration policy, and, in view of documented changes in factual and legal circumstances, to articulate reasons why, despite those changes, the policy should be applied to a particular case." Id. at 1571. On two separate occasions in the Bechtel litigation, both before and after the intervening Flagstaff decision, the Commission sought to explain its continued reliance on integration, Anchor Broadcasting Limited Partnership, 7 FCC Rcd 4566 (1992), modified, 8 FCC Rcd 1674 (1993). But the court ultimately concluded that "continued application of the integration preference is arbitrary and capricious, and therefore unlawful." Bechtel v. FCC, 10 F.3d 875, 878 (D.C. Cir. 1993) (Bechtel II). Specifically, the court rejected as "implausible" the claimed benefits of integration. It noted that, "[d]espite its twenty-eight years of experience with the policy, the Commission has accumulated no evidence to indicate that it achieves even one of the benefits that the Commission attributes to it, [and that] . . . the predictions at the root of the integration policy [i.e., that integrated owners will provide better service to the public] seem rather implausible." Id. at 880. Apart from the lack of evidence supporting the policy, the court also cited the "lack of permanence" of any such benefits of integration since licensees are not required to adhere to their proposals on a permanent basis, id. at 879-880, and it characterized the central importance placed on integration as "remarkable," given the many other factors that can affect a station's performance. Id. at 882. 5. Noting the court's skepticism in Bechtel I that the Commission could justify its continued reliance on the integration factor and the fact that the comparative criteria had not been reviewed comprehensively since the 1965 Policy Statement, the Commission issued a notice of proposed rulemaking in GC Docket No. 92-52 to reexamine the comparative criteria used to select among mutually exclusive applicants for new broadcast facilities. Following Bechtel I, the Commission issued a further notice of proposed rulemaking (FNPRM) proposing to amend 47 C.F.R.  73.3597(a), which governs the transfer or assignment of broadcast authorizations, to lengthen the period of time that a successful applicant receiving a grant after a comparative hearing must operate their stations before becoming eligible to transfer them. After Bechtel II, the Commission issued a second FNPRM seeking comment on a variety of issues raised by that decision. Because integration and the related qualitative enhancement factors have been crucial factors in recent comparative cases, the Commission, since 1994, has stayed all ongoing comparative cases pending resolution of the issues raised by Bechtel II. 6. Against this regulatory background, Congress, as part of the Balanced Budget Act of 1997, amended section 309(j) of the Communications Act to require expressly that the Commission use competitive bidding procedures to resolve most initial licensing proceedings involving mutually exclusive applications. Prior to these amendments, section 309(j) had authorized, but had not required, the Commission to use competitive bidding under certain circumstances, and, moreover, had not authorized the use of competitive bidding to award broadcast licenses. Under the 1997 amendments, if mutually exclusive applications for any initial license or construction permit are accepted, the Commission must grant the license or permit to a qualified applicant through a system of competitive bidding. Balanced Budget Act of 1997,  3002(a)(1)(A), codified as 47 U.S.C.  309(j). Section 3002(a)(2) provides, however, that the Commission's competitive bidding authority does not apply to licenses or construction permits for "initial licenses or construction permits for digital television service given to existing terrestrial broadcast licensees to replace their analog television service licenses." 7. In addition, new section 309(l) expressly deals with the resolution of pending comparative broadcast initial licensing cases. With respect to competing applications for initial licenses for commercial radio and television stations filed with the Commission before July 1, 1997, section 309(l) provides: (1) that the Commission has the authority to conduct a competitive bidding proceeding pursuant to section 309(j) to award such licenses or permits; (2) that it must treat persons filing such applications as the only persons eligible to be qualified bidders; and (3) that, for a period of 180 days beginning on the date of enactment of the Balanced Budget Act of 1997, the Commission must waive any provision of its regulations necessary to permit such persons to enter into an agreement to procure the removal of a conflict between their applications. 8. Finally, Congress through the Balanced Budget Act has amended section 309(i) of the Act, which governs the award of licenses through random selection. These amendments provide that, except for the award of licenses or permits for stations described by section 397(6) of the Act, the Commission's lottery authority expires on July 1, 1997. Id. at  3002(a)(2). III. DISCUSSION .A Overview 9. The enactment of the Balanced Budget Act of 1997 has significantly affected the issues relating to the Commission's procedures for selecting among competing broadcast applicants. At the time the Commission issued the NPRM and the two Further NPRMs in GC Docket No. 92-52, it had statutory authority to decide mutually exclusive applications for initial broadcast licenses for new television or radio stations only by comparative hearing or, potentially, by a random selection procedure conducted pursuant to section 309(i). Accordingly, the Commission sought comment on the continued use of comparative hearings, the development of comparative criteria in light of Bechtel and regulatory changes since adoption of the existing criteria, and on the use of a tie-breaker lottery. However, as noted above, Congress has now repealed the Commission's authority to decide such cases by a random selection system conducted pursuant to section 309(i). It has also expanded the Commission's authority to choose among mutually exclusive applications for initial broadcast licenses or permits through a competitive bidding system. 10. With this statutory framework in mind, and as required by the Balanced Budget Act, we propose below auction rules that will be used to decide mutually exclusive applications for any initial license or construction permit for a commercial radio or analog television station filed after June 30, 1997, and all pending and future mutually exclusive applications for a construction permit to provide a variety of Part 74 secondary commercial broadcast services that are not already subject to competitive bidding procedures, including low power television service and FM and television translator service. See Section C 2, below. We also seek comment on whether to treat all pending and future mutually exclusive applications to modify existing facilities in the broadcast and secondary broadcast services as initial applications that are auctionable under amended section 309(j)(1). See  47, below. We also propose to use auctions for pending mutually exclusive applications for new commercial full power broadcast stations filed before July 1, 1997, although we seek comment on whether we should use comparative hearings for all or a subset of such applications. See Section B, below. We note that competitive bidding procedures for future digital television services, which are not within the exemption set forth in section 309(j)(2)(B), will be addressed in a future rulemaking proceeding. 11. As discussed in greater detail in section C below, we propose to adhere to the general competitive bidding procedures, set forth in 47 C.F.R.  1.2101-1.2111, prescribed by the Commission to implement section 309(j) and employed to resolve mutually exclusive initial license applications, subject to whatever changes that we make in those general procedures. See Amendment of Part 1 of the Commission's Rules--Competitive Bidding Proceeding, Order, Memorandum Opinion and Order, and Notice of Proposed Rulemaking, 12 FCC Rcd 5686 (1997) (hereafter Part 1 NPRM or Part 1 Order). And, in accordance with new section 309(j)(3)(F) of the Act, commenters will have an adequate period for notice and comment on our proposed auction rules for initial licenses or construction permits for commercial radio and analog television stations and other services addressed here, as well as sufficient time after adoption of the final bidding rules to develop business plans, assess market conditions, and evaluate the availability of equipment. 12. Finally, we address issues relating to ITFS applications and the few remaining broadcast comparative renewal proceedings. See Sections D and E below. B. Proposals for Pending Broadcast Initial Licensing Proceedings 13. New section 309(l) of the Communications Act expressly governs "competing applications for initial licenses or construction permits for commercial radio or television stations that were filed with the Commission before July 1, 1997," and provides that "the Commission shall . . . have the authority to conduct a competitive bidding proceeding pursuant to subsection (j) to assign such license or permit." Based upon its language, we tentatively conclude that new section 309(l) accords the Commission the discretion to use competitive bidding to select among pending mutually exclusive applications filed before July 1, 1997. The Conference Report states, however, that the section "requires the Commission to use auctions for mutually exclusive applications filed before July 1, 1997." We therefore seek comment on whether the Balanced Budget Act of 1997 should be construed to require auctions for pre-July 1, 1997 applications, particularly since such applications are not included in the listed exemptions to the requirement for auctions under amended section 309(j) of the Act. For purposes of this NPRM, however, we assume that we have discretion regarding the use of auctions to resolve mutually exclusive applications filed before July 1, 1997. 14. We also tentatively conclude that using auctions to resolve pending comparative licensing cases better serves the public interest than deciding them by comparative hearing although we ask for comment on whether we should continue to use comparative hearings for some or all of these cases. We note at the outset that pending applicants have no vested right to a comparative hearing under the statute. Even in the absence of legislation expressly authorizing the application of the new procedures to pending applications, we have broad rulemaking authority to revise our processing rules and to apply the new rules to pending applicants. Such authority depends not on whether the new rules comport with the applicants' expectations based upon prior law, but on whether the determination to change our rules is arbitrary and capricious. 15. Our tentative view is that any unfairness in using auctions to decide these cases is not strong enough in and of itself to cause us not to consider holding auctions in these cases. None of the pre-July 1, 1997 applicants filed with the expectation of participating in an auction. The vast majority, however, filed after both Bechtel II and the initiation of the Commission's comparative freeze, when there was no established system for selecting among mutually exclusive broadcast applications. These applicants may have filed with the expectation of participating in a comparative hearing, but it is unlikely that they reasonably could have filed in reliance on any particular selection criteria. Even for those applicants who relied in good faith on existing selection procedures, the express holding in Bechtel II, 10 F.3d at 878, that "continued application of the integration preference is arbitrary and capricious, and therefore unlawful" prevents us from deciding pending cases completely in accordance with the applicants' reasonable expectations at the time of filing. 16. Additionally, with respect to equity issues, in view of our tentative determination not to conduct hearings in these cases, we propose to refund, upon request, all hearing fees paid by applicants in proceedings in which we select the permittee by competitive bidding. And, as a matter of fairness, we tentatively propose to refund, upon request, filing fees paid by those applicants choosing not to participate in the auction. All such refunds would be paid once the grant of the construction permit to the winning bidder is final and the license has been paid for in full. 17. We also tentatively conclude that auctions would likely lead to a more speedy resolution of these pending cases, thereby serving the public interest in getting service to the public sooner. Given the Bechtel II decision and the potential difficulty of devising judicially sustainable comparative criteria based on the current record, discussed further below, we tentatively conclude that using comparative hearings to decide these long-pending cases would be likely to delay their resolution. In contrast, it appears that auctions are probably less likely to result in further administrative and judicial litigation. 18. Moreover, in reviewing the relative merits of comparative hearings and auctions with respect to other services, we note that in other contexts we have found that auctions are preferable to comparative hearings. We have, in these other contexts, cited the advantages of auctions in terms of avoiding the considerable delay and substantial expenditures associated with comparative hearings; allocating spectrum to those valuing it the most and best able to serve the public; and recovering for the public a portion of the value of the spectrum that is made available for commercial use. We seek comment on the applicability of these considerations in the context of the pre-July 1 broadcast applications. In addition, we seek comment on whether competitive bidding has been established as the congressionally preferred method of awarding spectrum licenses, where mutually exclusive applications are filed, given that section 309(j) mandates auctions for most services, including certain pending secondary broadcast applications (e.g., low power television service, television translator service, FM translator service), and virtually all commercial broadcast applications filed after July 1, 1997. 19. We continue to have concerns with the potential delay, administrative costs, and uncertainty that may be associated with broadcast comparative hearings. It appears, for example, that continued consideration of integration and local residence/civic participation is effectively precluded by the court's analysis in Bechtel II, which emphasized the need for evidence to support these criteria. The record to date does not include persuasive evidence demonstrating the predictive value of these criteria in terms selecting the applicant that will best serve the public interest. Other factors such as broadcast experience, daytimer preference, and past broadcast record are relevant, at least in theory, in predicting future broadcast performance but could also be problematic. Commenters were divided on the relevance of such factors. 20. Commenters have also suggested other new comparative criteria. For example, the NAACP has proposed that we award credit to applicants promising to divest existing stations to minorities at a distress sale price. None, however, is sufficiently well-developed in the current record to warrant adoption at this time. 21. We seek comment on our proposal to use auctions, rather than comparative hearings, to decide all pending commercial radio and television comparative licensing cases, as defined by section 309(l). We also seek comment on whether, instead, we should use comparative hearings for pending cases. Those commenters advocating continued use of comparative hearings for mutually exclusive applications pending before July 1, 1997 should explain how their proposed criteria would be implemented in an administratively workable and judicially sustainable manner, and demonstrate how the proposed criteria would predict good or better service or serve some independent public interest goal. 22. We also ask for comment on whether, even if we decide to use auctions for most pre-July 1 applications, we should nevertheless use comparative hearings for a subset of such applications. We note that there are approximately eight unresolved cases involving mutually exclusive applications for new stations that progressed to a decision by the Commission, and another approximately 12 such unresolved cases that progressed to either an Initial Decision by an ALJ or a decision by the former Review Board, before the court found in Bechtel II that the integration criterion used by the Commission was unlawful. We ask for comment on whether the resources these applicants have expended, as well as the delays they have encountered, raise special equitable concerns that should lead us to have comparative hearings in these cases even if we use auctions for other pending cases. We invite commenters to describe in more detail the equitable considerations that they believe would support the use of comparative hearings for such a subset of pending applicants. Commenters supporting the use of comparative hearings for such applicants should indicate which subset of applicants they believe should be covered and why. They should also indicate which specific criteria they believe should be used and, as with commenters supporting the use of comparative hearings for all pre-July 1 applications, explain how these crtieria would be consistent with Bechtel II or would otherwise serve the public interest. Commenters should also explain how the particular comparative criteria they propose further the equitable interests they have identified. In addition, commenters may wish to address the basis for any equitable discretion we may have to apply to such pending cases any comparative criteria that might not meet the standards set forth in Bechtel II. We encourage commenters supporting the use of comparative criteria for a subset of pending cases to provide as much specific information and explanation as possible, so that we can decide this issue based on as full and informed a record as possible. C. Proposed Auction Rules 1. Rules and Procedures for Pending Comparative Licensing Cases. 23. Scope of Section 309(l): As discussed above, we tentatively propose to use auctions to resolve pending broadcast initial licensing proceedings that are within the scope of section 309(l). In the event the Commission uses auctions, new section 309(1) provides that "the Commission shall . . . (2) treat the persons filing such applications [i.e. competing applications for initial licenses or construction permits for commercial radio or television stations that were filed with the Commission before July 1, 1997] as the only persons eligible to be qualified bidders." Section 309(l) also contains special provisions, discussed below, to govern the settlement of such pending application proceedings. To determine the applicability of these provisions, it is therefore important to define the scope of the proceedings covered by section 309(l). 24. Based upon the language of the statute, we tentatively conclude that section 309(l) is inapplicable where all of a group of mutually exclusive applications were filed after June 30, 1997. Under those circumstances, we tentatively construe the statute as requiring an auction under amended section 309(j)(1), which specifies that "the Commission shall . . . grant the license or permit to a qualified applicant through a system of competitive bidding . . . if mutually exclusive applications are accepted." We tentatively reach the same conclusion (i.e. that an auction is mandated under section 309(j)(1)) where one application was filed by June 30, 1997 and the other mutually exclusive applications were filed thereafter. Nothing in new section 309(l), or in the accompanying legislative history, suggests that it applies to a single application on file before July 1, 1997, rather than to "competing applications" filed before that date. Thus, neither the section 309(l) provision limiting eligible bidders nor the settlement provision applies to that single application. This interpretation is confirmed by the legislative history, at least with respect to situations in which the Commission has not yet opened a filing window or established a deadline for the filing of mutually exclusive applications: The conferees recognize that there are instances where a single application for a radio or television station has been filed with the Commission, but that no competing applications have been filed because the Commission has yet to open a filing window. In these instances, the conferees expect that, regardless of whether the application was filed before, on or after July 1, 1997, the Commission will provide an opportunity for competing applications to be filed. Furthermore, if and when competing applications are filed, the Commission shall assign such licenses using the competitive bidding procedures developed under section 309(j) as amended. Conference Report at 573-74. 25. Where two or more mutually exclusive applications were filed before July 1, 1997, however, we tentatively conclude that the new section 309(l) applies. Under those circumstances, the statute specifies that, if competitive bidding procedures are employed to resolve competing applications filed before July 1, 1997, "the Commission shall . . . treat the persons filing such applications [i.e. before July 1, 1997] as the only persons eligible to be qualified bidders for purposes of such proceeding." Thus, we tentatively interpret section 309(l) as prohibiting us from opening an additional filing window for new mutually exclusive applications or including as eligible bidders, applicants who filed mutually exclusive applications filed after June 30, 1997. Thus, any such applications filed after June 30, 1997 would be dismissed and the applicants would not be eligible to participate in the auction. The legislative history confirms the plain meaning of the statute in this respect: "The Commission shall limit the class of eligible applicants who may be considered qualified bidders . . . to the persons who filed applications before that date [July 1, 1997]." Conference Report at 573. We recognize that in certain circumstances, this may lead to a rather harsh result, particularly where it requires the dismissal of applicants that timely filed within an announced filing period, and we ask for comment on whether there is any other legally permissible interpretation of section 309(l). 26. Settlements: Section 309(l)(3) provides that for a period of 180 days following enactment of the Balanced Budget Act [i.e. August 5, 1997], the Commission "shall . . . waive any provisions of its regulations necessary to permit such persons [i.e., those filing applications before July 1, 1997] to enter an agreement to procure the removal of a conflict between their applications." We construe this provision to require that the Commission must waive applicable provisions of its regulations in all instances in which settlement agreements are filed within the 180-day period (i.e., by February 1, 1998), although the Commission might not necessarily act on the settlement agreement within that time period. In accordance with the provision, the Commission has already waived 47 C.F.R.  73.3525(a)(3), which limits the reimbursement of applicants in a settlement agreement to their legitimate and prudent expenses. Gonzales Broadcasting, Inc., 12 FCC Rcd 12253, 1255-56  1, 10 (1997). In so doing, the Commission has indicated that, in addition to waiving applicable rules, as required by the Balanced Budget Act, it will look favorably on requests to waive certain policies in hearing cases where such waiver is necessary to facilitate settlements, such as the requirement that prevailing applicants in such settlements must adhere to divestiture promises that have been made in the context of a comparative proceeding. Id. at  10. In this regard, we note that, in order to facilitate full-market settlements among pre-July 1 applicants, consistent with the congressional policy underlying section 309(l)(3), we are inclined to waive our policy against "white knight" settlements involving the award of a permit to a non-applicant third party. 27. As indicated above, we also find that the waivers mandated by section 309(l)(3) apply only to mutually exclusive applications filed before July 1, 1997. The waiver requirement would not apply, for example, to a single pre-July 1, 1997 application that is mutually exclusive with one or more applications filed after that date, even if all applications were filed pursuant to a filing period that opened before July 1, 1997. Additionally, we believe that the waiver provision applies to any settlement agreement among pre-July 1, 1997 applicants, regardless of whether all such applicants are parties to the agreement. Our view, however, is that if there is only a partial settlement agreement among the pre-July 1, 1997 applicants, we could not conduct the auction until after the expiration of the 180-day period. Further, in the event a settlement agreement were filed after the 180-day period (and prior to any auction) we do not envision that we would waive our settlement rules except in extraordinary circumstances. This approach, we believe, is consistent with Congress's apparent intention to encourage early settlements in these cases. 28. Finally, we note that, since the legislation did not waive section 311(c) of the Act, settlement agreements filed pursuant to section 309(l) of the Act must comply with section 311(c), which requires Commission approval for settlement agreements. Settlement agreements in hearing cases should be submitted to the presiding ALJ or to the Commission, depending on where the case is now pending. In non-hearing cases, settlements should be submitted to the appropriate division of the Mass Media Bureau for consideration in accordance with sections 311(c) and 309(l)(3). 29. Special Auction Procedures for Comparative Licensing Cases. We expect that except for the special provisions discussed above relating to settlements and eligible bidders, the auction procedures for pending mutually exclusive applications, whether designated for hearing or pending before the Mass Media Bureau, would be substantially the same as for any mutually exclusive broadcast applications that are not within the scope of section 309(l). Those general procedures are discussed in section 3, below. We also anticipate that many of the pending cases currently in hearing status, and some of the non-hearing cases, will be settled under the provisions of Section 309(l)(3). In the event that these cases are not settled, however, we believe it is appropriate to adopt special procedures to govern them. 30. Hearing Cases. In cases already designated for hearing, we propose that, if no settlement has been filed within the 180-day period, and once the auction rules adopted in this proceeding are effective, the ALJ (or the General Counsel on delegated authority in cases pending before the Commission) would issue an order directing that the permittee is to be determined by competitive bidding procedures from among the pending applicants eligible to participate in the auction, and indicating whether there are any unresolved questions as to a particular applicant's basic qualifications. If not, the hearing proceeding would be terminated. In the event questions remain with respect to an applicant, the hearing will be resumed in the event that applicant is the winning bidder after the auction. The Order would also specify the date by which applicants desiring to participate in the auction must submit a completed short- form application (FCC Form 175) containing the information set forth in 47 C.F.R.  1.2105 and any service-specific rules adopted in this proceeding. We recognize that deferring questions as to the pending applicants' basic qualifications may require that we conduct a second auction if the high bidder is ultimately found disqualified, and that there are few remaining hearing cases. Thus, we seek comment on whether it would be more efficient to review the basic qualifications of the pending applicants prior to the auction. We also seek comment on procedures that should be followed in the event a settlement is submitted but is denied by the ALJ (or the General Counsel in cases pending before the Commission). 31. Also, no amendments of the applicants' pending long-form applications will be accepted until after the completion of the competitive bidding process and then only if filed by the winning bidder. We propose not to accept petitions raising new issues until after announcement of a winning bidder, and the issuance of a Public Notice announcing the acceptance of amendments to long-form applications as described, infra,  34. 32. We propose that the short-form application be submitted to, and processed by, the Mass Media Bureau, with the technical assistance of the Wireless Telecommunications Bureau, in accordance with the broadcast auction rules adopted in this proceeding. We recognize that the Mass Media Bureau, as a party to the prior hearing proceeding, is precluded by the separation of investigative and prosecuting functions prescribed by 5 U.S.C.  554(d) of the Administrative Procedure Act from having any decision-making responsibility with respect to any remaining qualifying issues in the hearing cases. We believe, however, that reviewing FCC Form 175 to determine eligibility for claimed bidding credits and processing other administrative information relating solely to conducting the auction involves no decision-making responsibilities that violate the separation of functions requirement. 33. We propose that, if more than one acceptable short-form application is filed leading to the determination of more than one qualified bidder for a particular construction permit, the auction will be conducted in accordance with the competitive bidding procedures then in effect for auctions generally and any applicable procedures adopted in this proceeding for commercial analog broadcast service. 34. We propose that the post-auction procedures be as follows in hearing cases. The Mass Media Bureau under delegated authority would in each case announce the identity of the winning bidder and specify the date by which the winning bidder must file any necessary amendments reporting any changes in its original long-form application and the date by which any petitions against the winning bidder must be filed. We seek comment on whether any limitation should be imposed on the filing of additional petitions to deny or enlarge issues in these cases. We propose to afford the winning bidder a period of 30 days for filing any necessary amendments and 15 days for filing a response to any new petitions raising qualifying issues. 35. After the winning bidder submits the required down payment (in the manner and time required by the rules or as specified in the order), we propose that the ALJ, or the Commission (in cases pending before the Commission), issue an order resolving any remaining hearing issues or other issues affecting the winning bidder's qualifications, and if appropriate, granting the application upon full payment of the winning bid. Cases resolved by ALJs would be subject to further Commission review in accordance with existing appeal procedures. If there are no outstanding hearing issues (including unresolved petitions to enlarge) pertaining to the winning bidder's basic qualifications, the Mass Media Bureau would rule on any new issues that are raised in any petitions filed after the termination of the hearing proceeding, and, similarly, either grant the application or designate it for hearing, if appropriate. 36. Non-Hearing Cases. We propose similar pre-auction procedures for the pending applications that have not been designated for hearing. We propose that all pending applicants eligible to participate in the auction pursuant to the terms of section 309(l)(2) will, in response to a public notice announcing the auction, have an opportunity to file a short- form application indicating their interest in bidding on the construction permits for which they previously filed, regardless of any question as to their basic qualifications, whether raised in an unresolved petition to deny or in a staff deficiency letter. Any such questions, including issues relating to the tenderability or acceptability of an applicant's technical proposal (in its original long-form application), will be considered after the auction. Where pending applicants fail to file such short-form applications we propose to dismiss their previously filed long-form applications. In the event mutually exclusive short-form applications are not filed for a particular construction permit, we will cancel the auction for that permit and proceed to consider the qualifications of the only remaining applicant. 37. We do not propose to accept any petition to deny against a pending applicant prior to the auction, and except for reporting any minor changes in the short-form application, we do not propose to accept any amendments to the pending long-form application until after the close of the auction. Following the announcement of the winning bidder and and the submission of the required down payment, we propose to afford the winning bidder 30 days to make any necessary amendments to the previously filed long-form application. We realize that, as a number of these applications have been pending for some time, many winning bidders may need to amend their previously-filed long-forms, and we seek comment on whether 30 days is an appropriate period for the filing of any such amendments by winning bidders. The winning bidders' long-form applications would then be placed on public notice, thereby triggering the filing window for petitions to deny. Even in those instances in which the filing window for petitions to deny had fully or partially run prior to enactment of the Balanced Budget Act, we deem it appropriate to adhere to the procedures adopted herein for petitions to deny following an auction generally. We would expect to dismiss the previously filed long-form applications of the unsuccessful competing bidders following the grant of the winning bidder's construction permit. And, for these non- hearing comparative initial licensing proceedings we would propose to follow all other post- auction rules and procedures set forth in Part 1 of the Commission's Rules as well as any service-specific rules adopted in this proceeding. 38. We seek comments on these proposed procedures and invite commenters to suggest any alternative procedures. We also seek comment on whether any special provisions are warranted for these pending comparative licensing cases in the event that the winning bidder is disqualified, withdraws, or otherwise defaults. 2. Procedures for Pending Applications Not Subject to Section 309(l) 39. A broader group of mutually exclusive pending applicants is outside the scope of section 309(l). Specifically, we have pending before the Commission a number of mutually exclusive applications for secondary broadcast service licenses which are not subject to section 309(l). These include LPTV and television translator applications that were filed in response to previous filing windows and previously would have been decided by random selection. Also pending before the Commission are a small number of mutually exclusive applications for commercial FM translators. Under our current rules, mutual exclusivity among FM translator applications is resolved based upon specific criteria set forth in 47 C.F.R.  74.1233(d)-(g), and such mutually exclusive applications are neither designated for comparative hearing nor lotteried. Finally, since the enactment of the Balanced Budget Act, applicants have continued to file applications for AM and FM construction permits in accordance with our existing filing procedures. Thus, we additionally have pending before the Commission a number of post-June 30th AM and FM applications. 40. As discussed above, auctions are mandatory under section 309(j) for mutually exclusive applications for new commercial radio and television stations filed after June 30, 1997. We believe that this auction requirement applies also to all pending mutually exclusive applications for constructions permits to provide secondary broadcast service, whether filed before or after June 30, 1997. Specifically, the Commission's discretion to use competitive bidding procedures to resolve pending applications filed before July 1, 1997 under new section 309(l) is expressly limited to "competing applications for commercial radio or television stations." We tentatively construe this as encompassing only full service commercial radio or television station applications, which have traditionally been decided by comparative hearing and which are subject to the comparative freeze initiated after Bechtel. Pending secondary broadcast service applications, whether filed before or after July 1, 1997, are in our view, governed by the broad language of amended section 309(j)(1) requiring competitive bidding procedures "if mutually exclusive applications are accepted for any initial licensee or construction permit." In so concluding, we also note that subsection 309(l) is entitled "Applicability of Competitive Bidding Procedures to Pending Comparative Licensing Cases." Further, given the simultaneous changes in our lottery authority under section 309(i), a more expansive reading of "competing applications for commercial radio or television stations" would authorize us to decide by comparative hearings certain secondary service applications which, prior to enactment of the Balanced Budget Act, would have been lotteried. Nothing in the statutory language nor the legislative history indicates that this is what Congress intended. We seek comment on our tentative conclusions regarding the applicability of section 309(l) to pending secondary broadcast service applications. 41. We thus propose that pending mutually exclusive applications for construction permits to provide broadcast service or secondary broadcast service, which are not subject to the special provisions of new section 309(1), discussed in  23-38 above, will be subject to the general competitive bidding procedures outlined below for future broadcast applications. Additionally, depending upon what we ultimately decide regarding the auctionability under section 309(j)(1) of mutually exclusive applications to modify existing broadcast service and secondary broadcast service facilities, pending modification applications, whether filed before or after July 1, 1997, could also be subject to our competitive bidding procedures for broadcast applications generally. However, certain minor adjustments in our proposed general competitive bidding procedures are necessary for applications filed before the effective date of those procedures. 42. With respect to the pending broadcast and secondary broadcast applications, described in  39 above, the time for filing mutually exclusive applications under our existing procedures has, in many instances, expired. In contrast to new section 309(l), which expressly restricts the group of applicants eligible to participate in an auction, section 309(j)(1) is silent on that question. It neither precludes the Commission from restricting the class of eligible bidders to the applications already on file, nor requires that the Commission reopen the filing period for additional applicants that would be eligible to participate in the auction. Thus, we appear to have discretion as to whether we conduct a closed auction that is limited to these pending mutually exclusive applications, or whether we include these applications within our first general broadcast auction, and permit new applicants to file additional applications that may be mutually exclusive with the pending applications. We ask for comment on how we should exercise this discretion, i.e., should we open the windows or keep them closed? 43. Following the effective date of the auction rules adopted in this proceeding, we propose to announce by Public Notice that there will be an auction, identify the groups of pending mutually exclusive (long-form) broadcast applications that will be resolved by competitive bidding, and the date by which those applicants must file short-form applications in order to participate in the auction. Given the simplicity and brevity of short-form applications, we do not believe that the requirement that these pending applicants confirm their interest in participating in an auction by filing a short-form application constitutes a significant burden on applicants. Moreover, applicants would need to file short-form applications so as to identify their authorized bidders, to create their FCC account numbers, and to claim status as a designated entity. The Public Notice would also specify the date by which additional applications must be filed in order to be included in that auction. In the interest of efficiency, we tentatively propose to conduct a single auction of all pending mutually exclusive broadcast applications that are not subject to the special provisions of new section 309(l). As an alternative to holding a combined auction, we ask for comment on the advantages, if any, of holding multiple auctions of pending applications (such as separate auctions for AM, FM, television and LPTV), and of including all or portions of these construction permits in the Commission's proposed quarterly auction process. Such auction(s) would also include any application for any of these services filed in response to the Public Notice that was mutually exclusive with previously filed long-form applications. 44. The previously-filed, long-form application of any pending applicant who fails to file a short-form application to participate in the auction would be dismissed. Assuming that, in response to a Public Notice, mutually exclusive short-form applications were submitted by applicants that previously filed long-form applications and/or by additional applicants, the auction would proceed pursuant to our generally established procedures. We also seek comment on whether any changes are warranted in our proposed post-auction procedures for these applicants. 45. Settlements. We tentatively propose that, before the deadline for filing the short- form applications, pending applicants not subject to the special provisions set forth in new section 309(l) may enter into settlement agreements pursuant to section 311(c) of the Act and the Commission's rules. Nothing in amended section 309(j)(1), or in the accompanying legislative history, requires any change in the Commission's disposition of such settlement agreements. However, as noted in  73 below, there is a question as to the extent to which auction participants may enter into a settlement agreement without violating our anti-collusion rules. We tentatively conclude that permitting settlements prior to the filing of the short- form application is adequate to protect the integrity of the competitive bidding process and consistent with the anti-collusion rules. We ask for comment on whether allowing settlements prior to the short-form application deadline preserves the integrity of the auction process. And, although we have generally permitted settlements before short-form applications are filed, we ask for comment on whether the Commission should, as a matter of policy, amend its rules to prohibit such agreements now that Congress, through the Balanced Budget Act, may have established auctions as the preferred method of awarding spectrum licenses where mutually exclusive applications are accepted. 3. General Rules and Procedures for Auctions 46. General Matters. At the outset, we note that, although amended section 309(j)(1) refers to "initial license or construction permit," broadcast auctions will generally result in the award of "construction permits," rather than "licenses," to the winning bidders. In this regard, we do not propose to modify our existing broadcast licensing procedures. Under those procedures, the Commission grants a construction permit to a successful applicant, who then has a specified period of time in which to construct its facilities. Following construction, the applicant will then file an application for a "license to cover construction permit" to obtain a license for the constructed facilities. See 47 C.F.R.  73.3598. We recognize that our procedures are different in this respect from other services in which we have issued licenses upon receiving full payment from the winning bidder. Prospective bidders should be aware that, by paying for their construction permits, they obtain no greater rights or equities than any other permittee. They must satisfy our requirements for a license, and if they do not, we will not issue the license. Similarly, prospective bidders for various secondary services, including low power television stations and FM or television translators, should recognize that, by changing our method of assigning licenses for such facilities, we have not changed the basic character of any of these secondary services. A winning bidder who, after paying for his construction permit and satisfying the requirements for a license, receives the license will not have any greater rights vis-a-vis full service broadcast facilities than any other broadcaster licensed to provide that same secondary service. 47. Additionally, we ask for comment on whether we should treat as subject to auctions under section 309(j)(1) mutually exclusive applications for major modifications of existing FM, AM, television, LPTV, or television or FM translator facilities, as well as applications for minor modifications, which can be mutually exclusive in certain rare instances. See  72, below. As a general rule the Commission has not subjected mutually exclusive applications to modify existing facilities to competitive bidding. Second Report and Order, supra n.5, 9 FCC Rcd at 2355  37-40. Nevertheless, the Commission has interpreted the operative language in section 309(j) -- "any initial license or construction permit" -- as authorizing the use of competitive bidding to resolve mutually exclusive modification applications, and it has indicated that it will consider the question of auctionability on a case-by-case basis. Id. The operative statutory language was not modified by the Balanced Budget Act, and, moreover, auctions for initial licenses are now mandatory, rather than discretionary. A somewhat different approach may be warranted here in light of our difficulties in devising administratively workable comparative criteria and the elimination of our authority to resolve any of these mutually exclusive applications by random selection. We seek comment on this issue. 48. We also seek comment on whether we should (or could) use comparative hearings to resolve certain types of mutually exclusive modification applications. Commenters proposing that comparative hearings be used for certain types of modification applications should explain what criteria would be used to resolve such hearings and an administratively workable means for doing so. They may also want to address any legal, equitable or other considerations that would militate against using competitive bidding procedures for certain types of modification applications if we decide to use auctions to resolve most mutually exclusive modification applications. Such considerations may arise in cases where modification applications implicate section 307(b) of the Communications Act. 49. We also ask for comment generally on whether we should adopt any special auction policies or procedures in the AM service or other services to accommodate section 307(b) of the Act, 47 U.S.C.  307(b), which requires that the Commission distribute licenses among states and communities so as to "provide a fair, efficient, and equitable distribution of radio service." For example, should we have bidding credits for applicants offering service to significant "white" or "grey" areas? 50. Also, whether particular applications are subject to the proposed competitive bidding procedures will depend on whether the broadcast service involved is required to be auctioned under amended section 309(j)(1), rather than on the identity of the mutually exclusive applicants. Thus, we propose to treat non-profit applicants for commercial frequencies, including those who could qualify under 47 C.F.R.  73.503 as a non-profit educational organization, no differently under the proposed filing and competitive bidding procedures than any other mutually exclusive applicant for commercial frequencies. With regard to the FM service in particular, we note that this proposal will not affect the current ownership and eligibility requirements for noncommercial facilities. 51. We propose conducting all auctions of mutually exclusive broadcast applications in conformity with the general competitive bidding rules set forth in Part 1, Subpart Q of the Commission's rules, subject to any changes that we ultimately make in those rules in the ongoing Part 1 rulemaking (or this proceeding), and substantially consistent with the bidding procedures that have been employed in previous Commission auctions. The Commission proposed in the Part 1 rulemaking that such general competitive bidding rules should govern all future auctions. Part 1 NPRM, 12 FCC Rcd at 5698  18. Accordingly, commenters may wish to review the proposed changes in the Part 1 rules, as well as the issues raised in the Part 1 NPRM, identify whatever they believe to be inappropriate in the context of broadcast auctions, and propose alternatives. Commenters advocating different procedures should explain in detail how such procedures would work and why the proposed Part 1 rules are inappropriate here. 52. Type of Auction. We note that the Commission has used the simultaneous multiple-round competitive bidding design in many previous auctions, and we tentatively propose to use that bidding design for broadcast auctions. In so proposing, we note that simultaneous multiple-round bidding has the advantage of affording bidders more information during the auction concerning the value that competing bidders place on what is being auctioned (in this case, construction permits) than is the case with single-round bidding. For this reason, simultaneous multiple-round bidding is more likely to result in the party that values the spectrum the most acquiring the permit. We seek comment on this proposal. 53. However, we also seek comment on alternate bidding designs that might be appropriate in the broadcast context. Alternative possibilities include: (1) sequential multiple-round auctions, using either oral ascending, remote or on-site electronic bidding; and (2) sequential or simultaneous single round auctions, using either remote and/or on site electronic bidding, or sealed bids. See generally 47 C.F.R.  1.2103, as amended by Part 1 Order, 12 FCC Rcd at 5691  6 & nn.9-12. Additionally, we have the authority under section 309(j) to explore other auction methodologies, including combinatorial bidding, which is highlighted in the new legislation. We therefore invite commenters to think creatively about what type of auction would be most appropriate. 54. Commenters should consider whether the same type of auction methodology is appropriate for all mutually exclusive broadcast and secondary broadcast applications that are subject to auction under amended section 309(j)(1), or whether a different approach is warranted to resolve mutual exclusivity among certain categories of broadcast applications. Would it be appropriate, for example, to use a different bidding design for those pending applications subject to the special provisions of section 309(l)? A different bidding approach might be appropriate both because the 180-day settlement period makes it likely that a relatively small number of groups of mutually exclusive applications will be auctioned and because the provision requires that the bidding be closed to additional applications. What is the best approach for auctions involving the broader group of pending applications, discussed in  39-45 above, where the anti-collusion rule prohibits settlements after the filing of short- form applications and there is no statutory prohibition against additional applicants? Should the type of auction vary depending on the type of service involved, the number of licenses at stake, how many bidders are likely to participate, and the degree to which interpendence may be important to those likely to bid on a particular type of permit? Finally, commenters should address whether certain types of cases, such as those presenting the "daisy chain" scenario described in  58 below, lend themselves to the use of combinatorial bidding, which allows bidders to make "all or nothing" bids on combinations or groups of licenses. With this type of bidding, the Commission may require that, in order to be declared the high bidder, a combinatorial bid must exceed the sum of the individual bids for a license by a specified amount. 55. We propose that, whatever type of bidding design we ultimately select for broadcast auctions, bidding would be remote rather than on-site, thereby providing bidders the flexibility to bid from any location. We ask for comment on whether to require bidders to bid electronically via computer, or whether to give bidders the option of bidding by telephone. Unlike telephonic assisted bidding, where a third party, the bid assistant, is always placed between the bidder and the system, remote electronic bidding places total control in the hands of the bidder. The flexibility to bid, check round results, check announcements, or make a suggestion in a seamless environment, from anywhere, has proven desirable for approximately 85% of the bidders in our auctions thus far. On the other hand, a telephonic bidding option would provide bidders a safeguard against power outages, computer breakdowns, or other unforeseen circumstances that might prevent them from bidding electronically. We also seek comment on whether requiring all bidders to bid electronically would be unduly burdensome to certain bidders (such as television translator associations) likely to participate in auctions for the secondary broadcast services. For example, telephonic bidding would afford bidders the flexibility to bid from any location without incurring the expense of electronic bidding. 56. Upfront Payments, Reserve Prices, Minimum Opening Bids, and "Daisy Chains". We seek comment on several bidding-related issues. First, we propose that the Mass Media Bureau work in conjunction with the Wireless Telecommunications Bureau in setting the upfront payment, which will be announced by Public Notice before the time for filing short-form applications. An upfront payment is paid by prospective bidders prior to the auction. See 47 C.F.R.  1.2106, requiring payment of the upfront payment after a prospective bidder files its short-form application. Requiring an upfront payment prior to the auction has proven a useful tool in ensuring that bidders are sincere, and we do not propose to depart from our Part 1 rules on upfront payments. However, we request comment on the appropriate amount, or method of determining an appropriate amount, of this upfront payment for bidders in broadcast auctions. In previous auctions, we have based the upfront payments upon the amount of spectrum and population (or "pops") covered by the licenses or permits for which parties intend to bid. We note that in the broadcast area there is other data, such as market size, market ratings, advertising rates and broadcast transactions, that might prove more useful than the MHz-pop formula that we have used in valuing auctionable licenses in other, less established telecommunications services. We seek comment on alternate valuation formulas that might be used to calculate upfront payments. 57. In the Balanced Budget Act, Congress directed the Commission to prescribe methods by which a reasonable reserve price or a minimum opening bid will be established for any license that is to be assigned by competitive bidding unless the Commission determines that such reserve prices or minimum opening bids would be contrary to the public interest. We therefore propose that the Mass Media Bureau work in conjunction with the Wireless Telecommunications Bureau to consider the use of reserve prices and minimum opening bids for auctionable commercial broadcast licenses, which would be announced by Public Notice before the time for filing short-form applications, unless, as a result of the comments solicited herein, it is determined that a reserve price or minimum opening bid would not be in the public interest. In addition, we seek comment on the methodology to be employed in establishing each of these mechanisms. We note the possibility of establishing minimum opening bids at the same level as upfront payments, as was done in connection with the auction for the 800 MHz Specialized Mobile Radio service, and of using a MHz-pop formula, as is proposed for the LMDS auction. We seek comment on alternative methods for estimating the value of the relevant licenses and thus for providing a basis for estimating reserve prices or minimum opening bids. Among the possible approaches to estimating license values are (1) using data on station transactions that are comparable in terms of station class and market characteristics, and (2) utilizing a financial model derived from data on the performance of operating stations (a) in the market that an applicant hopes to serve or (b) from a relevant comparable market. These methodologies might lead directly to estimated license values or they might yield MHz-pop values for a particular class of licensees that could then be combined with information on each license to generate valuation estimates. We seek comment on these and any other methodologies that interested parties believe are appropriate. 58. We also seek comment on how the Commission should deal with any "daisy chains" presented in auctions of AM radio, LPTV, or television or FM translator applications. Daisy chains occur when an application is mutually exclusive (i.e., would cause interference) with a second application, which is mutually exclusive with a third application in the same or adjacent community, and so on, even though the first application may not be directly mutually exclusive with any application except the second. Due to the possibility of daisy chains in AM radio, LPTV, and television and FM translator auctions, there may be limited instances in these auctions where, depending on who becomes the winning bidder among a mutually exclusive group, another application (in addition to the auction winner) may become grantable, or another smaller mutually exclusive group will still exist and need to be resolved. We therefore ask for comment on appropriate methods for resolving any daisy chains in the auction context. Commenters may wish to address whether the methods used to resolve daisy chains in the lottery process (such as the holding of "sub- lotteries") are applicable in the auction context, or whether a different method or methods may be more suitable, such as the use of combinatorial bidding. 59. Window Filing Approach. We also believe that, to implement effectively amended section 309(j)(1)'s requirement that the Commission use competitive bidding procedures "if ... mutually exclusive applications are accepted for any initial license or construction permit," a judicious modification of our filing procedures for the various broadcast services is necessary. After consideration, we propose to implement a more uniform window filing approach for AM, FM, television, LPTV, and television and FM translators that will facilitate the determination of the groups of mutually exclusive applications for auction purposes. We request comment on the proposed window filing approach described below, and how the approach complements the Commission's existing auction application and payment procedures. 60. Currently, the broadcast and secondary broadcast services all have differing filing procedures, and none of these procedures was designed to work in conjunction with the auction of mutually exclusive applications. An applicant for an AM frequency is allowed to file at any time for a frequency on which the applicant can operate without causing or receiving interference from existing AM stations or the AM facilities proposed in pending applications. See 47 C.F.R.  73.3571. In contrast, an applicant for a new FM station must request an unused channel identified in the Commission's FM Table of Allotments. If there is an unused FM allotment, an applicant may file for that unused channel allotment within the window filing period specified by the Commission. In the event no applications are tendered during that window filing period, applicants may file any time after the window has closed, and such applications are processed on a "first come/first serve" basis. See 47 C.F.R.  73.3573. Similarly, prior to September 1996 when the Commission stopped accepting applications for new analog television stations, a television applicant could request an unused allotment in the Commission's Table of Allotments for television. See 47 C.F.R.  73.3572. Contrary to these services, LPTV has a window filing procedure under which applications for new low power stations or applications for major changes in the existing facilities of low power stations are filed only during periodic filing windows that the Commission announces by public notice. See 47 C.F.R.  73.3572(g). An LPTV applicant may file for any available VHF or UHF channel upon which it can operate without causing objectionable interference to full service television stations, other low power stations, television translators or land mobile stations. Television translator applications are filed in the same manner as LPTV applications, see 47 C.F.R.  73.3572(g), while FM translator applications may be filed at any time and must propose facilities that protect all previously authorized FM stations (full service or other translators) from harmful interference. See 47 C.F.R.  74.1233. 61. To facilitate the orderly filing of broadcast and secondary broadcast service applications, and the determination of mutually exclusive groups of these applications for auction purposes, we propose to establish a specific time period or auction window during which all applicants seeking to participate in an auction must file their applications. Such windows, as discussed in greater detail below, will be announced by future public notices issued after the release date of the rules adopted in this proceeding. As an interim measure, we shall, effective upon the release of this NPRM, impose a temporary freeze on the filing of further applications in all commercial broadcast and secondary broadcast services, pursuant to our existing procedures. During the freeze, we will continue to accept and process petitions for rulemaking requesting the allotment of new FM channels to the FM Table of Allotments at any time, and applicants will be able to apply for any such allotments during subsequently announced FM auction filing windows. The freeze will apply to applications for new stations and for major changes in existing facilities but not to minor modification applications. It will also not affect the filing of applications for new stations or for major changes in existing facilities in the reserved portion of the FM broadcasting band (Channels 200-220). Additionally, we will exempt from the freeze any application timely filed in response to an outstanding AM (or FM translator) cut-off list or to an open FM window, but we will not issue any new cut-off lists or open any new filing windows. 62. This interim measure will avoid the unnecessary and wasteful expenditure of resources required to file the long-form applications. As discussed in greater detail below, the primary purpose of applications filed during an auction window is to determine mutual exclusivity for participation in an auction. Under our proposed auction procedures, prior to the auction applicants will only be required to file a short-form application (FCC Form 175), supplemented in instances involving non-table services by the engineering data contained in either an FCC Form 301 (application for AM, FM or television construction permit), FCC Form 346 (application to construct LPTV station or television translator), or FCC Form 349 (application to construct FM translator). Only winning bidders will be required to file long- form applications. Moreover, as section 309(j) mandates auctions in these services, no mutually exclusive applications can be resolved during the freeze. Thus, instead of incurring the substantially greater cost of filing long-form applications during the pendency of this rulemaking that will be reviewed only if an applicant is the winning bidder, applicants will have the opportunity to file less burdensome short-form applications in response to a public notice issued after the release date of any auction rules adopted in this proceeding. In this manner, the temporary freeze makes the transition from our current procedural rules to a revised auction-oriented approach less burdensome for applicants as well as for the Commission. 63. A public notice will announce the auction and the window for filing short-form applications in order to participate in a broadcast service or secondary broadcast service auction. It will specify when the filing window will open, and how long it will remain open. The Commission anticipates issuing any such public notice announcing a filing window no less than 30 days prior to the opening of the window, and that the filing window will remain open for at least five business days. We request comment on the number of days filing windows should remain open, and on the number of days notice that the Commission should give prior to opening any window. 64. We also seek comment on our proposal to have a combined filing window rather than separate filing windows for each type of broadcast or secondary broadcast service. In proposing a combined filing window, we recognize that while the opening of a combined window for the filing of applications for the various broadcast and secondary broadcast services at the same time may be more efficient, there may be advantages to opening separate windows for each service at separate times to accommodate circumstances unique to each service. For example, an LPTV auction may not be held until consideration of a pending Community Broadcasting Association request that "primary" status be awarded to licensees who comply with certain requirements. We request comment on these disparate options. Except for the FM service, where new station applicants may only file for vacant FM channels reflected in the Commission's Table of Allotments, we currently do not anticipate limiting filing windows on a geographic basis, such as opening windows only for particular states or regions. We would expect to open filing windows for the broadcast and secondary broadcast services as often as our resources allow, taking into consideration the Commission's need to maintain orderly processing procedures and the frequency with which auctions of mutually exclusive broadcast applications may be efficiently conducted. We note the possibility of handling certain auctions of construction permits for commercial broadcast facilities in the Commission's proposed quarterly auctions process, see Part 1 Order, 12 FCC Rcd at 5691-92  7, particularly if the number of construction permits at stake is small, or their estimated value is low. It would appear, for example, that applications to modify existing broadcast facilities might be particularly suitable for such treatment if we ultimately conclude that mutual exclusivity among such applications should be resolved by competitive bidding. We emphasize, however, that we make no commitment that auctionable broadcast licenses will be included every time the Commission conducts a quarterly auction. 65. In response to a public notice announcing a window for the filing of AM, FM, television, LPTV, and/or television or FM translator applications for new stations (and possibly applications for major changes in existing facilities), we propose requiring applicants to file a short-form application (FCC Form 175), along with any engineering data necessary to determine mutual exclusivity in a particular service. FM applicants would apply by submitting an FCC Form 175 application for any vacant allotment specified in the Commission's public notice announcing the opening of a filing window. Applications specifying the same vacant FM allotment(s) would be mutually exclusive, and no supplemental engineering data would be necessary to make this determination. As the filing of applications would be limited to the window filing period, the current ability to tender new FM applications on a "first come/first serve" basis after a window closes would be terminated. 66. Applicants for AM stations, LPTV stations, and television and FM translators would file short-form applications specifying a frequency or channel upon which the applicant could operate in accordance with the Commission's existing interference standards for these services, which we do not propose to alter in any way. To determine which AM, LPTV, and television and FM translator applications are mutually exclusive for auction purposes, we expect to require applicants for these services to file, in addition to their short- form applications, the engineering data contained in the pertinent FCC Form (i.e., FCC Form 301, FCC Form 346 or FCC Form 349). Similarly, if we ultimately decide to use auctions to resolve mutually exclusive applications to make major changes in existing facilities, in those rare instances in which analog television licensees file such applications (such as a change in the community of license), we propose to require that applicants file both an FCC Form 175 and the engineering data contained in an FCC Form 301. 67. We anticipate that all broadcast and secondary broadcast applicants would file their FCC Form 175 applications electronically, and we request comment on the burden such an electronic filing requirement would place on applicants for the secondary broadcast services. See Part 1 NPRM, supra,  11, 12 FCC Rcd at 5714  46 (proposing to require that all short-form applications be filed electronically beginning January 1, 1998). When necessary to be filed, we expect the engineering data contained in the FCC Form 301, FCC Form 346 or FCC Form 349 would be submitted in accordance with Section 73.3512 of the Commission's rules. We request comment on our proposal to require applicants filing during an auction window to submit FCC Form 175 applications, supplemented when necessary by appropriate engineering information. In particular, commenters should address whether this proposal requires applicants to file an appropriate, but not a burdensome, amount of information prior to an auction. 68. Pre-auction Processing. After the receipt of short-form applications in response to an announced filing window, the Commission would determine the mutually exclusive groups of applications for auction purposes. We tentatively conclude that, in cases where applicants have submitted engineering data in addition to the FCC Form 175, the Commission should not engage in pre-acceptance processing of such data, beyond the review necessary to determine mutual exclusivity for an auction. Under this approach, prior to any auction, we would examine the engineering data submitted by applicants only to the extent necessary to determine which applications are mutually exclusive with each other. Because, as described above, applicants for new FM stations must file for available, vacant allotments, as reflected on the Table of Allotments, additional engineering data is not necessary to determine mutual exclusivity, and the question of a pre-auction engineering review of the short-form application does not arise. 69. Under this approach, the Commission would not make determinations as to the ultimate acceptability or grantability of the applicants' technical proposals prior to the auction. For example, we could defer until after the auction questions as to whether an LPTV applicant's proposal involved coordination problems with Mexico or Canada, or interference problems with existing full power stations, land mobile stations, or other LPTV stations or television translators. The advantage of reviewing applications prior to an auction only to the extent necessary to determine mutual exclusivity is that it would save considerable Commission resources. Nonetheless, this approach has a significant downside in that it may result in applicants, whose technical proposals are unacceptable, participating and perhaps prevailing in an auction. Additionally, prospective bidders should be aware that a winning bidder whose complete long-form application (FCC Form 301, FCC Form 346 or FCC Form 349) cannot ultimately be granted for either legal or technical reasons may be subject to default payments under the Commission's general competitive bidding rules. See infra  74. See also 47 C.F.R.  1.2104(g); 1.2107(b); 1.2109(c). Finally, our general competitive bidding rules provide that if the winning bidder is ultimately found to be unqualified to be a licensee, we would conduct another auction for the license at issue and this would require that we afford new parties an opportunity to file applications for the license. See 47 C.F.R.  1.2109(c). 70. To avoid the possible inefficiencies that may result if we permit applicants with potentially unacceptable technical proposals to participate in an auction, we seek comment on an alternate approach whereby the Commission prior to an auction would engage in pre- acceptance processing of submitted engineering data. The purpose of such pre-auction review would be to identify any technical problems (primarily interference and international coordination) that could not be resolved by amendment. Under this approach, the Commission would return as unacceptable those applications containing unresolvable technical problems. We recognize that this approach, could slow the auction process, particularly since an applicant could seek reconsideration of the Commission's decision to return its application as unacceptable prior to an auction. Rather than delay the start of an auction pending decisions in any petitions for reconsideration of returned applications, we could proceed with the auction, with the understanding that the rights of winning bidders would be subject to the outcome of any such pending petitions. We seek comment on whether it would be preferable to examine engineering data prior to an auction only to determine mutual exclusivity, or to engage in a more extensive pre-auction review of the engineering data submitted by auction applicants, primarily in the AM, LPTV, and television and FM translator services. 71. Following the determination of mutual exclusivity among the applications filed in response to a window, we anticipate issuing public notices identifying the applicants in each group of mutually exclusive applications who would be eligible to bid on construction permits for the allotments or channels identified in their short-form applications. Such public notices would provide more detail on the time, place and method of competitive bidding to be used, as well as applicable bid submission and payment procedures, the deadline for submitting the upfront payments, the amounts of the upfront payments and any minimum opening bid or reserve price, all pursuant to the auction rules then in place. Of course, any application submitted in response to an announced window that is not mutually exclusive with any other application in the same service would not be subject to auction. The Commission anticipates that such non-mutually exclusive applications would be identified by public notice (possibly in the same public notice announcing the mutually exclusive groups), and a date established in the public notice for the filing of complete long-form applications (FCC Form 301, FCC Form 346 or FCC Form 349) by these non-mutually exclusive applicants. We request comment on requiring that non-mutually exclusive applicants file their long-form applications within 30 days after the date of any such public notice. We would then proceed to review the long-form applications. 72. Minor Modification Applications and Other Issues. Although, under our window filing approach, applications for new stations in the broadcast and secondary broadcast services, and possibly applications for major changes in existing facilities, must be filed in announced windows, we propose to allow licensees to file FCC Form 301, FCC Form 346 or FCC Form 349 applications for minor modifications at any time, in accordance with our existing filing procedures. In rare instances, under our current rules, two or more FM, AM, television or LPTV minor modification applications can be mutually exclusive. We seek comment on how to resolve situations where the licensees filing any such mutually exclusive minor modification applications cannot agree to resolve the mutual exclusivity. Depending on what we ultimately conclude regarding the auctionability of mutually exclusive modification applications generally, we might possibly consider including mutually exclusive FCC Form 301, FCC Form 346 or FCC Form 349 applications proposing minor modifications in existing facilities, which are filed outside an announced window, in the auction held following the Commission's next general filing window, or alternatively, in the Commission's next quarterly auction. We request comment on this issue. 73. Anti-Collusion and Bid Withdrawal Rules. Commenters may also address whether it is appropriate to apply other provisions of the Commission's general competitive bidding rules to broadcast auctions. They should focus on the anti-collusion rule, which provides that, after the short-form filing deadline, applicants may generally not discuss the substance of their bids or bidding strategies with other bidders that have applied to bid on the same licenses or permits. See 47 C.F.R.  1.2105(c). However, communications among bidders concerning matters wholly unrelated to the auction, such as discussions between a broadcast affiliate and its network programming supplier on issues unrelated to the auction in which they are competing bidders, would not violate the anti-collusion rule. We do believe that the terms of the anti-collusion rule will prohibit applicants who file mutually exclusive short-form applications in response to future broadcast auction windows from procuring the removal of competing applications by means of settlement agreements. We ask for comment on the effect of the anti-collusion rule in the broadcast context. 74. Commenters may additionally want to discuss the advisability in the broadcast context of applying the Commission's general policy of imposing bid withdrawal and default payment requirements in instances where high bids are withdrawn during the course of an auction, where winning bids are withdrawn after an auction has closed, and where winning bidders fail to submit their long-form applications or pay their winning bids. See 47 C.F.R.  1.2104(g); 1.2109. Commenters proposing that these or other aspects of our Part 1 auction rules, which we have successfully employed in numerous previous auctions, should not apply here should clearly explain why such generally applicable auction rules are not appropriate in the broadcast context. Commenters should also address any proposed amendments to the Commission's general competitive bidding procedures, see Part 1 NPRM, supra, 11, that they believe would warrant modification in auctions of construction permits to provide broadcast service or secondary broadcast service. 75. Post-Auction Application Procedures. We propose to follow, as closely as possible, the Commission's general post-auction application procedures and payment requirements set forth in Subpart Q of Part 1 of the Commission's rules, as amended, in broadcast and secondary broadcast service auctions. We anticipate applying the Commission's established procedures in the manner described below, and accordingly seek comment on applying these procedures to future auctions of mutually exclusive broadcast applications. 76. Following the close of an auction the Commission will issue a public notice announcing the close of the auction and identifying the winning bidders. Within 10 business days of this public notice, we expect to require each winning bidder to submit a down payment, supplementing its upfront payment, sufficient to bring its total deposit with the Commission up to 20% of its winning bid(s). In past auctions, the Commission has generally required such a 20% down payment. See 47 C.F.R.  1.2107. If commenters believe some other amount is more appropriate as a down payment, they should provide clear reasons to justify their position. Within 30 business days of this same public notice, we anticipate requiring each winning bidder to file a complete FCC Form 301, FCC Form 346 or FCC Form 349 long-form application for each construction permit for which it was the high bidder. We request comment on whether 30 days is a sufficient period of time for broadcast auction winners to prepare their long-form applications. 77. The winning bidders' long-form applications would then be placed on public notice, thereby triggering the filing window for petitions to deny. In Section 3008 of the 1997 Balanced Budget Act, Congress provided that the Commission may specify an abbreviated period of "no less than 5 days following issuance" of a public notice for the filing of petitions to deny against the applications submitted by auction winners. We therefore request comment on the appropriateness of establishing a period, such as 5 days, for the filing of petitions to deny against each auction winner's long-form application. If the Commission denies or dismisses all petitions to deny (if any are filed) and is otherwise satisfied that the applicant is qualified, we would issue a public notice announcing that the construction permit is ready to be granted. We anticipate requiring the auction winner to then make full payment of the balance of its winning bid within 10 business days, and the Commission would issue the construction permit to the auction winner within 10 business days after receiving full payment. We seek comment on these long-form application, petition to deny and payment procedures. 78. We also seek comment on whether any existing service-specific rules relating to processing and reviewing FCC Form 301, FCC Form 346 or FCC Form 349 applications should be modified to facilitate the auction process. In particular, commenters may wish to discuss which existing Commission procedures relating to the processing of applications for broadcast or secondary broadcast construction permits may need to be modified to enable winning bidders to resolve questions relating to their technical proposals or other matters contained in their long-forms. We specifically propose to amend our application processing and review procedures to, inter alia, relax the limitations on the number, and the timing of filing, of curative amendments contained in such rules as 47 C.F.R. Section 73.3522 (amendment of applications) and Section 73.3564 (acceptance of applications). We note that such changes would affect the rules for amending applications in all auctionable broadcast services, and that it would eliminate the tenderability criteria and two-tiered minimum filing requirements currently in effect for new full service FM applications. In relaxing the standards for filing amendments, however, we propose that deficiencies in long-form applications filed by winning bidders would not be curable by major amendment, and at this time, we do not anticipate modifying the current definition of "major amendment" for the various broadcast services Thus, we propose to require that major amendments to the long-form application, because they significantly change the long-form application as originally filed, must be filed in accordance with the window filing procedures discussed above. Winning bidders in all broadcast and secondary broadcast services who file long- form applications with waiver requests that cannot be granted, and who cannot provide timely alternate proposals consistent with our rules, will be dismissed. 79. With regard to the long-form applications filed by either winning bidders or non- mutually exclusive applicants for new FM stations specifically, we note that new instances of mutual exclusivity may arise if an applicant's long-form application proposes a site other than one protected pursuant to the Table of Allotments. To prevent such occurrences, we propose that such applicants should not be allowed to file FM long-form applications in conflict with any previously-filed commercial or noncommercial applications. Long-form applications would be entitled to "cut-off" protection from subsequently filed applications and rulemaking petitions. Thus, FM long-form applications would be protected as of the date they are filed with the Commission, just as minor modification applications are currently protected. Similarly, a commercial minor modification application could be mutually exclusive with a new or modification application in the FM educational reserved band. We propose that any commercial FM modification application must protect any previously or simultaneously filed application in the reserved band, in order to eliminate the possibility of creating a cross-band mutually exclusive situation. 80. We also seek comment on how the auction process for FM translators specifically would work in relation to 47 C.F.R.  74.1204(f). This rule currently allows FM broadcasters the right to object to proposed translators that would be likely to interfere with the reception of a regularly received existing service, even if there is no prohibited contour overlap. Application of this rule could result in the dismissal of long-form applications filed by FM translator auction winners, if an objecting party provides evidence of such interference with a regularly received service. Furthermore, an FM translator construction permit is currently subject to cancellation if it is determined that such facility causes objectionable interference or circumstances in the area served are so altered as to have prohibited grant of the application had such circumstances existed at the time of its filing. In addition, we seek comment on how the auction process for FM translators would work in relation to these specific provisions of 47 C.F.R.  74.1203(a) & (b) and 74.1232(h). 81. We finally request comment on whether any existing requirements contained in the FCC Form 301, FCC Form 346 and FCC Form 349 applications may be eliminated. Specifically, we are proposing to eliminate the requirement that applicants certify they have a "reasonable assurance" that the specific sites proposed as the location of their transmitting antennas will be available. We request comment on our proposal to delete the "reasonable assurance" of site certification from the FCC Forms 301, 346 and 349, and to rely on strict enforcement of our existing construction requirements to ensure that winning bidders in future broadcast auctions construct their facilities in a timely manner. See 47 C.F.R.  73.3598 (establishing two-year construction period for television stations and 18-month construction period for AM, FM and LPTV stations, as well as television and FM translators). Given the relatively brief period of time that winning bidders will have to prepare and file their complete long-form applications following the close of future broadcast auctions, we believe that elimination of the "reasonable assurance" of site requirement may be appropriate. 82. We believe the processing approach proposed above will promote the orderly and consistent filing of applications for different services and will facilitate the determination of mutually exclusive groups of applications for auction purposes. Accordingly, we seek comment on all aspects of our proposed approach. Commenters should feel free to discuss any other issues raised by our proposal to modify the existing application submission procedures for broadcast and secondary broadcast services, including the existing service- specific application filing procedures that may need to be modified or eliminated to implement our proposed uniform window filing approach. If commenters believe that some filing procedure other than the window filing approach we have proposed would better facilitate the auction process and serve the Commission's other goals, they should describe in detail any such alternative, and the comparative advantages of their proposal over the Commission's approach. 4. Designated Entities. 83. Section 309(j)(4)(D) of the Act, which was not amended by the Balanced Budget Act of 1997, provides that, in prescribing rules for a competitive bidding system, the Commission must ensure that small businesses, rural telephone companies, and businesses owned by members of minority groups and women are given the opportunity to participate in the provision of spectrum-based services and for this purpose it shall consider the use of tax certificates, bidding credits and other procedures. Pursuant to the Commission's obligation under 309(j)(4)(A) to "consider alternative payment schedules and methods of calculation, including lump sums or guaranteed installment payments, with or without royalty payments, or other schedules or methods," the Commission has adopted a number of measures designed to ensure participation by small businesses, including those owned by women and minorities. These include entrepreneur blocks, bidding credits, reduced upfront payments/down payments and installment payments. 84. Rural Telephone Companies. Consistent with Congress' specific inclusion of rural telephone companies among the designated entities in section 309(j)(4)(D), we seek comment on whether we should adopt bidding credits or other tools to ensure meaningful participation in the provision of broadcast services by rural telephone companies. 85. Small Businesses. Our experience has been that most applicants for new broadcast stations are small businesses. Nevertheless, we seek comment on whether we should adopt bidding credits or other tools to ensure the participation of small businesses in the provision of these services. Commenters should address whether considerations regarding small businesses may differ for future auctions than auctions involving pending cases. We also seek comment on how we should define small business for any special provisions we may adopt. Specifically, in our Part 1 Rule Making, we note that, in various services, we have adopted small business size standards based on gross revenues ceilings of $3 million, $15 million, or $40 million. We seek comment on which of these size categories for small businesses utilized in our prior auctions is most applicable for the broadcast services, or whether an alternative size standard would be more appropriate. As provided in 47 C.F.R.  1.2110(b)(1), the definition of small business should take into consideration the characteristics and the capital requirements of providing broadcast service to the public and the requirements set forth in the Small Business Act. 86. Minorities. The Commission has had a longstanding commitment to encouraging minority participation in the broadcast industry. As the Commission explained in 1978: [W]e are compelled to observe that the views of racial minorities continue to be inadequately represented in the broadcast media. This situation is detrimental not only to the minority audience but to all of the viewing and listening public. Adequate representation of minority viewpoints in programming serves not only the needs and interests of the minority community but also enriches and educates the non-minority audience. It enhances the diversified programming which is a key objective not only of the Communications Act of 1934 but also of the First Amendment. We continue to be very concerned about the underpresentation of minorities as owners of broadcast stations and the implications for program diversity. Indeed, the minority ownership of broadcast stations has recently declined from 3.07 percent in 1995 to 2.81 percent in 1996-97. 87. In Metro, applying an intermediate scrutiny standard, the Supreme Court upheld the constitutionality of our treatment of minority ownership policies in comparative proceedings. Specifically, the Court identified broadcast diversity as an important governmental objective, 497 U.S. at 567, determined that our minority ownership policies were substantially related to achieving that objective, id. at 566, and attached "great weight" to the joint determination of Congress and the Commission that "the minority ownership policies are critical means of promoting broadcast diversity." Id. at 578. We recognize that in Adarand the Supreme Court subsequently established that policies that take race into account are reviewed under a strict (as opposed to intermediate) scrutiny standard. We tentatively conclude that, to the extent that it complies with applicable constitutional standards, we should take steps to further our longstanding goal of increasing minority ownership of broadcast stations, as well as implementing the designated entity provisions of section 309(j)(4) of the Act. We ask for comment on how we can develop our policies, consistent with the standards set forth in Adarand. In particular, we ask for comment on what tools, such as bidding credits or others, might be used consistent with Adarand. In addition, we seek comment on whether we should limit any tools designed to increase minority ownership to those minority-owned businesses that are also small businesses. 88. Minority Eligibility Standards: If we adopt bidding credits or other special tools designed to further minority participation, we will need to develop eligibility criteria that will ensure that the scope of our program is appropriate. In this regard, we seek comment on what standards we might employ to specifically further our goal. We could, for example, specify that to qualify for any minority-based provisions, an applicant must be minority- controlled (i.e., minorities must have de facto as well as de jure control of the applicant and must own more than 50 percent of the equity on a fully diluted basis) and meet the eligibility requirements set forth in 47 C.F.R.  1.2110(b)(2). Additionally, to ensure that any minority policies are reserved for businesses in which minorities have a substantial financial stake, as well as de jure and de facto control, we could strictly define equity to require that minorities have the right to receive at least 50.1 percent of the annual distribution of any dividends paid on the voting stock and the right to receive dividends, profits, and other distributions from the business in proportion to their equity interests. This would be similar to the eligibility standards for minority owned businesses adopted but never implemented for the broadband PCS auctions. Another alternative might be to adopt the "controlling principal" test for financial attribution that we have proposed in the Part 1 Rule Making, 12 FCC Rcd at 5702-03  25-28, for all auctionable services. 89. We also seek comment on whether we should attribute fully any options or conversion rights held by non-minorities absent a demonstration that the decision to exercise the option or conversion rights is beyond the control of the ostensibly passive non-minority owner. Similarly, we seek comment on whether we should attribute fully the interests of: (1) any individual or entity that played a significant role as a promoter in forming the applicant; and (2) any non-voting stockholder unless the corporate documents unequivocally require insulation of the non-voting stockholder from participation in the licensee's affairs to the same extent that a limited partner must be insulated. We ask for comments on our proposed definition of minority-owned businesses eligible for any minority policies. Are there any circumstances, for example, in which it would be appropriate to extend any minority policies to broadcast applicants in which minority group members hold less than 50.1 percent of the equity but retain 50.1 percent voting control? 90. Female Ownership: We also ask for comments on whether special policies are warranted for female-owned applicants. We note that the constitutionality of our former practice of awarding comparative preferences for female ownership was not addressed by the Supreme Court in Metro and that we suspended that practice following Lamprecht v. FCC, 958 F.2d 382 (D.C. Cir. 1992), which held that our gender preference was not shown to be substantially related to achieving program diversity and that it was thus unconstitutional. Additionally, the Supreme Court has ruled that a state program, which makes distinctions based upon gender, must be supported by an "exceedingly persuasive justification" in order to withstand constitutional muster. United States v.Virginia Military Institute, 116 S.Ct 2264, 2274-76 (1996). We seek comment on whether there is sufficient evidence to justify special provisions for women-owned businesses under that standard. 91. However, pursuant to our obligation under 47 U.S.C.  257, we have commenced a comprehensive study to examine further the role of small businesses owned by women or minorities in the provision of telecommunications services and the impact of the Commission's policies on access to the industry for such businesses. The record compiled in this study may provide "exceedingly persuasive justification" for special provisions for women-owned broadcast applicants in future auctions of licenses for new broadcast stations. Commenters advocating the adoption of such measures at this time should address the constitutional issue and present specific empirical evidence supporting their views. They should also focus on how women-owned businesses should be defined for this purpose, and on whether such preferential treatment should be identical to that accorded to minority-owned businesses. 92. Diversification of Ownership. We also seek comment on whether we should adopt bidding credits or other measures to promote diversification of ownership. As noted above, diversification of ownership is one of the two primary objectives of our current licensing system. Are our multiple ownership rules sufficient to promote diversification, or are additional measures warranted given our tentative conclusion to use auctions to resolve mutual exclusivity among pending commercial broadcast applications that are subject to section 309(l) and Congress' direction that we must do so for all other pending and virtually all future commercial broadcast applications? We note, moreover, that in the absence of such measures, group owners may, as a result of economies of scale, have a significant advantage in an auction over newcomers not owning any broadcast stations. We thus ask for comment on whether we should adopt some measure in the competitive bidding process that is specifically designed to promote diversification of ownership. We also urge commenters to think creatively about how we might promote diversification of ownership through the competitive bidding process. Would it be appropriate, for example, to devise an asset or revenue test that would determine eligibility for such credit? Should we strictly limit any such credit to applicants having no other media interests, or alternatively, should we follow our case law in comparative proceedings and distinguish among applicants based on the extent and location of any media interests? In the event we adopt bidding credits how should they be calculated? Should the credits be tiered based upon the number, size, and location of any media interests, with the highest credits awarded to applicants with no media interests, lesser credits to applicants with a single media interest outside the local market, and the least credits to applicants with multiple distant media interests or a single media interest within the service area? In addition, should we place special restrictions on the transferability of licenses awarded in this manner, in addition to the unjust enrichment provisions contained in Part 1 of the Commission's rules, so as to maximize the diversification impact of such measures? 93. Bidding Credits. To the extent we adopt any bidding credits for rural telephone companies, small businesses, minorities, women, non-group owners or others, we ask for comment on what those credits should be and whether, and to what extent, any such bidding credits should be tiered, as we have done in other auction contexts. 94. Unjust Enrichment We have a statutory obligation to prescribe rules to "prevent unjust enrichment as a result of the methods employed to issue licenses and permits." 47 U.S.C.  309(j)(4)(E). To implement that provision and to ensure that any bidding credits have the intended effect of giving eligible designated entities the opportunity to participate in the provision of spectrum-based services, Commission rules generally exact a monetary penalty equal to the sum of the amount of the bidding credit plus interest if the licensee seeks to transfer the license to an entity ineligible for the bidding credit under the rules in effect at the time the license was awarded, or proposes to take any other action involving ownership or control that results in the loss of its status as a designated entity. See generally 47 C.F.R.  1.2111. How long the transferor must hold the station in order to avoid the penalty varies under service-specific rules. We tentatively believe that, if we adopt any special provisions for designated entities, similar measures are warranted here, given our experience with the comparative hearing process, particularly its tendency to foster ownership combinations formed primarily to secure a broadcast license, and the court's admonitions in Bechtel II concerning the arbitrariness of licensing decisions based on ephemeral considerations. 95. Specifically, we propose to require that, for a period of five years following Program Test Authority, broadcast licensees granted a new license through any designated entity or diversification bidding credits or other special provision must certify annually their continuing eligibility for such credit or provision, under the rules in effect at the time the license was awarded, and report within 30 days any change affecting such eligibility. We seek comment on whether the five-year period is appropriate to preserve the efficacy of a licensing system designed to disseminate licenses among a wide variety of licensees, and to fulfill our congressionally mandated obligation to prevent unjust enrichment. And, as a condition for Commission approval for the transfer or assignment of the license to an entity ineligible for the bidding credit or other special provision obtained by the licensee, or for other ownership changes rendering the licensee ineligible for a previously awarded bidding credit or other provision during that five-year period, we tentatively propose to require a monetary reimbursement to the Treasury for the previously awarded bidding credit. Alternatively, we seek comment on granting a one-time bidding credit, requiring that party to hold the license for five years, but allowing the licensee to bid (without credits) for additional licenses during the holding period. 96. We seek comment on how to calculate the unjust enrichment payment. Should we adhere to the current rule requiring reimbursement of the amount of the bidding credit plus interest, or should we adopt an unjust enrichment provision that provides a scale of decreasing liability based on the number of years a license has been held as proposed in our Part 1 Rule Making? In any event, if we adopt tiered bidding credits, we propose to require reimbursement of any differential that results from the sale or transfer between parties that qualify for varying size credits. We seek comment on whether there are any mitigating circumstances that would justify excusing altogether or reducing the unjust enrichment payment. Finally, we seek comment on what measures other than monetary penalties and reporting requirements may be appropriate to ensure that eligible entities retain their ownership and control status? Is a monetary penalty sufficient to ensure the integrity of the competitive bidding process or should other enforcement actions, such as short term renewals, forfeitures, or revocation proceedings, also be considered? 97. We also note the special disclosure requirements, set forth in section 1.2111(a), which apply to all post-auction transfers of stations held less than three years, regardless of whether the transferor received a bidding credit or other special consideration, and which were intended to solicit the data necessary to evaluate our competitive bidding systems generally. But we ask whether special transfer disclosure requirements or unjust enrichment provisions are appropriate where a licensee that did not receive any preferential treatment in the competitive bidding process seeks to assign or transfer the license prior to construction. D. Auction Authority for Instructional Television Fixed Service 98. The Instructional Television Fixed Service (ITFS) is a point-to-point microwave service whose channels are allocated to educational organizations and used primarily for the transmission of instructional, cultural and other types of educational material. Although Section 309(j) of the Communications Act, as amended by the 1997 Balanced Budget Act, specifically exempts noncommercial educational and public broadcast stations from the Commission's competitive bidding authority, that section does not specifically exempt ITFS stations from our competitive bidding authority. See 47 U.S.C.  309(j)(2). We therefore request comment on the applicability of the Commission's competitive bidding authority to mutually exclusive applications for ITFS stations. 99. As provided in 1993, the Commission's initial auction authority limited us to utilizing competitive bidding only for services where licensees received compensation in exchange for providing transmission or reception capabilities to subscribers. Accordingly, in our initial auction order, we excluded from the competitive bidding process "the broadcast television (VHF, UHF, LPTV) and broadcast radio (AM and FM) as well as the ITFS services." Second Report and Order, supra, n.5, 9 FCC Rcd at 2352. Although there is an express exemption from the requirement that the Commission use competitive bidding procedures to award licenses if mutually exclusive applications are accepted for noncommercial educational and public broadcast stations, as defined in Section 397(6) of the Communications Act, there is no exemption for ITFS, which is not a broadcast service. Also, the conference report accompanying the Balanced Budget Act, although referring to the broadcast and secondary broadcast services, makes no reference to ITFS. 100. Given the express terms of the amended Section 309(j), we ask for comment on whether we must, and if not, whether we should, apply competitive bidding to mutually exclusive ITFS applications. We note in this regard that ITFS, although a point-to-point microwave service, has certain characteristics in common with the noncommercial educational and public broadcast stations which are specifically exempted from our Section 309(j) auction authority. For example, the ITFS spectrum is specifically reserved for educational usage. Noncommercial educational broadcast stations are also statutorily exempt from payment of application processing fees. Due to the nature of the ITFS service, the Commission afforded ITFS applicants a similar exemption from such fees. We accordingly seek comment in this Notice on all issues relating to our statutory authority to auction mutually exclusive ITFS applications and on the appropriateness of so doing, if the Commission has any discretion in the matter. If we conclude that we must, or, if we have discretion that we should, auction mutually exclusive ITFS applications, we tentatively propose to apply the general auction rules adopted in this proceeding for broadcast applications to ITFS applications as well. We seek comment on this proposal. E. Proposals for Pending Broadcast Comparative Renewal Proceedings 101. In our NPRM, 7 FCC Rcd at 2671 n.1, we indicated that we were not attempting to address the distinct issues raised by comparative renewal proceedings. Two commenters in this proceeding asserted that the Commission should not apply the comparative criteria developed here to comparative renewal proceedings. In connection with its implementation of the Telecommunications Act of 1996, which eliminates comparative renewal proceedings with respect to renewal applications filed after May 1, 1995, see 47 U.S.C.  309(k), the Commission has terminated its comparative renewal rulemaking proceeding. Implementation of Sections 204(a) and 204(c) of the Telecommunications Act (Broadcast License Renewal Procedures), 11 FCC Rcd 6363, 6364  7 (1995). We believe that auctions are not a legally available option in pending comparative renewal proceedings. Our expanded authority to conduct competitive bidding procedures pursuant to section 309(j), as amended by section 3002(a) of the Balanced Budget Act of 1997, is expressly limited to "applications for initial licenses or construction permits," a restriction that precludes the use of competitive bidding procedures for renewal license applications. Nothing in the Balanced Budget Act or the Conference Report indicates that Congress intended otherwise. Thus, for the few pending comparative renewal proceedings subject to the comparative freeze, we believe we lack authority to conduct a competitive bidding procedure pursuant to section 309(j). (As of September 30, 1997 there were eight such cases.) 102. If we decide to do auctions for the pending cases involving applications for new commercial broadcast stations that are subject to section 309(l) and if comparative renewal cases in which the comparative issue is decisionally significant do not settle, we propose to lift the comparative freeze and to adjudicate them using a two-step procedure, described below. Particularly in light of the statutory change eliminating comparative proceedings for renewal applications filed after May 1, 1995, if we do not use comparative criteria for the section 309(l) cases, we tentatively believe that it would not be a meaningful or efficient use of our administrative resources to undertake the further rulemaking proceedings necessary to develop comparative criteria that would then be used to resolve only the few pending comparative renewal proceedings. Instead, if these circumstances develop, we propose to adopt for these cases the two-step renewal procedure we developed for comparative cellular renewal proceedings. Amendment of Part 22 of the Commission's Rules Relating to License Renewals in the Domestic Public Cellular Radio Telecommunications Service, 8 FCC Rcd 2834 (1993), recon. denied, 8 FCC Rcd 6288 (1993) (Cellular Order). Under that approach, we would grant the renewal application without a comparative hearing if we determined in a threshold hearing that the renewal applicant deserved a renewal expectancy for "substantial" performance during the license term. Commenters should address whether such a two-step approach, which would be analogous to the procedures for new renewal cases set forth in section 309(k), is judicially sustainable. In this regard, we note our analysis in the Cellular Order, 8 FCC Rcd at 2836  12, that the court could be persuaded to overrule Citizens Communications v. FCC, 447 F.2d 1201 (D.C. Cir. 1971), clarified, 463 F.2d 822 (D.C. Cir. 1972), in which it held that a similar two-step procedure developed for comparative broadcast renewal proceedings was contrary to the hearing requirements set forth in section 309 of the Act. 103. We also ask for comment on whether, as an alternative to the two-step procedure, or in conjunction with the two-step hearing that reaches the second stage, we should consider any comparative factors raised by the applicants on a case-by-case basis. To the extent any commenters advocate the development in advance of specific comparative criteria that would be used only to decide comparative cases involving renewal applications filed before May 1, 1995, they should make concrete proposals for a competitive, meaningful and workable system for doing so. They should keep in mind the need for persuasive evidence demonstrating the public interest significance of any proposed criteria, for an administratively workable system for implementing it, and for effective mechanisms to monitor licensee adherence to comparative commitments. IV. PROCEDURAL MATTERS A. Ex Parte Rules -- Permit-but-disclose proceeding 104. This is a permit-but-disclose notice and comment rulemaking. Ex parte presentations are permitted, except during the Sunshine Agenda period, provided they are disclosed, as specified in the Commission's rules. B. Regulatory Flexibility Act 105. An Initial Regulatory Flexibility Act Analysis for the Notice of Proposed Rulemaking is set forth in Appendix B. C. Authority 106. Authority for this rulemaking is contained in 47 U.S.C.  154(i), 154(j), 303(r), 309(g), 309(i), 309(j), 309(l), 403. D. Paperwork Reduction Act 107. This NPRM contains either a proposed or modified information collection. As part of its continuing effort to reduce paperwork burdens, we invite the general public and the Office of Management and Budget (OMB) to take this opportunity to comment on the information collections contained in this NPRM, as required by the Paperwork Reduction Act of 1995, Pub. L. No. 104-13. Public and agency comments are due at the same time as other comments on this NPRM; OMB comments are due 60 days from date of publication of this NPRM in the Federal Register. Comments should address: (a) whether the proposed collection of information is necessary for the proper performance of the functions of the Commission, including whether the information shall have practical utility; (b) the accuracy of the Commission's burden estimates; (c) ways to enhance the quality, utility, and clarity of the information collected; and (d) ways to minimize the burden of the collection of information on the respondents, including the use of automated collection techniques or other forms of information technology. V. ORDERING CLAUSES 108. ACCORDINGLY, IT IS ORDERED, That NOTICE IS HEREBY GIVEN of the proposed regulatory changes described above, and that COMMENT IS SOUGHT on these proposals. 109. IT IS FURTHER ORDERED, That pursuant to applicable procedures set forth in sections 1.415 and 1.419 of the Commission's Rules, 47 C.F.R.  1.415 and 1.419, comments SHALL BE FILED on or before January 26, 1998. 110. 111. and reply comments SHALL BE FILED on or before February 17, 1998. To file formally in this proceeding, commenters must file an original and four copies of all comments, reply comments, and supporting documents filed in this rulemaking proceeding. If commenters want each Commissioner to receive a personal copy of their comments, they must file an original plus nine copies. Comments and reply comments should be sent to the Office of the Secretary, Federal Communications Commission, Room 222, 1919 M Street, N.W., Washington, D.C. 20554. In addition, commenters should file copies of any such pleadings with the Mass Media Bureau, Video Services Division, Room 702, and Audio Services Division, Room 302, 1919 M St., N.W., Washington, D.C. 20554, and with the Office of General Counsel, Room 610, 1919 M St., N.W., Washington, D.C. 20554. Comments and reply comments will be available for public inspection during regular business hours in the FCC Reference Center, 1919 M St., N.W., Washington, D.C. 20554. 112. IT IS FURTHER ORDERED, That written comments by the public on the proposed and/or modified information collections are due [insert the same day as comments on the NPRM]. Written comments must be submitted by the Office of Management and Budget (OMB) on the proposed and/or modified information collections on or before [insert 60 days after date of publication in the Federal Register]. In addition to filing comments with the Secretary, a copy of any comments on the information collections contained herein should be submitted to Judy Boley, Federal Communications Commission, Room 234, 1919 M Street, N.W., Washington, DC 20554, or via the Internet to jboley@fcc.gov, and to Timothy Fain, OMB Desk Officer, 10236 NEOB, 725 - 17th Street, N.W., Washington, DC 20503 or via the Internet to fain_t@al.eop.gov. 113. IT IS FURTHER ORDERED, That, effective upon the close of business on the date of release of this Notice of Proposed Rulemaking, the Commission WILL NOT ACCEPT applications for construction permits or for major changes to existing facilities in any commercial broadcast or secondary broadcast service. However, the Commission WILL ACCEPT applications timely filed in response to an outstanding cut-off list or an open filing window. FEDERAL COMMUNICATIONS COMMISSION Magalie Roman Salas Secretary APPENDIX A I. GC Docket No. 92-52 The following comments were filed in response to the NPRM in GC Docket No. 92-52: 1. American Women in Radio and Television, Inc.; 2. Arnold Broadcasting Company; 3. The Association of America's Public Television Stations and National Public Radio (APTS/NPR); 4. John W. Barger; 5. Susan M. Bechtel; 6. Black Citizens for a Fair Media et al.; 7. Capital Cities/ABC, Inc. (Cap Cities); 8. CBS, Inc.; 9. Lauren A. Colby, Esquire; 10. [Larry G. Fuss d/b/a] Contemporary Communications; 11. Carol Cutting; 12. du Treil, Lundin & Rackley, Inc.; 13. Monica Dawn Edelstein; 14. The Federal Communications Bar Association (FCBA); 15. Galaxy Communications, Inc.; 16. The Georgia Public Telecommunications Commission; 17. James J. Henderson; 18. Herrin Broadcasting, Inc.; 19. Eric R. Hilding; 20. Judy Yep Hughes; 21. Lisa M. Jenkins; 22. James E. Martin, Jr. et al.; 23. The National Association for the Advancement of Colored People and the League of United Latin American Citizens (NAACP); 24. The National Association of Broadcasters (NAB); 25. National Broadcasting Company, Inc. (NBC); 26. The National Federation of Community Broadcasters (NFCB); 27. NCE Licensees; 28. Playa Del Sol Broadcasters, Inc.; 29. Harry M. Plotkin; 30. Jeffrey Rochlis; 31. Skyland Broadcasting Company; 32. Sunrise Broadcasting Corp.; 33. United States Catholic Conference; 34. Valley Public Television, Inc.; 35. John J. Wheeling ; 36. Women in Communications, Inc. et al. The following reply comments were filed in response to the NPRM in GC Docket No. 92- 52: 1. Anchor Broadcasting Limited Partnership; 2. The Association of America's Public Television Stations and National Public Radio (APTS/NPR); 3. Entertainment Communications, Inc. (Entercom); 4. The National Association of Black Owned Broadcasters, Inc. (NABOB); 5. The National Association for the Advancement of Colored People and the League of United Latin American Citizens (NAACP); 6. Jeffrey Rochlis; 7. Michael J. Wilhelm; 8. National Federation of Community Broadcasters; 9. Media Access Project and Telecommunications Research and Action Center. The following comments were filed in response to the FNPRM in GC Docket No. 92-52: 1. American Women in Radio and Television, Inc.; 2. August Communications Group, Inc. and John W. Barger; 3. Black Citizens for a Fair Media et al.; 4. du Treil, Lundin & Rackley, Inc.; 5. The Federal Communciations Bar Association (FCBA); 6. The National Association of Broadcasters; 7. Susan M. Bechtel; 8. National Public Radio and America's Public Television Stations (NPR/APTS); 9. New Miami Latino Broadcasting Corp.; 10. New Paltz Broadcasting, Inc.; 11. Reed Smith Shaw & McClay; 12. Rex Broadcasting Corp.; 13. Todd Robinson; 14. Marc C. Scott Communications, Inc.; 15. Tucker Broadcasting Corp., Limited Partnership; 16. United States Catholic Conference (USCC) The following reply comments were filed in response to the FNPRM in GC Docket No. 92- 52: 1. Susan M. Bechtel; 2. Black Citizens for a Fair Media et al.; 3. Evergreen Communications Co.; 4. Greater Greenwood Broadcasting Limited Partnership; 5. The National Association of Broadcasters; 6. Reed Smith Shaw & McClay; 7. Kin Shaw Wong and Hispanic Broadcasting, Inc.; 8. Rex Broadcasting; 9. August Communications; 10. Elinor G. Stephens The following comments were filed in response to the SFNPRM in GC Docket No.92-52: 1. Art Moore, Inc.; 2. The Association of America's Public Television Stations and National Public Radio (APTS/NPR); 3. Bechtel & Cole, Chartered; 4. Black Citizens for a Fair Media et al.; 5. Breeze Broadcasting Company; 6. Amador S. Bustos; 7. Caldwell Broadcasting Limited Partnership; 8. John A. Carollo, Jr. et al.; 9. Richard M. Carrus and Joelmart, Inc.; 10. Channel 47 Limited Partnership; 11. Stephen M. Cilurzo; 12. Giles Television, Inc.; 13. Fredericksburg Channel 2; 14. Galaxy Communications, Inc.; 15. Henry Geller 16. Lisa M. Harris; 17. Heidelburg-Stone Broadcasting Co.; 18. Highlands Broadcasting Co., Inc.; 19. Homewood Partners, Inc. 20. Irene Rodriguez Diaz de McComas; 21. J & M Broadcasting Co., Inc.; 22. JEM Broadcasting Co., Inc., 23. KERM, Inc.; 24. The League of United Latin American Citizens (LULAC); 25. Lowrey Communications, Limited Partnership; 26. Barbara D. Marmet; 27. Miller Communications, Inc.; 28. J. McCarthy Miller; 29. Minority Media and Telecommunications Council, et al.; 30. Miracle Radio, Inc.; 31. National Association of Broadcasters (NAB); 32. National Broadcasting Company, Inc. (NBC); 33. Paloma Broadcasting Company, Inc.; 34. Pears Broadcasting, Inc.; 35. Prairie Broadcasting;, Inc.; 36. Rio Grande Broadcasting, Inc.; 37. ROJO, Inc.; 38. SBH Properties, Inc.; 39. Scripps Howard Broadcasting Company; 40. Skyland Broadcasting Company; 41. Elinor Lewis Stephens ; 42. Robert M. Stevens; 43. Sun over Jupiter Broadcasting, Inc.; 44. TAK Communications, Inc.; 45. Trans-Columbia Communications ; 46. Carl Como Tutera; 47. United Broadcast Group, Ltd.; 48. Gary E. Willson; 49. Martha-Mary Willson; 50. Nancy A. Willson; 51. Werner Wortsman. The following reply comments were filed in response to the SFNPRM in GC Docket No. 92- 52: 1. American Women in Radio and Television, Inc.; 2. August Communications Group, Inc.; 3. Black Citizens for a Fair Media, et al.; 4. John W. Barger; 5. Breeze Broadcasting Company, Inc.; 6. John A. Carollo, et al.; 7. Fredericksburg Channel 2; 8. Irene Rodriguez Dias de McComas; 9. Jerome Thomas Lamprecht; 10. League of United Latin American Citizens; 11. Marantha Broadcasting Company, Inc.; 12. Barbara D. Marmet; 13. Miracle Radio, Inc.; 14. Mogol Media Broadcasting, Inc.; 15. Shockley Communications Corporation; 16. United Broadcasters Company; 17. The WB Television Network; 18. Paul D. Peterson, president Wylde Broadcasting. II. GEN Docket No. 90-264 The following comments were filed in GEN Docket No. 90-264: 1. American Women in Radio and Television, Inc.; 2. August Communications Group, Inc. and John W. Barger; 3. Black Citizens for a Fair Media et al.; 4. Susan M. Bechtel; 5. du Treil, Lundin & Rackley, Inc.; 6. The Federal Communications Bar Association (FCBA); 7. The National Association of Broadcasters (NAB); 8. National Public Radio and America's Public Television Stations (NPR/APTS); 9. New Miami Latino Broadcasting Corporation; 10. New Paltz Broadcasting, Inc.; 11. Reed Smith Shaw & McClay; 12. Rex Broadcasting Corporation; 13. Todd Robinson; 14. Marc C. Scott Communications, Inc. 15. Tucker Broadcasting Corporation, Limited Partnership; 16. United States Catholic Conference (USCC); The following reply comments were filed in GEN Docket No. 90-264: 1. Susan M. Bechtel; 2. Black Citizens for a Fair Media et al.; 3. Evergreen Communications Company; 4. Greater Greenwood Broadcasting Limited Partnership; 5. The National Association of Broadcasters; 6. Reed Smith Shaw & McClay; 7. Rex Broadcasting Corporation; 8. Kin Shaw Wong and Hispanic Broadcasting, Inc. APPENDIX B INITIAL REGULATORY FLEXIBILITY ANALYSIS As required by the Regulatory Flexibility Act (RFA), the Commission has prepared this Initial Regulatory Flexibility Analysis (IRFA) of the expected significant economic impact on small entities by the policies and procedures proposed in this Notice of Proposed Rulemaking. Written public comments are requested on the IRFA. Comments must be identified as responses to the IRFA and must be filed by the deadlines for comments on the NPRM provided above in Paragraph 110. The Secretary shall send a copy of the NPRM, including the IRFA, to the Chief Counsel for Advocacy of the Small Business Administration. See 5 U.S.C.  603(a). In addition, the NPRM and IRFA (or summaries thereof) will be published in the Federal Register. See id. I. Need for and Objectives of the Proposed Rules: This rulemaking is initiated to implement the Balanced Budget Act of 1997, Pub. L. No. 105-33, 111 Stat. 251 (1997), which amended section 309(j) and adopted new section 309(l) of the Communications Act. Comments are sought on: (1) proposed auction procedures to award initial licenses in the broadcast services and secondary broadcast services; (2) whether the Commission should use auctions or comparative hearings to resolve pending comparative initial licensing proceedings involving competing applications for commercial radio and television stations filed before July 1, 1997, as authorized by new section 309(l); (3) whether amended section 309(j) requires the use of auctions to award initial licenses for Instructional Television Fixed Services; and (4) how to resolve pending comparative renewal proceedings, which cannot be resolved by auction pursuant to amended section 309(j). II. Legal Basis: This NPRM is authorized under the Balanced Budget Act of 1997, Pub. L. No. 105-33, 111 Stat. 251, Title III, Section 3002, and Sections 4(i), 4(j), 303 (r), 309(g), 309(i), 309(j), 309(l), and 403 of the Communications Act of 1934, as amended, 47 U.S.C.  154(i), 154(j), 303(r), 309(g), 309(i), 309(j) 309(l), and 403. III. Description and Estimate of the Number of Small Entities To Which the Proposed Rule Will Apply: Under the RFA, small entities include small organizations, small businesses, and small governmental jurisdictions. 5 U.S.C.  601(6). The RFA, 5 U.S.C.  601(3), defines the term "small business" as having the same meaning as the term "small business concern" under the Small Business Act, 15 U.S.C.  632. A small business concern is one which: (1) is independently owned and operated; (2) is not dominant in its field of operation; and (3) satisfies any additional criteria established by the Small Business Administration ("SBA"). Pursuant to 5 U.S.C.  601(3), the statutory definition of a small business applies "unless an agency after consultation with the Office of Advocacy of the SBA and after opportunity for public comment, establishes one or more definitions of such term which are appropriate to the activities of the agency and publishes such definition(s) in the Federal Register." The SBA defines a radio broadcasting station that has no more than $5 million in annual receipts as a small business. A radio broadcasting station is an establishment primarily engaged in broadcasting aural programs by radio to the public. Included in this industry are commercial, religious, educational, and other radio stations. Radio broadcasting stations which primarily are engaged in radio broadcasting and which produce radio program materials are similarly included. The 1992 Census indicates that 96 percent of radio station establishments (5,861 of 6,127) produced less than $5 million in revenue in 1992. Official Commission records indicate that 11,334 individual radio stations were operating in 1992. As of September 30, 1997, official Commission records indicate that 12,227 radio stations and 2836 FM translator/booster stations were licensed. Additionally, the Small Business Administration defines a television broadcasting station that is independently owned and operated, is not dominant in its field of operation, and has no more than $10.5 million in annual receipts as a small business. Television broadcasting stations consist of establishments primarily engaged in broadcasting visual programs by television to the public, except cable and other pay television services. Included in this industry are commercial, religious, educational, and other television stations. Also included are establishments primarily engaged in television broadcasting and which produce taped television program materials. There were 1,509 television stations operating in the nation in 1992. That number has remained fairly constant, as indicated by the approximately 1,563 full power television stations, 2027 low power television stations, and 4994 television translator stations licensed as of September 30, 1997. In 1992, there were 1,155 television station establishments that produced less than $10.0 million in revenue. In addition, there are presently 2032 ITFS licensees. All but 100 of these licenses are held by educational institutions. Educational institutions may be included in the definition of a small entity. ITFS is a non-pay, non-commercial educational microwave service that, depending on SBA categorization, has, as small entities, entities generating either $10.5 million or less, or $11.0 million or less, in annual receipts. However, we do not collect, nor are we aware of other collections of, annual revenue data for ITFS licensees. Thus, we tentatively conclude that up to 1932 of these licensees are small entities. We seek comment on this conclusion. In the event the Commission decides, for equitable considerations or other reasons, to hold comparative hearings to resolve certain mutually exclusive pending applications for new commercial radio and television stations filed before July 1, 1997 or for a subset of such pending cases, any new comparative criteria developed in this proceeding will apply to these pending pre-July 1, 1997 applications. We estimate that there are approximately 1475 pending applicants for a new commercial radio or full power television station filed before July 1, 1997 that might be decided by comparative hearing rather than by auctions. Any auction procedures developed in this proceeding for all licenses to provide commercial broadcast service or secondary broadcast service that are presently subject to auction will affect: (1) any entity with a pending application for a construction permit for a new commercial radio or full power television broadcast station, if all mutually exclusive applications were filed after June 30, 1997; (2) any entity with a pending application for a construction permit for a new commercial radio or full power television station filed before July 1, 1997, if mutually exclusive applications were filed and none of the competing applications is a renewal application and if the Commission decides that such initial license applications should be subject to auction; (3) any entity that files an application in the future for a new commercial radio or full power analog television station if mutually exclusive applications are accepted; (4) any entity having a pending application on file, or filing an application in the future, for a new low power television station, or a television or FM translator station, if mutually exclusive applications are accepted; (5) any entity that has a pending or future application to make a major change in an existing facility in any commercial broadcast or secondary broadcast service, if mutually exclusive applications are accepted and if the Commission decides to auction such major change applications; and (6) any entity that has a pending or future ITFS application, if mutually exclusive applications are accepted and if the Commission decides that it must, or should, auction mutually exclusive ITFS applications. If auction procedures are adopted in this proceeding, all entities that file applications for construction permits to provide commercial broadcast service before the effective date of any such auction procedures must submit a completed short-form application (FCC Form 175) and any engineering information necessary to determine mutual exclusivity, if resolution of their applications is subject to competitive bidding procedures. This requirement would also apply to entities that file applications for construction permits to make major changes in existing commercial broadcast stations during this period if the Commission ultimately decides to resolve mutual exclusivity among competing major change applications by competitive bidding. In the event that an applicant is the winning bidder, it must submit a long-form application that would then be reviewed by the agency. We estimate that, as of October 31, 1997 there are approximately 1475 pending applicants for a new commercial radio or full power television station filed before July 1, 1997; approximately 315 pending applications for new radio and full power television stations filed after June 30, 1997 that are mutually exclusive with permit applications filed after that date; approximately 100 pending applications for new low power television stations/television translator stations; and approximately 24 pending applications for translator stations. All of these pending mutually exclusive applications will be subject to any auction procedures for analog broadcast service adopted in this proceeding. Applicants for construction permits are required to demonstrate sufficient financing to construct and initially operate the proposed station. However, we do not require the filing of financial information concerning the entity seeking a construction permit. Thus, except for those applicants already owning a broadcast station that seek a permit to construct additional stations, we have no data on file as to whether entities with pending permit applications, which are subject to the new auction rules for analog broadcast service, meet the Small Business Administration's definition of small business concern. We assume for the purposes of this IRFA that most of the entities formed for the purpose of applying for a permit to construct a new radio broadcast station or a television station are small entities, as defined by the SBA rules. In addition to the pending applicants that may be affected by the proposed auction procedures for analog broadcast service, any entity that applies for a construction permit for a new radio or television station in the future will be subject to the proposed auction procedures if mutually exclusive applications are filed. The number of entities that in the future may seek a construction permit for a new analog broadcast station is unknown. We anticipate, however, that due to the passage of the Telecommunications Act of 1996 and corresponding changes in our multiple ownership and attribution rules, the characteristics of future broadcast applicants may be somewhat different from those of pending applicants. We invite comment as to the number and characteristics of future applicants for new commercial analog broadcast stations, and for commercial facilities in the various secondary broadcast services. The new auction procedures would not apply to entities that filed applications for construction permits after June 30, 1997 for new commercial radio and full power television stations that are mutually exclusive with two or more pending initial license applications filed before July 1, 1997. We estimate that as of October 31, 1997, there were approximately 7 such applications (5 radio and 2 TV) that will be ineligible to participate in an auction to choose among mutually exclusive pre-July 1 applications for new commercial broadcast stations. In addition, any competitive bidding procedures developed for analog broadcast service will not apply to the few pending comparative renewal cases. Resolution of these cases will depend on any comparative criteria, two-step renewal process or other basis adopted in this proceeding for deciding these comparative renewal cases. This will affect broadcast station licensees that filed their applications for renewal of license on or before May 1, 1995 and any pending initial license applications that are mutually exclusive with such renewal applications. We estimate that there are approximately 9 initial license applications that are mutually exclusive with 8 pending renewal applications. This includes approximately 15 television applicants and 2 radio applicants. IV. Description of Projected Reporting, Recordkeeping and Other Compliance Requirements: Comment is sought on what filing and compliance requirements should be associated with any competitive bidding procedures consistent with the Commission's statutory obligations to require such transfer disclosures and other measures necessary to prevent unjust enrichment and the court's concerns in Bechtel regarding reliance on purely ephemeral licensing considerations. The NPRM tentatively proposes that, if bidding credits or other special provisions are adopted for any designated entities and/or non- group owners, licensees benefitting from such special provisions must annually certify for five years their continuing eligibility for such bidding credit or special provision under the rules in effect at the time the license was awarded, and report any changes in such eligibility within 30 days. In addition, applications for construction permits, short-form auction applications, and other submissions will be required of those falling within any proposed competitive bidding procedures, as described in Section III of this analysis. V. Significant Alternatives To Proposed Rule Which Minimize Significant Economic Impact on Small Entities and Accomplish Stated Objectives: This NPRM contains no significant alternatives because amended section 309(j) requires that the Commission use competitive bidding procedures to award virtually all licenses, including construction permits for new commercial broadcast facilities, and this requirement applies to most pending broadcast applications, except for comparative licensing cases that involve applications for new full service radio and television stations filed before July 1, 1997. See  39-82. As to that narrow category of applications, see  23-28, in which the Commission has the authority to resolve mutually exclusivity by comparative hearings rather than by competitive bidding procedures, the Commission's discretion is nevertheless constrained by the court's decision in Bechtel v. FCC, 10 F.3d 875 (D.C. Cir. 1993), and the potential difficulty of devising judicially sustainable comparative criteria. Although the NPRM tentatively concludes that, from a public interest standpoint competitive bidding procedures are preferable in these cases, see  13-20, it asks for comment on whether there are equitable reasons to decide these cases, or a subset of these cases, by comparative hearings. Moreover, we believe that the proposed competitive bidding procedures for all future, and, potentially, all pending, applications for construction permits to provide commercial broadcast service that are presently auctionable under the statute will have a minimal impact on small entities who apply for and obtain broadcast licenses. Also, to minimize any possible impact on small businesses, the NPRM asks for comment on whether bidding credits or other special provisions are warranted for small businesses, including those owned by members of a minority group or women and for rural telephone companies. The NPRM further concludes that, to the extent that it is permissible under applicable constitutional standards, the Commission should take steps to further its longstanding goal of increasing minority ownership of broadcast stations and implementing the designated entity provisions of section 309(j)(4) of the Act. VI. Federal Rules that May Duplicate, Overlap, or Conflict With the Proposed Rule: None.