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                            Before the
                Federal Communications Commission
                      Washington, D.C. 20554

In the Matter of                )       
                                )
Implementation of Section 309(j) of the)          MM Docket No. 97-234
Communications Act -- Competitive Bidding)
for Commercial Broadcast and Instructional)
Television Fixed Service Licenses)
                                )
Reexamination of the Policy Statement)       GC Docket No. 92-52
on Comparative Broadcast Hearings)
                                )
Proposals to Reform the Commission's)        GEN Docket No. 90-264
Comparative Hearing Process to Expedite)
the Resolution of Cases         )
                                )


                     FIRST REPORT AND ORDER


   Adopted:  August 6, 1998             Released:  August 18, 1998

By the Commission:  Chairman Kennard issuing a separate statement; Commissioners Furchtgott-Roth and
Tristani dissenting in part and concurring in part and issuing a joint statement.

                        TABLE OF CONTENTS

                                                       Paragraph
I.    INTRODUCTION                                          1
II.   BACKGROUND AND SUMMARY                                2
III.  DISCUSSION
     A.  Statutory Overview
          1.  General Authority to Use Competitive Bidding to Award Secondary    
          and Primary Commercial Broadcast Licenses                        7
          2.  Statutory Authority to Use Competitive Bidding for Modification
          Applications                                           13
     
          3.  Statutory Exemption for Noncommercial and Public Broadcast Stations    20
     
     B.  Resolution of Comparative Initial Licensing Cases Involving Applications 
     Filed Before July 1, 1997
          1.  Discretion to Use Auctions in Pending Cases                  26
          2.  Public Interest Considerations Favoring Resolution by
          Competitive Bidding                                    31
               3.  Treatment of Pending Hearing Cases                      51
     C.  General Rules and Procedures for Competitive Bidding
          1.  Pending Comparative Initial Licensing Cases Subject to Section 309(l)  60
          2.  Pending Applications Not Subject to Section 309(l)                105
          3.  Procedures for Broadcast Auctions Generally
               a.  General Competitive Bidding Matters                112
               b.  Competitive Bidding Design
                    (1) Auction Methodology                      121
                    (2) Upfront Payments, Minimum Opening Bids and 
                    Reserve Prices                               129
      
               c.  Auction Application and Payment Procedures              135
                    (1) Pre-Auction Application Procedures            136
                    (2) Post-Auction Processing Procedures            162
                    (3) Additional Application Processing Issues           177
          4.  Designated Entities                                     186
     D.  Auction Authority for Instructional Television Fixed Service                197
     E.  Resolution of Pending Comparative Renewal Proceedings                  209
     F.  Request for Recusal of Commissioners                              215
     IV.  PROCEDURAL MATTERS AND ORDERING CLAUSES           
     219

Appendix A:  List of Commenters
Appendix B:  Final Regulatory Flexibility Analysis
Appendix C:  Rules  


                         I.  INTRODUCTION         

     1.  By this First Report and Order, we implement provisions of the Balanced Budget Act of 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), by adding provisions governing auctions for broadcast services.  We adopt
general competitive bidding procedures to select among mutually exclusive applicants for commercial analog
broadcast service and Instructional Television Fixed Service (ITFS) licenses.  We adopt herein a "new entrant"
bidding credit to further the goals of the designated entity provisions of Section 309(j).  We note, however, that
we intend to continue our review of the barriers to entry or growth that may exist for small, minority- and
women-owned businesses in broadcasting, and make future adjustments to our auction rules, as appropriate,
in light of these studies.  In addition, pursuant to our discretion under Section 309(l) to utilize either
comparative hearings or competitive bidding procedures to resolve certain mutually exclusive commercial
broadcast applications filed before July 1, 1997, we conclude that all of these pre-July 1st applications should
be resolved by competitive bidding procedures.  We also decide in this First Report and Order to resolve
pending comparative renewal proceedings that are outside the scope of our auction authority under Sections
309(j) and 309(l) of the Communications Act through comparative hearings in which the applicants may
present whatever evidence they believe relevant, with the renewal expectancy remaining the most important
factor.  


                   II.  BACKGROUND AND SUMMARY

     2.  As fully described in the Notice of Proposed Rulemaking in this proceeding, the Commission has
traditionally used comparative hearings to decide among mutually exclusive applications to provide commercial
broadcast service, and it has used a system of random selection to award certain types of broadcast licenses,
such as low power television and television translator, pursuant to Section 309(i), 47 U.S.C.  309(i).  For
purposes of comparative hearings, the Commission has developed a variety of comparative criteria, including
the "integration" of ownership and management, which presumed that a station would offer better service to
the extent that its owner(s) were involved in the station's day-to-day management.  However, in Bechtel v. FCC,
10 F.3d 875, 878 (D.C. Cir. 1993) (Bechtel II), the United States Court of Appeals for the District of
Columbia Circuit held that "continued application of the integration preference is arbitrary and capricious, and
therefore unlawful."  The Commission subsequently froze all ongoing comparative cases (including
comparative renewal cases) pending resolution of the questions raised by Bechtel II.     

       3.  Subsequently, on August 5, 1997, Congress enacted the Balanced Budget Act of 1997, which
expanded the Commission's auction authority under Section 309(j) of the Communications Act to include
commercial broadcast applicants.  Amended Section 309(j) provides that, except for licenses for certain public
safety noncommercial services and for certain digital television services and noncommercial educational or
public broadcast stations, "the Commission shall grant the license or permit to a qualified applicant through
a system of competitive bidding . . . [i]f . . . mutually exclusive applications are accepted for any initial license
or construction permit."  Balanced Budget Act of 1997,  3002(a)(1), codified as 47 U.S.C.  309(j).  In
addition, Section 3002(a)(2), codified as 47 U.S.C.  309(i), amends Section 309(i) to terminate the
Commission's authority to issue any license through the use of a system of random selection after July 1, 1997,
except for licenses or permits for stations defined by Section 397(6) of the Communications Act (i.e.,
noncommercial educational or public broadcast stations).  Finally, Section 3002(a)(3) adopts Section 309(l),
codified as 47 U.S.C.  309(l), which governs the resolution of pending comparative broadcast licensing cases. 
Specifically, it says the Commission "shall have the authority" to resolve mutually exclusive applications for
commercial radio or television stations filed before July 1, 1997 by competitive bidding procedures.  It specifies
further that any auction conducted under this provision must be restricted to persons filing competing
applications before July 1, 1997.   

     4.  As a result of the Budget Act, the Commission no longer has the option of resolving competing
applications for commercial broadcast stations by comparative hearings except for certain applications filed
before July 1, 1997, and it lacks the authority to resolve  competing applications for commercial broadcast
stations by a system of random selection.  The Commission began this rulemaking proceeding to implement
these provisions of the Budget Act.

     5.  In the Notice, the Commission tentatively proposed to adhere to the Commission's existing
competitive bidding procedures that are already in place for non-broadcast services, set forth in 47 C.F.R. 
1.2101-1.2111, subject to any changes made in these procedures in the ongoing Part 1 Rulemaking, where the
Commission had proposed certain modifications to those procedures.  We invited interested parties to identify
any procedures that are inappropriate for broadcast auctions and to propose alternatives.  After the release of
the Notice in this proceeding, the Commission adopted a Third Report and Order and Second Further Notice
of Proposed Rulemaking in the Part 1 Rulemaking, 13 FCC Rcd 374 (1997) (hereafter Third Report and
Order), in which it modified its competitive bidding procedures in all auctionable services in an effort to
streamline the Commission's regulations, make the auction process more efficient, and provide more guidance
to auction participants.  The general competitive bidding procedures for future applications that are subject
to auctions are discussed in Section III(C).   

     6.  In addition to seeking comment on competitive bidding procedures for broadcast auctions, the
Notice requested comment on a variety of other issues raised by the auction legislation, including our tentative
conclusions regarding the scope of Section 309(l).  Section III(A) reviews the statutory framework for
broadcast auctions, and the special statutory provisions relating to pending comparative licensing cases in
Section 309(l).  Resolution of the frozen Bechtel cases is addressed in Section III(B). Special procedures for
pending applications which will be resolved by competitive bidding procedures, either because such resolution
is statutorily mandated or because we have concluded that it will better serve the public interest, are outlined
in Section III(C).  Our statutory obligation to use competitive bidding to award ITFS licenses is discussed in
Section III(D).  Section III(E) describes how we will handle pending comparative renewal proceedings, which
by statute may not be resolved through competitive bidding.  Finally, Section III(F) addresses a recusal request
filed in regard to this proceeding.
     

                         III.  DISCUSSION

A.  Statutory Overview

     1.  General Authority to Use Competitive Bidding to Award Secondary and Primary      
Commercial Broadcast Licenses

     7.  As indicated above, the Commission's authority to award spectrum licenses is set forth in Section
309(j) of the Communications Act.  Prior to the enactment of the Budget Act, Section 309(j) provided that the
Commission "shall have the authority . . . to grant . . . any initial license or construction permit . . . through
the use of a system of competitive bidding," but that authority was limited to awarding licenses for certain non-
broadcast uses of the electromagnetic spectrum and required a determination by the Commission that "a system
of competitive bidding will promote the objectives described in" Section 309(j)(3).  By virtue of the enactment
of the Budget Act, however, Section 309(j)(1) now reads: 

          If, consistent with the obligations described in paragraph (6)(E) [to avoid mutual exclusivity],
     mutually exclusive applications are accepted for any initial license or construction permit,
     then, except as provided in paragraph (2), the Commission shall grant the license or permit
     to a qualified applicant through a system of competitive bidding.

(emphasis added.)

     8.  Given the express language of amended Section 309(j)(1) providing that the Commission shall grant
any initial license or permit through a system of competitive bidding, we tentatively concluded in the Notice,
12 FCC Rcd at 22379 ( 40), that we are required to use auctions for all pending and new mutually exclusive
applications to provide secondary broadcast service, such as low power television (LPTV), and FM and
television translators. We also tentatively read Section 309(j)(1) as mandating that, except for certain pending
licensing cases, the resolution of which is expressly governed by Section 309(l), and certain digital stations
governed by Section 309(j)(2), the Commission must use competitive bidding to award authorizations for all
new primary commercial broadcast stations, if mutually exclusive applications are filed.  
                           
     9.  Discussion.  Based upon the broad, explicit language of Section 309(j)(1), we continue to believe
that auctions are mandatory for all secondary commercial broadcast services (e.g., LPTV, FM translator and
television translator services).  Similarly, we find that, except for certain pending applications that are subject
to Section 309(l), our auction authority is mandatory, rather than permissive, for all full power commercial
radio and analog television stations.  Specifically, our general auction authority set forth in Section 309(j)(1),
as amended, now provides that the Commission "shall grant" licenses by competitive bidding and it no longer
restricts the type of spectrum license which may be awarded through competitive bidding or requires an
affirmative public interest determination that the use of competitive bidding will serve the objectives of the
statute.   
 
     10.  In this regard, we disagree with the small number of commenters who contend that we lack
statutory authority to use competitive bidding to award licenses to provide secondary broadcast service. 
Nothing in the statutory language or in the accompanying legislative history indicates that the requirement to
use competitive bidding for "any initial license or construction permit" is limited to full power radio and analog
television stations, or that Congress intended such a limitation. Nor are secondary commercial broadcast service
licenses exempted from the auction requirement under Section 309(j)(2), which enumerates the certain types
of spectrum licenses that are not subject to competitive bidding.  We find no ambiguity in the statutory
language as to the requirement to auction these applications.  Moreover, the legislative history does not support
the contention that Congress intended to limit auction authority to those types of commercial broadcast licenses
generally awarded through the comparative hearing process.  The Conference Report states that "[a]ny
mutually exclusive applications for radio or television broadcast licenses received after June 30, 1997, shall
be subject to the Commission's rules regarding competitive bidding, including applications for secondary
broadcast services such as low power television, television translators, and television booster stations."  This
list of secondary broadcast service licenses is illustrative rather than exhaustive.  For this reason, the omission
of FM translators from that list does not persuade us, as a few commenters urge, that Congress intended to
exempt such applications from competitive bidding.     

     11.  We continue to believe, moreover, that all pending mutually exclusive applications for these
secondary broadcast services must be resolved through a system of competitive bidding.  Nothing in Section
309(j)(1) suggests that the requirement to use auctions applies only to applications filed in the future.  The only
statutory reference to pending applications is contained in Section 309(l).  This provision governs the resolution
of pending comparative licensing cases but applies only to "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 set forth in greater detail in Section III(B) below, our authority to auction these applications is
permissive, rather than mandatory.  Whether we have discretion not to use auctions for pending mutually
exclusive commercial secondary broadcast applications filed before July 1, 1997, therefore, depends on whether
such applications fall within the scope of subsection (l).  

     12.  We do not believe that Congress intended to include these secondary broadcast applications within
Section 309(l).  As several commenters note, licenses to provide secondary broadcast services are not awarded
through the comparative hearing process.  Yet, Section 309(l) is expressly titled, and thus governs, the
"[r]esolution of pending comparative licensing cases."  See also Conference Report at 573 (referring to Section
309(l) as pertaining to "pending comparative licensing cases").  Given that no "pending comparative licensing
cases" exist in the secondary broadcast services, we conclude that Congress intended Section 309(l) to apply
only to pending pre-July 1, 1997 applications that formerly were resolved through comparative hearings, i.e.,
commercial full service stations.  Moreover, although we previously resolved competing LPTV applications
by a system of random selection pursuant to Section 309(i), the Budget Act withdrew that authority.  See
Budget Act,  3002(a)(2).  Given the simultaneous termination of our lottery authority with respect to these
pending applications, we do not believe that Congress contemplated that we instead use comparative hearings,
in lieu of auctions, particularly since we do not currently award secondary broadcast service licenses through
the comparative hearing process.  Accordingly, we conclude that all mutually exclusive applications for
secondary broadcast service must be awarded through auctions. 

     2.  Statutory Authority to Use Competitive Bidding for Modification Applications

     13.  In the Notice, 12 FCC Rcd at 22382 ( 47), we asked for comment on whether we should apply
competitive bidding procedures to mutually exclusive applications for major modifications of existing broadcast
facilities, as well as applications for minor modifications, which can be mutually exclusive in certain rare
instances.  Some commenters opposing this proposal argue that the Commission does not have authority to
auction modification applications, because Section 309(j) states that mutually exclusive applications for "any
initial license or construction permit" shall be subject to competitive bidding.  47 U.S.C.  309(j)(1).  

     14.  After further consideration, we conclude that the Commission is not precluded by the terms of
Section 309(j) from auctioning mutually exclusive modification applications.  Applications proposing major
changes to existing facilities are, in our view, analogous to applications for construction permits for new
stations.  In the Second Report and Order originally adopting general competitive bidding procedures, we
concluded that it may be appropriate in some cases to treat a major modification application as an initial
application for competitive bidding purposes.  In particular, we said that if the changes to an existing facility
proposed in a modification application are substantial and if such modification application is mutually
exclusive with another major modification application or with an initial application, then resolving the mutual
exclusivity by competitive bidding may be appropriate.  We note that subjecting a modification application
to competitive bidding may also be particularly appropriate where it is mutually exclusive with one (or more)
initial applications, as Section 309(j) mandates the use of auctions where mutually exclusive applications are
accepted for "any initial license or construction permit."  47 U.S.C.  309(j)(1) (emphasis added).

     15.  We note, moreover, that our approach here is consistent with our previous interpretation of the
identical statutory language in Section 309(i) authorizing the Commission to award spectrum licenses through
a system of random selection "[i]f there is more than one application for any initial license or construction
permit."  47 U.S.C.  309(i)(1)(A) (1996) (emphasis added).  In adopting lottery procedures for the LPTV
service, we construed the statutory phrase "any initial license or construction permit" to authorize lotteries of
mutually exclusive major modification applications, and our lottery procedures for that service therefore
encompassed such applications.  See Second Report and Order in Gen. Docket No. 81-768, 93 FCC 2d 952,
981-82 (1983).  When Congress amended Section 309(i) to terminate our authority to use lotteries except with
respect to the award of noncommercial broadcast licenses, 47 U.S.C.  309(i)(5)(B) (1997), it retained the
statutory language "any initial license or construction permit."  That same language is repeated verbatim in the
provision setting forth our general auction authority.  See Section 309(j)(1).  Consistent with our previous
interpretation of Section 309(i) as it pertains to major modification applications, we therefore construe the
identical language in Section 309(j)(1) as authorizing us to resolve mutually exclusive major modification
applications through a system of competitive bidding.  
     16.  Our determination to subject mutually exclusive major modification applications to competitive
bidding is additionally supported by the absence of another viable method for resolving instances of mutual
exclusivity in a timely and efficient manner.  Although some commenters oppose the auctioning of modification
applications, they do not believe that comparative hearings are a "realistic option" for resolving competing
modification applications, and they do not suggest another method of resolving mutual exclusivities that are
as efficient as auctions.  For example, some commenters simply oppose the use of auctions to resolve
competing modification applications without suggesting any alternatives, while others suggest procedures that
seem time consuming and administratively cumbersome.  One commenter recommends the adoption of a point
accumulation system to permit the resolution of mutually exclusive modification applications.  We do not
believe that the development of a new point system for the sole purpose of evaluating a limited number of
broadcast major modification applications would be preferable to utilizing the Commission's well-established
auction system to resolve mutually exclusive modification applications.  Resolving competing major
modification applications on a comparative basis would most likely result in disagreements over criteria to
utilize in developing any such new comparative system.  Another commenter generally contends that, if
modification applications become mutually exclusive, the Commission "staff [should] work with the parties
to eliminate [the] mutual exclusivity."  If a technical solution cannot be found, then the Commission should
allow "the use of alternative dispute resolution techniques or other settlement avenues before considering
competitive bidding."  This suggestion appears administratively burdensome for the Commission and time
consuming for the parties; moreover, if the mutual exclusivity is not resolved by these unidentified alternative
dispute resolution techniques, then the use of auctions (or some other method of resolution) would still be
required.

     17.  We recognize, however, that competing major modification applications can often be resolved by
changes to the engineering proposals submitted by applicants and may raise special considerations where
settlements are particularly appropriate.  We will therefore allow applicants who have, under the window filing
procedures adopted herein for new and major modification applications, filed either competing major
modification applications, or competing major modification and new applications, to resolve their mutual
exclusivities by means of engineering solutions or settlements during a limited period after the filing of short-
form applications but before the start of the auction.  We realize that allowing competing major modification
applicants to settle following the filing of short-form applications is not consistent with the terms of the general
Part 1 anti-collusion rule, which is triggered by the filing of short-form applications.  See infra  155. 
However, that rule was formulated in the context of geographic area licensing, rather than site-specific licensing
as in broadcast where determinations of mutual exclusivity can depend on specific technical proposals, which
in some instances may be altered so as to allow the grant of several formerly mutually exclusive applications. 
We will therefore allow parties with competing major modification applications this limited opportunity to settle
or otherwise resolve their mutual exclusivities following submission of their short-form applications, in
accordance with our statutory directive "to use engineering solutions . . . and other means" to resolve competing
applications.  47 U.S.C.  309(j)(6)(E).  We emphasize that any such settlement agreements must comply with
all Commission regulations, and that the Commission will proceed to auction promptly any competing major
modification applications that are not resolved by the parties. 

     18.  In the past, we have designated for hearing groups of mutually exclusive broadcast applications
involving major modification applications.  Given Congress' expressed preference in the Budget Act for
competitive bidding as a method of selecting from among competing applicants, we believe that utilizing
auctions to resolve competing major modification applications would now be appropriate.  Applying
competitive bidding procedures to modification applications "comports with our objectives of increasing
competition and awarding spectrum to those who value it most highly."  Auctions are moreover an efficient
method of resolving mutually exclusive applications that should speed the grant of construction permits to
competing parties and the improvement or initiation of service to the public.  For these reasons, we will apply
competitive bidding procedures, as set forth in detail below, to resolve mutual exclusivities among major
modification applications and between major modification and initial applications, if the parties are unable to
resolve their mutual exclusivities during a limited period, as established by public notice, following the filing
of short-form applications.            

     19.  We will not, however, generally subject competing minor modification applications to auction
procedures.  Given the infrequency with which minor modification applications are mutually exclusive and the
less significant changes usually proposed in minor modification applications, we will, as discussed in detail
below, encourage parties "to use engineering solutions, negotiation . . . and other means" to resolve any mutual
exclusivities.  47 U.S.C.  309(j)(6)(E).  The commenters oppose utilizing auction procedures to resolve
competing minor modification applications, and we see less utility to be gained from subjecting minor change
applications to competitive bidding procedures.  Accordingly, in the rare instances in which minor modification
applications become mutually exclusive, the parties will be expected to work together to resolve the mutual
exclusivity.  See infra  177-178.  We furthermore note that, particularly if our proposal in another proceeding
regarding modifications is ultimately adopted, fewer modifications in the broadcast services will be regarded
as "major."   

     3.  Statutory Exemption for Noncommercial and Public Broadcast Stations  

     20.  Section 309(j)(2) sets forth three types of spectrum licenses to which our competitive bidding
authority does not apply.  In addition to licenses for certain public safety radio services and certain digital
television stations, we may not use competitive bidding to award licenses for "stations described in section
397(6) of this Act."  Section 397(6) of the Communications Act, 47 U.S.C.  397(6), defines the terms
"noncommercial educational broadcast station" and "public broadcast station."  To effectuate this exemption,
we proposed in the Notice, 12 FCC Rcd at 22383 ( 50), that such nonprofit applicants would be exempt from
competitive bidding when they applied to use reserved broadcast channels, for which applicants must be
noncommercial educational entities.  Auctions would be used for nonreserved frequencies, however, where
applicants may be either commercial or noncommercial educational entities.  We stated that we would treat
nonprofit applicants for commercial frequencies, including those who could qualify under 47 C.F.R.  73.503
as non-profit educational organizations, no differently under the proposed filing and competitive bidding
procedures than any other mutually exclusive applicant for commercial frequencies. 

     21.  Discussion.   Under current Commission regulations, certain television channels and FM
frequencies are reserved solely for noncommercial educational use.  Nonreserved broadcast channels are
usually called "commercial."  Currently, noncommercial educational applicants may apply for commercial
channels under the same application procedures as commercial applicants.  Upon establishment of their
qualifications under Sections 73.503 or 73.621, the stations are licensed as noncommercial stations.  Because
of this dichotomy and as the comments we received in response to the Notice made clear, applying the
exemption set forth in Section 309(j)(2)(C) in situations where one or more of the mutually exclusive applicants
for a broadcast license on a commercial frequency seeks to establish a noncommercial broadcast station is not
a simple matter. 

     22.  A number of commenters, including noncommercial educational broadcasters, note that Section
309(j)(2)(C) explicitly provides that the Commission's auction authority does not apply to licenses issued "for
stations described in section 397(6)" and that Section 397(6) of the Act, which defines noncommercial
educational and public stations, is not expressly limited to stations operating on reserved frequencies. 
Accordingly, they urge that mutually exclusive applications filed by noncommercial educational or public
broadcast entities are exempt from competitive bidding, regardless of whether the frequency applied for is
reserved or whether there are also commercial applicants for that frequency.  

     23.  Other commenters oppose this approach.  They contend that licenses or construction permits are
"issued by the Commission - for stations described in section 397(6)" only in those circumstances where the
Commission knows in advance that the ultimate licensee will be a noncommercial educational or public entity. 
Thus, they would argue, only in situations where by definition the license will be issued to an entity described
in Section 397(6), i.e., a reserved frequency is involved, are auctions prohibited.  These commenters point
out that substantial complexities are raised by interpreting the competitive bidding exemption for
noncommercial educational broadcasters to include such broadcasters when applying for commercial channels. 
For example, if ten commercial entities and one noncommercial entity apply for a nonreserved frequency and
if auctions may not be used to resolve the mutual exclusivity because of the presence of the single
noncommercial applicant, it is not clear what equities and public policies would govern the procedure to be
used to choose among the applicants.

     24.  We do not believe that we have received sufficiently focused comment to finally resolve the
noncommercial issue in this proceeding.  While the exemption in Section 309(j)(2)(C) for noncommercial
educational broadcasters clearly precludes us from using competitive bidding to award broadcast station
licenses on the reserved noncommercial frequencies, there are difficult issues as to how we should apply the
provision when licensing frequencies in the commercial band.  Different interpretations of the congressional
intent of Section 309(j)(2)(C) and its consequences can be made in the context of our allocation and licensing
practices.  One possible approach would be to prohibit the use of auctions whenever one or more of the
competing applicants for a nonreserved channel is a Section 397(6) entity.  Another possible approach would
be to conclude that frequencies in the commercial band could not be used for noncommercial stations.  Yet
another option could be to adopt some form of hybrid procedure involving both lotteries and auctions when
noncommercial and commercial applicants compete for commercial channels.  

     25. We did not focus on the complicated nature of this issue in our Notice in this proceeding.  As a
result, we believe that our decision would be aided by a further round of comment.  For example, a related
question is whether the Commission should modify its standards that allow noncommercial entities to seek to
reclassify commercial frequencies as noncommercial.  We intend to further develop all possible options for
resolving this question and seek further comment in the outstanding rulemaking proceeding (MM Docket No.
95-31) regarding the reexamination of the comparative standards for noncommercial educational applicants. 
Thus, we will not proceed to auction at this time any cases where both noncommercial and commercial
applicants have filed competing applications for nonreserved channels.  We will resolve these cases following
the release of a report and order in our noncommercial proceeding, MM Docket No. 95-31, although prior to
resolution by the Commission, the pending applicants involved in such cases may of course agree to a
settlement that complies with all Commission regulations.  See infra  76-77.  In ultimately resolving this
question of awarding licenses to noncommercial applicants applying for commercial channels, our goal will
be to maximize participation of noncommercial broadcast entities consistent with the statute.  
      

B.  Resolution of Comparative Initial Licensing Cases Involving Applications Filed Before July 1, 1997

     1.  Discretion to Use Auctions in Pending Cases

     26.  As noted above, Section 309(l) expressly governs the resolution of pending mutually exclusive
applications for new commercial radio and television stations filed before July 1, 1997.  We tentatively
concluded in the Notice that this provision accords us the discretion to decide such cases either by a competitive
bidding proceeding or through the comparative hearing process.  In this regard, we relied on statutory language
providing that "the Commission shall  . . . have the authority to conduct a competitive bidding proceeding
pursuant to subsection (j) to assign such license or permit."  We noted, however, that the Conference Report
contradicted this reading of the provision in that it states that the section "requires the Commission to use
competitive bidding to resolve any mutually exclusive applications" filed "prior to July 1, 1997."  We asked
for comments on whether the statute could be read to require that these pending pre-July 1, 1997 applications
must be resolved by competitive bidding procedures.  

     27.  Discussion.  We continue to believe that we have discretion to resolve comparative licensing
proceedings that involve pre-July 1, 1997 applications for new commercial radio and television stations by
either competitive bidding procedures or through the comparative hearing process.  The vast majority of
commenters either support our tentative reading of the statute or acknowledge without addressing the issue that
we have statutory authority to use comparative hearings for these cases.  We disagree with commenters that
either the absence of an express reference to the pre-July 1, 1997 applications in the Section 309(j)(2)
exemptions, or the indication in the legislative history accompanying Section 309(l) that auctions are
"required," compels a conclusion that auctions are required.   

     28.  The explicit language of Section 309(l)(1) provides that the Commission "shall have the authority
to conduct a competitive bidding proceeding," in contrast to the mandatory language of Section 309(j)(1)
providing that "the Commission shall grant the license . . . through a system of competitive bidding."  The
language of Section 309(l), we believe, unambiguously addresses a situation in which auctions are permissible,
but are not required.  There was thus no reason for Congress to exempt these applications from the
Commission's auction authority in Section 309(j)(2) unless Congress meant, in contrast to the permissive
language of Section 309(l)(1), to prohibit use of auctions to resolve such applications.   

     29.  Some commenters urge that the absence of language in Section 309(l) affirmatively stating that
the Commission may use comparative hearings to resolve these cases signifies that auctions are mandatory
rather than permissive.  We disagree.  Until enactment of the Budget Act, the Commission had disposed of
such initial license applications exclusively through the comparative hearing process.  Thus, in interpreting
Section 309(l), we attach little significance, for example, to Section 3002(a)(2) of the Budget Act, which
repeals our lottery authority.  Given the Commission's exclusive use of comparative hearings to resolve
competing applications to provide full power radio and television service, Congress had no reason to provide
statutory language affirming the Commission's existing authority to resolve this group of pending cases through
the comparative hearing process.  By contrast, it had every reason to provide explicit language prohibiting such
resolution, if this was what it meant to do.    

     30.  It is a well-established principle of statutory construction that when congressional intent, as
reflected in the statutory language, is clear "that is the end of the matter; for the court, as well as the agency,
must give effect to  the unambiguously expressed intent of Congress."  Chevron U.S.A v. Natural  Res. Def.
Council, 467 U.S. 837, 842-43 (1985).  Here, the plain language of Section 309(l)(1) raises no question that
justifies resort to the legislative history for clarification as to the proper interpretation. Nor can the statement
in the legislative history that auctions are "required" for these cases override the plain language of the statute,
which does not impose such a requirement but merely affords the Commission authority to use auctions.  We
also note that a contrary interpretation would render Section 309(l)(1) superfluous, inasmuch as Section
309(j)(1) already provides authority to use auctions in these cases. This provides additional support, consistent
with the statute's express language, that in Section 309(l)(1) Congress intended to single out these pending
cases for different treatment, by affording the Commission discretion to determine whether the use of auctions
would be appropriate.  For these reasons, we conclude that our auction authority for the pre-July 1, 1997
applications is permissive rather than mandatory, and that we have authority to resolve these applications
through the comparative hearing process.   

     2.  Public Interest Considerations Favoring Resolution by Competitive Bidding 

     31.  In this section we address the general issue of whether to use a system of competitive bidding to
resolve mutual exclusivity among any of the pre-July 1, 1997 applications subject to Section 309(l).  Special
circumstances relating to certain frozen hearing cases, and particularly whether equitable considerations
warrant a different approach in those cases, are discussed in Section III(B)(3) below.    

     32.  In the Notice, 12 FCC Rcd at 22369-72 ( 14-19), we tentatively concluded that resolving the
pending comparative licensing cases subject to Section 309(l) through a system of competitive bidding would
serve the public interest. At the outset, we noted our statutory authority to alter our process for choosing among
license applications and to apply amended processing rules to pending applications.  We observed that the vast
majority of pending applicants, having filed after Bechtel II and the imposition of the comparative freeze, were
unlikely to have relied on any particular selection criteria. Id. at 22370 ( 15). And, as to those pending
applicants filing before Bechtel, we noted that the court's invalidation of the integration criterion precluded us
from deciding cases according to applicants' reasonable expectations when they filed.  In these circumstances,
we tentatively concluded that resolving the pending cases by auction was not unfair even for these applicants. 
 

     33.  We also cited our continuing concern with the potential delay, administrative costs, and
uncertainty associated with comparative hearings and the relative advantages of auctions in terms of expediting
service to the public in a more cost-effective manner, allocating the spectrum to the applicant valuing it the
most, and recovering for the public a portion of the value of spectrum made available for commercial use.  We
sought comments on our tentative conclusion that generally resolving these competing pre-July 1, 1997
applications through a system of competitive bidding would better serve the public interest than resolving them
through the comparative hearing process.  In this context, we also proposed to refund, upon request, all hearing
fees paid in cases in which we ultimately use competitive bidding procedures to select the winner, as well as
filing fees actually paid by applicants declining to participate in the auction. 
  
     34.  Discussion.  We continue to believe that auctions will generally be fairer and more expeditious
than deciding the pending mutually exclusive applications filed before July 1, 1997 through the comparative
hearing process.  We conclude that auctions will generally expedite service and better serve the public interest
in these cases.  Based upon our long experience with the comparative process, we believe that once the
competitive bidding procedures, as well as any special processing rules for these pending comparative cases
are in place, auctions will result in a more expeditious resolution of each particular case, thereby expediting
the initiation of new broadcast service to the public.  In this regard, we note that, despite the 180-day period
during which we waived our settlement rules as required by Section 309(l)(3), there are approximately 150
proceedings involving more than 600 pre-July 1, 1997 mutually exclusive applications that remain to be
decided.  

     35.  Commenters are also correct that holding an auction in these cases will not eliminate possible
litigation over the basic qualifications of the winning bidder.  We note, however, that the Communications Act
authorizes the Commission to prescribe expedited procedures for the resolution of issues concerning the
qualifications of winning bidders.  See 47 U.S.C.  309(j)(5).  We adopt such procedures below.  See Section
III(C).  Based on our experience with the hearing process, moreover, we believe that any possible delay caused
by such litigation would still be significantly less than what we might reasonably expect if we were to resolve
these cases through the comparative hearing process.
   
     36.  In this regard, we have long noted the potential for delay inherent in the adjudicatory nature of the
comparative process.  In connection with a rulemaking initiated in 1989 to explore the possibility of using
lotteries to award initial broadcast licenses, for example, we estimated that a routine comparative proceeding
can take from three to five years or more to complete after designation of the mutually exclusive applications
for hearing, and that complex cases may take much more time.  More recently in Orion Communications
Limited v. FCC,  131 F.3d 176, 180 (D.C. Cir. 1997), the court recognized that repetitious appeals may
prolong proceedings for years even after the Commission's decision.    

     37.  Here, the potential for delay is also increased by the court's decision in Bechtel II invalidating our
central comparative criterion, integration of ownership and management, and the resulting freeze on the
processing and adjudication of comparative proceedings in effect since February 1994.  The commenters are
divided over the ease by which the Commission may resolve the standard comparative issue if it elects not to
use auctions to resolve the frozen Bechtel cases, and the extent to which Bechtel II permits us to modify the
existing comparative criteria.  But none dispute our assertion in the Notice, 12 FCC Rcd at 22366-67 ( 5),
that the integration criterion has been crucial in recent comparative cases, or urge that we decide these cases
without regard to the court's express holding in Bechtel II, 10 F.3d at 878, that "continued application of the
integration preference is arbitrary and  capricious, and therefore unlawful."   Moreover, we note many other
relevant factors (e.g., local residence, civic participation, past broadcast experience) were "enhancements" of
the integration criterion.  Determining which of these criteria could best survive Bechtel II-type scrutiny and
determining how such criteria should now be weighted is a difficult process that no doubt would lead to serious
challenges in the courts with the outcome unclear.  Indeed, there is wide disparity in the record as to what the
best approach would be.  The value of developing a revised comparative system (and expending the associated
administrative costs) is further attenuated by the fact that it would only be used for these pending cases (and
potentially also a very small number of comparative renewal cases) and would have no future applicability. 
Thus, we conclude that using a system of competitive bidding rather than the comparative hearing process for
competing pre-July 1, 1997 applications that are subject to Section 309(l) will avoid the difficulties and
potential delays of developing and defending new or modified comparative criteria to apply in the cases that
did not settle during the 180-day period that ended February 1, 1998.

     38.  Moreover, we are acutely aware of the delay already occasioned in all of the frozen Bechtel cases. 
Section 309(j)(3) provides that "[i]n identifying classes of licenses and permits to be issued by competitive
bidding," the Commission shall seek to promote "(A) the development and rapid deployment of new
technologies . . . for the benefit of the public . . . without administrative or judicial delays."  (emphasis added.) 
As a more general matter, expedited service to the public is an important public interest consideration.  We
estimate that it would take many years for the Commission's administrative law judges to adjudicate and decide
well over 100 cases.  Auctions can be carried out much more quickly.  And, whatever the cause of past delay
in resolving these cases, we believe that minimizing further delay and now providing new service to the public
as quickly as possible best serves the public interest.  
   
     39.  Some commenters favoring the use of comparative hearings for these pending cases express
concern that the switch to auctions will detrimentally affect the quality of broadcast service.  They focus
particularly on the impact that auctions will allegedly have in terms of securing service that is narrowly tailored
to the needs of the small, local community.   As to these more general policy concerns, however, Congress
itself has made the judgment that auctions are generally preferable to comparative hearings by requiring them
for commercial broadcast applications filed on or after July 1, 1997.  In giving us discretion to determine
whether or not to use auctions in pending cases, we believe Congress intended us to focus on any special
circumstances in these cases that would tip the policy balance in favor of comparative hearings, not to re-visit
the general congressional determination that broadcast auctions serve the public interest.  In any event, it is far
from clear that a licensee that wins its license in an auction has less incentive to serve the needs and interests
of the community than one who wins in a comparative hearing.

     40.  Moreover, auctions will have significant public interest benefits.  In a 1997 report to Congress,
we indicated that our experience with auctions shows that competitive bidding is a more efficient and cost-
effective method of assigning spectrum in cases of mutual exclusivity than any previously employed method,
including comparative hearings.  And, as we stated in the Notice, 12 FCC Rcd at 22371 ( 18), we have relied
on the relative advantages of auctions -- which also include the public interest benefits of encouraging the
efficient use of the frequency, assigning the frequency to the eligible party that values it the most and recovering
for the public a portion of the value of spectrum made available for commercial use -- in other contexts in
which we have faced a choice of either using comparative hearings or a system of competitive bidding to
resolve mutual exclusivity among license applicants.  We believe many of these same benefits will apply in this
context.    

     41.  We continue to believe, moreover, that there is no inherent unfairness in using auctions to resolve
mutual exclusivity among these pre-July 1, 1997 applications.  Commenters are correct that all of these
applicants, including those not designated for hearing, filed in response to public notices stating that mutual
exclusivity would be resolved by the comparative hearing process.  Most, however, filed after Bechtel II and
the institution of the comparative freeze, which made it clear that some change in the existing comparative
criteria was inevitable.  While possibly filing with the expectation of participating in a comparative hearing,
these applicants clearly had no basis to rely on a particular selection scheme. And, as to those that filed before
Bechtel II, the court's holding in that case legally precludes us from deciding their pending applications in
accordance with their reasonable expectations when they filed their applications.    

     42.  Additionally, it is by no means certain that an applicant that formulated its comparative proposal
based on the criteria in effect before Bechtel II will have a better chance of prevailing in a comparative hearing
than in an auction.  This uncertainty, moreover, is unaffected by the strength of its comparative proposal under
the pre-Bechtel II criteria.  The difficulty is that integration, although one of several factors used to predict
which applicant will offer the best service, was nevertheless a crucial element of the comparative scheme before
Bechtel II.  Specifically, quantitative integration (i.e., the extent to which the owners would manage the station
on a day-to-day full time basis) determines the credit awarded for a variety of qualitative enhancement factors,
such as local residence, civic participation, broadcast experience, past broadcast record and minority
ownership.  Elimination of this criterion, even if all other criteria are retained, may therefore have a profound,
largely unpredictable impact on all comparative proposals.  Given the pivotal role assigned to quantitative
integration and particularly its potential to diminish or nullify all credit for a multiplicity of possible
enhancement factors, we cannot predict how an applicant will fare under such a modified comparative system.
Nor can we replicate the remaining standards existing before Bechtel II in a manner that would preserve the
applicants' relative comparative standing prior to Bechtel II.                     

     43.  And, although the switch to auctions requires that pending applicants spend additional funds to
participate in the auction, the statute requires that such auctions be limited to the pending applicants.  See
Section 309(l)(2), 47 U.S.C.  309(l)(2).  This insulates them from having to bid against applicants not
previously incurring costs to secure the license and ensures that these previous expenditures will not unfairly
disadvantage the pending applicants in the auction.  In all likelihood, the amounts bid for the licenses in these
cases will reflect the significant amounts already expended by all qualified bidders.  In these circumstances,
and particularly given that we may not lawfully consider the integration criterion after Bechtel II, we believe
that deciding the competing pre-July 1, 1997 applications by auction entails no inherent unfairness to any of
these applicants, including those that had filed their applications before the Bechtel II decision. 

     44.  We disagree with commenters that changing the selection process for pending applications filed
before July 1, 1997 is impermissibly retroactive or otherwise unlawful.  As we indicated in the Notice, 12
FCC Rcd at 22369-70 ( 14), our statutory authority to alter the way we process applications and to apply the
amended processing rules to pending applications is well established.  The seminal case is United States v.
Storer Broadcasting Co., 351 U.S. 192, 202 (1956), where the Supreme Court upheld the dismissal without
a hearing of an application based on a rule adopted after the application was filed.  Following Storer, the courts
have consistently recognized that filing an application creates no vested right to a hearing, and that an
application may be dismissed if the substantive standards subsequently change.  The pre-July 1, 1997
applicants, whether their applications are pending on the processing line or have been designated for hearing,
have no vested right to a comparative hearing that is abridged by our decision to award such authorizations
by a system of competitive bidding.  Thus, resolving these cases by auction is not a retroactive rule and is not
unlawful under Bowen v. Georgetown University Hospital, 488 U.S. 204 (1988), because this does not "impair
rights a party possessed when [it] acted, increase a party's liability for past conduct, or impose new duties with
respect to transactions already completed."  Nor is Section 309(l) retroactive "merely because it is applied
in a case arising from conduct antedating the statute's enactment . . . or upsets expectations based in prior law." 
Landgraf, 511 U.S. at 269.   

     45.  Rather, our authority to resolve these cases by auction rather than by comparative hearing depends
upon whether that decision is arbitrary and capricious.  In this regard, we note that the Commission was upheld
in its previous determination to decide by lottery cellular applications that had been filed with the expectation
that mutual exclusivity would be decided by comparative hearing.  See Maxcell Telecom Plus, Inc. v. FCC,
815 F.2d 1551, 1555 (D.C. Cir. 1987).  There, as here, legislation afforded the Commission an alternative to
deciding mutually exclusive license applications through the comparative hearing process.  Moreover, in
contrast to this situation, there was no legal impediment to the Commission resolving the pending cellular
applications according to the applicants' original expectations.  Nevertheless, the court in Maxcell, after
evaluating the impact of the regulatory change on pending applicants, concluded that the Commission's
overriding concern with the efficient processing of cellular applications fully justified the Commission's
decision to use lotteries rather than comparative hearings to decide pending applications.   Similar
considerations justify our decision to use auctions here.

     46.  We disagree with commenters that Maxcell is distinguishable either because none of the pre-July
1st applicants had notice of a possible regulatory change, or because the switch to auctions requires that such
applicants make additional expenditures to pursue their bid for licenses.  As noted above, as a result of
Bechtel II, whatever the Commission decides regarding the pending frozen cases, the process will be different
than when the pre-Bechtel II applications were filed.  And the post-Bechtel II applicants were on notice that
whatever system we adopted would have to be different from the integration-centered system struck down in
Bechtel II. Moreover, as noted above, any adverse financial impact of having to participate in an auction is
mitigated somewhat by the statutory requirement that any auction to decide these cases be limited to the
pending applicants for a particular license.  Thus, using auctions to resolve the pre-July 1st applications is not
arbitrary and capricious or impermissibly retroactive.  And, from a public interest standpoint, we believe that,
on balance, any adverse financial or equitable impact on the pending applicants is overcome by the strong
public interest in the public receiving new broadcast service as quickly as possible and other benefits of
auctions, particularly given the legal impossibility of deciding any of these cases based on the comparative
criteria in effect before Bechtel II.  

     47.  Finally, neither the statute nor our proposed implementation of the statute involves a denial of
equal protection or the taking of property without due process under the Fifth Amendment, as argued by some
commenters.  Pursuant to Section 309(l)(2), only persons filing applications before July 1, 1997 will be
allowed to participate in the auction.  No equal protection issue ever arises because the law applies equally to
these pending applicants, none of which knew when they filed their applications that mutual exclusivity would
be resolved by auction.  No other persons will be qualified to participate in auctions involving applicants in
the frozen Bechtel cases.  Moreover, the shift to auctions is supported by strong public interest reasons.   

     48.  We also disagree with commenters that there is a violation of due process because applicants who
have expended considerable sums to prepare, and in some instances prosecute, their applications through the
comparative hearing process now face the prospect, by virtue of an unforeseeable regulatory change, of either
abandoning their considerable investment or spending additional funds to participate in an auction.  As
indicated above, whatever the expectations of these applicants, they had no vested interest in having their
applications decided by a comparative hearing, and the impact of this regulatory change is ameliorated
somewhat by the statutory requirement that auctions to decide these cases be closed to other participants.  In
these circumstances, a decision to resolve the pending applications through a system of competitive bidding
pursuant to subsequent legislation expressly authorizing such resolution thus does not deprive them of due
process.  
 
     49.  The statute is also not a taking of property without just compensation in violation of the Fifth
Amendment.  The payment of regulatory fees, in this case hearing and filing fees, does not constitute a taking
under the Fifth Amendment regardless of whether such fees accurately reflect the cost to the Commission of
processing the applications in question.  And, in any event, as proposed in the Notice, 12 FCC Rcd at 22370-
71 ( 16), we will refund upon request all hearing fees actually paid by applicants in proceedings in which the
construction permit is awarded by auction rather than by comparative hearing, and all filing fees paid by pre-
July 1, 1997 applicants within the scope of Section 309(l) who elect not to participate in the auction.  

     50.  We decline the suggestion of various commenters that we go further and reimburse the legitimate
and prudent expenses of applicants who either do not participate in the auction or are outbid in the auction. 
As indicated above, whatever the expectations of these applicants, they had no vested interest in having their
applications decided by a comparative hearing, and the impact of this change is ameliorated somewhat by the
statutory requirement that auctions to decide these cases be closed to other participants.  In these
circumstances, a decision to resolve the pending applications instead through a system of competitive bidding,
pursuant to subsequent legislation expressly authorizing such resolution, does not, as some have argued,
deprive them of due process or constitute a taking without just compensation.  Courts have, as commenters
note, allowed compensation for losses incurred as a result of an unanticipated regulatory shift, but they have
done so only pursuant to a contract in which the government expressly agreed to indemnify private parties
against the risk of such a regulatory shift. Thus, even assuming arguendo, that we had the legal authority to
reimburse these applicants, we have no obligation to reimburse the pending applicants' expenses in
prosecuting applications filed with the expectation of participating in a comparative hearing, and we decline
to do so.   

     3.  Treatment of Pending Hearing Cases 

     51.  In the Notice, 12 FCC Rcd at 22372 ( 22), we sought comment on whether, even if we decide
to use competitive bidding procedures for most cases involving pre-July 1, 1997 applications, we should
nevertheless use comparative hearings for the approximately 20 cases that had progressed at least through an
Initial Decision by an Administrative Law Judge before the court held in Bechtel II that the principal criterion
previously used by the Commission to predict which applicant would offer the best service (integration) was
unlawful.  In this context, we asked for comment on whether the resources these applicants have expended, as
well as the delays they have experienced, raise special equitable concerns that should lead us to resolve this
group of cases through the comparative process.  Following the expiration of the 180-day waiver period for
settlements prescribed by Section 309(l)(3) and discussed in Section III(C)(1) below, fewer than ten hearing
cases in which the applications have progressed at least through an Initial Decision by an Administrative Law
Judge remain for resolution either through a system of competitive bidding or the comparative hearing
process.   

     52.  Discussion.  We agree with those commenters who argue that, even for the small number of cases
that have progressed at least through an Initial Decision, auctions better serve the public interest than
comparative hearings.  We recognize that these applicants have spent considerable time and money
prosecuting their applications before Bechtel II, and that as a result of that decision, our consideration of its
implications, and congressional consideration and enactment of auction legislation, they have experienced
significant delays in obtaining a final decision as to the selection of the licensee.  These circumstances,
however, do not outweigh the additional delays, uncertainty and administrative costs that would be incurred
by resolving these cases through the comparative hearing process and which led us to decide to resolve pending
cases through auction.   See supra discussion at   34-43.

     53.  We disagree with those commenters who argue that these cases, which have already progressed
at least through an Initial Decision, can be expeditiously resolved through the hearing process and that it would
be arbitrary and capricious to ignore the results of the prior hearing.  Despite the compilation of a hearing
record in these cases, we anticipate that their resolution through the hearing process will not be expeditious,
and that auctions for these cases will much more likely expedite service to the public.   Our experience with
the hearing process gives us reason to believe that these cases will likely involve significant litigation over
points of questionable public interest significance.  

     54.  This is particularly true because the key comparative criterion -- integration -- will no longer exist
and the Commission would be required to articulate a revised comparative criteria system.  To the extent that
new criteria would be adopted, as some commenters urge, we would need to allow an opportunity for
applicants to supplement the record.  In the event factual disputes were to arise with respect to such
supplemental filings (which they almost certainly would), and perhaps in any event, supplemental hearings and
supplemental Initial Decisions would be required.  If the Commission simply used the remaining criteria and
qualitative enhancements (with the qualitative enhancements considered as stand-alone comparative criteria),
and articulated a clear new weighting system, supplemental hearings and supplemental Initial Decisions might
be avoidable.  But we would still need to allow supplemental pleadings for applicants to evaluate themselves
and the other applicants under the revised comparative system.  We are confident every applicant would argue
it should win and the competing applicants should lose, and that they would press their views vigorously.  Even
assuming that all of this could be decided directly by the Commission without a remand to the ALJ in every
case, this process would be time-consuming.  Thus, while it would not take as much time as those cases that
have not been designated for hearing, we believe it would be far more time-consuming than if we held auctions. 


     55.  For all these reasons, we anticipate that, even though the time-consuming tasks associated with
prosecuting a case through an Initial Decision have been completed, resolving these cases through the
comparative process would further delay service to the public, and thus would not serve the public interest.

     56.  We recognize that the switch to auctions requires further expenditures by applicants who have
already made substantial expenditures in reliance on established Commission procedures for awarding
commercial broadcast licenses where there are mutually exclusive applications.  As noted above, however,
Section 309(l)(2) provides that, in the event auctions are held to resolve cases involving pre-July 1, 1997
applications, only the pending applicants are eligible to be qualified bidders.  This means that the pending
applicants will be bidding only against the competing applicants that have spent the same amount of time, and
presumably incurred similar expenses, in prosecuting their applications through a comparative hearing.  In this
manner, the pending applicants will not be unfairly disadvantaged in the auction as a result of previous
expenditures to secure the license.  Rather, as in the case of applicants not designated for hearing, we would
expect that the price ultimately paid for the license will reflect the expenditures incurred by all qualified bidders
in prosecuting their long-pending applications. 

     57.  One commenter suggests that, although Section 309(l)(2) clearly prohibits the Commission from
opening new filing periods for additional applications that would be included in auctions involving pre-July 1st
applications, it nevertheless leaves open the question of new investors or participants in existing applications. 
We recently amended our Part 1 rules to prescribe uniform ownership disclosure standards requiring applicants
filing short-form applications for future auctions to identify controlling interests as well as all parties holding
a 10% or greater interest.  See Third Report and Order, 13 FCC Rcd at 418-420.  To the extent that the
comments urge that we require preauction disclosures of all new owners or parties, we disagree that either the
letter or the spirit of Section 309(l)(2) warrants the adoption of special disclosure standards for applications
that are subject to Section 309(l)(2).  Thus, for such applications we will require the reporting prior to the
auction of any changes in the ownership information required by our uniform Part 1 disclosure standards.  We
nevertheless agree that, consistent with Part 1 rules providing that a short-form application is considered to be
newly filed if it is amended by a major amendment (see 47 C.F.R.  1.2105(b)(2)), a change in the control of
an application otherwise subject to Section 309(l) would render the existing applicant ineligible to participate
in an auction that is statutorily limited to pre-July 1st applicants.  
     
     58.  We also note that proceeding with hearings and concomitant litigation will also be costly for all
the applicants.  Thus, given the circumstances, additional costs cannot be avoided.  Even assuming that the
winning bid in an auction will exceed the additional litigation costs the winner would have to pay in a hearing,
all the applicants would incur further litigation expenses.  It is not at all clear that it is fairer to all the
applicants, particularly to those who eventually lose in a hearing, to make them incur significant, additional
hearing expenses as a tradeoff for the possibility that the winner's expenses may be less than in an auction. 
Given the difficulty of predicting who would win under the revised comparative criteria if we resolved these
cases through the comparative hearing process (see supra  42), we think it is appropriate to focus on fairness
to the class as a whole, not just on the winning applicants.  

     59.  In addition, we are ameliorating the impact of additional expenses by refunding all hearing and
certain filing fees.  See infra  101-104.  In sum, the public interest in getting new service to communities long
awaiting such service as soon as possible under the circumstances, when combined with the other public
interest benefits of auctions, discussed above, outweigh, in our view, any adverse impact on these pending
hearing applicants of requiring them to participate in an auction.  The auction procedures for these pending
hearing cases are set forth in Section III(C)(1), below.  These cases should be set for auction particularly
quickly in light of how long they have been pending. 


C.  General Rules and Procedures for Competitive Bidding 

     1.  Pending Comparative Initial Licensing Cases Subject to Section 309(l)

     60.  Scope of Section 309(l).  Having decided to exercise our discretion under Section 309(l)(1) to
resolve through competitive bidding all applications that are subject to that provision, we must now establish
the rules for the auctions.  Paragraph (2) of Section 309(l) restricts the persons we may treat as qualified
bidders eligible to participate in a competitive bidding proceeding conducted to resolve these pending cases,
and paragraph (3) prescribes special settlement provisions, discussed below, for these cases. To determine
whether these paragraphs apply to particular applicants and proceedings, however, we need to define the scope
of pending cases covered by Section 309(l). 
 
     61.  By its express terms, Section 309(l) applies to "competing applications for . . . construction
permits for commercial radio or television stations that were filed with the Commission before July 1, 1997." 
Paragraph (2), in contrast to the permissive language in paragraph (1), mandates that if the Commission
exercises its discretion to use competitive bidding in these cases it "shall . . . treat the persons filing such
applications as the only persons eligible to be qualified bidders for purposes of such [competitive bidding]
proceeding [to assign such license or permit]."  In the Notice, 12 FCC Rcd at 22373-74 ( 24), we tentatively
concluded that Section 309(l) did not apply to a single application filed before July 1, 1997.  We relied in this
regard on the express reference in Section 309(l) to "competing applications."  Thus, in the event one or more
applications filed after June 30, 1997 are mutually exclusive with a single pre-July 1, 1997 application, we
tentatively concluded that an auction was mandated under Section 309(j) and that the special Section 309(l)
provisions concerning bidder eligibility and settlements would not apply.      

      62.  In contrast, we tentatively concluded, Notice, 12 FCC Rcd at 22374 ( 25), that Section 309(l)
did apply whenever two or more mutually exclusive pre-July 1, 1997 applications are filed.  We found further
that paragraph (2), which dictates that "only persons filing such applications" are eligible to be qualified
bidders, may require the dismissal of post-June 30, 1997 applications in certain circumstances.  In this context,
we considered the consequences of a filing period, which opened before June 30, 1997 but closed after that
date.  We tentatively concluded that, in the event two or more applications were filed before July 1, 1997, any
mutually exclusive applications filed after June 30 1997, because they are ineligible under paragraph (2) to be
qualified bidders, must be dismissed.  Recognizing that this is a harsh result, particularly when it requires the
dismissal of applications timely submitted within an announced filing period, we asked for comment on whether
there are other legally permissible interpretations of this provision. 

     63.  Discussion.  We continue to believe that, where post-June 30th applications are mutually
exclusive with two or more pre-July 1, 1997 applications, we are statutorily compelled by the express language
of Section 309(l)(2) to dismiss them and conduct a competitive bidding procedure that is restricted to the pre-
July 1, 1997 applications.  We also believe that given the express reference to "competing applications" in
Section 309(l), this provision does not apply to a single pre-July 1, 1997 application.  It is well established that
statutory construction must begin with the language employed by Congress and the assumption that the
ordinary meaning of the language accurately expresses the legislative purpose.  With this principle in mind,
we turn first to the issue of eligibility to participate in the auction.  Paragraph (2) unambiguously provides that
the Commission "shall . . .  treat the persons filing such applications as the only persons eligible to be qualified
bidders," and the Conference Report, at 573, confirms that "[t]he Commission shall limit the class of eligible
applicants who may be considered qualified bidders . . . to the persons who filed applications with the
Commission before that date [July 1, 1997]." (emphasis added.)   Thus, we confirm our tentative conclusion
that we are statutorily precluded from permitting post-June 30th applicants to participate as qualified bidders
in a competitive bidding procedure conducted to resolve mutual exclusivity among two or more pre-July 1,
1997 competing applications.  Given our decision to use competitive bidding procedures for these cases, we
must therefore dismiss any such mutually exclusive applications filed after June 30, 1997.   

     64.  Several commenting parties complain that the distinction between applications filed before July
1 and after June 30 is arbitrary.  None, however, offers an alternative, legally persuasive reading of the statute
that would permit us to include post-June 30th applications in any competitive bidding procedure involving
mutually exclusive pre-July 1st applications.  Nor have they cited relevant precedent authorizing us to vary
from the plain meaning of the statutory provision.  Rather, Congress adopted a bright line distinction.  That
such a distinction operates to exclude some applicants but to include others does not make it unlawful. 
Moreover, the practical effect of this bright line distinction will be limited, as we believe that settlement
agreements have been filed in connection with the small number of cases involving post-June 30th applications
mutually exclusive with two or more pre-July 1, 1997 applications.  

     65.  The express language of Section 309(l) likewise governs the resolution of the second issue,
regarding the applicability of any portion of Section 309(l) to singleton applications filed before July 1, 1997. 
Given the unambiguous reference in Section 309(l) to "competing applications . . . filed with the Commission
before July 1, 1997," we are not persuaded that any of its special provisions (regarding bidder eligibility or the
180-day period during which certain settlement rules were waived) apply to a singleton application filed before
July 1, 1997.  Thus, whether we should grant pre-July 1st singleton applications, or alternatively open new
filing periods and conduct auctions in those instances in which mutually exclusive applications are filed, is
governed by Section 309(j)(1) rather than by Section 309(l).  But Section 309(j) is silent on this question (see
infra  106), making it appropriate to look to the legislative history to determine what Congress intended with
regard to singleton applications.  The legislative history addresses this point at least with respect to situations
in which there are no mutually exclusive applications "because the Commission has yet to open a filing
window."  Specifically, "the conferees expect that, regardless of whether the [singleton] application was filed
before, on or after July 1, 1997, the Commission will provide an opportunity for competing applications to be
filed, consistent with the Commission's procedures," and employ competitive bidding to assign the license if
competing applications are filed.  Where the filing windows or cut-off lists have closed, however, we agree that
it is appropriate to grant pending singleton applications.  Such applications, even if filed before July 1, 1997,
are outside the express scope of Section 309(l)(2).  Neither the language of Section 309(j)(1) nor its
accompanying legislative history suggests that Congress intended to require that we reopen already closed filing
periods if there is only one pending application.  Particularly given our obligations under Section 309(j)(6)(E)
to avoid mutual exclusivity, nothing in the requirement in Section 309(j) to use competitive bidding procedures
to resolve mutually exclusive applications provides a basis to create a further opportunity for the filing of
mutually exclusive applications where, despite an opportunity to file competing applications, there is only one
pending application.  The possibility of our opening an already closed filing period exists only in the event that
there are pending mutually exclusive applications not subject to Section 309(l).  See infra  105-109.  To the
extent that we suggested otherwise in the Notice, we correct that impression here.
    
     66.  Pending Applications With Waiver Requests of the Freeze on Television Applications.  In a
related context, we have received a number of comments asking us to clarify whether Section 309(l)(2), which
insulates pre-July 1, 1997 applicants from competition with post-June 30, 1997 applicants in the event of an
auction, applies to analog television applications submitted for filing before July 1, 1997 along with requests
for waiver of the permanent freeze on applications for new analog television broadcast stations.  By way of
background, we note that the Commission announced in July 1996 that it would no longer accept applications
for any vacant NTSC allotment, but it provided an additional 30-day period (until September 20, 1996) for
the filing of such applications.  Advanced Television Systems and Their Impact upon the Existing Television
Broadcast Service (Sixth Further Notice), 11 FCC Rcd 10968, 10992 (1996).  At that time, the Commission
indicated that it would continue to process on a case-by-case basis pending requests for waiver of the 1987
freeze that involved the top 30 television markets, as well as any waiver requests filed during the 30-day period. 
It pledged further that, in the event it granted any waiver requests and accepted the related television
applications, it would  "continue [its] process of issuing Public Notices that 'cut-off' the opportunity for filing
competing, mutually exclusive applications [and] . . .  w[ould] allow additional competing applications to be
filed."  Id. at 10992 (1996).  

     67.  At issue here is whether pending applications with waiver requests, all filed before July 1, 1997,
are subject to the provisions of Section 309(l), and in particular the extent to which Section 309(l)(2) precludes
the acceptance of additional applications that would be eligible to compete in any auction employed to resolve
mutual exclusivity among any pre-July 1, 1997 analog television applications accepted for filing.  We conclude
that the pending applications with waiver requests constitute "applications . . . filed with the Commission before
July 1, 1997" within the meaning of Section 309(l).  We discern no distinction in the statutory language, or in
the accompanying legislative history, between applications filed with waiver requests and applications
submitted without waiver requests.   

     68.  Thus, to the extent that there are multiple pending applications with waiver requests for a single
television allotment, that, if granted, would result in mutually exclusive applications, the restrictions on bidder
eligibility set forth in Section 309(l)(2) would apply.  We disagree that these applications are beyond the scope
of Section 309(l) because no file number was assigned, no public notice was issued, and no cut-off list was
published.  We recognize that there is some degree of unfairness in this result, particularly given our explicit
pledge to provide an opportunity for the filing of competing applications with respect to any analog television
application that we accepted.  We believe, however, that we have no choice under the statute.  The language
of paragraph (2) is unambiguous that, where competing applications were filed with the Commission before
July 1, 1997, "the Commission shall . . . treat the persons filing such applications as the only persons eligible
to be qualified bidders."  The situation of prospective applicants deprived of the opportunity to file competing
applications by our grant of multiple waiver requests for a single allotment is analogous to that of post-June
30th applicants that are similarly ineligible to participate in an auction because more than one application was
filed with the Commission before July 1, 1997 during an open cut-off period.  We note that these pending,
potentially mutually exclusive applicants, who filed applications with freeze waiver requests before July 1,
1997, would not be entitled to participate in an auction except to the extent that we grant particular waiver
requests and accept the related applications.  Pursuant to our determination to use auctions for all applications
that are subject to Section 309(l), if we grant multiple waiver requests for a single allotment, we will conduct
an auction that, as required by Section 309(l)(2), will be limited to mutually exclusive applicants who
submitted applications on or before the September 20, 1996 close of the period for filing such applications. 
No auction would be required, however, where multiple applications with waiver requests were filed but by
the time they were processed only one application with a waiver request remained on file.  In the event we grant
the remaining waiver request, we would simply grant the related pre-July 1, 1997 application without soliciting
further applications.  We believe that this result is compelled by the express language of Section 309(l)(2).  
 

     69.  By contrast, if only one application with a freeze waiver request was filed for a single allotment,
such that there would be no mutually exclusive applications, Section 309(l) would not apply because the
threshold requirement for "competing applications . . . filed with the Commission before July 1, 1997" has not
been satisfied.  Nothing in the Budget Act or the legislative history indicates that, where a single pre-July 1st
application with a waiver request was filed, Section 309(l)(2) precludes the acceptance of additional
applications consistent with our normal practice, that would then be resolved through a system of competitive
bidding pursuant to Section 309(j).  Such applications are no different under the statute than other pre-July 1,
1997 applications that were not subject to a cut-off period.   

     70.  In this regard, we disagree with commenters urging that we may, consistent with the legislative
history, grant such single television applications as soon as we grant the freeze waiver request.  As noted above,
the Conference Report, at 574, reflects that, where no competing applications were filed against a singleton
application because "the Commission has yet to open a filing window," it is expected to provide an opportunity
for competing applications to be filed and to use an auction if competing applications are filed.  A few
commenters urge that the Commission effectively opened a filing window for competing applications when it
afforded a 30-day period ending on September 20, 1996 for the filing of applications for vacant NTSC
allotments before it ceased accepting such applications.  We disagree.  The intent of that 30-day period was
to afford an opportunity to file any applications that were currently being prepared for filing, not to solicit
competing applications.  Sixth Further Notice, 11 FCC Rcd at 10992.  The Commission did not, for example,
publish a list of pending applications with requests for waiver of the 1987 freeze, but promised to provide in
the future an opportunity to file competing applications, with respect to any applications with waiver requests
filed by September 20, 1996 that it accepted.  Id.  For this reason, we disagree with commenters that, by
delaying the effective date of the permanent freeze until September 20, 1996, the Commission effectively
opened such a filing period.  Thus, in the event we grant a freeze waiver request and accept a single television
application for a NTSC allotment filed prior to July 1, 1997, we will, consistent with the statute and the
Conference Report, solicit additional applications, and, if mutually exclusive applications are filed, resolve
those applications by competitive bidding.        

     71.  Settlements.  In the Notice, 12 FCC Rcd at 22374-75 ( 26), we tentatively construed Section
309(l)(3) to require the Commission to waive any applicable provisions of its settlement regulations to permit
applicants subject to Section 309(l) to enter into settlement agreements that remove conflicts among their
applications.  We also indicated that, in addition to the mandatory waiver of any regulations governing
settlements among competing broadcast applicants, we were willing to waive certain policies to facilitate
settlements among pending applicants for new commercial full-power radio or television stations filed before
July 1, 1997, including the prohibition against "white knight" settlements involving the award of a permit to
non-applicant third party where necessary to facilitate a full-market settlement among pre-July 1, 1997
comparative broadcast applicants.  Based upon the express language of the statute, we concluded that
applicants outside the scope of Section 309(l) (i.e., pending applicants for secondary broadcast service, post-
June 30, 1997 applicants for a new commercial full-power radio or television station, and a single pre-July 1,
1997 applicant that is mutually exclusive with one or more post-June 30, 1997 applicant(s) for a new
commercial full-power radio or television station) could not benefit from the waiver.   

     72.  Pursuant to Section 309(l)(3), mandating that the Commission "shall . . . waive any provisions
of its regulations necessary to permit such persons to enter an agreement to procure the removal of a conflict
between their applications," we have waived the payment limitations set forth in Section 73.3525 of the
Commission's rules, 47 C.F.R.  73.3525, as well as our prohibition against third-party settlements.  Several
commenters urge that our settlement policy is too restrictive in excluding post-June 30, 1997 applicants for new
commercial full power radio and television stations (even if mutually exclusive with pre-July 1, 1997
applicants) and all pending applicants for licenses to provide secondary broadcast service.
     
     73.  Discussion.  We believe that, with one minor modification, our tentative reading of Section
309(l)(3) was correct.  Although we indicated that this provision would apply to settlement agreements filed
with the Commission within the 180-day period, we believe that the better reading of this provision is that it
applies to agreements executed within the 180-day period and filed with the Commission, pursuant to Section
73.3525(a) of the Commission's rules.  We note, moreover, that we have received comments suggesting that
only full-market settlements among pre-July 1, 1997 applicants are eligible to take advantage of the waiver
mandated by Section 309(l).  We reiterate that the statutory waiver provision applies to any settlement among
pre-July 1, 1997 applicants for a new commercial full-power radio or television station, even if all the
applicants are not parties to the agreement.  See Notice, 12 FCC Rcd at 22375 ( 27). We will, however, only
waive our policy against "white knight" settlements to facilitate full-market settlement agreements among
competing applicants.  Id. at 22374-75 ( 26).  See also infra  78-79.   

     74.  Commenters are correct that we have the discretion to waive our settlement rules and policies on
our own motion to facilitate settlements among applicants outside the scope of Section 309(l) and to extend
beyond the 180-day period the statutorily mandated waiver for settlements among pre-July 1st applicants that
fall within Section 309(l).  As several commenters assert, nothing in the language of Sections 309(j)(1) or
309(l)(3) or the accompanying legislative history expressly precludes us from waiving our settlement rules and
policies on our own motion to accommodate settlement agreements that are not expressly within the scope of
Section 309(l)(3).  And, despite the expansion of our authority under Section 309(j) to mandate auctions in
certain situations, Congress did not modify our statutory obligation under Section 309(j)(6)(E) to use
appropriate means "to avoid mutual exclusivity in application and licensing proceedings."  Indeed, the
Commission's continuing obligations under Section 309(j)(6)(E) were specifically highlighted in the Conference
Report.    

     75.  We are not persuaded, however, that an across-the-board waiver for applicants ineligible to take
advantage of the waiver mandated by Section 309(l)(3) or a further waiver period for applicants that were
eligible to take advantage of the statutorily mandated waiver but did not do so would serve the public interest
or comport with congressional intent. Congress made no change in Section 311(c) that would require a
substantial relaxation of our settlement rules generally. Moreover, in an apparent effort to expedite resolution
of the frozen Bechtel comparative cases and at the same time provide an avenue of relief to the long-pending
frozen Bechtel applicants, Congress selected a significant yet not unlimited period of time during which more
liberal settlements were permitted among these applicants.  It did not make this waiver open-ended or extend
it to other pending mutually exclusive commercial broadcast applicants, who, by virtue of Section 3002(a) of
the Budget Act, are now subject to resolution by competitive bidding.  Post-June 30, 1997 applicants in
comparative licensing cases, moreover, were expressly excluded from the 180-day waiver provision.  In these
circumstances, we believe that a further across-the-board waiver is not what Congress contemplated and would
not further Congress's policy of encouraging early settlements of these pending comparative cases. We believe,
moreover, that our existing settlement rules and policies are adequate to fulfill our statutory obligation to avoid
mutual exclusivity under Section 309(j)(6)(E) for applicants in the frozen Bechtel cases that were not settled
by February 1, 1998.   

     76.  We emphasize, moreover, that pre-July 1, 1997 applicants, who would have been able to take
advantage of the statutorily mandated waiver set forth in Section 309(l)(3) if such agreements had been entered
into by February 1, 1998, may still avoid an auction through a settlement agreement that complies with all
Commission regulations.  This same avenue is available to post-June 30th applicants and to all pending
secondary service applications, which fall outside the scope of Section 309(l).  Our settlement rules permit,
inter alia, payments to a settling applicant that do not exceed its legitimate and prudent expenses.  We note
further that this is the second time that there has been a waiver of the settlement rules in an effort to facilitate
resolution of the long-frozen comparative initial licensing proceedings.  While we agree that a further waiver
would not necessarily lead to the kind of abusive filings the settlement rules were originally intended to
discourage, the settlement period that just ended was fairly lengthy.  We have no reason to believe that an
additional period would produce settlements in a significant number of the remaining cases.   

     77.  In these circumstances, therefore, we are not persuaded that fundamental fairness requires a
further waiver period, particularly given our explicit statement in the Notice that we did not envision waiving
our settlement rules beyond the 180-day period that ended February 1, 1998.  In the event that pending
applicants believe special circumstances warrant a waiver of our settlement regulations and policies, they may
submit a waiver request.  However, in no event may pending competing applicants for new facilities discuss
settlement after short-form applications (FCC Form 175) are due.  See infra  155.  In accordance with our
continuing obligation to avoid mutual exclusivity under Section 309(j)(6)(E) and our public interest
responsibilities, we will, of course, give full and careful consideration to all such waiver requests.  

     78.  White Knight Settlement Agreements.  Three separate questions have been raised relating to the
waiver of the prohibition against non-party settlements that warrant consideration.  First, SL Communications
urges that the waiver should apply to all comparative proceedings involving pre-July 1, 1997 applications, even
proceedings in which there is only one remaining applicant (e.g., to permit the buyout by a non-party of a
bankrupt or unqualified applicant).  However, as noted in  71-73 above, the special settlement provisions of
Section 309(l)(3) apply only to "competing [i.e., mutually exclusive] applications."  Moreover, as we
determined in Dorothy O. Schulze and Deborah Brigham, A General Partnership, 13 FCC Rcd 3259, 3264
(1998), this provision of the Budget Act applies exclusively to cases that might otherwise be resolved by
competitive bidding.  The discretion to use a system of competitive bidding, however, arises only if there are
mutually exclusive applications.  Second, Paxson Communications urges that the waiver of the prohibition
against "white knight" settlement agreements is too restrictive.  In support of its claim that the waiver should
encompass partial, as well as universal, settlements, Paxson observes that white knight settlements are often
the only realistic means by which applicants can be reimbursed for tremendous expenses incurred in these
protracted cases. However, approving white knight settlement agreements that did not include all of the pending
applicants would be contrary to the spirit, if not the letter, of Section 309(l)(2).  This provision expressly
restricts qualified bidders to those persons filing applications before July 1, 1997 and was clearly intended to
insulate pending applicants from having to bid against entities whose financial resources were not similarly
encumbered by prosecution expenses.   

     79.  Two commenters make a similar suggestion regarding pre-July 1, 1997 applicants that were
unable to reach a settlement within the 180-day period.  Specifically, they urge us to permit such applicants
to enter into "white knight" settlements whereby non-parties can acquire the bidding rights of the pending
applicants.  They claim this would provide equitable relief to applicants, which did not anticipate having to
participate in an auction, and would also serve the public interest by maximizing auction revenues.  Whatever
the benefits of this approach in terms of settling the remaining cases, it is, however, contrary to Section
309(l)(2), which explicitly restricts our discretion regarding persons qualified to participate in a competitive
bidding proceeding that involves pre-July 1, 1997 applicants.  And, in any event, for the reasons set forth
above, we are not inclined to waive any of our settlement rules and policies beyond the 180-day period that
ended on February 1, 1998. 

     80.  Special Auction Procedures for Frozen Non-Hearing Cases.  To auction the pre-July 1, 1997
full service commercial broadcast applications that have not been designated for hearing and that did not settle
under the special provisions of Section 309(l)(3), we will, to the extent possible, apply the general competitive
bidding procedures adopted for future broadcast auctions, as set forth in Section III(C)(3) below.  Some
modifications will, of course, need to be made to our general auction procedures adopted herein, so as to apply
them to a closed group of pending mutually exclusive applications.  To keep our auction procedures as clear
and consistent as possible, we have attempted, as described below, to deviate as little as possible from the
competitive bidding procedures adopted for broadcast auctions generally.     
     81.  To prepare the frozen pre-July 1st non-hearing cases for auction, the Mass Media Bureau, in
conjunction with the Wireless Telecommunications Bureau, will by public notices identify the applicants in
each group of mutually exclusive applications who are eligible to bid on the broadcast construction permits
for which they previously filed long-form applications (i.e., FCC Form 301 for AM, FM or television
construction permits).  We emphasize that, in accordance with congressional directive, pending applicants will
be eligible to bid on only those construction permits for which they previously filed long-form applications. 
Such public notices will also announce the filing deadline for short-form applications (FCC Form 175),
announce the amount of and deadline for submitting upfront payments, and provide more detail on the time,
place and method of competitive bidding to be used, as well as applicable bid submission and payment
procedures.

     82.  We will require all pending applicants to confirm their interest in participating in an auction by
filing a short-form application.  Although we realize that these applicants have already filed complete long-
forms, the submission of a short-form application is necessary so that applicants may identify their authorized
bidders, create their FCC account numbers, and indicate whether they are entitled to a "new entrant" bidding
credit.  See infra  190.  Pending applicants who have already filed long-form applications will not, of course,
need to file any engineering data with their FCC Form 175s, as future applicants in non-table services will be
required to do so that determinations of mutual exclusivity can be made.  See infra  143.  Given the
importance of certain information on the short-form application to the auction process and the brevity of the
short-form itself, we will require the submission of short-forms by pending applicants, and will dismiss the
previously-filed, long-form application of any pending applicant who fails to timely file a short-form
application to participate in the auction.  If the Commission were to receive only one short-form application
confirming interest in bidding competitively on any construction permit, and thus there is no mutual exclusivity
for auction purposes, the Commission will cancel the auction for any such permit and proceed to the review
of the sole remaining applicant's previously-filed long-form application.    

     83.  Assuming that mutually exclusive short-form applications are submitted by the previously-filed
applicants, the auction will proceed pursuant to our general competitive bidding procedures.  As in auctions
of broadcast applications filed in the future, we will also require prospective bidders submitting short-form
applications to make an upfront payment prior to the commencement of the auction of any pending
applications.  The submission of an upfront payment helps safeguard the auction process by requiring
applicants to demonstrate their financial wherewithal and by providing the Commission with funds to cover
any bid withdrawal or default payments.  The amount of the upfront payments for pending applicants will be
determined as set forth under our general auction rules in  129-134.  All pending applicants who file complete
short-forms and submit appropriate upfront payments will be qualified to participate in the auction, which will
proceed as set forth below.        

     84.  We will not, prior to the auction, review the long-form applications previously filed by the pending
applicants, nor will we accept amendments to these previously-filed long-forms.  In addition, before the auction
we will not consider petitions to deny already filed, or accept additional petitions, against pending applications,
nor consider any questions raised in such petitions relating to the tenderability or acceptability of the pending
long-form applications.  Although some commenters called for the review of all pending applications and
petitions to deny prior to auction, we believe that the interests of this group of pending applicants will be best
served overall by our approach.  Only those pending applicants who ultimately become winning bidders will
need to expend time and resources to amend their long-form applications.  Moreover, if we were to review all
of the considerable number of pending applications, and any petitions to deny against them, prior to an auction,
we would delay the commencement of bidding significantly.  Proceeding to the auction as expeditiously as
possible will not only end the administrative limbo in which these pending applications have been caught, but
will also result in the licensing of new broadcast stations to serve the public more quickly.

     85.  Following the close of the auction and the issuance of a public notice announcing the winning
bidders, we will require each winning bidder to submit a down payment on its winning bid(s) within ten
business days, and to make any necessary amendments to its previously-filed long-form application(s) within
30 days.  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 rare instances in which the filing window for
petitions to deny against the winning bidder's application had fully or partially run prior to the enactment of
the Budget Act, we will, consistent with the procedures adopted herein for petitions to deny following an
auction generally, allow ten days for the filing of petitions to deny.  See infra  165.  We believe this approach
is appropriate and not unduly burdensome, particularly given the rarity of the situation and the abbreviated
petition to deny period for auction winners' applications.  We will also, at this time, consider any pending
petitions to deny that were previously filed against the winning bidder.  For the reasons discussed in greater
detail in  99 below with respect to the frozen hearing cases, we will consider site assurance and financial
qualification issues raised in any petition to deny only to the extent they involve allegations of false
certification. 
   
     86.  If the Commission denies any petitions to deny and otherwise determines that the applicant is
qualified, we will then follow our general procedures set forth herein for payment and for issuing the
construction permit to the winning bidder.  See infra  166.  The previously-filed long-form applications of the
unsuccessful competing bidders will be dismissed following the grant of the winning bidder's construction
permit.  If, however, the winning bidder fails to remit the required payments, is found unqualified to be a
licensee, or is otherwise disqualified, we will exercise our discretion to offer the construction permit to the other
highest bidders in descending order at their final bids.  Because Congress has expressly restricted
participation in any auction of the mutually exclusive applications subject to Section 309(l) to the pending pre-
July 1st applicants, we believe that offering any construction permit upon which the winning bidder defaults
to the next highest bidders, rather than reauctioning the construction permit to new applicants, would comport
with statutory requirements and would be more expeditious.  

     87.  In organizing the auction of the pre-July 1, 1997 pending broadcast applications subject to the
comparative freeze, the Commission retains the discretion to conduct a combined auction of some or all pending
applications subject to competitive bidding, or to conduct separate auctions for the different services.  We also
retain the discretion to include some or all of these pending broadcast applications when the Commission holds
auctions of unsold or defaulted licenses in other services.  

     88.  Special Auction Procedures for Frozen Hearing Applicants.  In the Notice, 12 FCC Rcd at
22376 ( 30), we tentatively proposed that in these hearing cases the Administrative Law Judge (or the General
Counsel in cases pending before the Commission) would issue an order indicating that the permittee is to be
selected by competitive bidding, specifying the date by which such applicants must give notice of their intent
to participate in the auction, and stating whether there are unresolved issues as to the basic qualifications of
any particular applicant.  We tentatively proposed to terminate the hearing proceeding in those cases in which
there were no such issues, and to resume the hearing in other cases only in the event an applicant with such
unresolved issues was the winning bidder after the auction.  We sought comment on whether it would be more
efficient to review the basic qualifications of the pending applicants in hearing cases prior to the auction.   

     89.  At the outset we clarify that, where the Commission has denied or dismissed an application and
such denial or dismissal has become final (e.g., when an applicant failed to seek further administrative or
judicial review of that ruling), such an entity is not entitled to participate in the auction.  Among those
remaining in the proceeding, we will permit all pending applicants to participate in the auction, without regard
to any unresolved hearing issues (or outstanding petitions to enlarge) as to the basic qualifications of a
particular applicant.  We will do so regardless of the number of remaining applicants or whether the adverse
resolution of outstanding basic qualifying issues would eliminate all but one applicant.  This serves the public
interest by not delaying the selection of an auction winner to resolve potentially irrelevant issues.  It also
comports with Section 309(j)(5) of the Communications Act authorizing the prescription of expedited
procedures for the resolution of any issues pertaining to the winning bidder's basic qualifications.  It is more
efficient to decide basic qualifying issues only against the winning applicant.

     90.  We therefore disagree with commenters who contend that deciding basic qualifying issues prior
to the auction will lead to a more expeditious resolution of these long-pending hearing cases.  Deferring such
issues until after the auction furthers the public interest by avoiding unnecessary litigation that would waste
the resources of the private parties and of the Commission.  The alternative is to postpone the auction until after
we fully litigate these unresolved questions, which may substantially delay service to the public.  In this regard,
we could not, as some commenters have suggested, exclude from the auction pending applicants based on non-
final administrative determinations or unresolved allegations against such particular applicants.  We believe
that the time and expense entailed in adjudicating fully all unresolved issues relating to the basic qualifications
as to all pending applicants would greatly exceed any additional delay that might result from the eventual
disqualification of a winning bidder.  For these reasons, we find that deferring consideration of basic qualifying
issues until after the auction is fairer and ultimately more efficient than resolving any issues relating to the basic
qualifications of all pending applicants, only one of which will be the winning bidder.  This approach is
consistent with our practice in prior auctions and lotteries of including applicants even where questions may
exist as to their qualifications.  

     91.  We disagree, moreover, that either Section 309(l)(2) or the accompanying legislative history
requires that we determine the pending applicants' basic qualifications before conducting any auction.  Section
309(l), although clear that we may only award licenses to fully qualified applicants, is silent on whether basic
qualifying issues should be adjudicated before or after the competitive bidding procedure.  But it directs that
any competitive bidding procedure employed to resolve these cases be conducted pursuant to Section 309(j). 
In this regard, Section 309(j)(5) provides that "[c]onsistent with the objectives described in paragraph (3), the
Commission shall, by regulation, prescribe expedited procedures consistent with the procedures authorized by
subsection (i)(2) for the resolution of any substantial and material issues of fact concerning qualifications." 
47 U.S.C.  309(j)(5).  The "rapid deployment of new . . . services for the benefit of the public" is one of the
objectives listed in paragraph (3), which was not amended as part of the Budget Act, and, despite the
termination of our lottery authority to award certain types of commercial broadcast licenses, Section 309(i)(2)
still accords the Commission discretion to make the determination of basic qualifications with respect to the
lottery winner only.  In fact, we initially declined to adopt rules implementing our authority to award licenses
through a system of random selection precisely because the statute originally required that we adjudicate the
applicants' basic qualifications before the lottery.  This undermined the primary purpose of the statute, which
was to reduce the expense, delays and backlogs incurred by comparative proceedings.  Auction authority was
likewise granted to avoid the costs and delays of comparative hearings, and the language in Section 309(i)
is comparable to Sections 309(j)(1) and 309(l) in that both prescribe requirements that must be met before the
Commission can award a license, not before it conducts a lottery or an auction.  In these circumstances, we
believe that, if Congress had intended to require that in these frozen Bechtel cases the Commission depart from
its established practice of determining qualifications only with respect to the winning bidder, it would have done
so explicitly.  The Conference Report does not suggest otherwise.  It provides that "[t]he Commission shall
limit the class of eligible applicants who may be considered qualified bidders (provided such applicants
otherwise qualify under the Commission's rules) to the persons who filed applications with the Commission
before that date."  This simply says that the only applicants who may be included in the auction are those on
file before July 1, 1997 who meet the Commission's rules to be a qualified bidder, not those who are necessarily
qualified to be a licensee.  In this respect, the Conference Report supports our conclusion that Section 309(l)(2)
does not require that we exclude from an auction pre-July 1, 1997 applicants with outstanding, unresolved
basic qualifications issues.  

     92.  As a result of settlements executed during the 180-day waiver period, all of the frozen hearing
cases are now pending before the Commission.  Following release of this order, the General Counsel, acting
on delegated authority, will issue an order in each case identifying the eligible, qualified bidders entitled to
participate in the auction, referring all such cases to the Mass Media Bureau for processing in accordance with
the auction procedures outlined above for the frozen Bechtel non-hearing cases, and either stay or terminate
the hearing proceeding, depending on whether there are any unresolved hearing issues (including any unresolved
petitions to enlarge issues) relating to the basic qualifications of any particular applicant.  As proposed in the
Notice, 12 FCC Rcd at 22376 ( 30), the hearing proceeding will resume only in the event that such an
applicant is the winning bidder.  
  
     93.  Thereafter, all pleadings filed before the auction relating to any frozen comparative case (whether
hearing or non-hearing) should be submitted to the Mass Media Bureau for processing in accordance with its
procedures for frozen non-hearing cases outlined above, except that settlement agreements in stayed hearing
proceedings should be submitted to the Commission.  As we recognized in the Notice, 12 FCC Rcd at 22376-
77 ( 32), the Mass Media Bureau, as a party to the 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 function with respect to any remaining qualifying issues in these hearing
cases.  We continue to believe that having the Mass Media Bureau review FCC Forms 175 to determine
completeness and process administrative information relating solely to the conduct of the auction does not entail
decision-making responsibilities that would violate the separation of  functions requirement.   No commenters
disagree with this conclusion.  And, given our determination to resolve after the auction any remaining basic
qualification issues in these hearing cases, pre-auction pleadings unrelated to the conduct of the auction, except
possibly for certain settlement agreements, would be procedurally improper and will be summarily dismissed. 
Thus, even in a stayed hearing proceeding, a settlement agreement is the only type of procedurally proper pre-
auction pleading that might be filed that would entail decision-making responsibilities that could not be handled
by the Mass Media Bureau.  Such settlements, and any related pleadings, should therefore be submitted to the
Commission rather than to the Mass Media Bureau.

     94.  The General Counsel, acting pursuant to delegated authority, will expeditiously process all such
settlement agreements in accordance with all applicable Commission rules and policies, including the anti-
collusion rules, which, as discussed below, are triggered by the filing of a short-form application.  If such a
settlement agreement is approved, the General Counsel will issue an order either dismissing the application(s)
of certain previously identified qualified bidder(s) or, in the event of a universal settlement agreement resulting
in the grant of an application, terminating the proceeding.  

     95.  In the Notice, 12 FCC Rcd at 22376 ( 30), we asked for comment on how we should proceed in
the event a settlement agreement in a frozen hearing case filed either with the ALJ or the Commission was
denied or withdrawn.  We received no comments on this question.  We will proceed as follows.  If a settlement
agreement pending before the Commission is denied or withdrawn prior to the deadline for short-form
applications, the General Counsel will issue an order as described above, stating that the proceeding is ripe for
resolution by competitive bidding, identifying all qualified bidders entitled to participate in the auction, referring
the case to the Mass Media Bureau, and indicating whether the hearing proceeding is terminated or stayed
pending the completion of the auction.   
   
     96.  Post-Auction Procedures for Hearing Cases.  The post-auction procedures for hearing cases in
which the hearing proceeding was terminated before the auction shall be governed by the same procedures
outlined above for non-hearing frozen Bechtel proceedings.  

     97.  In cases in which the proceeding was stayed because there were hearing issues (or unresolved
petitions to enlarge issues) pertaining to the basic qualifications of a particular applicant, the hearing
proceeding will resume only if such applicant is the winning bidder.  In such stayed hearing cases, therefore,
the order identifying the winning bidder will also state whether the hearing proceeding is resumed.  In the event
none of the outstanding hearing issues (or unresolved petitions to enlarge issues) pertain to the winning bidder's
basic qualifications, the hearing proceeding will be terminated as a ministerial matter by the Mass Media
Bureau, and the case will proceed in accordance with the procedures for non-hearing cases (and any hearing
cases where the hearing proceeding was terminated before the auction).   

     98.  If the hearing proceeding is resumed, it will proceed as follows.  All applicants who have not
formally requested the dismissal of their applications, or whose applications have not been finally denied or
dismissed, are entitled to participate in the resumed hearing proceeding.  The Commission will issue an order
resolving according to its routine adjudicatory procedures any unresolved hearing issues and any other issues
relating to the basic qualifications of the winning bidder.  As tentatively proposed in the Notice, 12 FCC Rcd
at 22377 ( 34), we will accord the winning bidder 30 days for any amendments necessary to report changes
in its long-form application and 15 days to respond to any new petitions to enlarge.  The filing of new petitions
to enlarge will be governed by 47 C.F.R.  1.229 of the Commission's rules.  Given the small number of cases
in which the hearing proceeding is likely to resume, we deem it inappropriate to restrict the time for filing new
motions to enlarge issues, and no commenters have urged that we do so.  We clarify, however, that there will
be no new opportunity for the filing of petitions to deny in these resumed hearing proceedings. 
          
     99.  Site and Financial Certification Issues.   To the extent that there are unresolved site or financial
issues in these resumed hearing proceedings, or such issues are requested in a new petition to enlarge issues,
we will resolve such issues (or add such issues if a substantial and material question of fact is raised) only to
the extent that they involve a question of false certification.   As discussed in  172-176 below regarding
broadcast auctions generally, we are eliminating the site and financial certification requirements from the long-
form applications filed by auction winners.  In these circumstances, we deem it inappropriate to resolve such
issues in cases in which there has not been a settlement agreement and the permittee must therefore be selected
by competitive bidding.  The winning bidder is subject to the same requirements regarding the payment of the
winning bid, and the same payment provisions in the event of a default as any other broadcast applicant granted
a construction permit through a system of competitive bidding.  It is those requirements, rather than the original
certifications, that serve as a mechanism to discourage insincere proposals.  For this reason, adjudicating issues
relating to whether the winning bidder had reasonable assurance of site availability or was financially qualified
would waste the resources of the Commission and of the parties and would serve only to delay service to the
public.  Candor, however, continues to concern the Commission whether it awards the broadcast construction
permits through the comparative hearing process or through a system of competitive bidding.  Cf. Dorothy O.
Schulze and Deborah Brigham, A General Partnership, 13 FCC Rcd 3259, 3264 (1998).  Issues relating to
whether the winning bidder falsely certified reasonable assurance of its site availability or financial
qualifications must therefore be resolved before we can grant a construction permit to the winning bidder. 

     100.  All other unresolved hearing issues and any new issues relating to the winning bidder's basic
qualifications in these cases will be resolved in accordance with the Commission's routine adjudicatory
procedures.  Thus, the Commission will issue an order resolving such issues and, if appropriate, grant the
winning bidder's application.  In the event the winning bidder is ultimately disqualified and such determination
is not subject to further administrative and judicial review, we will, as urged by some commenters, exercise
our discretion to offer the construction permit to the other highest bidders in descending order at their final bids. 
See 47 C.F.R.  1.2109.  We do not believe that reauctioning any permit upon which the winning bidder
defaults or is disqualified would serve the public interest because the Commission is precluded by Section
309(l) from soliciting any new applicants to participate in such a reauction, and a reauction could also entail
some further delay in granting the permit.  

     101.  Refunds.  In the Notice, 12 FCC Rcd at 22370-71 ( 16), we proposed to refund all hearing fees
paid in any frozen comparative proceeding in which the permittee is ultimately selected by competitive bidding
rather than through the comparative hearing process, and also to refund the filing fees paid by any applicant
that elects not to participate in the auction.   Given the length of the comparative freeze, we continue to believe
that such refunds are appropriate as a matter of fairness. Certain commenters request that we pay such refunds
immediately, with interest, because, they assert, the fees were collected under false pretenses and are being
improperly retained.  We disagree.  All such fees were properly collected at a time when a comparative
hearing was the only mechanism for resolving mutually exclusive applications for full power radio and
television stations, and we have not impermissibly retained any fees.  In this First Report and Order we decide
for the first time to exercise our discretion under Section 309(l) regarding comparative licensing cases and to
resolve such cases by a system of competitive bidding, pursuant to our newly authorized auction authority for
commercial broadcast licenses.  Moreover,  there is no provision in the statute or our implementing rules
authorizing the refund of fees with interest.  We believe that the payment of interest would be inappropriate
here, particularly since we charge penalties but do not assess interest for late-filed fees.    

     102.  Administrative considerations dictate that refunds be issued only upon a specific request, rather
than automatically.  In this regard, the procedure for requesting a refund is neither complicated nor lengthy. 
As to the timing of the refunds, however, we agree with commenters that refunds to applicants electing not to
participate in the auction should not be delayed until after the grant of the winning bidder's application is
final.  On or before the date for filing a short-form application, pending applicants in all comparative licensing
cases subject to resolution by competitive bidding pursuant Section 309(l) may file a pleading disavowing any
interest in participating in the auction and seeking the dismissal of their applications.   Once the dismissal of
any such application is final, we will entertain requests for refunds of any hearing and filing fees actually paid
by such applicants.    

     103.  However, we will not refund filing fees paid by applicants participating in the auction that are
outbid by a competing applicant.  We take the extraordinary step of refunding filing fees paid by those
applicants not participating in the auction, in recognition of the fact that these applicants might not have filed
their applications if they had known the permit would be awarded by competitive bidding.   This is appropriate
as a matter of fairness because these applications have been pending up to four years or longer.  There is no
comparable basis to refund such fees to unsuccessful bidders, which, but for the higher bid of a competing
applicant, would have received a construction permit.  In contrast to applicants withdrawing their applications
rather than participating in a competitive bidding proceeding, unsuccessful bidders, by competing in the
auction, have continued to prosecute their applications.  There is therefore no reason to refund previously paid
filing fees.  Although equitable considerations militate against requiring applicants to pay fees for proceedings
in which they do not participate, the ultimate disposition of an application is not a valid basis for refunding
filing fees.
    
     104.  As to the timing of the refund of hearing fees to such unsuccessful bidders, the refund is 
premised on the fact that applications, filed in anticipation of a comparative hearing, are now decided by
auction.  Refunds are therefore premature until the dismissal or denial of the unsuccessful bidder's application
is final and it can no longer challenge the winning bidder's basic qualifications.   That occurs, however, only
once the grant of the winning bidder's application and the denial of the losing bidder's application is final.  
     
      2.  Pending Applications Not Subject to Section 309(l)     

     105.  As generally described above in  7-12 and  60-65, a broader group of pending mutually
exclusive applications falls outside the scope of Section 309(l) and is subject to the mandatory auction authority
contained in Section 309(j)(1).  These applications include mutually exclusive pending applications for the
secondary broadcast services (whether filed before or after July 1, 1997), and competing full service AM and
FM applications filed on or after July 1, 1997, but prior to the temporary freeze on the filing of such
applications imposed after the release of the Notice in this proceeding.  This pending group subject to auction
under Section 309(j)(1) also includes a few situations where one broadcast application was filed before July
1, 1997, and other mutually exclusive applications were filed on or after that date.  We will, as proposed in
the Notice, 12 FCC Rcd at 22379-80 ( 41), apply to the extent possible the general competitive bidding
procedures adopted for future broadcast auctions.  See Section III(C)(3).  The minor adjustments necessary
to be made to our general competitive bidding procedures to accommodate the pending mutually exclusive
applications not subject to Section 309(l) are set forth below.  Any of these pending applicants who choose not
to participate in an auction may also request a refund of their previously-paid filing fees, pursuant to the
procedure set forth with regard to the Section 309(l) pending applicants.  See supra  101-104.

     106.  The most significant issue with regard to the pending applications falling outside the scope of
Section 309(l) concerns the pool of bidders who will be eligible for any auction of these mutually exclusive
applications.  In contrast to new Section 309(l), which expressly restricts the group of applicants eligible to
participate in an auction to the pre-July 1, 1997 applicants, Section 309(j)(1) is silent on that question.  This
section neither precludes the Commission from restricting the class of eligible bidders to those with applications
already filed, nor requires the Commission to reopen the filing period for additional applicants that would be
eligible to participate in the auction.  Because we have discretion as to whether to conduct an auction limited
to the pending mutually exclusive applications, or whether we include such 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 asked for comment on how to exercise this discretion.  See Notice, 12 FCC Rcd
at 22380 ( 42). 

     107.  All commenters addressing this issue oppose the reopening of any filing periods or windows that
have already closed to allow additional parties to file competing applications.  They argue that reopening any
such filing periods or windows would be unfair to pending applicants who were diligent in filing their
applications in a timely manner and would reward dilatory applicants who had previously failed to file within
clearly delineated time parameters.  Commenters assert that th