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Finally, we discuss several procedures that might be used to award spectrum not specifically reserved for noncommercial educational use but for which NCE entities may apply pursuant to Sections 73.201(radio) and 73.606 (TV) of our rules.  X-  I. BACKGROUND ă  Xv- 2. Most organizations that want to operate noncommercial educational television, radio, and FM translator stations apply for specific channels that the Commission reserves exclusively  X1-for the use of noncommercial educational stations. See 47 C.F.R.  73.501(radio) and 73.606  X -(TV). A wide variety of entities may be eligible to apply for these channels, including schools, churches, educational divisions of state and local governments, and notforprofit  X -corporations and foundations.  * yOe - xZԍ NCE stations must promote a primarily educational purpose and not air commercials. Within those limits,  xKthere are many programming choices on NCE stations, such as instructional programs, programming selected by  yO- xstudents, bible study, cultural programming, indepth news coverage, and children's programs such as Sesame Street that entertain as they teach.  Applicants must demonstrate that they meet basic eligibility  X -requirements, which we do not propose to change. See 47 C.F.R.  73.503 (radio) and  73.621 (television). Alternatively, applicants that are eligible as noncommercial entities can elect to operate on the remainder of the broadcast spectrum which, although not specifically  X-reserved for NCE use, is also available to them. See generally 47 C.F.R.  73.201 and  Xy-73.606.  We address herein, how the Commission will select one permittee when (1) there are multiple eligible NCE applicants on NCE spectrum, and (2) when NCE entities are among the applicants competing for commercial spectrum.  X-3. Existing Selection Process. With respect to reserved band NCE spectrum, for the past 30 years, the Commission has convened traditional evidentiary hearings before administrative law judges to select among competing applicants. The criteria used in these hearings were established in 1967, and differ from those applied in choosing among applications for the commercial spectrum. The primary factor considered in traditional NCE hearings is "the extent to which each of the proposed operations will be integrated into the overall educational  X-operations and objectives of the respective applicants." See New York University, 10 RR 2d 215, 21718 (1967). The judge can also consider whether "other factors" in the record demonstrate that one applicant will provide a superior noncommercial educational broadcast  XN-service. Id.; See also CarnegieMellon Student Government Corporation, 7 FCC Rcd 3914,  X7-391516 (1992). These other factors include areas and population served, hours of operation,  X -and promises to install auxiliary power equipment.  * yO#- xЍ Another previous NCE criterion (the manner in which the proposed operation of the respective applicants meets  yOI$- xZthe needs of the community to be served) was eliminated due to elimination of formal ascertainment studies. See  yO%- xReal Life Educational Foundation of Baton Rouge, Inc., 6 FCC Rcd 2577, 2578 (Rev. Bd. 1991) citing Program  yO%-Policies and Reporting Requirements Related to Public Broadcasting Licensees, 98 FCC 2d 746 (1984). Ċ The hearing judge has considerable" 0*&&aa>" discretion to determine which applicant is best, and explains his conclusions in a written decision. In the event of a tie, the judge may require NCE applicants to share the channel,  X-with each operating part time. See generally 47 C.F.R.  73.1715. Commenters to this  X-proceeding, and even some of our decision makers,H* yO4-ԍ See para. 5 infra.H have criticized the existing hearing procedures as too costly, too time consuming, and as being based on selection criteria that  X-often focus on trivial distinctions between applicants.   X_-4. The selection criteria applied to noncommercial educational applicants who choose, for whatever reason, to apply to operate on nonreserved spectrum has been different. Because such applicants would be competing with commercial applicants, and would be free to operate commercially if they so wished, the Commission has required all nonreserved band applicants to follow the rules applicable to commercial stations. Prior to our recent establishment of spectrum auctions for commercial applicants, traditional comparative hearings were used to award licenses on commercial spectrum. All applicants in those hearings, commercial and noncommercial, were compared under the "commercial" criteria,  X -which are different from those used on reserved NCE spectrum. See Comparative Selection,  X-MM Docket No. 97234, FCC 98194 (August 18, 1998) at para 2, citing Policy Statement on  Xy-Comparative Broadcast Hearings, 1 FCC 2d 393 (1965).  XK-5. History of This Proceeding. Interest in changing the licensing process on reserved NCE frequencies began in the early 1990's. In 1991, the Commission's Review Board described the existing NCE criteria as "vague" and "meaningless," and indicated that it was often  X-difficult for it to expound a rational choice in noncommercial licensing cases. Real Life  X-Educational Foundation of Baton Rouge, Inc., 6 FCC Rcd 2577, 2580, n.8 (Rev. Bd. 1991). Shortly thereafter, a federal court reached similar conclusions with respect to the core  X-criterion used to evaluate commercial applications, in a line of cases known as the Bechtel  X-decisions.XX* yO- xԍ Bechtel v. FCC, 957 F.2d 873 (D.C. Cir. 1992); after remand to FCC 10 F.3d 875 (D.C. Cir. 1993) (Bechtel)  x(overturning as unsupported by evidence of benefit, the integration credit, a major comparative factor used in commercial proceedings, which favored applicants proposing to work fulltime at their station).  As a result, we initiated a broad inquiry into possible changes for both the  X-commercial and noncommercial broadcast selection processes.nx* yO- xԍ See Notice of Proposed Rulemaking, Reexamination of the Policy Statement on Comparative Broadcast  yO - xHearings, GC Docket No. 9252, 7 FCC Rcd 2664 (1992); Further Notice of Proposed Rulemaking, 8 FCC Rcd  yOL!- x-5475 (1993); Second Further Notice of Proposed Rulemaking, GC Docket No. 9252, 9 FCC Rcd 2821 (1994);  yO"- xNotice of Proposed Rulemaking, Competitive Bidding for Commercial Broadcast and ITFS Service Licenses, MM  yO"- x;Docket No. 97234, GC Docket No. 9252, Gen. Docket No. 90264, 12 FCC Rcd 22,363 (1997); First Report and  yO#-Order, MM Docket No. 97234, GC Docket No. 9252, Gen. Docket No. 90264, FCC 98194 (August 18, 1998).n  The noncommercial and commercial aspects of the inquiry were later separated, so that commenters could focus in  Xe-greater depth on the noncommercial issues. Notice of Proposed Rulemaking, MM Docket No."e 0*&&aa"  X-9531, 10 FCC Rcd 2877 (1995) (Notice). Twentyone commenters including colleges, religious broadcasters, government entities, and other notforprofit educational organizations,  X-responded to our request for NCE comments.* yOK- x<ԍ A summary of suggestions from the comments appears in Appendix A and a list of commenters appears in Appendix D. There is a temporary freeze on the processing of mutually exclusive NCE applications, pending the establishment of new selection criteria.  X-See Notice, 10 FCC Rcd at 2879.  Xv-6. Legislative Initiatives. The Balanced Budget Act of 1997 ("Act") was enacted after our  X_-last opportunity to seek comment in the current proceeding. See Balanced Budget Act of  XH-1997, Pub. L. No. 10533, 11 Stat. 251 (1997) (Balanced Budget Act). Pursuant to explicit direction from Congress in the Balanced Budget Act, the Commission recently adopted  X -auction procedures for mutually exclusive commercial broadcast licenses. Notice of Proposed  X -Rule Making, Competitive Bidding for Commercial Broadcast and ITFS Service Licenses,  X -MM Docket No. 97234, 12 FCC Rcd 22,363 (1997); First Report and Order, MM Docket  X -No. 97234, FCC 98194 (August 18, 1998) (Competitive Bidding). With respect to NCE spectrum, the Act does not grant auction authority, but specifically preserves the Commission's authority to choose NCE licensees by lottery, while simultaneously revoking  X-that authority in commercial broadcast services. See Balanced Budget Act,  3002(a),  Xy-codified as 47 U.S.C.  309(i)(5)(B). Thus, we believe that it is appropriate to consider the use of lotteries for NCE applications as an option on reserved band frequencies. The language of the Balanced Budget Act requires auctions for commercial licenses but prohibits auctions to resolve mutually exclusive applications for "noncommercial educational broadcast" and "public broadcast stations," as defined by Section 397(6) of the Act. The latter provision, codified as Section 309(j)(2)(C), raises questions as to whether, and under what procedures, noncommercial entities may continue to compete with commercial applicants for commercial  X-spectrum. We discussed this issue briefly in the Competitive Bidding proceeding, and determined that we would benefit from further discussion of this issue in the present proceeding.  X|- II. DISCUSSION ă  XN- A. Procedures on Reserved NCE Spectrum  X -7. First, we address procedures to be used for applications for spectrum in the reserved band, which is the primary focus of the present proceeding. We consider below three options for comparing applicants for NCE spectrum: (1) traditional comparative hearings (the current selection method); (2) lotteries (an option that we are considering based on Congress's preserving our authority to conduct lotteries for NCE applications); and (3) a point system (an option suggested by some of the commenters). We seek comment on our tentative conclusion to select either a lottery or a point system, as described in further detail below. "" 0*&&aa!"Ԍ X-ԙ  x1. Traditional Comparative Hearings  X-8. The Balanced Budget Act requires the use of competitive bidding procedures for certain pending, and all future, mutually exclusive commercial broadcast applications, but prohibits the use of competitive bidding procedures to resolve noncommercial proceedings involving  X-stations described in Section 397(6) of the Communications Act. Balanced Budget Act,   Xv-3002(a) (1) (A), codified as 47 U.S.C.  309(j)(2)(C). We are also considering whether to continue traditional noncommercial comparative hearings. The majority of comments filed so far in this proceeding favor retaining some form of comparative hearing. A few of these commenters suggest that we keep the current system entirely because, despite that system's shortcomings, it is fair to all applicants. A greater number of commenters, while assuming the continued use of traditional hearings, focus on changing the criteria used in those hearings to make them more meaningful. The primary benefit of traditional hearings, as presented in the comments, is that those hearings afford substantial discretion to Commission decisionmakers. Some commenters believe that such discretion is needed if we are to select the best licensee. However, other commenters maintain that well qualified NCE applicants can be selected by more objective methods that are simpler and less costly.  Xb-9. We have considered these views supporting retention of the existing process, but tentatively conclude that we should not continue to use traditional hearings. As we noted in the context of the commercial proceeding, traditional hearings have disadvantages which  X-remain of concern today.* yO- x>ԍ See Competitive Bidding, 12 FCC Rcd at 22365, citing Random Selection, 4 FCC Rcd 2256 (1989),  yO^-terminated, 5 FCC Rcd 4002 (1990). Specifically, traditional comparative hearings can be cumbersome, costly, and delay service to the public without substantial offsetting public interest benefits in terms of selecting the "better" applicant, because the selection often turns on minimal  X-distinctions.  Due to similar concerns, we question the continued advisability of using traditional hearings to select among noncommercial applicants. Although we recognize differences between commercial and noncommercial broadcasting, we tentatively conclude that elimination of traditional comparative hearings is equally, if not more, important in noncommercial proceedings, where applicants often have limited financial resources and the effects of delays and high costs are therefore amplified. These problems with traditional hearings have particular significance in the noncommercial context, as reflected in a longstanding staff practice giving educational applicants the opportunity first to resolve mutual exclusivity among themselves by making technical changes, and thereby avoid the  X -burdens imposed by traditional hearings.C X  * yO"- xԍ Recognizing the difficulty that some competing educational applicants have bearing the costs associated with  x,traditional hearings, it is a matter of longstanding staff practice to afford competing NCE radio applicants a 60day  xYperiod prior to hearing designation to amend their applications to remove the mutual exclusivity, such as by making  yO2%- xtechnical changes or entering into sharetime arrangements. See, e.g. Letter from Chief, FM Branch, Mass Media  yO%- xBureau to Family Stations, Inc., In re: NEWFM, Kingston, N.Y., Application No. BPED881005MI, Ref. No. 8920"%0*&&1&"ԫ xHC (Mass Media Bureau September 14, 1990) (giving two NCE radio applicants 60 days to remove their mutual  xexclusivity "to avoid sending educational applicants to hearing, if at all possible, so that the substantial delays and expenses involved in the hearing can be avoided" ). C Although a few commenters suggest that we might"  0*&&aa" reduce the burdens of traditional NCE comparative hearings by using "paper" hearings, they do not describe this process or address shortcomings with some types of paper hearings that we have noted in other communications services. For example, in choosing lotteries over paper hearings for multipoint distribution systems, we noted that paper hearings, though not as resourceintensive as full proceedings, are still cumbersome, and have taken up to two  X-years to complete.M * yO& - xԍ See Local Multipoint Distribution Service, CC Docket No. 92297, 8 FCC Rcd 557 (1993). See also Report  yO - xJand Order, Interstate Rate of Return Represcription, CC Docket No. 92134, 10 FCC Rcd 6788 (1995) (simplifying  yO - x-burdensome paper hearings); Second Report and Order, Selecting Among Certain Competing Applications Using  yO~ -Random Selection, 93 FCC 2d 952 (1983) (choosing lotteries over paper hearings in LPTV).M We believe that procedures which are simpler than traditional hearings could achieve satisfactory results, while placing fewer burdens on noncommercial applicants and conserving Commission resources. Accordingly, we tentatively reject traditional hearings in favor of using a lottery or point system for NCE applications.  X - x2.  Lotteries  X - 10. In the Balanced Budget Act of 1997, Congress preserved our authority to use lotteries as  X -a method for resolving competing applications by NCE applicants.  Lotteries have both advantages and disadvantages. On the positive side, the Commission can select applicants much more quickly through a lottery process than through a traditional comparative hearing, and even more quickly than through a point system, and therefore ensure service to the public sooner. We also believe that lotteries would be less expensive to administer than traditional hearings or point systems, thereby placing fewer burdens on the financial resources of applicants and the Commission. Such benefits could be especially meaningful because, as noted above, many NCE applicants have limited financial resources. Further, the number of competing applications received in the NCE service is increasing annually, even with the  X-processing freeze that is currently in place.] * yO- xLԍ As of early October 1998 there were 91 mutually exclusive applications in 28 separate proceedings for  yOO- xireserved NCE television channels and 699 applications in 252 separate proceedings competing for reserved NCE  x,radio channels. The number of mutually exclusive NCE applications filed each year is growing, especially for radio.  xFor example, of the 445 applications for new or major changes to NCE FM radio stations received in 1997,  yO - xapproximately 250 were mutually exclusive. Based on receipts thus far, we project that approximately 750 NCE  yOo!-radio applications will be filed in 1998, of which approximately 500 will be mutually exclusive. ] We believe that once this freeze is lifted the numbers of mutually exclusive applications will increase even more. Lotteries could be of significant benefit to us and to applicants in addressing these increased numbers of  X-applications, and also in reducing our current backlog of almost 800 mutually exclusive NCE television and radio applications. Finally, lotteries could reduce the delays in service posed by postdecision appeals because unsuccessful applicants are less likely to appeal the results"H 0*&&aa" of random selection than of a more subjective process.  X- 11. Weighing against these potential advantages of lotteries are several unresolved legal and policy questions. For example, a lottery is a method of random selection based on chance. Some commenters, including the Association of America's Public Television Stations and National Public Radio, have previously raised concerns about the quality of public service that would be provided by applicants who had not been compared to other applicants in a more subjective manner. Arguably, however, all qualified NCE applicants, whether chosen by a lottery or by a point system, would have an incentive to offer quality service to the public in order to elicit the financial support of listeners and underwriters. We invite comment on this issue, as well as on the following issues specific to lotteries.  X - 12. Weighting of Lotteries. The Communications Act, in order to promote the diversification of ownership, requires us to give a significant preference in any broadcast lottery to two types of applicants: (1) those who would increase the diversification of ownership; and (2) those controlled by a member or members of minority groups. 47 U.S.C.  309(i)(3). This statutory mandate is consistent with our own historical commitment to encourage diversity of  Xy-ownership and minority ownership in commercial broadcasting. See Competitive Bidding, 12  Xb-FCC Rcd at 22,398 402 (1997) and cases cited therein. However, the U.S. Supreme Court  XK-has held that policies granting racial preferences are subject to strict scrutiny.5 K* yO- xԍ Adarand Constructors v. Pena, 515 U.S. 200 (1995). See also Lutheran ChurchMissouri Synod v. FCC, No.  yO-971116 (D.C. Cir. April 14, 1998), petition for rehearing en banc denied (September 15, 1998).   5 The minority ownership preference required by the statute will have to surmount this constitutional hurdle.  X-Accordingly, we invite comment on how we can develop NCE lottery preferences for minorities consistent with the applicable legal standard and whether the constitutional hurdles  X-should deter us from using lotteries to award NCE licenses. We note that we have ongoing  X-studies on related issues that will be relevant to the resolution of this matter. We seek comment on whether we should postpone a decision to adopt lottery procedures until such studies are completed and we provide a further opportunity for comment on those studies. We also ask, on the other hand, whether the public interest in lifting the current freeze, so that the NCE spectrum can be effectively utilized as soon as possible, militates against postponement. Finally, we urge any commenters advocating lottery preferences for minority ownership to submit empirical evidence supporting such preferences.  X - 13. If these constitutional problems can be overcome, we would expect to weight a lottery  X -2:1 in favor of applicants controlled both de jure and de facto by members of minority  X-groups.  * yO#- xYԍ The term "minority group" includes Blacks, Hispanics, American Indians, Alaska Natives, Asians, and Pacific Islanders. 47 U.S.C.  309(i)(3)(C)(ii); 47 C.F.R.  1.1621(b). An additional preference would be available to applicants, minority or non X-minority, with neither de facto nor de jure control of any other, or few other, media of mass"x 0*&&aa"  X-communication.* yOy- xԍ The term "media of mass communication" includes television, radio, cable television, daily newspapers, and  yOA-other services as identified in 47 U.S.C.  309(i)(3)(C)(i) and 47 C.F.R.  1.1621(a).  Applicants qualifying for this second preference would receive a 2:1 preference if their owners do not have a majority interest in any other media of mass communication, or a 1.5:1 preference if they have interests in no more than three other  X-outlets, none of which serve the community of the proposed station. No media ownership preference would be granted to an applicant with a majority interest in any other media of mass communication serving the same community as the NCE broadcast station for which it  Xv-is applying, even if it is the applicant's only other media interest. These are the same  X_-weightings that have been used in past Low Power Television lotteries,_ * yO0 - xԍ The Commission has concluded that, under the provisions of the Balanced Budget Act, it must award future  yO -LPTV licenses by auction. Competitive Bidding, FCC 98194 (August 18, 1998).  and are consistent  XH-with the statutory requirement for broadcast lotteries and its legislative history.Hx* yOq- xԍ See Communications Amendment Act of 1982, S. Rep. No. 97101, 97th Cong., 2d Sess. (1982), reprinted  yO9-in 1982 U.S.C.C.A.N. 2237, 229192. See 47 C.F.R.  1.1622. The formulas for awarding preferences are reproduced as Appendix B for the reader's convenience. We seek comment on this proposal. If commenters would favor a lottery weighted for factors in addition to those specified in the statute, the commenters should identify those factors and identify the statutory basis for such additional factors. For example, if supported by a sufficiently detailed analysis and identification of a source of statutory authority from commenters, we might consider adopting an additional factor that is given less weight than the two statutory factors, and/or whose statistical impact is considered after performing the required steps outlined in Appendix B.  Xb- 14. We are concerned about whether weighting of lotteries in favor of applicants owning few other stations would affect statewide educational networks operating pursuant to state  X4-education plans. We view the development of these networks as positive. See, e.g. 47 C.F.R.  73.502. However, if these stations are under common control, they might be placed at a disadvantage in a lottery by reducing or eliminating any preference for media diversity. Accordingly, we ask commenters to provide us with information about whether stations that are part of statewide educational plans are generally under common control. Would the applicants for such stations generally be statecontrolled entities, or independently controlled entities that might qualify for a diversity preference in their own right? To the extent that they would be deemed a single entity not entitled to a diversity preference, is this a factor that should deter us from use of a lottery?  XN-15. Other Lottery Considerations. To award lottery diversity preferences for minority controlled entities, and entities who control few other stations, we would have to identify those in control of each NCE applicant. Determining the control of organizations is not always straightforward in the NCE context, where applicants are generally nonprofit, non" 0*&&aa["ԫstock entities without such traditional indicia of control as stock ownership, equity, and rights  X-to receive dividends./ * yOb- xԍ There is the possibility that a small segment of noncommercial educational stations have stockholders, stock  x,subscribers, or holders of membership certificates. FCC Form 340, Instructions for Section II Legal Qualifications.  yO- xBut see Notice of Inquiry, MM Docket 8977, Transfers of NonStock Entities, 4 FCC Rcd 3403 (1989) (asking at what point we should consider a transfer of control to have occurred in nonstock organizations)./ See 47 C.F.R.  1.2110(b)(2).  Therefore, we seek comment on determining control of NCE applicants for purposes of lottery preferences. In lotteries for Low Power Television (LPTV) stations, which can be licensed to commercial as well as to noncommercial entities, we have based lottery preferences for noncommercial entities on the  X-composition of the station's governing board. Second Report and Order, Selection from  Xv-Among Certain Competing Applicants Using Random Selection or Lotteries, Gen. Docket No. 81768, 93 FCC 2d 952 (1983); 47 C.F.R.  1.1621(c). We have clarified, however, that the numerical composition of the Board, standing alone, is insufficient to warrant a lottery  X1-preference for minority ownership where nonminorities nevertheless exercise de facto or de  X -jure control of the nonstock corporation. See Trinity Broadcasting of Florida, 8 FCC Rcd 2475, 2477, 2479 (1993) (refusing request for declaratory ruling that applicant was "minority owned" under 47 C.F.R.  73.3555(e) because minority group members occupied majority of  X -directorship of nonstock corporation and holding that usual indicia of de facto control are applicable to nonstock corporation).  X-16. We seek comment on whether it is appropriate to use board composition in an NCE context, for purposes of determining whether an applicant is entitled to either of the statutory lottery preferences. The current record indicates that some organizations may have charters or bylaws that require outgoing board members to be replaced with others of similar  X4-characteristics. Commenters also indicate, however, that participation on other NCE governing boards can be voluntary, honorary, or temporary, and that organizations might invite or not invite the participation of certain board members only after a licensing decision  X-is made. * yOP- x,ԍ These concerns were raised in a different context, i.e., as criticism of a proposed hearing credit for applicants  yO-whose governing boards are similar to the composition of the community. See Appendix A.  We invite comment on whether we should adopt standards to guard against manipulation of governing board membership in order to obtain a statutory preference and, if so, how.  X-17. We also note an effect that lotteries could have on reserved band FM translators  X|-rebroadcasting a commonly owned NCE primary station within that station's service area.& |* yO5"- xԍ This proceeding addresses translators only to the extent that the translators propose to operate on reserved  x[NCE frequencies in the FM band. We recently established auction procedures for TV translators and for FM  yO#- xtranslators that operate on nonreserved spectrum. See Competitive Bidding. There are no specific frequencies for use by noncommercial educational translator stations, except in the reserved portion of the FM band. & Such translators generally operate to fill in gaps in the main station's service, for example,"e 0*&&aa" when there are dead spots caused by an area's topography. If such "fillin" NCE translators were included in lotteries with "outofarea" translators proposing to import distant signals, the fillin applicants could not get a diversity credit due to the existence of the nearby coowned station. We do not believe that this would be a desirable result, given that the coowned station is unable to serve all areas within its predicted contours without the translator. Under our current rules, when we are faced with such applications, "fillin" translators are given preference over those that import distant signals, and if all applicants are equal in terms  X_-of the "fillin" issue, then other secondary considerations are applied. See 47 C.F.R.  74.1233(d) (g). In the event that we elect to proceed by lottery, should we adopt twotrack eligibility rules for fillin and nonfillin translators? Specifically, we anticipate that only fillin translator proposals would be eligible to compete with other fillin proposals in a lottery. Nonfillin facilities would be eligible to compete in a lottery only if no conflicting fillin proposals were received. We invite comment on this issue. Also, if commenters believe that lotteries have a potential adverse impact on any other particular type of applicant, we ask them to describe that impact and to suggest ways to minimize it.  X-18.  Finally, we ask whether commenters foresee any potential for abuse or speculation in NCE lotteries. In 1989, we expressed concern that lotteries for commercial broadcast  Xb-stations might generate speculative applications.LXb* yO- xԍ See Notice, Selection from Among Competing Applicants for New AM, FM, and Television Stations by  yO- xRandom Selection, MM Docket No. 8915, 4 FCC Rcd 2256 (1989); Report and Order, MM Docket No. 8915, 5 FCC Rcd 4002 (1990). L Do commenters believe that the potential for such abuse exists in the noncommercial educational service? If so, would the holding  X4-period proposed below minimize any such concerns? See  paras. 30 31 infra. Would a limit on the number of lotteries in which applicants can participate within a given time  X-period, discourage the mass filing of NCE applications subject to lottery? Id. For example, in the LPTV service, in which applicants have also been selected by lottery, each applicant is limited to filing five applications within a particular filing window. Will the opening of specific time "windows" in which NCE applications will be accepted, limit abuse by making it less likely that applicants will file only as a response to earlier proposals,  X-copying or relying upon the work of the first applicant who files? * yO,- xԍ Under current rules, the acceptance of a noncommercial educational application announces the terms of that  xproposal and triggers the right for anyone else to file competing applications within 90 days. Under a window  xsystem, Commission action would open the filing period, giving an applicant the ability to file at the end of a window so as to lessen the potential for "copy cat" proposals.   Xe-19. Lottery Procedures. For NCE lotteries, we would expect to generally use the same procedures that have been used in the past to award permits by lottery in the Low Power Television service. 47 C.F.R.  1.1604 1.1623. For example, in the LPTV service we open filing windows at periodic intervals. During those windows applicants are limited to five applications for new stations, and an unlimited number of applications for major changes"  0*&&aa=" to existing stations. If applications filed within a window are mutually exclusive with others so filed, we use a computer program to calculate selection probabilities for each mutually exclusive applicant based on the preferences which the applicant has claimed. Based on these calculations, every applicant is given the equivalent of one "chance" in the lottery, with additional proportional numbers of "chances" given to applicants who appear to be entitled to  X-preferences. See Appendix B. This is accomplished by assigning each applicant a number  Xv-block corresponding proportionately to their number of chances of winning (e.g., in a lottery comprised of two applicants with equal preferences, each with a 1 in 2 chance of selection, one applicant would be assigned number block 000 to 499 and the other would be assigned number block 500 to 999). Applicants are given the opportunity to correct incorrect information prior to the lottery and are required to update their applications to reflect any changes that would affect lottery weighting. A drawing is then held using numbered pingpong balls to choose a winning number. For example, an applicant with the number block  X -000 to 499, would be our tentative selectee if any number within that range, such as 435, were selected. Only after selection of one tentative permittee by lottery, do we examine that proposed permittee's qualifications for grant, invite petitions to deny that proposed permittee's  X-application, and examine issues raised in any such petition.  Sometimes, without prior consideration of such matters, a lottery winner may be found unqualified or not to have been entitled to a preference which that applicant received. In such case, a second lottery is conducted. We invite comment on whether, in the event that we decide to use lotteries to award NCE construction permits, we should employ all existing LPTV lottery procedures or whether those procedures should be modified in certain ways to make them more appropriate to the NCE service. We also encourage commenters to raise any new ideas they may have  X-about lottery procedures.  X- x3. Point Systems  X-20. We also request comment on the use of a point system, as specifically described below.x* yO - xԍ If we decide that a point system is the most desirable option, we may need to seek legislation that would  xallow us to delegate to the staff the authority to examine applications pursuant to a point system. Such legislation  xwould be necessary because a point system is technically considered a type of simplified hearing, and by statute we  xcurrently only have statutory authority to delegate authority over hearings to administrative law judges, or to  yO,- xindividual Commissioners. See 47 U.S.C.  155(c)(1). The Commission has been successful in obtaining a specific  yO- xprovision of the Communications Act permitting staff consideration of ITFS point system proceedings. Id. See also  yO-ITFS Processing Issues, 11 FCC Rcd 12,380 (1996).  Under such a system, the Commission would assign points to various characteristics, evaluate applications for those characteristics, and award a permit to the applicant with the highest score. Such a system has been used with success in the Instructional Television Fixed Service (ITFS), but the specific factors used in ITFS would not be applicable to NCE"7 0*&&aa]"  X-broadcasting, due to the differing goals of these two services.* yOy- xԍ ITFS is a nonbroadcast, pointtopoint service, intended primarily to provide formal educational programming  xoffered for credit to enrolled students of accredited schools. NCE broadcasting accommodates broader educational  xypurposes. Thus, factors critical in ITFS can be of little relevance in NCE broadcasting. The Commission has  yO- x=determined that, pursuant to the general provisions of the Balanced Budget Ac t, pending and future mutually  xKexclusive ITFS applications will be resolved by auction, unless Congress enacts legislation specifically exempting  yOa-ITFS from auction. See Comparative Bidding. As with lotteries, discussed  X-above, point systems are less costly, easier to administer, and faster than traditional comparative hearings. A point system would utilize more objective selection criteria than those we have used in traditional comparative hearings. But, unlike lotteries, a point system would be designed to select the best qualified applicant, rather than leaving that selection to chance. The key to the success or failure of a point system would be the factors used for comparison. If, for example, we were to choose a point system that relies on inherently subjective factors, much of the benefit of moving away from traditional comparative hearings could be eliminated. The elements of a point system would be entirely within the discretion of the Commission, unlike lotteries which must include certain statutorily mandated preferences. This might afford us greater flexibility although, as indicated below, we would likely include factors similar to the statutory lottery factors in a point system as well. Several commenters expressed support for the use of a point system. The commenters did not, however, generally agree on the factors that they would consider, on the number of points  X -they would assign to each factor, or on what to do in the event of a tie. See Appendix A.  X-21. If we use a point system, we propose to award points as follows:  Xb-Xx (A) Local Diversity (2 points): the principal community contour of the proposed NCE station does not overlap the principal community contour of any commonly controlled broadcast station. This factor would foster broadcast diversity by enabling  X-the public to be served by different NCE licensees. Unlike the broader diversity  X-preference required in lotteries, a point system could limit the preference to local diversity. We believe that state networks generally would not be disadvantaged under such an analysis. As in lotteries, however, when considering what media outlets are commonly controlled, we are presented with an issue that presents special difficulties  X-in a noncommercial context. See para. 15 supra.(#  X|-x (B) Fair Distribution of Service : Section 307(b) of the Communications Act, 47 XxU.S.C.  307(b), provides for the fair, efficient, and equitable distribution of service among communities. The Commission has found three factors especially relevant to  X7-assessing the relative needs of various communities for broadcast service. See Faye &  X -Richard Tuck, Inc., 3 FCC Rcd 5374, 5376 (1988). We propose to incorporate these three factors into a point system by awarding points to proposals that are either:(# " @0*&&aa"Ԍx` ` (1) the first fulltime NCE aural or first fulltime NCE video service received x` ` in the community (2 points); x` ` (2) the second fulltime NCE aural or second fulltime NCE video service x` ` received in the community (1 point); or x` ` (3) the first local service licensed to the community. (1 point)  XH-Xx (C) Technical Parameters (generally 1 point, but see note 24): the station would more broadly serve the public because there is a 10 percent or greater difference in the  X -area and population to be served in this proposal than in a competing proposal.  * yO - xJԍ An applicant who covers an area and population that is 10% greater than another applicant would receive one  x;point. In rare instances an applicant with far superior coverage in comparison to others might get two points, if its  xproposal is 10% greater than a second proposal which, in turn, is 10% greater than a third proposal. In such a rare case, the first proposal would get 2 points, the second 1 point, and the third 0 points. (#  X -x (D) Other Factors : We also invite comment on whether other factors should be  X -xincluded in a point system, as discussed further in paragraphs 23 and 24 infra.  X -22. We note that technical parameters, which have been considered in traditional noncommercial educational hearings, have traditionally been examined in a subjective manner, that does not provide the quantification needed in a point system. We propose to quantify as follows and request comments on our proposal. To get any points at all, a proposal would  XK-need to cover both 10% more area and 10% more people. We have tentatively decided not to  X4-base the preference on coverage of either 10% more area or 10% more people. We are concerned that, otherwise, we would not easily be able to make meaningful distinctions between stations and the relative needs of the populations they would serve. For example, we are not convinced that we should always consider as equal (1) service focussing on the large population of a city with many existing broadcast choices, but not reaching people in outlying areas who have fewer options and (2) service to people with fewer existing broadcast choices who, although living in a very large geographic area, are fewer in number due to the presence of lakes, mountains, or deserts in proposed coverage area. A judge in a traditional hearing, after considering all of the evidence presented, might more readily determine whether such applicants were technically equal, or whether one was superior to the other. In a point system, however, we believe that it would be best to award points only to applicants who  X7-demonstrate superiority both in terms of population and area, and thereby base our decision on factors more readily compared. Proposed service to a large population within a large geographic area, would generally be superior to service to either one of these, standing alone.  X-   X-23. We recognize that in some NCE proceedings, no applicant will vary by 10% in technical parameters or propose a first or second service. In such cases, our proposed point system" 0*&&aa" would turn on solely the issue of local diversity. Do commenters consider this a sufficient basis on which to select among NCE applicants? If not, do they have other carefully supported suggestions of additional criteria? Any suggested criteria should be easy to document, difficult to feign, and directly and verifiably connected to furthering a public interest goal. To support any particular suggestion, we would recommend that commenters explain the direct link between that suggestion and a public interest goal, such as why an applicant with one particular characteristic would provide a service superior to that of an applicant using another readily available method. We would especially welcome the submission of studies or other empirical evidence supporting such comments.  X -24. Keeping the above goals in mind, we seek comment on each of the following factors as  X -possible additional bases for award of points. (1) Minority Control Credit: for applicants  X -controlled both de jure and de facto by minorities in order to further diversify the NCE mass media service. We invite comment on whether we should include this factor in light of current constitutional concerns where, unlike lotteries, we are not required to include this  X -factor by statute. If so, how might we implement this factor consistent with Adarand v.  X-Pena?P* yO -ԍ See supra para. 12. P In addition, are there racially neutral alternatives that might indirectly further our diversification goals? This factor also involves consideration of control, which as discussed  Xb-in para. 15 supra, presents special difficulties in a noncommercial context; (2)   Local  XK-Educational Presence Credit  : giving an established local organization a credit over new or distant organizations, upon a showing that obtaining a license to operate a local station is  X-important to achieving the established local organization's educational goals. X* yO&- x-ԍ For example, a school that has established itself at its current location for a significant period, and which  xwill use the station as part of its curriculum to train its students in broadcasting, might be able to demonstrate that  xonly a station in the immediate vicinity of its campus could meet its educational goals and needs. There would be  xa public interest in accommodating this need, especially from the perspective of efficient spectrum management.  xNCE spectrum is a scarce resource that can accommodate only a limited number of new entrants in a particular  xlocation. Given a choice between two NCE applicants, one that can only meet its educational goals within a small  xjspecific geographic region, and one that can operate equally well from another location, we believe it is most  xefficient to give a preference to the local applicant. The nonlocal applicant can also apply in other locations,  xincluding those where spectrum may be more readily available and, thus, the educational programming of both  xapplicants may ultimately reach the listening public. The establishment of the applicant in the area for the specific  xwperiod prior to the time of application would both help establish its need for a license at that location and reduce the potential for abuse.  xMWe view this as very different from a local residence credit, previously considered in commercial hearing  xproceedings. A local residence credit, which never applied to noncommercial proceedings but which was suggested  yO"- xby some NCE commenters, may raise potential difficulties under Bechtel to the extent that it makes assumptions  xregarding the responsiveness of programming to community needs. In contrast, the local educational presence credit  xproposed here does not assume that a local organization is inherently better qualified to respond to local needs and  xinterests. Rather, it is a recognition of a greater educational need by one particular applicant over another for a local  xbroadcast license because one organization cannot fully satisfy its educational objectives outside a particular"%0*&&&"  yO-geographic area. How long"X0*&&aa" should the organization need to be present in the local community to be considered eligible  X-for such a credit?  (3) StateWide Plan Credit: for stations that would be part of an existing  X-education plan of a state or municipality; or (4) Representativeness Credit: giving NCE television applicants, who must currently demonstrate that their leadership is broadly representative of the community, an extra credit if their leaders are significantly more  X-representative than those of other applicants.'` X* yO- xԍ For example an applicant whose leaders are from five elements of the community, as traditionally considered,  xY(e.g. businesses, civic groups, professions, religious groups, schools, government), would be more representative than  xan applicant whose leaders represent four such elements. These elements were most succinctly articulated in a  x"Community Leader Checklist" that broadcast licensees once used to ensure that they consulted with a wide cross yO - xsection of the community to formally ascertain the community's needs. See Ascertainment of Community Problems  yO~ - x=by Broadcast Applicants, 41 Fed. Reg. 1372, 1384 (January 7, 1976). Although we no longer require formal  xascertainment, the elements themselves continue to be used to determine whether television applicants are broadly  xrepresentative. As a basic eligibility question on FCC Form 340, television applicants who are educational  xjorganizations (like nonprofit corporations formed to apply for broadcast licenses), must make this showing.  xZHowever, governments and educational institutions (like colleges and schools) which are in existence for broader  xKpurposes are presumed to be broadly representative. If the Commission were to use this as a selection factor, we would propose to incorporate the elements into our rules.' See FCC Form 340, Section II, Question 3.  Xv-To the extent that commenters support any of these factors, we ask them to suggest the number of points that should be awarded.  X1-25. TieBreakers. Whatever factors might be considered in a point system, we would need to determine what to do if two or more applicants receive the same number of points. Several commenters suggest that, in the event of a tie, we should award a "finder's preference" to the applicant who filed its application first. This suggestion raised concerns among other commenters, such as National Public Radio, that any award of a license based on filing date, could result in a "land rush" for noncommercial frequencies. We agree that a reward for the first to file could result in a rush to apply for all vacant NCE channels. Such an outcome would be undesirable because it could create an artificial demand to apply for such frequencies prematurely and prevent future upgrades by existing licensees. Accordingly, we tentatively reject the idea of a finder's preference for noncommercial FM and TV stations, and  XK-focus instead on other possible tiebreaker mechanisms.XK * yO|- xiԍ We might, however, consider a first come, first served tie breaker for NCE FM translator stations, because  xa rush for frequencies is less likely in that secondary service. Consideration of filing date is one of several factors currently used to resolve competing translator applications. 47 C.F.R.  74.1233(g).  X-26. One tiebreaker possibility would be to require the tied applicants to share the channel. A number of commenters dislike mandatory sharetime arrangements, finding them confusing to audiences, and potentially inefficient for licensees. If more than two applicants tie, there is some merit to these arguments. However, in our experience, we would expect that most ties"0*&&aaT" would involve only two applicants. In such cases, should we give two equally qualified applicants an equal opportunity to use the channel, with the understanding that they might reach another mutually acceptable arrangement between themselves at a later date? For example, if equal sharing of time was unacceptable to the applicants, they could negotiate with each other to reach a different arrangement that would meet their own individual needs,  X-up to and including one applicant's relinquishing all of its time to the other.  See 47 C.F.R   Xv-73.561; Nassau Community College, 12 FCC Rcd 12,234 (1997) (licensees permitted to modify time sharing arrangements at their discretion upon notification to FCC, even if the result is voluntary elimination of one station). If we adopt this option, we propose that the applicant would not be permitted to receive consideration greater than its reasonable and prudent expenses in return for any such relinquishment of time, unless the applicant had been operating onair for a minimum holding period, as discussed in paras. 3031 below.  X -27. A second option would be to use a tiebreaker lottery, weighted in accordance with statutory requirements. Although, as discussed above, we are seeking comment on concerns that we have about lotteries as a primary selection system, we have fewer concerns about using lotteries as tiebreakers. This is because a narrower class of applicants would be  Xy-eligible to participate in tiebreaker lotteries, i.e. those who had already been found equally qualified under a point system. Nevertheless a few of our original concerns remain,  XK-especially those related to the statutory requirement that broadcast lotteries be weighted to favor applicant diversity and minority ownership. Would commenters consider a tiebreaker lottery preferable to mandatory time sharing? Should a tie breaker lottery be held only if the tie is between three or more applicants (with another method, such as timesharing, used for twoway ties)?  X-28. A third possibility would be to use another secondary factor to break a tie. In the ITFS  X-service, for example, we have considered, as a tie breaker, which station would serve the  X-largest number of students. Third Report and Order, Instructional Television Fixed Service, MM Docket No. 83523, 4 FCC Rcd 4830 (1989). This particular tiebreaker would not be equally applicable to NCE stations, which potentially have much broader goals than ITFS stations, and might not be limited to serving a student population. Might there, however, be some other factor that could serve as an NCE tiebreaker, such as one of the factors that we  X -have mentioned in paragraph 24 above (i.e., credits for local presence, statewide plans, or representativeness of leadership)? What further tiebreaking measures might we use if there is still a tie after consideration of this secondary factor? We request comment on all three of these tiebreaker proposals or any others a commenting party may wish to suggest. " 0*&&aa"  X-  x4. Holding Period  X-29. Congress encourages us to devise measures to ensure that any preferences embedded in our application selection processes and the purposes such preferences are intended to serve,  X-are not undermined by the rapid reassignment or transfer of stations. See Communications  Xv-Amendments Act of 1982, S. Rep. No. 97191, 97th Cong., 2d Sess. (1982), reprinted in 1982  X_-U.S.C.C.A.N. 2237 at 2289 ("1982 Lottery Guidelines").  Six commenters addressed the  XH-possibility of a "holding period" for NCE stations granted on a comparative basis, as a means of protecting the integrity of these grants. Most of these commenters agree that NCE licensees should be required to hold stations for some minimum period of time. They say, for example, that our new selection criteria might become meaningless if the prevailing applicant could immediately transfer the station to another entity. Commenters, such as the National Federation of Community Broadcasters, also state that a holding period would address the  X -Bechtel court's concerns (raised in a commercial context) by requiring licensees to remain true to their comparative promises. American Family Radio further states that a holding period is needed to limit speculation. The commenters differ on the amount of time that they believe  Xy-is an adequate holding period, with suggestions ranging from one year to seven years. The University of Arizona would support a holding period only if exceptions can be made, such as when funding requires restructuring.  X-30. We tentatively conclude that there should be a holding period for NCE licenses awarded on the basis of a lottery preference or point system. We do not propose a holding period for licensees receiving no such preference (such as single applicants, licenses awarded through settlement, or licenses awarded to an applicant that received no preferential weighting in a lottery). This tentative conclusion is based on our belief that if applicants are to be selected on the basis of their different characteristics, those characteristics should be maintained for a minimum period of public service to be meaningful. We also believe that a holding period has the ability to limit any speculation that might accompany a new selection system, especially one that is faster, simpler, and less costly for applicants. To further deter speculation, we would also require the prevailing applicant to certify that they have not entered into any agreement or option, explicit or implicit, to transfer to another party any  X -station construction permit or license awarded. See generally 1982 Lottery Guidelines, 1982 U.S.C.C.A.N. at 2290. During the holding period, prevailing applicants would be required to certify annually their continued eligibility for the preferences and points they received. As Congress has indicated in its discussion of lotteries, if those eligible for preferences were simply applying for licenses for the purpose of obtaining a quick profit on the sale of the station once the license is awarded or the holding period ends, the entire preference  X"-mechanism would be undermined. Id.  Xh$-31. We do not at present propose a specific length for the holding period, because we would like to receive comment from NCE organizations on several possibilities. One option would"Q%0*&&aa $" be to establish a holding period of five years of onair operations. This is similar to a  X-provision in the commercial Competitive Bidding proceeding, that applicants who receive monetary bidding credits in an auction would be required to repay the amount of those credits plus interest, as prescribed in the Commission's Part I auction rules, as a condition of Commission approval of the assignment or transfer within five years to an entity not meeting  X-the eligibility criteria for the bidding credit. See Competitive Bidding at para. 194. Should we require that an NCE organization that assigns or transfers control of its broadcast station prior to five years of operations be allowed to recoup no more than its legitimate and prudent expenses? If commenters do not believe that a five year period would be appropriate for noncommercial entities, they should thoroughly explain their reasoning and propose an alternate time period. For example, would they favor a holding period of three years, similar to the three year holding period that existed prior to elimination of our antitrafficking policy?  X - See Elimination of Three Year Rule and Underlying AntiTrafficking Policy, 52 RR 2d 1081  X -(1982), reconsidered in part, 99 FCC 2d 971 (1985). Commenters, in considering various  X -holding periods, should be aware that the Bechtel court, in the commercial context, indicated that a oneyear holding period for applicants chosen in traditional comparative hearings was  X-too short to bring about its perceived goals.x* yO - xԍ See Bechtel, 10 F.3d at 879. Moreover, the Bechtel court, in dicta, stated that even a three year holding  xperiod might be insufficient to support a credit for ownermanagers, but this view appears to have been based on an  yO- xKadditional factor not present in the current context, i.e. an earlier FCC indication that the integration credit was  yOa- x expected to bring about permanent benefits. See Bechtel, 10 F.3d at 880. The noncommercial point system proposed  xherein is an attempt to bring about an overall benefit to the public, through a combination of factors, some long term,  xjothers serving to get the station started in a good direction and lasting for a period of time long enough to be meaningful to listeners and to deter speculators from entering noncommercial educational broadcasting.  See 47 C.F.R.  73.3597(a).   Xb-32. If applicants need to transfer a station prior to the holding period selected, and such station was awarded pursuant to a comparative preference, we would expect that the licensee would be limited to recoupment of its reasonable and prudent expenses. Currently we have such a requirement for applicants seeking to transfer the permits for unconstructed broadcast stations, both commercial and noncommercial. In the context of an unconstructed station, we consider as reimbursable the permittee's reasonable expenses of obtaining the permit and the cost of any partial construction efforts. Extending this concept to NCE stations that have been built and are operating raises a question of how to define reasonable and prudent expenses in a new context. Which, for example, among the following expenses should be included: costs of preparing and prosecuting the application for construction permit; costs of station construction; all costs of station operation; costs of station operation only to the extent that the costs are not offset by the station or organization's income? Should salaries paid to the board of directors of an operating station be excluded? Given our goals of decreasing the potential for speculation, and of retaining the public benefit of selection criteria for a reasonable time, what other costs should be either included or excluded? " 0*&&aa"Ԍ X- 33. Finally, how should we address changes in a station's board of directors in the context of a holding period? While we can address potential assignment of a station's license by limiting a station's sales price during a holding period, we cannot address the possible resignation of board members in this same way. Nevertheless, it would be problematic to us to select a particular organization based on the diversity of its governing board, only to have  X-the de facto or de jure control of that organization change shortly thereafter. We seek comment on how to address this issue. Should we, for example, award diversity preferences only to organizations whose own governing documents specify board diversity (e.g. if the organization itself addresses whether existing and incoming board members can have other media interests)? What other measures might the Commission adopt to ensure that a lottery or point preference awarded to promote diversification is a meaningful licensing criterion?  X - B. Noncommercial Educational Applicants on "Commercial" Frequencies  X -  X - !34. In the past, the Commission has permitted noncommercial educational entities also to  X -apply for spectrum not specifically reserved for noncommercial use, i.e., for "unreserved" or  X-"commercial" frequencies. * yO -ԍ In contrast, commercial applicants are not eligible to be considered for noncommercial frequencies. All applicants competing for commercial broadcast spectrum,  Xy-including any NCE applicants seeking such channels, are required to compete under the rules  Xb-applicable to commercial applicants.bX* {Ok- xԍ See, e.g., Central Michigan University, 7 FCC Rcd 7636, 7637 (1992) (purpose of subjecting both  xnoncommercial and commercial applicants for unreserved channels to the same filing and processing requirements  yO- x,"was to ensure comparable treatment of similarly situated applicants"); Memorandum Opinion and Order in Docket  yO- xhNo. 20418, 90 FCC 2d 160, 179180 (1982); Reservation of Channel 13 in Eureka, California, 7 RR 2d 1593, 1597  yO- x(1966); Channel Assignments in WilmingtonAtlantic City, 18 RR 1653, 166162 (1959) (declining to reserve  x"commercial" television channel for educational use and stating that educational entities could apply for use of  yO- xJunreserved channel on comparative basis with commercial applicants); Josephine Broadcasting Limited Partnership,  yO- x5 FCC Rcd 3162 (Audio Serv. Div. 1990); Viera & Lloyd, 5 FCC Rcd 5813 (Audio Serv. Div. 1990); Georgia Public  yO- xTelecommunications Commission, 4 FCC Rcd 6357 (Audio Serv. Div. 1989) (designating for hearing mutually  xexclusive applications for FM stations on unreserved channels where applicants included both commercial and noncommercial entities).  In the commercial Competitive Bidding proceeding, the Commission therefore initially proposed that NCE applicants could continue to apply for commercial spectrum in the new auction environment by participating in spectrum auctions,  X-along with commercial applicants.  * yO - xԍ For example, all TV translators must operate on commercial frequencies since none are allotted to reserved channels. Competitive Bidding, 12 FCC Rcd at 22,383. Some commenters in the commercial proceeding, however, argued that such action would place NCE applicants at a financial disadvantage and would be inconsistent with language in the Balanced Budget Act exempting noncommercial stations from auctions. We did not receive sufficiently focused comment to resolve this difficult issue in the commercial proceeding.  X-Therefore, in Competitive Bidding, we postponed resolution of this question and stated that" 0*&&aa4"  X-we would seek additional comment in this rulemaking proceeding. See FCC 98194, at para. 25.  X- Statutory Construction  X-"35. At issue is the language of Section 309(j)(2)(C) of the statute, which provides that competitive bidding "shall not apply to licenses or construction permits issued by the Commission ... for stations described in section 397(6)" of the Communications Act. Section 397(6) defines the terms "noncommercial educational broadcast station" and "public broadcast station." Some parties to the commercial proceeding read this language to mean that auctions  X -cannot be used any time there is the potential that a license may be awarded to an NCE station. Under this view, mutually exclusive applications filed by NCE entities are exempt from competitive bidding, regardless of whether the frequency applied for is also available to  X -competing commercial applicants. See Competitive Bidding, FCC 98194, at para. 22. Other participants in the commercial proceeding, however, read the statute as prohibiting  X -auctions only when the Commission knows in advance with a certainty that the ultimate  X-licensee will be an NCE entity. Id. at para. 23. Under this interpretation, auctions are prohibited only if a reserved frequency is involved or if NCE entities are the only applicants for a particular commercial frequency. We seek additional comment on these or other possible interpretations of the statutory language, in relation to our authority to develop procedures for selecting among mutually exclusive applications on commercial channels. The universe of options available to us will necessarily depend upon how we resolve this issue.  X- Auction Options  X-x 1. Current or Modified Auction Procedures  X-#36. If the statute permits NCE applicants to participate in auctions for commercial channels,  X|-one option would be to proceed as originally proposed, i.e. commercial and NCE applicants would compete for commercial frequencies under the same general procedures recently  XN-adopted in the Competitive Bidding proceeding. Alternatively, we could modify those procedures somewhat when an NCE entity was involved. For example, there are certain bidding credits available to all applicants for commercial channels. Should there also be a specific bidding credit for NCE entities? If so, what should that credit be? Would the credit  X-be available to all NCE applicants or only to certain categories, e.g., those below a certain funding level? Should we consider any other special procedures to enhance fair competition in auctions between NCE and nonNCE entities, if such auctions are consistent with the statute?  X"-  X#-x 2. Reserving Additional Spectrum for NCE Use  XQ%-$37. Another possibility would be to auction commercial spectrum using the current or"Q% 0*&&aa $" modified procedures described above, but to counterbalance any perceived competitive disadvantage NCE applicants might face by making it easier for an NCE entity to request reallocation of a commercially available channel to one available only to NCE applicants.  X-We note that a significant portion of the spectrum is already reserved for NCE use.D!* yO4- xԍ In the FM service 20 specific channels (87.9 MHz to 91.0 MHz) of a total of 100 channels are currently  xreserved for NCE use. 47 C.F.R.  73.201 and 73.501. In the television service a similar proportion of channels  xare reserved for NCE use, but using different channels in different geographic areas. For example, in Alabama, 15  xof 54 analog TV channels and 9 of 40 digital TV channels are reserved for NCE use. 47 C.F.R.  73.606 and 73.621.D However, we are sensitive to the fact that some noncommercial educational radio and television stations may, for technical reasons, have no choice but to operate on unreserved frequencies. Currently, we allow NCE entities to reallocate spectrum from nonreserved to reserved through a rulemaking process in only two limited circumstances. Specifically, we permit reallocation when reserved band frequencies are unavailable due to potential interference to either: (1) foreign allocations (Canadian or Mexican) or (2) operations on VHF  X -television Channel 6.=" x* {OC- xԍ  See, e.g., Lindside, West Virginia, 2 FCC Rcd 6046 (Alloc. Br. 1987); Burlington and Newport, Vermont,  yO -45 RR 2d 786 (Broad. Bur. 1979); Presque Isle, Maine, 36 RR 2d 840 (Broad. Bur. 1976).= Should we also consider recognizing a third circumstance in which commercial spectrum might be reallocated for NCE use and, therefore, exempt from the auction process, based on a showing of strong public need? One such possibility would be to  X - grant specific reallotments if (a) the NCE entities would be precluded from serving their proposed communities of license using the reserved band by existing reserved band stations or pending applications, and (b) the proposed allotment would provide the first or second NCE  X-aural or video service received in the community.p#X* yO- xZԍ This might occur, for example, if existing NCE stations that serve large population centers are not serving  xsmaller outlying communities, and another NCE entity wants to provide the first or second NCE service to those smaller communities without causing interference to the existing stations. p What is the extent of relief that would be obtained through this proposal? Are there any other circumstances under which we should consider reallocating commercial channels for noncommercial use? If commenters would  XK-support a reallocation option, how can we minimize the impact of studying these presumably detailed NCE submissions and related pleadings on the staff, on other applicants, and on the auction process in general? How would this option potentially impact the development of digital television? Should the option, if adopted, be limited to the AM and FM broadcast services because of any such potential impact? Should any frequencies in the commercial band, that we might reallocate for noncommercial use pursuant to this option, always remain reserved? Alternatively, should such frequencies return to the commercial band if the NCE licensee seeks to transfer the station to a commercial operator? What procedures should the Commission implement to ensure the integrity of the allotment process and promote the noncommercial service?  Xe- "e #0*&&aa"Ԍ X-NonAuction Options  X-%38. We also present several other options for discussion. If, for example, we conclude that the statute precludes participation of NCE entities in auctions for commercial channels, would commenters support any of the options below, or suggest other nonauction approaches?  X-  Xv-x 1. Ineligibility  XH-&39. One option would be to find NCE entities ineligible for nonreserved channels altogether. Such an option would be a departure from current policy, but could be a simple way to resolve the conflict in a statute that might both require auctions of commercial spectrum and preclude NCE applicants from participating in such auctions. We invite comment on the impact of such a decision on NCE applicants. For example, are there some NCE entities who might prefer participating in spectrum auctions with commercial entities to being foreclosed from applying for commercial spectrum? What options would be available to them if NCE entities were ineligible to participate in auctions? Should we expand their opportunities to reallocate some commercial channels for NCE use as described in para. 37 above? What are the views of NCE stations already operating on commercial channels? We tentatively conclude that there would be no significant impact on such stations because the existing operations of those stations would be grandfathered and our existing rules, allowing onestep upgrades by existing licensees on commercial channels, would generally allow them to upgrade without competing with other applicants.  Xx 2. Special NCE Processing Track  X-'40. The Association of America's Public Television Stations suggested, in the commercial proceeding, that we should establish a separate processing track for NCE applications for commercial spectrum. According to that plan, once a technically acceptable application is filed for a commercial channel by a noncommercial applicant, the channel would be deemed reserved for noncommercial educational use and only other noncommercial applicants would be permitted to file. The prevailing NCE applicant would then be selected using whatever procedure we decide to use when NCE entities file mutually exclusive applications for a reserved channel.  X-(41. A consequence of this suggested approach might be the reallocation of commercial channels to noncommercial use, whether or not alternative noncommercial channels are  X -available.o$X * yO=#- xJԍ For example, an NCE entity desiring to operate on the AM band (in which no channels are reserved for NCE  xZuse) might apply for the last commercial AM channel available in an area, precluding its commercial use, instead of using one of several available FM channels reserved for NCE stations. o We seek comment on the impact of this approach on current and future commercial uses. Do commenters project the filing of increased numbers of NCE"!$0*&&aa " applications for unreserved channels? Would it be consistent with Congressional intent to remove commercial spectrum from the auction block without regard to the level of public need?  X-)42. We also note that noncommercial permittees and licensees on commercial frequencies can convert to commercial stations simply by modifying their permit or license. 47 C.F.R.  73.1690(c)(9). Thus, it might be possible for an NCE applicant to obtain commercial spectrum at no cost, build, and then sell privately to a commercial entity that would otherwise have been subject to an auction. Could holding periods or some other mechanism address this issue? Should we make it more difficult for stations operating on commercial channels to convert from NCE to commercial operations, if their licenses were first awarded after the effective date of our auction authority?  X - x3. Hybrid Approach  X -*43. Yet another option would be to adopt some form of hybrid procedure. For example, when both NCE and commercial entities are competing for a commercial frequency, we might first hold a lottery, with statutory diversification and minority preferences. If a noncommercial educational entity wins the lottery, it would get the license, assuming that it is otherwise qualified. If, however, a commercial entity (which is precluded by statute from receiving a license awarded by lottery) "wins," this would be grounds for dismissal of the NCE applications and would trigger an auction in which all remaining commercial applicants  X-would be eligible to participate. Alternatively, commercial and NCE applicants might first be compared using a point system, and proceed to auction if an NCE applicant was not selected on that basis. If an NCE station is not selected in the nonauction phase of a particular proceeding, and there is only one commercial applicant, we propose that that applicant would be awarded the license as a singleton.  X|-+44. We note that the lottery/auction hybrid raises the same minority and diversity issues discussed above in our consideration of lotteries on reserved spectrum. The point system/auction hybrid would require us to undertake the difficult task of devising a point system equally appropriate to commercial and noncommercial applicants. A few of the criteria discussed above for NCE point systems (such as local diversity and technical parameters) might equally apply to commercial applicants, but other factors (such as local educational presence and statewide plans) are clearly inapplicable to commercial stations. The same is true for some criteria proposed by National Public Radio in the commercial  X -proceeding.% X * yO=#- xԍ NPR proposes to choose among all competing applicants on nonreserved channels by considering factors used  xby the National Telecommunications Information Administration to prioritize funding requests from NCE applicants.  yO$- xSee 15 C.F.R.  2301. This includes whether an applicant would: (1) offer a first or second NCE service, (2) have  xsignificant minority or female control or programming uniquely serving minorities or women, and (3) have significant"%$0*&&%"  xinvolvement of or service to the local community, including first local origination of an NCE broadcaster in a  yOX- xigeographic area. See Comments of National Public Radio, Inc., National Federation of Community Broadcasters and The Corporation for Public Broadcasting in GC Docket No. 9252 at 2123.  We invite comment. Finally, we ask commenters who support a hybrid" %0*&&aa"  X-approach to suggest ways to prevent speculation. See para. 42 supra.  X- Pending Applications  X-  X-,45. There are currently approximately 40 pending proceedings, in which commercial and  X-noncommercial applicants are competing on nonreserved channels.`&* yO& - xJԍ In Competitive Bidding, we stated that we would not proceed to auction any cases where both noncommercial  xand commercial applicants have filed competing applications for nonreserved channels, but that we would resolve  yO - xthese cases following release of a report and order in this proceeding. See FCC 98194 at para. 25. In the TV  xxservice, there are seven pending proceedings in which NCE applicants are competing with commercial applicants  xon commercial channels. In total, 16 commercial and eight noncommercial television applications are involved. All  xof those applications were filed prior to July 1, 1997, the date chosen by Congress as the beginning of mandatory  yO- xauction of certain full service broadcast authorizations. In the FM service, there are approximately 18 groups of pre x<July 1997 applications, containing approximately 92 commercial applicants and 25 noncommercial educational  yOf- xapplicants. There are also approximately 17 mutually exclusive groups filed after July 1, 1997, containing  yO.-approximately 79 commercial applicants and 20 NCE applicants.` Should the procedures used to resolve these proceedings be the same or different from those applied to future applicants? For example, were the Commission to decide that NCE entities will no longer be eligible to apply for commercial spectrum, what procedures would apply to cases where such applications have already been filed?  X -  nIII. PROCEDURAL MATTERS  X -Comments and Reply Comments  X -  X - -46. Pursuant to Sections 1.415 and 1.419 of the Commission's rules, 47 C.F.R.  1.415, 1.419, interested parties may file comments on before [45 days after publication in the Federal Register U%I ], and reply comments on or before [65 days after publication in the Federal Register]. Comments may be filed using the Commission's Electronic Comment Filing  XK-System (ECFS) or by filing paper copies. See Electronic Filing of Documents in Rulemaking  X4-Proceedings, 63 Fed. Reg. 24,121 (1998). .47. Comments filed through the ECFS can be sent as an electronic file via the Internet to . Generally, only one copy of an electronic submission must be filed. If multiple docket or rulemaking numbers appear in the caption of this proceeding, however, commenters must transmit one electronic copy of the comments to each docket or rulemaking number referenced in the caption. In completing the transmittal screen, commenters should include their full name, Postal Service mailing address, and the applicable" &0*&&aa" docket or rulemaking number. Parties may also submit an electronic comment by Internet email. To get filing instructions for email comments, commenters should send an email to ecfs@fcc.gov, and should include the following words in the body of the message, "get form