******************************************************** NOTICE ******************************************************** This document was converted from WordPerfect to ASCII Text format. Content from the original version of the document such as headers, footers, footnotes, endnotes, graphics, and page numbers will not show up in this text version. All text attributes such as bold, italic, underlining, etc. from the original document will not show up in this text version. Features of the original document layout such as columns, tables, line and letter spacing, pagination, and margins will not be preserved in the text version. If you need the complete document, download the WordPerfect version or Adobe Acrobat version, if available. ***************************************************************** Before the Federal Communications Commission Washington, D.C. 20554 In re Application of ) ) CHESTER P. COLEMAN ) File No. BPH - 950830JA ) For Construction Permit ) To Replace Expired Permit for ) Station KEEN(FM), Palmer, Alaska) MEMORANDUM OPINION AND ORDER Adopted: February 20, 1997 Released: March 10, 1997 By the Commission: 1. The Commission has under consideration an application for review filed by Chester P. Coleman ("Coleman") on March 27, 1996. Coleman seeks review of a February 23, 1996 letter decision by the Chief, Audio Services Division, Mass Media Bureau ("Staff Decision"). The Staff Decision denied Coleman's application to replace the expired construction permit for new commercial FM broadcast station KEEN, Palmer, Alaska, treating his application as a petition for reconsideration because the expired permit had already been canceled when the staff first became aware that a replacement application had been filed. As set forth more fully below, we deny the application for review. 2. Background. Coleman was granted a permit on December 10, 1993 to construct a new commercial FM broadcast station in Palmer, Alaska. By the terms of the permit, construction was to have been completed and program test operations commenced by June 10, 1995. The staff notified Coleman on September 12, 1995 -- more than ninety days after expiration of his permit -- that it had canceled his construction permit and deleted the call sign for KEEN. The staff noted that Coleman had not filed a license application nor had he filed an application requesting an extension of time within which to construct his proposed station. In fact, Coleman had filed the above- referenced application to replace his expired permit on August 29, 1995, two weeks before cancellation of the permit but almost two months after the deadline for filing such an application. Because Coleman's replacement application did not reach the appropriate staff for consideration until after his permit had been canceled, the staff treated his replacement application as a petition for reconsideration of its decision canceling his permit, and considered the petition for reconsideration on its merits. 3. Coleman indicated in his replacement application that no construction had commenced and that no equipment had been delivered due to circumstances wholly beyond his control. He attributed his lack of construction progress to the Commission's delay in acting on assignment applications for KOLA(FM), San Bernardino, California. Coleman indicated that he had expected to receive a brokerage commission of $300,000 from the KOLA transaction, which he planned to use to complete construction of KEEN. Coleman stated that these funds did not become available to him until July 15, 1995, more than a month after expiration of the permit for KEEN. 4. The Staff Decision rejected Coleman's argument that the unavailability of funds from the KOLA transaction was a circumstance beyond his control, and determined that he had failed to meet any of the public interest factors that would justify replacement of his construction permit. See 47 C.F.R. Section 73.3534(b). The staff noted that Coleman had certified in his original construction permit application (FCC Form 301) that he was financially qualified to construct and operate the KEEN facility, and that he had never notified the Commission prior to grant of his construction permit that such certification was premised on his expectation of a brokerage commission from the sale of KOLA. The Staff Decision pointed out that in Section III, Items 2-3 of his construction permit application, Coleman had indicated that $53,150 was the amount necessary to construct and operate KEEN for three months, and that he was the sole source of funds for the project. The Staff Decision also referenced Coleman's October 14, 1993 amendment to his permit application in which he stated that he had "$53,150 available from his personal funds for the construction and operation of the proposed station" (emphasis added). Thus, the staff denied Coleman's petition for reconsideration for failure to justify an extension of time within which to construct KEEN. 5. Coleman raises two challenges to the Staff Decision: (1) that treating Coleman's replacement application for KEEN as a petition for reconsideration was a prejudicial procedural error because it imposed a higher hurdle for Coleman in seeking a replacement permit and because it deprived him of an opportunity to address the staff's cancellation of the permit in a petition for reconsideration; and (2) that the staff erred in holding that Coleman's failure to construct was not due to circumstances beyond his control where he had a contractual right to a $300,000 commission from the sale of KOLA, and receipt of that commission was delayed by the Commission's approval process. 6. Discussion. The Commission's rules and policies are intended to encourage the timely construction and prompt initiation of service by new broadcast facilities. See Construction of Broadcast Stations, 102 FCC 2d 1054, 1057 (1985). Permittees who do not demonstrate a willingness to construct their authorized facilities are, in effect, "warehousing" spectrum, which precludes service by other potential broadcasters and thus disserves the public interest. See id. In keeping with these goals, the Commission will grant an extension of time to construct a broadcast station only in one of the following three circumstances: (1) construction is complete and testing is underway looking toward prompt filing of a license application; (2) substantial progress has been made; or (3) no progress has been made for reasons clearly beyond the control of the permittee, but the permittee has taken all possible steps to expeditiously resolve the problem and proceed with construction. See 47 C.F.R. Section 73.3534(b) (listing the "one-in-three" criteria with examples). The Commission has broad discretion in determining whether circumstances alleged to have prevented construction were clearly beyond the applicant's control. See New Orleans Channel 20, Inc. v. FCC, 830 F.2d 361, 365-66 (D.C. Cir. 1987); Edmund Dinis, 11 FCC Rcd 11074, 11076 (1996). 7. Coleman states that he "inadvertently neglected to file an application to extend the [p]ermit," and that realizing this oversight in August 1995, he prepared and filed the above-captioned application to replace his expired permit. Coleman argues that he has received prejudicial treatment because "the staff would never have issued the September 12, 1995 letter canceling the permit" if it had been aware that his replacement application had been filed, since according to him, the staff rarely denies a first request for extension or replacement of a construction permit. Coleman ignores the fact that, even if his permit had not already been canceled, an extension or replacement is warranted only where an applicant is able to make the "one-in-three" showing. The staff determined he had failed to make the requisite showing, so his permit would have been canceled in any event. See Press Broadcasting Co., Inc. v. FCC, 59 F.3d 1365, 1372 (D.C. Cir. 1995) (warning that the Commission may not "arbitrarily" relieve an applicant of its obligation under 47 C.F.R. Section 73.3534 to demonstrate that an extension is justified under the "one in three" standard). Furthermore, we emphasize that the staff would have been fully justified in dismissing Coleman's application without any consideration of the merits, since it was filed almost two months after the deadline for such an application. See 47 C.F.R. Section 73.3534(e). The staff nevertheless considered the application to determine whether any new information warranted reconsideration of the action cancelling his permit. See 47 C.F.R. Section 1.106(c)(2). See also Mansfield Christian School, 10 FCC Rcd 12589 (1995) (denying replacement application filed seven months after expiration of permit after considering application on the merits). We believe that this course of action, rather than prejudicing Coleman, actually afforded him an opportunity not required by the rules to have his case considered on the merits. 8. Coleman further contends that because the staff treated his replacement application as a petition for reconsideration, he never had an opportunity to file a formal petition for reconsideration of the cancellation of the permit wherein he would have presented his case for replacement much more fully than he did in what he believed at the time to be a "relatively routine reinstatement application." Coleman states that he was thus deprived of the opportunity to present legal and factual arguments in support of reconsideration of cancellation of his permit. This argument is unavailing. The rules clearly require that the "one-in-three" showing be made at the time the extension or replacement application is filed. See 47 C.F.R. Section 73.3534(b). See also New Orleans Channel 20, Inc. v. FCC, 830 F.2d at 364 (construction permit extension request is procedurally similar to waiver request in which applicant faces "high initial hurdle"); Deltaville Communications, 11 FCC Rcd 10793, 10797 (1996) ("A permittee has the burden of demonstrating that it has satisfied one of the three Section 73.3534(b) criteria during the most recent construction period."); Carolyn S. Hagedorn, 11 FCC Rcd 1695, 1696 (1996) (explaining that an applicant for extension of a construction permit is "required to make a specific and detailed showing in order to justify an extension . . . or bear fully the risk that its showing will be found inadequate."). The rules also prohibit the submission of additional information at the petition for reconsideration stage, except under limited circumstances that are not present here. See 47 C.F.R. Section 1.106(c). In any event, we find that Coleman has not been prejudiced because he has been given an opportunity to make his case fully to the Commission in the form of the instant application for review. 9. Concerning the merits of Coleman's replacement application, the Staff Decision correctly noted that unavailability of funds is generally not considered a circumstance "clearly beyond the control of the permittee" that would warrant an extension of time in which to construct. See High Point Community Television, Inc., 2 FCC Rcd 2506, 2507 (1987) (holding that the collapse of financial arrangements, standing alone, does not constitute a sufficient reason for failing to construct). See also Revision of FCC Form 301, 50 RR 2d 381, 382 (1981) (FCC Form 301 instructions state that it is "Commission policy not to grant [an] extension of time for construction on the basis of financial inability or unwillingness to construct."). In order to receive an extension based upon financial inability, a permittee has had to show that construction progress was "unexpectedly and summarily defeated by the repeated cancellation of committed financing from traditional capital sources." Horseshoe Bay Centex Broadcasting Co., 5 FCC Rcd 7125, 7128 (1990) (emphasis in original). In Horseshoe Bay, we granted an extension where the bank upon which the permittee was relying for financing was taken over by the FDIC and the permittee "made diligent and continual attempts to complete construction," pursuing at least three other funding sources. Id. Coleman has not provided any indication that he sought any alternative means of financing the construction of KEEN after realizing that his commission from the KOLA transaction was not forthcoming. Thus, this case is in line with other cases where extension of a construction permit was denied based on lack of diligent efforts to procure new financing. See High Point Community Television, Inc., 2 FCC Rcd at 2507; L.E.O. Broadcasting, Inc., 2 FCC Rcd 1810, 1811 (MMB 1987) (bank upon which permittee was relying for financing was taken over by the FDIC and permittee made no showing that it had searched for alternative financing). See also Carolyn S. Hagedorn, 11 FCC Rcd at 1696 & n.4 (noting that applicant's failure "to detail any efforts to obtain alternate financing" was alternative ground for denying extension request). Coleman argues that these cases are distinguishable because they involve applicants who were unable to arrange financing or who lost financing, and in this case, the "necessary financing was always there." We disagree. While the potential for financing may have existed in this case, the actual funds to construct were never available during the construction period. We recently reiterated our policy in Zephyr Broadcasting, Inc., FCC 96-433 (released November 8, 1996). In Zephyr, we declined to extend the permit of an underfinanced permittee which relied to its detriment on other potential broadcast transactions to finance the construction of a new broadcast station. The very similar facts of this case mandate the same result here. 10. Nor are we persuaded by Coleman's attempts to place the blame for his inability to finance construction of KEEN on the timing of Commission staff action on the KOLA assignment applications. Coleman made a private business decision to continue to rely on funds from the KOLA transaction throughout the KEEN construction period, even though it was apparent that the KOLA transaction was not routine. Such private business decisions do not constitute circumstances beyond an applicant's control. See Community Service Telecasters, Inc., 6 FCC Rcd 6026, 6028 (1991) (finding that abandonment of originally authorized site in favor of another site was "business judgment" made independently of original site's usefulness or availability); L.E.O. Broadcasting, Inc., 2 FCC Rcd at 1811 (finding that applicant's decision to pursue modification that FAA rejected rather than building as authorized was private business judgment and not circumstance beyond control). See also Whitco Broadcasters, Inc., 2 FCC Rcd 1721 (MMB 1987) (finding that financial difficulties resulting from new Commission rule did not constitute circumstance clearly beyond permittee's control). 11. Coleman also requests that his replacement application be granted on equitable grounds based upon the length of time that it took the staff to process the KOLA application. Coleman cites William J. Kitchen, 7 FCC Rcd 4169 (1992), for the proposition that the Commission has discretion to take equitable considerations into account in evaluating extension requests. However, Kitcheninvolved a permittee who wished to build a station in Pago Pago and encountered "unique difficulties . . . in securing a lease for a transmitter site in American Samoa under the unusual and protracted processes there." Id. at 4170. The staff found that delay in progress resulted from circumstances beyond Kitchen's control. In describing the "unique difficulties" that warranted an extension of Kitchen's permit, the staff noted that his continuing efforts to negotiate a lease required him to make more than twelve trips to American Samoa. Id. By contrast, Coleman has not demonstrated that he took any steps toward construction during the permit period or that he made any efforts to address the lack of funding for KEEN. Coleman alternatively argues that this case is analogous to cases such as Kitchen in which a permittee has been prevented from proceeding with construction due to a delay in obtaining governmental approvals for use of a transmitter site. Coleman reasons that the only difference between those cases and this one is that "here the delay in governmental approval prevented Coleman from getting to his money rather than to his site." However, in cases such as Kitchen, the governmental approval was necessary before the applicant could legally begin construction. In this case, the only impediment to Coleman's progress was the lack of available funds, which, as discussed supra, he has failed to demonstrate was a circumstance clearly beyond his control. 12. Coleman argues that the staff erroneously ruled that Coleman's contractual right to receive a $300,000 commission from the sale of KOLA did not constitute the requisite "reasonable assurance" as to the availability of the funds necessary for construction of KEEN, citing Multi-State Communications, Inc. v. FCC, 590 F.2d 1117 (D.C. Cir. 1978), cert. denied, 440 U.S. 959 (1979) (holding that the Commission erred in failing to accept a bank letter as proof of "reasonable assurance" of funds). The Staff Decision made no such ruling. Rather, it was based on Coleman's failure to make the required "one-in-three" showing that would justify replacement of his canceled permit. 13. Finally, Coleman does not make a satisfactory showing that he has made substantial progress toward construction, the second of the "one-in-three" criteria for granting an extension. Coleman states that although his permit expired on June 10, 1995, and he failed to file a replacement application until August 29, 1995, he immediately began taking steps to construct KEEN as soon as he received his commission for the sale of KOLA in July 1995. Permittees are not entitled to rely on construction occurring after the expiration of their authorized construction period. Rainbow Broadcasting Co., 9 FCC Rcd 2839, 2846 (1994), rev'd on other grounds sub nom. Press Broadcasting Co. v. FCC, 59 F.3d 1365 (D.C. Cir. 1995), on remand 11 FCC Rcd 1167, 1167-68 (1995); High Point Community Television, Inc., 2 FCC Rcd at 2507. See also Miami MDS Co. v. FCC, 14 F.3d 658, 660-61 (D.C. Cir. 1994) (finding that Common Carrier Bureau's refusal to credit an MDS applicant's post-construction period progress was in line with Mass Media Bureau precedent concerning broadcast permittees). This policy is designed to discourage permittees from remaining idle and not proceeding with construction until their permit is about to expire or has expired. SeeRainbow Broadcasting Co., 9 FCC Rcd at 2846. Coleman thus is entitled to credit only for those steps taken in his most recent construction period, which expired June 10, 1995. During this relevant period, no steps were taken toward construction. 14. Accordingly, IT IS ORDERED that pursuant to Section 1.115(g) of the Commission's Rules, 47 C.F.R. Section 1.115(g), the Application for Review filed by Chester P. Coleman on March 27, 1996 IS HEREBY DENIED. FEDERAL COMMUNICATIONS COMMISSION William F. Caton Acting Secretary