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

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


                     FIRST REPORT AND ORDER


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

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

                        TABLE OF CONTENTS

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

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


                         I.  INTRODUCTION         

     1.  By this First Report and Order, we implement provisions of the Balanced Budget Act of 1997,
which expanded the Commission's competitive bidding authority under Section 309(j) of the Communications
Act of 1934, 47 U.S.C.  309(j), by adding provisions governing auctions for broadcast services.  We adopt
general competitive bidding procedures to select among mutually exclusive applicants for commercial analog
broadcast service and Instructional Television Fixed Service (ITFS) licenses.  We adopt herein a "new entrant"
bidding credit to further the goals of the designated entity provisions of Section 309(j).  We note, however, that
we intend to continue our review of the barriers to entry or growth that may exist for small, minority- and
women-owned businesses in broadcasting, and make future adjustments to our auction rules, as appropriate,
in light of these studies.  In addition, pursuant to our discretion under Section 309(l) to utilize either
comparative hearings or competitive bidding procedures to resolve certain mutually exclusive commercial
broadcast applications filed before July 1, 1997, we conclude that all of these pre-July 1st applications should
be resolved by competitive bidding procedures.  We also decide in this First Report and Order to resolve
pending comparative renewal proceedings that are outside the scope of our auction authority under Sections
309(j) and 309(l) of the Communications Act through comparative hearings in which the applicants may
present whatever evidence they believe relevant, with the renewal expectancy remaining the most important
factor.  


                   II.  BACKGROUND AND SUMMARY

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

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

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

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

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

                         III.  DISCUSSION

A.  Statutory Overview

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

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

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

(emphasis added.)

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

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

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

     2.  Statutory Authority to Use Competitive Bidding for Modification Applications

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

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

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

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

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

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

     3.  Statutory Exemption for Noncommercial and Public Broadcast Stations  

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

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

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

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

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

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

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

     1.  Discretion to Use Auctions in Pending Cases

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

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

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

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

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

     2.  Public Interest Considerations Favoring Resolution by Competitive Bidding 

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

     3.  Treatment of Pending Hearing Cases 

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

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

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

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


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

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

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

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


C.  General Rules and Procedures for Competitive Bidding 

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

     92.  As a result of settlements executed during the 180-day waiver period, all of the frozen hearing
cases are now pending before the Commission.  Following release of this order, the General Counsel, acting
on delegated authority, will issue an order in each case identifying the eligible, qualified bidders entitled to
participate in the auction, referring all such cases to the Mass Media Bureau for processing in accordance with
the auction procedures outlined above for the frozen Bechtel non-hearing cases, and either stay or terminate
the hearing proceeding, depending on whether there are any unresolved hearing issues (including any unresolved
petitions to enlarge issues) relating to the basic qualifications of any particular applicant.  As proposed in the
Notice, 12 FCC Rcd at 22376 ( 30), the hearing proceeding will resume only in the event that such an
applicant is the winning bidder.  
  
     93.  Thereafter, all pleadings filed before the auction relating to any frozen comparative case (whether
hearing or non-hearing) should be submitted to the Mass Media Bureau for processing in accordance with its
procedures for frozen non-hearing cases outlined above, except that settlement agreements in stayed hearing
proceedings should be submitted to the Commission.  As we recognized in the Notice, 12 FCC Rcd at 22376-
77 ( 32), the Mass Media Bureau, as a party to the hearing proceeding, is precluded by the separation of
investigative and prosecuting functions prescribed by 5 U.S.C.  554(d) of the Administrative Procedure Act
from having any decision-making function with respect to any remaining qualifying issues in these hearing
cases.  We continue to believe that having the Mass Media Bureau review FCC Forms 175 to determine
completeness and process administrative information relating solely to the conduct of the auction does not entail
decision-making responsibilities that would violate the separation of  functions requirement.   No commenters
disagree with this conclusion.  And, given our determination to resolve after the auction any remaining basic
qualification issues in these hearing cases, pre-auction pleadings unrelated to the conduct of the auction, except
possibly for certain settlement agreements, would be procedurally improper and will be summarily dismissed. 
Thus, even in a stayed hearing proceeding, a settlement agreement is the only type of procedurally proper pre-
auction pleading that might be filed that would entail decision-making responsibilities that could not be handled
by the Mass Media Bureau.  Such settlements, and any related pleadings, should therefore be submitted to the
Commission rather than to the Mass Media Bureau.

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

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

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

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

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

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

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

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

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

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

     107.  All commenters addressing this issue oppose the reopening of any filing periods or windows that
have already closed to allow additional parties to file competing applications.  They argue that reopening any
such filing periods or windows would be unfair to pending applicants who were diligent in filing their
applications in a timely manner and would reward dilatory applicants who had previously failed to file within
clearly delineated time parameters.  Commenters assert that the pending applicants have already expended time
and funds to file complete long-form applications, and it would be inequitable to reopen filing windows for new
applicants who would be required to file only short-form applications.  In addition, commenters assert that
reopening filing periods to allow additional competing applications would only delay the grant of construction
permits and the commencement of service to the public.  Given these equitable and public interest
considerations, commenters argue that the sole purpose in reopening filing windows would be in expectation
of generating higher auction revenues, which they contend is impermissible in this context, citing 47 U.S.C.
 309(j)(7)(A) (in prescribing certain auction regulations, the Commission may not base a finding of public
interest, convenience and necessity on expectation of federal revenues from the use of a system of competitive
bidding).

     108.  Notwithstanding Section 309(j)(7)(A), we continue to believe that we have the discretion to
reopen relevant filing periods, if so doing would serve the public interest.  We agree, however, with the
commenters that, in cases of pending mutually exclusive applications not subject to Section 309(l) where the
relevant period or window for filing applications under our existing procedures has expired, the public interest
would not be served by reopening the filing period for additional mutually exclusive applications.  These
pending applicants timely filed complete long-form applications pursuant to our procedures then in place, with
the reasonable expectation that their only competitors would be persons who similarly timely filed applications
within the Commission's designated filing period.  The reopening of filing windows would certainly not expedite
the disposition of the pending applications or the commencement of service to the public, but could produce
further delays.  Moreover, unlike situations where we have declined to hold an auction limited to pending
applicants but preferred to permit the filing of applications by additional parties, the auction procedures
adopted herein make no substantial changes in the nature of the broadcast services or in the rights and
responsibilities of broadcast licensees.  Thus, we see no compelling reason to reopen filing windows that have
already expired to permit the filing of additional applications by applicants who failed to file during the
Commission's previously clearly delineated filing periods.

     109.  Accordingly, for groups of pending mutually exclusive applications not subject to Section 309(l)
where the relevant filing periods have already expired, the auction will proceed in the same manner as the
auction of the Section 309(l) pending applications, for which we are statutorily precluded from reopening any
filing periods.  The procedures set forth in  80-87 above will therefore also govern the auction of the pending
applications not subject to Section 309(l) that have already been subject to competition through the opening
and closing of periods for the filing of mutually exclusive applications.  With regard to any remaining pending
singleton applications where the relevant period for filing competing applications has opened and closed, but
no mutually exclusive applications were ever filed, we will continue to process and grant according to our
regular procedures.  See supra  65.        

     110.  We note, however, that there are pending before the Commission a number of broadcast
applications (primarily AM and FM translator) that have never been subjected to competition because periods
or windows for the filing of competing applications have not yet been opened by the Commission.  Rather
than open individual filing windows or issue individual cut-off lists for each of these pending broadcast
applications, we believe it more efficient to simply include these applications in the first general auction we
conduct for new applicants in the relevant service.  Specifically, during the first auction window opened for
new applications in that service under the general window filing approach adopted herein (see infra  136-
140), these pending applicants will be required to confirm their interest in participating in an auction for the
construction permit for which they previously applied by filing a short-form application.  No engineering data
will be required to be filed with the short-forms of these pending applicants for the purpose of making mutual
exclusivity determinations, as they have already filed complete long-forms.  The Commission will dismiss the
long-form application of any pending applicant who fails to file a timely short-form application during the first
general auction window for the relevant service.  Following the determination of mutual exclusivity among all
the applications filed in response to this window by both pending and new applicants, the Commission will
proceed, as described below in our general auction procedures, to the auctioning of the mutually exclusive
applications and to the processing of any non-mutually exclusive applications.  See infra  149-161.

     111.  As with the pending applications subject to Section 309(l), we will not, prior to the auction,
review the long-form applications previously filed by pending applicants not subject to section 309(l) who
participate in the first general auction window, nor will we accept amendments to or petitions to deny against
these previously-filed long-forms.  Within 30 days following the close of the auction, a winning bidder will,
if a new applicant, be required to submit a complete long-form application and, if a pending applicant, be
required to make any necessary amendments to its pending long-form.  Procedures for the submission of all
payments and for the filing of petitions to deny against the long-forms of the winning bidders will be the same
as under our general auction procedures.  See infra  162-176. 

     3.  Procedures for Broadcast Auctions Generally

          a.  General Competitive Bidding Matters

     112.  Retention of Broadcast Licensing Procedures.  As proposed in the Notice, 12 FCC Rcd at
22381-82 ( 46), a winning bidder in broadcast auctions will, consistent with existing broadcast licensing
procedures, be awarded a construction permit, rather than a "license."  As currently required, winning bidders
will then be required, within a specified time period, to construct their facilities and file an application for a
"license to cover construction permit" to obtain a license for the constructed facilities.  See 47 C.F.R. 
73.3598.  We will retain this broadcast licensing procedure in the auction context, because it comports with
the requirements of Section 319 of the Communications Act and has functioned well in the non-auction
context.  We also note that, given the requirements of Section 319, broadcast auction winners, unlike winning
bidders in some other auctionable services, will not be permitted to construct their facilities prior to grant of
their long-form applications and issuance of their construction permits.  See 47 U.S.C.  319(d) ("With
respect to any broadcasting station, the Commission shall not have any authority to waive the requirement of
a permit for construction," except that the requirement for a permit may be waived by the Commission "for
minor changes in the facilities of authorized broadcast stations.").   

     113.  Secondary Services in the Auction Context.  We reiterate that awarding broadcast and
secondary broadcast service construction permits by auction will not alter the secondary nature of the LPTV
and FM and television translator services.  See Notice, 12 FCC Rcd at 22382 ( 46).  A winning bidder who,
after paying for its construction permit and satisfying the requirements for a secondary broadcast license,
receives the license will not have any greater rights vis-a-vis full service broadcast facilities than any other
broadcaster licensed to provide that same secondary service.  For example, an LPTV or television translator
licensee who receives its license by competitive bidding must still protect full power television stations from
interference and will still be subject to displacement by a full service television licensee.  See 47 C.F.R.  
73.3572(a); 74.703(b).  Similarly, an FM translator station will not be permitted to continue to operate if
it causes interference to any authorized broadcast station, even if the translator licensee received its license by
competitive bidding.  See 47 C.F.R.  74.1203(a) & (b).  A few commenters complain that auctioning
secondary services is unfair or inequitable.  However, the fact that mutual exclusivity among secondary
broadcast applicants will in the future be resolved by competitive bidding cannot, in our opinion, provide
sufficient grounds to alter the basic character of any of the secondary services.  See 47 U.S.C.  309(j)(6)(D)
(nothing in the use of competitive bidding shall "be construed to convey any rights . . . that differ from the
rights that apply to other licensees within the same service that were not issued pursuant" to the Commission's
competitive bidding authority).  Given our statutory mandate to auction the LPTV and translator services
despite their secondary status (see supra  9-12), bidders must carefully weigh the risks that the secondary
nature of these services present and adjust their bidding strategies accordingly.  

     114.  Displacement of LPTV and Television Translators by Digital Television (DTV) Stations. 
Although the secondary status of the LPTV and television translator services is unchanged by the adoption of
competitive bidding procedures, we reemphasize here, as requested by several commenters, our support for
certain previously-adopted special measures to protect LPTV and television translator stations during the
transition to digital television.  As we stated in the Sixth Report and Order, LPTV stations and television
translators displaced by new DTV stations will be allowed to apply for suitable replacement channels in the
same area without being subject to competing applications.  Such applications by displaced LPTV and
television translator stations will be considered on a first-come, first-served basis, and may be submitted at any
time without waiting for a filing window to open.  See Sixth Report and Order in MM Docket No. 87-268, 12
FCC Rcd 14588, 14653-54 (1997) (hereafter Sixth Report and Order).  Our adoption of auction filing
windows in this proceeding does not alter our earlier decision with regard to displacement relief for LPTV and
television translator stations.   

     115.  Accommodation of Section 307(b) in AM Auctions.  As set forth in Section 307(b) of the
Communications Act, the Commission is charged with the duty to make such distribution of broadcast licenses
"among the several States and communities as to provide a fair, efficient, and equitable distribution of radio
service to each of the same."  47 U.S.C.  307(b).  Section 307(b), however, enunciates this mandate without
denoting the procedure to be employed to effectuate the fair, efficient and equitable distribution of radio service. 
Over the years, the Commission has used a variety of means to implement the Section 307(b) directive. 
Previously, when mutually exclusive applicants sought authority to construct broadcast stations to serve
different communities, the Commission, in the context of the comparative hearing process, implemented the
Section 307(b) mandate by first determining which community had the greatest need for additional service,
before addressing the comparative qualifications of the applicants.  See FCC v. Allentown Broadcasting Corp.,
349 U.S. 358 (1955).  If the 307(b) determination was dispositive, the standard comparative issues were not
considered.  See Pasadena Broadcasting Co. v. FCC, 555 F.2d 1046 (D.C. Cir. 1977).  The Commission
altered this approach for implementing Section 307(b) in the commercial FM and television services by
establishing and incorporating in its rules a Table of Allotments for each service.  These allotment tables
provide for a distribution of channels for specific communities throughout the United States based on fixed
mileage separations.  The Commission fulfills the 307(b) obligation by making available for licensing only a
frequency that has been assigned to a specific community in the Table of Allotments through a rulemaking
proceeding.  A system of priorities guides the Commission's 307(b) determinations, setting preferences for
applicants proposing to establish a station in a nonserved or underserved community. 

     116.  By comparison, AM radio frequencies are allocated on a demand basis, with applicants
specifying the desired community and providing engineering exhibits to demonstrate the absence of interference
to existing stations.  Without an allotment table, mutual exclusivity may occur between AM applicants
proposing to serve different communities.  If such mutually exclusive AM applications were filed, the
Commission formerly addressed the Section 307(b) considerations in the resultant comparative hearing process.

     117.  As discussed above, Section 309(j) of the Communications Act sets forth the Commission's
authority to award spectrum licenses by competitive bidding.  In originally authorizing the Commission's use
of competitive bidding to award licenses in subscriber-based services and in subsequently expanding that
authority to include broadcast licenses, Congress did not eliminate or revise Section 307(b) of the Act.  Prior
to authorizing (let alone requiring) the use of auctions for broadcast stations, Congress expressly indicated that
its grant of auction authority to the Commission should not affect specific provisions of the Communications
Act that limit the rights of licensees, or that direct the Commission to adhere to other requirements.  In
particular, Congress stated that the adoption of competitive bidding procedures does not affect, inter alia,
Section 307 of the Communications Act.  Section 309(j)(6) contains "Rules of construction" and stipulates that
"Nothing in this subsection, or in the use of competitive bidding, shall ... (B) limit or otherwise affect the
requirements of ... section ... 307 ... of this title ...."  47 U.S.C.   309(j)(6)(B).  This provision of Section
309(j)(6) was neither modified nor excised by the 1997 Budget Act. 

     118.  As noted with respect to FM and television, a community's need for service is assessed in the
context of the initial rulemaking proceeding to determine additions and substitutions to the Table of Allotments. 
This procedure is unaltered by the implementation of competitive bidding.  Furthermore, we have always
required demonstration that a singleton AM applicant seeking to change its community of license complies with
our standards under Section 307(b).  However, the discontinuance of the comparative hearing process leaves
the 307(b) analysis for mutually exclusive AM applications without a venue.  

     119.  A few commenters urge the Commission to treat all such mutually exclusive AM applicants
seeking authority to serve different communities as a non-auctionable class.  We reject this proposal as
inconsistent with the clear statutory mandate.  As described in detail above, amended Section 309(j) requires
the Commission to auction mutually exclusive applications for the broadcast and secondary broadcast services,
and includes no express exemption from competitive bidding for competing AM applications that specify
different communities of license. 

     120.  After consideration, however, we conclude that, our competitive bidding authority under Section
309(j) should be implemented in a way that accommodates our statutory duty under Section 307(b) to effect
an equitable geographical distribution of stations across the nation.  Congress specifically directed that the
requirements of Section 307 should not be affected by the use of competitive bidding.  See 47 U.S.C. 
309(j)(6)(B).  Thus, our obligation to fulfill the Section 307(b) statutory mandate endures. The Commission
and the courts have traditionally interpreted Section 307(b) to require that we identify  the community having
the greater need for a broadcast outlet as a threshold determination in any licensing scheme, for to decide
otherwise would subordinate the "needs of the community" to the "ability of an applicant for another locality." 
FCC  v. Allentown Broadcasting Corp. at 361-362.  We conclude that our rules should incorporate a similar
threshold Section 307(b) analysis to determine whether particular applications are eligible for auctions. 
Specifically, with respect to AM applications, a traditional Section 307(b) analysis will be undertaken by the
staff prior to conducting auctions of competing applications.  If the Section 307(b) determination is dispositive,
the staff will grant the application proposing to serve the community with the greater need if there are no
competing applications for that community, and dismiss as ineligible any competing applications not proposing
to serve that community.  If no Section 307(b) determination is dispositive (or if more than one application
remains for the community with the greater need), the applicants must then be included in a subsequently
scheduled auction.  This approach is consistent with our established practice in the commercial FM and
television services with allotment tables where, as discussed above, the Section 307(b) analysis customarily
precedes the licensee selection process.  The number of AM applications subject to such a 307(b) staff analysis
should be minimal, as there are relatively few instances of mutual exclusivity among AM applications
submitted for new stations and major modifications.  Moreover, this procedure accommodates both Section
307(b) and Section 309(j), and results in a balanced implementation of the two respective sections of the
Communications Act.      

          b.  Competitive Bidding Design

               (1) Auction Methodology
     
     121.  In the Notice, 12 FCC Rcd at 22383 ( 51), we proposed to conduct all auctions of mutually
exclusive broadcast applications in conformity with the general competitive bidding rules set forth in Part 1,
Subpart Q of the Commission's rules, subject to any changes made to those rules in the then-ongoing Part 1
rulemaking, and substantially consistent with the bidding procedures that have been employed in previous
Commission auctions.  Accordingly, we asked that commenters review the proposed changes in the Part 1 rules,
identify any rules they believed to be inappropriate for broadcast auctions, and propose alternatives. 
Commenters advocating different procedures were requested to explain in detail how such procedures would
work and why the proposed Part 1 rules would be inappropriate in the broadcast context.  

     122.  The Notice, 12 FCC Rcd at 22383-85 ( 52-55), sought comment on a variety of competitive
bidding design options for the auction of broadcast service construction permits.  Specifically, we discussed
the possibility of using a simultaneous multiple round auction design, similar to that used in many previous
auctions, as well as alternate bidding designs that might be appropriate in the broadcast context, including: (1)
sequential multiple round auctions, using either oral ascending, remote or on-site electronic bidding; and (2)
sequential or simultaneous single round auctions, using either remote and/or on site electronic bidding, or sealed
bids.  See generally 47 C.F.R.  1.2103.  Additionally, we noted that we have the authority under Section
309(j) to explore other auction methodologies.   

     123.  We received a number of comments on the type of auction design that should be utilized for the
auction of broadcast construction permits.  Several commenters addressing the issue oppose the use of a
simultaneous multiple round auction design, arguing that the Commission should employ a simpler auction
design.  Specifically, simultaneous multiple round bidding is regarded as inappropriate for broadcast auctions
because such auctions will be for scattered facilities and there is little likelihood that bidders will seek to
acquire groupings of licenses.  A small number of commenters specifically favor the use of open outcry for
broadcast auctions, due to the simplicity and speed of that auction method.  With regard to the auction
methodology to be employed in the event we determine to auction ITFS licenses, several commenters express
similar reservations about simultaneous multiple round bidding and support open outcry.  Another
commenter specifically favors the use of multiple round auctions because in single round or sealed bid auctions
the successful bidder may be forced either to bid too much for the spectrum or be unable to increase its bid if
it is too low.    

     124.  The Notice, 12 FCC Rcd at 22386-87 ( 58), also sought comment on how the Commission
should deal with any "daisy chains" presented in auctions of AM radio, LPTV, or television or FM translator
applications.  As we discussed, daisy chains occur when an application is mutually exclusive (i.e., would cause
interference) with a second application, which is mutually exclusive with a third application in the same or
adjacent community, and so on, even though the first application may not be directly mutually exclusive with
any application except the second.  Due to the possibility of daisy chains in AM, LPTV, and television and
FM translator auctions, there may be limited instances in these auctions where, depending on who becomes the
winning bidder among a mutually exclusive group, another application (in addition to the auction winner) may
become grantable, or another smaller mutually exclusive group will still exist and need to be resolved.  We
therefore sought comment on appropriate methods for resolving any daisy chains in the auction context.  We
also suggested that commenters address whether the methods used to resolve daisy chains in the lottery process
(such as the holding of "sub-lotteries") are applicable in the auction context, or whether a different method or
methods may be more suitable, such as the use of combinatorial bidding.     

     125.  Only two commenters addressed the issues of daisy chains and combinatorial bidding. 
Specifically, one commenter argues that daisy chains are a problem that should be dealt with by not conducting
auctions for AM stations.  The other commenter states that combinatorial bidding should be avoided because
it is an open invitation to speculators who will then resell licenses to the highest bidder.

     126.  As we discussed in the Notice, because the same type of auction methodology may not be
appropriate for all mutually exclusive broadcast and secondary broadcast applications, different approaches
may be warranted to resolve mutual exclusivity among certain categories of broadcast applications and for
"daisy chain" situations.  After considering the comments on this issue, we conclude that the appropriate
auction design will vary depending on the type of service involved, the number of construction permits at stake,
how many bidders are likely to participate, and the degree to which interdependence may be important to those
likely to bid on a particular type of permit.  As the record suggests, we believe that a simple, rapid auction
design, such as a single round sealed bid auction, will likely be appropriate for those permits that are relatively
low-valued or for which there is little likelihood of interdependence (such as translator construction permits). 
At the same time, however, our auction experience demonstrates that there are instances where a simultaneous
multiple round auction design can prove useful in ensuring that an auction progresses as efficiently as possible. 
In addition, as we discussed in the Notice, simultaneous multiple round bidding has the advantage of affording
bidders more information during the auction concerning the value that competing bidders place on the permits
being auctioned than is the case with single round bidding.  For this reason, simultaneous multiple-round
bidding is more likely to result in the party that values the spectrum the most acquiring the permit.  Therefore,
for broadcast construction permits that are more highly valued, or for which there is a greater likelihood of
interdependence among the permits, we will likely use simultaneous multiple round auctions.

     127.  Consistent with our Part 1 rules, we therefore delegate authority to the Mass Media Bureau and
the Wireless Telecommunications Bureau (hereafter, the Bureaus) to seek comment on and establish an
appropriate auction design methodology prior to the start of each broadcast auction or group of broadcast
auctions.  As we discussed in the Third Report and Order, 13 FCC Rcd at 447-449, the Budget Act requires
that, "before the issuance of bidding rules" the Commission must provide adequate time for parties to comment
on proposed auction procedures, and that "after issuance of bidding rules," the Commission must provide
adequate time "to ensure that interested parties have a sufficient time to develop business plans, assess market
conditions, and evaluate the availability of equipment."  Consistent with these provisions, in the Third Report
and Order we directed the Wireless Telecommunications Bureau, under its existing delegated authority, to
seek comment on a variety of auction-specific issues prior to the start of each auction.  Specifically, we
directed the Wireless Telecommunications Bureau to consider a variety of mechanisms relating to day-to-day
auction conduct, including the structure of bidding rounds and stages, establishment of minimum opening bids
or reserve prices, minimum acceptable bids, initial maximum eligibility for each bidder, activity requirements
for each stage of the auction, activity rule waivers, criteria for determining reductions in eligibility, information
regarding bid withdrawal and bid removal, stopping rules, and information relating to auction delay,
suspension, or cancellation.  See Third Report and Order, 13 FCC Rcd at 448.  We also directed the Wireless
Telecommunications Bureau to afford interested parties a reasonable time, in light of the start date of each
auction and relevant pre-auction filing deadlines, to comment on auction-specific issues.  Id.

     128.  As we indicated in the Third Report and Order, we believe that this process is consistent with
the requirements of Section 309(j)(3)(E), as added by the Budget Act, and will afford potential bidders
adequate notice, as well as an opportunity to comment on issues relating to the day-to-day conduct of each
auction.  See 47 U.S.C.  309(j)(3)(E).  Although we did not specifically propose to employ this practice for
broadcast auctions, we conclude that it should apply in this context as well.  Therefore, consistent with our
decision in the Third Report and Order and the guidance we provide herein, we direct the Bureaus to seek
comment on the types of auction-specific issues raised in the Notice prior to the start of each auction or group
of auctions for particular broadcast services. 
     
               (2) Upfront Payments, Minimum Opening Bids and Reserve Prices

     129.  The general Part 1 auction rules provide for the submission of upfront payments by prospective
bidders prior to the commencement of an auction, the amount of which generally determines a bidder's
eligibility to bid on any license or combination of licenses in each round of the auction.  See 47 C.F.R. 
1.2106.  In the Notice, 12 FCC Rcd at 22385 ( 56), we proposed that the Bureaus should establish the upfront
payments applicable in broadcast service auctions, which would be announced by public notice prior to any
auction.  We sought comment on the appropriate amount, or method of determining an appropriate amount,
of this upfront payment for bidders in broadcast auctions.  While in previous auctions we have typically based
the upfront payments upon the amount of spectrum and population (or "pops") covered by the licenses or
permits for which parties intend to bid, we noted that in the broadcast area there is other data, such as market
size, market ratings, advertising rates and broadcast transactions, that might prove more useful than the MHz-
pop formula utilized in valuing other, less established telecommunications services.  We therefore sought
comment on alternate valuation formulas.

     130.  As we recognized in the Notice, 12 FCC Rcd at 22381 ( 57), Congress in the Budget Act
directed the Commission to prescribe methods by which a reasonable reserve price or a minimum opening bid
will be established for any license that is to be assigned by competitive bidding, unless such reserve prices or
minimum opening bids would be contrary to the public interest.  In response to this legislative directive, we
proposed that the Bureaus consider the use of reserve prices and minimum opening bids for auctionable
commercial broadcast construction permits.  We sought comment on the methodology to be employed in
establishing each of these mechanisms, and noted the possibility of establishing minimum opening bids at the
same level as upfront payments, as was done in connection with the auction for the 800 MHz Specialized
Mobile Radio service, and of using a MHz-pop formula, as was done in the recently-completed Local
Multipoint Distribution Service auction.  We also sought comment on a variety of alternative methods for
estimating the value of the relevant construction permits and thus for providing a basis for estimating reserve
prices or minimum opening bids.  Finally, we proposed to announce any reserve prices or minimum opening
bids established for broadcast construction permits by public notice prior to auction, unless, based upon the
record with respect to a particular auction or service, it is determined that a reserve price or minimum opening
bid would not be in the public interest. 

     131.  A number of commenters addressed the issues of upfront payments, minimum opening bids, and
reserve prices in the broadcast auction context.  With regard to upfront payments, commenters argue that while
upfront payments are useful to ensure that only serious applicants participate in broadcast auctions, upfront
payments should be small to allow small businesses to compete effectively.  Commenters differ, however,
on how upfront payments should be determined, and suggest a variety of factors, including: (1) the population
served and the class of station; (2) data drawn from station transactions and the performance of operating
stations in the market that the applicant hopes to serve; (3) current permit costs; and (4) a flat upfront
payment amount such as $100,000.  At least one commenter believes that pending applicants who filed prior
to July 1, 1997, should only be required to submit a nominal upfront payment, while other applicants should
be required to demonstrate a greater financial commitment.  Other commenters oppose an upfront payment
requirement for broadcast auctions, arguing that upfront payments are contrary to the public interest, or that
the Commission's existing default and bid withdrawal payments alone are sufficient to discourage insincere
bidders. 

     132.  Several commenters also discussed the Commission's tentative conclusions regarding minimum
opening bids and/or reserve prices.  Those commenters who support their use make a variety of suggestions
as to how such mechanisms should be established.  One commenter contends that the minimum opening bid
should be equal to the upfront payment and based upon the population proposed to be served.  In contrast,
another commenter argues that minimum opening bids, like upfront payments, should be determined using data
based upon station transactions and the performance of operating stations in the market that the applicant hopes
to serve, particularly in smaller market areas for which there is no comparable market data that could fairly
be used to estimate license value.  Other commenters oppose the establishment of a minimum opening bid
and/or reserve price for the auction of broadcast construction permits, arguing that (1) the Commission, Mass
Media Bureau and Wireless Telecommunications Bureau lack the expertise and/or staff resources necessary
to establish a minimum opening bid and/or reserve price; (2) a minimum opening bid or reserve price is either
unnecessary or not in the public interest because the auction itself will establish the fair market value of the
broadcast construction permits; or (3) the purpose of a minimum opening bid or reserve price would only
be to generate funds for the U.S. Treasury.  Two commenters also contend that, for pending applications
filed before July 1, 1997, minimum opening bids or reserve prices would be particularly inequitable.  

     133.  We disagree with those commenters who contend that the Commission lacks expertise to establish
upfront payments, minimum opening bids or reserve prices for auctions.  The submission of upfront payments
prior to auction has been provided for in our general Part 1 auction rules since they were first promulgated,
and the staff of the Wireless Telecommunications Bureau has established upfront payments for most of the
Commission's 16 previously-concluded spectrum auctions.  That Bureau has also accurately evaluated such
disparate services as Direct Broadcast Satellite, Digital Audio Radio Satellite Service, 800 MHz Specialized
Mobile Radio and the Local Multipoint Distribution Service to establish minimum opening bids.  Moreover,
Congress in the Budget Act explicitly directed us to prescribe methods by which reserve prices or minimum
opening bids will be established, unless we specifically determine that doing so would not be in the public
interest.  See 47 U.S.C.  309(j)(4)(F).  General assertions by some commenters that establishment of a
minimum opening bid or reserve price would not be in the public interest for broadcast auctions are
unpersuasive, given the terms of Section 309(j)(4)(F) and the successful use of minimum opening bids in
previous Commission auctions.    

     134.  As discussed above (see supra  127-128), we will, for auctions of broadcast construction
permits, employ the procedure adopted in the Third Report and Order, whereby we will seek comment on a
variety of auction-specific issues prior to the start of the auction. Therefore, consistent with the  Budget Act,
our treatment of these issues in the Third Report and Order, and our proposals in the Notice, we delegate to
the Bureaus authority to seek comment on and, as appropriate, to establish upfront payments, minimum
opening bids and/or reserve prices for each auction or group of auctions of broadcast service construction
permits.  In formulating proposals regarding upfront payments, reserve prices and minimum opening bids, we
believe that both Bureaus should consider the issues raised by commenters in this proceeding.  With respect
to the methodology to be employed in establishing each of these mechanisms, among the factors the Bureaus
may consider are the type of service that will be offered, the amount of spectrum being auctioned, the degree
of competition from incumbent providers, the size of the geographic service areas, potential advertising
revenue, unalterable limitations due to physical phenomena (e.g., propagation losses), equipment design
limitations, issues of interference with other spectrum bands, and any other relevant factors that could
reasonably have an impact on valuation of the spectrum being auctioned. 

          c.  Auction Application and Payment Procedures 

     135.  In the Second Report and Order, the Commission initially established general competitive
bidding rules and procedures for all auctionable services, but indicated that such rules could be modified on
a service-specific basis.  More recently, in the Third Report and Order, the Commission substantively amended
these general competitive bidding rules in an effort to streamline regulation, increase the efficiency of the
auction process, and provide more specific guidance to auction participants.  Based on the experience gained
in the course of conducting numerous auctions and to provide for a more consistent and efficient competitive
bidding process, the Third Report and Order modified the general Part 1 auction rules, and stated that these
uniform rules would govern all future auctions, unless the adoption of service-specific rules was determined
to be warranted with regard to particular matters.  Id., 13 FCC Rcd at 382.  Accordingly, we will follow for
all broadcast services the procedural and payment rules established in the Second Report and Order and Third
Report and Order, set forth at 47 C.F.R. Chapter I, Part 1, Subpart Q, with certain modifications, as
specifically indicated below.  Our objective has been to design rules and procedures that will reduce
administrative and financial burdens on bidders and the Commission, ensure that bidders and licensees are
qualified, and minimize the delays in the authorization and construction of new or expanded broadcast facilities
to serve the public.  See 47 U.S.C.  309(j)(3)(A) (in designing auction rules, the Commission should seek to
promote development and rapid deployment of new technologies, products and services for public benefit,
without administrative or judicial delays).     

               (1) Pre-Auction Application Procedures

     136.  Window Filing Approach.  As described in the Notice, 12 FCC Rcd at 22387 ( 60), the
broadcast and secondary broadcast services currently all have differing filing procedures, and none of these
procedures was designed to work in conjunction with the auction of mutually exclusive applications.  In this
First Report and Order, we replace these disparate filing procedures for the various services with a uniform
window filing approach that will facilitate the efficient determination of groups of mutually exclusive
applications for auction purposes.  

     137.  In the television, AM and FM translator services, the new window filing approach will replace
the existing two-step cut-off list procedures presently utilized.  See 47 C.F.R.  73.3571; 74.1233.  The
current LPTV and television translator window filing procedures will be modified to conform with the auction
window filing procedures.  See 47 C.F.R.  73.3572(g).  In the FM service, as discussed in the Notice, 12 FCC
Rcd at 22390 ( 65), the adoption of a fixed period filing window will terminate the ability of applicants to
tender new and major change FM applications on a first come/first served basis, as permitted under the Report
and Order in Docket 84-750, 50 Fed. Reg. 19936 (May 13, 1985).  See also 47 C.F.R.  73.3573.  With
regard to the FM allotment process, channels will continue to be assigned to the FM Table of Allotments
through our existing rulemaking process, and we will continue to accept and process petitions for rulemaking
requesting the allotment of new FM channels to the Table of Allotments at any time.  However, we will no
longer open filing windows in allotment report and orders for the newly-allotted channel; applicants will,
instead, be able to apply for any such allotments during subsequently announced FM auction filing windows. 
See 47 C.F.R.  73.3564(d).

     138.  We hereby replace these disparate filing procedures with a specific time period, or auction
window, during which all applicants seeking to participate in an auction must file their applications for new
broadcast facilities or for major changes to existing facilities.  Prior to any broadcast auction, the Bureaus
will release, pursuant to delegated authority, various public notices concerning the auction and the procedures
to be followed in the auction.  As indicated in the Notice, 12 FCC Rcd at 22389 ( 63), an initial public notice
will announce an upcoming auction and will specify when the window for filing to participate in the auction
will open and how long it will remain open.  The filing window will remain open a sufficient period of time so
that applicants, such as those for the AM and LPTV services, will be able to prepare and file the engineering
information necessary to make determinations of mutual exclusivity.  See infra  143.  We emphasize that
applications filed before or after the dates specified in the public notice will not be accepted.  Applications
submitted prior to the window opening date identified in the public notice will be returned as premature, and
applications submitted after the specified deadline will be dismissed with prejudice as untimely.

     139.  We will retain the discretion to have combined filing windows allowing the submission of
applications for several broadcast services, or to have separate filing windows for each type of broadcast or
secondary broadcast service.  Although the opening of a combined window for the filing of applications for the
various broadcast and secondary broadcast services at the same time may be more efficient, we recognize that
opening separate windows for each service may better accommodate the circumstances unique to each service
and better allow the Commission to control the filing and processing of applications.  We will open filing
windows for the broadcast and secondary broadcast services as often as our resources allow, taking into
consideration the Commission's need to maintain orderly processing procedures and the frequency with which
broadcast auctions may be efficiently conducted, as well as equitable considerations that may warrant
conducting auctions for pending applications before opening auction filing windows for new applications. 
Mutually exclusive broadcast applications filed during these windows may also be included in auctions of
unsold or defaulted licenses, particularly if the number and estimated value of the construction permits at issue
is low.  We feel that the efficiency of the broadcast application and auction process will be best promoted by
the Commission retaining discretion to open filing windows and schedule auctions in such a flexible manner.

     140.  We feel that the uniform window filing approach described above best complements the auction
process and, at the same time, provides the staff with a mechanism to control effectively the filing and
processing of broadcast applications.  In particular, adherence to date certain openings and closings of filing
windows (rather than first come/first served processing) will enable the Commission to identify more efficiently
discrete groups of mutually exclusive applications for auction purposes.  Although a few commenters state that
the window filing approach would encourage the filing of large numbers of speculative applications, we have
found that speculation is actually greatly reduced in the auction context, given the strict payment and other
bidding requirements.  Given the paucity of substantive comments even addressing our window filing proposal,
we conclude that commenters had no strong objections to the replacement of our existing disparate filing
procedures with a uniform window filing approach.
               
     141.  Short-Form Applications.  To reduce the burden on bidders and the Commission, and to
minimize the potential for delays, broadcast applicants, in accordance with our general Part 1 auction rules,
will be required to submit only a short-form application (FCC Form 175) prior to any auction, and only
winning bidders will need to file complete long-forms (FCC Form 301 for AM, FM and television stations,
FCC Form 346 for LPTV and television translators, or FCC Form 349 for FM translators).  Specifically, in
response to a public notice announcing a window for the filing of broadcast and/or secondary broadcast
applications for new stations and for major changes in existing facilities, we will, as proposed in the Notice,
12 FCC Rcd at 22390 ( 65), require applicants to file a short-form application, along with any engineering
data necessary to determine mutual exclusivity in a particular service.

     142.  With regard to the FM service, the Notice proposed that applicants would apply by submitting
the FCC Form 175 application for any vacant FM allotment specified in the public notice announcing the
auction filing window.  Applications specifying the same vacant FM allotment would be mutually exclusive,
and no supplemental engineering data would be necessary to make this determination.  Commenters, however,
noted that the Commission's proposal would protect from subsequently filed applications (such as minor change
applications that may be filed at any time) only the reference points of any vacant allotment.  According to
these commenters, the reference point of a vacant allotment and an applicant's actual desired location may be
separated by a considerable distance, and they argued that FM applicants should be allowed to submit actual
site preferences prior to the auction, emphasizing that the ability to protect a specific tower or site from
subsequently filed proposals would be a crucial factor in deciding whether to participate in an auction and how
much to bid.  Accordingly, to address these concerns, we will give FM applicants the opportunity to submit
a set of preferred site coordinates as a supplement to the FCC Form 175.  We emphasize that FM applicants
are not required to submit a set of preferred site coordinates, and may simply indicate the vacant allotment upon
which they intend to bid.

     143.  Applicants for AM stations, LPTV stations, and television and FM translators will be required
to file short-form applications specifying a channel or frequency upon which the applicant may operate in
accordance with the Commission's existing interference standards for these services, which we are not altering
in any way.  To determine which AM, LPTV, and television and FM translator applications are mutually
exclusive for auction purposes, we will require applicants for these services to file, in addition to their short-
form applications, the engineering data contained in the pertinent FCC form (i.e., FCC Form 301, FCC Form
346 or FCC Form 349).  Similarly, in those rare instances in which analog television licensees file major
modification applications (such as a change in the community of license), we will require that such applicants
file both an FCC Form 175 and the engineering data contained in the FCC Form 301.  We believe that
submission of this technical data with a short-form constitutes the least burdensome means of providing us with
the necessary information to make mutual exclusivity determinations.

     144.  Overall, we conclude requiring prospective bidders to file only short-forms (supplemented for
non-table services with engineering information) prior to any auction will enable us to identify the groups of
mutually exclusive applications for auction in the most expeditious manner possible.  Based on our
experience in conducting numerous auctions in different services, we also believe that submission of the FCC
Form 175, which requires various certifications as to the legal, technical, financial and other qualifications of
the applicant, is sufficient documentation to demonstrate an applicant's qualifications to participate in an
auction.  We therefore disagree with commenters who argue that merely requiring submission of the short-form
prior to auction (as is our practice for all auctions) will invite speculators and insincere applicants.  We
emphasize that, for broadcast auctions, we will follow the general auction rule, 47 C.F.R.  1.2105, with regard
to completion of the short-form and exhibits to be submitted with the short-form. More detailed
information about the completion and submission of the short-form applications will be included in the public
notices released prior to the opening of auction filing windows.
        
     145.  Amendment of Short-Form Applications.  To encourage maximum bidder participation in
broadcast auctions, we will, in accordance with the Part 1 auction rules, provide applicants whose timely-filed
short-form applications are substantially complete, but which contain minor errors or defects, with an
opportunity to correct and resubmit their applications prior to the auction.  However, applicants will not be
permitted to make any major changes to their applications after the initial filing deadline (i.e., the close of the
filing window), and any application that does not contain the requisite certifications will be dismissed with
prejudice and may not be resubmitted.  See 47 C.F.R.  1.2105(b)(1).  Major amendments include changes in
ownership of the applicant that would constitute a change of control, changes in an applicant's size that would
affect eligibility for any designated entity provisions, and changes in the license service areas identified in the
short-form applications on which the applicant intends to bid.  See 47 C.F.R.  1.2105(b)(2).  For auctions of
broadcast services, we will construe "changes in the license service areas" to encompass changes in the
engineering information submitted with short-form applications in non-table services, changes of the vacant
allotments specified in short-forms in the FM and television services, or changes in any preferred site
coordinates submitted with short-forms in the FM service.  Thus, changes in the engineering submissions
accompanying a short-form will be regarded as major changes, and cannot be made after the initial filing
deadline.  Minor amendments include typographical corrections, those reflecting ownership changes or
formation of bidding consortia specifically permitted under the anti-collusion rule (see infra  158), and those
making other changes not identified as major.      

     146.  After reviewing the short-form applications, the Bureaus will issue a public notice listing all
applications containing minor defects, and applicants will be given the opportunity to cure and resubmit
defective applications.  On the date set for submission of corrected applications, applicants who on their own
discover minor errors in their applications also will be permitted to file corrected applications.  Following a
review of the corrected applications, we will proceed to determine which of the short-form applications
accepted for filing are mutually exclusive.  See infra  149-153.    

     147.  Method of Filing Short-Form Applications.  After requesting comment on the issue, the
Commission determined in the Third Report and Order to require all short-form applications to be filed
electronically beginning January 1, 1999.  See 47 C.F.R.  1.2105(a).  The Notice in this proceeding, 12 FCC
Rcd at 22390-91 ( 67), anticipated that all broadcast and secondary broadcast applicants would file their FCC
Form 175 applications electronically, and requested comment on this proposal.  Some commenters oppose
requiring electronic filing, stating concerns about technical problems and placing certain applicants, such as
LPTV and translator applicants and those who are not computer literate, at a disadvantage.  After
consideration, we have determined to follow the general auction rule mandating electronic filing, and will
therefore require all applicants for broadcast auctions to file their FCC Form 175 applications electronically
beginning January 1, 1999, unless it is not operationally feasible. Applicants for non-table services, who, as
noted above, must submit engineering information with their short-forms, will be required to file the engineering
section of the electronic versions of the FCC Forms 301, 346 and 349, which are currently being developed. 
More detailed instructions on electronic filing will be provided in the public notices announcing auction filing
windows. 

     148.  We believe that requiring electronic filing for broadcast auctions will best serve the interests of
the prospective bidders as a whole.  Electronic filing does not pose an undue financial burden for applicants,
as no fee is assessed for filing the FCC Form 175 electronically.  This method of filing also promotes openness
in the auction process generally.  Competing bidders, as well as the general public, may easily review
electronically filed applications by downloading applications, without needing to travel to Commission
headquarters or contract for the photocopying of paper applications.  To further facilitate public access, the
Commission has developed user-friendly electronic filing software and Internet World Wide Web forms to give
auction applicants the ability to easily file and review applications.  This software also aids applicants in
ensuring the accuracy of their applications as they are being completed, and enables applicants to correct errors
and omissions prior to submitting their applications.  To assist the public, we provide technical support
personnel to answer questions and work with callers using the electronic auction system.  Especially after the
recent enhancements to our electronic filing system, we are confident that the system is reliable and secure, and
bidders in previous auctions have apparently agreed, as the vast majority have chosen to file electronically, even
when electronic filing was not required.  While we are cognizant of the fact that some broadcast applicants
may currently lack experience in the filing of electronic applications, we feel, for the reasons described above,
that the advantages of electronic filing are significant, and we will therefore, in accordance with the Part 1
auction rules, require short-form applications to be filed electronically.  Although we are mandating the
electronic filing of the FCC Form 175 in broadcast auctions, we nevertheless reserve the right to provide for
manual filing in the event of technical failure or other difficulties.                              

     149.  Determination of Mutual Exclusivity.  After receipt of the short-form applications, the
Commission must determine which applications are mutually exclusive for auction purposes.  In the Notice,
12 FCC Rcd at 22391 ( 68), we tentatively concluded that, in cases where applicants have submitted
engineering data in addition to the FCC Form 175, the Commission would not engage in pre-auction processing
of the data, beyond the review necessary to determine mutual exclusivity for auction purposes.  We sought
comment on an alternate approach whereby the Commission would substantively evaluate the submitted
engineering data, noting that this more extensive pre-auction processing could reduce the risk of applicants with
defective technical proposals prevailing at auction.  We cautioned, however, that evaluating and returning
short-form applications with technical problems (such as interference or international coordination) would
likely delay the auction process, as a returned applicant could seek reconsideration of the Commission's
decision.

     150.  While some commenters support our alternate approach of conducting an engineering review
prior to auction, other commenters addressing this issue support our tentative conclusion to utilize pre-
auction engineering submissions solely for the purpose of determining mutual exclusivity.  These commenters
emphasize that the primary purpose of filing applications prior to auction should be to determine mutual
exclusivity, rather than to determine the acceptability of an applicant's engineering proposal or other
submissions.  According to these commenters, the filing and review of long-form applications following the
auction would be sufficient for the Commission to determine the acceptability of the applicant's engineering
proposal, and, moreover, would relieve the Commission of the burden of reviewing in depth the technical and
other qualifications of all potential applicants prior to the auction.    
     151.  We will adopt our tentative conclusion and will accordingly examine the engineering data
submitted by applicants for AM and LPTV stations and television and FM translators only to the extent
necessary to determine the mutually exclusive groups of applications for auction purposes.   In keeping with
the Commission's efforts to "reduce the administrative burdens of the initial stages of the auction process, avoid
unnecessary delay in the initiation of service, and encourage applicants to participate in the process," Second
Report and Order, 9 FCC Rcd at 2376, we will not make any determination as to the acceptability or
grantability of an applicant's technical proposal prior to the auction.  Deferring technical review until the post-
auction submission of long-form applications by the winning bidders will minimize the potential for delay and
will promote the deployment of new broadcasting service to the public as expeditiously as possible, in keeping
with our statutory objective. 

     152.  We observe, however, that by filing the FCC Form 175, broadcast applicants are certifying that
they are "legally, technically. . . and otherwise qualified pursuant to Section 308(b) of the Communications Act
of 1934," and we expect to be able to rely on applicants' representations in this regard.   We also remind
applicants that the Commission has ample tools at its disposal to discourage unqualified applicants from
participating in the auction process.  For example, prospective bidders should be aware that a winning bidder
whose long-form application cannot ultimately be granted for either legal or technical reasons may be subject
to default payments under the Commission's general competitive bidding rules.  See infra  161.  See also
47 C.F.R.  1.2104(g)(2); 1.2107(b); 1.2109.  Our general competitive bidding rules also provide that if a
winning bidder is found unqualified to be a licensee, the Commission may either reauction the license to
existing or new applicants, or offer it to the other highest bidders in descending order at their final bids.  See
47 C.F.R.  1.2109(c).  These provisions establish strong incentives for potential bidders to make certain of
their qualifications before the auction, so that we may avoid delays in the deployment of new services to the
public that would result from the disqualification of winning bidders and the reauctioning of broadcast
construction permits.  See Second Report and Order, 9 FCC Rcd at 2382.

     153.  Following the determination of mutual exclusivity among the applications filed in an auction
window, the Bureaus will issue a public notice identifying the applicants in each mutually exclusive group
eligible to bid at auction on the construction permits for the allotments or channels identified in their short-form
applications.  The public notice may also provide more detailed information regarding the time, place and
method of competitive bidding to be used in the upcoming auction, applicable bid submission and payment
procedures, the amount of the upfront payments, the procedures and deadline for submitting the upfront
payments, and any minimum opening bid or reserve price for the construction permits being auctioned. 
Mutually exclusive applicants identified by public notice will be required to submit the full amount of their
upfront payment to the Commission's lock-box bank by the date specified in the public notice, in accordance
with the provisions of 47 C.F.R.  1.2106.  After receiving from the Commission's lock-box bank the names
of all applicants who have submitted timely upfront payments, the Bureaus will issue a public notice
announcing the names of all applicants determined to be qualified to bid in the broadcast auction.  An applicant
who fails to submit a sufficient upfront payment will not be identified on this public notice as a qualified
bidder, will be ineligible to bid in the auction, and its application will be dismissed.  See 47 C.F.R.  1.2106(c). 
Each applicant identified on this public notice will be issued a bidder identification number that must be used
when submitting bids. 

     154.  Non-Mutually Exclusive Short-Form Applications.  If the Commission receives only one
acceptable short-form application for any broadcast allotments or channels, then mutual exclusivity is absent
and the Commission is precluded from using competitive bidding to award the broadcast construction permits. 
In these circumstances, the Bureaus will issue a public notice cancelling the auction for those particular
construction permits and identifying the non-mutually exclusive applicants, who will then be required to submit
the appropriate long-form application within 30 days.  The Commission's general rules governing the
submission of fees and the filing of applications will apply to the long-form applications submitted by non-
mutually exclusive applicants, and these applications will be processed in accordance with our general
processing procedures.  In particular, the long-form applications will be placed on public notice, and, consistent
with the procedures adopted herein, ten days will be allowed for the filing of petitions to deny.  See infra  165. 

     155.  Anti-Collusion Rule.  In the Notice, 12 FCC Rcd at 22393-94  ( 73), we sought comment on
whether applicants for broadcast auctions should be subject to the Commission's anti-collusion rule, which
provides that, after the short-form filing deadline, applicants generally may not discuss the substance of their
bids or bidding strategies with other bidders that have applied to bid on the same licenses or permits.  See 47
C.F.R.  1.2105(c).  We adopt our proposal to apply the anti-collusion rule to broadcast service auctions. 
We recognize that a number of commenters oppose this, believing instead that auction applicants should be
permitted to conclude settlement agreements following the short-form filing deadline with those applicants with
whom they are mutually exclusive.  Except to the extent discussed in  17 with respect to competing major
modification applicants, we disagree.  The Commission adopted the anti-collusion rule to both prevent and to
facilitate the detection of collusive conduct, thereby enhancing the competitiveness of the auction process and
the post-auction market structure.  See Second Report and Order, 9 FCC Rcd at 2386-2388.  Although the
services subject to auction have increased in number and have become more diverse, we continue to believe that
our anti-collusion rule is necessary to deter bidders from engaging in anti-competitive behavior.  The rule has
proven effective in the 16 spectrum auctions conducted to date, and we conclude that it should apply in the
broadcast context as well.

     156.  Accordingly, applicants in broadcast auctions will be required to identify on their short-form
applications any parties with whom they have entered into any consortium arrangements, joint ventures,
partnerships or other agreements or understandings which relate in any way to the competitive bidding process. 
See 47 C.F.R.  1.2105(a)(2)(viii); 1.2105(c)(1).  Applicants also will be required to certify on their short-
form applications that they have not entered into any explicit or implicit agreements, arrangements or
understandings of any kind with any parties, other than those identified, regarding the amount of their bids,
bidding strategies, or the particular construction permits on which they will or will not bid.  See 47 C.F.R. 
1.2105(a)(2)(ix).  After short-form applications are filed and prior to the time that the winning bidder has made
its required down payment, all bidders will be prohibited from cooperating, collaborating, discussing or
disclosing in any manner the substance of their bids or bidding strategies with other bidders that have applied
to bid in the same geographic license area, unless such bidders are members of a bidding consortium or other
joint bidding arrangement identified on the bidder's short-form application. Consistent with the anti-collusion
rule's prohibition of discussions between competing applicants, we also conclude that we will not permit
applicants to modify or amend their technical or engineering data submitted with their short-form applications
following the short-form filing deadline so as to eliminate mutual exclusivity, except as previously discussed
with regard to the engineering submissions of competing major modification applicants.  See supra  17, 145. 
For purposes of the anti-collusion rule, an applicant is defined as the entity submitting a short-form application;
all holders of partnership, ownership, and any stock interest amounting to ten percent or more of the applicant;
and any holder of a controlling interest in the applicant.  47 C.F.R.  1.2105(c)(6)(i). 

     157.  In addition, winning bidders in broadcast service auctions will be required to attach as an exhibit
to their long-form applications a detailed explanation of the terms and conditions and parties involved in any
bidding consortia, joint venture, partnership or other agreement or arrangement they have entered into relating
to the competitive bidding process.  All such arrangements must have been finalized prior to the filing of the
short-form applications.  See 47 C.F.R.  1.2107(d); 1.2105(c)(1). 

     158.  We also adopt for broadcast auctions the exceptions to the anti-collusion rule, which were
recently reaffirmed in the general Part 1 auction rules.  Specifically, under Section 1.2105(c)(4) of our rules,
a party holding a non-controlling, attributable interest in one applicant will be permitted to acquire an
ownership interest, form a consortium with, or enter into a joint bidding arrangement with other applicants for
licenses in the same geographic area, provided that (1) the attributable interest holder certifies that it has not
and will not communicate with any party concerning the bids or bidding strategies of more than one of the
applicants in which it holds an attributable interest, has formed a consortium, or has entered into a joint bidding
arrangement; and (2) the arrangements do not result in a change in control of any of the applicants.  47 C.F.R.
 1.2105(c)(4)(i) & (ii).  In addition, participants in broadcast auctions will be permitted to take advantage of
another exception to the general anti-collusion rule, under which a holder of a non-controlling attributable
interest in an applicant may obtain an ownership interest in or enter into a consortium arrangement with another
applicant for a license in the same geographic area provided that the original applicant has withdrawn from the
auction, is no longer placing bids, and has no further eligibility.  To meet the requirements of this exception,
the attributable interest holder will be required to certify to the Commission that it did not communicate with
the new applicant prior to the date the original applicant withdrew from the auction, and that it will not convey
bidding information, or otherwise serve as a nexus, between the previous applicant and the new applicant.  See
47 C.F.R.  1.2105(c)(4)(iii).  These exceptions were adopted to allow holders of non-controlling attributable
interests in an applicant greater flexibility to form agreements with other applicants, thereby enabling
applicants to acquire additional capital needed to bid at auction.  As we previously have stated, we believe
that these exceptions will encourage investment in auction applicants without threatening the overall
competitiveness of the auction process.  See Third Report and Order, 13 FCC Rcd at 465-466.  

     159.  We take this opportunity to reemphasize certain aspects of our anti-collusion rule for the benefit
of potential broadcast auction applicants.  As indicated in the Notice, Section 1.2105(c) may affect the way
in which auction applicants conduct their routine business during an auction by placing significant limitations
upon their ability to pursue business opportunities involving broadcast services in the geographic areas for
which they have applied to bid for permits.  As a general matter, the anti-collusion rule does not prohibit non-
auction related business negotiations between auction applicants that have applied for the same geographic
service areas.  We caution auction applicants, however, that certain business discussions concerning, but not
limited to, issues such as management, sales, local marketing agreements, rebroadcast agreements, and other
transactional arrangements may all raise impermissible subject matter for discussion because they may convey
pricing information and bidding strategies.  Because auction applicants should avoid all discussions with
each other that will likely affect bids or bidding strategies, we believe that individual applicants, and not the
Commission, are in the best position to determine in the first instance which communications are permissible
and which are not.  

     160.  As previously indicated, the Commission will aggressively investigate any allegations that an
auction participant has violated Section 1.2105(c).  Bidders who are found to have violated the Commission's
anti-collusion rules may, among other sanctions, have their applications denied, be subject to forfeitures, be
subject to the loss of their down payments or their full bid amounts, or face the cancellation of their licenses. 
In addition, where allegations appear to give rise to violations of the federal antitrust laws, the Commission
may investigate and/or refer such cases to the United States Department of Justice for investigation.   

     161.  Rules Regarding Bid Withdrawal and Default.  We also sought comments in the Notice, 12
FCC Rcd at 22394 ( 74), on the advisability of applying in the broadcast context the Commission's general
policy of imposing bid withdrawal and default payment requirements in instances where high bids are
withdrawn during the course of an auction, where winning bids are withdrawn after an auction has closed, and
where winning bidders fail to submit their long-form applications or pay their winning bids.  See 47 C.F.R. 
1.2104(g); 1.2109.  All commenters addressing these issues support our proposals.  We therefore will apply
our Part 1 auction rules regarding bid withdrawal and default to auctions of broadcast construction permits. 
The Commission has successfully employed these rules in previous auctions, and they have functioned
effectively to ensure that only serious, financially qualified bidders participate in our auctions.  In the event that
a broadcast auction winner defaults or is otherwise disqualified, we will similarly follow the established Part
1 rules regarding the reauctioning of the construction permits at issue.  See 47 C.F.R.  1.2109.     
          
             (2) Post-Auction Processing Procedures

     162.  Down Payments.  Following the close of bidding in an auction, the Bureaus will issue a public
notice announcing the close of the auction and identifying the winning bidders.  To provide further assurance
that winning bidders will be able to pay the full amount of their bids and construct their facilities, we will,
consistent with the Part 1 auction rules, require winning bidders in broadcast auctions to submit a down
payment.  See 47 C.F.R.  1.2107(a) & (b).  Specifically, within ten business days of the public notice
announcing the close of the auction, winning bidders will be required to supplement their upfront payments with
a down payment amount sufficient to bring their total deposits with the Commission up to 20% of their winning
bids.  If the upfront payment already tendered by a winning bidder, after deducting any bid withdrawal
payments due, amounts to 20% or more of its winning bid(s), no additional deposit will be required.  To the
extent that any upfront payment not only covers, but exceeds, the required down payment, the Commission will
refund any excess amount after determining that no bid withdrawal payments are owed by the bidder.  The
down payment will be held by the Commission until the winning bidder has been issued its construction permit
and has paid the remaining balance of its winning bid, or until the winning bidder is found unqualified to be
a permittee or has defaulted, in which case it will be returned, less any applicable default payments.  All down
payments should be submitted to the Commission's lock-box bank in accordance with 47 C.F.R.  1.2107(b)
and any relevant public notices.  

     163.  Long-Form Applications.  A winning bidder that meets its down payment obligations in a timely
manner must file an appropriate long-form application for each construction permit for which it was the high
bidder.  Under the general Part 1 auction rules, a winning bidder is required, within ten business days after
being notified of its winning bidder status, to submit its long-form application.  See 47 C.F.R.  1.2107(c). 
Given the complexity of certain of the technical and legal submissions in broadcast service long-form
applications, we suggested in the Notice that winning bidders in broadcast auctions should be allowed 30 days
to file their long-form applications.  A small number of commenters state that winning bidders should be given
an even longer period of time, such as 45, 60 or 90 days, to file their long-form applications, although other
commenters find 30 days to be sufficient.  After consideration, we believe that 30 days should be a sufficient
period of time for winning bidders to prepare their long-form applications.  In particular, we note that winning
bidders in the AM, LPTV, and television and FM translator services will have already prepared engineering
data required by long-form applications in connection with their earlier submission of their short-form
applications.  Even in the FM service, applicants may have already conducted investigations of potential
transmission sites and submitted a set of preferred site coordinates as a supplement to the FCC Form 175. 
Moreover, we are eliminating herein the reasonable assurance of site certification and the financial qualification
requirements contained in long-form applications, which may additionally reduce the period of time necessary
for winning bidders to complete their long-form applications.  See infra  172-176.  For these reasons, we will
adopt our proposal in the Notice to require submission of long-form applications by winning bidders within
30 days following the release of the public notice announcing the close of the auction and identifying the
winning bidders.  We will, however, retain the discretion to extend this 30 day period for the filing of long-form
applications upon the showing of good cause by an applicant.  

     164.  Long-form applications filed by winning bidders in broadcast auctions should include, if
applicable, the exhibits required by the general Part 1 auction rules, and should be filed pursuant to the rules
governing the relevant broadcast service and according to any procedures set out by public notice.  The
statutorily established application fees will apply to the long-form applications filed by winning bidders. 
When electronic procedures become available for the submission of broadcast service long-form applications,
the Commission may require all winning bidders to file their long-form applications electronically.  An
applicant that fails to submit the required long-form application will be deemed to have defaulted and will be
subject to the default payments set forth in the Part 1 auction rules.  See 47 C.F.R.  1.2107(c); 1.2104.   
            
 
     165.  Petitions to Deny.  After the winning bidder's long-form application has been accepted for filing,
a public notice will be released announcing this fact, thereby triggering the filing window for petitions to deny. 
See 47 C.F.R.  1.2108(b).  Previously, the Commission has generally provided a 30 day period for the filing
of petitions to deny against broadcast applications.  As indicated in the Notice, however, in Section 3008 of
the Budget Act, Congress granted the Commission the authority to shorten the period for filing petitions to
deny, and, as a result, to grant licenses more rapidly.  Some commenters objected to the establishment of a
petition to deny period as brief as that allowed under Section 3008 (i.e., five days), contending, inter alia, that
such a short period is insufficient to evaluate the technical proposals and legal information contained in
broadcast long-form applications.  While recognizing that the Commission relies on petitioners as private
attorneys general to assist in overseeing the conduct of applicants and licensees and in the fulfillment of its
statutory functions, we also consider expedition of service to the public to be of paramount significance.  Delay
in awarding a construction permit frustrates the public interest and denies communities new or expanded
broadcast service.  To expedite service, the Commission was asked to disincent disappointed bidders from
raising spurious objections to winning bidders.  Accordingly, after careful consideration and in light of
Congress' directive in the Budget Act, we believe that a shortened petition to deny period of ten days is
appropriate for applications for broadcast and secondary broadcast construction permits obtained through the
competitive bidding process.  Consistent with the Part 1 auction rules, the time for filing oppositions will be
five days from the filing date for petitions to deny, and the time for filing replies will be five days from the filing
date for oppositions.  See 47 C.F.R.  1.2108(c). 

     166.  If the Commission denies or dismisses all petitions to deny (if any are filed), and is otherwise
satisfied that the applicant is qualified, a public notice will be issued announcing that the construction permit
is ready to be granted.  Auction winners will be required to pay the balance of their winning bids in a lump sum
within ten business days following the release of this public notice.  If a winning bidder fails to pay the balance
of its winning bid in a lump sum by the applicable deadline as specified by the Commission, it will be allowed
to make payment within ten business days after the payment deadline, provided that it also pays a late fee equal
to 5% of the amount due.  When a winning bidder fails to pay the balance of its winning bid by the late
payment deadline, it is considered to be in default and subject to the applicable default payments.  See 47
C.F.R.  1.2109(a).  We anticipate generally issuing the construction permit to the auction winner within ten
business days after receiving full payment.  

     167.  Amendments to Long-Form Applications.  To assist winning bidders in resolving Commission
concerns relating to their technical proposals or other matters contained in their long-form applications, we
specifically proposed to modify our application processing procedures to relax the limitations on the number,
and the timing of filing, of curative amendments.  The Notice, 12 FCC Rcd at 22395 ( 78), indicated that such
changes would affect the rules for amending applications for all auctionable broadcast services, and would
specifically eliminate the tenderability criteria and two-tiered minimum filing requirements currently in effect
for new full service FM applications.   No comments were received regarding this proposal.

     168.  Under the competitive bidding and processing procedures established herein, only winning bidders
and non-mutually exclusive applicants will file long-form applications.  We believe the relatively smaller
volume of long-forms requiring processing permits us to accomplish our operational goals in a less restrictive
manner and warrants liberalization of the procedures now applied to defective broadcast and secondary
broadcast service applications.  Accordingly, we shall adopt a more lenient approach toward the processing
of defective broadcast applications for new facilities and major changes, employing staff deficiency letters, and
permitting multiple corrective amendments, if necessary. 

     169.  Applicants must continue to meet the technical and legal requirements of all applicable rules, but
we will expand the current limited opportunity to amend defective applications.  Long-form applications for
new facilities and for major changes in existing facilities in all broadcast services will no longer be immediately
returned for defects pertaining to completeness or technical or legal acceptance criteria, without ample
opportunity to correct the deficiency.  As stated in the Notice, however, in relaxing the standards for filing
amendments, deficiencies in long-form applications filed by winning bidders will not be curable by major
amendment.  As they significantly change the long-form application as originally filed, major amendments must
be filed in accordance with the window filing procedures discussed above.  Moreover, winning bidders in all
broadcast and secondary broadcast services who file long-form applications with waiver requests that cannot
be granted, and who cannot provide timely alternate proposals consistent with our rules, will be dismissed.

     170.  With regard to applications for new full service commercial FM stations or for major changes
to such facilities, this new process will replace the existing procedure whereby applicants are provided with
one opportunity period to correct application defects, and applicants unable to correct all acceptability defects
within this time period are dismissed without occasion for reinstatement.  The new process will also replace
the current AM and FM translator approach to defective applications, where the nature of the defect determines
the course of staff action.  Currently, if the AM or FM translator application is substantially complete and
meets all core technical acceptance criteria, the staff will send a deficiency letter giving the applicant 30 days
to correct the defect in question.  For more substantial defects, i.e., those going to substantial completeness or
technical acceptability, the staff returns the application as either not substantially complete or unacceptable
for filing.  Similarly, the Commission currently allows LPTV and television translator applicants whose
applications are substantially complete but contain defects or omissions 30 days to amend in response to a staff
deficiency letter.  See 47 C.F.R.  73.3564(a)(2).  Unlike these current procedures, the new processing
standards for broadcast long-form applications will enable applicants for new facilities and for major changes
to avoid dismissal and to liberally correct heretofore fatal defects in application information.  We will, however,
retain the amendment filing procedures presently used for applicants for minor modification of facilities in all
broadcast services.

     171.  For all full service FM applications for new facilities and major changes, we will also abolish
the two-tiered minimum filing requirement, regardless of whether the long-form application is submitted post-
auction by a winning bidder, or by an applicant determined to be non-mutually exclusive.  In essence, the
short-form application previously submitted at the initial stage of the competitive bidding process serves this
function.  Having established through the short-form that the applicant has met the minimum filing
requirements prior to auction, the Commission need not repeat the exercise upon the subsequent filing of the
long-form application.  Applications for minor modification of FM facilities, however, will continue for the
present to be processed under existing procedures, including the employment of the two-tiered minimum filing
requirements.  

     172.  Elimination of Reasonable Assurance of Site Certification.  In the Notice, 12 FCC Rcd at
22396 ( 81), we proposed to eliminate the requirement that applicants certify they have a "reasonable
assurance" that the site or structure proposed as the location of their transmitting antennas will be available. 
We requested comment on our proposal to delete the reasonable assurance of site certification from the FCC
Forms 301, 346 and 349, and to rely on the strict enforcement of our existing construction requirements to
ensure that winning bidders in future broadcast auctions construct their facilities in a timely manner.  Given
the relatively brief time period that winning bidders will have to prepare and file their long-form applications
following the close of a broadcast auction, we surmised that elimination of the requirement of reasonable
assurance of site availability was appropriate.

     173.  A certification of site availability, requiring that an applicant certify that reasonable assurance
has been obtained from the property owner that the site will be available, was added to the FCC Form 301, at
the request of commenters, as a component of the "hard look" processing approach.  The certification
provided verification of existing Commission policy and was implemented as a deterrent to the filing of
frivolous and speculative applications that frustrated our processing goals. 

     174.  We believe that the competitive bidding process itself serves to lessen the incentive for insincere
application filings and provides a strong stimulus for timely station construction, so to recapture bidding
investments.  We therefore will eliminate the reasonable assurance of site certification requirement for all
broadcast and secondary broadcast new and major change applicants, regardless of whether the long-form
application is submitted post-auction by a winning bidder, or by an applicant determined to be non-mutually
exclusive.
 
     175.  Furthermore, our construction period requirements provide the Commission with an additional
safeguard to ensure that winning bidders construct their authorized facilities in a timely manner.  The
Commission has found that the strict enforcement of such build-out requirements, in conjunction with  the
employment of competitive bidding procedures, best promote the rapid deployment of service to the public. 
Although some commenters urge the Commission to retain the site certification requirement, we no longer
find it vital to our pursuit of prompt initiation of service to the public.   

     176.  Elimination of Financial Qualification Certification Requirement.  After consideration, we
will also eliminate from the broadcast long-form applications the requirement for the applicant to certify as to
its financial qualifications, estimate the total funds necessary to construct and operate the broadcast facility
for three months, and to identify each source of funds.  We believe that our competitive bidding procedures
provide adequate assurance that applicants will be financially qualified.  Any winning bidder submitting a long-
form application will have, prior to filing its application, already submitted a timely upfront payment and down
payment, and will also be required to pay the full amount of its winning bid to obtain its construction permit. 
We think it unlikely that bidders, who must construct their facilities to recoup the expenditures made in
obtaining their construction permits via auction, will have the incentive to participate in and prevail at auction
if they lack the financial wherewithal to construct their facilities.  Accordingly, we agree with the few
commenters who address this issue, and eliminate the financial qualification requirements from the FCC
Forms 301, 346 and 349.      

               (3) Additional Application Processing Issues

     177.  Minor Modification Applications.  Although, under the window filing approach adopted herein,
applications for new and major changes in the broadcast and secondary broadcast services must be filed in an
announced filing window, applications for minor modifications of existing facilities will not be restricted to
announced window filing periods and may continue to be filed at any time in accordance with existing
procedures.  Minor modification applications will continue to be governed by first come/first served
processing procedures, whereby priority rights are determined by the filing date of the minor modification
application and such filing will cut-off the filing rights of all subsequent applicants.  To avoid the possibility
of the filing of minor modifications that are mutually exclusive with the applications submitted by auction
applicants during general auction filing windows, we will retain the discretion to impose temporary freezes on
the filing of minor modifications in particular services during the brief periods that auction filing windows are
open for such services.
  
     178.  In rare instances, two or more FM, AM, television or LPTV minor modification applications can
be mutually exclusive.  As discussed above and as the commenters urge, we will generally not subject
mutually exclusive minor modification applications to competitive bidding, but expect the parties to use
engineering solutions and negotiations to resolve the mutual exclusivities.  See supra  19.  However, we note
one situation in which many minor modification applications have recently been filed on the same day, with
the potential to create an unusually large number of mutual exclusivities.  On June 1, 1998, we received over
one thousand LPTV and television translator applications requesting replacement channels due to displacement
by new DTV stations.  As with other competing minor modification applications, we expect these LPTV
applicants to use engineering solutions and negotiations to resolve any mutual exclusivities.  But we note in
this situation, due to the large number of applications filed on the same day all seeking a limited number of
replacement channels, that the applicants may experience greater difficulties in resolving the mutual
exclusivities.  If we find that, following a reasonable period after release of a public notice identifying any
mutually exclusive LPTV displacement applicants, a significant number of these applicants have been unable
to resolve their mutual exclusivities, then the Commission reserves the right to subject these competing
displacement applications to competitive bidding.   
     
     179.  Cross-Band Mutual Exclusivity in FM Service.  Mutual exclusivity may also arise between
applications filed for channels in the FM reserved band (Channels 200-220) and applications filed for non-
reserved FM channels.  Given the lack of statutory authority to auction applications for channels reserved
for noncommercial educational use (see supra  24), we will not subject these cross-band mutually exclusive
applications to competitive bidding.  In the rare instances in which cross-band conflicts arise, we will, as in the
case of competing minor modification applications, expect the parties concerned to use engineering solutions
and negotiations to resolve the mutual exclusivities. 

     180.  Cut-Off Protection for Auction Applicants.  Pursuant to the window filing procedures adopted
herein, applicants for new broadcast facilities or for major modifications to existing facilities must file short-
form applications during specified window filing periods.  After the closing date of any window, no
applications (such as minor modification applications) may be filed that would conflict with the short-form
applications filed during the window.  Accordingly, under the new window filing procedures, short-form
applications for all services will receive cut-off protection as of the close of the window filing period.  FM
applicants supplementing their FCC Form 175 applications with a set of preferred site coordinates will be
protected at that site from subsequently filed applications.  See supra  142.  All FM applicants, including
those choosing not to supplement the FCC Form 175 with preferred site coordinates, will receive full class
facility protection at the reference points of the vacant allotment.  As described above, applicants for AM
and LPTV stations and for television and FM translators must submit with their short-form applications the
engineering data from the appropriate long-form application to provide us with the information necessary to
make mutual exclusivity determinations.  See supra  143.  The specific facilities proposed in these engineering
supplements will be protected pursuant to our existing interference rules as of the date of the closing of the
auction window.  

     181.  In addition to protecting the sites specified in short-form applications, long-form applications will
also be afforded cut-off protection.  All long-form applications for new facilities and for major modifications
to existing facilities (whether filed by winning bidders or non-mutually exclusive applicants) will be cut-off as
of the date of filing with the Commission, and will be protected from subsequently filed long-form applications
and rulemaking petitions.  All long-form applicants will be required to protect all previously filed commercial
and noncommercial applications. 

     182.  Winning bidders (or non-mutually exclusive applicants) filing long-form applications may change
the technical proposals that they specified in their short-form applications.  A winning bidder may not,
however, specify in its long-form application a change in its proposed facility that constitutes a major change
from the facility specified in its short-form.  With respect to the FM service, if an FM applicant specifies a
preferred site in its short-form application, and specifies a different site in its long-form, the site specified in
the short-form will no longer receive cut-off protection.  However, the reference points of the vacant allotment
will remain protected until a construction permit is granted, even if the site specified in the applicant's long-
form and the allotment site differ.  In the non-table AM, LPTV, and television and FM translator services, if
the facilities specified in the long-form differ from those previously specified in the short-form, both facilities
will receive protection until grant of the long-form application.

     183.  Furthermore, we note our proposal in another proceeding to conform the processing procedures
for AM and FM translator minor modification applications to those currently used for commercial FM minor
modification applications by providing cut-off protection.  See Technical Streamlining Notice, FCC 98-117
at  46-47.  This represents a departure from our current procedures, as AM and FM translator minor change
applications currently receive no cut-off protection from competing applications until the date the application
is granted.  It is therefore not unusual for a minor change application in the AM service, which had no conflicts
as of the date of its filing, to conflict with a subsequently filed application.  If ultimately adopted, our
proposal to provide cut-off protection for AM and FM translator minor modification applications as of the date
of filing with the Commission should reduce the potential for mutual exclusivity between minor modification
applications.

     184.  Transfer and Assignment of Broadcast Permits Awarded by Auction. Under Section 1.2111(a)
of the general auction rules, an applicant seeking approval of a transfer of control or assignment of a license
within three years of receipt of such license by means of competitive bidding must, together with its transfer
or assignment application, file with the Commission a statement indicating that its license was obtained through
competitive bidding.  Such applicant must also file with the Commission the associated contracts for sale,
option agreements, management agreements, or other documents disclosing the consideration that the applicant
would receive in return for the transfer or assignment of the license.  47 C.F.R.  1.2111(a).  These transfer
disclosure requirements are intended to aid the Commission in monitoring whether abuses relating to trafficking
in licenses have occurred, and we see no reason to deviate from our general auction rules in the broadcast
context.  Accordingly, we will require broadcast service auction winners to comply with these disclosure
requirements if they apply to assign or transfer their construction permits or licenses within the relevant three-
year period.  

     185.  As part of the Commission's current, wide ranging efforts to streamline Mass Media Bureau
procedures and initiate the electronic filing of applications, we have, however, proposed in another proceeding
to eliminate entirely the requirement to submit contracts with any broadcast assignment or transfer
applications, contrary to the provisions of Section 1.2111(a).  If the Commission were ultimately to adopt
this proposal with regard to broadcast assignment and transfer applications generally, we will at that time
revisit the requirements imposed by Section 1.2111(a) on broadcast auction winners who apply to assign or
transfer their licenses so as to make the broadcast auction rules consistent with the general broadcast service
rules.     

     4.  Designated Entities

     186.  Section 309(j) of the Communications Act provides that the Commission "ensure that small
businesses, rural telephone companies, and businesses owned by members of minority groups and women are
given the opportunity to participate in the provision of spectrum-based services."  47 U.S.C.  309(j)(4)(D). 
To achieve this congressional goal, the statute directs the Commission to "consider the use of tax certificates,
bidding preferences, and other procedures."  Id.  In addition, Section 309(j)(3)(B) instructs the Commission,
in establishing eligibility criteria and bidding methodologies, to promote "economic opportunity and competition
. . . by avoiding excessive concentration of licenses and by disseminating licenses among a wide variety of
applicants, including small businesses, rural telephone companies, and businesses owned by members of
minority groups and women," which are collectively referred to as "designated entities."  47 U.S.C. 
309(j)(3)(B).  Section 309(j)(4)(A) further provides that to promote these objectives, the Commission shall
consider alternative payment schedules, including lump sums or guaranteed installment payments.  47 U.S.C.
 309(j)(4)(A).  In addition to the statutory directive to "ensure" opportunities for designated entities in
spectrum auctions, the Commission has had a long-standing commitment to promoting the diversification of
ownership of broadcast facilities.  Indeed, "a maximum diffusion of control of the media of mass
communications" was one of the two primary objectives of the traditional comparative broadcast licensing
system.  Policy Statement on Comparative Broadcast Hearings, 1 FCC 2d 393, 394 (1965).  Section 257
of the Telecommunications Act of 1996, moreover, directed the Commission to identify and eliminate market
entry barriers for small and entrepreneurial telecommunications businesses.

     187.  To fulfill our obligations under Section 309(j), the Notice, 12 FCC Rcd at 22397-22404 ( 83-
97), sought comment on whether bidding credits or other special measures were necessary to encourage
participation by rural telephone companies, small businesses, and minority- and women-owned businesses in
the provision of broadcast services, and, if so, how eligibility for any such special measures should be
established.  In particular, we requested comment on how special measures for minority- and women-owned
entities could be developed consistent with applicable constitutional standards.  The Notice also asked for
comment on the advisability of adopting bidding credits or other measures to promote diversification of
ownership, and on the appropriateness of adopting rules to prevent unjust enrichment in connection with the
special measures approved for designated entities.  

     188. Many commenters argue that the present record is insufficient to support the adoption of bidding
credits for women and minorities under the standards enunciated in United States  v. Virginia, et al., 518 U.S.
515 (1996) and Adarand Constructors, Inc. v. Pena, 515 U.S. 200 (1995).  Some commenters urge that we
delay the adoption of competitive bidding procedures for broadcast auctions until completion of studies already
in progress that may shed light on these questions.  And, although a number of commenters support the
adoption of bidding credits for small businesses, they have supplied relatively little information regarding the
capital requirements of, or the characteristics of the expected pool of bidders for, the various broadcast
services.  Determining the details of any small business credit is also complicated in the broadcast context
by the fact that, at least traditionally, most applicants for new broadcast stations are in fact small businesses
under almost any reasonable definition, particularly in the context of radio.  Pursuant to our Section 257
proceeding, we have commenced a series of studies to examine the barriers encountered by small, minority-
and women-owned businesses in the secondary markets and the auctions process.  We believe it is important
to complete these studies and provide for an opportunity for public comment before any ultimate determination
of what rules we should have for designated entities.  At the same time, we believe that it is important to move
forward promptly with auctions.  Particularly with regard to pending cases, considerations of fairness demand
that no further delays occur and that we proceed expeditiously to licensing.    

     189.  In proceeding with auctions before determining what rules we may ultimately adopt for small,
minority- or women-owned businesses, we are, of course, sensitive to our statutory obligations regarding
designated entities.  As a preliminary matter, we note that, based on our experience in conducting comparative
hearings under the 1965 Policy Statement on Comparative Broadcast Hearings, it is likely that the vast
majority of the pending pre-July 1st applicants are small businesses, and indeed likely very small businesses. 
With respect to specific measures that may further assist designated entities,  we note that all of the commenters
who addressed the question supported a bidding credit or other special measure for applicants with no or few
other media interests.  We conclude that, based on the record to date, adopting such a "new entrant" bidding
credit would be the most appropriate way to implement the statutory provisions regarding opportunities for
small, minority- and women-owned businesses before the completion of the studies mentioned above and related
public comment.  Providing bidding credits to entities holding no or few mass media licenses will promote
opportunities by minorities and women consistent with congressional intent without implicating prematurely
the constitutional issues raised in  188.  While such an approach may not be as direct and fine-tuned as
measures we may ultimately adopt after further development of the record, we believe a bidding credit for
entities who have no or few other media interests will work to give these groups the additional opportunities
intended by Congress, in furtherance of the statutory objectives.  Because the record regarding small businesses
is not well developed and existing size standards seem ill-suited to the broadcast auction context, we do not
believe it is appropriate, as we did for certain other auctions, merely to adopt bidding credits for small
businesses. In these circumstances, we conclude that the best approach is to commence the auction process
utilizing this "new entrant" bidding credit.  We hereby instruct the staff to complete expeditiously all
necessary Adarand studies, and we anticipate the release of a further notice considering designated entity issues
in the broadcast context following completion of these studies. If additional or alternative designated entity
measures are ultimately adopted in a further report and order released following completion of our evidentiary
studies, then any such measures will be applicable to the auction of any broadcast and ITFS applications then
on file with the Commission.

     190.  With respect to the details of our new entrant bidding credit, we believe an appropriate model
that has worked well exists in our lottery rules for mass media services.  Those rules have been used for several
years for LPTV, television translator and Multipoint Distribution Service licenses.  The rules take a two-tiered
approach.  Specifically, applicants whose owners in the aggregate hold more than 50% of the ownership
interests in no other media of mass communications receive a two-to-one lottery preference, and applicants
whose owners in the aggregate hold more than 50% of the ownership interests in one, two or three other media
of mass communications receive a one and a half to one lottery preference.  See 47 C.F.R.  1.1622(b). 
These preferences are not available to entities holding more than 50% of the ownership interests in certain local
media services.  We will use these rules with two adjustments: (1) we will add an explicit requirement that
the rules cover de facto controlling interests, as well as interests of more than 50% of the ownership interests;
and (2) to conform the approach to the existing tiered approach taken with auction bidding credits, see 47
C.F.R.  1.2110(e)(2), we will adopt bidding credits of 35% and 25%, respectively.   

     191.  Other Designated Entity Issues.  Although we are deferring a final decision regarding any
additional or alternative special measures for small, minority- and women-owned businesses until the
completion of the various pending studies relating to these entities, we determine here certain other designated
entity issues.  We conclude that the provision of additional measures for rural telephone companies is
unnecessary in broadcast auctions.  The record does not indicate that rural telephone companies have any
particular interest in providing broadcast services.  Indeed, no commenter supports providing bidding credits
or other incentives to rural telephone companies.  As we have previously noted, Congress included rural
telephone companies among the categories of designated entities because it was "concerned with assuring rural
consumers the benefits of new technologies and providing opportunities for participation by rural telephone
companies in the provision of wireless services that supplement or replace their landline facilities."  Second
Report and Order, 9 FCC Rcd at 2391-92.  We do not believe that bidding credits or other special measures
for rural telephone companies are needed to assure that rural consumers receive new broadcast service or that
rural telephone companies have the opportunity to participate in broadcast service auctions.  We accordingly
decline to adopt special measures for rural telephone companies in particular, although those companies will
be eligible for bidding credits if they qualify as new entrants or, if such bidding credits are ultimately adopted
in our further report and order, as small, minority- or women-owned businesses.

     192.  We also decline to adopt bidding credits, as urged by a small number of commenters, for various
other entities, including:  (1) applicants who would have qualified for an AM daytime-only preference in an
FM comparative hearing; and (2) a "pioneer's" or "finder's" preference for the applicant who successfully
petitioned for the allotment when a newly-allotted FM channel is auctioned. We decline to adopt bidding
credits or other special measures for these categories of entities, which, unlike the case with the likely recipients
of the "new entrant" credit, are not among the entities specifically designated by Congress in our competitive
bidding authority.  We are also reluctant to replicate, in the guise of bidding credits, specific comparative
criteria (such as the AM daytime-only preference), given our past difficulties with the criteria employed in
comparative hearings.  We note, moreover, that the grant of a bidding credit to an FM applicant who
petitioned for the allotment of a channel being auctioned is analogous to the pioneer preferences that Congress
has specifically eliminated.  
     
     193.  Unjust Enrichment.  In designing competitive bidding systems, the Commission has a statutory
obligation to require "antitrafficking restrictions and payment schedules as may be necessary to prevent unjust
enrichment."  47 U.S.C.  309(j)(4)(E).  Accordingly, the Notice sought comment regarding the appropriate
approach to prevent unjust enrichment by designated entities that acquire broadcast licenses through the use
of bidding credits or other special measures.  To fulfill our statutory obligations and ensure that the new entrant
bidding credit measure we adopt herein has the intended effect of aiding eligible entities to participate in
broadcast auctions, we adopt the unjust enrichment provisions described below.  Provisions to prevent unjust
enrichment in the context of any additional or alternative designated entity measures will be considered if any
such measures are adopted in our further order specifically addressing such issues.

     194.  Specifically, we will follow the general Part 1 auction rules in requiring, under certain
circumstances, reimbursement of bidding credits utilized to obtain broadcast licenses.  A broadcast licensee,
or the holder of a construction permit, who utilized a new entrant bidding credit will be required to reimburse
the government for the amount of the bidding credit, plus interest based on the rate for ten-year U.S. Treasury
obligations applicable on the date the construction permit was granted, as a condition of Commission approval
of the assignment or transfer of that license or construction permit, if the licensee or permittee seeks to assign
or transfer control of the license or construction permit to an entity that does not meet the eligibility criteria for
the bidding credit.  See 47 C.F.R.  1.2111(d)(1).  The amount of this repayment will be reduced over a five-
year period, as set forth in 47 C.F.R.  1.2111(d)(2).  This unjust enrichment provision also responds to the
concerns expressed by the court in Bechtel II regarding the ephemeral nature of comparative preferences and
the need for post-grant enforcement.  See 10 F.3d at 879-880.

     195.  However, if a permittee or licensee who utilized a new entrant bidding credit to obtain a
broadcast license simply acquires within the five-year reimbursement period an additional broadcast facility
or facilities, such that the licensee would not have been eligible for the new entrant credit, the licensee will not
be required to reimburse the government for the amount of the bidding credit.  To require reimbursement in
such a situation would discourage new entrants from attempting to obtain another broadcast facility and would,
in effect, punish the most successful new entrants into the broadcast industry.  We believe such a result would
be contrary to the basic purpose of the new entrant bidding credit, which is to encourage new entities to not
only enter, but to remain and succeed, in the broadcast industry.  We note this approach is in accord with
existing Commission rules as to certain small business special measures.  Accordingly, we will not, as
proposed for designated entities generally in the Notice, require broadcast permittees and licensees granted a
license through a new entrant credit to certify annually their continuing eligibility for the credit under the new
entrant rule in effect when the permit or license was awarded.

     196.  Based on our experience conducting numerous auctions, we believe that these reimbursement
requirements are sufficient to preserve the integrity of the designated entity measures adopted herein, and we
note that the few commenters who addressed unjust enrichment issues generally agree.  To improve our
ability to enforce these reimbursement requirements, we also intend to amend our broadcast transfer and
assignment applications to include questions as to whether the construction permit or license at issue was
obtained via competitive bidding and whether the licensee used a new entrant bidding credit.


D.  Auction Authority for Instructional Television Fixed Service 
     197.  Statutory Authority.  The Instructional Television Fixed Service (ITFS) is a point-to-point or
point-to-multipoint microwave service whose channels are allocated to educational organizations and are used
primarily for the transmission of instructional, cultural and other types of educational material.  An described
above, Section 309(j) of the Communications Act, as amended by the Budget Act, mandates the utilization of
competitive bidding to resolve mutually exclusive applications, with certain specified exemptions.  See 47
U.S.C.  309(j)(1) & (2).  Although the spectrum reserved for ITFS, an instructional microwave service, is
not specifically exempted from the Commission's expanded general auction authority, the channels reserved
for noncommercial educational and public broadcasters, as discussed above, are so exempt under Section
309(j)(2)(C).  See supra  24.  Given this apparent disparity between the treatment of spectrum similarly
reserved for educational purposes, we sought comment on whether, under the terms of the amended Section
309(j), we must, and if not, whether we should, apply competitive bidding to mutually exclusive ITFS
applicants.  See Notice, 12 FCC Rcd at 22404-22405 ( 98-100).  Based on our further review of the express
terms of the amended Section 309(j), we conclude that channels reserved for ITFS are not exempt from
competitive bidding under Section 309(j)(2)(C).

     198.  As originally provided in 1993, the Commission's initial auction authority was limited to services
where licensees received compensation in exchange for providing transmission or reception capabilities to
subscribers.  Thus, the Commission at that time lacked the authority to auction the broadcast services as well
as ITFS, and Congress specifically indicated that the Commission was not to construe payments received by
ITFS licensees for leasing excess capacity to MDS operators as constituting compensation from "subscribers,"
as that term was used in the initial auction statute.  The Budget Act, however, amended Section 309(j) so
as to eliminate the subscriber limitation from the Commission's auction authority and to mandate the use of
competitive bidding to resolve mutually exclusive applications, with certain specific exceptions.  The
exceptions to this general auction mandate are set forth in Section 309(j)(2), which provides that the
Commission's competitive bidding authority "shall not apply to licenses or construction permits issued" in three
specific services, of which ITFS is not one.  47 U.S.C.  309(j)(2).

     199.  Because Section 309(j) generally requires the use of competitive bidding to resolve mutually
exclusive applications with only certain specified exemptions, the Commission does not have the discretion to
create another exemption for ITFS.  When Congress explicitly enumerates certain exceptions to a general
requirement, additional exceptions should not be implied.  The list of exemptions from our general auction
authority set forth in Section 309(j)(2) is clearly exhaustive, rather than merely illustrative, of the types of
licenses or permits that may not be awarded through a system of competitive bidding.  By its express terms,
Section 309(j)(1) requiring the use of auctions to award licenses or permits applies to all situations in which
mutually exclusive applications are filed except as provided in paragraph (2).  Nothing in the language of
Section 309(j)(2) enumerating three types of licenses or permits not included in our general auction authority,
nor in the accompanying legislative history, suggests that Congress intended to authorize the creation of
additional categories of licenses that would not be awarded by a system of competitive bidding. 

     200.  We also decline to interpret the noncommercial educational broadcast exemption from
competitive bidding contained in Section 309(j)(2)(C) to include ITFS, as urged by many commenters.  As
the Commission has stated and the courts have recognized, ITFS is not a broadcast service.  The primary use
of ITFS, delivery of educational materials to a limited audience (students pursuing academic credit), does not
constitute a broadcast use because the communications are not intended to be received by the general public. 
Moreover, excess capacity use of ITFS channels (such as by MDS operators) is typically provided on a
subscription basis, and the Commission has clearly determined that subscription video services are not
broadcast.

     201.  Because the exemption from competitive bidding set forth in Section 309(j)(2)(C) specifies only
Section 397(6) of the Communications Act, which refers to only noncommercial educational and public
broadcast stations, we have no authority to exempt a nonbroadcast service such as ITFS.  As the Supreme
Court has repeatedly emphasized, there is one "cardinal canon" in interpreting a statute -- a presumption "that
a legislature says in a statute what it means and means in a statute what it says there."  Moreover, Congress
could have simply and clearly made that exemption include ITFS by referencing Section 397(7) of the
Communications Act, as well as Section 397(6).  Section 397(7) defines the term "noncommercial
telecommunications entity," which would include ITFS licensees.  The fact that Congress chose not to
reference Section 397(7), in addition to Section 397(6), in the Section 309(j)(2)(C) exemption from competitive
bidding further supports the conclusion that Congress did not intend to exempt ITFS from competitive bidding.

     202.  Given the explicitness of the statutory mandate to utilize competitive bidding and the limited
nature of the statutory exemptions from competitive bidding set forth in Section 309(j)(2), examining the
legislative history of the Budget Act as a guide to interpretation of the amended Section 309(j) appears
unnecessary.  In any event, in this case recourse to the legislative history of the Budget Act is not particularly
enlightening, as it contains no discussion whatsoever concerning ITFS.  Furthermore, the policy arguments set
forth by various commenters against auctioning ITFS cannot override Section 309(j)'s statutory mandate to
utilize competitive bidding for competing applications in all services, except those specifically exempted. 

     203.  Congressional Clarification of Section 309(j).  Several commenters argue that, despite the
absence of an express exemption for ITFS from competitive bidding in Section 309(j), Congress would not
have made such a fundamental shift in its treatment of ITFS without some explicit discussion of the service
in the text or the legislative history of the Budget Act.  These commenters contend that the Commission
should not infer from the omission of a specific statutory exemption for ITFS an intent by Congress to ignore
the long-standing reservation of ITFS spectrum for noncommercial educational purposes, and urge the
Commission to seek a clarifying amendment of Section 309(j) from Congress.

     204.  Although we understand and sympathize with commenters' concerns about subjecting ITFS to
competitive bidding, we, as discussed in detail above, feel compelled to conclude, based on the express terms
of Section 309(j), that competing ITFS applications are subject to auction. We are concerned, nonetheless, that
Section 309(j), as adopted, may not reflect Congress' intent with regard to the treatment of competing ITFS
applications.  Given the instructional nature of the service and the long-standing reservation of ITFS spectrum
for noncommercial educational use, it is possible, as commenters argue, that Congress did not intend its
expansion of our auction authority in the Budget Act to include ITFS. Accordingly, we will request that
Congress amend Section 309(j) so that the statute clearly reflects its intent with regard to ITFS.  Absent a clear
statement from Congress that it means to exempt ITFS from competitive bidding, then the Commission will
proceed with the auction of mutually exclusive ITFS applications, as described below. We will not commence
ITFS auctions immediately, however, in order to allow sufficient time for us to obtain Congressional guidance. 

     205.  Pending Mutually Exclusive ITFS Applications.  Pending ITFS applications are outside the
scope of new Section 309(l) of the Communications Act, which provides that the Commission has discretion
regarding the resolution of pending comparative licensing proceedings involving pre-July 1, 1997 applications
for commercial radio and television stations.  Accordingly, pending mutually exclusive ITFS applications,
although pending since at least the last ITFS filing window in October 1995, must be resolved by competitive
bidding pursuant to Section 309(j)(1).  As we concluded, however, with respect to pending broadcast
applications that are outside the scope of Section 309(l) (see supra  105-109), we believe it would not serve
the public interest to accept additional competing ITFS applications despite our authority to do so under
Section 309(j)(1), and we will therefore limit the eligible bidders in any auction of the pending ITFS
applications to those with applications already on file.

     206.  We realize that the pending ITFS applicants filed their applications under our current rules, with
the expectation that any mutually exclusive applications would be resolved pursuant to the Commission's
established point system.  These applications have, moreover, been pending since at least October 1995, and
some for an even longer period of time.  For these reasons, we believe that the pending competing ITFS
applicants should be given an opportunity to settle, without any limitations on payments to withdrawing
applicants.  For a 120-day period following the publication of this First Report and Order in the Federal
Register, the Commission will accordingly waive any of its rules (such as 47 C.F.R.  73.3525(a)(3)) that
precludes the receipt of any money or other consideration in excess of legitimate and prudent expenses in
exchange for the dismissal of an application, and will also waive our policy against "white knight" settlements
involving the award of a license to a non-applicant third party.  Given the congressional directive in Section
309(l)(3) to waive such limitations on settlement prior to any auction of the pending pre-July 1, 1997 broadcast
applications, we believe it appropriate to provide a similar period for pending competing ITFS applicants to
settle prior to the scheduling of any auction.

     207.  Competitive Bidding Procedures Applicable to ITFS.  As we proposed in the Notice, the same
application and competitive bidding procedures that we are adopting herein for the broadcast services will also
apply to ITFS.  Applications for new ITFS facilities or for major changes to existing facilities may only be
submitted during an announced auction window; ITFS minor modification applications may continue to be filed
at any time and will not be subject to competitive bidding.  To apply during an announced auction window,
ITFS applicants should submit an FCC Form 175 and the engineering data contained in the FCC Form 330. 
Applicants who submit mutually exclusive short-form applications for ITFS licenses will be subject to auction,
and will be required to make all upfront, down and full payments, as set forth in our general auction rules. 
Only winning bidders or non-mutually exclusive applicants will be required to file complete long-form
applications, and petitions to deny against ITFS long-form applications must be filed within the same ten-day
period as adopted herein for broadcast long-form applications.  As with the broadcast long-form applications,
we are deleting the financial certification requirement from the FCC Form 330.

     208.  We emphasize that the adoption of competitive bidding procedures for ITFS will not alter the
current technical requirements, interference protection rules, or eligibility criteria for the service.  Thus, to
apply to participate in any future ITFS auction, the applicant must be eligible under our existing rules to hold
an ITFS license.  Similarly, ITFS licensees who obtain their licenses via competitive bidding will be subject
to our existing rules regarding use of ITFS channels.  See supra  197.  Thus, we are not altering in any way
the basic requirements and characteristics of ITFS, but are merely altering the method through which we
resolve competing applications in that service.


E.  Resolution of Pending Comparative Renewal Proceedings

     209.  In the Notice, 12 FCC Rcd at 22406 ( 102), we proposed that, if the Commission did not adopt
a revised comparative hearing system for pending comparative cases for new stations, and if comparative
renewal cases where the comparative issue was decisionally significant did not settle, we would instead use
a two-step procedure.  Under this approach, a renewal application would be granted if we determined, after
a threshold hearing, that the renewal applicant deserved a renewal expectancy for "substantial performance." 
As part of the two-step procedure (i.e., in connection with those cases where the renewal applicant did not
receive a renewal expectancy) or as an alternative, we asked for comment on whether we should consider any
comparative factors raised by the applicants on a case-by-case basis.  See Notice, 12 FCC Rcd at 22406-07
( 103).  We recognized that the two-step process had been determined to be unlawful by the United States
Court of Appeals for the District of Columbia Circuit, but indicated that we believed the court could be
persuaded to change its mind in light of subsequent case law.

     210.  We continue to believe that a two-step renewal procedure is consistent with the Communications
Act and that we could convince the court to overrule its decision to the contrary. We also believe that the
two-step procedure would be a quicker system for resolving these cases, at least for those cases where a
renewal expectancy is granted and the hearing concludes after the first step.  (We would anticipate, based on
past experience, that this would be the outcome in most cases.)  Indeed, we think this approach would be faster
(at least for the one-step hearings) even if we stayed our decision to adopt the two-step approach pending the
outcome of judicial review.  Nevertheless, we have decided not to adopt the two-step procedure.  We do not
believe it would best serve the public interest to expend the resources of the Commission, private parties and
the courts to litigate (at what would presumably have to be the en banc level) the lawfulness of a procedure
previously found to be unlawful when the new procedure would apply to only a handful of cases (roughly eight)
and would have no future applicability.  In addition, we note that even under the two-step procedure, we could
not avoid full comparative hearings for those cases that reach the second stage because the renewal applicant
does not qualify for a renewal expectancy.  And, for those cases, the two-step approach would be slower since,
assuming we stayed this part of our order pending judicial review, the process could not get underway until
after a decision by the court.

     211.  As we discussed at length above, having comparative hearings for pending cases is far from the
most desirable result.  Indeed, our experience with the comparative hearing process has been that it tends to
produce protracted litigation over minutiae of questionable public interest significance.  Nevertheless, having
rejected the two-step approach, we have no choice here other than to use comparative hearings.  The
Commission has traditionally used for comparative renewals the same standard comparative issue used in
connection with mutually exclusive applications for new commercial broadcast stations.  In addition, as part
of the standard comparative issue in renewal proceedings, the Commission awards a renewal expectancy to
renewal applicants whose performance has been "substantial."  The renewal expectancy has been the most
important comparative factor in a comparative renewal proceeding; integration (and diversification) have been
factors of lesser weight.  Although integration was less important in comparative renewal proceedings than
comparative proceedings involving new applications (in those instances where the renewal applicant received
a renewal expectancy), it nevertheless was one of the relevant factors.  Indeed, if no renewal expectancy were
awarded, it would have become a key factor.  Because the court found integration to be unlawful in Bechtel
II and prohibited its further use, any system of comparative renewal hearings we adopt here must, by definition,
be different than the system we have used in the past.

     212.  As noted above, it is a difficult task, open to significant potential legal challenge, to attempt to
craft a revised set of comparative criteria or even to establish a revised weighting system using the existing
criteria other than integration and the integration enhancements as stand-alone factors.  While we do not have
the option of auctions in this context, we continue to believe that it does not serve the public interest to develop
such a revised or newly weighted system that would apply only to a small number of cases.  Developing legally
sustainable criteria that would reliably predict future performance is particularly problematic when the universe
to which it applies will be so small and where there will be no future applicability.   

     213.  We think the most equitable and expeditious approach here would be simply to permit the
renewal applicants and their challengers, within the confines of the generally phrased standard comparative
issue, to present the factors and evidence they believe most appropriate.  As noted above, this is what we
suggested as an alternative approach to the two-step procedure in the Notice, and no commenters have provided
any persuasive arguments against such an approach to comparative hearings if we reject the two-step
procedure.  Of course, if the renewal applicant can demonstrate substantial performance and thus an
entitlement to a renewal expectancy, this will continue to be the most important factor and can be expected in
most cases to outweigh other considerations in favor of the challenger.    

     214.  In so concluding, we acknowledge that comparative renewal hearings tend to be time-consuming
and expensive for both the Commission and the private parties, and to disserve the public interest by prolonging
the period during which a renewal applicant operates under a cloud.  In these circumstances, we remain willing,
where the circumstances afford assurance that the competing applications were not filed for speculative or other
improper purpose, to waive the limitations on payments to dismissing applicants in comparative renewal
proceedings, and we will, as commenters suggest, expeditiously consider such settlement agreements.  This
will serve the public interest by expediting the resolution of proceedings that were prolonged as a result of the
court's decision in Bechtel II.  Although we are sympathetic to the unusual delays occasioned in these cases
by the comparative freeze, we decline to consider the licensee's performance after the renewal term for purposes
of determining whether it deserves a renewal expectancy, as one commenter suggests, or to make other
suggested changes in comparative renewal proceedings that would apply to only a few pending cases and have
no future applicability.  We believe that the fairest and most expeditious approach in these cases is to decide
them as nearly as possible according to the standards in effect prior to Bechtel II.  We accomplish this by
deciding them on a case-by-case basis, affording all parties the flexibility to present evidence they deem
relevant under the standard comparative issues, and at the same time adhering to the criteria for evaluating the
renewal applicant's performance during the license term to determine its eligibility for, and the comparative
significance of, any renewal expectancy.  


F.  Request for Recusal of Commissioners

     215.  Willsyr Communications, an applicant in a frozen hearing proceeding involving a new FM station
in Biltmore Forest, North Carolina, filed a Motion to Recuse FCC Commissioners, as well as comments in this
rulemaking proceeding.  This Motion is denied in its entirety. A separate statement from Chairman Kennard
addresses the request that he recuse himself from this rulemaking.  Based on the applicable law of recusal,
the other four commissioners decline to recuse themselves from this rulemaking and from the related
adjudicatory proceeding involving Biltmore Forest.  Recusal from a rulemaking is warranted only upon a clear
and convincing showing of an unalterably closed mind, as to issues of fact or policy, whereas the test for
disqualification of a Commissioner from an adjudicatory proceeding on grounds of bias or the appearance of
bias is whether "a disinterested observer may conclude that [the decisionmaker] has in some measure adjudged
the facts as well as the law of a particular case in advance of hearing it." 

     216.  At no time during the confirmation process was Commissioner Furchtgott-Roth, Tristani or
Powell, or any member of his or her staff, contacted as to the merits of using comparative hearings rather than
auctions to decide certain pending adjudicatory proceedings, as to the merits of the ongoing permanent license
proceeding involving Biltmore Forest, North Carolina, or of any adjudicatory licensing proceeding potentially
affected by the auction rules we adopt today.  In addition, subsequent to confirmation, none has received any
impermissible ex parte communication regarding the merits of any issue in this rulemaking, or any related
adjudicatory proceeding.  Each confirms that no impermissible factor has influenced, or would influence in the
future, his or her decision on any aspect of this rulemaking proceeding, or on the merits of pending applications. 
There is, therefore, no basis to challenge the participation of Commissioners Furchtgott-Roth, Powell and
Tristani in deciding any issue in this rulemaking proceeding or any related adjudicatory licensing proceeding. 


     217.  There is also no basis to challenge the participation of Commissioner Ness in either proceeding. 
A requester seeking the recusal of a commissioner from an adjudicatory proceeding must point to specific
statements clearly showing prejudgment of both the facts and law of a given case, and such statements must
be viewed in the context of the entire case.  Willsyr, however, relies exclusively on public remarks quoted
in Mediaweek (Jan. 5, 1998) that Commissioner Ness was "concerned that auctions, while quick and efficient,
ignore the equities that exist in some of these outstanding radio license cases, including Lee's."  These
remarks merely reformulate an issue of policy expressly articulated by the Commission in its Notice in this
rulemaking proceeding.  But they neither suggest that Lee should be singled out for special treatment,
intimate how the Biltmore Forest proceeding should be resolved, nor indicate Commissioner Ness's view on
whether certain cases should be resolved through the comparative hearing process instead of by auction. 
Hence, the statements provide no basis for a disinterested reader of the Mediaweek article to conclude that the
Commissioner had adjudged in advance any party-specific question of fact or law concerning the merits of any
of the pending applications for Biltmore Forest, or that recusal from the adjudicatory proceeding is necessary
to prevent the appearance of such prejudgment.  As to the policy issue of whether to use comparative hearings
in certain cases, the remarks identify, but do not discuss the relative merits of, competing public interest
considerations (i.e, the speed and efficiency of auctions and the equities existing in some cases) pertinent to that
issue.  Thus, they in no way show by clear and convincing evidence that Commissioner Ness had an unalterably
closed mind on that issue, and therefore they fall far short of the threshold showing necessary to disqualify a
commissioner from participating in a rulemaking. 
        
     218.  Willsyr also surmises that the remarks quoted in the Mediaweek article indicate that
Commissioner Ness must have been presented with, and considered, extra-record evidence regarding the merits
of Orion Broadcasting's pending license application for Biltmore Forest in the context of the issue concerning
the use of comparative hearings.  The Commissioner affirmatively states that she has not received any
impermissible ex parte communications regarding the merits of pending applications or the issue of whether
considerations of fairness warrant the use of comparative hearings rather than auctions to decide certain
outstanding license cases (including the mutually exclusive applications at issue in the Biltmore Forest license
proceeding).     
     

          IV.  PROCEDURAL MATTERS AND ORDERING CLAUSES  

     219.  The Final Regulatory Flexibility Analysis, pursuant to the Regulatory Flexibility Act, 5 U.S.C.
 604, is contained in Appendix B.

     220.  Accordingly, IT IS ORDERED, That pursuant to the authority of Sections 4(i) and (j), 301,
303(f), 303(g), 303(h), 303(j), 303(r), 307(c), 308(b), 309(j), 309(l) and 403 of the Communications Act of
1934, as amended, 47 U.S.C.  154(i), 154(j), 301, 303(f), 303(g), 303(h), 303(j), 303(r), 307(c), 308(b),
309(j), 309(l) and 403, this First Report and Order IS ADOPTED, and Part 73 and Part 74 of the
Commission's Rules ARE AMENDED as set forth in the attached Appendix C.

     221.  IT IS FURTHER ORDERED, That the rule amendments set forth in Appendix C WILL
BECOME EFFECTIVE 60 days after their publication in the Federal Register, and the information collection
contained in these rules will become effective 60 days after publication in the Federal Register, following OMB
approval, unless a notice is published in the Federal Register stating otherwise.

     222.  IT IS FURTHER ORDERED, That the Motion to Recuse FCC Commissioners, filed February
25, 1998, by Willsyr Communications, Limited Partnership, IS DENIED. 

     223.  IT IS FURTHER ORDERED, That pursuant to 47 U.S.C.  155(c) and 47 C.F.R.  0.61,
0.131(c), 0.283 and 0.331, the Chief of the Mass Media Bureau and the Chief of the Wireless
Telecommunications Bureau ARE GRANTED DELEGATED AUTHORITY to prescribe and set forth
procedures as set forth herein, including the authority to seek comment on and set forth mechanisms relating
to the day-to-day conduct of specific broadcast service and Instructional Television Fixed Service auctions.

     224.  IT IS FURTHER ORDERED, That the Commission's Office of Public Affairs, Reference
Operations Division, SHALL SEND a copy of this First Report and Order, including the Final Regulatory
Flexibility Analysis, to the Chief Counsel for Advocacy of the Small Business Administration.   

     225.  IT IS FURTHER ORDERED, That GC Docket No. 92-52 and GEN Docket No. 90-264 ARE
TERMINATED.



                              FEDERAL COMMUNICATIONS COMMISSION


                              Magalie Roman Salas
                              Secretary






















            APPENDIX A -- LIST OF COMMENTING PARTIES  


Comments

American Women In Radio & Television, Inc.
Anchor Broadcasting Limited Partnership
Arizona Board of Regents for Benefit of the University of Arizona, et al. (collectively,
           "ITFS Parties")
Arizona Board of Regents for Benefit of the University of Arizona, et al. (collectively, 
            "Noncommercial Educational Broadcast Licensees")
Association for Community Education 
Association of America's Public Television Stations (AFCCE)
Association of Federal Communications Consulting Engineers
Barger, John W. 
Batesville Broadcasting Company, Inc. 
Beacon Broadcasting, Inc.
Bechtel, Susan M.
BellSouth Corporation and BellSouth Wireless Cable, Inc.
Bernhard, Andrew and Julia, et al. (collectively, "Certain Broadcast Applicants")
Bible Broadcasting Network, Inc. 
Big Ben Broadcasting, et al. (collectively, "Various Post-July 1, 1997 FM Applicants")
Bill, Howard G.
Bingham, Steve
Bledsoe Communications, Ltd. 
Board of County Commissioners of Monroe County, Florida, et al. (collectively, "Six
           Video Broadcast Licensees")
Board of Education of the City of Atlanta, et al.
Board of Trustees of Community-Technical Colleges (Connecticut), et al.
Boelter, Elizabeth and Adolph
Brandt, Lawrence
Brantley Broadcast Associates
Breeze Broadcasting Co., Ltd.
Bulmer, John Anthony 
Burr, Phillip
Cavallo, James G. 
Channel Twenty Television Co., LLC
Cilurzo, Stephen M. 
Colby, Lauren A., on Behalf of Various Identified Parties 
College of the Albermarle, et al. 
Columbia FM Limited Partnership
Communications Technologies, Inc.
Cook Inlet Region, Inc.
Corporation for Public Broadcasting
Cowan, Terry A.
Cox Radio, Inc.
Cromwell Group, Inc.
Czelada, Edward
Dakota Communications, et al.
Danbeth Communications, Inc.
Davis Television Duluth, LLC, et al.
De La Hunt Broadcasting Corporation
Desmond, Thomas
Diotte, Linda
Eckols, Dorisann L.
Eustis, Jeffrey N.
Eells, Thomas M.
Ferrigno, Michael 
Flinn, Jr., George S.
Friendship Broadcasting, LLC
Grace Communications L.C.
Grass Roots Radio, Inc.
Grimmelmann, Cynthia
Gross, Joe L. 
Gulf Coast Broadcasting, Inc.
Harris, Lisa M. 
Hatfield & Dawson Consulting Engineers, Inc.
Hawley, Judy
Heidelberg-Stone Broadcasting Co.
Hispanic Information and Telecommunications Network
Howard, Jr., Kenneth C. 
Independent Broadcast Consultants, Inc.
Indiana Higher Education Telecommunications System
J & M Broadcasting Co., Inc.
J. McCarthy Miller and Biltmore Forest Broadcasting FM, Inc.
Jacor Communications, Inc.
Jay Man Productions, Inc.
JEM Broadcasting Co., Inc.
JTL Communications Corporation
Kayo Broadcasting 
KERM, Inc.
Kidd Communications
KM Communications, Inc.
KM Broadcasting, Inc.
Kulba, Leslee
Kurtz, Wolfgang V.
Lakefront Communications, Inc.
Lamprecht, J. Thomas
Lansman, Jeremy
Lay Catholic Broadcasting Network 
Liberty Productions, LP
Lindsay Television, Inc.
Linear Research Associates
Lutz, Betty M. 
Mableton Investment Group
Maciejewski, Jack L.
Magrill, Kyle 
Mahaffey, Robert B. 
Marri Broadcasting, L.P.
Moore, Jr., Robert R.
Morris, Art
Music Ministries, Inc. and Sacred Heart University, Inc.  
NAACP Legal Defense and Educational Fund, Inc.
National Association of Black Owned Broadcasters
National Association of Broadcasters
National ITFS Association
National Public Radio, Inc., et al. 
National Translator Association
NDEE NITCHI'I BINAGODI'E d/b/a/ Apache Radio Broadcasting Corp.
New Jersey Television Corporation
New Life Evangelistic Center, Inc.
Nobco, Inc.
Noordyk, Donald James
Noordyk, Todd Stuart
Orion Communications Limited
Pacific Radio Engineering
Pappas Telecasting of America
Pennsylvania State University  
Pentecostal Revival Association, Inc.
Perkins, Jr., Roy F. 
Positive Alternative Radio, Inc., et al.
Power, John 
R&S Media, et al.
Reynolds, Lee S.
Reynolds Technical Associates
Rio Grande Broadcasting Co.
Robol, Ken
Rocky Mountain Corporation for Public Broadcasting
Runnels, Dewey Matthew
School District of Palm Beach County, Florida
Schwary, R.L. 
Scranton Times, L.P. and Shamrock Communications, Inc.
Sellmeyer Engineering
Seven Ranges Radio Co. Inc.
Shannon, Paula
Simes, Raymond and L.T. Simes II
Sinclair Broadcast Group, Inc.
SL Communications, Inc.
Smith, Thomas C.
Sound Broadcasting, Inc. and Regency Broadcasting, Inc.
Steinkopf, K.
Tanana Valley Television Company
Throckmorton Broadcasting, Inc.
Tri-County Broadcasting, Inc.
Trinity Broadcasting of Florida, Inc., et al. (collectively, "Parties to Comparative Renewal   
Proceedings")
United Broadcasters Company
University of Northern Iowa
Wilk, Edward J.
Williams Broadcasting Company
Willsyr Communications, LP
Wilson, Duane D. 
Wireless Cable Association International, Inc. 
Young, Harold W.

Reply Comments

Adams Communications Corporation and Alan Shurberg d/b/a/ Shurberg Broadcasting of Hartford
Arizona Board of Regents for Benefit of University of Arizona, et al. (collectively, "Noncommercial 
     Educational Broadcast Licensees")
Arizona Lotus Corp.
Arnold Broadcasting, Inc. 
Ball State University, et al.
Beacon Broadcasting Corporation
Bechtel, Susan M.
BellSouth Corporation and BellSouth Wireless Cable, Inc.
Belmont Abbey College
Big Ben Broadcasting, et al. (collectively, "Various Post-July 1, 1997 FM Applicants")
Bill, Howard G.
Brantley Broadcast Associates
Carteret Community College
CD Broadcasting, Inc.
Channel Twenty Television Company, LLC
College of the Albermarle, et al.
Communications Technologies, Inc.
Community Telecommunications Network
Davis Television Corpus Christi, LLC, et al.
Duhamel Broadcasting Enterprises
Eustis, Jeffrey N. 
Galaxy Communications, Inc.
Glendale Broadcasting Company and Maravillas Broadcasting Company
Hispanic Information and Telecommunications Network
Hoke County School System
Jacor Communications, Inc.
KQED, Inc.
Lakefront Communications, Inc.
Linear Research Associates
McComas, Irene Rodriquez Diaz de
Minnesota Public Radio
Mitchell Community College
Montgomery Communications, Inc.
National Minority T.V., Inc.
National Public Radio, Inc., et al.
Network for Instructional TV, Inc., et al. (collectively, "ITFS Coalition")
NOW Foundation
Orion Communications Limited
Out of Market Productions
Paxson Communications Corporation
Peoples Network, Inc., et al.
Positive Alternative Radio, Inc., et al.
Press Communications, LLC
Queens College
Radio Enterprises of Ohio, Inc.
R&S Media, et al.
Rowan-Cabarrus Community College
Simon T 
United Church of Christ, Office of Communication, et al.
University of North Carolina, et al.
University of Northern Iowa
Vermont Public Radio and Monroe Board of Education
WB Television Network 
WEEU Broadcasting Company
WGUL-FM, Inc.
Willsyr Communications, Limited Partnership
Wireless Cable Association International, Inc.
                            APPENDIX B

           FINAL REGULATORY FLEXIBILITY ANALYSIS (FRFA)
                      First Report and Order

     As required by the Regulatory Flexibility Act (RFA), an Initial Regulatory Flexibility Analysis
(IRFA) was incorporated in the Notice of Proposed Rulemaking (Notice) in this proceeding.  The
Commission sought written public comments on the proposals in the Notice, including on the IRFA.  The
Commission's Final Regulatory Flexibility Analysis (FRFA) in this First Report and Order conforms to the
RFA, as amended by the Contract With America Advancement Act of 1996.

I.  Need For and Objectives of Action: 

     This First Report and Order adopts rules to implement the Balanced Budget Act of 1997 (Budget
Act) which amended Section 309(j) and adopted new Section 309(l) of the Communications Act. 
Specifically, this First Report and Order:  (1) adopts competitive bidding procedures to award construction
permits in the commercial broadcast and secondary broadcast services;  (2) amends application filing
procedures for the broadcast services to complement the competitive bidding process; (3) determines to utilize
competitive bidding to resolve pending mutually exclusive broadcast applications; (4) determines that the
Commission is statutorily required to auction competing Instructional Television Fixed Service (ITFS)
applications; and (5) establishes procedures for resolving a small number of pending comparative renewal
cases, which cannot be resolved by auction under the Commission's revised competitive bidding authority.  The
First Report and Order adopts a tiered "new entrant" bidding credit for entities with controlling interests in
either no, or less than four, other media entities so as to further the goals of the designated entity provisions
of Section 309(j).  As noted in the First Report and Order, the Commission intends to continue its review of
the barriers to entry or growth that may exist for small, minority- and women-owned businesses in
broadcasting, and to make adjustments to its designated entity provisions, as appropriate, in light of these
studies.  

 II.  Significant Issues Raised by the Public in Response to the Initial Analysis:

     No comments were received specifically in response to the IRFA contained in the Notice.  However,
some comments did address certain small business issues.  A number of commenters called for the adoption
of bidding credits for small businesses to ensure their participation in broadcast spectrum auctions, noting that
bidding credits have been effective in helping small businesses compete in previous Commission auctions. 
To promote diversification of ownership of broadcast stations, a number of commenters also supported the
adoption of bidding credits for non-group owners, who would likely be small businesses.  Some commenters
argued that upfront payments should be small enough to allow small businesses to compete effectively. 
Commenters generally opposed the use of competitive bidding for selecting among mutually exclusive ITFS
applicants.  ITFS licensees are primarily educational institutions and governmental educational entities, and
commenters contended that subjecting ITFS to competitive bidding would, inter alia, divert the limited funds
of educators away from educational purposes to purchasing licenses and perhaps even discourage educators
from applying for licenses.

     Small business-related issues were also raised by commenters more indirectly.  A small number of
commenters opposed requiring prospective bidders in broadcast auctions to file their short-form applications
(FCC Form 175) electronically, contending that electronic filing would be a barrier to participation by those
not computer literate or by low power television (LPTV) and translator applicants (many of whom are small
businesses).  Several commenters also asked the Commission to reconfirm its support for certain previously-
adopted special measures to protect LPTV and television translator stations that are displaced during the
transition to digital television.  These commenters sought confirmation that such displacement applications
by LPTV and television translator licensees would not be subjected to competing applications and auction
procedures.  A small number of commenters additionally contended that it was unfair or inequitable to
auction secondary broadcast services (LPTV and television and FM translators), the licensees of which tend
to be small businesses.


III.  Description and Number of Small Entities Involved:

     Under the RFA, small entities include small organizations, small businesses, and small governmental
jurisdictions.  The RFA defines the term "small business" as having the same meaning as the term "small
business concern" under the Small Business Act.  A small business concern is one which:  (1) is
independently owned and operated; (2) is not dominant in its field of operation; and (3) satisfies any additional
criteria established by the Small Business Administration (SBA).  Pursuant to the RFA, the statutory definition
of a small business applies when considering the impact of an agency's action(s) "unless an agency after
consultation with the Office of Advocacy of the SBA and after opportunity for public comment, established
one or more definitions of such term which are appropriate to the activities of the agency and publishes such
definition(s) in the Federal Register."

     In the Notice we stated that we tentatively believe that the SBA's definition of "small business" greatly
overstates the number of radio and television broadcast stations that are small businesses and is not particularly
suitable for our purposes, and we sought comment on how we should define small business for this purpose. 
While we utilized the SBA's definition to determine the number of small businesses to which any auction
procedures would apply, we reserved the right to adopt a more suitable definition of "small business" as applied
to radio and television broadcast stations.  We received no comment in response to the IRFA on how to define
radio and television broadcast "small businesses."  Therefore, we will continue to utilize the SBA's definitions
for the purposes of this FRFA.

     Radio Broadcasting Stations.  The SBA defines a radio broadcasting station that has no more than
$5 million in annual receipts as a small business.  A radio broadcasting station is an establishment primarily
engaged in broadcasting aural programs by radio to the public.  Included in this industry are commercial,
religious, educational, and other radio stations.  Radio broadcasting stations which primarily are engaged
in radio broadcasting and which produce radio program materials are similarly included.  Official
Commission records indicate that 11,334 individual radio stations were operating in 1992.  The 1992 Census
indicates that 96 percent of radio station establishments (5,861 of 6,127) produced less than $5 million in
revenue in 1992. As of May 31, 1998, official Commission records indicate that 4,724 AM radio stations,
7,595 FM radio stations and 3,011 FM translator/booster stations were licensed.  We conclude a similarly
high percentage (96 percent) of current radio broadcasting licensees are small entities.   
     Television Broadcasting Stations.  The SBA defines a television broadcasting station that is
independently owned and operated, is not dominant in its field of operation, and has no more than $10.5 million
in annual receipts as a small business.  Television broadcasting stations consist of establishments primarily
engaged in broadcasting visual programs by television to the public, except cable and other pay television
services.  Included in this industry are commercial, religious, educational, and other television stations. 
Also included are establishments primarily engaged in television broadcasting and which produce taped
television program materials.  There were 1,509 television stations operating in the nation in 1992.  In
1992, there were 1,155 television station establishments that produced less than $10.0 million in revenue
(76.5 percent).  As of May 31, 1998, official Commission records indicate that 1,579 full power television
stations, 2089 low power television stations, and 4924 television translator stations were licensed.  We
conclude that a similarly high percentage of current television broadcasting licensees are small entities (76.5
percent).

     ITFS.  In addition, there are presently 2032 ITFS licensees.  All but 100 of these licenses are held by
educational institutions.  Educational institutions may be included in the definition of a small entity.  ITFS
is a non-pay, non-commercial educational microwave service that, depending on SBA categorization, has, as
small entities, entities generating either $10.5 million or less, or $11.0 million or less, in annual receipts. 
However, we do not collect, nor are we aware of other collections of, annual revenue data for ITFS licensees. 
Thus, we conclude that up to 1932 of these licensees are small entities.

     Pending and Future Applicants Affected by Rulemaking.  The auction procedures set forth in the First
Report and Order will affect: (1) any entity with a pending application for a construction permit for a new full
service commercial radio or analog television broadcast station, if mutually exclusive applications have been
filed; (2) any entity that files an application in the future for a new full service commercial radio or analog
television station, if mutually exclusive applications are filed; (3) any entity with a pending application on file,
or filing an application in the future, for a new low power television station, or a television or FM translator
station, if mutually exclusive applications have been or are filed; (4) any entity that has a pending or future
application to make a major change in an existing facility in any commercial broadcast or secondary broadcast
service, if mutually exclusive applications have been or are filed; and (5) any entity that has filed or files in the
future an application for a license for an ITFS station, if mutually exclusive applications have been filed or are
filed.

     We estimate that, as of the adoption date of the First Report and Order, there are approximately:

            700 mutually exclusive pending applications for commercial radio stations, and 200
     pending competing applications for full power commercial analog television stations;

            100 mutually exclusive pending applications for low power television stations and
     television translator stations, and 30 competing applications for FM translator stations; and

            200 or more mutually exclusive pending applications for ITFS stations.

     Although applicants for broadcast construction permits have been required to demonstrate sufficient
financing to construct and initially operate the proposed broadcast station, we do not require the filing of
financial information specifically concerning the entity seeking a construction permit, such as the entity's annual
revenues.  Thus, we have no data on file as to whether entities with pending permit applications, which are
subject to the new auction rules adopted for the broadcast services, meet the SBA's definition of a small
business concern.  However, we conclude that, given the smaller size of the markets at issue in the pending
applications, most of the entities with pending applications for a permit to construct a new primary or
secondary broadcast station are small entities, as defined by the SBA rules.  
     In addition to the pending applicants that may be affected by the auction procedures adopted for the
broadcast services, any entity that applies for a construction permit for a new broadcast station in the future
will be subject to these competitive biding procedures if mutually exclusive applications are filed.  It is not
possible, at this time, to estimate the number of markets for which mutually exclusive applications will be
received, nor the number of entities that in the future may seek a construction permit for a new broadcast
station.  Given the fact that fewer new stations (particularly fewer analog television stations) will be licensed
in the future and that these stations generally will be located in smaller, more rural areas, we conclude that most
of the entities applying for these stations will be small entities, as defined by the SBA rules.

     Any competitive bidding procedures developed for the broadcast services will not apply to the few
pending comparative renewal cases.  Resolution of these cases will be done on a case-by-case basis, with the
most important factor being the renewal applicant's performance during the license term and its eligibility for
a renewal expectancy.  This will affect broadcast station licensees that filed their applications for renewal of
license on or before May 1, 1995, and any pending initial license applications that are mutually exclusive with
such renewal applications.  We estimate that there are approximately 9 initial license applications that are
mutually exclusive with 8 pending renewal applications.  This includes approximately 15 television applicants
and 2 radio applicants.

IV.  Summary of Projected Reporting, Recordkeeping and Other Compliance Requirements:
     
     The First Report and Order adopts a number of rules that include reporting, recordkeeping, and
compliance requirements.  These requirements will apply to all applicants subject to the new competitive
bidding procedures, as more fully detailed in the First Report and Order (referred to in this section more
generally as "applicants").  We find that these requirements are the minimum needed to ensure the integrity and
efficiency of broadcast licensing and to serve the public interest, as reflected in this record.

     Applicants will be required to submit a short-form application (FCC Form 175) prior to any auction. 
Only winning bidders will need to file complete long-forms (FCC Form 301 for AM, FM and television
stations, FCC Form 346 for LPTV and television translators, or FCC Form 349 for FM translators). 
Specifically, in response to a public notice announcing a window for the filing of broadcast and/or secondary
broadcast applications for new stations and for major changes in existing facilities, applicants will be required
to file a short-form application, along with any engineering data necessary to determine mutual exclusivity in
a particular service.

     With regard to the FM service, applicants will have the opportunity to submit a set of preferred site
coordinates as a supplement to the FCC Form 175.  FM applicants are not required to submit a set of preferred
site coordinates, and may simply indicate the vacant allotment in the FM Table of Allotments upon which they
intend to bid.  No engineering data will be required to be submitted with FM service short-form applications.

     Applicants for AM stations, LPTV stations, and television and FM translators will be required to file
short-form applications specifying a channel or frequency upon which the applicant may operate in accordance
with the Commission's existing interference standards for these services, which we are not altering in any way. 
To determine which AM, LPTV, and television and FM translator applications are mutually exclusive for
auction purposes, we will require applicants for these services to file, in addition to their short-form
applications, the engineering data contained in the pertinent FCC form (i.e., FCC Form 301, FCC Form 346
or FCC Form 349).  Similarly, in those rare instances in which analog television licensees file major
modification applications (such as a change in the community of license), we will require that such applicants
file both an FCC Form 175 and the engineering data contained in the FCC Form 301.

     Applicants for broadcast auctions will be required to follow the general auction rules, 47 C.F.R. 
1.2105, with regard to completion of the short form and exhibits to be submitted with the short form.

     Applicants will be required to identify on their short-form applications any parties with whom they
have entered into any consortium arrangements, joint ventures, partnerships or other agreements or
understandings which relate in any way to the competitive bidding process.  Applicants also will be required
to certify on their short-form applications that they have not entered into any explicit or implicit agreements,
arrangements or understandings of any kind with any parties, other than those identified, regarding the amount
of their bids, bidding strategies, or the particular construction permits on which they will or will not bid.
After short-form applications are filed and prior to the time that the winning bidder has made its required down
payment, all bidders will be prohibited from cooperating, collaborating, discussing or disclosing in any manner
the substance of their bids or bidding strategies with other bidders that have applied to bid in the same
geographic license area, unless such bidders are members of a bidding consortium or other joint bidding
arrangement identified on the bidder's short-form application.

     Consistent with the Commission's general Part 1 auction rules, all applicants for broadcast auctions
must file their FCC Form 175 applications electronically beginning January 1, 1999.  Applicants for the AM,
LPTV, and television and FM translator services, who, as noted above, must submit engineering information
with their short forms, will be required to file the engineering section of the electronic versions of the FCC
Forms 301, 346 and 349, which are currently being developed. 

     A winning bidder that meets its down payment obligations in a timely manner will be required to file
an appropriate long-form application for each construction permit for which it was the high bidder.  Applicants
will be required to submit any applicable exhibits required by the general Part 1 auction rules, and should
be filed pursuant to the rules governing the relevant broadcast service and according to any procedures set out
by public notice.

     Applicants may be subject to upfront payments, minimum opening bids and/or reserve prices in order
to participate in broadcast service auctions.  The Mass Media Bureau in conjunction with the Wireless
Telecommunications Bureau shall seek public comment on and, as appropriate, shall establish these
mechanisms for each auction, or group of auctions, in the broadcast services.

     Following the close of bidding in an auction, the Commission will issue a public notice announcing the
close of the auction and identifying the winning bidders.  Winning bidders will be required to submit a down
payment.  Specifically, within 10 business days of the public notice announcing the close of the auction,
winning bidders will be required to supplement their upfront payments with a down payment amount sufficient
to bring their total deposits with the Commission up to 20% of their winning bids.  If the upfront payment
already tendered by a winning bidder, after deducting any bid withdrawal payments due, amounts to 20% or
more of its winning bid(s), no additional deposit will be required.  To the extent that any upfront payment not
only covers, but exceeds, the required down payment, the Commission will refund any excess amount after
determining that no bid withdrawal payments are owed by the bidder.  The down payment will be held by the
Commission until the winning bidder has been issued its construction permit and has paid the remaining balance
of its winning bid, or until the winning bidder is found unqualified to be a permittee or has defaulted, in which
case it will be returned, less any applicable default payments.

     Auctions winners will be required to pay the balance of their winning bids in a lump sum within 10
business days following the release of a public notice announcing that their construction permits are ready to
be granted.  If a winning bidder fails to pay the balance of its winning bid in a lump sum by the applicable
deadline as specified by the Commission, it will be allowed to make payment within 10 business days after the
payment deadline, provided that it also pays a late fee equal to 5% of the amount due.

     Broadcast auction participants will be subject to the bid withdrawal, default and disqualification
payments set forth in the general Part 1 auction rules, in instances where high bids are withdrawn during the
course of the auction, where winning bids are withdrawn after an auction has closed, and where winning
bidders fail to submit their long-form application, pay their winning bids or are disqualified.

     A licensee, or holder of a construction permit, who utilized a new entrant bidding credit will be required
to reimburse the government for the amount of the bidding credit, plus interest, as a condition for Commission
approval of the assignment or transfer of the license or permit to an entity that would not have qualified for the
new entrant credit.  As provided in the Commission's Part 1 rules, the amount of the repayment will be reduced
over a five-year period.  A licensee who received a new entrant bidding credit, however, will not be required
to repay such bidding credit if it obtains within the five-year reimbursement period additional media interests
so that it no longer meets the eligibility requirements for the new entrant credit it previously received.
     
V.  Steps Taken to Minimize Significant Economic Impact on Small Entities, 
     and Significant Alternatives Considered:

     Due to the insufficiency of the record in this proceeding, the First Report and Order does not make
a final determination regarding the adoption of bidding credits or other special measures to enhance
participation by various designated entities, including small businesses, in broadcast service and ITFS auctions. 
The First Report and Order does adopt a tiered new entrant bidding credit for entities with controlling interests
in either no, or less than four, other media entities so as to enhance participation by small businesses and other
designated entities, including small businesses owned by women and minority group members.  Following the
completion of certain pending evidentiary studies, the Commission may, in a further report and order in this
proceeding, adopt additional or alternative bidding credits or other measures that more directly alleviate any
adverse impact on small businesses (including those owned by women or by minority group members) of the
requirement to participate in an auction to obtain a construction permit to provide commercial broadcast
service.  If additional or alternative designated entity measures are ultimately adopted, then any such measures
will be applicable to the auction of any broadcast and ITFS applications then on file with the Commission.

     Moreover, even if further special measures are not ultimately adopted, we believe that some of the
competitive bidding procedures adopted in this First Report and Order reduce the time and cost of securing
commercial broadcast and ITFS licenses to the ultimate benefit of small businesses.        

     Entities interested in bidding for broadcast station permits will not be required to submit a long form
application prior to auction.  We will require only that a short form application be submitted prior to auction,
although AM, LPTV, and television and FM translator applicants will be required to submit the engineering
data necessary to make determinations of mutual exclusivity.  Requiring only minimal information in a short
form application rather than a more detailed long form application will reduce the burden on small entities
interested in participating in an auction.  These entities (particularly FM applicants who are not required to
submit any engineering data with their short-forms) will not be required to expend additional sums to prepare
a complete long form application prior to auction.  Limiting pre-auction costs will encourage and facilitate the
participation of small entities in the auction and eliminate a potential barrier to entry for these parties.

     The procedures adopted here further expedite service to the public, thereby reducing the cost to small
entities of participating in these auctions, by limiting our pre-auction processing to what is necessary to
determine mutual exclusivity.  Similarly, in the case of pending applications, we will defer until after the
auction all issues as to a bidder's basic qualifications or the acceptability of its application, whether raised in
a petition to deny or a motion to enlarge issues, and we will decide such issues only with respect to the auction
winner.       

     Also, as permitted by Section 3008, we have reduced the time for filing petitions to deny to 10 days
after the long form applications submitted by winning bidders are accepted for filing.  Some commenters
objected to the establishment of a petition to deny period as brief as that allowed under Section 3008 (i.e., five
days), contending, inter alia, that such a short period is insufficient to evaluate the technical proposals and
legal information contained in broadcast long-form applications.  While recognizing that the Commission
relies on petitioners as private attorneys general to assist in overseeing the conduct of applicants and licensees
and in the fulfillment of its statutory functions, we also consider expedition of service to the public to be of
paramount significance.  Accordingly, after careful consideration and in light of Congress' directive in the
Budget Act, we found that a shortened petition to deny period of 10 days is appropriate for applications for
broadcast and secondary broadcast construction permits obtained through the competitive bidding process. 

     We have eliminated the requirement that applicants affirmatively certify their financial qualifications
and the availability of their proposed tower locations in their applications.  This will provide small entities with
additional flexibility to focus their limited financial resources on participation in the auction rather than
preparing financial and other documentation and securing a tower location.  We believe that the competitive
bidding process itself serves to lessen the incentive for insincere application filings and provides a strong
stimulus for timely station construction, so as to recapture bidding investments.  In addition, we think it
unlikely that bidders, who must construct their facilities to recoup the expenditures made in obtaining their
construction permits via auction, will have the incentive to participate in and prevail at auction if they lack the
financial wherewithal to construct their facilities. 

     We recognize that, despite the efficiency of auctions and the resulting reduction in the costs associated
with filing an application, having to participate in an auction may limit the opportunities available to small
businesses, particularly regarding future applications filed in anticipation of the winner being selected through
a system of competitive bidding.  However, except for certain commercial broadcast applications filed before
July 1, 1997, Section 309(j)(1), as amended by the Budget Act of 1997, requires that the Commission use
competitive bidding procedures to award virtually all construction permits for commercial broadcast stations
where mutually exclusive applications are filed.   After carefully considering the comments, we determined that
auctions are statutorily required to resolve mutually exclusive secondary broadcast service applications, as
nothing in the statute or in the legislative history reflects an intention to limit Section 309(j)(1) to full power
radio and television applications.  We advised applicants to be aware that the requirement that competing
applications be auctioned did not change the secondary nature of the LPTV and television and FM translator
services.   

     Relying on the fact that the exemption from competitive bidding set forth in Section 309(j)(2) is
expressly limited to noncommercial educational and public broadcast stations, we also determined that the
exemption does not apply to ITFS, which is a non-broadcast service.  Thus, although we agreed with
commenters that ITFS is similar to noncommercial educational broadcast service and that Section 309(j) may
not reflect on its face Congress's intent regarding the treatment of competing ITFS applications, we found that
auctions are statutorily required to resolve all pending and future mutually exclusive ITFS applications.  
However,  we will request that Congress amend Section 309(j) so that the statute clearly reflects its intent with
regard to ITFS.  Absent a clear statement from Congress that it means to exempt ITFS from competitive
bidding, we will proceed to auction mutually exclusive ITFS applications.  We will not commence ITFS
auctions immediately, however, in order to allow sufficient time for us to obtain Congressional guidance.    

     Auctions are not statutorily required to resolve modification applications, since Section 309(j)(1)
expressly refers to "mutually exclusive applications for . . . any initial license or construction permit."   
Nevertheless, we determined to use competitive bidding to resolve mutually exclusive major modification
applications but not mutually exclusive minor modification applications.  Although some commenters opposed
the auctioning of modification applications, commenters did not suggest another method of resolving
mutually exclusive major modification applications that is as efficient as competitive bidding.  We will,
however, allow applicants who have filed competing major modification applications, or competing major
modification and new applications, to resolve their mutual exclusivity by means of engineering solutions or
settlement before proceeding to auction.  Given the infrequency with which minor modification applications
are mutually exclusive and the less significant changes proposed in minor modification applications, we saw
less utility to be gained from subjecting minor change applications to competitive bidding procedures.  Thus,
in accord with the comments, the parties will be expected to work together to resolve any mutual exclusivities
between minor modification applications.

     Section 309(l) governs the resolution of approximately 130 pending comparative licensing proceedings
involving pre-July 1, 1997, applications for new commercial radio or television stations that did not settle
within the 180-day waiver period prescribed by Congress.  For settlements executed within that period, we
waived our settlement rules, including the prohibition against "white knight" settlement agreements where a full-
market settlement was involved.  Such a waiver would allow a non-party to receive the license after paying the
pending applicants to settle.   We concluded that this "white knight" waiver could not be extended to partial
settlements, as some commenters urged, because doing so would contravene Section 309(l)(2), which
explicitly restricts our discretion regarding persons qualified to participate in a competitive bidding proceeding
that involves pre-July 1, 1997 applications.  

     We also concluded that, contrary to certain comments, it would not serve the public interest to waive
our settlement rules on our own motion to facilitate settlements among applicants ineligible to take advantage
of the statutory 180-day settlement period where applicants could settle for more than their legitimate and
prudent expenses, or expand the 180-day period for applicants who were eligible to take advantage of the
statutorily-mandated waiver period but did not do so.  We noted that Congress had made no change to Section
311(c) that would require a substantial relaxation of our settlement rules, and pending competing applicants
may settle at any time under our existing policies that limit payments.  Moreover, there was no reason to believe
that an additional waiver period would produce settlements in a significant number of the remaining cases.

     Based upon the express language of Section 309(l), we concluded that in cases that did not settle, we
have discretion to resolve applications subject to that provision by either auction or comparative hearings.  
Some commenters favored the use of comparative hearings for these pending pre-July 1, 1997 cases and
expressed concern that the switch to auctions will detrimentally affect the quality of broadcast service.  They
focused particularly on the impact that auctions will allegedly have in terms of securing service that is narrowly
tailored to the needs of the small, local community.  We found that Congress itself has made the judgment
that auctions are generally preferable to comparative hearings by requiring them for competing commercial
broadcast applications filed on or after July 1, 1997.  We concluded that, by providing us with the discretion
to determine whether or not to use auctions in pending pre-July 1st cases, Congress intended us to focus on any
special circumstances in these cases that would tip the policy balance in favor of comparative hearings, not to
re-visit the general congressional determination that broadcast auctions serve the public interest. 

     In exercising this discretion, we concluded that, even for the few pre-July 1, 1997 cases that had
already progressed through an Initial Decision by an Administrative Law Judge, auctions will generally be
fairer and more expeditious than deciding these pending cases through the comparative hearing process,
particularly since the court's invalidation of the key comparative criterion prevents us from deciding any of
these cases according to the applicants' reasonable expectation when they filed their applications.   Under these
circumstances, we disagreed that it would be arbitrary and capricious to ignore the results of the prior hearing. 
We found that for the Commission's Administrative Law Judges to adjudicate and decide the approximately
130 pending proceedings would take many years while auctions can be carried out much more quickly.   

     We rejected arguments raised by commenters that changing the selection process for pending
applications filed before July 1, 1997 is impermissibly retroactive or otherwise unlawful.  We found that
none of the pre-July 1, 1997 applicants subject to the new Section 309(l) have a vested right to a comparative
hearing that is abridged by our decision to resolve such applications by a system of competitive bidding.   And,
in any event, the economic impact of this regulatory change is ameliorated somewhat by the statutory
requirement that auctions to decide these pending cases be closed to other participants. 

     Based upon the express language of Section 309(l)(2), we found that, where post-June 30, 1997,
applications are mutually exclusive with two or more pre-July 1, 1997 applications, we must dismiss them and
conduct a competitive bidding procedure that is restricted to the pre-July 1, 1997 applications.  We rejected
arguments by some commenters that the distinction between pre-July 1st and post June 30th applications is
arbitrary.  We found that Congress adopted a bright line distinction and that this distinction operates to
exclude some applicants but to include others does not make it unlawful.  Moreover, the practical effect of this
bright line distinction will be limited, as we believe that settlement agreements have been filed in connection
with the small number of cases involving post-June 30th applications mutually exclusive with two or more pre-
July 1st applications.  

     Except for applications subject to Section 309(l), there is no statutory bar to reopening new filing
periods for applications that would be mutually exclusive with pending applications.  We agreed with
commenters that reopening already closed filing periods would not serve the public interest since it would delay,
rather than expedite, the resolution of the pending applications, and would defeat the reasonable expectations
of applicants who timely filed long-form applications.  As in the case of pending applications subject to Section
309(l)(2), restricting the qualified bidders to the pending applicants ameliorates the economic impact on small
businesses of having to participate in an auction.  

     As a matter of fairness to pending applicants, we determined to refund all hearing and certain filing
fees paid by all pending applicants.  But we declined the suggestion of various commenters that we also
reimburse the legitimate and prudent expenses of pending pre-July 1st applicants subject to the comparative
freeze, who either do not participate in the auction or are outbid in the auction.  We are aware of no legal
authority to make such additional reimbursement and concluded we have no obligation to do so. 

     We concluded that, consistent with our approach in most of the Commission's previous auctions,
broadcast and ITFS applicants should be required to submit upfront payments with their short-form
applications prior to auction.   We also reserved the right to adopt minimum opening bid and/or reserve prices
for each license.   Establishing upfront payments, minimum opening bid and/or reserve prices may have a
significant economic impact on small businesses interested  in applying for commercial broadcast and ITFS
licenses.   However, upfront payments have been required in our general Part 1 auction rules since they were
first promulgated, and Congress has directed us to prescribe minimum opening bids or reserve prices unless
we specifically determine that this will not serve the public interest.   While we were unpersuaded by
generalized assertions that reserve prices or minimum opening bids would contravene the public interest, we
directed the staff to seek comment on, and as appropriate, establish upfront payments, opening bids and/or
reserve prices for each auction or group auctions, and to consider the issues raised by commenters in this
proceeding in formulating proposals regarding upfront payments and minimum opening bids or reserve prices.

     We adopted our proposal to apply the anti-collusion rule to broadcast service auctions.  A number of
commenters opposed this, believing instead that auction applicants should be permitted to conclude settlement
agreements following the short-form filing deadline with those applicants with whom they are mutually
exclusive.  We noted that we adopted the anti-collusion rule to both prevent and to facilitate the detection
of collusive conduct, thereby enhancing the competitiveness of the auction process and the post-auction market
structure.  We found that the rule has proven effective in the numerous spectrum auctions conducted to date,
and concluded to apply the rule to broadcast auctions.  A limited exception to the anti-collusion rule will,
however, allow applicants who have filed either competing major modification applications, or competing major
modification and new applications, to resolve their mutual exclusivity by means of engineering solutions or
settlements during a limited period after the filing of short-form applications.

     For the pending comparative renewal proceedings (which may not be resolved by auction), we
determined that the most equitable and expeditious approach would be simply to permit the renewal applicants
and their challengers, within the confines of the generally phrased standard comparative issues, to present
whatever factors and evidence they believe most appropriate.  We found that none of the commenters provided
any persuasive arguments against such an approach to comparative hearings if we rejected our alternative two-
step procedure.  We acknowledged that comparative renewal hearings tend to be time-consuming and
expensive for both the Commission and the private parties, and to disserve the public interest by prolonging
the period during which a renewal applicant operates under a cloud.  However, we stated that we remain
willing, where the circumstances afford assurance that the competing applications were not filed for speculative
or other improper purpose, to waive the limitations on payments to dismissing applicants in comparative
renewal proceedings.

VI.  Report to Congress:

     The Commission will send a copy of the First Report and Order, including this FRFA, in a report to
be sent to Congress pursuant to the Small Business Regulatory Enforcement Fairness Act of 1996.  See 5
U.S.C.  801(a)(1)(A).  In addition, the Commission will send a copy of the First Report and Order, including
the FRFA, to the Chief Counsel for Advocacy of the Small Business Administration.  A copy of the First
Report and Order and FRFA (or summaries thereof) will also be published in the Federal Register.  See 5
U.S.C.  604(b).
                                 APPENDIX C


I.   Part 1 of Chapter 1 of Title 47 of the Code of Federal Regulations is amended as follows:

Subpart A - General Rules of Practice and Procedure

Section 1.65 is amended to read as follows:

 1.65  Substantial and significant changes in the information furnished by applicants to the Commission.
(a)  Each applicant is responsible for the continuing accuracy and completeness of information furnished in a
pending application or in Commission proceedings involving a pending application.  Whenever the information
furnished in the pending application is no longer substantially accurate and complete in all significant respects,
the applicant shall as promptly as possible and in any event within 30 days, unless good cause is shown, amend
or request the amendment of his application so as to furnish such additional or corrected information as may
be appropriate.  Whenever there has been a substantial change as to any other matter which may be of
decisional significance in a Commission proceeding involving the pending application, the applicant shall as
promptly as possible and in any event within 30 days, unless good cause is shown, submit a statement
furnishing such additional or corrected information as may be appropriate, which shall be served upon parties
of record in accordance with  1.47.   Where the matter is before any court for review, statements and requests
to amend shall in addition be served upon the Commission's General Counsel.  For the purposes of this section,
an application is "pending" before the Commission from the time it is accepted for filing by the Commission
until a Commission grant or denial of the application is no longer subject to reconsideration by the Commission
or to review by any court.
(b)  Applications in ITFS and broadcast services subject to competitive bidding will be subject to the provisions
of  73.5002, 73.3522 and 1.2105(b) regarding the modification of their  applications.

                            * * * * * 

Subpart L - Random Selection Procedures for Mass Media Services

Section 1.1601 is amended to read as follows:

 1.1601  Scope.

The provisions of this subpart, and the provisions referenced herein, shall apply to applications for initial
licenses or construction permits or for major changes in the facilities of authorized stations in the following
services:

     (a)  [Reserved]
     (b)  [Reserved]

 1.1604  Post-selection hearings.

(a)  Following the random selection, the Commission shall announce the "tentative selectee" and, where
permitted by  73.3584 invite Petitions to Deny its application.
(1)  [Removed]

                            * * * * * 


II.  Part 73 of Chapter 1 of Title 47 of the Code of Federal Regulations is amended as follows:

Section 73.1010 is amended to read as follows:

 73.1010  Cross reference to rules in other parts.
Certain rules applicable to broadcast services, some of which are also applicable to other services, are set forth
in the following Parts of the FCC Rules and Regulations.
(a) Part 1, "Practice and Procedure."

                              ******

(8) Subpart Q, "Competitive Bidding Proceedings" ( 1.2101-1.2112). 


Section 73.3500 is amended to read as follows:

 73.3500  Application and report forms.

Following are the FCC broadcast application and report forms, listed by number.

Form number                   Title

175 . . . . .             Application to Participate in an FCC Auction               
     


Section 73.3522 is amended to read as follows:

 73.3522  Amendment of applications.
(a) Broadcast services subject to competitive bidding.
     (1) Applicants in all broadcast services subject to competitive bidding will be subject to the provisions
of  73.5002 and 1.2105(b) regarding the modification of their short-form applications.
     (2) Subject to the provision of  73.5005, if it is determined that a long form application submitted by
a winning bidder or a non-mutually exclusive applicant for a new station or a major change in an existing
station in all broadcast services subject to competitive bidding is substantially complete, but contains any
defect, omission, or inconsistency, a deficiency letter will be issued affording the applicant an opportunity to
correct the defect, omission or inconsistency.  Amendments may be filed pursuant to the deficiency letter curing
any defect, omission or inconsistency identified by the Commission, or to make minor modifications to the
application, or pursuant to  1.65.  Such amendments should be filed in accordance with  73.3513.  If a
petition to deny has been filed, the amendment shall be served on the petitioner.
     (3) Subject to the provisions of  73.3571, 73.3572 and 73.3573, deficiencies, omissions or
inconsistencies in long-form applications may not be cured by major amendment. The filing of major
amendments to long-form applications is not permitted.  An application will be considered to be newly filed
if it is amended by a major amendment.
     (4) Paragraph (a) of this section is not applicable to applications for minor modifications of facilities
in the non-reserved FM broadcast service, nor to any application for a reserved band FM station.

(b) Reserved band FM and reserved noncommercial educational television stations. 
     (1) Predesignation amendments.  Subject to the provisions of  73.3525, 73.3572, 73.3573 and
73.3580, mutually exclusive broadcast applications for reserved band FM stations and television stations on
a reserved channel may be amended as a matter of right by the date specified (not less than 30 days after
issuance) in the FCC's Public Notice announcing the acceptance for filing of the last-filed mutually exclusive
application.  Subsequent amendments prior to designation of the proceeding for hearing will be considered only
upon a showing of good cause for late filing or pursuant to  1.65 or  73.3514. Unauthorized or untimely
amendments are subject to return by the FCC's staff without consideration.
     (2) Postdesignation amendments. (i) Except as provided in paragraph (ii) of this section, requests to
amend an application after it has been designated for hearing will be considered only upon written petition
properly served upon the parties of record in accordance with  1.47 and, where applicable, compliance with
the provisions of  73.3525, and will be considered only upon a showing of good cause for late filing. In the
case of requests to amend the engineering proposal (other than to make changes with respect to the type of
equipment specified), good cause will be considered to have been shown only if, in addition to the usual good
cause consideration, it is demonstrated:
          (A) That the amendment is necessitated by events which the applicant could not reasonably have
     foreseen (e.g., notification of a new foreign station or loss of transmitter site by condemnation); and
          (B) That the amendment does not require an enlargement of issues or the addition of new parties to the
     proceeding.
(ii) In comparative broadcast cases (including comparative renewal proceedings), amendments relating to issues
first raised in the designation order may be filed as a matter of right within 30 days after that Order or a
summary thereof is published in the Federal Register, or by a date certain to be specified in the Order.  (iii)
Notwithstanding the provisions of paragraphs (b)(2)(i) -(ii) of this section, and subject to compliance with the
provisions of  73.3525, a petition for leave to amend may be granted, provided it is requested that the
application as amended be removed from the hearing docket and returned to the processing line.  
(c) Minor modifications of facilities in the non-reserved FM broadcast service.      
     (1) Subject to the provisions of  73.3525, 73.3573, and 73.3580, for a period of 30 days following
the FCC's issuance of a Public Notice announcing the tender of an application for minor modification of a non-
reserved band FM station, (other than Class D stations), minor amendments may be filed as a matter of right. 
     (2) For applications received on or after August 7, 1992, an applicant whose application is found to
meet minimum filing requirements, but nevertheless is not complete and acceptable, shall have the opportunity
during the period specified in the FCC staff's deficiency letter to correct all deficiencies in the tenderability and
acceptability of the underlying application, including any deficiency not specifically identified by the staff. [For
minimum filing requirements see  73.3564(a). Examples of tender defects appear at 50 FR 19936 at 19945-46
(May 13, 1985), reprinted as Appendix D, Report and Order, MM Docket No. 91- 347, 7 FCC Rcd 5074,
5083-88 (1992). For examples of acceptance defects, see 49 FR 47331.] Prior to the end of the period specified
in the deficiency letter, a submission seeking to correct a tender and/or acceptance defect in an application
meeting minimum filing requirements will be treated as an amendment for good cause if it would successfully
and directly correct the defect. Other amendments submitted prior to grant will be considered only upon a
showing of good cause for late filing or pursuant to  1.65 or  73.3514. 
     (3) Unauthorized or untimely amendments are subject to return by the Commission without
consideration. However, an amendment to a non-reserved band application will not be accepted if the effect
of such amendment is to alter the proposed facility's coverage area so as to produce a conflict with an applicant
who files subsequent to the initial applicant but prior to the amendment application. Similarly, an applicant
subject to "first come/first  serve" processing will not be permitted to amend its application and retain filing
priority if the result of such amendment is to alter the facility's coverage area so as to produce a conflict with
an applicant which files subsequent to the initial applicant but prior to the amendment.

Note 1: When two or more broadcast applications are tendered for filing which are mutually exclusive with
each other but not in conflict with any previously filed applications which have been accepted for filing, the
FCC, where appropriate, will announce acceptance of the earliest tendered application and place the later filed
application or applications on a subsequent public notice of acceptance for filing in order to establish a deadline
for the filing of amendments as a matter of right for all applicants in the group.


Section 73.3525 is amended to read as follows:

 73.3525  Agreements for removing application conflicts.

                              ******

(c) Except where a joint request is filed pursuant to paragraph (a) of this section, any applicant filing an
amendment pursuant to  73.3522(b)(1) and (c), or a request for dismissal pursuant to  73.3568(b)(1) and
(c), which would remove a conflict with another pending application; or a petition for leave to amend pursuant
to  73.3522(b)(2) which would permit a grant of the amended application or an application previously in
conflict with the amended application; or a request for dismissal pursuant to  73.3568(b)(2), shall file with
it an affidavit as to whether or not consideration (including an agreement for merger of interests) has been
promised to or received by such applicant, directly or indirectly, in connection with the amendment, petition
or request.

(d) Upon the filing of a petition for leave to amend or to dismiss an application for broadcast facilities which
has been designated for hearing or upon the dismissal of such application on the FCC's own motion pursuant
to  73.3568, each applicant or party remaining in hearing, as to whom a conflict would be removed by the
amendment or dismissal shall submit for inclusion in the record of that proceeding an affidavit stating whether
or not he has directly or indirectly paid or promised consideration (including an agreement for merger of
interests) in connection with the removal of such conflict.

                              ******

(l) The prohibition of collusion as set forth in  1.2105(c) and 73.5002 of this section, which becomes
effective upon the filing of short-form applications, shall apply to all broadcast services subject to competitive
bidding.




Section 73.3564 is amended to read as follows:

 73.3564  Acceptance of applications.
(a) (1)  Applications tendered for filing are dated upon receipt and then forwarded to the Mass Media Bureau,
where an administrative examination is made to ascertain whether the applications are complete.  Except for
applications for minor modifications of facilities in the non-reserved FM band, as defined in  73.3573 (a)(2),
long form applications subject to the provisions of  73.5005 found to be complete or substantially complete
are accepted for filing and are given file numbers. In the case of minor defects as to completeness, a deficiency
letter will be issued and the applicant will be required to supply the missing or corrective information.
Applications that are not substantially complete will not be considered and will be returned to the applicant.

(2) In the case of minor modifications of facilities in the non-reserved FM band, applications will be placed on
public notice if they meet the following two-tiered minimum filing requirement as initially filed in first
come/first served proceedings:
    (i) The application must include:
    (A) Applicant's name and address,
    (B) Applicant's original signature,
    (C) Principal community,
    (D) Channel or frequency,
    (E) Class of station, and
    (F) Transmitter site coordinates; and

(ii) The application must not omit more than 3 of the second tier items specified in appendix C, Report and
Order, MM Docket No. 91-347, FCC 92-328, 7 FCC Rcd 5074 (1992). Applications found not to meet
minimum filing requirements will be returned to the applicant. Applications found to meet minimum filing
requirements, but that contain deficiencies in tender and/or acceptance information, shall be given an
opportunity for corrective amendment pursuant to  73.3522. Applications found to be substantially complete
and in accordance with the Commission's core legal and technical requirements will be accepted for filing.
Applications with uncorrected tender and/or acceptance defects remaining after the opportunity for corrective
amendment will be dismissed with no further opportunity for corrective amendment.
 
(b) Acceptance of an application for filing merely means that it has been the subject of a preliminary review
by the FCC's administrative staff as to completeness. Such acceptance will not preclude the subsequent
dismissal of the application if it is found to be patently not in accordance with the FCC's rules.

(c) At regular intervals, the FCC will issue a Public Notice listing all long form applications which have been
accepted for filing.  Pursuant to  73.3571(h), 73.3572, and 73.3573(f), such notice shall establish a cut-off
date for the filing of petitions to deny. With respect to reserved band FM applications, the Public Notice shall
also establish a cut-off date for the filing of mutually exclusive applications pursuant to  73.3573(e).
However, no application will be accepted for filing unless certification of compliance with the local notice
requirements of  73.3580(h) has been made in the tendered application.

(d) The FCC will specify by Public Notice, pursuant to  73.5002, a period for filing applications for new
stations or for major modifications in the facilities of an existing station. Except for reserved band FM stations
and TV stations on reserved noncommercial educational channels, applications for new and major
modifications in facilities will be accepted only during these window filing periods specified by the
Commission. 

(e) Applications for minor modification of facilities may be tendered at any time, unless restricted by the FCC.
These applications will be processed on a "first come/first served" basis and will be treated as simultaneously
tendered if filed on the same day. Any applications received after the filing of a lead application will be grouped
according to filing date, and placed in a queue behind the lead applicant.  The FCC will periodically release
a Public Notice listing those minor modification of facilities applications accepted for filing.
  
(f) If a non-reserved band FM channel allotment becomes vacant, after the grant of a construction permit
becomes final, because of a lapsed construction permit or for any other reason, the FCC will, by Public Notice,
announce a subsequent filing window for the acceptance of new applications for such channels.

(g) Applications for operation in the 1605-1705 kHz band will be accepted only if filed pursuant to the terms
of  73.30(b).


Section 73.3568 is amended to read as follows:

 73.3568  Dismissal of applications.
(a) (1) Failure to prosecute an application, or failure to respond to official correspondence or request for
additional information, will be cause for dismissal. 
(2) Applicants in all broadcast services subject to competitive bidding will be subject to the provisions of 
73.5002 and 1.2105(b) regarding the dismissal of their short-form applications.  
(3) Applicants in all broadcast services subject to competitive bidding will be subject to the provisions of 
73.5004, 73.5005 and 1.2104(g) regarding the dismissal of their long-form applications and the imposition of
applicable withdrawal, default and disqualification payments.

(b) (1) Subject to the provisions of  73.3525, dismissal of applications for channels reserved for
noncommercial educational use will be without prejudice where an application has not yet been designated for
hearing, but may be made with prejudice after designation for hearing.
(2) Subject to the provisions of  73.3525, requests to dismiss an application for a channel reserved for
noncommercial educational use, without prejudice, after it has been designated for hearing, will be considered
only upon written petition properly served upon all parties of record. Such requests shall be granted only upon
a showing that the request is based on circumstances wholly beyond the applicant's control which preclude
further prosecution of his application.

(c) Subject to the provisions of  73.3523 and 73.3525, any application for minor modification of facilities
may, upon request of the applicant, be dismissed without prejudice as a matter of right.

(d) An applicant's request for the return of an application that has been accepted for filing will be regarded as
a request for dismissal.





Section 73.3571 is amended to read as follows:

 73.3571   Processing of AM broadcast station applications.

(a) Applications for AM broadcast facilities are divided into three groups.

(1) In the first group are applications for new stations or for major changes in the facilities of authorized
stations. A major change for an AM station authorized under this part is any increase in power, except where
accompanied by a complimentary reduction of antenna efficiency which leads to the same amount, or less,
radiation in all directions (in the horizontal and vertical planes when skywave propagation is involved, and in
the horizontal plane only for daytime considerations), relative to the presently authorized radiation levels, or
any change in frequency, hours of operation, or community of license. A major change in ownership is a
situation where the original party or parties to the application do not retain more than 50% ownership interest
in the application as originally filed.  

(2) The second group consists of applications for licenses and all other changes in the facilities of authorized
stations.

(3) The third group consists of applications for operation in the 1605-1705 kHz band which are filed
subsequent to FCC notification that allotments have been awarded to petitioners under the procedure specified
in  73.30.

(b) (1) The FCC may, after acceptance of an application for modification of facilities, advise the applicant that
such application is considered to be one for a major change and therefore is subject to the provisions of 
73.3522,  73.3580 and 1.1111 of this chapter pertaining to major changes.  Such major modification
applications will be dismissed as set forth in paragraph (h)(1)(i) of this section.
(2) An amendment to an application which would effect a major change, as defined in paragraph (a) (1) of this
section, will not be accepted except as provided for in (h)(1)(i).

(c) An application for changes in the facilities of an existing station will continue to carry the same file number
even though (pursuant to FCC approval) an assignment of license or transfer of control of said licensee or
permittee has taken place if, upon consummation, the application is amended to reflect the new ownership.

(d) If, upon examination, the FCC finds that the public interest, convenience and necessity will be served by
the granting of an application, the same will be granted. If the FCC is unable to make such a finding and it
appears that a hearing may be required, the procedure set forth in  73.3593 will be followed.

(e) Applications proposing to increase the power of an AM station are subject to the following requirements:
(1) In order to be acceptable for filing, any application which does not involve a change in site must propose
at least a 20% increase in the station's nominal power.
(2) Applications involving a change in site are not subject to the requirements in paragraph (e)(1) of this
section.
(3) Applications for nighttime power increases for Class D stations are not subject to the requirements of this
section and will be processed as minor changes.
(4) The following special procedures will be followed in authorizing Class II-D daytime-only stations on 940
and 1550 kHz, and Class III daytime-only stations on the 41 regional channels listed in  73.26(a), to operate
unlimited-time.
(i) Each eligible daytime-only station in the foregoing categories will receive an Order to Show Cause why its
license should not be modified to specify operation during nighttime hours with the facilities it is licensed to
start using at local sunrise, using the power stated in the Order to Show Cause, that the Commission finds is
the highest nighttime level--not exceeding 0.5 kW--at which the station could operate without causing
prohibited interference to other domestic or foreign stations, or to co-channel or adjacent channel stations for
which pending applications were filed before December 1, 1987.
(ii) Stations accepting such modification shall be reclassified. Those authorized in such Show Cause Orders
to operate during nighttime hours with a power of 0.25 kW or more, or with a power that, although less than
0.25 kW, is sufficient to enable them to attain RMS field strengths of 141 mV/m or
more at 1 kilometer, shall be redesignated as Class II-B stations if they are assigned to 940 or 1550 kHz, and
as unlimited-time Class III stations if they are assigned to regional channels.
(iii) Stations accepting such modification that are authorized to operate during nighttime hours at powers less
than 0.25 kW, and that cannot with such powers attain RMS field strengths of 141 mV/m or more at 1
kilometer, shall be redesignated as Class II-S stations if they are assigned to 940 or 1550
kHz, and as Class III-S stations if they are assigned to regional channels.
(iv) Applications for new stations may be filed at any time on 940 and 1550 kHz and on the regional channels.
Also, stations assigned to 940 or 1550 kHz, or to the regional channels, may at any time, regardless of their
classifications, apply for power increases up to the maximum generally permitted. Such applications for new
or changed facilities will be granted without taking into account interference caused to Class II-S or Class III-S
stations, but will be required to show interference protection to other classes of stations, including stations that
were previously classified as Class II-S or Class III-S, but were later reclassified as Class II-B or Class III
unlimited-time stations as a result of subsequent facilities modifications that permitted power increases
qualifying them to discontinue their "S" subclassification.

(f) Applications for minor modifications for AM broadcast stations, as defined in (a)(2) of this paragraph, may
be filed at any time, unless restricted by the FCC, and, generally will be processed in the order in which they
are tendered.  The FCC will periodically release a Public Notice listing those applications accepted for filing.
Any such applications found to be mutually exclusive must be resolved through settlement or technical
amendment.

(g) Applications for change of license to change hours of operation of a Class C AM broadcast station, to
decrease hours of operation of any other class of station, or to change station location involving no change in
transmitter site will be considered without reference to the processing line.

(h) Processing new and major AM broadcast station applications.

(1)(i) The FCC will specify by Public Notice, pursuant to  73.5002, a period for filing AM applications for
a new station or for major modifications in the facilities of an authorized station.  AM applications for new
facilities or for major modifications will be accepted only during these specified periods. Applications
submitted prior to the appropriate filing period or "window" opening date identified in the Public Notice will
be returned as premature. Applications submitted after the specified deadline will be dismissed with prejudice
as untimely.  (ii) Such AM applicants will be subject to the provisions of  1.2105 and 73.5002 regarding the
submission of the short-form application, FCC Form 175, and all appropriate certifications, information and
exhibits contained therein. To determine which AM applications are mutually exclusive, AM applicants must
submit the engineering data contained in FCC Form 301 as a supplement to the short-form application.  Such
engineering data will not be studied for technical acceptability, but will be protected from subsequently filed
applications as of the close of the window filing period.  Determinations as to the acceptability or grantability
of an applicant's proposal will not be made prior to an auction. (iii) AM applicants will be subject to the
provisions of  1.2105 and 73.5002 regarding the modification and dismissal of their short-form applications. 
  
(2) Subsequently, the FCC will release Public Notices: (i) identifying the short-form applications received
during the window filing period which are found to be mutually exclusive; (ii) establishing a date, time and
place for an auction; (iii) providing information regarding the methodology of competitive bidding to be used
in the upcoming auction, bid submission and payment procedures, upfront payment procedures, upfront
payment deadlines, minimum opening bid requirements and applicable reserve prices in accordance with the
provisions of  73.5002; (iv) identifying  applicants who have submitted timely upfront payments and, thus,
are qualified to bid in the auction.  

(3) If, during the window filing period, the FCC receives non-mutually exclusive AM applications, a Public
Notice will be released identifying the non-mutually exclusive applicants, who will be required to submit the
appropriate long form application within 30 days of the Public Notice and pursuant to the provisions of 
73.5005(d). These non-mutually exclusive applications will be processed and the FCC will periodically release
a Public Notice listing such non-mutually exclusive applications determined to be acceptable for filing and
announcing a date by which petitions to deny must be filed in accordance with the provisions of  73.5006
and 73.3584. If the applicant is duly qualified, and upon examination, the FCC finds that the public interest,
convenience and necessity will be served by the granting of the non-mutually exclusive long form application,
the same will be granted. 

(4) (i) The auction will be held pursuant to the procedures set forth in  1.2101 et seq. and 73.5000 et seq.
Subsequent to the auction, the FCC will release a Public Notice announcing the close of the auction and
identifying the winning bidders. Winning bidders will be subject to the provisions of  1.2107 and 73.5003
regarding down payments and will be required to submit the appropriate down payment within 10 business days
of the Public Notice. Pursuant to  1.2107 and 73.5005, a winning bidder that meets its down payment
obligations in a timely manner must, within 30 days of the release of the Public Notice announcing the close
of the auction, submit the appropriate long-form application for each construction permit for which it was the
winning bidder.  Long-form applications filed by winning bidders shall include the exhibits identified in 
73.5005(a). 
(ii) These applications will be processed and the FCC will periodically release a Public Notice listing such
applications that have been accepted for filing and announcing a date by which petitions to deny must be filed
in accordance with the provisions of  73.5006 and 73.3584.  If the applicant is duly qualified, and upon
examination, the FCC finds that the public interest, convenience and necessity will be served by the granting
of the winning bidder's long form application, a Public Notice will be issued announcing that the construction
permit is ready to be granted. Each winning bidder shall pay the balance of its winning bid in a lump sum
within 10 business days after release of the Public Notice, as set forth in  1.2109(a) and 73.5003. 
Construction permits will be granted by the Commission following the receipt of the full payment. (iii) All long-
form applications will be cut-off as of the date of filing with the FCC and will be protected from subsequently
filed long-form applications. Applications will be required to protect all previously filed commercial and
noncommercial applications. Winning bidders filing long-form applications may change the technical proposals
specified in their previously submitted short-form applications, but such change may not constitute a major
change. If the submitted long-form application would constitute a major change from the proposal submitted
in the short-form application, the long-form application will be returned pursuant to paragraph (h)(1)(i) of this
section. 
 
(i) In order to grant a major or minor change application made contingent upon the grant of another licensee's
request for a facility modification, the Commission will not consider mutually exclusive applications by other
parties that would not protect the currently authorized facilities of the contingent applicants. Such major change
applications remain, however, subject to the provisions of  73.3580 and 1.1111. The Commission shall grant
contingent requests for construction permits for station modifications only upon a finding that such action will
promote the public interest, convenience and necessity.  


Section 73.3572 is amended to read as follows:

 73.3572   Processing of TV broadcast, low power TV, TV translator and TV
      booster station applications.

(a) Applications for TV stations are divided into two groups:
     (1) In the first group are applications for new stations or major changes in the facilities of authorized
stations. A major change for TV broadcast stations authorized under this part is any change in frequency or
community of license which is in accord with a present allotment contained in the Table of Allotments (
73.606).  Other requests for change in frequency or community of license for TV broadcast stations must first
be submitted in the form of a petition for rulemaking to amend the Table of Allotments.  In the case of low
power TV, TV translator, and TV booster stations authorized under Part 74 of this chapter, a major change
is any change in:
     (i) Frequency (output channel) assignment (does not apply to TV boosters);
     (ii) Transmitting antenna system including the direction of the radiation,
     directive antenna pattern or transmission line;
     (iii) Antenna height;
     (iv) Antenna location exceeding 200 meters; or
     (v) Authorized operating power.
     (2) However, if the proposed modification of facilities, other than a change in frequency, will not
increase the signal range of the low power TV,  TV translator or TV booster station in any horizontal direction,
the modification will not be considered a major change.
      (i) Provided that in the case of an authorized low power TV, TV translator  or TV booster which is
predicted to cause or receive interference to or from  an authorized TV broadcast station pursuant to  74.705
or interference with broadcast or other services under  74.703 or  74.709, that an application for a change
in output channel, together with technical  modifications which are necessary to avoid interference (including
a change  in antenna location of less than 16.1 km), will not be considered as an  application for a major change
in those facilities.
     (ii) Provided further, that a low power TV, TV translator or TV booster  station: authorized on a
channel from channel 60 to 69, or which is causing  or receiving interference or is predicted to cause or receive
interference to or from an authorized DTV station pursuant to  74.706, or which is located within the
distances specified below in paragraph (iii) of this section to the coordinates of co-channel DTV authorizations
(or allotment table coordinates if there are no authorized facilities at different coordinates), may at any time
file a displacement relief application for a change in output channel, together with any technical modifications
which are necessary to avoid interference or continue serving the station's protected service area.  Such an
application will not be considered as an application for a major change in those facilities. Where such an
application is mutually exclusive  with applications for new low power TV, TV translator or TV booster
stations, or with other nondisplacement relief applications for facilities modifications, priority will be afforded
to the displacement application(s) to the exclusion of the other applications.
     (iii)(A) The geographic separations to co-channel DTV facilities or allotment reference coordinates,
as applicable, within which to qualify for displacement relief are the following:
          (1) Stations on UHF channels: 265 km (162 miles)
          (2) Stations on VHF channels 2-6: 280 km (171 miles)
          (3) Stations on VHF channels 7-13: 260 km (159 miles)
     (B) Engineering showings of predicted interference may also be submitted to justify the need for
displacement relief.
     (iv) Provided further, that the FCC may, within 15 days after acceptance of any other application for
modification of facilities, advise the applicant  that such application is considered to be one for a major change
and therefore subject to the provisions of  73.3522, 73.3580, and 1.1111 of this chapter pertaining to major
changes.  Such major modification applications filed for low power TV, TV translator, TV booster stations,
and for a non-reserved television allotment, are subject to competitive bidding procedures and will be dismissed
if filed outside a specified filing period.  See 47 C.F.R.  73.5002(a).

(b) A new file number will be assigned to an application for a new station or for major changes in the facilities
of an authorized station, when it is amended so as to effect a major change, as defined in paragraph (a)(1) of
this section, or result in a situation where the original party or parties to the application do not retain more than
50% ownership interest in the application as originally filed and  73.3580 will apply to such amended
application.  An application for change in the facilities of any existing station will continue to carry the same
file number even though (pursuant to FCC approval) an assignment of license or transfer of control of such
licensee or permittee has taken place if, upon consummation, the application  is amended to reflect the new
ownership.

(c) Amendments to low power TV, TV translator, TV booster stations, or non-reserved television applications,
which would require a new file number pursuant to paragraph (b) of this section, are subject to competitive
bidding procedures and will be dismissed if filed outside a specified filing period.  See 47 C.F.R.  73.5002(a). 
When an amendment to an application for a reserved television allotment would require a new file number
pursuant to paragraph (b) of this section, the applicant will have the opportunity to withdraw the amendment
at any time prior to designation for a hearing if applicable; and may be afforded, subject to the discretion of
the Administrative Law Judge, an opportunity to withdraw the amendment after designation for a hearing.

(d) Applications for TV stations on reserved noncommercial educational channels will be processed as nearly
as possible in the order in which they are filed. Such applications will be placed in the processing line in
numerical sequence, and will be drawn by the staff for study, the lowest file number first. In order that those
applications which are entitled to be grouped for processing may be fixed prior to the time processing of the
earliest filed application is begun, the FCC will periodically release a Public Notice listing applications which
have been accepted for filing and announcing a date (not less than 30 days after issuance) on which the listed
applications will be considered available and ready for processing and by which all mutually exclusive
applications and petitions to deny the listed applications must be filed.   
   
(e) (1) The FCC will specify by Public Notice, pursuant to  73.5002, a period for filing applications for a new
non-reserved television, low power TV and TV translator stations or for major modifications in the facilities
of such authorized station.  (2) Such applicants shall be subject to the provisions of  1.2105 and competitive
bidding procedures.  See 47 C.F.R.  73.5000 et seq.

(f)  Applications for minor modifications for television broadcast, low power television and TV translator
stations, as defined in paragraph (a)(2) of this Section, may be filed at any time, unless restricted by the FCC,
and, generally, will be processed in the order in which they are tendered.    
    
(g) TV booster station applications may be filed at any time.  Subsequent to filing, the FCC will release a
Public Notice accepting for filing and proposing for grant those applications which are not mutually exclusive
with any other TV translator, low power TV, or TV booster application, and providing for the filing of
Petitions To Deny pursuant to  73.3584.   


Section 73.3573 is amended to read as follows:

 73.3573  Processing FM broadcast station applications.

(a) Applications for FM broadcast stations are divided into two groups:

(1) In the first group are applications for new stations or for major changes in the facilities of authorized
stations. A major change for an FM station authorized under this part is any change in frequency or community
of license which is in accord with a present allotment contained in the Table of Allotments ( 73.202 (b)). A
licensee or permittee may seek the higher or lower class adjacent channel, intermediate frequency or co-channel
or the same class adjacent channel of its existing FM broadcast station authorization by filing a minor change
application. Other requests for change in frequency or community of license for FM stations must first be
submitted in the form of a petition for rulemaking to amend the Table of Allotments. Long-form applications
submitted pursuant to  73.5005 for a new FM broadcast service may propose a higher or lower class adjacent
channel, intermediate frequency or co-channel.  For noncommercial educational FM stations, a major change
is any change in frequency or community of license or any change in power or antenna location or height above
average terrain (or combination thereof) which would result in a change of 50% or more in the area within the
station's predicted 1 mV/m field strength contour. (A change in area is defined as the sum of the area gained
and the area lost as a percentage of the original area). A major change in ownership is a situation where the
original party or parties to the application do not retain more than 50% ownership interest in the application
as originally filed. 

(2) The second group consists of applications for licenses and all other changes in the facilities of authorized
stations.

Note. 1: Applications to modify the channel and/or class of an FM broadcast station to an adjacent channel,
intermediate frequency (IF) channel, or co-channel shall not require any other amendments to the Table of
Allotments. Such applications may resort to the provisions of the Commission's Rules permitting short spaced
stations as set forth in  73.215 as long as the applicant shows by separate exhibit attached to the application
the existence of an allotment reference site which meets the allotment standards, the minimum spacing
requirements of  73.207 and the city grade coverage requirements of  73.315. This exhibit must include a
site map or, in the alternative, a statement that the transmitter will be located on an existing tower. Examples
of unsuitable allotment reference sites include those which are offshore, in a national or state park in which
tower construction is prohibited, on an airport, or otherwise in an area which would necessarily present a
hazard to air navigation.

(b) (1) The FCC may, after the acceptance of an application for modification of facilities, advise the applicant
that such application is considered to be one for a major change and therefore subject to the provisions of 
73.3522, 73.3580 and 1.1111 of this chapter pertaining to major changes.  Such major modification
applications in the non-reserved band will be dismissed as set forth in paragraph (f)(2)(i) of this section.
(2) An amendment to a non-reserved band application which would effect a major change, as defined in
paragraph (a)(1) of this section, will not be accepted, except as provided for in (f)(2)(i).
(3) A new file number will be assigned to a reserved band application for a new station or for major changes
in the facilities of an authorized station, when it is amended so as to effect a major change, as defined in
paragraph (a)(1) of this section. Where an amendment to a reserved band application would require a new file
number, the applicant will have the opportunity to withdraw the amendment at any time prior to designation
for hearing, if applicable; and may be afforded, subject to the discretion of the Administrative Law Judge, an
opportunity to withdraw the amendment after designation for hearing.

(c)   An application for changes in the facilities of any existing station will continue to carry the same file
number even though (pursuant to FCC approval) an assignment of license or transfer of control of such licensee
or permittee has taken place if, upon consummation, the application is amended to reflect the new ownership.

(d) If, upon examination, the FCC finds that the public interest, convenience and necessity will be served by
the granting of an application for FM broadcast facilities, the same will be granted. If the FCC is unable to
make such a finding and it appears that a hearing may be required, the procedure given in  73.3593 will be
followed.

(e) Applications for reserved band and Class D FM broadcast stations will be processed as nearly as possible
in the order in which they are filed. Such applications will be placed in the processing line in numerical
sequence, and will be drawn by the staff for study, the lowest file number first. In order that those applications
which are entitled to be grouped for processing may be fixed prior to the time processing of the earliest filed
application is begun, the FCC will periodically release a Public Notice listing applications which have been
accepted for filing and announcing a date (not less than 30 days after publication) on which the listed
applications will be considered available and ready for processing and by which all mutually exclusive
applications and/or petitions to deny the listed applications must be filed.

(f) Processing non-reserved FM broadcast station applications.

(1) Applications for minor modifications for non-reserved FM broadcast stations, as defined in (a)(2) of this
paragraph, may be filed at any time, unless restricted by the FCC, and, generally, will be processed in the order
in which they are tendered.  The FCC will periodically release a Public Notice listing those applications
accepted for filing. Processing of these applications will be on a "first come/first serve" basis with the first
acceptable application cutting off the filing rights of subsequent applicants. All applications received on the
same day will be treated as simultaneously tendered and, if they are found to be mutually exclusive, must be
resolved through settlement or technical amendment. Applications received after the tender of a lead application
will be grouped, according to filing date, behind the lead application in a queue. The priority rights of the lead
applicant, as against all other applicants, are determined by the date of filing, but the filing date for subsequent
applicants for that channel and community only reserves a place in the queue. The rights of an applicant in a
queue ripen only upon a final determination that the lead applicant is unacceptable and if the queue member
is reached and found acceptable. The queue will remain behind the lead applicant until a construction permit
is finally granted, at which time the queue dissolves. 

(2) (i) The FCC will specify by Public Notice, pursuant to  73.5002(a), a period for filing non-reserved band
FM applications for a new station or for major modifications in the facilities of an authorized station.  FM
applications for new facilities or for major modifications will be accepted only during the appropriate filing
period or "window". Applications submitted prior to the window opening date identified in the Public Notice
will be returned as premature. Applications submitted after the specified deadline will be dismissed with
prejudice as untimely.  (ii) Such FM applicants will be subject to the provisions of  1.2105 and 73.5002
regarding the submission of the short-form application, FCC Form 175, and all appropriate certifications,
information and exhibits contained therein. FM applicants may submit a set of preferred site coordinates as
a supplement to the short-form application.  Any specific site indicated by FM applicants will not be studied
for technical acceptability, but will be protected from subsequently filed applications as a full-class facility as
of the close of the window filing period.  Determinations as to the acceptability or grantability of an applicant's
proposal will not be made prior to an auction. (iii) FM applicants will be subject to the provisions of  1.2105
and 73.5002(c) regarding the modification and dismissal of their short-form applications. 
  
(3) Subsequently, the FCC will release Public Notices: (i) identifying the short-form applications received
during the window filing period which are found to be mutually exclusive; (ii) establishing a date, time and
place for an auction; (iii) providing information regarding the methodology of competitive bidding to be used
in the upcoming auction, bid submission and payment procedures, upfront payment procedures, upfront
payment deadlines, minimum opening bid requirements and applicable reserve prices in accordance with the
provisions of  73.5002; (iv) identifying  applicants who have submitted timely upfront payments and, thus,
are qualified to bid in the auction.  

(4) If, after the close of the appropriate window filing period, a non-reserved FM allotment remains vacant,
the window remains closed until the FCC, by Public Notice, specifies a subsequent period for filing non-
reserved band FM applications for a new station or for major modifications in the facilities of an authorized
station pursuant to paragraph (f)(2)(i) of this section. If, during the window filing period, the FCC receives only
one application for any non-reserved FM allotment, a Public Notice will be released identifying the non-
mutually exclusive applicant, who will be required to submit the appropriate long-form application within 30
days of the Public Notice and pursuant to the provisions of  73.5005. These non-mutually exclusive
applications will be processed and the FCC will periodically release a Public Notice listing such non-mutually
exclusive applications determined to be acceptable for filing and announcing a date by which petitions to deny
must be filed in accordance with the provisions of  73.5006 and 73.3584 of this chapter. If the applicant is
duly qualified, and upon examination, the FCC finds that the public interest, convenience and necessity will
be served by the granting of the non-mutually exclusive long-form application, it will be granted. 

(5) (i) The auction will be held pursuant to the procedures set forth in  1.2101 et seq. and 73.5000 et seq.
Subsequent to the auction, the FCC will release a Public Notice announcing the close of the auction and
identifying the winning bidders. Winning bidders will be subject to the provisions of  1.2107 and 73.5003
regarding down payments and will be required to submit the appropriate down payment within 10 business days
of the Public Notice. Pursuant to  1.2107 and 73.5005, a winning bidder that meets its down payment
obligations in a timely manner must, within 30 days of the release of the public notice announcing the close of
the auction, submit the appropriate long-form application for each construction permit for which it was the
winning bidder.  Long-form applications filed by winning bidders shall include the exhibits identified in 
73.5005(a). 
(ii) These applications will be processed and the FCC will periodically release a Public Notice listing such
applications that have been accepted for filing and announcing a date by which petitions to deny must be filed
in accordance with the provisions of  73.5006 and 73.3584 of this chapter.  If the applicant is duly qualified,
and upon examination, the FCC finds that the public interest, convenience and necessity will be served by the
granting of the winning bidder's long-form application, a Public Notice will be issued announcing that the
construction permit is ready to be granted. Each winning bidder shall pay the balance of its winning bid in a
lump sum within 10 business days after release of the Public Notice, as set forth in  1.2109(a) and
73.5003(c).  Construction permits will be granted by the Commission following the receipt of the full payment.
(iii) All long-form applications will be cut-off as of the date of filing with the FCC and will be protected from
subsequently filed long-form applications and rulemaking petitions. Applications will be required to protect
all previously filed commercial and noncommercial applications. Winning bidders filing long-form applications
may change the technical proposals specified in their previously submitted short-form applications, but such
change may not constitute a major change. If the submitted long-form application would constitute a major
change from the proposal submitted in the short- form application or the allotment, the long-form application
will be returned pursuant to paragraph (f)(2)(i) of this section. 
    
Note 2: Processing of applications for new low power educational FM applications:

Pending the Commission's restudy of the impact of the rule changes pertaining to the allocations of 10-watt and
other low power noncommercial educational FM stations, applications for such new stations, or major changes
in existing ones, will not be accepted for filing. Exceptions are: (1) In Alaska, applications for new Class D
stations or major changes in existing ones are acceptable for filing; and (2) applications for existing Class D
stations to change frequency are acceptable for filing. In (2), upon the grant of such application, the station
shall become a Class D (secondary) station. (See First Report and Order, Docket 20735, FCC 78-386, 43 FR
25821, and Second Report and Order, Docket 20735, FCC 78-384, 43 FR 39704.) Effective date of this FCC
imposed "freeze" was June 15, 1978. Applications which specify facilities of at least 100 watts effective
radiated power will be accepted for filing

Note 3: For rules on processing FM translator and booster stations, see  74.1233 of this chapter.



III. The following sections are added as amendments to Part 73 of Chapter 1 of Title 47 of the Code
of Federal Regulations.

Subpart I - Competitive Bidding Procedures

 73.5000  Services subject to competitive bidding.

(a) Mutually exclusive applications for new facilities and for major changes to existing facilities in the
following broadcast services are subject to competitive bidding:  AM; FM; FM translator; analog television;
low power television; and television translator.  Mutually exclusive applications for new facilities and for major
changes to existing facilities in the Instructional Television Fixed Service (ITFS) are also subject to competitive
bidding.  The general competitive bidding procedures found in 47 C.F.R. Part 1, Subpart Q will apply unless
otherwise provided in 47 C.F.R. Part 73 and Part 74.  

(b) Mutually exclusive applications for broadcast channels in the reserved portion of the FM band (Channels
200-220) and for television broadcast channels reserved for noncommercial educational use are not subject to
competitive bidding procedures.  


 73.5001 Competitive bidding procedures.

(a) Specific competitive bidding procedures for broadcast service and ITFS auctions will be set forth by public
notice prior to any auction.  The Commission may also design and test alternative procedures, including
combinatorial bidding and real time bidding.  See 47 C.F.R.  1.2103 and 1.2104.

(b) The Commission may utilize the following competitive bidding mechanisms in broadcast service and ITFS
auctions:

   (1) Sequencing.  The Commission will establish and may vary the sequence in which broadcast service
construction permits and ITFS licenses will be auctioned.

   (2) Grouping.  In the event the Commission uses either a simultaneous multiple round competitive bidding
design or combinatorial bidding in broadcast service or ITFS auctions, the Commission will determine which
construction permits or licenses will be auctioned simultaneously or in combination.

   (3) Reservation price.  The Commission may establish a reservation price, either disclosed or undisclosed,
below which a broadcast construction permit or ITFS license subject to auction will be not awarded.

   (4) Minimum and maximum bid increments.  The Commission may, by announcement before or during
broadcast service or ITFS auctions, require minimum bid increments in dollar or percentage terms.  The
Commission may, by announcement before or during broadcast service or ITFS auctions, establish maximum
bid increments in dollar or percentage terms.

   (5) Minimum opening bids.  The Commission may establish a minimum opening bid for each broadcast
construction permit or ITFS license subject to auction.  

   (6) Stopping rules.  The Commission will establish stopping rules before or during multiple round broadcast
service or ITFS auctions in order to terminate the auction within a reasonable time.

   (7) Activity rules.  The Commission will establish activity rules which require a minimum amount of bidding
activity.  In the event that the Commission establishes an activity rule in connection with a simultaneous
multiple round auction, each bidder will be entitled to request and will be automatically granted a certain
number of waivers of such rule during the auction.



 73.5002  Bidding application and certification procedures; prohibition of collusion.   

(a) Prior to any broadcast service or ITFS auction, the Commission will issue a public notice announcing the
upcoming auction and specifying the period during which all applicants seeking to participate in an auction
must file their applications for new broadcast or ITFS facilities or for major changes to existing facilities. 
Broadcast service or ITFS applications for new facilities or for major modifications will be accepted only
during these specified periods.  This initial and other public notices will contain information about the
completion and submission of applications to participate in the broadcast or ITFS auction, any materials that
must accompany the applications, and any filing fee that must accompany the applications or any upfront
payments that will need to be submitted.  Such public notices will also, in the event mutually exclusive
applications are filed for broadcast construction permits or ITFS licenses, contain information about the
method of competitive bidding to be used and more detailed instructions on submitting bids and otherwise
participating in the auction.  In the event applications are submitted that are not mutually exclusive with any
other application in the same service, such applications will be identified by public notice and will not be
subjected to auction.   

(b) To participate in broadcast service or ITFS auctions, all applicants must timely submit short-form
applications (FCC Form 175), along with all required certifications, information and exhibits, pursuant to the
provisions of 47 C.F.R.  1.2105(a) and any Commission public notices.  So determinations of mutual
exclusivity for auction purposes can be made, applicants for non-table broadcast services or for ITFS must
also submit the engineering data contained in the appropriate FCC form (FCC Form 301, FCC Form 346, FCC
Form 349 or FCC Form 330).  Beginning January 1, 1999, all short-form applications must be filed
electronically. 

(c) Applicants in all broadcast service or ITFS auctions will be subject to the provisions of 47 C.F.R. 
1.2105(b) regarding the modification and dismissal of their short-form applications.  Notwithstanding the
general applicability of Section 1.2105(b) to broadcast and ITFS auctions, applicants who file mutually
exclusive major modification applications, or mutually exclusive major modification and new station
applications, will be permitted to make amendments to their engineering submissions following the filing of
their short-form applications so as to resolve their mutual exclusivity.  

(d) The prohibition of collusion set forth in 47 C.F.R.  1.2105(c), which becomes effective upon the filing of
short-form applications, shall apply to all broadcast service or ITFS auctions.  Notwithstanding the general
applicability of Section 1.2105(c) to broadcast and ITFS auctions, applicants who file mutually exclusive
major modification applications, or mutually exclusive major modifications and new station applications, will
be permitted to resolve their mutual exclusivities by means of engineering solutions or settlements during a
limited period after the filing of short-form applications.  Such period will be further specified by Commission
public notices.


 73.5003 Submission of upfront payments, down payments and full payments.

(a) To be eligible to bid, each bidder in every broadcast service or ITFS auction shall submit an upfront
payment prior to the commencement of bidding, as set forth in any public notices and in accordance with  47
C.F.R.  1.2106.

(b) Within ten (10) business days following the close of bidding and notification to the winning bidders, each
winning bidder in every broadcast service or ITFS auction shall make a down payment in an amount sufficient
to bring its total deposits up to twenty (20) percent of its high bid(s), as set forth in 47 C.F.R.  1.2107(b).

(c) Each winning bidder in every broadcast service or ITFS auction shall pay the balance of its winning bid(s)
in a lump sum within ten (10) business days after release of a public notice announcing that the Commission
is prepared to award the construction permit(s) or license(s), as set forth in 47 C.F.R.  1.2109(a).  If a
winning bidder fails to pay the balance of its winning bid in a lump sum by the applicable deadline as specified
by the Commission, it will be allowed to make payment within ten (10) business days after the payment
deadline, provided that it also pays a late fee equal to five (5) percent of the amount due.  Broadcast
construction permits and ITFS licenses will be granted by the Commission following the receipt of full
payment.


 73.5004 Bid withdrawal, default and disqualification.   

(a) The Commission shall impose the bid withdrawal, default and disqualification payments set forth in 47
C.F.R.  1.2104(g) upon bidders who withdraw high bids during the course, or after the close, of any broadcast
service or ITFS auction, who default on payments due after an auction closes, or who are disqualified.  Bidders
who are found to have violated the antitrust laws or the Commission's rules in connection with their
participation in the competitive bidding process may also be subject to the remedies set forth in 47 C.F.R. 
1.2109(d). 

(b) In the event of a default by or the disqualification of a winning bidder in any broadcast service or ITFS
auction, the Commission will follow the procedures set forth in 47 C.F.R.  1.2109(b)-(c) regarding the
reauction of the construction permit(s) or license(s) at issue.


 73.5005 Filing of long-form applications. 
 
(a) Within thirty (30) days following the close of bidding and notification to the winning bidders, each winning
bidder must submit an appropriate long-form application (FCC Form 301, FCC Form 346, FCC Form 349
or FCC Form 330) for each construction permit or license for which it was the high bidder.  Long-form
applications filed by winning bidders shall include the exhibits required by 47 C.F.R.  1.2107(d) (concerning
any bidding consortia or joint bidding arrangements);  1.2110(i) (concerning designated entity status, if
applicable); and  1.2112(a) & (b) (concerning disclosure of ownership and real party in interest information,
and, if applicable, disclosure of gross revenue information for small business applicants). 

(b) The long-form application should be submitted pursuant to the rules governing the service in which the
applicant is a high bidder and according to the procedures for filing such applications set out by public notice. 
When electronic procedures become available for the submission of long-form applications, the Commission
may require all winning bidders to file their long-form applications electronically.  

(c) An applicant that fails to submit the required long-form application under this section, and fails to establish
good cause for any late-filed submission, shall be deemed to have defaulted and shall be subject to the payments
set forth in 47 C.F.R.  1.2104(g).

(d) An applicant whose short-form application, submitted pursuant to 47 C.F.R. 73.5002(b), was not
mutually exclusive with any other short-form application in the same service and was therefore not subject to
auction, shall submit an appropriate long-form application within thirty (30) days following release of a public
notice identifying any such non-mutually exclusive applicants.  The long-form application should be submitted
pursuant to the rules governing the relevant service and according to any procedures for filing such applications
set out by public notice.  The long-form application filed by a non-mutually exclusive applicant need not
contain the additional exhibits, identified in  73.5005(a), required to be submitted with the long-form
applications filed by winning bidders.  When electronic procedures become available, the Commission may
require any non-mutually exclusive applicants to file their long-form applications electronically.  


 73.5006 Filing of petitions to deny against long-form applications. 

(a) As set forth in 47 C.F.R.  1.2108, petitions to deny may be filed against the long-form applications filed
by winning bidders in broadcast service or ITFS auctions and against the long-form applications filed by
applicants whose short-form applications to participate in a broadcast or ITFS auction were not mutually
exclusive with any other applicant.

(b) Within ten (10) days following the issuance of a public notice announcing that a long-form application has
been accepted for filing, petitions to deny that application may be filed.  Any such petitions must contain
allegations of fact supported by affidavit of a person or persons with personal knowledge thereof.

(c) An applicant may file an opposition to any petition to deny, and the petitioner a reply to such opposition. 
Allegations of fact or denials thereof must be supported by affidavit of a person or persons with personal
knowledge thereof.  The time for filing such oppositions shall be five (5) days from the filing date for petitions
to deny, and the time for filing replies shall be five (5) days from the filing date for oppositions.

(d)  If the Commission denies or dismisses all petitions to deny, if any are filed, and is otherwise satisfied that
an applicant is qualified, a public notice will be issued announcing that the broadcast construction permit(s)
or ITFS license(s) is ready to be granted, upon full payment of the balance of the winning bid(s).  See 47
C.F.R.  73.5003(c).  Construction of broadcast stations or ITFS facilities shall not commence until the grant
of such permit or license to the winning bidder.  


 73.5007 Designated entity provisions.  

(a) New entrant bidding credit.  A winning bidder that qualifies as a "new entrant" may use a bidding credit
to lower the cost of its winning bid on any broadcast construction permit.  A thirty-five (35) percent bidding
credit will be given to a winning bidder if it and/or its owners have no recognizable interest (more than fifty
(50) percent or de facto control) in the aggregate, in any other media of mass communications.  A twenty-five
(25) percent bidding credit will be given to a winning bidder if it and/or its owners, in the aggregate, have a
recognizable interest in no more than three mass media facilities.  No bidding credit will be given if any of the
commonly owned mass media facilities serves the same area as the proposed broadcast station, or if the
winning bidder and/or its owners have recognizable interests in more than three mass media facilities.  

   (1)  The new entrant bidding credit is not available to applicants that control, or whose owners control, in
the aggregate, more than fifty (50) percent of any other media of mass communications in the same area as the
proposed broadcast facility.  The facilities will be considered in the "same area" if the following defined areas
wholly encompass, or are encompassed by, the proposed broadcast or secondary broadcast facility's relevant
contour:

     (i) AM broadcast station--predicted or measured 2mV/m groundwave contour (see 47 C.F.R. 
73.183 or 73.186);
     (ii) FM broadcast or FM translator station--predicted 1.0 mV/m contour (see 47 C.F.R.  73.313);
     (iii) Television broadcast station--Grade A contour (see 47 C.F.R.  73.684);
     (iv) Low power television or television translator station--the predicted, protected contour (see 47
C.F.R.  74.707(a));
     (v) Cable television system--the franchised community of a cable system;
     (vi) Daily newspaper--community of publication; and
     (vii) Multipoint Distribution Service station--protected service area (see 47 C.F.R.  21.902(d) or
21.933).         

   (2) Unjust enrichment.  If a licensee or permittee that utilizes a new entrant bidding credit under this
subsection seeks to assign or transfer control of its license or construction permit to an entity not meeting the
eligibility criteria for the bidding credit, the licensee or permittee must reimburse the U.S. Government for the
amount of the bidding credit, plus interest based on the rate for ten-year U.S. Treasury obligations applicable
on the date the construction permit was originally granted, as a condition of Commission approval of the
assignment or transfer.  If a licensee or permittee that utilizes a new entrant bidding credit seeks to assign or
transfer control of a license or construction permit to an entity that is eligible for a lower bidding credit, the
difference between the bidding credit obtained by the assigning party and the bidding credit for which the
acquiring party would qualify, plus interest based on the rate for ten-year U.S. Treasury obligations applicable
on the date the construction permit was originally granted, must be paid to the U.S. Government as a condition
of Commission approval of the assignment or transfer.  The amount of the reimbursement payments will be
reduced over time.  An assignment or transfer in the first two years after issuance of the construction permit
to the winning bidder will result in a forfeiture of one hundred (100) percent of the value of the bidding credit;
during year three, of seventy-five (75) percent of the value of the bidding credit; in year four, of fifty (50)
percent; in year five, twenty-five (25) percent; and thereafter, no payment.  If a licensee or permittee who
utilized a new entrant bidding credit in obtaining a broadcast license or construction permit acquires within this
five-year reimbursement period an additional broadcast facility or facilities, such that the licensee or permittee
would not have been eligible for the new entrant credit, the licensee or permittee will not be required to
reimburse the U.S. Government for the amount of the bidding credit.
     

 73.5008 Definitions applicable for designated entity provisions. 

(a) Scope.  The definitions in this section apply to 47 C.F.R.  73.5007, unless otherwise specified in that
section.

(b) A medium of mass communications means a daily newspaper; a cable television system; or a license or
construction permit for a television station, a low power television or television translator station, an AM, FM
or FM translator broadcast station, a direct broadcast satellite transponder, or a Multipoint Distribution Service
station.

(c) The owners of a winning bidder shall include the winning bidder, in the case of a sole proprietor; partner,
including limited or "silent" partners, in the case of a partnership; the beneficiaries, in the case of a trust; any
member, in the case of a nonstock corporation or unincorporated association with members; any member of
the governing board (including executive boards, boards of regents, commissions, or similar governmental
bodies where each member has one vote), in the case of nonstock corporation or unincorporated association
without members; and owners of voting shares, in the case of stock corporations.     


 73.5009 Assignment or transfer of control.

(a) The reporting requirement contained in 47 C.F.R.  1.2111(a) shall apply to an applicant seeking approval
for a transfer of control or assignment of a broadcast construction permit or license within three years of
receiving such permit or license by means of competitive bidding.

(b) The ownership disclosure requirements contained in 47 C.F.R.  1.2112(a) shall apply to an applicant
seeking consent to assign or transfer control of a broadcast construction permit or license awarded by
competitive bidding.  



IV.  Part 74 of Chapter 1 of Title 47 of the Code of Federal Regulations is amended as follows:

Subpart I - Instructional Television Fixed Service

Section 74. 910 is amended as follows:

 74.910  Part 73 application requirements pertaining to ITFS stations.

                            * * * * *

73.3522(a)  Amendment of Applications
Subpart I, "Competitive Bidding Procedures" (Secs. 73.5000 - 73.5006).




Section 74.911 is amended as follows:

 74.911  Processing of ITFS station applications.

                            * * * * *

(c)(1) (i)  The FCC will specify by Public Notice, pursuant to  73.5002, a period for filing ITFS applications
for a new station or for major modifications in the facilities of an authorized station.  (ii) Such ITFS applicants
shall be subject to the provisions of  1.2105 and the ITFS competitive bidding procedures.  See 47 C.F.R.
 73.5000 et seq.

                            * * * * *
(d)  [Removed]

 74.912  [Removed]


 74.913  [Removed]


Section 74.1233 is amended to read as follows:

 74.1233  Processing FM translator and booster station applications.
(a)  Applications for FM translator and booster stations are divided into two groups:

(1)  In the first group are applications for new stations or for major changes in the facilities of authorized
stations.  In the case of FM translator stations, a major change is any change in frequency (output channel),
or change (only the gain should be included in determining amount of change) or increase (but not decrease)
in area to be served greater than ten percent of the previously authorized 1 mV/m contour.  All other changes
will be considered minor.  All major changes are subject to the provisions of  73.3580 and 1.1104 of this
chapter pertaining to major changes.

(2)  In the second group are applications for licenses and all other changes in the facilities of the authorized
station.

(b)  Applications for booster stations and reserved-band FM translator stations will be processed as nearly
as possible in the order in which they are filed.  Such applications will be placed in the processing line in
numerical sequence, and will be drawn by the staff for study, the lowest file number first.  In order that those
applications which are entitled to be grouped for processing may be fixed prior to the time processing of the
earliest filed application is begun, the FCC will periodically release a Public Notice listing reserved-band
applications that have been accepted for filing and announcing a date (not less than 30 days after publication)
on which the listed applications will be considered available and ready for processing and by which all mutually
exclusive applications and/or petitions to deny the listed applications must be filed.

(c)  In the case of an application for an instrument of authorization, other than a license pursuant to a
construction permit, grant will be based on the application, the pleadings filed, and such other matters that may
be officially noticed.  Before a grant can be made it must be determined that:

(1)       There is not pending a mutually exclusive application filed in accordance with paragraph (b) of this
section.

(2)  The applicant is legally, technically, financially and otherwise qualified;

(3)  The applicant is not in violation of any provisions of law, the FCC rules, or established policies of the
FCC; and

(4)  A grant of the application would otherwise serve the public interest, convenience and necessity.

(d)  Processing non-reserved band FM translator applications.

(1)  Applications for minor modifications for non-reserved FM translator stations, as defined in (a)(2) of
this paragraph, may be filed at any time, unless restricted by the FCC, and, generally, will be processed in the
order in which they are tendered.  The FCC will periodically release a Public Notice listing those applications
accepted for filing.  All minor modification applications found to be mutually exclusive, must be resolved
through settlement or technical amendment. 

(2)(i)     The FCC will specify by Public Notice, pursuant to  73.5002(a), a period for filing non-reserved
band FM translator applications for a new station or for major modifications in the facilities of an authorized
station.  FM translator applications for new facilities or for major modifications will be accepted only during
these specified periods.  Applications submitted prior to the window opening date identified in the Public Notice
will be returned as premature. Applications submitted after the specified deadline will be dismissed with
prejudice as untimely.  (ii) Such FM translator applicants will be subject to the provisions of  1.2105 and
73.5002(a) regarding the submission of the short-form application, FCC Form 175, and all appropriate
certifications, information and exhibits contained therein. To determine which FM translator applications are
mutually exclusive, FM translator applicants must submit the engineering data contained in FCC Form 349
as a supplement to the short-form application.  Such engineering data will not be studied for technical
acceptability, but will be protected from subsequently filed applications as of the close of the window filing
period.  Determinations as to the acceptability or grantability of an applicant's proposal will not be made prior
to an auction. (iii) FM translator applicants will be subject to the provisions of  1.2105 regarding the
modification and dismissal of their short-form applications. (iv) Consistent with  1.2105(a), beginning January
1, 1999, all short-form applications must be filed electronically. 
  
(3)   Subsequently, the FCC will release Public Notices: (i) identifying the short-form applications received
during the appropriate filing period or "window" which are found to be mutually exclusive; (ii) establishing
a date, time and place for an auction; (iii) providing information regarding the methodology of competitive
bidding to be used in the upcoming auction, bid submission and payment procedures, upfront payment
procedures, upfront payment deadlines, minimum opening bid requirements and applicable reserve prices in
accordance with the provisions of  73.5002;  (iv) identifying  applicants who have submitted timely upfront
payments and, thus, are qualified to bid in the auction.  

(4)  If, during the window filing period, the FCC receives non-mutually exclusive applications for a non-
reserved FM translator station, a Public Notice will be released identifying the non-mutually exclusive
applicants, who will be required to submit the appropriate long form application within 30 days of the Public
Notice and pursuant to the provisions of  73.5005.  These non-mutually exclusive applications will be
processed and the FCC will periodically release a Public Notice listing such non-mutually exclusive
applications determined to be acceptable for filing and announcing a date by which petitions to deny must be
filed in accordance with the provisions of  73.5006 and 73.3584 of this chapter.  If the applicants are duly
qualified, and upon examination, the FCC finds that the public interest, convenience and necessity will be
served by the granting of the non-mutually exclusive long-form application, the same will be granted. 

(5)(i)     The auction will be held pursuant to the procedures set forth in  1.2101.  Subsequent to the auction,
the FCC will release a Public Notice announcing the close of the auction and identifying the winning bidders.
Winning bidders will be subject to the provisions of  1.2107 regarding down payments and will be required
to submit the appropriate down payment within 10 business days of the Public Notice. Pursuant to  1.2107,
a winning bidder that meets its down payment obligations in a timely manner must, within 30 days of the
release of the public notice announcing the close of the auction, submit the appropriate long-form application
for each construction permit for which it was the winning bidder.  Long form applications filed by winning
bidders shall include the exhibits identified in  73.5005.   
(ii) These applications will be processed and the FCC will periodically release a Public Notice listing such
applications that have been accepted for filing and announcing a date by which petitions to deny must be filed
in accordance with the provisions of  73.3584 of this chapter.  If the applicants are duly qualified, and upon
examination, the FCC finds that the public interest, convenience and necessity will be served by the granting
of the winning bidder's long form application, a Public Notice will be issued announcing that the construction
permit is ready to be granted. Each winning bidder shall pay the balance of its winning bid in a lump sum
within 10 business days after release of the Public Notice, as set forth in  1.2109(a).  Construction permits
will be granted by the Commission following the receipt of the full payment. (iii) All long-form applications
will be cut-off as of the date of filing with the FCC and will be protected from subsequently filed long-form
translator applications.  Applications will be required to protect all previously filed applications. Winning
bidders filing long-form applications may change the technical proposals specified in their previously submitted
short-form applications, but such change may not constitute a major change. If the submitted long-form
application would constitute a major change from the proposal submitted in the short-form application or the
allotment, the long-form application will be returned pursuant to paragraph (d)(2)(i) of this section. 
    
(e)  Selection of mutually exclusive reserved band FM translator applications.

(1)  Applications for FM translator stations proposing to provide fill-in service (within the primary station's
protected contour) of the commonly owned primary station will be given priority over all other applications.

(2)  Where applications for FM translator stations are mutually exclusive and do not involve a proposal
to provide fill-in service of a commonly owned primary stations, the FCC may stipulate different frequencies
as necessary for the applicants.

(3)  Where there are no available frequencies to substitute for a mutually exclusive application, the FCC
will base its decision on the following priorities:  (i)  First-full-time aural services;  (ii)  second full-time aural
services;  and (iii)  other public interest matters including, but not limited to the number of aural services
received in the proposed service area, the need for or lack of public radio service, and other matters such as
the relative size of the proposed communities and the growth rate.

(4)  Where the procedures in paragraph (1), (2) and (3) of section (f) fail to resolve the mutual exclusivity,
the applications will be processed on a first-come-first-served basis.   STATEMENT OF CHAIRMAN WILLIAM E. KENNARD REGARDING REQUEST 
                           FOR RECUSAL

     I write separately to respond to the request of Willsyr Communications that, due to congressional
influence, I should recuse myself from participating in this rulemaking proceeding with respect to the adoption
of any rules that would govern the resolution of the application of Orion Communications for a license for a
new FM station in Biltmore Forest, North Carolina.  In support of its recusal request, Willsyr attaches excerpts
from the Congressional Record and newspaper clippings purportedly showing that Senator Helms placed a hold
on my nomination as chairman in order to secure assurances regarding the disposition of Orion Broadcasting's
application for a new FM radio station in Biltmore Forest, North Carolina.  Based upon a careful review of
the facts and the law governing recusals by administrative officials, I decline to recuse myself from this
rulemaking proceeding.

     The courts have made clear that in an administrative adjudication "the appearance of bias or pressure
may be no less objectionable than reality." ATX, Inc. v. United States Department of Transportation, 41 F.3d
1522, 1527 (D.C. Cir. 1994), citing District of Columbia Fed. of Civic Assns. v. Volpe, 459 F.2d 1231, 1246-
47 (D.C. Cir. 1972)   Guided by these principles and out of an abundance of caution, I recused myself from
participating in the adjudicatory proceeding involving the radio license for Biltmore Forest as soon as it became
clear that the proceeding might become an issue in the confirmation process.    I did so because I was acutely
aware of the need to avoid even the appearance of any bias, which is critical to safeguarding the integrity of
the FCC processes.   

     Willsyr argues that, having recused myself from the adjudicatory licensing proceeding, I must also
recuse myself from participating in the rulemaking with respect to the adoption of any rules that would govern
the resolution of the licensing proceeding.  However, a request for recusal by an administrative official from
a rulemaking proceeding is subject to a far higher evidentiary showing than a similar request in an adjudicatory
proceeding.    Recusal from a non-judicial proceeding -- such as the rulemaking to implement the Commission's
newly expanded auction authority --  is appropriate only where there is clear and convincing evidence of an
unalterably closed mind on an issue that is critical to the disposition of the proceeding.  Further, congressional
influence in a rulemaking is improper only to the extent that it causes the agency to deviate from the substantive
law.   Finally, the appearance of bias in the non-adjudicatory context may be cured by the development of "a
full-scale administrative record which might dispel any doubts about the true nature of [the agency's] action." 
ATX, 41 F.3d at 1528, citing Volpe, 459 F.2d at 1249.    

      Willsyr points to no specific statements that even suggest, let alone provide clear and convincing
evidence, that I have an unalterably closed mind on any issue in this rulemaking proceeding.   During the
confirmation process, in written responses to questions, I acknowledged that "the Bechtel decision has caused
unfairness to many applicants who have had further processing of their applications delayed and, as a result
of that court decision, will necessarily have their applications processed under new procedures."  Consistent
with that response and my responsibility regarding the implementation of the Commission's newly authorized
auction authority under the Balanced Budget Act in a fair and impartial manner, I also indicated that "[t]he
Commission certainly may consider as part of th[e] rulemaking proceeding any arguments that particular
classes of pending applicants should be treated differently."  However, inclusion of that issue was largely
dictated by statutory language unambiguously according the agency discretion to resolve such cases by auctions
or comparative hearings.  Therefore, my willingness to support inclusion in the Notice of Proposed Rulemaking
in this proceeding of a request for comment on whether there were equitable circumstances warranting the use
of comparative hearings in certain types of cases is certainly not evidence that I have a closed mind on any
issue in the rulemaking. 

     Nor did I agree to support the adoption of rules, or take any other action, that would be favorable to
a particular applicant in exchange for Senator Helms's agreement to support my nomination to be Chairman
of the Commission.  Senator Helms's remarks in support of my confirmation, published in the Congressional
Record and quoted in a variety of press reports, do not reflect otherwise.  Senator Helms stated:

                    I have been given assurances satisfactory to me by Mr. Kennard that he will,
          within statute and regulation, work in good faith with me and others to
          resolve the problems the Bechtel decision caused. 

                     I was very impressed when Mr. Kennard came to my office and met with me
          about 3 weeks ago.  I appreciate his voluntary assurance that he will work
          with us on the Zeb Lee case.


Senator Helms further explained this matter in a letter to the Senate Select Committee on Ethics.   Specifically,
the  November 20, 1997 letter states:

          After his recusal from the WZLS matter, and before his confirmation, I met with Mr. Kennard
     to discuss, among other things, the difficulties of implementing the Bechtel decision.   I
     appreciated Mr. Kennard's candor; and on the Senate floor I announced that I would vote for
     his confirmation, stating "I have been given assurances satisfactory to me by Mr. Kennard that
     he will, within statute and regulation, work in good faith with me and others to resolve the
     problems associated with the Bechtel decision."  . . .  At no time, either publicly or in my
     private conversations with Mr. Kennard, did I state that my support for his nomination
     depended on the outcome of any specific adjudication.  Instead, I sought clarification and
     acknowledgment of the public policy issues raised by implementation of the Bechtel decision,
     a matter of great importance to not only one of my constituents, but to all those similarly
     situated. 

     As Senator Helms's remarks and my written answers to the committee reflect, my concerns regarding
the unfairness resulting from the Bechtel decision pertained not to a particular applicant in a pending case, but
to the general policies surrounding applicants that were caught in the comparative freeze.  As the Commission's
General Counsel, I headed the office that was chiefly responsible for making recommendations to the
Commission regarding these hearing cases, and I was well acquainted with the issues that arose from the
Bechtel decision.  It was these policy concerns, in light of the explicit discretion in the statute regarding the use
of auctions or hearings in certain pending cases, that led me to support the inclusion of a request for comments
on whether equitable considerations militated against the use of auctions in all of these cases.  Of course, even
without a specific request focusing on this issue, commenters would have had an opportunity to argue that
equitable considerations warranted different treatment for certain classes of pending applicants.   

     Finally, scattered, purely speculative newspaper articles reporting the circumstances surrounding my
confirmatiion and the initial opposition but ultimate support of my nomination by Senator Helms, are not a
basis for requiring my recusal from this rulemaking proceeding.  None of the press reports quote me directly
and only quote material from Senator Helms published in the Congressional Record.   Nevertheless, various
articles and editorials surmise that, because Senator Helms expressed some concern regarding the plight of
Orion in connection with my nomination, his ultimate support of that nomination must have been the result of
my agreement to assist Orion not only in the adjudicatory proceeding but through the adoption of rules that
would somehow favor Orion.  However, none of these articles corroborate the existence of such an agreement,
reflect my prejudgment of any issue in MM Docket No. 97-234, et al. (or in the related Biltmore Forest case
from which I am recused), or otherwise provide any evidence supporting the request that I recuse myself from
participating in any aspect of this rulemaking proceeding.   

     Suffice it to say that Senator Helms received no assurance from me regarding the outcome of the
adjudicatory proceeding involving Biltmore Forest or the adoption of any rules to govern the resolution of that
proceeding.   To safeguard the integrity of the adjudicatory proceeding and to avoid the appearance of any
impropriety regarding any decision ultimately reached in that proceeding, I recused myself from that
proceeding.   Having done so, I see no reason also to recuse myself from any aspect of this rulemaking
proceeding.  On the discrete issues raised in the rulemaking proceeding, I have participated in every aspect of
this First Report and Order.   As is my practice, I approached every issue decided herein with an open mind
and I have relied solely on the record compiled in this proceeding.       
  STATEMENT OF COMMISSIONERS HAROLD FURCHTGOTT-ROTH AND GLORIA
                  TRISTANI, DISSENTING IN PART
                                
In the Matter of Implementation of Section 309(j) of the Communications Act --
MM Docket No. 97-234, GC Docket No. 92-52, GEN Docket No. 90-264

     We would not have sought additional comment on the question whether section 309(j)(2)(C)
precludes us from using competitive bidding to award a broadcast license to a noncommercial educational
broadcast or public broadcast station to operate on a commercial channel.  We believe that Congress'
mandate is clear:  the Commission lacks authority to employ auctions to issue licenses to such stations,
regardless of whether they operate on a reserved or on a commercial frequency.  Since the statute is clear
on its face, we are bound to give it effect.  See Chevron, U.S.A., Inc. v. Natural Resources Defense
Council, Inc., 467 U.S. 837, 842-43 (1984). 

     The express exemption to our competitive bidding authority in section 309(j)(2)(C) provides that
such authority "shall not apply to licenses or construction permits issued by the Commission . . . for
stations described in section 397(6) of this title."  Section 397(6), in turn, defines the terms "noncommercial
educational broadcast station" and "public broadcast station" as "a television or radio broadcast station
which . . . under the rules and regulations of the Commission . . . is eligible to be licensed by the
Commission as a noncommercial educational radio or television broadcast station and which is owned and
operated by a public agency or nonprofit private foundation, corporation, or association" or "is owned and
operated by a municipality and which transmits only noncommercial programs for education purposes."

     Nothing in section 309(j)(2)(C) limits the inapplicability of our auction authority to licenses issued
for noncommercial and public broadcast stations on reserved channels.  The statute makes no distinction
between licensees granted to section 397(6) stations to operate on reserved spectrum and licensees granted
to such entities to operate on unreserved spectrum; the prohibition on the licensing of these stations
pursuant to auctions is, in this regard, unqualified.  The statute makes plain that the Commission simply
has no competitive bidding authority when it comes to licenses issued for stations described in section
397(6). 

      Similarly, nothing in section 397(6) limits the definition of noncommercial educational and public
broadcast stations to those operating on reserved channels.  Rather, section 397(6) defines the stations
exempt from auctions under section 309(j)(2)(C) in terms of the station's eligibility under Commission
rules to be licensed as a noncommercial educational or public broadcast station.  And Commission rules do
not require broadcast stations to operate only on reserved bands in order to be eligible for status as a
noncommercial educational or public broadcast station.  See 47 C.F.R.  73.503.  To the contrary, our
rules specifically address the situation in which noncommercial educational stations operate on unreserved
channels.  See 47 C.F.R.  73.513.

     Had Congress intended to limit the exemption for noncommercial educational and public
broadcasters from competitive bidding to cases in which such broadcasters were applying for reserved
frequencies, presumably Congress would have done so explicitly.  Indeed, prior versions of both the House
and Senate bills expressly provided for an auction exemption limited to "channels reserved for
noncommercial use," but those limitations were eliminated prior to passage.  See H.R. 2015, 105th Cong.,
1st Sess.,  3301(a)(1); S. 947, 105th Cong., 1st Sess.,  3001(a)(1).  Where Congress deletes limiting
language from a bill prior to enactment, it may be presumed that the limitation was not intended.  See
Russello v. United States, 464 U.S. 16, 23-24 (1983).  We would not read this limitation back into the
statute.

     We fully agree with the majority, however, that it is not clear how the exemption from our auction
authority contained in section 309(j)(2)(C) should be implemented.  The practical question of how to
establish a process for awarding licenses to noncommercial educational and public broadcast stations
without running afoul of section 309(j)(2)(C) is, admittedly, a difficult one.  We also agree that there is a
range of options for how the Commission could award broadcast licenses to stations described in section
397(6).  But to the extent that the majority fails to exclude the possibility that noncommercial educational
and public broadcast stations seeking commercial frequencies will be forced to obtain their licenses through
auctions, we respectfully dissent.