A. Ownership and Eligibility (11-36)

1.Alienability of Authorizations

a.Changes in Board Membership

11. Section 73.865 of the Rules provides that “[a]n LPFM authorization may not be transferred or assigned except for a transfer or assignment that involves: (1) Less than a substantial change in ownership or control; or (2) An involuntary assignment of license or transfer of control.”[1]  The Reconsideration Order clarified that the gradual change of a licensee’s governing board or membership body is a permissible “insubstantial change,” even if the majority of current members joined after the station’s authorization was granted.[2]  As the FNPRM noted, however, “[o]ur rules . . . do not permit a sudden change in the board or membership of an LPFM licensee, which would constitute an impermissible transfer of control.”[3]  Panelists at the February 2000 LPFM forum and other parties concerned with the viability of LPFM stations remarked that the proscription of sudden changes in governing board membership causes unnecessary complications for LPFM licensees.[4]  Responding to that concern, the FNPRM proposed to amend our rules to permit sudden changes of more than 50 percent of the membership of governing boards.[5] 
12.  As commenters have since observed, frequent elections and changes in governing board membership are common among volunteer organizations and other entities that operate LPFM stations.[6]  As LPFM station KVLP-LP noted, experience on the board of an LPFM station can confer valuable leadership experience to community members, leading community groups to encourage frequent shuffling of board membership.[7]  Unsurprisingly, then, most commenters favor amending our rules to permit transfers of control in the case of a sudden change in a majority of a governing board’s membership so long as the overall mission of the organization remains unchanged.[8]  
13. We agree.  In crafting our LPFM rules, the Commission intended to preserve the integrity of the LPFM service and of the local organizations operating LPFM stations.  We did not intend, however, to hamper the customary governance procedures of those organizations or to make LPFM less “accessible to community groups.”[9]  To the extent that our rules have blocked that access, we now remove that inadvertent barrier and adopt the FNPRM’s proposal to allow sudden changes of more than 50 percent of the membership of governing boards.  Accordingly, we will amend Section 73.865 of our Rules to clarify that transfers of control involving a sudden change of more than 50 percent of an LPFM licensee’s governing board shall not be deemed “a substantial change in ownership and control.”[10]          

b.  Assignments and Transfers

14. The FNPRM sought comment on whether the Rules should permit the sale of LPFM authorizations, for some or no consideration, and whether they should impose a holding period by the initial permittee and licensee.[11]  Noting that at least 221 construction permits have lapsed due to the permittee’s failure to construct facilities, REC Networks (“REC”) argues that an LPFM permittee or licensee should be able to convey its authorization when doing so would prevent the loss of the permit.[12]  Indeed, most commenters support amending the rules to permit sales in at least some circumstances, although they express diverse views with respect to when such transactions should be allowed.[13]  At one extreme are those commenters who maintain that LPFM stations should be transferable without restriction because there is little risk of manipulation or take-over in the “market” for LPFM authorizations.[14]  At the opposite end of the spectrum are those who contend that transfers of control or assignments should be limited to those situations in which the assignee or transferee “represents the community” and no consideration is involved.[15]  Prometheus argues that the Commission should not allow transfers or assignments to be made in exchange for consideration, as such a rule could lead to speculation by those with substantial resources, at the expense of local community groups that lack funding.[16]
15. The for-profit sale of LPFM authorizations to any buyer is fundamentally inconsistent with the Commission’s desire to promote local, community based use and ownership of LPFM stations.[17]  Transfers of control or assignments for consideration will create a market for LPFM licenses and may facilitate trafficking in licenses by those who have no interest in providing LPFM services to the public. Such a state of affairs would likely interfere with, rather than spur development of, community-based programming and hamper the ability of community-based entities to obtain LPFM authorizations. Therefore, we will not permit the sale of LPFM licenses for consideration exceeding the depreciated fair market value of the physical equipment and facilities of the station,[18] and will not allow under any circumstances the transfer or assignment of construction permits.  
16. With respect to the imposition of eligibility restrictions on a transferee or assignee of an LPFM license, some commenters suggest that we permit the sale of an LPFM authorization to any willing buyer.[19]  Others suggest that we limit the universe of eligible assignees and transferees to other local nonprofits.[20]  We conclude that the appropriate balance is struck by requiring the assignee or transferee of an LPFM license to satisfy ownership and eligibility criteria existing at the time of the assignment or transfer.[21]  That restriction will prevent entities from using intermediaries to circumvent our LPFM eligibility requirements and will further address our concern about potential trafficking in LPFM authorizations by ensuring that future LPFM licensees meet the Commission's criteria for LPFM service.  At the same time, permitting assignments or transfers among qualified parties will allow newly-“merged” local entities, consisting of several eligible organizations, to pool their resources to provide the necessary financial support for quality local programming when, standing alone, those entities would be otherwise incapable of constructing and operating an LPFM station. 
17.  For all transfers and assignments, we will require a three year holding period from the issuance of license, during which a licensee cannot transfer or assign the license, and must operate the station, as suggested by Prometheus.[22]  That restriction will prevent entities from using the LPFM assignment and transfer process to undermine the Commission’s LPFM policies and will ensure that the benefits to the public which were the basis for the license grant will be realized. 

c. Procedures

18. The FNPRM asked what procedures would be appropriate to allow assignments and transfers while ensuring the integrity of the LPFM service.  Because many LPFM permittees and licensees are entities that do not issue ownership shares, the Commission drew attention to the Non-Stock Transfer NOI[23] for guidance in establishing the procedures for transfers of control of such licensees.  The Non-Stock Transfer NOI proposed to treat a sudden change of a governing board’s majority as an insubstantial transfer for which approval must be sought on an FCC Form 316 (“short form”) broadcast application.[24] The FNPRM sought comment on adopting a similar approach for changes in the governing boards of LPFM permittees and licensees that are non-stock entities.[25]  The FNPRM also sought comment on the process by which LPFM stations should seek approval of assignments and transfers of control.[26]
19. Few commenters addressed the issue of the appropriate procedures for transfers of control or assignments of LPFM authorizations.  Christian Community Broadcasters proposed using a modified FCC Form 318 LPFM construction permit application to cover all instances of ownership changes or changes in board membership.[27]  Limestone Community Radio suggested instead that entities use a modified FCC Form 316 for “typical” changes in station ownership.[28]  Still other commenters suggest that the Commission should take a more active role in overseeing any LPFM ownership changes to ensure “ethical use” of LPFM licenses.[29]
20. We will use existing FCC forms for the conveyance of LPFM licenses, rather than adopting new forms and filing procedures.  We see no reason to depart from the filing procedures that currently are used for other broadcasting services.  Accordingly, we direct LPFM licensees to use modified FCC Forms 314 and 315 for assignments and transfers of control, respectively, and FCC Form 316 for pro forma changes in ownership.  We will apply the Non-Stock Transfer NOI to appropriate LPFM licensees, and thus, will interpret a sudden change of a governing board’s majority as an insubstantial transfer for which approval must be sought on an FCC Form 316 (“short form”) broadcast application.[30]  Use of these forms offers many advantages, particularly to smaller entities that have few resources to dedicate to the application process, such as the ability to retrieve and submit the forms electronically. 

2.Ownership and Eligibility Limitations

21. As discussed above, the Rules required that, during the two years following the first LPFM filing window, no entity was permitted to own more than one LPFM station, and ownership was restricted to local entities.  The Rules gradually relaxed these restrictions.  Currently, the Rules limit the number of LPFM stations a single entity may own up to ten stations[31] and the Rule that allows only local entities to apply for LPFM licenses has sunsetted.[32]  As we explained in the FNPRM, the Commission’s intention in gradually increasing the ownership limitation from one to ten stations and in allowing the local entity restriction to sunset “was to make it more likely that local entities would operate this service, but to ensure that if no local entities came forward, the available spectrum would not go unused.”[33]  In connection with its query of whether to allow the sale of LPFM stations, the FNPRM asked if either the ownership limitation or the restriction to local entities should be extended or reinstated.
22. Several organizations urge the Commission to maintain “strict local and multiple ownership requirements,” to ensure that LPFM service continues to advance the public’s interest in localism and diversity.[34]  According to some of these commenters, any relaxation of either the multiple ownership restriction or the locality-based restriction is fundamentally at odds with the “community radio” rationale that justifies the existence of LPFM stations.[35]  Prometheus Radio Project argues that, even when no local entity applies for an LPFM authorization, non-local entities should be barred from applying, because “LPFM is not a goal in itself, rather it is a means to promote localism.”[36]
23. We agree.  As emphasized in our Report and Order, our two primary goals in establishing the LPFM service were to “create opportunities for new voices on the airwaves and to allow local groups, including schools, churches, and other community-based organizations, to provide programming responsive to local community needs and interests.”[37]  The Report and Order also stated that the potential benefit of allowing multiple ownership — increased efficiency — was clearly outweighed by “the benefit to a community of multiple community-based voices.”[38]  By amending the Rules to permanently limit LPFM eligibility, we protect the public interest in localism and foster greater diversity of programming from community sources. Thus, we will reinstate the prohibition on the ownership of more than one LPFM station.
24. In addition, we agree with those parties that suggest that we reinstate the local ownership restrictions.[39]  Although growing in both usage and recognition, LPFM service is still in its nascence and doing away with the locality restriction could threaten its predominantly local character, in particular the hallmark of a LPFM station’s local character, its local origination of programming.  In upholding the local origination selection criterion for mutually exclusive applications, our Second Order emphasized that local origination is “intended to encourage licensees to maintain production facilities and a meaningful staff presence within the community served by the station.”[40]  Even outside the limited context of mutually exclusive applications, we view local origination as a central virtue of the LPFM service and therefore will reinstate the eligibility restriction contained in Section 73.853(b) of the Rules to encourage local origination.[41]  We also wish to clarify our definition of local origination.  According to Prometheus, a licensee could theoretically create one program, continually repeat it on a tape loop, and still claim it meets the definition of local origination.[42]  Prometheus asserts that in order to meet the local origination requirement, programming cannot be automated, including randomized songs or long blocks of locally produced programming run multiple times, and cannot be aired more than two times.[43]  We agree that there is room for abuse here, and as such, we clarify that repetitious automated programming does not meet the local origination requirement.  We will only allow a program to be broadcast twice in order to meet the local origination requirement.  After its initial broadcast a program can be rebroadcast once and still meet our requirement.  After that, the program cannot count toward the local origination requirement.
25.  Finally, we adopt the suggestion by Prometheus that we extend the local standard for rural markets.[44]  Pursuant to Section 73.853(b) of the Rules, an LPFM applicant is deemed local if it is physically headquartered or has a campus within ten miles of the proposed LPFM transmitter site, or if 75 percent of its board members reside within ten miles of the proposed LPFM transmitter site.[45]  The ten-mile limit was adopted based on the “station's likely effective reach.”[46]  Prometheus’ comments express concern that this ten-mile local entity standard is difficult to meet for rural applicants, especially in finding board members who reside within ten miles of the proposed transmitter site.[47]  Prometheus states that people in rural communities often listen to and participate in stations that are outside of their home coverage area, because they listen to the station while driving to and from work.[48]  As such, Prometheus requests modifying the ten-mile requirement to twenty miles for all LPFM applicants for proposed facilities in other than the top fifty urban markets, for both the distance from transmitter and residence of board member standards.[49]  We agree with Prometheus that applicants for stations located in rural communities find it particularly challenging to meet the current ten-mile standard.  We also agree that the concept of “local” should be more expansive in rural areas.  Accordingly, we will revise Section 73.853(b) of the Rules to reflect Prometheus’ proposal. 

3.Time-Sharing

26. The Report and Order established a comparative point system for determining which among mutually exclusive LPFM applicants should receive the authorization that they commonly seek.[50]  If such applicants have the same point total, two or more of the tied applicants may propose to share use of the LPFM frequency by submitting a time-share proposal within 30 days of the release of a public notice announcing their tie.[51] If the tie among the applicants is not resolved through a voluntary time-sharing agreement, the tied applicants submitting grantable applications are placed in an involuntary time-sharing arrangement, and granted equal, successive, non-renewable license terms for the applied-for facility of no less than one year each, for a total combined term of eight years.[52]  The FNPRM proposed amending the Rules governing mutually exclusive LPFM applications in two key respects.  First, in response to a request by MAP, the FNPRM proposed to extend, from 30 to 90 days, the period allowed for applicants to submit a voluntary time-sharing agreement.[53]  Second, the FNPRM proposed to amend the Rules to permit the renewal of licenses granted under the involuntary time-sharing successive licensing procedures.[54]  We address those proposals in turn.

a.Deadline for Submission of Voluntary Time-Sharing Agreements

27. In its Petition for Reconsideration of the Report and Order, MAP observed that “LPFM applicants are largely comprised of small organizations with few administrative resources,” and that few applicants “have access to the expertise of professional engineers.”[55]  Accordingly, few applicants are able to identify mutually exclusive applications before receiving notice from the Commission that they are tied with others, leaving them only 30 days to contact the other applicants, complete negotiations and execute and file their agreements with the Commission.  Because those negotiations likely will be conducted by inexperienced volunteers, MAP argues, reaching a successful compromise within that time frame is very unlikely.[56]  Finding MAP’s argument persuasive, the FNPRM proposed to extend to 90 days the time period within which mutually exclusive LPFM applicants must reach and file a voluntary time-sharing arrangement.[57]
28. All commenters who addressed the issue favor adoption of the proposal to so extend the negotiation and filing period to 90 days.  NPR, “recogniz[ing] the fundamental importance of a diversity of programming services and station ownership,” observes that allowing LPFM applicants more time to enter into voluntary time-sharing arrangements will promote that diversity.[58]  Similarly, REC contends that 30 days is not enough time in which to reach and file a viable time-sharing agreement.  REC sought to assist applicants with negotiations of universal settlements, but found that often basic contact information supplied on the applications was inaccurate.[59]  Drawing from that experience and similar considerations, REC urges the Commission to extend the period of time in which mutually exclusive applicants may negotiate and file time-sharing agreements.[60]
29. We agree with the views of NPR, REC, and others, and therefore adopt the FNPRM’s proposal to extend the negotiating and filing period to 90 days.  Mutually exclusive LPFM applicants should be given every opportunity to arrive at a negotiated time-sharing arrangement before the LPFM rules impose a successive-term licensing scheme on the applicants.  To the extent that the 30-day time period in Section 73.872 of the Rules[61] has impeded the successful negotiation of time-sharing arrangements, we remove that impediment and hope that this will reduce considerably the likelihood that involuntary time-sharing arrangements with multiple successive license terms will be necessary. 

b.License Renewal Procedures for Parties to Time-Sharing Arrangements

30. Section 73.872(d) of the Rules provides that an LPFM authorization issued under involuntary time-sharing arrangements, under which mutually exclusive applicants are granted successive license terms, is not renewable.[62]  The FNPRM also proposed that we change this provision and make such authorizations renewable.[63]  The FNPRM sought comment on how the renewal process should operate, given that increased flexibility in the Rules governing assignments and transfers of control may lead licensees under such arrangements to negotiate voluntary time-sharing agreements among themselves.
31. REC is one of the few commenters to respond to our queries about involuntary time-sharing arrangements.[64]  In its submission, REC suggests that if licensees under an involuntary time-sharing arrangement “come up with a universal settlement to engage in a conventional time-share arrangement . . . the Commission should grant such an arrangement and remove the non-renewable condition of the permit and/or license.”[65]  REC further proposes that, at the end of the eight-year term, all licensees in a successive license term group should each be permitted to file a renewal application. 
32. The FNPRM tentatively proposed to make renewable all viable licenses under both voluntary and involuntary time-sharing arrangements.[66]  Making renewable only the authorizations of those organizations that can reach a mutually acceptable agreement with respect to scheduling, however, will provide a powerful incentive to licensees that thus far have been unable to reach such agreement.  This will lead to more efficient use of the spectrum.  Accordingly, we agree with REC that when organizations subject to an involuntary time-sharing arrangement reach a “universal settlement” with respect to the allocation of time on the relevant frequency, the non-renewable condition of their authorizations should be removed. 
33. For the same reasons, we also agree with REC that stations subject to involuntary time-sharing under successive license terms that subsequently enter into a voluntary time-sharing agreement should be permitted to file a renewal application.  However, we are not persuaded that we should accommodate those licensees with successive license terms that fail to reach a universal voluntary agreement with the ability to renew.  By doing this, we would be rewarding such applicants’ unwillingness or inability to reach such agreements.  We note that, of the more than 1,200 construction permits granted in the LPFM service, currently no stations hold authorizations for involuntary time sharing.  In this Order, we have extended the 30-day time period in Section 73.872 of the Rules[67] for applicants to negotiate and file universal voluntary time-share agreements to 90 days.[68] We have also enabled those applicants originally issued involuntary time-share permits that reach such agreements to ultimately acquire renewable licenses.  We believe that these measures will greatly reduce the likelihood that involuntary time-sharing arrangements will be necessary. Therefore, we decline to provide a renewal expectancy for involuntary time-share licensees.  We strongly encourage any such permittees and licensees and future mutually exclusive applicants to enter into universal voluntary time-share agreements.
34. Making renewable the authorizations of parties who time-share who have reached voluntary time-sharing agreements raises a number of practical questions with respect to how and when those arrangements will supersede involuntary ones.  First, we must determine when a voluntary time-sharing agreement should replace the successive-term structure of the involuntary arrangement.  As we noted in the FNPRM, it is likely that licensees will reach universal time-sharing agreements prior to seeking renewal.[69]  We will therefore construe the superseding agreement as a “minor change,” allowing the licensees who seek to operate under a universal voluntary time-sharing agreement to file the minor change application as soon as the agreement is reached, rather than having to wait for a filing window.[70]  Expediting our approval of voluntary time-sharing arrangements in this manner will encourage prompt negotiations among licensees operating under involuntary time-sharing arrangements and, it is hoped, promote a more efficient use of scarce LPFM spectrum than that under the successive licensing terms that apply to involuntary time-sharing arrangements.  Accordingly, we will revise the Rules to facilitate those voluntary agreements.  We stress, however, that voluntary time-sharing agreements must be genuinely universal, involving all permittees and licensees of a particular LPFM facility.  That is, to give rise to a renewal expectancy, all of those in a time-share group must be parties to the time-sharing agreement.
35. To ensure that voluntary time-sharing arrangements will result in the most efficient use of LPFM spectrum, we also must address how to apportion unused airtime among licensees in a time-share group.  This circumstance may arise in a number of ways.  For example, a permittee in that group could fail to construct its facilities, decide to cease operations, or have its authorization revoked for a serious violation of the Rules.  There might also be situations in which no permittee or licensee has come forward requesting to operate during a certain part of the day or week.  REC points to an example in Visalia, California, where one licensee, KFSC-LP, broadcasts from 5 to 9 a.m. Monday through Saturday and a second licensee, KQOF-LP, broadcasts from 5 to 9 p.m. Monday through Saturday.  No licensee broadcasts other than those times.[71]  REC proposes that, prior to the opening of a new filing window, new entrants who can reach a universal settlement with existing stations should be allowed to do so.  REC also argues that new entrants should be allowed to apply for periods of unused time once a window for new applications has opened.[72] 
36. We agree with REC that, during filing windows for new applications, new parties should be permitted to apply for unused and unwanted time on a particular frequency.  We will not entertain such applications outside of an open filing window, however, even when the potential new entrant could successfully negotiate a universal settlement with existing licensees.  Aside from the administrative burden that such out-of-window filings could create, allowing a new entrant to act before a formally-announced filing window could prejudice unfairly other potential applicants who, under the comparative criteria set forth in Section 73.872(b) of the Rules,[73] would be entitled to a preference over the would-be new entrant’s mutually exclusive application.  Restricting applications for unwanted time to new filing windows does raise a potential concern in that the restriction will leave periods of time on a particular frequency vacant until the Commission elects to open a filing window for new applications.  To alleviate that concern, and to promote a more efficient use of available LPFM frequency, we will allow existing stations in a voluntary time-share group to apportion among themselves any time that, for any reason, becomes unused.  As with the negotiation and execution of voluntary time-sharing agreements by parties in an involuntary time-share arrangement, we will deem amendments to a voluntary time-sharing agreement to account for unused time requests to be minor modifications that may be filed at any time.