D. Eligibility and Ownership (24-55)

24. In order to further our diversity goals and foster local, community-based service, we will not allow any broadcaster or other media entity subject to our ownership rules to control or to hold an attributable ownership interest in an LPFM station or enter broadcast related operating agreements with an LPFM licensee.  Additionally, to foster the local nature of LPFM service, we are limiting eligibility to local entities during the first year LPFM licenses are available.  We are also adopting a significant local ownership preference to be applied in resolving mutually exclusive applications.  After local entities have had an opportunity to apply for construction permits, we will permit applications by qualified non-local applicants.  After the first two years, we will permit multiple ownership of LPFM stations nationally, but only up to a maximum of 10 LPFM stations over a phased-in period.
25. Throughout this discussion we use the term “community” in a manner different from our traditional use of the term.[1]  Here, we use the term to refer to the very small area and population group that will make up the potential service area and audience of an LPFM station.  Given the very small nature of LPFM service contours and prospective audiences, we do not expect LPFM service areas to be coincident with traditional political boundaries that we use to define communities in other contexts, such as our allocations process.[2]

1.Cross-Ownership Restrictions

26. Background.  In the Notice, the Commission tentatively concluded that strict cross-ownership restrictions would be appropriate for low power radio.  We proposed to prohibit any person or entity with an attributable interest in a broadcast station from having an ownership interest in any LPFM station in any market.  We sought comment on whether the proposed strict cross-ownership restrictions would unnecessarily prevent individuals and entities with valuable broadcast experience from contributing to the success of the LPFM service.  We also asked for comment on whether broadcasters with an attributable interest in broadcasting stations should be allowed to establish an LPFM station in a community where they do not have an attributable broadcast interest.  We proposed to prohibit joint sales agreements, time brokerage agreements, local marketing or management agreements, and similar arrangements between full power broadcasters and low power radio entities.  We also sought comment on whether the cross-ownership restriction should be extended to prevent common ownership of LPFM stations with cable systems, newspapers, or other mass media.
27. Comments.  Several commercial broadcasters, educational broadcasters and individuals propose that cross ownership be allowed.[3]   The NAB opposes restricting current broadcasters from low power ownership, claiming that consolidation of ownership in fact increases diversity of broadcast formats because of economic efficiencies.[4]  The NAB further alleges that such a prohibition would preclude low power stations from realizing efficiencies through joint operations with a full power counterpart.[5]  Some commenters propose that current broadcasters be allowed to apply for LPFM stations, but that they should be required to give up their current station license prior to initiating operations at the LPFM station.[6]  Others propose that full service station owners not be barred, so long as the LPFM station is in another market.[7]  Metro Detroit Broadcasting Corporation proposes a waiver of multiple ownership provisions for minority-owned low power stations.[8]
28. Most commenters, however, oppose cross-ownership of full-service stations and LPFM stations.[9]  The National Lawyers Guild, for example, asks why the Commission would allow the few companies who already hold a broadcast license also to hold a low power license when 99.9 percent of the American people are barred from using the most effective communications media in the nation.[10]  Most commenters also support the Commission’s proposal to prohibit arrangements between full service broadcasters and LPFM entities, such as joint sales and time brokerage agreements.  UCC, et al., adds that not only should such agreements between full power licensees and low power licensees be prohibited, but also that agreements of a similar nature between two or more low power licensees should be disallowed.[11]
29. Decision.  We will prohibit common ownership of LPFM and any other broadcast station, including translators and low power television stations, as well as other media subject to our ownership rules.[12]  Thus, no broadcaster or other media entity, or any party with an attributable interest in them, can hold any attributable ownership interest in an LPFM licensee.  One of the most important purposes of establishing this service is to afford small, community-based organizations an opportunity to communicate over the airwaves and thus expand diversity of ownership -- a purpose inconsistent with common ownership of LPFM stations and existing broadcast facilities or other media interests.  Moreover, many of the commenters’ remarks favoring cross ownership are directed to the establishment of the proposed LP1000 service.  These arguments regarding efficiencies and economies and competitive standing for stations that might compete commercially, however, are less applicable to noncommercial educational LP100 and LP10 stations.  Similarly, our own expressed concern that cross-ownership limits could retard the development of low power radio by excluding entities with broadcast experience is less pressing in the absence of commercial 1000 watt stations.  We conclude that our interest in providing for new voices to speak to the community, and providing a medium for new speakers to gain experience in the field, would be best served by barring cross-ownership between LPFM licensees and existing broadcast owners and other media entities.  This prohibition is national and absolute in nature, unlike our existing cross-media ownership rules.  Thus, for example, a newspaper cannot have an attributable interest in any LPFM station, regardless of whether the newspaper and LPFM station are co-located.  We believe our interest in promoting diversity warrants such a strict approach. 
30. We have also decided to prohibit operating agreements in any form, including time brokerage agreements, local marketing or management agreements, and similar arrangements, between full power broadcasters and LPFM broadcasters, or between two or more low power licensees, as suggested by UCC, et al.[13]  As noted above, many commenters strongly oppose allowing any form of operating agreement that would dilute new ownership in the low power service.  We are concerned that such agreements too readily could undermine the strict cross-ownership restriction adopted by allowing an ineligible entity to program or manage an LPFM station.  We see no harm, however, in permitting any existing licensee to apply for an LPFM station on the condition that it is otherwise qualified and it represents that it will divest its interest prior to commencement of LPFM operations.

2.Requirement That Applicant Be Community-Based

31. Background.  In the Notice, we sought comment on whether to establish a local residency requirement, although we were not inclined, at that time, to do so.  We were concerned that a residency requirement would limit the pool of potential owners of low power stations and would deny opportunity to individuals and entities who resided in a location where no frequency is available, as there will not be low power frequencies available in every community.  We also noted that we expected in the case of LP100s and LP10 stations, in particular, that the very nature of the stations would attract primarily local or nearby residents.  We note that given our decision to restrict eligibility to noncommercial educational entities, the term “residency” is somewhat misleading.  The issue now is whether we should limit applicants to entities based within the local community they wish to serve and, if so, how we should define whether or not they are community-based.  Nonetheless, given that the Notice and comments are cast in terms of residency, we will continue to use the term, but do so in the organizational or institutional sense noted here.
32. Comments.  Most commenters support a requirement that LPFM licensees be locally based.[14] They argue that local residents are more likely to be aware of issues of importance to the local community, and to gear their programming accordingly.  UCC, et al. proposes that a majority of the entity’s board reside in the station’s service area.[15]  The Civil Rights Organizations suggest that a majority of the licensee’s board of directors, the head of the board and the CEO be local residents.[16]  Some commenters propose that applicants should be based within 25[17] or 50 miles[18] of the new low power station, or within the station’s proposed contour.[19]  Community Broadcasters proposes that a majority of the members of the governing body of the LPFM licensee be residents within the primary service contour of the proposed station.[20]  On the other hand, many commenters oppose the imposition of a residency requirement.  Some argue that a local residency requirement would be struck down under the standards set forth by Bechtel v. FCC,[21] discussed below.  Some point out that a residency requirement is incompatible with a five- to ten-station national ownership cap.[22]
33. Decision.  We continue to be concerned about the potentially preclusive effect of a strict local “residency” requirement and do not believe that local sources are the only valuable sources of information and service.  Nonetheless, this service is intended to respond to the highly local interests that are not necessarily being met by full-power stations.  Furthermore, since LPFM will be a noncommercial educational service, we cannot rely on commercial market forces and business incentives to ensure that local needs are fulfilled.  Given the small coverage of LPFM stations, and our intention that the particular needs and interests of these small areas be served, local familiarity is more significant than it might be for a station serving a larger area and population.  We thus conclude, after consideration of the comments and on further reflection, that the disadvantages of imposing a requirement that applicants be community-based are outweighed by the benefits to be gained by maximizing the likelihood that LPFM stations are operated by entities grounded in the communities they serve.  Accordingly, for the initial and subsequent windows opened within two years after the first filing window for LPFM service has been opened, all LPFM applicants must be based within 10 miles of the station they seek to operate.  This means that the applicant must be able to certify that it or its local chapter or branch is physically headquartered, has a campus, or has 75 percent of its board members residing within 10 miles of the reference coordinates of the proposed transmitting antenna.  We chose the 10-mile distance as proportionate to most stations’ likely effective reach.  We are concerned that a larger distance, in many areas of the country, could lead to ownership outside the bounds of the station’s real community and the people they will actually serve.  We are concerned that a smaller area would too severely and unduly restrict the opportunities presented by LPFM.  An organization providing public safety radio services will be considered community-based in the area over which it has jurisdiction.[23]  Beginning two years after the first window for LPFM service has been opened, non-local applicants will be eligible to apply in subsequent windows for those classes of stations pursuant to public notices issued by the Mass Media Bureau.  By this approach, we intend to make it more likely that local entities will operate this service.  If no local entities come forward, however, we do not want the available spectrum to go unused.
34. We do not find convincing the argument made by some commenters that imposition of a local residency eligibility requirement here would pose the same legal problems as the “integration of ownership and management” factor formerly employed as a comparative criterion in the commercial broadcast service.  While that comparative criterion was overturned as arbitrary and capricious in the Bechtel case,[24] that case did not invalidate a preference for locally based applicants per se.  Rather, it rejected a preference for a particular form of business organization -- in which station owners worked more than a certain number of hours per week at their station -- that had not been shown to provide superior service even though the preference had been used for many years.  The preference for local licensees here, in contrast, rests on our predictive judgment that local entities with their roots in the community will be more attuned and responsive to the needs of that community, which have heretofore been underserved by commercial broadcasters.  We believe that local residence should carry particular weight here because we envision LPFM as a uniquely local service designed to serve local community needs.  We note that while the court invalidated the integration criterion in the Bechtel decision, it recognized that an applicant who is familiar with the community is likely to be aware of its special needs.[25]
35. Furthermore, we believe that local roots are particularly important in a noncommercial educational service like LPFM.  As noted above, we cannot rely on commercial market forces to ensure that LPFM licensees are responsive to local needs because they will be noncommercial entities providing noncommercial program services.  Indeed, Congress and the Commission have long recognized the unique role played by local entities in providing noncommercial educational programming, and we have favored local entities in providing other noncommercial educational services.[26]
36. Finally, we do not believe that our preference for local applicants here raises the concerns voiced by the court in Bechtel.  The court was concerned in Bechtel that the integration preference elevated quantitative factors – the number of hours the station owners promised to work at the station – over arguably more important qualitative factors such as broadcast experience and established local residence.  In contrast, the community-based requirement that we adopt today does not rest on quantitative factors and is not based on promises of future conduct.  Rather, we are adopting a simple, straightforward requirement that applicants be based in the local community.  In addition, a primary concern underlying the court’s decision was that there was no obligation for a successful applicant in the commercial broadcast service to adhere to its integration proposal, and there was no evidence indicating the extent to which licensees had done so in the past.  In contrast, LPFM licenses will not be transferable, so we can be assured that a local entity that is awarded the license will continue to operate the station.  For these reasons, we do not believe that the community-based requirement that we adopt today suffers from the problems identified by the court in the Bechtel decision.

3.National Ownership Limits

37. Background.  In the Notice, we also sought comment on the issue of a national multiple ownership cap.  In particular, we asked whether a limit of five or ten stations nationally would provide a reasonable opportunity to attain efficiencies of operation while preserving the availability of the stations to a wide range of applicants and their essentially local character.
38. Comments.  Comments on this issue are wide-ranging in their opinions.  Some groups favor an absolute nationwide one-station-per-owner limit, arguing that a one-station-per-entity cap would distribute the low power stations as widely as possible and create the opportunity for the most diverse ownership.[27]  The Civil Rights Organizations “disagree in the strongest terms” with the idea that a low power licensee could hold more than one license.[28]  UCC, et al., states that the Commission’s belief that economies of scale from national ownership will improve service is especially ill-founded.[29]  It similarly exhorts us to disallow “agreements” between low power stations.[30]   Some commenters support a less strict national cap, arguing that some national cap will promote greater diversity in the service, but that a one-per-owner limit is excessively restrictive.[31]  Several commenters agree with the Commission’s suggested range of five to ten stations, nationally.[32]  Finally, some groups oppose any type of national cap.  The NAB does not believe that a national ownership cap is allowed under the 1996 Act, and believes that common ownership will improve efficiency in the service.[33]
39. Decision.  We are adopting a staged rule, which will initially foster diversity by disallowing any common ownership of LPFM stations, but eventually permit the accumulation of additional stations where local applicants fail to come forward.  This will increase the service available to the public and permit the efficiencies that can be achieved by multiple ownership where there is not an immediate local interest in operating a station.  To achieve this, we will require that for the first two years of LPFM service, any one entity may own only one LPFM station.  The two year-long period will begin on the day that the first LP100 filing window opens for applications.  After the first two years, to bring into use whatever low power stations remain available but unapplied for, we will allow one entity to own up to five stations nationally, and after the first three years of this service, we will allow an entity to own up to ten stations nationwide. 
40. In addition to ensuring the fullest use of LPFM spectrum in the long term, we believe that this tiered system will balance the interests of local entities, which we expect to be the first entrants in this service, and national noncommercial educational entities, which may be interested in additional local outlets to increase their reach and to achieve certain efficiencies of operation.  We note the attribution exception for national or other large entities with local community-based chapters, discussed below in the attribution section, which will allow the local chapters to apply as individual entities and thus not be constrained by this national ownership provision.
41. In the Notice, we tentatively concluded that Section 202 of the Telecommunications Act of 1996 (the 1996 Act)[34] eliminating national multiple ownership restrictions for existing full power commercial stations does not apply to a new broadcast service.  Given our decision to limit LPFM to noncommercial educational broadcasters, Section 202 clearly does not apply to LPFM and we need not discuss this issue further.[35]

4.Local Ownership Limits

42. Background.  In the Notice, we proposed to prohibit entities from owning more than one LPFM station in the same community.  We were concerned that it would be difficult to achieve wide new entry into the broadcasting market and enhance diversity if more than one low power station in an area were under common control.  At the same time, we sought comment on whether such a restriction would inappropriately deny to LPFM licensees the efficiencies achievable through multiple ownership, and on what cooperative arrangements might facilitate the development of LPFM service without unduly diluting its benefits.  We also sought comment on the appropriate definition of “market” or “community” for the purposes of LPFM service. 
43. Comments.  Many commenters agree strongly with the Commission’s proposal that LPFM ownership should be limited to one station per community.[36]  They argue that allowing multiple ownership in a local area would reduce the number and diminish the diversity of new entrants.  Most contend that the demand for stations from local owners will be plentiful and that there will be no need to allow outside owners to own low power stations.[37]  The NAB opposes the proposed ban on common local ownership, saying that common ownership leads to increased efficiencies.[38]  A few commenters address the issue of the definition of “community” for the purpose of determining the limitations of local ownership but none offered specific alternative definitions.  Some commenters expressed concern that the current Commission definition of a “community” is ambiguous and therefore subject to inequitable application.[39]
44. Decision.  We will restrict local ownership and allow one entity to own only one LPFM station in a “community.”  We concur with those commenters who expressed concern over the potential for diminution of diversity in ownership if one entity were allowed to control more than one station in their community.  The comments opposing the restriction seem directed to and more appropriate in the context of the proposed 1000 watt service, which could have operated commercially.  The primary benefit of local multiple ownership, increased efficiency, is less compelling with respect to LP100 and LP10 noncommercial educational stations, particularly as compared to the benefit to a community of multiple community-based voices.  As noted above, we use the term community in this Report and Order to refer to the very small population group that makes up a station’s potential audience.  For purposes of the local ownership limits, we will require that no entity own or have an attributable interest in two or more LPFM stations located within 7 miles of each other.  That is, to comply with our local ownership limits, the antennas of commonly-owned stations must be separated by at least seven miles.  We believe seven miles is appropriate given the approximately 3.5 mile signal reach of LP100 stations.  Although the signal reach of LP10 stations is smaller, for the sake of simplicity we will apply the seven-mile ownership separation to both classes of service.
45. In the Notice we noted that Section 202 of the 1996 Act permitted significant local multiple ownership of full power commercial radio stations but questioned whether this standard would apply to a new low power service.  Our decision here, however, to limit LPFM stations to noncommercial educational service renders this question moot.  As discussed above regarding the national multiple ownership issue, Section 202, by its terms, does not apply to noncommercial stations.
46. We note that the attribution exception for local chapters of national entities, discussed in the next section, will allow local chapters to apply as individual entities and thus avoid the bar that the national ownership rules would otherwise impose.

5.Attribution

47. Background.  Given the significance we have accorded the ownership of LPFM stations, the strict cross- and multiple-ownership rules and the community-based eligibility and selection criteria we are adopting, determining who “owns” or constitutes a low power radio applicant or licensee is critically important.  In the Notice, we sought comment on what interests or relationships should be attributable in this regard.
48. Comments.  Comments on attribution vary widely.  Some commenters express concern that if the existing attribution rules were applied to these stations, some entities with large national organizations and small chapters would be unable to hold multiple licenses even though they maintain a local presence and would provide community-oriented programming.[40]  Other commenters propose that attribution rules be waived in the case of accredited educational institutions, so that they can hold a full power station and also an LPFM station.[41]  Amherst argues that it should be illegal for a subsidiary, affiliate, agent or franchisee of any institution holding a broadcast license to acquire an LPFM license.[42]
49. Decision.  We will apply rules similar to the existing commercial attribution rules to determine a licensee’s compliance with the ownership limits set forth above.  Because many of the entities that will hold LPFM licenses will be non-stock corporations (or other non-stock entities), we will attribute the interests of the applicant, its parents, its subsidiaries, their officers and members of their governing boards.  If an entity that holds an LPFM license does have stock, then the existing attribution rules will apply and voting stock interest of 5% or more will be attributable unless the investor is passive in nature, in which case voting stock interests of 20% or more will be attributable.  Partners and non-insulated limited partners are attributable, as are officers and directors.  Non-voting stock and debt are not attributable unless they satisfy the “equity-debt-plus” standards set forth in our recent attribution order.[43]  Thus, for example, if a full-power broadcaster in a community were to invest in an LPFM licensee in that same community and the investment accounted for more than 33% of the LPFM’s total capitalization, the investment would be attributable and would violate the cross-ownership ban discussed above.  Similarly, if a director of the same full power broadcaster were to act as an officer of the LPFM, the director would be attributed with both stations and would violate the ban.  Consistent with the existing commercial attribution rules,[44] however, an exception will apply to certain officers and directors of the parent of an LPFM applicant or licensee.  Such an officer or director may hold otherwise attributable interests in a broadcast licensee or other media entity subject to our ownership rules without making the LPFM applicant ineligible, provided the duties and responsibilities of the officer or director are wholly unrelated to the LPFM station and the officer or director recuses himself or herself from consideration of any matters affecting the LPFM station.[45]  This exception will avoid making ineligible entities that will serve the purposes of this service well, such as universities or schools, which may have large and diverse board membership, while protecting against control of an LPFM licensee by ineligible media owners.  For the same reason, in the LPFM context we will extend the exception to officers and directors of the LPFM applicant or licensee itself, if that entity is a multifaceted organization, such as a university, and the duties and responsibilities of the officer or director are wholly unrelated to the LPFM station and the officer or director recuses himself or herself from consideration of any matters affecting the LPFM station.[46]  We emphasize that these exceptions are narrow in scope.  An individual holding an attributable media interest may not act as an officer of the LPFM station, nor function in any other attributable role.
50. We will, moreover, include an attribution exception for local chapters of national or other large organizations.  In the event that a local chapter can demonstrate that it: (1) is separately incorporated, and (2) has a distinct local presence and mission, the local chapter can apply for a license in its own right and the national entity’s “ownership” will not be attributed to it.  In order to meet this standard, the local entity must be able to show a significant membership within the community, as well as a local purpose that can be distinguished from its national purpose.  For example, the general purpose of raising awareness of the toxic waste problem in the United States would not suffice, but raising awareness of the toxic waste problem in particular local areas would meet the local purpose standard.

6.General Character Qualifications and Unlicensed Broadcasters

51. Background.  In the Notice, we generally proposed to apply the same standards for character qualification requirements to all LPFM broadcasters as we do to full power broadcasters.  The Commission asked if commenters saw any reason to distinguish between full and low power radio licensees for this purpose.  In addition, we sought comment on whether to disqualify unlicensed broadcasters who once violated or who still are violating Commission rules.  We sought comment on whether the Commission should adopt a middle ground and accept applications from parties who have broadcast illegally, but who either (1) promptly ceased operation when advised by the Commission to do so, or (2) voluntarily ceased operation within ten days of the publication of the Notice in the Federal Register.
52. Comments.  The National Lawyers Guild and the Civil Rights Organizations both argue for amnesty for unlicensed broadcasters.[47]  Many individuals insist that without radio “pirates,” LPFM would not have been created.[48]  Others, such as Amherst and UCC, et al., support the middle ground set forth in the Notice, saying that it is most fair to the interests of future low power broadcasters and to the public.[49]  The Alliance for Community Media also supports the Commission’s proposed compromise.[50]  Many commenters believe that anyone who has operated illegally should not be eligible for a license.  NAB believes that because “pirate” broadcasters operated illegally, they should not be excused or granted amnesty.[51]  Some object to restricting parties with an interest in a broadcast station from owning an LPFM station, but allowing “pirates” to own them.[52]
53. Decision.  We have decided, as we proposed, to apply the same character qualification requirements to low power station licensees as we currently apply to full power licensees.  The Commission’s character policy is underpinned by our interest in a licensee’s truthfulness and reliability. We have a critical need to ascertain whether a licensee will in the future be forthright in its dealings with the Commission and operate its station in a manner consistent with the requirements of the Communications Act and the Commission’s rules and policies.[53]  No commenter showed a reason to distinguish between full and low power broadcasters on this basis, and we do not believe one exists.
54. The most significant specific question that character concerns raise in the context of this proceeding, as discussed in the Notice, is how past illegal broadcast operations reflect on that entity’s proclivity “to deal truthfully with the Commission and to comply with our rules and policies,”[54] and thus on its basic qualifications to hold a license.  We are persuaded to adopt our original proposal and accept a low power applicant who, if it at some time broadcast illegally, certifies, under penalty of perjury, that: (1) it voluntarily ceased engaging in the unlicensed operation of any station no later than February 26, 1999, without specific direction to terminate by the FCC; or (2) it ceased engaging in the unlicensed operation of any facility within 24 hours of being advised by the Commission to do so.  Applicants will be required to make such certifications as part of their applications for an LPFM station.  Such certifications will be made with respect to the applicant as well as all parties to the application (i.e., any party with an attributable interest in the applicant).  Submission of false or misleading certifications will subject the applicant to enforcement action including fines, revocation of license and criminal penalties.
55. Contrary to some commenters’ arguments, this rule does not unconstitutionally infringe on the First Amendment rights of unlicensed broadcasters.[55]  Disqualification under this rule is based solely on lack of compliance with statutory and regulatory requirements.  All parties should note, however, that as licensed broadcasters, ignorance, whatever its cause, is not considered an excuse for violation, and full compliance with our rules will be required.  Moreover, as implied by the provisions of the Notice, the illegality of unauthorized broadcasting must now be presumed to be well-known, and any unlicensed broadcast operation occurring more than 10 days after the Notice was issued will make the applicant ineligible for low power, full power, or any other kind of license and will be subject to fines, seizure of their equipment, and criminal penalties.