FEDERAL COMMUNICATIONS COMMISSION
                           WASHINGTON, DC  20554

                                              February 24, 1997
                                                                                             IN REPLY
                                                                                             REFER TO:
                                                                                                                     
                                                                                             1800B3-BCD


Gregg P. Skall, Esquire 
Pepper & Corazzini
1776 K Street, NW, Suite 200
Washington, DC 20006

Harold K. McCombs, Jr., Esquire
Duncan, Weinberg, Miller & Pembroke, PC
1615 M Street, NW, Suite 800
Washington, DC  20036

                                                  In re:              KOFY(AM), San Mateo, California
                                                                       Application for Modification of      
                                                                                Daytime Facilities
                                                                       File No. BP-960523AC

                                                                       KPAY(AM), Chico, California
                                                                       Contingent Surrender of License


Dear Counsel:

We have on file Pacific FM, Inc.'s ("Pacific") above-referenced application for a minor
modification of station KOFY(AM), San Mateo, California's daytime facilities.  The
modification application seeks consent to make changes in the KOFY(AM) directional
antenna system.  On January 29, 1997, Pacific filed an amendment ("Amendment") to the
subject application. 
(FN1).  We also have on file a Technical Services Agreement ("Agreement") between
Pacific and McCoy Broadcasting Company, Inc. ("McCoy"), licensee of KPAY(AM), Chico,
California. (FN2).  Pursuant to the Agreement, McCoy 
proposes to surrender the KPAY(AM) license for cancellation contingent upon, inter alia, 
the finality of the grant of the subject KOFY(AM) application. (FN3).  
For the reasons stated below, we grant the subject application conditioned upon
the surrender of the KPAY(AM) license prior to the commencement of KOFY(AM)
program tests.

The Commission has undertaken significant initiatives to improve and revitalize the AM
service.  Review of the Technical Assignment Criteria for the AM Broadcast Service, 6 FCC
Rcd 6273 (1991), recon. granted in part and denied in part, 8 FCC Rcd 3250 (1993).  One
such initiative permits licensees to reach agreements to make facilities changes to reduce
interference.  Policies to Encourage Interference Reduction Between AM Broadcast Stations, 5
FCC Rcd 4492 (1990) ("Interference Reduction Proceeding").  In order to encourage such
agreements, the Commission's rules were amended to provide for the acceptance of
contingent applications that would facilitate a reduction in overall AM interference.  Id. at
4493.  The amended contingent application rule, 47 C.F.R. Section 73.3517, applies to both
deletions and modifications of existing interfering AM stations.  In amending the rule to
permit the filing of contingent applications that would "reduce interference to one or more
AM stations or . . . otherwise increase the area of interference-free service," the
Commission removed regulatory barriers that prevent or discourage individual AM stations
from entering into private agreements that would ultimately decrease interstation
interference and improve the quality of AM service.  Id. at 4492.  Contingent application
arrangements that propose the deletion or modification of an AM station require a
case-by-case public interest determination and the parties must demonstrate that a sufficient
"local service floor" will be maintained in the community losing a local transmission service
and throughout the service area that will experience a reduction in service due to the
deletion or modification.

Interference Reduction.  The Amendment demonstrates that the cancellation
of the KPAY(AM) license will eliminate substantial amounts of mutual interference
between KPAY(AM) and KOFY(AM).  Moreover, no new interference will be caused or
received as a result of the proposed modification of KOFY(AM)'s daytime facilities. 
(FN4).


Local Service Floor.  The Amendment demonstrates that the deletion of
KPAY(AM) will not create any new "white" area within KPAY(AM)'s former service area.
(FN5). Additionally, although a new 35 km2 "grey" 
area will be created, this "grey" area contains no population. (FN6).

 
Conclusion. We have considered (1) the amount of AM interference that will
be eliminated by the cancellation of the KPAY(AM) license, (2) the number of aural
services that will continue to serve KPAY(AM)'s service area and (3) the service gain
proposed by the KOFY(AM) modification application and we find that the public interest
will be served by Commission approval of the Agreement.

Accordingly, the Technical Services Agreement between Pacific FM, Inc., and McCoy
Broadcasting Company, Inc. is, to the extent indicated herein, APPROVED and the
application for a minor modification of station KOFY(AM), San Mateo, California's
daytime facilities (File No. BP-960523AC) is GRANTED.  This action is conditioned as
follows:

       This action is conditioned upon the surrender of the KPAY(AM), Chico,
       California, license to the Commission for cancellation prior to the commencement
       of Program Test Authority by KOFY(AM), San Mateo, California, with the
       facilities authorized by this construction permit, pursuant to the discontinuance
      of operation provisions in 47 C.F.R. Section 73.1730.


                                                                 Sincerely,




                                                                  Dennis Williams, Assistant Chief 
                                                                  Audio Services Division
                                                                  Mass Media Bureau   

__________________________________
Footnotes:

FN1: 
Although the Amendment was originally filed as an amendment to a pending application 
seeking to modify KOFY(AM)'s nighttime facilities (File No. BMP-960830AD), on February 
21, 1997, Pacific filed a correction to indicate that the Amendment was intended to 
amend the subject application.         
             
FN2: 
The Agreement was filed as part of an application to assign the license of KNSN(AM),
Chico, California (File No.  BAL-960523EB).  This application, granted July, 16, 1996, 
authorized the assignment of the KNSN(AM) license from Alta California Broadcasting, Inc. 
to McCoy.  Our records indicate that this assignment has not yet been consummated.  

FN3: 

The Agreement also calls for surrender of the KPAY(AM) license to be contingent upon
certain circumstances involving a modification application for KNSN(AM), Chico, 
California (File No. BP-960523AA).  We find, however, that there is no interference 
between KPAY(AM) and KNSN(AM) and thus no reason for us to allow any contingency 
between the KPAY(AM) surrender and the KNSN(AM) modification application.  
See 47 C.F.R.  73.3517.  See also Policies to Encourage Interference Reduction Between 
AM Broadcast Stations, 5 FCC Rcd 4492 (1990).  We note, however, that the KNSN(AM) 
modification application was granted on February 20, 1997.  See Broadcast Actions, 
Report No. 43936 (released February 25, 1997).

FN4:  
Although the 5 mV/m KOFY(AM) daytime contour proposed in the subject application
yielded theoretical overlap with the 5 mV/m daytime contour proposed in a pending modification
application (File No. BMP-960807AA) filed by the permittee of unbuilt station KIOQ(AM),
Folsom, California, on January 7, 1997, Pacific filed an amendment to the subject
application demonstrating an absence of actual overlap between the two proposed 
daytime contours.

FN5: 

 A "white" area is an area that does not receive interference-free primary service from an
authorized AM station or does not receive a signal strength of at least 1 mV/m from an
authorized FM service.  See 47 C.F.R. Section 73.14.

FN6: 

A "gray" area receives one full-time service.  See Interference Reduction Proceeding, 5 FCC
Rcd at 4496, n. 14.