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File pnmc5021 (.txt & .wp) is in directory \pub\Public_Notices\Miscellaneous. ************************************************************************* Before the Federal Communications Commission Washington, D.C. 20554 In re Applications of ) ) NORTH TEXAS RADIO, INC. ) ) For Construction Permit to ) File No. BP - 940218AB Change Community of License ) ) and ) ) NORTH TEXAS RADIO, INC. ) (Assignor) ) ) and ) File No. BAPL - 941221EA ) COLLIN COUNTY RADIO, L.C. ) (Assignee) ) ) For Assignment of License ) and Construction Permit of ) KAAM(AM), Plano, Texas ) MEMORANDUM OPINION AND ORDER Adopted: July 2, 1996 Released: July 11, 1996 By the Commission: 1. The Commission has under consideration: (1) an Application for Review filed on July 28, 1995 by Metro Broadcasters-Texas, Inc. ("Metro"), licensee of KHYI(FM), Howe, Texas, and KTLR-FM, Terrell, Texas; (2) a Joint Opposition filed by Collin County Radio, L.C. ("Collin County") and North Texas Radio, Inc. ("North Texas") on August 11, 1995; and (3) a Reply filed by Metro on August 22, 1995. 2. Metro requests review of an action by the Chief, Audio Services Division, approving the above-captioned application for assignment of license and construction permit. By letter to Kathryn R. Schmeltzer, Esq., dated June 29, 1995 ("Staff Decision"), the staff denied Metro's petition to deny, and granted the above-captioned assignment of license and construction permit for KAAM(AM), Plano, Texas, (formerly KWFT), from North Texas to Collin County. The Staff Decision also dismissed Metro's petition for reconsideration of a separate authorization to change KAAM's community of license from Wichita Falls, Texas to Plano. 3. In the Application for Review, Metro assigns as error three conclusions by the staff: (1) that Metro lacked standing to file the petition for reconsideration of the decision granting the change of community of license; (2) that the decision to grant KAAM's change of community application did not violate Section 307(b) of the Communications Act or applicable precedent; and (3) that Metro failed to raise a substantial and material question of fact that North Texas and Collin County had engaged in a premature transfer of control of the license of KAAM. After considering the arguments raised in the Application for Review, together with the Joint Opposition and the Reply, we conclude that the staff did not err in its determinations. Accordingly, we deny the Application for Review and affirm grant of the applications for a construction permit to change KAAM's community of license and for assignment of license and construction permit. I. BACKGROUND 4. Modification Application. North Texas filed an application for a construction permit to change its community of license from Wichita Falls to Plano on February 18, 1994. Metro did not oppose the application by filing either a petition to deny or an informal objection during its pendency. The staff granted the construction permit on November 9, 1994. Metro filed a petition for reconsideration of the Commission's grant on December 19, 1994. Metro stated that it did not file a petition to deny the North Texas application because Metro was unaware that processing of North Texas' application was proceeding until Broadcasting and Cable published a notice of the Commission's grant of the KAAM application on December 12, 1994. Metro alternatively asserted that it did not participate earlier because it could not have anticipated that the Commission would make a material error in processing the North Texas application. The staff dismissed the petition for reconsideration for lack of standing, in accordance with 47 C.F.R. Section 1.106(b)(1), because Metro had not filed a petition to deny the original major change application, and the staff determined that Metro had not shown good reason why it was not possible for it to participate in the earlier stages of the proceeding. 5. The Staff Decision separately considered the "public interest" argument raised by Metro in its petition for reconsideration, i.e., that the staff erred in not presuming for purposes of analysis under Section 307(b) of the Communications Act, 47 U.S.C. Section 307(b), that North Texas intended to serve the Dallas-Ft. Worth area, since Plano is located within the Dallas-Ft. Worth Urbanized Area. The staff determined that such a presumption is not established under applicable Commission policy, and that the cases relied upon by Metro were inapposite. The staff noted that Plano, which had no local transmission service, was entitled to a first local service preference in comparison with Wichita Falls, which had ten additional radio stations licensed to it, including eight FM stations and two AM stations, as well as three television stations. The staff found that these facts were consistent with those found to promote the "equitable and efficient" distribution of radio service under Section 307(b). 6. Assignment Application. North Texas filed an application to assign its license and construction permit to Collin County on December 21, 1994. Metro filed a petition to deny the assignment on February 8, 1995. Metro alleged that North Texas and Collin County had engaged in an unauthorized transfer of control of the license of KAAM. Metro alleged that Collin County had been "significantly involved" in virtually every aspect of KAAM's affairs since KAAM filed its application to relocate in February 1994. Metro alleged specifically that: (1) a principal of Collin County prepared the engineering materials for the North Texas major change application; (2) Collin County's attorneys filed pleadings on behalf of North Texas; (3) an Asset Purchase Agreement ("Purchase Agreement") entered into by North Texas and Collin County on December 20, 1994 obligated North Texas to cease broadcasting at its former location and "cooperate in the relocation of the Station's facilities" to Plano; (4) Collin County's managers and "other interested investors" were responsible for moving KAAM's equipment; (5) Collin County had pre-paid North Texas $200,000 of the total consideration being given for KAAM; and (6) a time brokerage agreement with a "buy-out" penalty effectively gave Collin County the right to continue supplying KAAM's programming indefinitely. 7. The Staff Decision rejected Metro's argument that it had raised a substantial and material question of fact that North Texas and Collin County had engaged in an unauthorized transfer of control. The staff found: (1) that the Collin County principal who prepared the engineering materials for the North Texas relocation application had done so as a consulting engineer prior to his involvement in Collin County; (2) that North Texas had separately retained the same law firm as Collin County as early as February 14, 1994; (3) that the President and majority shareholder of North Texas, Don Whan, had maintained control over the station move based on the facts that he had hired the attorney and engineer for the station relocation, and he had signed relevant FCC applications, including a February 6, 1995 request for special temporary authority to remain silent during construction of the new facility; (4) that the Purchase Agreement in December 1994 merely confirmed the intention of North Texas to relocate, which had been planned for nearly a year, and had recently been authorized; (5) that the so-called "prepayment" to North Texas was actually a down payment and a loan to be repaid in the event that Collin County did not purchase KAAM; and (6) that the buy-out penalty for a nonexistent time brokerage agreement did not by itself indicate a transfer of control. II. DISCUSSION A. Standing to File Petition for Reconsideration 8. Metro argues that the staff erred by not affording its petition for reconsideration of the staff's action granting KAAM's application to change community of license to Plano full procedural status as a petition for reconsideration pursuant to Section 1.106(c)(2) of the Commission's Rules, 47 C.F.R. Section 1.106(c)(2). This section states that a petition for reconsideration "which relies on facts not previously presented" to the Commission or to the designated authority may be granted only where the Commission or the designated authority "determines that consideration of the facts relied on is required in the public interest." Id. 9. The staff, however, did not dismiss Metro's petition for reconsideration because the petition relied upon new facts. The staff dismissed Metro's petition because Metro had not met the two-part showing required of a party initially attempting to enter a proceeding at the petition for reconsideration stage. See 47 C.F.R. Section 1.106(b)(1); KRPL, Inc., 5 FCC Rcd 2823 (1990) (dismissing petition for reconsideration where petitioner failed to demonstrate good cause for not filing petition to deny). Such a party is required: (1) to state with particularity the manner in which the person's interests are adversely affected by the action taken; and (2) to show good reason why it was not possible to participate in the earlier stages of the proceeding. 47 C.F.R. Section 1.106(b)(1). Metro satisfied the first part of this test by establishing that it would be a competitor of the relocated station. Metro failed to satisfy the second part of the test. Metro stated in its petition for reconsideration that it did not file a petition to deny North Texas' major change application because it could not have anticipated that the Commission would make a material error in processing the application. This argument does not rise to the level of a "good reason" for purposes of applying Section 1.106(b)(1). See, e.g., Press Broadcasting Co., 3 FCC Rcd 6640 (1988), aff'd sub nom. United Church of Christ v. FCC, 911 F.2d 803 (D.C. Cir. 1990) (denying standing to file petition for reconsideration based on claim that lack of participation earlier was due to a mistaken belief that an application would be denied); Concord Telephone Exchange, Inc., 56 RR 2d 653, 656-57 (1984) (stating that "a person who has a right to participate in a proceeding before the Commission cannot delay exercising that right until after the Commission has acted and then expect to be allowed to participate by filing post-grant pleadings[ ]"). 10. The staff correctly decided that Metro's petition for reconsideration was subject to dismissal as a result of its failure to participate earlier in the proceeding. The staff then separately considered Metro's Section 307(b) argument and determined that there was no public interest consideration that would warrant a grant of the petition. Thus, Metro's reliance on Cosmos Broadcasting of Louisiana, Inc., 56 FCC 2d 320 (1975) (considering subject matter of dismissed petition for reconsideration -- EEO issues -- on public interest grounds), and Section 1.106(c)(2), is unavailing here, where the staff has already fully considered and rejected its public interest argument. B. Section 307(b) Issue 11. Metro asserts that the staff's decision granting North Texas' application to change its community of license to Plano was contrary to Commission precedent applying Section 307(b). According to Metro, North Texas' application to move from Wichita Falls should have been denied because North Texas failed to rebut a "presumption" that it actually intended to serve the entire Dallas-Ft. Worth area, given that Plano is located within the Dallas-Ft. Worth Urbanized Area. Metro cites as authority for its position a series of cases beginning with Faye and Richard Tuck, Inc., 3 FCC Rcd 5374 (1988) ("Tuck"). The staff correctly determined that the cases relied upon by Metro were inapposite, and that no such presumption exists with regard to individual AM applicants seeking a change in community of license. 12. The Commission is charged with the responsibility "to provide a fair, efficient and equitable distribution of radio service . . . ." 47 U.S.C. Section 307(b). Thus, whenever an applicant seeks to change its community of license, the Commission compares the relative needs of the existing and proposed communities for radio service. See Ark-Valley Broadcasting Company, Inc., 15 FCC 818, 820 (1951). The Commission generally has preferred a community with no local transmission service over a community that already has a local station without regard to the comparative ability of each applicant to serve its respective community. Tuck, 3 FCC Rcd at 5376. Metro, relying on a line of cases involving comparative hearings, and FM and TV allotment proceedings, argues that the staff should have adopted a presumption when analyzing KAAM's modification application that KAAM intended to serve the Dallas-Fort Worth community and that had the staff done so it could not have concluded that Plano was to be preferred over KAAM's then existing community of license, Wichita Falls. Metro concludes that the staff erred in failing to designate the change of community of license application for hearing. 13. In Tuck, the first case relied upon by Metro, the Commission took the opportunity to clarify its Huntington doctrine, which the Court of Appeals had previously found confusing. Tuck, 3 FCC Rcd at 5376; see New Radio Corp. v. FCC, 804 F.2d 756, 762 (D.C. Cir. 1987). The Huntington doctrine is a limited exception to the usual 307(b) presumption that every separate community needs at least one local transmission service. Id. Since 1951, the doctrine has been applied in comparative hearing cases to defeat the dispositive preference for first local transmission service which applicants proposing service to suburban communities might otherwise enjoy. It is applied where competing applications are filed for separate communities that are dependent upon, and contiguous to, a central city, and the applicants propose sufficient power to serve the entire metropolitan area. The rationale is that selection should not be based on a Section 307(b) preference in such cases because all applicants are likely proposing to serve the metropolitan area. Selection among mutually exclusive applications is based instead on the standard comparative criteria. Tuck, 3 FCC Rcd at 5376. The Commission noted in Tuck that the Court of Appeals requires the Commission to give adequate reasons for any extension of this "exceptional" doctrine. See id. at 5377 (citing Miners Broadcasting Service, Inc. v. FCC, 349 F.2d 199, 201 (D.C. Cir. 1965)). 14. In Tuck, the Commission adopted the Census Bureau's Urbanized Area to define a metropolitan area "community" for purposes of applying the Huntington doctrine. See Tuck, 3 FCC Rcd at 5379. The Commission later indicated that Huntington could be applied in proceedings to amend the FM and TV Tables of Allotments. See Modification of FM and TV Authorizations to Specify a New Community of License, 4 FCC Rcd 4870 (1989), clarified, 5 FCC Rcd 7094, 7095-96 & n.11 (1990). The Commission was addressing a concern that the procedural flexibility afforded by its recently adopted rule allowing FM and TV applicants to specify a new community of license, 47 C.F.R. Section 1.420(i), could result in "the wholesale migration of stations from rural to urban areas." Id. at 7096. In 1992, the staff applied a Huntington-type analysis to an FM allotment proceeding to deny a first local service preference to Norwood, which is located within the Cincinnati Urbanized Area. See Fairfield and Norwood, Ohio, 7 FCC Rcd 2377, 2378 (MMB 1992). We have also recently applied Huntington, in a limited context, in a TV allotment proceeding. See Bessemer and Tuscaloosa, Alabama, 11 FCC Rcd 2967 (1996) (awarding a first local service preference to Bessemer, which is 15 miles from Birmingham, which is located within the Birmingham Urbanized Area, and which has a population 1/8 that of Birmingham). Notwithstanding these extensions of Huntington to TV and FM allotment proceedings, we have never required application of the Huntington doctrine to AM singleton applicants, i.e., those not facing mutually exclusive applications. 15. Since 1975, AM singleton applicants have been permitted to specify first local service to suburban communities without facing a presumption that they actually intend to serve the larger nearby community. See Suburban Community Policy, the Berwick Doctrine, and the De Facto Reallocation Policy, 93 FCC 2d 436, 439 (1983), recon. denied, 56 RR 2d 835 (1984). While we have always required a showing that such changes comply with our standards under Section 307(b), our application of a Huntington analysis in the AM service has been limited to cases involving mutually exclusive applicants. There has been no recent rule change, as with FM and TV, that would raise a concern that AM applicants will be able to engage in a wholesale migration from rural to urban areas. The staff therefore correctly decided that the extension of the Huntington doctrine to a singleton AM applicant attempting to change its community of license, as urged by Metro, was not required by existing policy, and that North Texas was entitled to a first local service preference for specifying Plano as its new community of license. In any event, it does not appear that consideration of Huntington would likely result in depriving North Texas of a first local transmission service preference in relocating to Plano. An examination of KAAM's proposed 5.0 mV/m daytime contour indicates less than 50% coverage of the Dallas-Fort Worth metropolitan area. Secondly, Plano is located 15 miles from downtown Dallas and has a 1990 U.S. Census population of 128,713 (one-eighth that of Dallas), which is estimated to be 150,600 as of 1995. See Rand McNally Commercial Atlas and Marketing Guide (1995). Thirdly, Plano has numerous indicia of independence, including the fact that it is incorporated, that it has hospitals, banks and post offices, and that it is listed by Rand McNally as a "principal business center." See id. Consequently, we find that grant of North Texas' change of community of license application for KAAM without designation for hearing on 307(b) issues was appropriate. C. Unauthorized Transfer of Control 16. Section 310(d) of the Communications Act states in pertinent part: No construction permit or station license, or any rights thereunder, shall be transferred, assigned, or disposed of in any manner, voluntarily or involuntarily, directly or indirectly, or by transfer of control of any corporation holding such permit or license, to any person except upon application to the Commission and upon finding by the Commission that the public interest, convenience, and necessity will be served thereby. 47 U.S.C. Section 310(d). Section 73.3540(a) of the Commission's Rules provides that the "[p]rior consent of the FCC must be obtained for a voluntary assignment or transfer of control." 47 C.F.R. Section 73.3540(a). 17. In ascertaining whether a prohibited transfer of control has occurred, we have traditionally looked beyond legal title to see whether a new entity or individual has obtained the right to determine basic operating policies of the station. See WHDH, Inc., 17 FCC 2d 856, 863 (1969), aff'd sub nom. Greater Boston Television Corp. v. FCC, 444 F.2d 841 (D.C. Cir. 1970), cert. denied, 403 U.S. 923 (1971). Although a licensee may delegate certain functions to an agent or employee on a day-to-day basis, ultimate responsibility for essential station matters, such as personnel, programming and finances, is nondelegable. Southwest Texas Public Broadcasting Council, 85 FCC 2d 713, 715 (1981). 18. Metro alleges that the Bureau erred in failing to conclude that Metro raised a substantial and material question of fact that North Texas and Collin County had engaged in an unauthorized transfer of control of the license of KAAM. In urging the necessity for a hearing, Metro relies on California Public Broadcasting Forum v. FCC, 752 F.2d 670 (D.C. Cir. 1985) for the proposition that "the determination of which factual version is indeed accurate is precisely the function of an evidentiary hearing." Id. at 680. However, a hearing is only warranted where disputed facts relate to a substantial and material issue. See id. at 674. In this case, there is no dispute as to facts, only as to the conclusions to be drawn from those facts. 19. Metro alleges that "Collin County's principal owner," Jack Sellmeyer, prepared KAAM's application to change its community of license. North Texas does not dispute this fact. Jack Sellmeyer is a consulting engineer whose firm is listed in Commission records as providing engineering services for North Texas for nearly a decade. His involvement in the application does not therefore demonstrate control by Sellmeyer in connection with the assignment application. Metro also urges the Commission to infer that an unauthorized transfer of control has taken place from the fact that "Collin County's Washington attorney prepared North Texas' opposition to Metro's petition for reconsideration." North Texas does not dispute this fact, but instead contends that no unauthorized transfer of control has taken place and provides supporting documentation that North Texas had separately retained the attorney in question, and that it had done so prior to filing its application to change community of license. 20. Metro urges the Commission to conclude that the proposed buyer, Collin County, "took KAAM off the air in anticipation of the Plano move and paid for the relocation" based on the facts: (1) that KAAM went off the air after North Texas entered into the purchase agreement; (2) that North Texas received a deposit and entered into a loan agreement with Collin County; and (3) that a Collin County principal recorded a telephone message announcing that KAAM had ceased broadcasting from Wichita Falls and that Collin County investors had transported the station's broadcasting equipment to a warehouse, and were making arrangements for KAAM's tower construction and looking for new studio and office space. These facts also are not disputed. The Bureau declined to reach the conclusions urged by Metro, however, based on the additional facts that KAAM had been planning to move as early as February 1994, when it filed its major change application; that the loan amount was to be repaid by North Texas in the event that Collin County did not purchase KAAM; and that the Purchase Agreement in question called for the buyer and seller to "cooperate" in the relocation of the station facilities. We do not agree with Metro that the provisions calling for KAAM to cease broadcasting and relocate are indicative of a premature transfer of control in this case. The contract provisions merely assured the intended buyer, Collin County, that the licensee would maintain the status quo ante, i.e., that the licensee would continue to prosecute the change of community of license that it had begun nearly one year prior to entering into the purchase agreement, and that had already been approved by the Commission. Furthermore, the phone message relied upon by Metro for its assertion of unauthorized transfer of control indicated only that the speaker had knowledge of the relocation rather than control over it. The Collin County principal, Hue Beavers, simply stated that KAAM had ceased broadcasting from Wichita Falls "never to return to the air at that location," and that several persons associated with the proposed buyer "picked up much of the transmitting equipment from Wichita Falls and transported it to a warehouse." 21. Metro criticizes the Bureau's decision as not being based on substantial evidence because it credited the declarations of principals of the proposed seller and buyer, Don Whan and Jack Sellmeyer, respectively, which it characterizes as "self-serving and vague," and because the Bureau failed to weigh these declarations against the "specific facts" presented in Metro's Petition. Metro contends that neither Whan nor Sellmeyer provided sufficient details about how Whan "supervised" the removal of the four towers from the Wichita Falls site, or how Whan was "active" in the relocation of the station's equipment from Wichita Falls and the construction of the Plano facility to support the Bureau's conclusion that no unauthorized transfer of control took place. Metro states also that it finds "significant" the fact that Mr. Beavers, the Collin County principal, made no mention in his public phone messages of Whan having any involvement in transporting KAAM's equipment. 22. Metro, however, mischaracterizes the Bureau's decision in asserting that it was based solely on Whan's and Sellmeyer's declarations. In reviewing the record as a whole, the Bureau found that Whan remained in control of the station's relocation in part because Whan had shown that he had hired the attorney for the station relocation, and that he had signed relevant FCC applications, including a Feb. 6, 1995 request for special temporary authority to remain silent during construction of the new facility. Furthermore, it is not significant that Hue Beavers made no mention of Whan's supervision of the move in the listeners' telephone message. Metro's implication that such omission constitutes evidence that an unauthorized transfer of control took place is purely speculative and unsupported. Consequently, the Bureau properly found that Metro failed to raise a substantial and material question of fact that Whan abdicated control of the relocation. 23. Metro also disputes the Bureau's finding that a clause in the Asset Purchase Agreement describing a future time brokerage agreement did not indicate that control over KAAM had passed from North Texas to Collin County. Metro reiterates its position that the "buy-out" provisions of the potential time brokerage agreement are evidence of Collin County's unauthorized assumption of control over KAAM. The Bureau found that the buy-out payment - - return of Collin County's financial contribution and TBA payments, plus 50% of the net proceeds of any sale of the station to a subsequent purchaser in the event that the proposed transaction did not close -- was designed to ensure performance of the sale agreement and that the damages did not relate primarily to termination of a time brokerage agreement. We affirm the staff's decision that the inclusion of the buy-out payment clause in the sales agreement did not confer control over KAAM to Collin County under the circumstances of the present case, and that it did not indicate that Collin County was in a position to control the licensee. Furthermore, since such agreement was never executed, and according to the parties' counsel, will not be, it is unnecessary for us to decide whether such an agreement would violate our time brokerage policy. 24. We conclude that Metro has failed to raise a substantial and material question of fact that North Texas and Collin County had engaged in an unauthorized transfer of control. Furthermore, the Bureau's decision that Metro had failed to do so was based on substantial evidence. IV. CONCLUSION 25. After carefully examining the arguments raised in the Application for Review, together with the Joint Opposition and the Reply, we conclude that the staff did not err in determining: (1) that Metro lacked standing to file the petition for reconsideration; (2) that the decision to grant KAAM's change of community application did not violate Section 307(b) of the Communications Act or applicable policy and precedent; and (3) that Metro failed to raise a substantial and material question of fact that North Texas and Collin County had engaged in a premature transfer of control of the license of KAAM. 26. Accordingly, IT IS ORDERED, That pursuant to Section 1.115(g) of the Commission's Rules, 47 C.F.R. Section 1.115(g), the Application for Review filed by Metro Broadcasters-Texas, Inc. on June 29, 1995 IS HEREBY DENIED. FEDERAL COMMUNICATIONS COMMISSION William F. Caton Acting Secretary