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A. 1. a.(1)(a) i) a) 1. 1. 1. a.(1)(a) i) a)#X\  P6G;P#X01Í ÍX01Í Í#Xj\  P6G; DXP#uuuuuuuuuuuuuuuxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxN/>/>/>/x]SSSSx]x]x]x]xSxSx]SSxSxSf]xSxSxSxIxIxWxIx{nInInInISSSWS]a?/?]?9?]]WW]n/nKn9nCn/x]xx]x]SSxxIxIxI]?]?]?]WnUn9nax]x]x]x]x]x]xxWnInInIx]n9x]]?n9xSz+SS8-8WuuuuuuuuuuuuuuuuuuuuuuuuuuuuuuuuuuuuuuuuuuuuuuuuxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxN8HH"&H>XHH8HB8>HH^HH>"".2",2,2,"222N2222"&22H22,006"6."""""""""""2H,H,H,H,H,XAB,>,>,>,>,""""H2H2H2H2H2H2H2H2H2H2H,H2H1H2H2H282H,H,H,B,B,B6B,H?>,>,>,>,H2H2H2H6H2H6H2""2"""2F866H2>>(>">">H2;H2H2H2H2XHB"B"B"8&8&8&86>*>>.H2H2H2H2H2H2^HH6>,>,>,H2>"H28&>"H2?22!!WFFFFFFFFFFFFFFFFFFFFFFFFFFFFFFFFFFFFFFFFFFFFFFFFxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxN$<<$.2",2222`2 LL2 LL2L"",,2d""d<d<CCYYdCCddCYCdYzzzzCCCCqodYYYYYYYYYYY8888dddddddndddddddxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxNd``4JUU``````Codd`C88UU`88``zzdddvoo8UdC"d`d9dCCz4d`o`d``Y`s]zUvdYY;;;;zzozoY~NYdYC8YooYdYzvdzddYYzozzz~C`zYzzzz44```````z`sdYC\   pxtll\tll@\@\`L"5@^*7DSS77S^*7*.SSSSSSSSSS..^^^Jxooxf]xx7Axfxx]xo]fxxxxf7.7NS7JSJSJ7SS..S.SSSS7A.SSxSSJP!PZ*7777CE7SSxJxJxJxJxJooJfJfJfJfJ7.7.7.7.xSxSxSxSxSxSxSxSxSxSxJxSxSxSxSxS]SxSxJxJoJoJoJfJfJfJxSxSxxSxSxSxSCS7S777SAxSf.fExSxSxSxo7oE]A]AN:*LS7JSSSSS.4}}S2S}277JJS77SS7J72t7[[[[^ee*C`^.wRSSn[Cfx`xWlRx[][ceIfIs`Wx[rriwge*7DSS77S^*7*.SSSSSSSSSS..^^^Jxooxf]xx7Axfxx]xo]fxxxxf7.7NS7JSJSJ7SS..S.SSSS7A.SSxSSJP!PZ7SJSS7]777JJ:S7A7xx*7SSSS!S7.S^7SC[227`L*724S}}}Jxxxxxxoffff7777xxxxxxx^xxxxxx]SJJJJJJoJJJJJ....SSSSSSS[SSSSSSSxxxJxxxxJxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxx1xxx1xxx1xxx1xxxxxxxxxxxxxff]f]oJiAoJSxJ8.xJo]]JoSJxfcSfSSrJxJof]fffi8PxxfJffffz++PPPPPPPxxxfP`SJ8Muu]daqqZZnn{{xu{{M{aZZ5M5M҅P?k"5@^2Coddȧ8CCdr2C28ddddddddddCCrrrdzNdzoȐC8CtdCdoYoYCdo8Co8odooYNCodddYO,Oh2CC!CCPRCdodddddȐYYYYYN8N8N8N8oddddooooddoddddzodddYYYYYYddddooPoNoNCNodo8RoodȐYYoNoNNF2ldCdddddd#"  Commission, and that the proceeds of the initial assignment of the license for such  channel, or any portion thereof, shall be used solely in furtherance of  Qnoncommercial broadcast operations, or for such other purpose as the Federal  X-Communications Commission may determine appropriate.He {O4- xԍ #X\  P6G;P#In the Sixth Report and Order adopting the Television Table of Allotments, the Commission stated that a non xcommercial educational station operating on a reserved channel, which seeks to operate on a commercial basis,  x"would by appropriate rule making proceedings be required to petition for a change in the character of the channel  xassignment involved. It will then have to file an application for a new license, in competition with any others who  {OV- xmay seek the channel."  Sixth Report and Order in Docket Nos. 8736, et al., 41 FCC 148, 212, n.51 (1952); see also  {O - x;Amendments to the Television Table of Assignments to Change Noncommercial Educational Reservation, 59 RR 2d  {O - x: 1445, 145859 (1986)((Intraband Television Channel Exchanges); recon. denied, 3 FCC Rcd 2517 (1988). The cited statutory provisions expressly authorize the Commission to avoid these procedures in acting on WQED's request.  x   x2. By Public Notice released June 26, 1996, we afforded interested persons an  x/opportunity to comment on the public interest considerations, as outlined by the statutory  xLguidelines under which we must make our determination, as well as the factual representations  xjcontained in the Petition. Comments were filed on July 5, 1996 by The Alliance for Progressive  X1- xAction and the QED Accountability Project (Alliance),gX1e yO- xԍ #X\  P6G;P#The Alliance states that it is a coalition of approximately 40 public interest organizations in the Greater  xPittsburgh area, and that it has sponsored the QED Accountability Project since 1993 as a "watch dog" organization for public television.g The Association of Local Television  X - xStations, Inc. (ALTV), e yO- xԍ #X\  P6G;P#ALTV states that it is a nonprofit, incorporated association of broadcast stations unaffiliated with the ABC, CBS or NBC networks. and Pittsburgh Educational Television, Inc.X P e yO- xԍ #X\  P6G;P#PET states that it is a newly organized nonprofit corporation formed to apply for Channel *16 if the frequency  xbecomes available for application. PET also filed a petition to revoke WQEX(TV)'s license on the ground that WQED has admitted that it is no longer financially qualified to be a Commission licensee. Comments were also  xsubmitted on behalf of Channel 29 Associates, licensee of low power television station WBPA xzLP, Channel 29, Pittsburgh, a WB Network affiliate; Choice Olean T.V. Station, Inc., licensee  xof low power television station W20AB, Olean, New York; the St. Louis Regional Educational  xand Public Television Commission, licensee of noncommercial educational television station  xKETC, St. Louis, Missouri; Standfast Broadcasting Corp., licensee of WYDC, Channel 48,  xMCorning, New York; Unicorn Communications, permittee of WNGS, Channel 67, Springville,  xNew York; and Jerry L. Toms. In addition, the Commission received over one hundred letters  xfrom viewers, community organizations and government officials commenting on the merits of  XK-WQED's petition. WQED and Alliance filed comments on July 9, 1996.YKpe yOl#- x<ԍ #X\  P6G;P#WQED filed a Motion to Strike Alliance's July 9th filing as an unauthorized pleading. In our Public Notice  x[inviting comments, we stated that "interested persons may file comments no later than Friday, July 5, 1996.  xJResponsive comments may be filed no later than Tuesday, July 9, 1996. No further submissions are contemplated."  xAlliance's July 9th filing was not filed in response to any of the comments filed on July 5th, but merely reiterates  xarguments made in its earlier comments, and attaches copies of additional letters sent to the Commission opposing  yOT'-WQED's petition. Accordingly, we will grant WQED's motion to strike Alliance's July 9th filing.Y"K,-(-(ZZ "Ԍ X-ԙ" BACKGROUND ă  X-   x 3. Section 73.606(b) of the Commission's rules sets forth the Television Table of  xAllotments in which specific channels are allotted to specific communities. Channels designated  x{with an asterisk are reserved for noncommercial educational use and are licensed only to  X- xynonprofit educational organizations or municipalities.  See 47 C.F.R.  73.606, 73.621. Channel  x*13, Pittsburgh was reserved for noncommercial educational use in 1952 at the request of the  xStanding Committee of Educators for an Educational Television Station, a consortium of local  XJ- xcolleges, universities and school systems, and other area colleges and universities. See Sixth  X5- xReport and Order, 41 FCC at 267275 (1952). WQED initiated service on Channel *13 in 1954.  xIn 1958, WQED petitioned the Commission to assign a second reserved channel to Pittsburgh so  xthat it could enlarge the classroom and home instruction service offered on WQED(TV), and  X - x-provide specialized educational service for industries and professions in the Pittsburgh area. e yOk - xԍ #X\  P6G;P#The licensee of WQED(TV) and WQEX(TV) has undergone several corporate names changes since acquiring the stations. Its current name is WQED Pittsburgh. In assigning the second reserved channel, the Commission concluded that:  PXx[A] compelling need has been shown for a second educational television channel  in Pittsburgh. The use of Channel 13 for 811/2 hours per week averages almost  12 hours daily and from the standpoint of efficient use of the channel, compares  favorably with regular commercial television broadcast stations. Under these  2circumstances, the assignment of a second educational TV channel to Pittsburgh cannot be considered prodigal.   V - xAmendment of Section 3.606, Table of Assignments, Television Broadcast Stations (Pittsburgh,  X- x?Pennsylvania), 17 RR 1563, 1565 (1958); see also Amendment of Section 3.606, Table of  X- xAssignments, Television Broadcast Stations (Pittsburgh, Pennsylvania), 17 RR 1568d (1958) (noncommercial educational reservation changed from Channel 22 to Channel 16).   x4. WQED(TV) reaches more than 680,000 households per week, and WQEX(TV) reaches  x.over 400,000 households per week, according to recent Nielsen ratings. In its Petition, WQED  x.states that WQED(TV) currently operates on Channel *13 for seventeen hours per day, with a  xfull daytime schedule of PBS educational children's programming, followed by "The News Hour  x[with Jim Lehrer" and other PBS and locallyproduced adult programming. WQEX(TV) operates  xon Channel *16 for sixteen hours per day, and broadcasts a mix of local, PBS, and syndicated  x=programming such as "Perry Mason" and "The Honeymooners," shown without commercials.  xOver the years WQED has also produced, for its own presentation and for distribution over the  xPBS network, programs such as "Mister Rogers' Neighborhood," "Once Upon a Classic,"  x"Wonderworks," "Where in the World is Carmen Sandiego," "The Infinite Voyage," and "National  xGeographic Specials." WQED has also produced such local programming as the "Pittsburgh History Specials;" "The Editors," a public affairs series; "Black Horizons," a minority affairs  xseries; and three prime time, weekly callin programs, "Health Talk," "Agewise Weekly," and"# ,-(-(ZZe"" "Cullen/Devlin."  X-v WQED'S PETITION TO DELETE NONCOMMERCIAL RESERVATION ă   x5. By its petition, WQED requests that the Commission amend Section 73.606 of its rules  xto delete the noncommercial reservation of Channel *16, the frequency on which WQEX(TV)  xoperates, thus allowing WQED to assign the license for WQEX(TV) to a commercial broadcaster.  xWQED proposes to use the proceeds of the sale of WQEX(TV) to relieve its severe financial  xjdistress and create an endowment to enable its flagship station, WQED(TV), to implement new  xjlocal and national programming initiatives and make major fixed asset acquisitions. In support of its petition, WQED states the following.  X -  x6. WQED's Current Fiscal Crisis. According to WQED, it is in "financial distress" and  x\"technically insolvent." To document this contention, WQED submits: (1) a June 19, 1996  xanalysis of the results of operations and financial condition of WQED, prepared by H. Melvin  x/Ming, Executive Vice President and Chief Operating Officer of WQED; (2) audited financial  xstatements for WQED as of and for the years ended June 30, 1993, 1994 and 1995, and an  xIndependent Auditor's Report on Supplementary Information dated June 5, 1996, prepared by  xKPMG Peat Marwick LLP (KPMG); and (3) a June 19, 1996 analysis entitled "Study of the  xFinancial Condition of WQED Pittsburgh" prepared at Duquesne University (the "Duquesne University Study").   x7. WQED is a taxexempt organization under Section 501(c)(3), and a nonprivate  xfoundation under Section 509(a)(1) of the Internal Revenue Code of 1986. KPMG states that the  x]Company's financial statements are presented in accordance with Statement of Financial  xAccounting Standards No. 117, "Financial Statements of Not for Profit Organizations," which  x-requires classification of net assets and changes therein according to the existence or absence of  xidonorimposed restrictions. Revenues are reported as increases in unrestricted net assets, unless  xyuse of the related assets is limited by donorimposed restrictions, and expenses are reported as  Xe- xdecreases in unrestricted net assets.&ee yO- xԍ #X\  P6G;P# "Permanently restricted net assets" are subject to donorimposed stipulations that they be maintained  xpermanently. Generally, the donors of those assets allow WQED to use the income earned on related investments  xfor general or specific purposes. "Temporarily restricted net assets" are subject to donorimposed stipulations that  xmay or will be met by actions of the Company and/or the passage of time. Once the temporary restrictions on net  {O- xassets expire (i.e., the donorstipulated purposes have been fulfilled and/or the stipulated time period has elapsed), the net assets are reported as reclassified.& According to KPMG, the audited financial statements show  xthat the Company reported net unrestricted operating income or (loss) of $(3.0) million, $.1  xmillion and $(4.8) million and negative cash flow from operations of $1.2 million, $.6 million and $1.5 million for the fiscal years ended June 30, 1995, 1994 and 1993, respectively. These" B,-(-(ZZ>"  xlosses resulted in an unrestricted net asset deficit of $6.1 million at June 30, 1995. Current  X- x!liabilities exceeded current assets by $9.5 million as of June 30, 1995.7 e yOb- x-ԍ #X\  P6G;P#Unaudited schedules submitted by WQED show an unrestricted operating loss of $1.48 million for the nine months ending March 31, 1996, and that current liabilities exceed current assets by $10.7 million as of that date.7 According to the  xfinancial statements audited by KPMG, WQED had restricted cash and investments of  x{approximately $6.4 million as of June 30, 1995. Its fixed assets, which consist primarily of  xWQED's building and broadcasting equipment, had a depreciated value of approximately $5.7 million as of June 30, 1995.   x8. WQED states that it has a revolving credit facility with Mellon Bank, which is secured  xby all of the assets of the Company. According to WQED, the borrowing agreement imposes  xcertain covenants which restrict capital expenditures and additional borrowings, and require the  xCompany to maintain specified minimum amounts of net assets at the Bank and unrestricted net  xrevenue on a quarterly basis. The audited financial statements report that WQED had an  xoutstanding bank debt balance of $6.4 million at June 30, 1995. Unaudited schedules report that  xthe bank debt totalled $8.75 million for the nine months ending March 31, 1996 and debt service  xfor the same period was $630,000. WQED further states that it is indebted to its permanently  xzrestricted endowment fund in the amount of $2.2 million for funds borrowed in fiscal 1993 to  xprovide working capital, and $2.3 million for funds borrowed in April 1996 to repay a portion  xof the bank debt then due and payable. WQED also states that it has $2.9 million in overdue accounts payable, for a total current debt of $14.5 million.  X4-  |x9. WQED asked a Duquesne University team of professors and graduate students to  xNanalyze WQED's financial condition and explore various options to improve its financial  xcondition. The Duquesne University study concludes that WQED's financial crisis is the result  xof accumulated financial deficits over a number of years, and that the Company is now  x"technically insolvent and continues to operate only with the tolerance of its creditors." The  x[study further concludes that WQED's financial crisis is not capable of selfcorrection, and that  xwithout an immediate, major infusion of cash, "WQED Pittsburgh faces the very real possibility  xof closing its doors." After analyzing several possible options for raising the large amount of  xcash required by WQED at this time, the Duquesne University study concludes that the only  xsolution to WQED's current insolvency crisis is the conversion of Channel *16 into a commercial  xlicense, which would give the Company either the capacity to sell the license and use the  X7-proceeds to retire its debt, or use the asset as collateral for a longterm loan.xx  X -  x10. Public Interest Considerations. WQED asserts that dereservation of Channel *16  xwould be in the public interest because without the sale of WQEX(TV), WQED will be forced  xto drastically curtail or eliminate production of both local and national programming. In addition,  x\the infusion of capital from the sale of WQEX(TV) will allow management time to implement  xplans to secure WQED's long term survival and allow it to make the transition to digital  xtelevision broadcasting and produce more issueoriented community programming. WQED also  xasserts that the commercial sale of WQEX(TV) will dissolve an existing duopoly WQED(TV)"#  ,-(-(ZZe""  x>and WQEX(TV) in the Pittsburgh market, and add a new commercial voice. In this regard,  xjWQED states that Pittsburgh has fewer commercial allocations than comparably sized markets,  xand that as a commercial channel, Channel 16 would be available for a WB Network affiliation.  xMoreover, according to WQED, there will be no reduction in the amount of locallyproduced,  xissueresponsive programming in Pittsburgh because WQED(TV) will expand its hours of  x-operation from seventeen to twentyfour hours, in order to continue local programming presently  xbroadcast on WQEX(TV). WQED further claims it no longer needs WQEX(TV) to provide an  x[additional distribution outlet for classroom instructional programming, the original purpose for  x\which the second channel was obtained, and that there is widespread public support for its  X1- x?proposal to dereserve and sell WQEX(TV).W X1e yO - x;ԍ #X\  P6G;P#WQED submitted numerous letters from government officials, educational institutions, charitable and cultural  xorganizations, employees and viewers stating their support for WQED's proposal to sell WQEX(TV) to a commercial operator.W Finally, WQED asserts that its proposal is  xconsistent with Congress' desire that public broadcasting become more selfsufficient and spectrum efficient.  X -  Ox11. Proposed Use of the Sale Proceeds. Upon dereservation of Channel *16, WQED  xproposes to sell WQEX(TV) to an unidentified commercial broadcaster, and use the proceeds to  xpay down its financial liabilities. Any remaining proceeds would be placed in a permanently  xrestricted endowment, the income from which would be utilized to fund (i) current and new local  xand national programming initiatives, and (ii) major fixed assets acquisitions, including  xZacquisitions necessary to permit WQED(TV)'s conversion to digital broadcasting. The Company  xstates that representatives of its Board of Directors and the WQED Pittsburgh Community  xAdvisory Board will sit on the Board of the endowment trust, which will engage its own financial  x[advisors and accountants. WQED intends that management's discretion to withdraw earnings from the permanently restricted fund will be limited.  X-  !x12. The Cornerstone Contingent Obligation. In addition to the bank debt and overdue  xiaccounts payable reported in its audited financial statements, WQED also disclosed in its Petition  xthat it would use the proceeds of the sale of Channel 16 to pay a currently contingent obligation  xNto Cornerstone TeleVision, Inc. (Cornerstone). As explained in the Management Report  xsubmitted as Exhibit 4 to its Petition, this contingent obligation arises from a May 1996  xMagreement between WQED and Cornerstone, the licensee of commercial station WPCBTV,  xChannel 40, Greensburg, Pennsylvania, which WQED entered into as a contingency plan should  xthe Commission decline to dereserve Channel *16. Under the terms of the agreement, Cornerstone, a nonprofit organization, is required to exchange its Channel 40 for Channel *16  xand operate on Channel *16 as a noncommercial station, thereby allowing WQED to sell Channel  x!40 to a commercial buyer. In consideration for Cornerstone's agreements relating to the  xexchange, WQED has agreed to pay Cornerstone $7.5 million upon the closing of an assignment  xof license of WQEX(TV) to a commercial buyer, in which case the exchange would not occur.  xKAccording to the Management Report, if the parties find it necessary to proceed with the channel  x[exchange, and WQED assigns the license for Channel 40 to a commercial buyer, the agreement"" ,-(-(ZZ!"  x|provides that the net proceeds of the sale will be evenly divided between WQED and  xCornerstone, except that Cornerstone will be entitled to 60 percent of any proceeds in excess of $45 million.  X- THE COMMENTS ă   x13. With the exception of noncommercial television station KETC, all of the commenters  x=oppose WQED's request that the Commission dereserve Channel *16 so that it may be sold to  XH- xa commercial broadcaster. XHe yO - xԍ #X\  P6G;P#We note that, before WQED filed its petition, the Commission received numerous letters from community  xorganizations, viewers and government officials urging that we allow WQED to sell Channel *16 to a commercial broadcaster. We also received a number of letters urging us to refuse any such request. Most of the commenters maintain that Congress did not mandate the  xLdereservation of Channel *16. Rather, they argue, the Commission was only directed to reach  xNan expedited determination within 30 days from receipt of WQED's petition, and that the  x[Commission remains obliged to make its own supportable public interest determination. While  X - xjmost of the commenters agree that WQED is in precarious financial condition,-  e yO- xԍ #X\  P6G;P#Channel 29 argues that WQED has failed to prove that its broadcast operations are losing money, or that if they are, such losses have been the proximate cause of the Company's overall financial difficulties.- they uniformly  xstress that the Commission has consistently maintained a strong policy advocating the importance  xof noncommercial educational broadcasting, and that the Commission has never deleted a  xnoncommercial reservation without substituting another reserved channel in the same community.  xAs ALTV states, while it is sympathetic to WQED's financial plight, WQED is asking the  xCommission to "cast aside over 40 years of precedent and sound public policy . . . to take the  xunprecedented step of dereserving a channel on which a noncommercial station is licensed and  xyoperating . . . on the basis of a purported public interest showing which reflects little more than  xthe shortterm self interest of one noncommercial licensee [who] wants to be bailed out . . .."  x=ALTV Opposition at 67. The commenters also argue that there is a greater need for a second  xnoncommercial outlet in Pittsburgh than for a seventh commercial outlet and that large segments  xjof the Pittsburgh viewing audience only have access to educational programming through free  x.overtheair broadcasting. The commenters further contend that dereservation is not the only  xoption to solve WQED's financial problems. ALTV and WBPALP contend that because WQED  xhas entered into a channel exchange agreement with Cornerstone that would preserve Channel *16  xas a noncommercial allotment, the drastic step of dereservation is unnecessary to solve WQED's  x financial crisis. Alliance contends that WQED can seek to reorganize through a Chapter 11  x>bankruptcy proceeding, and PET states that if WQED is financially incapable of sustaining  xoperations on Channel *16, the Commission should revoke the WQEX(TV) license and allow other entities, such as PET, to apply.   2x14. In its consolidated reply, WQED contends that Congress strongly favors the  xidereservation of Channel *16 and ordered the Commission to substitute statutory criteria for prior  xprecedent, statutory criteria which WQED asserts it has fully met. WQED also asserts that there  xkwill be a minimal loss of programming diversity if WQEX(TV) is sold. According to WQED," @ ,-(-(ZZ"  xkthe two stations together currently broadcast nearly 100 hours a month of locallyproduced  xLprogramming, with almost twothirds being carried on WQED(TV), and that local programming  xon WQED(TV) will be expanded by preempting current programming. WQED also notes that  x<some of programming on WQEX(TV) is not educational, that the two stations presently duplicate  xprogramming, and that the duplication will increase dramatically in the fall because of a reduction  xin its grant from the Corporation for Public Broadcasting. WQED also defends its agreement  xzwith Cornerstone as a prudent contingency arrangement, but asserts that dereservation is a  xpreferable option because WQED, and therefore public broadcasting, would receive a greater financial benefit.  X -( DISCUSSION ă   !x15. The statutory language pursuant to which WQED filed its petition does not require  xthe Commission to grant the relief WQED requests. Rather, it specifies criteria that the  xKCommission should utilize in determining whether to grant WQED's request to dereserve Channel  x*16 in Pittsburgh. The criteria are: (1) the public interest; (2) the existing common ownership  xof two noncommercial stations in Pittsburgh; (3) the financial distress of WQED; and (4) the  xthreat to the public of losing or impairing local public broadcasting service in the area. We have  xcarefully and fully considered each of these criteria. Applying these criteria, we cannot find that dereservation of Channel *16 under the circumstances now before us is appropriate.   x16. We are presented here with strong competing public interest considerations. On the  x{one hand, the record clearly establishes that WQED, the licensee of two highly regarded  xnoncommercial educational television stations in the Pittsburgh market, and a recognized leader  x[in the production of educational programming, is in severe financial distress. As characterized  xby the Duquesne University study, WQED is "in an unsustainable financial position," is  X- x"technically insolvent," and "continues to operate only with the tolerance of its creditors." Xe yO#- xԍ #X\  P6G;P#A company is deemed insolvent if its current liabilities exceed its current assets. According to the audited  x-financial statements, WQED has not had enough current assets to cover its current liabilities since 1990, and its current liabilities are now three times its current assets. The  xfinancial solution which WQED proposes however the deletion of the reservation of an  xoperating noncommercial educational television station so that it may be sold to a commercial  x<operator is not only unprecedented, but is also inconsistent with the Commission's stated goal,  xover the past four decades, of promoting the growth of public television and the broadcast of educational programming.   ]x17. Before the Commission adopted its Television Table of Allotments, it conducted an extensive hearing on whether certain assignments in the VHF and UHF band should be reserved  xifor the exclusive use of noncommercial, educational television stations. Based upon the evidence before it, the Commission concluded that: "! ,-(-(ZZ "  Xx[T]he record shows the desire and ability of education to make a substantial  #contribution to the use of television. . . . The public interest will clearly be served  Pif these stations are used to contribute significantly to the educational process of  the nation. The type of programs which have been broadcast by educational  organizations, and those which the record indicates can and would be televised by educators, will provide a valuable complement to commercial broadcasting.   XH- xSixth Report and Order, 41 FCC at 160. Accordingly, the Commission has historically sought  X3- xto reserve approximately twentyfive percent of television channels for noncommercial use.P3e {O - xԍ #X\  P6G;P#See Amendment of Section 73.606(b), Table of Allotments, TV Broadcast Stations, (Anchorage, Palmer and  {Ov -Seward, Alaska), 5 FCC Rcd 7570, 7571 (Policy & Rules, 1990), citing Sixth Report and Order, 41 FCC at 166. P  xCongress has also recognized the fundamental importance of public broadcasting to the nation.  X - xZIn creating the Corporation for Public Broadcasting,{ $e {O-ԍ #X\  P6G;P#See Public Broadcasting Act of 1967.{ Congress specifically found, inter alia, that  x=the public interest is served by encouraging "the growth and development of public radio and  xtelevision broadcasting, including the use of such media for instructional, educational, and cultural  xpurposes" and "the development of programming that . . . addresses the needs of unserved and  xunderserved audiences, particularly children and minorities;" and that "public television and radio  xstations . . . constitute valuable local community resources for utilizing electronic media to address national concerns and solve local problems . . . ." 47 U.S.C.  396(a).  XO-  x18. Since reserving television channels for noncommercial operation in 1952, the  xCommission has never dereserved a noncommercial channel without substituting another reserved  xchannel. The Commission has repeatedly denied requests to delete reserved channels, citing as  xa principal reason for doing so the need to preserve the future availability of the channels. The  xCommission has maintained this view even where dereservation was sought by an incumbent  x<noncommercial licensee which represented that it would go dark absent grant of its dereservation  X- xrequest. See Amendment of Section 73.606, Table of Assignments, Television Broadcast Stations  X- x@(Ogden, Utah), 26 FCC 2d 142 (1970), recon. denied, 28 FCC 2d 705 (1971). Similarly,  xdereservation has been denied where the request involved a vacant channel and thus would not  xhave resulted in the withdrawal of existing noncommercial service and despite a history of failed  Xm- xattempts to provide noncommercial service on the reserved channel. See Amendment of Section  XX- x73.606, Table of Assignments, Television Broadcast Stations, (Ogden, Utah), 45 RR 2d 768, 774  x(Broadcast Bureau, 1979)("[T]he Commission's commitment to noncommercial broadcasting has  xremained intact, and there is a heavy burden of persuasion on petitioners who seek to remove  X-such frequencies from the reserved list . . . .")&e {O|$- x,ԍ  #X\  P6G;P#See also Amendment of Section 73.606(b), Table of Assignments, TV Broadcast Stations, (Great Falls, Havre  {OF%- xand Missoula, Montana), 1986 WL 291502 (Policy and Rules, April 14, 1986): Amendment of Section 73.606(b),  {O&- xxTable of Assignments, Television Broadcast Stations, (Houston, Texas), 50 RR 2d 1420, 1423 (Broadcast Bureau,  yO&-1982).  " ,-(-(ZZ="Ԍ   ԙx19. The Commission has also stated that its general policy is to disfavor the dereservation  xiof lower band UHF channels even where higher band channels could be substituted and reserved  X- x for noncommercial use and the channels are presently unused.  See Amendment of Section  X- x<73.606(b), Table of Allotments, Television Broadcast Stations, (Clermont and Cocoa, Florida),  X- x5 FCC Rcd 6566, 6568 (1990), aff'd, Rainbow Broadcasting Company v. FCC, 949 F.2d 405  x(D.C. Cir. 1991)("[W]e note our longstanding reluctance to alter noncommercial educational  xjallotments by dereserving a lower UHF channel and substituting a higher UHF channel.") For  x/example, in denying a request that it substitute Channel 61 for Channel *21 as the reserved channel at Houston, Texas, the Broadcast Bureau observed that:  QXx[T]he reasons offered for dereserving Channel *14 lower cost, easier tuning,  early initiation of service are also true for providing a noncommercial  educational service on Channel *14. The liklihood of initiating a noncommercial  educational rather than a commercial service on Channel 61 is less given the  ~difference in costs at a time when state and federal funding [for noncommercial broadcasting] has been cut back . . . .   X- xHouston, Texas, 50 RR 2d at 1423. Similarly, when the Commission adopted procedures  xpermitting intraband channel exchanges between commercial and noncommercial stations, based  xLin part on the fact that noncommercial educational stations would receive consideration which  xwould enable them to improve the quality of their facilities or even, in some cases, to initiate broadcast operations, the Commission stressed that:  XxIn no circumstances will educational reservations be eliminated through this  Bprocess . . . Rather, it merely provides for more effective use of noncommercial  educational channels by shifting reservations within the same band from one  channel to another in light of evidence of substantial public interest benefits  proffered in subsequent rule making proceedings. The number of reserved and  unreserved channels available to provide service to a given community will remain the same.   X?-Intraband Television Channel Exchanges, 59 RR 2d at 1462.-"?e {O- x<ԍ  #X\  P6G;P#See also Rainbow Broadcasting Company, 949 F.2d at 410 ("At the initial allocation of channel space in  x1952, the FCC set aside for itself special discretion in handling the allocation of channel space for educational  xstations. . . . In recognition of the public benefit of the operation of noncommercial stations, the FCC has since 1952 followed a pattern of insulating educational stations from market pressures.") -   {x20. In short, the Commission has repeatedly favored the longterm structural integrity of  xits noncommercial channel allotments scheme, including the maintenance of channel capacity as  xa means of facilitating future growth, over the needs of particular licensees, both commercial and  xknoncommercial. We recognize, of course, that special public interest justifications could be  x<presented that would support an exception to our strongly held policy disfavoring dereservation. "! ,-(-(ZZ "  xGiven the circumstances in this case, however, we cannot conclude that WQED has made the  xcompelling showing we believe essential for us to do so. First, we are not persuaded that there  xexists a clear and present "threat to the public of losing or impairing local public broadcasting  xservice" that would warrant the dereservation of Channel *16. While WQED has indicated that  x<it would have to restructure its operations somewhat should dereservation of Channel *16 not be  xapproved, it acknowledges that it will not go dark if it is unable to sell Channel 16 to a commercial broadcaster. Consolidated Reply at 9.   x21. Second, we cannot conclude that there is no need for a second noncommercial  xchannel at Pittsburgh. According to the Alliance, the combined viewing share of WQED(TV)  xjand WQEX(TV) is double the national average for noncommercial television station viewing in  xa market. While WQED asserts that it no longer needs WQEX(TV) to provide the service for  xwhich it was originally intended, classroom instructional programming, this argument overlooks  x{the facts that WQEX(TV) is presently offering programming 16 hours a day and that this  xprogramming cannot be fully replaced simply by extending the hours of operation of WQED.  xKMoreover, Pittsburgh currently has the benefit of two noncommercial educational stations during  xprime viewing hours, a benefit that would not be maintained by extending WQED's broadcast  Xy- xday. We also note that at least two other nonprofit entities, Cornerstone and PET, have expressed an interest in providing noncommercial educational programming on Channel *16.   x22. We are also not persuaded by the record that dereservation is necessary to relieve the  xfinancial distress of WQED or to alleviate the threat of losing or impairing local public television  xin Pittsburgh. Rather, it appears that other options are available to WQED to resolve its financial  xcrisis. A significant factor in this regard is the apparent availability to WQED of substantial  x?financial assistance through an agreement it has reached with Cornerstone, a nonprofit  xyorganization which Petitioner asserts would fit our noncommercial licensing criteria, that would  xnot require us to dereserve Channel *16 or to otherwise reduce the number of noncommercial  xzstations allotted to Pittsburgh. Under that agreement, and subject to Commission approval,  xLWQED would assign Channel *16 to Cornerstone and Cornerstone would, in return, assign its  xcommercial Channel 40 to WQED. Channel *16 would remain reserved and allotted to  XN- xKPittsburgh and Cornerstone would operate on the channel as a noncommercial, nonprofit entity.#Ne yO- xԍ #X\  P6G;P#Several commenters state that Cornerstone broadcasts an extensive amount of religious programming on its  x,present station, WPCBTV, and question whether it is qualified to operate on a reserved channel. The Commission  xhhas previously held that noncommercial educational organizations and institutions, even though religiously oriented,  {O - ximay acquire reserved broadcast channels if they make an appropriate showing as to their qualifications.  See Way  {O - xJof the Cross of Utah, Inc., 101 FCC 2d 1368 (1985); see also Columbia Bible College Broadcasting Co., 6 FCC Rcd 516 (1991); 47 C.F.R.  73.621.#  xWQED would then sell Channel 40 to a commercial broadcaster and split the proceeds of the sale  xwith Cornerstone. While WQED argues that under this approach it would receive smaller  xproceeds than from the sale of Channel 16 as a commercial station, it has not suggested that this  xalternative would produce income inadequate to avoid the service and programming losses that  xit predicts will occur absent some form of financial relief. Indeed, given WQED's decision to  xjenter the agreement with Cornerstone and the substantial potential cost to it from having done" D,-(-(ZZ"  xso, it is a fair inference that the channel exchange which that agreement contemplates would  xprovide significant financial relief to WQED. We agree with ALTV and WBPALP that under  xthese circumstances, we cannot find on the record now before us that the public interest would,  xon balance, be best served by the dereservation of Channel *16 in Pittsburgh, as WQED has requested.   x23. Finally, WQED's contention that grant of its Petition should be favored because it  xwould dissolve an existing duopoly ownership pattern in Pittsburgh WQED(TV) and  xWQEX(TV) is unpersuasive. The result which WQED advances as worthy of pursuit through  xygrant of its Petition enhanced diversity and competition in the Pittsburgh market through the  xMdivestiture of Channel *16 to a commercial broadcaster will be achieved in a manner more  xcompatible with the broad public interest if WQED were to pursue other options with respect to  x{WQEX(TV), one of which may be to implement its agreement with Cornerstone. Nor has  xiWQED presented the type of compelling evidence necessary to justify dereservation based on its allegation that Pittsburgh suffers from a lack of commercial service.   lx24. We specifically do not prejudge or signal approval of any future application seeking  xour consent to a "channel swap" between WQED and Cornerstone. Further, WQED has not  xaffirmatively advanced a channel exchange with Cornerstone as a viable alternative to its request  x.to dereserve and sell Channel *16. There is no dispute on the record, however, as to the facts  xZwe have recited here concerning the Cornerstone agreement. Moreover, in the face of arguments  xby ALTV and others that the Cornerstone approach should be preferred to dereservation of  xzChannel *16, WQED has answered only that it would not receive as great a benefit from the  xchannel exchange as from an outright sale of Channel 16. It has not contended that the channel  xexchange is an unworkable solution to its difficulties. Thus, while we do not have before us a  xcomplete record as to the Cornerstone agreement, we do have uncontroverted evidence that an  xalternative remedy is available to WQED that would have a substantially less adverse impact on  xour noncommercial allotment policies. This record is quite sufficient to inform our decision here  xthat WQED has not met the heavy burden it faces in justifying dereservation of Channel *16.  xShould WQED choose to do so, of course, it may submit any further details or arguments  x?concerning the channel exchange approach which it wishes and we will afford any such  xjsubmission expedited consideration. Alternatively, should WQED elect to immediately pursue  x"its channel exchange agreement with Cornerstone, we will accord similarly expedited  X -consideration to any implementing applications it might file.UX e yO - xԍ #X\  P6G;P#Given our resolution here, we need not, and do not, address commenters' remaining assertions in opposition  xJto the proposed dereservation of Channel *16 or other matters raised that are beyond the scope of WQED's instant request.U x  X-w OTHER MATTERS ă   x25. Alliance requested that we schedule oral argument on WQED's petition. Based on  xthe record before us, and Congress' command that we act on WQED's petition within 30 days,"" ,-(-(ZZ!"  xwe conclude that oral argument is unnecessary to assist in our determination on WQED's petition.  x=We will also deny Alliance's request that we order WQED to produce certain documents. The  xrequested documents relating to allegations of mismanagement and fraud by prior management  x are not relevant to our determination here. Moreover, given our decision to deny WQED's  x petition, documents relating to the Duquesne University Study, the Mellon bank loan, and  xWQED's dealings with creditors are also unnecessary. Finally, we will not require WQED to  xproduce its agreement with Cornerstone and with any potential purchaser of Channel 40. Those  x>documents will be filed with the Commission should WQED elect to submit the assignment  xapplications necessary to effectuate its agreement with Cornerstone. Short of WQED requesting  xfurther Commission action implicating the Cornerstone agreement, we see no need for the documents Alliance seeks.   Nx26. In addition to its opposition, PET also filed a Petition to Revoke License, requesting  x|that the Commission take official notice of WQED's Petition to Delete Noncommercial  xLReservation and revoke the license of WQEX(TV) because WQED is financially unqualified to  X - xremain a Commission licensee.~ e yO -ԍ #X\  P6G;P#WQED filed an Opposition on July 12, 1996. ~ Section 312 of the Communications Act, 47 U.S.C.  312,  xgives the Commission the discretion to institute revocation proceedings on its own motion, but  Xy- xdoes not specifically create rights in third parties to file petitions to revoke licenses. KSDK, Inc.,  x93 FCC 2d 893, 895 (1983). Thus, we will treat PET's petition as an informal request for  xCommission action pursuant to Section 1.41 of the rules, and find that PET has failed to raise  xan issue regarding WQED's qualifications. The Commission requires that applicants for new  xbroadcast stations and proposed assignees of broadcast permits and licenses certify that they have  xsufficient capital to construct the station and then operate for three months without advertising  X- xor other broadcast revenue.  See New Financial Qualifications Standard for Broadcast Television  X- xApplicants, 72 FCC 2d 784 (1979). The Commission does not, however, exercise any continuing  xoversight regarding a licensee's finances, as evidenced by the fact that FCC Forms 303S  x(Application for Renewal of License), 395B (Broadcast Station Annual Report) and 323/323E  X- x[(Ownership Report) do not require an applicant to disclose any financial information. See also  x47 U.S.C.  309(k). We also note that in the event that a licensee's financial condition causes  xit to fail to broadcast for twelve consecutive months, the license automatically expires at the end  xof that period. 47 U.S.C.  312(g). WQED states that WQEX(TV) will remain on the air  x^irrespective of the action taken on its Petition to Delete Noncommercial Reservation. Accordingly, PET's petition will be denied.  X-H% CONCLUSION ă   0x27. Based upon our review of the record before us, we conclude that the public interest  x<would not be served by removing the noncommercial reservation from Channel *16 at Pittsburgh.  xLAccordingly, IT IS ORDERED, That the Petition to Delete Noncommercial Reservation filed by WQED Pittsburgh on June 24, 1996 IS HEREBY DENIED. "p$ X,-(-(ZZF#"Ԍ  0x28. IT IS FURTHER ORDERED, That the Petition to Revoke License filed by Pittsburgh Educational Television, Inc. IS HEREBY DENIED. x` `  hhFEDERAL COMMUNICATIONS COMMISSION x` `  hhWilliam F. Caton x` `  hhActing Secretary x` `  hh@hppJuly 29, 1996  X -% SEPARATE STATEMENT `JOF  X-9COMMISSIONER SUSAN NESS ă  Xb-RE: WQED Petition to Delete NonCommercial Reservation  x-My vote today to deny WQED's Petition is largely based upon my concern about the effect such  xa dereservation would have on the noncommercial broadcasting system in the United States, a  xkservice about which I deeply care. The WQED request would affect not just Pittsburgh, but would have implications for stations in several cities across the country.  xThe owner of WQED and WQEX has asked for the change in WQEX's noncommercial status  xin order to sell WQEX to a commercial broadcaster. Such a sale would eliminate an important  x\noncommercial voice in the greater Pittsburgh area. Since 1952, the Commission has never  x>granted a change to commercial status without adding another noncommercial station to a market.  x[I decline to disturb longstanding Commission precedent, especially with a decision that could  xripple through the country, putting undue pressure on other public television stations to sell what  x{essentially is their birthright. The strength of our noncommercial system flows from the  xycombination of quality programming for underserved audiences and distribution over a system of reserved television stations that blanket the country.  xiWhen "swaps" between VHF noncommercial and UHF commercial broadcasters became an issue  xseveral years ago, the prospect of immediate financial gains nearly obliterated concern about undermining the long term health of the public broadcasting system.  xAlthough I am sympathetic to the desire of WQED management to solve its financial problems,  x-the sale of its sister station to a commercial broadcaster is not the only possible solution. During  xthe course of this debate, other less draconian measures were suggested which would allow two"%',-(-(ZZ%" public televisions stations to continue to serve the greater Pittsburgh community.  xDespite my vote to deny WQED's Petition, I am concerned about the long term viability of  x0WQED and WQEX if their current financial problems are not solved. However, I remain  xconfident that station management and the Pittsburgh community can work together to fashion a solution that will return both stations to financial health. x` `  hh@hppJuly 24, 1996  X - CONCURRING STATEMENT OF  X - COMMISSIONER RACHELLE B. CHONG IN WHICH  X - COMMISSIONER JAMES H. QUELLO JOINS ă  Vy- x{Re:Deletion of Noncommercial Reservation of Channel *16, 482488 MHz, Pittsburgh, Pennsylvania, FCC No. 96314  XK-  x=I reluctantly concur in the Commission's decision in this case. WQED Pittsburgh, the licensee  xof noncommercial educational television stations WQED(TV), Channel *13 and WQEX(TV),  x Channel *16 in Pittsburgh, like many other public television stations, is in serious financial  xtrouble. WQED thought it had devised a creative way to solve its financial trouble. Its solution,  xto sell Channel *16 as a commercial station, would have allowed WQED to become financially  xhealthy now and help it stay financially viable well into the future. It would have allowed  x.WQED to continue to produce the quality educational programming for which it is known. In  xladdition, this solution would have permitted Pittsburgh, a city with fewer commercial TV  xallocations than comparablysized markets, to have a new commercial competitor and more  xdiversity in commercial programming. In my view, these could have been compelling reasons  xto support a grant of WQED's petition to dereserve Channel *16 so that Channel 16 could be sold as a commercial station.  xyI concur in the denial of WQED's petition, however, because the record shows that WQED has  xanother alternative to relieve its current financial distress without dereservation of Channel *16.  xI understand that WQED has an option to swap Channel *16 for commercial Channel 40 and  xdivide any proceeds from the subsequent sale of Channel 40 with the Channel 40 licensee. The  xpublic expressions we received from the citizens of Pittsburgh make it unclear whether this  xalternative would better serve the development of public broadcasting in that city. Nonetheless,  xgiven the public interest considerations that led the FCC to reserve noncommercial channels and  xythe Commission's strong precedent disfavoring dereservations, the presence of this alternative leads me to conclude that we cannot grant the petition on this record.