The Contract
The FCC's rules require that every application for assignment or transfer of a broadcast license must be accompanied by a written contract or narrative outlining the terms of the deal. The FCC needs to know whether the agreement between the parties complies with its rules.

For example, the Commission is especially interested in knowing whether the assets conveyed include the broadcast license. This is a frequent mistake, since the license can only be transferred or assigned with the consent of the Commission. Moreover, the Commission will want to be certain that the broadcast license is not being used as collateral for a loan or whether there is any other form of "reversionary interest" on the part of the seller; that is, whether the seller retains any rights in the license. Both of these practices are prohibited by the Communications Act. Finally, the Commission's rules prohibit the transfer or assignment of a bare license. The contract must also include assets sufficient for the station to broadcast.

You should engage the services of an experienced communications attorney to prepare or review the contract to be certain that your interests are fully protected and that the contract complies with all applicable FCC rules.

The Application
There are two types of applications. FCC Form 314 is used for an assignment of the license when the assets of the station are being sold by one entity to another. For example, Buyer, Inc. purchases the assets of Seller, Inc. FCC Form 315 is used when there is a transfer of control. These can take several forms. In one instance, the majority of the stock of Station, Inc. is being sold to one or more parties or Buyer, Inc. purchases all of the stock of Station, Inc. from Seller, Inc. In both instances, seller and/or buyer may be corporations, limited or general partnerships or a limited liability company, a new form of ownership now coming into increasing use. A third form of transfer of ownership, FCC Form 316, is used in limited circumstances when there is a pro forma transfer of control such as a corporate reorganization, a change of name or an involuntary transfer of control resulting from a bankruptcy or death of a majority shareholder. The FCC is beginning to make its forms available online at its Web Site.

The application form asks for basic information concerning the buyer and seller to determine whether the licensee is in good standing and that the proposed buyer is qualified to be a licensee of the Commission. These questions relate to whether the buyer meets character qualifications; that is, whether any party has a felony conviction, has been found in violation of the Commission's rules or is otherwise unqualified; whether not more than 20 percent of the proposed licensee is owned or controlled by non-U.S. citizens and whether the proposed licensee will be in compliance with the multiple ownership rules. A memo detailing the multiple ownership rules may be found at the Pepper & Corazzini Web Site.

Filing and Processing the Application
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Filing
Once the application is complete, it must be signed by buyer and seller and filed with the FCC together with the required filing fee. There are special procedures for filing the application with the Commission's collection agent, Mellon Bank in Pittsburgh. An application sent to the FCC in Washington will be returned.

Public Notice
Approximately 10 days after the application is filed, the FCC will issue a Public Notice announcing the filing of the application. This will trigger a 30-day period during which time objections to grant of the application may be filed. Public notice must also be given over the facilities of the station involved and, unless there is only one station in the service (AM, FM or TV) in the community of license, notice must also be given in a newspaper circulating in the community.

FCC Processing
During the public notice period, the FCC staff will begin reviewing the application. The staff may have questions about one or more aspects of the application, which may require an amendment to resolve. The Commission will also consider any issues raised in the context of a petition to deny.

The Grant
If there are no unusual problems, the application will normally be granted within a few days after expiration of the public notice period. The Commission will then issue another public notice announcing grant of the application. This will trigger a second 30-day period during which time any party may ask for reconsideration of the staff action granting the application. Additionally, the Commission on its own motion may review the staff action, although this rarely occurs. Once this period has expired, the order granting the application is "final" and no longer subject to review. Many buyers will require that the order be "final" before they will close. Institutional lenders will usually not disburse funds until the order is final.

Consummating the Transaction
The Commission allows parties 90 days from the date of the grant to consummate the transaction. Extensions can be granted routinely; but, after six months, the grant will be considered "stale" and the Commission will usually require the filing of a new application.

This provides only a brief overview of the process. There are many twists and turns in the road between striking the initial deal and a grant of the application. Large sums of money and valuable tangible and intangible rights and assets are involved. For this reason, you are encouraged to engage experienced FCC counsel to assist you at each step of the way.

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Prepared by:
Pepper & Corazzini, L.L.P.
1776 K St., N.W. Washington, DC 20006
Phone: 202-296-0600 Fax: 202-296-5572
E-mail: pepcor@commlaw.com
Web Site: http://www.commlaw.com

This document is not intended as legal advice and is provided for informational purposes only. The use of this information does not establish an attorney-client relationship with Pepper & Corazzini, L.L.P. You should consult an experienced communications attorney before relying on any of the information contained in this document.