A significant number of public broadcasters have pending applications for noncommercial frequencies that have overlapping applications filed for the same or adjacent channel frequencies. These mutually exclusive (MX) applications have been stalled while the FCC established its process for resolving these applications.

The FCC has adopted a point system for the resolution of the competing frequencies. As part of this process, the FCC issued a public notice that establishes a one-time window that will allow competing applications to negotiate and reach favorable settlement agreements prior to entering into the point system proceedings. This window opened March 22 and closes June 4, 2001. By June 4, all MX applicants must have settled with all other MX'd applicants in their proceeding, or amended their application, either to claim the points to which they are entitled or to make technical changes that will eliminate the MX with all other applications. Applicants who file nothing will be dismissed.

The benefits of this one time settlement period established by the FCC are:

q Financial. Until June 4, the FCC has waived the requirement that limits settlement amounts to the demonstrated cost an applicant has incurred in preparing and filing its application. This means that for a limited time competing applicants are free to propose buyouts above actual costs, a strong financial incentive for stations to settle in competing situations. While settlements after June 4 are possible, buyouts will be limited to reimbursement costs.

q Time deadline. The opportunity for settling these competing situations for more than costs is limited. Such settlements must be on file with the FCC by June 4, 2001.

q Settlement benefits applicants. If competing applicants can reach agreement on a settlement, one applicant will be able to get the frequency in an uncontested process with the FCC, and the competing applicants will divide the proceeds from the agreed-upon settlement. Broadcasters that reach a settlement agreement will either financially benefit from that settlement or will receive the frequency without going through the point system process.

q Avoids point system proceedings. Reaching a settlement in an MX situation avoids the risk and uncertainty of the frequency being awarded based upon the FCC point system, as well as the costs associated with these proceedings.

q A faster track to securing the frequency. If applicants can reach a settlement agreement and the public broadcaster is successful in buying out other applicants, the construction permit will be granted sooner than going through the FCC point system process, particularly since that process permits petitions to deny the winning application and appeals of the result.

Options

We strongly encourage stations to consider the settlement option during this one-time window. When the FCC set a similar window for commercial stations, there were a number of settlements, through a "private auction" process, that resolved the competing applications and gave the competing applicants an opportunity to keep the proceeds from the auction.

One option we are considering is to coordinate negotiations for public broadcasting by serving in a brokerage capacity representing public broadcasting entities. In this capacity we would work with individual public broadcasting applicants. We would contact competing applicants to explore the interest that other applicants might have in negotiating a settlement. If other applicants are interested we would then try to negotiate a mutually acceptable agreement. These agreements can take many forms, but usually competing applicants are bought out for an agreed upon sum, and the remaining applicant is awarded the construction permit. During the negotiations, the public broadcaster could decide whether it wants to buy out other applicants or accept a buyout offer. With this approach we could then standardize agreements for the settlements. If we assume this negotiating role, we would propose an initial fixed fee to represent the public broadcasting applicant and a small percentage of the total settlement reached, a fee that would be shared by all the applicants since it would be coming from the settlement proceeds.

Benefits

We believe this coordinated approach for public broadcasting will help accomplish the goal of obtaining more frequencies for public broadcasters. It will take advantage of the window that the FCC has provided to reach a settlement prior to implementation of the point system. Alternatively, public broadcasters could accept a cash buyout should they decide that option makes the most sense. Public broadcasters that have multiple MX'd applications on file may be interested in concentrating on some of those applications. For example, someone with five applications on file could agree to be bought out in three situations and apply the proceeds from those settlements to payments for the two frequencies that are strategically most important.

Since many of the competing applications have been filed by national groups we would also have the advantage of negotiating on a national scale with the groups that have filed hundreds of applications all around the country.

Next Steps

We will be contacting stations that have applications on file to see if this approach is one that would be of interest. Since the window that the FCC has set is short, we encourage you to focus on this issue and think through the options and approaches that might make the most sense from your perspective. We will keep you informed of dates and important information coming from the FCC on this issue as the FCC proceeds. In the meantime, look for another memo in the near future with more details on this coordinated approach that we are considering.

We encourage you to contact us with any feedback on your thinking about this, or any questions that you may have.