An insider's view of the FCC assignment and transfer process

Confirmed: The station trading market in the United States is in the midst of a slump, and those transactions being applied for often involve bankruptcy, lenders claiming equity and other forms of distress. But if, nevertheless, you’d like your next transaction to be processed promptly, please follow the instructions.

So says Taft Snowdon, the Media Bureau lawyer who oversees the processing of applications for the assignment and transfer of radio stations. No sale of a radio station escapes the eyes of Snowdon, giving him an unparalleled big picture view of the trading environment to go along with his intimate knowledge of how each comma, period and semi-colon properly fits into a contract or application.

RBR/TVBR asked Erwin Krasnow, a preeminent communications transactional lawyer and coauthor of Profitably Buying and Selling Broadcast Stations, to interview Taft in an effort to provide RBR/TVBR readers behind-the-scenes insight into the way that the FCC processes assignment and transfer applications.

Krasnow: What is your official title?

Snowdon: Supervisory Attorney, Audio Division, Media Bureau.

Krasnow: For how long have you been reviewing assignment and transfer applications? Snowdon: Believe it or not, 37 years. My first job at the FCC was working for the Transfer Branch of the then Broadcast Bureau.
Krasnow: What’s different about the way that the FCC processes sales applications today than was the case years ago?

Snowdon: We now have computers rather than pens, pencils and pads of paper! Actually, the biggest differences are the streamlining of the applications themselves and the speed with which they are acted upon. For many, many years, backlogs were the order of the day. It would take as much as six or seven months for an application to be acted upon.

Krasnow: You and your staff deserve kudos for the speed in which applications are processed.

Snowdon: Thanks. The Media Bureau recognizes the economic pressures on sellers and buyers of radio stations once a sale is announced and has adopted “speed of service” goals for the processing of assignment and transfer applications.

Krasnow: What is the goal for action on a long-form application (FCC forms 314 and 315)?

Snowdon: We try to have the application processed within a 30-day period and to grant the application within 60 days from the date of the filing of the application, provided that no amendments are needed and no petitions to deny or informal objections have been filed. As you know, under the Communications Act we cannot take action on long-form applications until 30 days have passed after the issuance of a Public Notice announcing the acceptance for filing of the application. An FCC Form 314 or Form 315 application is required for a voluntary assignment or transfer of control that results in a major de facto or de jure change in ownership.

Krasnow: What about short-form or pro forma applications (FCC form 316)?

Snowdon: Two weeks. Short-form applications are not subject to the statutory 30-day waiting period.

Krasnow: Who reviews the applications?

Snowdon: I oversee the processing of all the radio station applications. Over a thousand applications are filed each year. The initial review and recommendation for each application is performed by industry analysts.

Krasnow: What type of review is done by these analysts?

Snowdon: They check to make sure that the FCC filing fee has been paid, that the transaction documents list the purchase price and, where needed, that a multiple ownership study has been submitted. Following their initial review, they determine whether the seller and buyer are legally, financially and otherwise qualified to complete the transaction.

Krasnow: With respect to the radio station marketplace, you are certainly in a position to see the “big picture.” Do you see any trends?

Snowdon: Reflecting the downturn in the economy and the lack of access to capital, we have seen more bankruptcy filings and situations where lenders are taking equity in the stations that are in default on their loans. Also a lot of construction permits are being sold because either the permit holder’s financing has dried up or the buyer wants to take advantage of the 18-month extension of time to construct that is available to Eligible Entities. In some cases, faced with the prospect of FCC cancellation of the license of a station that would be off the air for 12 months, some licensees are selling the station to a buyer who has the funds to place the station back on the air. Along with the change in FCC rules, more applications are now being filed to sell FM translator stations to the owners of AM stations. Finally, we anticipate seeing an influx of LPFM assignment applications because the mandatory four-year holding period for many of these stations is being satisfied.

Krasnow: What are common mistakes made by applicants and how can they be cured?

Snowdon: These days a majority of the applications that we receive are complete and grantable. When we do find mistakes or other problems, they can usually be cured by the filing of an amendment. The goal of applicants, of course, should be to make sure that their application is complete and in order before making the filing because the need for the submission and review of amendments lengthens the processing time. An essential step for all applicants is to familiarize themselves with the detailed instructions and worksheets contained in the FCC forms, especially those relating to compliance with the multiple ownership rules.

Krasnow: What are the most common reasons that a long-form application needs to be amended?

Snowdon: Here are eight of the most common mistakes:

Failure to provide proper and complete ownership information. For example, the ownership structure, the percentage of voting and equity or the breakdown of ownership of subsidiary corporations and LLCs.
For transfer of control applications, the failure to provide the structure of the entity after the transfer is consummated and also the failure to complete the “Changes in Interest” table. 

For transactions involving buyers of noncommercial stations, the failure to provide voting percentages for officers, members or directors. Where the assignee is a non-profit entity, no equity percentages should be submitted.

Where there are multiple transferors/transferees, failure to list only the lead party and using the phrase “et al” to cover the other parties that are involved.

Failure to submit a narrative to accompany the multiple ownership study.

Failure to submit detailed “Educational Objectives” for those non-commercial buyers whose qualifications have not been “passed” on by the FCC.

For LPFM applications, the failure to submit LPFM eligibility criteria information.

Failure to submit the required information concerning the assignee and principals of the assignee in an “Eligible Entity” narrative.

Krasnow: What about mistakes in short-form applications?

Snowdon: Here are the four most common errors:

1. Failure to provide the “Description of Transaction.”

2. Failure to include the proper Court Documentation.

3. Failure to list the correct assignor/assignee or transferor/transferee in “involuntary” transfers.

4. Failure to insert the word “Deceased” after the person’s name for any “deceased” party.

Krasnow: Out of the thousand or so assignment and transfer applications filed in a year, approximately how many are opposed by means of an informal objection or petition to deny?

Snowdon: Less than 10%.

Krasnow: What are the most common grounds asserted in petitions to deny and informal objections in support of a request that the FCC dismiss or deny an application?

Snowdon: I would think that the top four issues concern: loss of local service, format changes, improper certifications and what we regard as essentially private contractual disputes. Once the FCC streamlined the application process by relying more on certifications by the applicants, we have seen many more filings by “private attorneys general” questioning those certifications.

Krasnow: How long can the filing of an objection or petition slow down the processing of an application?

Snowdon: As a matter of policy, we try to issue decisions in contested proceedings within six months of the date the application was filed.

Krasnow: Do you have any practical suggestions for expediting the processing of applications?

Snowdon: Sure. Here are three suggestions. First, carefully review the instructions to filling out the form --- too many applications need to be amended because the parties simply did not follow these detailed instructions.

Second, pay the filing fee by credit card rather than by check. The Commission’s electronic fee payment system allows for immediate payment by credit card and facilitates processing of the application. Finally, the seller or seller’s counsel should make sure that the station being sold is not in a “red light” status because of the failure to pay FCC regulatory fees. The buyer should get assurance from the seller that past due regulatory fees will be paid --- the Bureau must wait for payment of past due fees before completing the processing of an application.

Krasnow: Do you have any parting words of advice for sellers and buyers of radio stations?

Snowdon: We are now approaching a new renewal cycle for radio stations. Buyers and sellers should be aware that we will not grant an assignment or transfer of control application while the renewal application of the station being sold is pending and potentially subject to petitions to deny, so they should allow plenty of time for the processing of their application and its consummation. The processing cycle for license renewal applications is a minimum of four months. The parties should also be aware that the Bureau does not grant the renewal of any station that is off the air.

Krasnow: It seems to me that if an owner does not have sufficient funds to resume operation of a silent station, now might be a good time – prior to the renewal cycle – to sell the station.

Snowdon: That’s prudent advice.

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