Due Diligence — A Not Too Technical Guide (Part 2)


Erwin Krasnow / Gary Cavell
By Garrison C. Cavell and Erwin G. Krasnow, Esq.

In Part 1 of our not-too-technical, not-too-basic guide (RBR/TVBR. March 1, 2013), we mentioned that there are four key engineering-related areas to consider in advance of closing a broadcast station transaction: Station Potential, Regulatory Paperwork, Facility Condition, and Regulatory Compliance. We’ve talked about evaluating the station’s potential and now we will be taking a look at the dreaded topic of regulatory paperwork.

When researching the engineering-related records and paperwork in a station purchase, there are several areas which have the potential to overlap and, more importantly, to bite you after the sale.

We all hate paperwork – but this aspect of due diligence need not be a dull, mind-numbing exercise, particularly if you get a little help from professionals who know where to look for and how to analyze the information. Once you start looking through the various archives, files, stacks of papers and FCC on-line resources, you will be able to get a much better handle on the station you are buying.

When going through this process, we usually find nuggets of information that give us perspective and shed light on the mindset of the previous owners. Prior limitations and missed opportunities become evident, and often ideas begin to form for saving money, improving something (such as the station’s coverage area), or preventing an FCC fine (among other disasters). Sometimes you uncover “threats” that the former owner chose to ignore. And of course, it’s common to find things that have been overlooked or forgotten, some of which have the potential to cost you money if they are not resolved. While it usually is preferable to have oversight matters addressed on the present owner’s “watch,” your lawyer can best advise you on timing matters.

Again, while it is certainly possible to do this sort of sniffing around yourself, we believe that you would be better served to use your business, legal and engineering advisors to do the initial mining — have them set the stage for you. Lawyers and consulting engineers are accustomed to digging for things, and interpreting what they see –and they know where things are often hidden or where things should be. Use these resources not only to retrieve documents for you, but also to have them go through this stuff, comment on what they see, and organize it for you.

Where to look
There are several places where we like to look – while many are on-line, much can be learned by an old fashioned physical records search.

The first place is in the FCC’s Public Reference Room in Washington, DC. You can either schedule a couple of days yourself to slog through the files (hint: avoid Fridays), hire an independent research service, or engage your legal firm’s researcher to do the leg work. To save frustration and confusion, talk with someone who has been through this exercise recently before you undertake this exercise yourself. (Hint: In the FCC’s reference room, there are research and copying services available for hire.) Make copies of records the station should have, and records that you may need to make a point or seek a correction or price adjustment.

There are generally two areas for research – the “license files” and the “engineering files.” Both files can overlap, but each contains unique information. Engineering files typically have to be requested the day before you want to see them, and if you are lucky, they will be made available the next day. You cannot order engineering files on Friday.

License files are where you can find copies of applications, construction permits (“CPs”), licenses, notices of violation, complaints, special temporary authority (“STA”) requests, ownership reports, and general correspondence between the station (or its representatives) and the FCC. The engineering files also have application materials, but may have more detailed “dirt” on complications the station had during an application process, operational issues, fines, and the like. Often there are handwritten notes made by an FCC staffer in the margins of documents that can be revealing (and are sometimes funny), or there may be separate notes and comments by staff. This information has the potential for being very valuable in piquing you or your engineer’s radar for possible recurring operational trouble or compliance issues.

The second research location is inside the station, particularly in the old engineering offices and at the transmitter site. (Hint: When doing your research at the station, bring along a portable copier or scanner. Sometimes the paperwork mysteriously “disappears” after you’ve left the building.) Again, you should be able to locate in the Local Public Inspection File and at the station’s “control point” certain documents like pending applications, CP’s, and licenses. Look for a license for anything that radiates RF energy, like the station main facility, any auxiliary sites, satellite uplinks, RPU STL and ENG systems, and two-way radio systems. If these facilities are in use, they should be licensed – and accurately reflect the facilities being used. Does the facility match what is shown on the license? We’ve seen cases where the station is actually located several miles from the licensed site, or where the main studio is not in compliance with the FCC rules for location.

Sidebar – while satellite receive sites are no longer required to be licensed, it is a good idea that they be registered with the FCC in order to afford the system proper protection from other users. If the frequency coordinator does not know of the existence of a receive site, they cannot protect it from interference.

Make it your business to go through any “engineering files” you can find. They may be in the GM’s office, or in the engineer’s office. Drive out to the transmitter site and review any paperwork you can find there. Spend time looking at repair records, stray receipts, repair logs, equipment manuals, notes and old FCC filings and licenses. You’d be surprised at what you can learn about the station. (Hint: Make sure that any old tower drawings are kept and preserved – this can save you a lot of money should a structural review be needed in the future. Same is true for building permits, drawings, and electrical plans.) Take plenty of notes.
The third place to look is on-line. Use this to buttress and supplement – not replace – the physical paper records research. For ease of use, you can try Cavell Mertz’s free www.FCCinfo.com website. Here you can search the FCC’s on-line files using any number of parameters, such as call sign, community of license, and licensee. Click through the blue links as you go and you’ll see the latest FCC “CDBS” (Consolidated Database System) information for the station – it is refreshed daily. You’ll see technical parameters, licensee name, and even information on microwave and auxiliary services facilities associated with the station. There is also a “map it” function, which lets you see where the licensed coordinates place the transmitting site. Is it near where the tower is located/registered?

The FCC’s website is an excellent source of information, although some find it a bit more daunting to navigate. The FCC’s Media Bureau (www.FCC.gov/mb) is where you can find the CDBS access, the call sign reservation system, and information on ownership reports. Take a look at the shortcut menus to access other areas of information.

Any tower that is over 200 feet tall, or meets certain criteria if shorter – like being close to an airport – must be studied by the FAA and an FCC Antenna Structure Registration Number (“ASRN”) is required to be associated with the structure. To find an ASRN, http://wireless.fcc.gov/antenna/ is the place to start. Here you can see the FCC’s reference copy of the ASRN, and also find little tidbits, such as has the ownership been properly changed for a prior transfer, or does someone else “own” the structure? Or is a notice of construction (Form 854) due but is still absent? Are the coordinates correct? Is the height correct?

By using Cavell-Mertz FCCInfo “Google Earth” kmz plug-in tool, you can spot the FCC licensed location versus an ASR location for a station (see http://www.fccinfo.com/fccinfo_google_earth.php ) versus what you saw as you visited the site, to see if the station is located where it is supposed to be (this search will work as long as the information is not too old). You’d be surprised at how many aren’t.

Finally, you can go to the FAA’s website https://oeaaa.faa.gov/oeaaa/ – and do a “circle” search for towers to find a copy of the last FAA Determination of No Hazard. This can come in handy if there is ever an aeronautical incident involving your tower – and yes, it DOES happen.

Next:  We’ll help you get a handle on assessing the condition of the station you are purchasing.

Garrison C. Cavell, the President of Cavell, Mertz & Associates, Inc., has worked in management and technical positions in communications and broadcast systems for over 31 years. He focuses principally on fostering communications between engineering professionals and their counterparts in finance, government and the executive suite. Gary has gained experience as a witness before FCC Administrative Law Judges and zoning boards, and is regularly engaged to speak at industry functions both on engineering and executive management topics. He can be reached at [email protected] and (703) 392-9090.

Erwin G. Krasnow, the co-chair of the Communications Group of Garvey Schubert Barer, is a former General Counsel of the National Association of Broadcasters, Washington counsel to the Media Financial Management Association, and a coauthor (with John M. Pelkey and John Wells King) of Profitably Buying and Selling Broadcast Stations and Washington counsel to the Media Financial Management Association. He can be reached at [email protected] and (202) 298-2161.