As part of its order in it proceeding to encourage diversity in broadcast ownership, the FCC adopted a number of new rules, including a rule allowing parties holding construction permits for new broadcast stations to sell those permits to "qualified entities." The buying qualified entity would then then get 18 months to construct the new station, even if the construction permit would otherwise expire in less than 18 months. Under prior policy, an FCC construction permit would expire 3 years after it is issued, with no real opportunity for extension (though the construction period could be "tolled" for the period that certain impediments to construction existed, i. e. litigation over zoning, FCC litigation over the validity of the permit, or Acts of God that temporarily stopped construction – but only for the limited period that such an impediment existed). The new rule was adopted to encourage the sale to new entrants to broadcast ownership who could purchase construction permits that might otherwise expire. Today, the FCC issued some clarifications of the new rule.
The clarification was issued principally to set out when the sale must take place in order for the buyer to qualify for the 18 month extension. The FCC’s staff looked at the literal language of the new rule, and concluded that the sale must be approved by the FCC and consummated before the expiration date of the construction permit in order for the buyer to get the 18 month extension. If the sale is not completed before expiration, the permit would expire. Thus, the Commission warned applicants planning to take advantage of this new rule to file for the FCC approval of the sale at least 90 days before the expiration of the permit, to give time for the FCC approval of the sale and a consummation. However, because of the uncertainty of the rule, the Commission decided that it would allow any party wanting to buy an unbuilt construction permit and who files to acquire that permit by May 31 to get the 18 month extension, even if the permit expires while the FCC application for approval of the sale is pending. But after June 1, the buyer will not get the extension if the sale is not completed before the expiration of the permit.
A qualified entity entitled to take advantage of the 18 month extension is a one who would qualify as a small business under the rules of the Small Business Administration. Essentially, for a radio broadcaster, a small business is one with revenues of less than $6.5 million in the year prior to the sale.
This rule provides small businesses the opportunity to acquire rights to construct a new station at potentially firesale prices – as in many cases they may be the only ones who can get sufficient time to construct a station. But parties wanting to take advantage of this rule need to be sure that they leave time to get the FCC approval in a timely fashion, so that the permit doesn’t expire before the extension has the opportunity to kick in.