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Deadline Trips up Auction 98 Applicant

Winning bidder of FM CP first must pay $107,000, followed by second deficiency payment

Time was not on the side of the winning bidder of an FM station construction permit after the Federal Communications Commission denied the licensee’s request for an extension, ordered it make a $107,000 default payment and dismissed its application for the permit.

In 2015, the Erie Radio Co. secured the rights for an FM construction permit in Westfield, N.Y., as part of an Auction 98 proceeding. But after missing the deadline by one day and failing to make its required down payment for the permit, the licensee sought an informal request for an extension of time.

According to the FCC, the terms spelled out under the Auction 98 rules state that down payments are due from winning bidders 10 business days after the release of the auction’s closing public notice; the rules also say that a winning bidder that fails to remit the required down payment will be disqualified, and will subject to additional payments as described in those rules.

While Erie did file its short-form application on time and submitted an upfront payment of $25,000, it did not pay follow through on paying its remaining down payment on time. According to the commission, Erie did not complete its wire transfer payment of $107,100 until 4:35 pm the day after the deadline. 

Erie requested a one-day extension of that deadline, saying that circumstances beyond its control caused delay in sending the down payment. The licensee submitted a letter from its bank that said despite Erie’s best efforts to wire the funds on August 26, 2015, it was unable to execute the wire until the following day. Erie even went on to wire the total balance of its bid six days before the final payment deadline.

But objections came in swiftly. Connoisseur Media Licenses filed an objection to Erie’s request and argued that a bank error that delays a down payment cannot justify a waiver of the commission’s down payment deadline.

The commission agreed. The commission said that although Erie couched its request as simply an extension of time, Erie is essentially seeking a waiver of its obligations.

“This section has been the subject of numerous petitions for waivers filed by winning bidders in various spectrum auctions, and the commission has denied each one,” the FCC said. “Erie cannot side-step this ample adverse precedent — which Erie wholly ignores in its request — by seeking an extension of time.”

Waivers are only handed out when no reasonable alternative existed that would have allowed the party to comply with this rule. “The commission has long explained that one of the principal purposes of the requirement that winning bidders make a full and timely down payment is to ensure that bidders are financially capable of constructing and operating their systems, and that timely payment of both upfront and down payment obligations is one of the best indicators prior to award of licenses of a bidder’s bona fide ability to pay,” the commission said.

Wire transfer difficulties are not unique circumstances that warrant departure from the commission’s policy of strict enforcement of the down payment rule, the FCC said.

Not even Erie’s goal of bringing a new station to what Erie called an underserved community outweighs the public interest benefit in enforcement of the commission rules. Thus, the commission denied Erie’s request, assessed an interim default payment, and dismissed its application for the Westfield permit.

It’s an expensive outcome for Erie. The applicant must make two additional penalty payments: a deficiency payment (which ends up being the difference between Erie’s bid and the amount of the second-closer bid); and an additional payment (equal to either 20% of Erie’s bid or the subsequent winning bid, whichever ends up being less).

For now, the FCC determined that Erie’s interim default payment is $107,100.