[Updated 1/9/19] REC files objection to $65K LPFM sale
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Update January 9, 2019: The applicant has amended the application with a new asset purchase agreement that better reflects the depreciated value of the station equipment. The new sale price is $39,880.55. While we still do not feel that LPFM stations should be sold for this much, we are satisfied that the schedule now reflects the depreciated value in accordance with the FCC rules specific to LPFM and that the uncertified transmitter has been addressed. As a result of this effort by the applicant and their counsel and despite our overall concern of this type of culture in the LPFM service, REC has agreed to withdraw our objection against this application.
REC Networks has filed an Informal Objection against the "sale" of WBVL-LP, Kissimmee, FL from The Broadcasting Group, Inc. to Sucuremedia, Inc. REC had targeted this sale as it violated the FCC's rules regarding assignments of LPFM stations for any consideration that exceeds the depreciated fair-market value of any tangible goods included in the transaction.
When LPFM was first created, the FCC determined that allowing LPFM stations to assign their licenses and permits would result in speculation. In 2005, after the FCC had already granted waivers for several assignments with remuneration ranging from $20,000 to $100,000, the FCC proposed a formal rule to permit LPFM stations to assign or transfer their licenses under the conditions that the new organization was local, did not result in a "for profit" sale and did not result in multiple ownership. Multiple LPFM ownership was still permitted in 2005 and was also being proposed for elimination in the same proposal. The FCC formalized a waiver process in 2005 until the formal rules in 2007 using the proposed criteria.
In 2007, with the Third Report and Order, in addition to the elimination of LPFM multiple ownership, the FCC formalized the assignment and transfer rules that we have today. Specifically, LPFM stations seeking to assign their licenses to another organization must be in operation for three years (based on the date of the license grant and assuming no silent periods) and that consideration received for the assignment (sale) does not exceed the depreciated fair market value of the physical equipment and/or facilities. In addition, the "assignee" must meet all other LPFM requirements such as being a recognized nonprofit corporation and meeting the LPFM localism guidelines.
In the case of WBVL-LP, the sale of the station was originally considered at $100,000. Prior to filing, the asset purchase agreement was hand-corrected to reduce the sale price to $65,000. In order to justify that value, the application included a schedule that included several categories (such as furniture, cables and promotional items) as well as many pieces of broadcast and computer equipment itemized out. REC was able to determine that the claimed value of the itemized products were actually the purchase prices if the items were purchased new at vendors such as Broadcast Supply Warehouse and Amazon.com. The "summary" items were suspicious include $15,000 worth of furniture and studio furniture as well as $7,000 worth of cables. Also included in the asset purchase agreement was a broadcast transmitter that is mass-marketed on eBay and does not bear an FCC certification ID number. Operating an LPFM station with a transmitter that does not have FCC certification is a violation of §73.1660(a)(2) of the FCC Rules and subjects a violating LPFM station to enforcement action up to and including fines.
Over 10 years ago, LPFM advocates such as REC and Prometheus Radio Project argued that LPFM stations should be able to assign their licenses but in a manner where it would not result in trafficking of licenses. While most assignments and transfers, including those filed prior to the rule changes involved little or no consideration, having such a large sale, there have been a small number of unsuccessful applications, including one in suburban Houston that was voluntarily dismissed after intervention by REC to stop an attempt to game the revised assignment and transfer rules.
REC Networks does review the merits of all LPFM assignment applications to assure that the incoming party is qualified to be an LPFM licensee and that the assignment followed the various rules governing such transactions. In 2018, REC had filed three informal objections against LPFM assignment applications, all in Florida, for various reasons including localism, corporate status and violation of the "depreciated fair-market value" rule. REC, who is trying to drive improvements to the FCC rules to provide LPFM stations with more flexibility feels that we must maintain integrity in the service, a service that has the strictest ownership rules but the weakest enforcement of those rules.
More about the FCC's rules regarding LPFM station assignments and transfers at rule §73.865.