[Federal Register Volume 61, Number 221 (Thursday, November 14, 1996)]
[Rules and Regulations]
[Pages 58333-58340]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 96-29054]
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FEDERAL COMMUNICATIONS COMMISSION
47 CFR Part 22
[PP Docket No. 93-253; CC Docket No. 90-6; FCC 96-361]
Implementation of Section 309(j) of the Communications Act--
Competitive Bidding
AGENCY: Federal Communications Commission.
ACTION: Final rule.
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SUMMARY: This document adopts competitive bidding rules for mutually
exclusive applications for cellular unserved Phase I and Phase II
service areas. These rules result from the Commission's decision to use
competitive bidding to select from among mutually exclusive
applications. The Adoption of these rules will enable the Commission to
complete the licensing of cellular unserved area licenses.
EFFECTIVE DATE: December 16, 1996.
FOR FURTHER INFORMATION CONTACT: Thomas Horan, Wireless
Telecommunications Bureau, (202) 418-0660.
SUPPLEMENTARY INFORMATION: This is a summary of the Ninth Report and
Order in PP Docket No. 93-253; CC Docket No. 90-6; FCC 96-361, adopted
August 23, 1996 and released November 7, 1996. The complete text of the
Ninth Report and Order is available for inspection and copying during
normal business hours in the FCC Reference Center (Room 239), 1919 M
Street, N.W., Washington, D.C. and also may be purchased from the
Commission's copy contractor, International Transcription Service,
(202) 857-3800, 2100 M Street, N.W., Suite 140, Washington, D.C. 20037.
Synopsis of the Report and Order
Background
1. Initial cellular systems operators were given a five-year period
during which to expand their systems within the geographic area in
which they are licensees. Cellular unserved areas were created from the
geographic area not covered by the licensee at the close of the five-
year build-out period. We adopted an application processing scheme that
has two phases for all cellular markets in which the five-year build-
out period has expired or will expire in the future. Phase I is a one-
time process that provides an opportunity for eligible parties to file
competing applications for authority to operate a new cellular system
in, or to expand an existing cellular system into, unserved areas as
soon as these areas become available. Phase II is an ongoing process
that allows eligible parties to apply for any unserved areas that may
remain in a market after the Phase I process is complete.
Grouping of Licenses
2. Following adoption of these rules, all Phase I auction
applicants, including those who previously filed FCC Form 464s, shall
file a short-form application (FCC Form 175) prior to the filing
deadline announced by Public Notice. The filing window for Phase I
applications will open on the 31st day after the expiration of a
market's five-year build-out period. For mutually exclusive Phase I
applications that were filed prior to our new FCC Form 175 filing
requirement, only the applicants who have timely-filed FCC Form 464
applications will be eligible to submit an FCC Form 175 and participate
in the auction for these markets. The auction process will repeat
itself approximately every six months until all of the Phase I licenses
for which there are mutually exclusive applications have been
auctioned. Applicants cannot file more than one Phase I initial
application for any cellular market, and Phase I initial applications
must not propose any de minimis or contract service area boundary
extensions. Phase I licensees may file a single major modification
application no later than 90 days after the grant of their Phase I
initial application. This major modification application may propose de
minimis or contract service area boundary extensions, or a non-
contiguous Cellular Geographic Area (``CGSA'') provided that the non-
contiguous CGSA meets the minimum coverage requirement of section
22.951 of the Commission's rules.
3. The start of the Phase II process is dependent on the resolution
of the Phase I short-form filing deadline. If a Phase I initial
application is granted for a market and channel block, Phase II
applications for that market and channel block may be filed on or after
the 121st day after the Phase I application is granted. If no Phase I
initial applications are received, Phase II applications may be filed
on or after the 32nd day after the expiration of the relevant five-year
build-out period. Competing Phase II applications are subject to a 30-
day filing window following a Phase II application's publication in a
Public Notice. Phase II applicants should continue to submit an FCC
Form 464A and an FCC Form 600 during the appropriate filing windows.
For Phase II applications, we will require the FCC Form 600 prior to
the FCC Form 175 in order to determine whether mutual exclusivity
exists among applicants. Mutual exclusivity will be determined by
comparing the technical information contained in each FCC Form 600 to
determine whether any applicants are applying for the same specific
cell sites in any given cellular unserved area. This differs from the
Phase I process, because Phase I applicants are applying for the entire
unserved area. Thus, mutual exclusivity may be determined by reviewing
the FCC Form 464 application for Phase I licenses. If the Commission
determines mutually exclusive Phase II initial applications have been
received, these applicants will be required to file a short-form
application (FCC Form 175) prior to the filing deadline specified in a
Public Notice. The Phase II licenses for which there are mutually
exclusive applications will be auctioned in either a separate Phase II
auction or as part of a Phase I auction. The Wireless
Telecommunications Bureau (``Bureau'') will issue a Public Notice
describing the auction process for Phase II licenses prior to any Phase
II auctions.
Competitive Bidding Design
4. For Cellular Unserved Phase I and Phase II service areas, we are
electing to use a simultaneous multiple round auction, but we reserve
the option to do this auction sequentially.
[[Page 58334]]
5. For the cellular unserved auctions, we will use a simultaneous
stopping rule. Bidding will remain open on all licenses until bidding
stops on every license. We intend to close the auction after one round
passes in which no new valid bids or proactive activity rule waivers
are submitted. The Commission, however, retains the discretion to keep
the auction open even if no new valid bids and no proactive waivers are
submitted. The Commission delegates to the Bureau the authority to
exercise such discretion. In the event that the Bureau exercises this
discretion, the effect would be the same as if a bidder had submitted a
proactive waiver. In addition, the Commission will retain the
discretion to declare after a certain number of rounds that the auction
will end after some specified number of additional rounds and delegates
to the Bureau the authority to exercise such discretion. If this option
is used, we will accept bids only on licenses where the high bid had
increased in at least one of the last three rounds.
Bidding Procedures
6. We intend to allow only remote bidding for the cellular unserved
area licenses auction. Bidders will be able to submit bids from remote
locations electronically using special bidding software, or via
telephone. We have established a schedule of fees that participants in
the competitive bidding process will be assessed for certain on-line
computer services, bidding software, and for bidder information
packages. By Public Notice, the Bureau will provide additional
information to prospective bidders to acquaint them with bidding
procedures.
Bid Increments
7. We will establish minimum bid increments for bidding in each
round of the auction at a level of five percent of the high bid in the
previous round. The Commission also retains the discretion to vary the
minimum bid increments for individual licenses or groups of licenses at
any time before or during the course of the auction, based on the
number of bidders, bidding activity, and the aggregate high bid amounts
and delegates to the Bureau the authority to exercise such discretion.
The Bureau will announce by Public Notice prior to the auction the
general guidelines for bid increments. Where a tie bid occurs, we will
determine the high bidder by the order in which the Commission receives
the bids.
Duration of Bidding Rounds
8. We will retain the discretion to establish the duration and
frequency of bidding rounds (e.g., the number of bidding rounds per day
and the length of each bidding round) by Public Notice before each
auction and delegate to the Bureau the authority to exercise such
discretion. The Bureau will announce any changes to the duration of or
intervals between bidding rounds either by Public Notice prior to the
auction, or announcement during the auction.
Activity Rules
9. The Commission will assign a ``bidding unit'' value to each
cellular unserved license for the purpose of measuring bidding activity
and eligibility. For the cellular unserved auction, each cellular
unserved license will be assigned a uniform 5,000 bidding units. This
amount will be equal to the upfront payment associated with each
cellular unserved license. Licenses on which a bidder is the high
bidder at the end of the bid withdrawal period in the previous round
count against the maximum eligibility bidding limit. To preserve their
maximum eligibility, bidders are required to maintain a certain level
of bidding activity during each round of the auction. The auction is
divided into three stages with increasing levels of bidding activity
required in each stage of the auction. A bidder is considered active on
a license in the current round if the bidder has submitted an
acceptable bid for that license in the current round, or has the high
bid for that license at the end of the bid withdrawal period in the
previous round, in which case, the bidder does not need to bid on that
license in the current round to be considered active on that license. A
bidder's activity level in a round is the sum of the bidding units
associated with licenses on which the bidder is active.
10. We intend to establish the following minimum required activity
levels for each stage of the auction: In each round of Stage One of the
auction, a bidder who wishes to maintain its current eligibility is
required to be active on licenses encompassing at least 60 percent of
the bidding units for which it is currently eligible. Failure to
maintain the requisite activity level will result in a reduction in the
amount of bidding units upon which a bidder will be eligible to bid in
the next round of bidding. During Stage One, if activity is below the
required minimum level, eligibility in the next round will be
calculated by multiplying the current round activity by five-thirds
(\5/3\). Eligibility for each applicant in the first round of the
auction is determined by the amount of the upfront payment received and
the licenses identified in its short-form application. In each round of
Stage Two, a bidder who wishes to maintain its current eligibility is
required to be active on 80 percent of the bidding units for which it
is eligible in the current round. During the second stage, if activity
is below the required minimum level, eligibility in the next round will
be calculated by multiplying the current round activity by five-fourths
(\5/4\). In each round of Stage Three, a bidder who wishes to maintain
its current eligibility is required to be active on licenses
encompassing 95 percent of the bidding units for which it is eligible
in the current round. In Stage Three, if activity in the current round
is below 95 percent of current eligibility, eligibility in the next
round will be calculated by multiplying the current round activity by
twenty-nineteenths (\20/19\). The Commission, however, will retain the
discretion to set and, by announcement before or during the auction,
vary the required minimum activity levels (and associated eligibility
calculations) for each auction stage, to control the pace of the
auction and delegates to the Bureau the authority to exercise such
discretion.
Stage Transitions
11. Stage transitions will be determined by the auction activity
level. The ``auction activity level'' is the sum of the bidding units
of licenses for which the high bid increased in the current round as a
percentage of the total bidding units of all licenses offered in the
auction. The cellular unserved auction will begin in Stage One and
generally will move from Stage One to Stage Two when the auction
activity level is below ten percent for three consecutive rounds in
Stage One. The auction generally will move from Stage Two to Stage
Three when the auction activity level is below five percent for three
consecutive rounds in Stage Two. In no case can the auction revert to
an earlier stage. The Commission will retain the discretion to
determine and announce during the course of an auction when, and if, to
move from one auction stage to the next, based on a variety of measures
of bidder activity, including, but not limited to, the auction activity
level as defined above, the percentage of licenses (measured in terms
of bidding units) on which there are new bids, the number of new bids,
and the percentage increase in revenue. The Commission delegates to the
Bureau the authority to exercise such discretion.
[[Page 58335]]
Activity Waivers
12. We will provide bidders five waivers of the above-described
activity rule that may be used in any round during the course of the
auction. If a bidder's activity level is below the required activity
level, a waiver will be applied automatically.
A waiver will preserve current eligibility in the next round. An
activity rule waiver applies to an entire round of bidding and not to a
particular service area.
13. Bidders will be afforded an opportunity to override the
automatic waiver mechanism when they place a bid if they intentionally
wish to reduce their bidding eligibility and do not want to use a
waiver to retain their eligibility at its current level. If a bidder
overrides the automatic waiver mechanism, its eligibility will be
permanently reduced (according to the formulas specified above), and it
will not be permitted to regain its bidding eligibility from a previous
round. An automatic waiver invoked in a round in which there are no new
valid bids will not keep the auction open. Bidders will have the option
of entering an activity rule waiver proactively during the bid
submission period. If a bidder submits a proactive waiver in a round in
which no other bidding activity occurs, the auction will remain open.
14. The Commission will retain the discretion to issue additional
waivers during the course of an auction for circumstances beyond a
bidder's control and delegates to the Bureau the authority to exercise
such discretion. The Bureau will also have the flexibility to adjust by
Public Notice prior to an auction the number of waivers permitted, or
to institute a rule that allows one waiver during a specified number of
bidding rounds or during specified stages of the auction.
Pre-Auction Application Procedures
15. Before each scheduled auction for cellular unserved area
licenses, the Bureau will release an initial Public Notice announcing
the auction. This initial Public Notice will specify the license(s) to
be auctioned, the time and place for the auction, and other important
information concerning the procedures, terms, and conditions of the
auctions. The initial Public Notice will also specify the filing
deadline for short-form applications.
16. Potential bidders who currently have long-form applications
(FCC Form 401 or FCC Form 600) on file for the cellular unserved area
licenses being offered in the first auction will be required to submit
a short-form application (FCC Form 175) by a date specified in the
initial Public Notice to participate in the cellular unserved area
auction. Those applicants who filed their applications on the FCC Form
401 will be required to resubmit their applications on an FCC Form 600,
and we will waive the filing fee for the FCC Form 600. Those applicants
will not have to repeat information which is contained on the FCC Form
401.
17. This requirement will provide current applicants with the
opportunity to file their short-form applications electronically. The
Bureau will provide detailed instructions on electronic filing in a
Public Notice prior to the auction. For the first auction for cellular
unserved area licenses, all other potential bidders will also be
required to submit, either electronically or manually, a short-form
application by the date specified in the Public Notice announcing the
auction. If the Commission receives only one application that is
acceptable for filing for a particular frequency block and there is
thus no mutual exclusivity, the Bureau will cancel the auction for this
license. Phase I applicants would then file a long-form application
(FCC Form 600) by a date established by the Bureau. Phase II applicants
would not file another long-form application (FCC Form 600, since one
would already be on file.
Upfront Payments
18. We are establishing a uniform upfront payment amount of $5,000
per license. A bidder may file applications for every license being
auctioned, but its upfront payment should reflect the maximum number of
licenses it seeks to win.
19. Upfront payments will be due by a date specified by Public
Notice, but generally not later than 14 days before a scheduled
auction. To receive a bidder identification number, the applicant or
its representative will be required to deposit with Mellon Bank, by
cashiers' check or wire transfer, at least $5,000. During the auction,
bidders will be required to provide their bidder identification numbers
when submitting bids. The highest bidder for each license will be asked
to sign a bid confirmation form. The upfront money will later be
counted toward the down payment for the license. During the period that
upfront payment deposits are held pending ultimate award of the
license, the interest that accrues will be retained by the Government.
Down Payments
20. Winning bidders will be required to supplement their upfront
payments to bring their total deposit with the Commission up to at
least 20 percent of the final payment due for the license(s) won in
that particular auction. If the upfront payment already tendered
amounts to 20 percent or more of the winning bid, no additional deposit
will be required. If the upfront payment on deposit is greater than 20
percent of the winning bid amount after deducting any bid withdrawal
and default penalties due, the additional monies will be refunded. If a
bidder has withdrawn a bid or defaulted but the amount of the payment
cannot yet be determined, the bidder will be required to make a deposit
of 20 percent of the amount bid on such licenses. When it becomes
possible to calculate and assess the payments, any excess deposit will
be refunded. Upfront payments will be applied to such deposits, and to
bid withdrawal and default assessments due, before being applied toward
the bidder's down payment on licenses the bidder has won.
21. The winning bidders will be required to submit the required
down payment by cashier's check or wire transfer to Mellon bank by a
date to be specified by Public Notice, generally within five business
days following the close of bidding. The Commission will hold the down
payment until the high bidder has been awarded the license and has paid
the remaining balance due on the license.
Full Payment
22. Long-form applications (FCC Form 600) will be due from
successful Phase I bidders within ten (10) business days after they
have been notified of their winning bidder status, including those
applicants who have an FCC Form 401 currently on file who are required
to refile on FCC Form 600. Thus, FCC Form 600 applications will be due
from all successful Phase I bidders on the same date. If a filing fee
is required, the general rules governing the submission of fees will
apply except for applicants who currently have FCC Form 401
applications on file. Once we have reviewed a long-form application and
have made an initial determination that the applicant is qualified, we
will release a Public Notice that the long-form applications have been
accepted. This Public Notice will trigger the filing window for
petitions to deny. After resolution of petitions to deny, the
Commission will later release a Public Notice announcing that the
Commission is prepared to award licenses. Applicants will be required
to submit full payment for the license(s) within five days of the
release of this Public Notice. If the Commission denies all
[[Page 58336]]
petitions to deny, and is otherwise satisfied that the applicant is
qualified, the Commission will grant the license generally within ten
(10) business days after receiving full payment.
23. Phase I or Phase II applicants with long-form applications (FCC
Form 401 or FCC Form 600) currently on file will be permitted to make
both minor and major modifications to their FCC Form 600 applications,
including ownership changes or changes in the identification of parties
to bidding consortia on or before the date of the auction. Other
applicants will not be permitted to make any major modifications to
their applications, including ownership changes or changes in the
identification of parties to bidding consortia. Prospective bidders in
a Phase I auction should be aware that their single major modification
application permits them to bid for a license to cover all unserved
areas in that particular market. Phase II applicants are limited to
bidding for the ability to serve only the areas described in the
technical parameters shown in their FCC Form 600 application and do not
hold any rights to any unserved area not covered in this application.
Bid Withdrawal, Default, and Disqualification
24. Any bidder who withdraws a high bid during an auction before
the Commission declares bidding closed, or defaults by failing to remit
the required down payment within the prescribed time, would be required
to reimburse the Commission in the amount of the difference between its
high bid and the amount of the winning bid the next time the license is
offered by the Commission, if the subsequent winning bid is lower.
After bidding closes, we will apply Sec. 1.2104(g)(2) of the
Commission's rules to assess a defaulting auction winner an additional
payment of three percent of the subsequent winning bid or three percent
of the amount of the defaulting bid, whichever is less. The additional
three percent payment is designed to encourage bidders who wish to
withdraw their bids to do so before bidding ceases. We will hold
deposits made by defaulting or disqualified auction winners until full
payment is made. Entities that obtain their licenses through the
auction process will forfeit all monies paid to the Commission if their
licenses are revoked or canceled.
25. In the event an auction winner defaults or is otherwise
disqualified after an auction is closed, the Commission must exercise
our discretion to decide whether to hold a new auction or offer the
license to the second highest bidder. In the unlikely event that there
is more than one bid withdrawal on the same license, we will hold each
withdrawing bidder responsible for the difference between its withdrawn
bid and the amount of the winning bid the next time the license is
offered by the Commission.
Transfer Disclosure Provisions
26. We conclude that the transfer disclosure requirements of
Sec. 1.2111(a) should apply to all cellular radiotelephone licenses for
unserved areas obtained through the competitive bidding process.
Licensees transferring their licenses within three years after the
initial unserved area license grant will be required to file, together
with their transfer applications, the associated contracts for sale,
option agreements, management agreements, and all other documents
disclosing the total consideration received in return for the transfer
of their licenses.
Performance Requirements
27. We will not adopt additional performance requirements for the
cellular unserved area licenses beyond those already provided in the
service rules for all auctionable services.
Rules Prohibiting Collusion
28. We will subject cellular unserved area licensees to the rules
prohibiting collusion embodied in Secs. 1.2107(d) and 1.2105(c) of the
Commission's rules. Bidders will be required by Sec. 1.2105(a)(2) to
identify on their short-form applications all parties with whom they
have entered into any consortium arrangements, joint ventures,
partnerships, or other agreements or understandings that relate to the
competitive bidding process. Bidders will be required to certify that
they have not entered and will not enter into any explicit or implicit
agreements, arrangements or understandings with any parties, other than
those identified, regarding the amount of their bid, bidding
strategies, or the particular properties on which they will or will not
bid. In light of our decision to apply Sec. 1.2105 to mutually
exclusive cellular radiotelephone applicants for unserved areas, we are
modifying Sec. 22.949(c) which currently provides that settlements
among all applicants with mutually exclusive applications (full
settlements) for unserved areas must be filed no later than fifteen
(15) days before the competitive bidding procedure is scheduled to take
place. To provide consistency with auction rules for other services,
Sec. 22.949(c) will now reflect that full settlements must be filed no
later than the deadline for the short-form application (FCC Form 175).
29. Although applicants may not make major modifications to their
short-form applications, a single member of a bidding consortium may
withdraw from a consortium only in a particular RSA or MSA(s), but
otherwise remain in the consortium for purposes of bidding on all other
markets specified on the short-form application. However, such
arrangements to assign the member's interests in particular licenses to
other consortium members after the auction must be disclosed on an
original or amended short-form application, and a request to transfer
or assign the license also must be filed in conjunction with the long-
form application.
30. Section 1.2107(d) provides that, as an exhibit to the long-form
application, the applicant must provide a detailed explanation of the
terms and conditions and parties involved in any bidding consortia,
joint venture, partnership or other agreement or arrangement it had
entered into relating to the competitive bidding process prior to the
time the bidding was completed. The rule provides that such agreements
must have been entered into prior to the filing of the short-form
application. Section 1.2105(c), however, provides an exception to that
prohibition for bidders who have not filed short-form applications for
licenses in any of the same geographic license areas because of the low
risk of anticompetitive conduct among those bidders. Those bidders may
enter into such discussions, consortia, or arrangements, or add equity
partners, during the course of an auction provided that such changes do
not result in a change of control of the applicant. We will also permit
communications among bidders concerning matters unrelated to the
license auctions, except for communications resulting in a transfer of
control of the applicant.
Designated Entities
31. We believe it is unnecessary to create special provisions for
designated entities in the auctions for cellular unserved area
radiotelephone licenses. Unlike broadband PCS, which is a new service
that attracts many entrepreneurs to the wireless telecommunications
arena, unserved area licenses in the cellular radiotelephone service
are highly specialized licenses that are valued mainly by a discrete
group of entrepreneurs. In addition, because cellular unserved area
radiotelephone service, characterized by small geographic areas that
were not covered by the initial cellular licensee during the five-year
build-out period, is not a capital-intensive service, we expect that
designated entities who are interested in
[[Page 58337]]
participating in provision of the service will more easily access the
capital needed to participate in the auction.
Procedural Matters
32. Pursuant to the Regulatory Flexibility Act of 1980, 5 U.S.C.
604, the Commission's final analysis for the Ninth Report and Order is
as follows:
33. Need for and purpose of the action. As a result of new
statutory authority, the Commission may utilize competitive bidding
mechanisms in the grant of certain initial licenses. The Commission
published an Initial Regulatory Flexibility Analysis (IRFA) within the
Notice of Proposed Rule Making, Implementation of Section 309(j) of the
Communications Act--Competitive Bidding, PP Docket No. 93-253, 58 FR
53489 (Oct. 15, 1993), 8 FCC Rcd 7635 (1993) (Auctions NPRM) and
published a Final Regulatory Flexibility Analysis within the
Competitive Bidding Second Report and Order, Implementation of Section
309(j) of the Communications Act--Competitive Bidding, PP Docket No.
93-253, 59 FR 22980 (May 4, 1994), 9 FCC Rcd 2348 (1994) (Competitive
Bidding Second Report and Order). As noted in that previous final
analysis, this proceeding will establish a system of competitive
bidding for choosing among certain applications for initial licenses.
34. Issues raised in response to the IRFA. The IRFA in PP Docket
No. 93-253 noted that the proposals under consideration in the Auctions
NPRM included the possibility of new reporting and recordkeeping
requirements for a number of small business entities. No commenters
responded specifically to the issues raised in the IRFA. We have made
some modifications to the proposed requirements as appropriate.
35. Significant alternatives considered and rejected. All
significant alternatives have been addressed in the Competitive Bidding
Second Report and Order.
36. With respect to the Ninth Report and Order, a Final Regulatory
Flexibility Analysis (FRFA), in compliance with 5 U.S.C. 801, is
provided as follows:
Final Regulatory Flexibility Analysis
37. As required by Section 603 of the Regulatory Flexibility Act, 5
U.S.C. 603 (RFA), an Initial Regulatory Flexibility Analysis (IRFA) was
incorporated in the Auctions NPRM. The Commission sought written public
comments on the proposals in the Auctions NPRM including on the IRFA.
The Commission's Final Regulatory Flexibility Analysis (FRFA) in this
Order conforms to the RFA, as amended by the Contract with America
Advancement Act of 1996 (CWAAA), Public Law 104-131, 110 Stat. 847
(1996).
A. Need for and Objective of the Rules
38. This Report and Order adopts final auction rules that will
enable the Commission to complete the licensing of unserved areas in
the cellular radiotelephonic service. Initial cellular operators were
given a five-year period during which to expand their systems within
Metropolitan Service Areas (MSAs) and Rural Statistical Areas (RSAs) in
which they are licensees. The Commission adopted an application
processing approach that has two phases for all cellular markets in
which the five-year period has expired or will expire in the future.
The Commission now adopts competitive bidding as the appropriate method
to award licenses from among mutually exclusive applications for
unserved areas filed after July 26, 1993, in light of the competitive
bidding authority contained in the Omnibus Budget Reconciliation Act of
1993. In adopting these rules for the provision of cellular service in
unserved areas, the Commission's objectives are to: (1) foster the
creation of a seamless and integrated nationwide cellular service, so
that subscribers can receive high quality cellular service throughout
the nation, and (2) make cellular service available to the public as
expeditiously as possible.
B. Summary of Issues Raised by Public Comment on the Initial Regulatory
Flexibility Analysis
39. The Commission included an Initial Regulatory Flexibility
Analysis (IRFA) within the Auctions NPRM and published a Final
Regulatory Flexibility Analysis (FRFA) in the Competitive Bidding
Second Report and Order, the initiating document for this item. There
were no specific comments in response to the IRFA or the FRFA. With
respect to comments received in response to the Auctions NPRM from the
initiating proceeding, the majority of comments that related to
cellular unserved areas focused on whether auctions should be used for
pending applications or whether the Commission should use lotteries to
award those licenses. This issue was resolved in the Competitive
Bidding Second Report and Order in which the Commission determined that
unless specifically excluded, licenses for the Public Mobile Radio
Service, including unserved area licenses, should be awarded through
competitive bidding. The Competitive Bidding Second Report and Order
also prescribed general rules and procedures, including a broad menu of
competitive bidding methods, to be used for all auctionable services.
C. Projected Reporting, Recordkeeping and Other Compliance Requirements
of the Rules
40. Authorizing use of simultaneous multiple round auctions.
The Commission is adopting a rule which will permit cellular
unserved areas to be auctioned using a simultaneous multiple round
auction. This type of auction has the advantage of providing bidders
full flexibility to bid for any license as more information becomes
available during the course of the auction. A simultaneous multiple
round auction will allow remote access to bidding software, auction
information, bid submission and results. This will make it easier for
small business operators to participate in an auction without leaving
their places of business. Also, it will make information concerning the
status of the auction easier to access, which will reduce the
administrative burden on participants in the auction.
Short Form Applications Required
41. Applicants for Phase I licenses were required to file an FCC
Form 464 within 31 days after the expiration of the five-year build-out
period of the authorized system(s) on the channel block requested in
the market containing the unserved area. The adopted auction rules
require all Phase I auction applicants to file a short-form application
(FCC Form 175) prior to the filing deadline announced by Public Notice.
The short-form applications require applicants to provide information
required by Sec. 1.2105(a)(2) of the Commission's Rules. The short-form
applications are used to determine if there is mutual exclusivity for a
license.
42. Also, potential bidders who currently have long-form
applications (FCC Form 401 or FCC Form 600) on file for the cellular
unserved area licenses will be required to submit a short-form
application (FCC Form 175) by a date specified in the initial Public
Notice to participate in the cellular unserved auction.
43. The Commission does not believe requiring all applicants to
file a short-form application is burdensome because the information
requirement is not substantial. Submitting a short-form application may
be beneficial by providing the applicants with the opportunity to file
their short-forms electronically. Those applicants who file their
applications electronically will have the option of bidding in the
auction either electronically or
[[Page 58338]]
telephonically. The Commission is moving toward electronic filing of
short-forms applications to streamline the administrative process for
auction participants.
Upfront Payment
44. The Commission is adopting a rule requiring each auction
participant to make an upfront payment in the amount of $5,000 per
license prior to the beginning of an auction. An upfront payment
provides some degree of assurance that only serious, qualified bidders
will participate in the auction and serves as a deterrent to the filing
of speculative applications which would delay the provision of cellular
service to the public. Upfront payments will be due by a date specified
by Public Notice. The upfront money will later be counted toward the
down payment for the license. Bidders who do not make the winning bid
will be refunded their upfront payment minus any applicable bid
withdrawal or default payments. The upfront payment procedures should
keep the auction process simple and keep the costs down for
entrepreneurs who wish to bid on only a few licenses.
D. Description and Estimate of Small Entities Subject to the Rules
45. The Commission has not developed a definition of small entities
applicable to cellular licensees. Therefore, the applicable definition
of small entity is the definition under the Small Business
Administration (SBA) rules applicable to radiotelephone companies. This
definition provides that a small entity is a radiotelephone company
employing fewer than 1,500 persons. Since the Regulatory Flexibility
Act amendments were not enacted until after the record in this
proceeding was closed, the Commission was unable to request information
regarding the number of small cellular businesses and is unable at this
time to determine the precise number of cellular firms which are small
businesses.
46. The size data provided by the SBA does not enable the
Commission to make a meaningful estimate of the number of cellular
providers which are small entities because it combines all
radiotelephone companies with 500 or more employees. We therefore used
the 1992 Census of Transportation, Communications, and Utilities,
conducted by the Bureau of the Census, which is the most recent
information available. This document shows that only 12 radiotelephone
firms out of a total of 1,178 such firms which operated during 1992 had
1,000 or more employees. Therefore, even if all 12 of these firms were
cellular telephone companies, nearly all cellular carriers were small
businesses under the SBA's definition. We assume, for purposes of our
evaluations and conclusions in this FRFA, that all of the current
cellular licensees are small entities, as that term is defined by the
SBA. Although there are 1,758 cellular licenses, we do not know the
exact number of cellular licensees, because a cellular licensee may own
several licenses.
E. Steps Taken to Minimize the Burdens on Small Entities
47. The rules adopted in the Ninth Report and Order are designed to
minimize burdens on small businesses who may participate in the
competitive bidding process. By adopting a simultaneous multiple round
design for cellular unserved area auctions, but reserving discretion to
use an alternative competitive bidding design, the Commission adds
flexibility to its process for awarding licenses. The Commission
intends to allow only remote bidding. Bidders will be able to submit
bids from remote locations electronically using special bidding
software, or via telephone. One advantage of simultaneous multiple
round auctions is that they can make it possible for bidders to
participate from their own places of business.
F. Significant Alternatives Considered and Rejected
48. In 1994, the Commission established procedures to ensure that
licenses awarded by auction were disseminated to a wide variety of
applicants, including small businesses, but left the decision whether
and how to use special provisions to the subsequent Reports and Orders
designating specific competitive bidding rules for a particular
service. For cellular unserved area radiotelephone licenses, the
Commission considered and rejected creating special provisions for
designated entities such as small businesses. The Commission believed
that creating special provisions was unnecessary. Unlike licenses for
new wireless telecommunications services such as PCS which attract
numerous entrepreneurs and existing licensees from other services,
cellular unserved area licenses are highly specialized licenses within
limited geographic boundaries that are valued mainly by a discrete
group of entities (most of whom are already providing cellular service
in adjacent areas). In addition, the Commission anticipates that few
markets will attract significant bids. Cellular unserved areas
typically are small geographic areas, which most likely would entail
smaller build-out costs as compared to other wireless
telecommunications services. As a result, the Commission expects that
small businesses who are interested in participating in provision of
this service may more easily access the capital needed to participate
in the auction.
G. Commission's Outreach Efforts to Learn of and Respond to the Views
of Small Entities Pursuant to 5 U.S.C. 609
49. Because the petitions and comments were filed in this
proceeding prior to the enactment of the 1996 Regulatory Flexibility
Act amendments, the Commission did not seek specific comments regarding
small entities' views of these rules being adopted. In the overall
proceeding in which this item was adopted, however, the Commission
sought comment on how the Commission could achieve the objectives of
the Omnibus Budget Reconciliation Act of 1993 related to designated
entities such as small businesses.
H. Report to Congress
50. The Commission shall send a copy of this Final Regulatory
Flexibility Analysis, along with this Report and Order, in a report to
Congress pursuant to the Small Business Regulatory Enforcement Fairness
Act of 1996, 4 U.S.C. 801(a)(1)(A). A copy of this FRFA will also be
published in the Federal Register.
51. Accordingly, it is ordered that, pursuant to the authority of
Sections 4(I), 303(r), 309(j), and 332 of the Communications Act of
1934, as amended, 47 U.S.C. 154(I), 303(r), 309(j), and 332, this Ninth
Report and Order is adopted and Part 22 of the Commission's Rules IS
AMENDED as set forth below.
52. It is further ordered that the rule amendments set forth below
will become effective December 16, 1996.
List of Subjects in 47 CFR Part 22
Communications common carriers, Reporting and recordkeeping
requirements.
Federal Communications Commission.
William F. Caton,
Acting Secretary.
Rule Changes
Part 22 of title 47 of the Code of Federal Regulations is amended
as follows:
PART 22--PUBLIC MOBILE SERVICES
1. The authority citation for Part 22 is revised to read as
follows:
[[Page 58339]]
Authority: Sections 4, 303, 309 and 332, 48 Stat. 1066, 1082, as
amended; 47 U.S.C. 154, 303, 309 and 332, unless otherwise noted.
2. Section 22.943 is amended by adding paragraph (b)(3) to read as
follows:
Sec. 22.943 Limitations on assignments and transfers of cellular
authorizations.
* * * * *
(b) * * *
(3) An applicant seeking approval for a transfer of control or
assignment (otherwise permitted under the Commission's Rules, 47 CFR
chapter I) of a license within three years of receiving a new license
through a competitive bidding procedure must, together with its
application for transfer of control or assignment, file with the
Commission a statement indicating that its license was obtained through
competitive bidding. Such applicant must also file with the Commission
the other documents and information set forth in Sec. 1.2111 of this
chapter.
* * * * *
3. Section 22.949 is amended by revising paragraph (c) to read as
follows:
Sec. 22.949 Unserved area licensing process.
* * * * *
(c) Settlements among some, but not all, applicants with mutually
exclusive applications for unserved areas (partial settlements) are
prohibited. Settlements among all applicants with mutually exclusive
applications (full settlements) are allowed and must be filed no later
than the date that the FCC Form 175 (short-form) is filed.
* * * * *
4. New Secs. 22.960 through 22.967 are added to Part 22, Subpart H,
to read as follows:
Sec. 22.960 Cellular unserved area radiotelephone licenses subject to
competitive bidding.
Mutually exclusive initial applications for cellular unserved area
Phase I and Phase II licenses filed after July 26, 1993, are subject to
competitive bidding procedures. The general competitive bidding
procedures found in part 1, subpart Q, of this chapter will apply
unless otherwise provided in this part.
Sec. 22.961 Competitive bidding design for cellular unserved area
radiotelephone licensing.
The Commission will employ a simultaneous multiple round auction
design when choosing from among mutually exclusive initial applications
to provide cellular unserved area radiotelephone service, unless
otherwise specified by the Wireless Telecommunications Bureau before
the auction.
Sec. 22.962 Competitive bidding mechanisms.
(a) Grouping. All cellular unserved area Phase I and Phase II
licenses will be auctioned simultaneously, unless the Wireless
Telecommunications Bureau announces, by Public Notice prior to the
auction, an alternative auction scheme.
(b) Minimum bid increments. The Wireless Telecommunications Bureau
will, by announcement before or during an auction, require minimum bid
increments in dollar or percentage terms.
(c) Stopping rules. The Wireless Telecommunications Bureau will
establish stopping rules before or during multiple round auctions in
order to terminate an auction within a reasonable time.
(d) Activity rules. The Wireless Telecommunications Bureau will
establish activity rules which require a minimum amount of bidding
activity. In the event that the Wireless Telecommunications Bureau
establishes an activity rule in connection with a simultaneous multiple
round auction, each bidder will be entitled to request and will be
automatically granted a certain number of waivers of such rule during
the auction.
Sec. 22.963 Withdrawal, default and disqualification payments.
(a) During the course of an auction conducted pursuant to
Sec. 22.961, the Commission will impose payments on bidders who
withdraw high bids during the course of an auction, who default on
payments due after an auction closes, or who are disqualified.
(b) Bid withdrawal prior to close of auction. A bidder who
withdraws a high bid during the course of an auction will be subject to
a payment equal to the difference between the amount bid and the amount
of the winning bid the next time the license is offered by the
Commission. No withdrawal payment would be assessed if the subsequent
winning bid exceeds the withdrawn bid. This payment amount will be
deducted from any upfront payments or down payments that the
withdrawing bidder has deposited with the Commission.
(c) Default or disqualification after close of auction. If a high
bidder defaults or is disqualified after the close of such an auction,
the defaulting bidder will be subject to the payment in paragraph (a)
of this section plus an additional penalty equal to three (3) percent
of the subsequent winning bid. If the subsequent winning bid exceeds
the defaulting bidder's bid amount, the 3 percent payment will be
calculated based on the defaulting bidder's bid amount. These amounts
will be deducted from any upfront payments or down payments that the
defaulting or disqualified bidder has deposited with the Commission.
Sec. 22.964 Bidding application (FCC Form 175).
All applicants who wish to participate in competitive bidding for
cellular unserved area radiotelephone licenses must submit applications
on FCC Form 175 pursuant to Sec. 1.2105 of this chapter. The Wireless
Telecommunications Bureau will issue a Public Notice announcing the
availability of cellular unserved area Phase I and Phase II licenses
and, in the event that mutually exclusive applications are filed, the
date of the auction for those licenses. This Public Notice will specify
the date on or before which applicants intending to participate in a
cellular unserved area radiotelephone service auction must file their
applications in order to be eligible for that auction, and it will
contain information necessary for completion of the application as well
as other important information such as the materials which must
accompany the short form, any upfront payment that will need to be
submitted, and the location where the application must be filed.
Sec. 22.965 Submission of upfront payments and down payments.
(a) Each bidder in the cellular unserved radiotelephone service
auction(s) will be required to pay the Commission, immediately prior to
the auction, by cashier's check or by wire, at least $5,000 in order to
get a bidder identification number. The upfront money will later be
counted toward the full payment of the license.
(b) Each winning bidder in the cellular unserved radiotelephone
service auction(s) will be required to make a down payment to the
Commission's lock-box bank in an amount sufficient to bring its total
deposits up to 20 percent of its winning bid within five business days
after the close of the auction, or by a date specified by Public
Notice. The remainder of the full payment for the license shall be paid
within 5 days following the release of a Public Notice that will
indicate that the Commission is prepared to award the license(s). The
Commission will grant the license generally within ten (10) business
days after receiving full payment.
Sec. 22.966 Long-form applications.
Each winning bidder will be required to submit a long-form
application on
[[Page 58340]]
FCC Form 600 within ten (10) business days after being notified by
Public Notice that it is the winning bidder. Applications on FCC Form
600 shall be submitted pursuant to the procedures set forth in
Sec. 1.2107 of this chapter and any associated Public Notices.
Sec. 22.967 License grant, denial, default, and disqualification.
(a) Each winning bidder will be required to pay the balance of its
winning bid in a lump sum payment within five (5) business days
following Public Notice that the Commission is prepared to award the
license. The Commission will grant the license generally within ten
(10) business days after receipt of full and timely payment of the
winning bid amount.
(b) A bidder who withdraws its bid subsequent to the close of
bidding, defaults on a payment due, or is disqualified, will be subject
to the payments specified in Sec. 22.963 or Secs. 1.2104(g) and 1.2109
of this chapter, as applicable.
[FR Doc. 96-29054 Filed 11-13-96; 8:45 am]
BILLING CODE 6712-01-P
