[Federal Register Volume 59, Number 85 (Wednesday, May 4, 1994)]
[Unknown Section]
[Page 0]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 94-10638]
[[Page Unknown]]
[Federal Register: May 4, 1994]
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FEDERAL COMMUNICATIONS COMMISSION
47 CFR Part 1
[PP Docket No. 93-253, FCC 94-61]
Implementation of Competitive Bidding
AGENCY: Federal Communications Commission.
ACTION: Final rule.
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SUMMARY: The Commission has adopted rules establishing general
procedures that will apply whenever it employs a system of competitive
bidding (``auctions'') to choose from among mutually exclusive
applications for certain initial licenses. This action is taken to
implement section 309(j) of the Communications Act of 1934, as amended.
Procedures applicable to specific services will be determined in future
Reports and Orders. The new rules will promote the development and
rapid deployment of new technologies, products, and services for the
benefit of the public, including those residing in rural areas. These
rules also will promote economic opportunity and competition, and
disseminate licenses among a wide variety of applicants, including
small businesses, rural telephone companies, and businesses owned by
members of minority groups and women. This action will provide recovery
for the public of a portion of the value of the public spectrum made
available for commercial use.
EFFECTIVE DATE: June 3, 1994.
FOR FURTHER INFORMATION CONTACT:
Toni Simmons, Office of Plans and Policy, (202) 418-2030.
SUPPLEMENTARY INFORMATION: This is a summary of the Commission's Second
Report and Order, PP Docket No. 93-253, adopted March 8, 1994, and
released April 20, 1994. The full text of this Second Report and Order
is available for inspection and copying during normal business hours in
the FCC Dockets Branch, Room 230, 1919 M Street NW., Washington, DC.
The complete text may be purchased from the Commission's copy
contractor, International Transcription Service, Inc., 2100 M Street
NW., suite 140, Washington, DC 20037, telephone (202) 857-3800.
Paperwork Reduction Act
The Federal Communications Commission has submitted the following
information collection request to OMB for review and clearance under
the Paperwork Reduction Act of 1980, 44 U.S.C. 3507. Persons wishing to
comment on this information collection should contact Timothy Fain,
Office of Management and Budget, Room 3225, New Executive Office
Building, Washington, DC 20503, (202) 395-3561. For further
information, contact Judy Boley, Federal Communications Commission,
(202) 632-7513.
Please note: The Commission has requested emergency review of this
collection by May 6, 1994, under the provisions of 5 CFR 1320.18.
Title: Implementation of Section 309(j) of the Communications Act--
Competitive Bidding, Second Report and Order, PP Docket No. 93-253.
Action: New collections.
Respondents: Individuals, state or local governments, non-profit
organizations, business or other for-profit entities, including small
business.
Frequency of response: On occasion.
Estimated Annual Burden:
------------------------------------------------------------------------
Estimated
Number of average Estimated
Section/forms respondents hours per annual
response responses
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FCC Form 175......................... 6,400 .50 3,200
Section 1.2105(a)(2) (i)-(ix)........ 6,400 .50 3,200
Section 1.2107....................... 4,700 1.00 4,700
Section 1.2108....................... 2,350 20.00 47,000
Section 1.2111....................... 100 .50 50
FCC Form 175-S....................... 2,700 .25 675
Microfiche Req....................... 6,400 2.00 12,800
Total Annual Burden: 71,625.
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Needs and Uses: In the Second Report and Order in PP Docket No. 93-
253, the Commission has amended 47 CFR part 1 to add a new Subpart Q
which contains the general rules and requirements governing the
competitive bidding process for certain initial licenses. Applicants
are required to file certain information so that the Commission can
determine whether the applicants are legally, technically, and
financially qualified to be licensed. Affected public are any member of
the public who wants to become a licensee. The foregoing estimates
include the time for reviewing instructions, searching existing data
sources, gathering and maintaining the data needed, and completing and
reviewing the burden estimates or any other aspect of the collection of
information including suggestions for reducing the burden to the
Federal Communications Commission Records Management Division,
Paperwork Reduction project, Washington, DC 20554 and to the Office of
the Management and Budget Paperwork reduction project, Washington, DC
20503.
Summary of Second Report and Order
Introduction
1. In this Second Report and Order, we prescribe general rules and
procedures to implement the Commission's new authority under Section
309(j) of the Communications Act of 1934, as amended, to use
competitive bidding to award licenses for use of the radio spectrum. In
the future, in subsequent Reports and Orders, specific rules within the
scope of these general rules will be adopted for each service subject
to competitive bidding.
2. A voluminous number of comments and reply comments were filed by
interested parties in response to the Notice of Proposed Rule Making
(58 FR 53489 (October 15, 1993)) in this docket. These comments address
the many proposals made in the Notice.
Eligibility of License Applications for Competitive Bidding
3. The Commission will use competitive bidding to award licenses
only when the statutory criteria for auctionability set forth in
Section 309(j) of the Communications Act are met. First, there must be
mutually exclusive applications for an initial license or construction
permit. Second, the service applied for must principally involve the
transmission or reception of communications services to subscribers for
compensation. Applying these criteria, the Commission determined that
mutually exclusive licenses in the Interactive Video Data Service
(IVDS), the Personal Communications Services, most of the Public Mobile
Services, the Multipoint Distribution Service, the Multichannel
Multipoint Distribution Service, the Specialized Mobile Radio Service,
Marine Public Coast Stations and for exclusive frequencies above 900
MHz in the Private Carrier Paging Service should be awarded through
competitive bidding.
4. Because licensees in the Broadcast Radio and Broadcast
Television Services, Maritime Operational Fixed Stations, Personal
Radio Services (except IVDS), certain Private Land Mobile Radio
Services and certain other services do not receive compensation from
subscribers, these services are excluded from the competitive bidding
process. The following kinds of applications are not subject to
competitive bidding: Applications for renewal of licenses, most
applications for modification, applications for subsidiary
communications services, and applications for frequencies used as
intermediate links in the provision of service.
Competitive Bidding Design Options
5. We adopt simultaneous multiple round auctions as our primary
auction methodology. However, as the record convinces us that there is
no single competitive bidding design that is optimal for all
auctionable services and because Congress directed us to design and
test multiple alternative methodologies, we have provided alternative
methods from which to choose under appropriate circumstances. The
alternative design options are single round sealed bid auctions (either
sequential or simultaneous) and sequential oral auctions.
6. The two primary characteristics that will determine the choice
of auction design are: (1) The degree to which licenses are
interdependent, and (2) whether the expected license values are high or
low. Because we expect most licenses to be of high value and
interdependent, the simultaneous multiple round auction is our
preferred auction design. The Commission will select the competitive
bidding design to be used in auctioning particular licenses on a
service-specific basis. Combinatorial bidding, which may be used with
any type of auction, is also authorized for use as a competitive
bidding mechanism.
Procedures to Implement the Competitive Bidding Designs
7. To efficiently implement the competitive bidding designs, we
must specify certain auction procedures. We will choose from these
procedures and incorporate them into the service-specific rules that we
will adopt in the future.
8. Sequencing. We will choose the sequence of what is auctioned.
The importance of the choice of sequence increases with the degree of
interdependence among the items auctioned in sequence. We intend to
minimize the importance of the choice of sequence by auctioning
licenses sequentially only when there is not a high degree of value
interdependence across the licenses or groups that are offered in
sequence.
9. Duration of bidding rounds. In simultaneous multiple round
auctions, bids can be submitted continuously with the high bids
announced at the end of each round. With discrete rounds, the
Commission can more readily control the pace at which the auction
proceeds. The duration of bidding rounds and the interval between
rounds in simultaneous multiple round auctions may be varied by
announcement during the course of an auction. We generally intend to
give bidders a single business day to submit bids and intend to conduct
a new bidding round each business day, but we may choose other round
lengths and intervals between rounds.
10. Minimum bid increments. In multiple round auctions, whether
they be sequential or simultaneous, the Commission will generally
specify minimum bid increments. The bid increment is the amount or
percentage by which the bid must be raised above the previous round's
high bid in order to be accepted as a valid bid in the current round.
Imposing a minimum bid increment speeds the progress of the auction
and, along with activity and stopping rules, helps to ensure that the
auction comes to closure within a reasonable period of time. We reserve
the right to specify minimum bid increments in dollar terms as well as
in percentage terms. We also may vary the minimum bid increments with
respect to different licenses being awarded in one auction.
11. Stopping rules for multiple round auctions. Prior to each
multiple round auction, the Commission will announce by Public Notice a
stopping rule for determining when the auction is over. We seek a
stopping rule that will (1) terminate the auction in a reasonable
period of time, (2) be simple and clearly understood by participating
bidders and observers of the auction process, and (3) in the case of
simultaneous auctions, close all markets at approximately the same
time. In simultaneous auctions, the stopping rules must also specify
whether to close markets individually or simultaneously. Hybrid
stopping rules are also possible.
12. The following stopping rules are preferred: (1) When auctioning
licenses one at a time, or simultaneously and closing markets one at a
time bidding on a market will close if a single round passes in which
no new acceptable bids (i.e., no bids that meet any applicable bid
increment rule) are submitted for that license; (2) when auctioning
licenses simultaneously and closing markets simultaneously--bidding on
all markets will close if a single round passes in which no new
acceptable bids are submitted for any license.
13. Activity rules. To ensure that simultaneous auctions with our
preferred simultaneous stopping rule close within a reasonable period
of time, an activity rule is likely to be necessary to prevent bidders
from waiting until the end of the auction before participating. Where
we decide to employ an activity rule, we will seek one that (1) moves
auctions along at an appropriate speed, (2) provides bidders with
sufficient flexibility to pursue a wide range of alternative bidding
strategies, and (3) is simple and clearly understood by participating
bidders.
14. When the Commission employs a simultaneous stopping rule, our
preferred activity rule will be the three stage rule proposed by
Professors Paul Milgrom and Robert Wilson. Under this rule, the minimum
activity level, measured as a fraction of the self declared maximum
eligibility, would increase during the course of the auction. The
auction would be divided into three stages. During the first stage of
the auction, bidders would be required to be active on licenses
encompassing at least one-third of the MHz-pops for which they are
eligible. In the second stage, bidders would be required to be active
on licenses encompassing at least two-thirds of the MHz-pops for which
they are eligible. In the third stage, bidders would be required to be
active on licenses encompassing 100 percent of the MHz-pops for which
they are eligible. Bidders under this rule would be required to meet
these activity levels to retain their desired eligibility. A shortfall
in activity would reduce eligibility levels accordingly.
15. The Commission retains the flexibility to choose among activity
rules, other than the three stage Milgrom-Wilson rule, on a case-by-
case basis. These include: (1) A Milgrom-Wilson rule with one or two
stages, (2) a rule that requires bidders to be active on a single
license, (3) a rule that requires that a bidder's activity level remain
within a single range throughout the action, (4) a rule that replaces
the maximum allowed bidding levels in the Milgrom-Wilson rule with a
bidding premium for exceeding those maximums, or (5) a combination of
the foregoing rules. We conclude that a waiver procedure is necessary
in conjunction with a Milgrom-Wilson activity rule. Under our preferred
option, bidders will be permitted five automatic waivers of the minimum
activity requirement during the course of an auction.
16. Bid withdrawal and default penalties. If a high bid is
withdrawn prior to the close of a simultaneous round auction, the
Commission will impose a penalty equal to the difference between the
withdrawn bid and the amount of the winning bid the next time the
license is offered by the Commission. No withdrawal penalty will be
assessed if the subsequent winning bid exceeds the withdrawn bid. If a
winning bidder defaults after the close of such an auction, the
defaulting bidder will be required to pay the foregoing penalty plus an
additional penalty equal to three percent of the amount of the winning
bid the next time the license is offered by the Commission or three
percent of the amount of the defaulting bidder's bid, whichever is
less.
17. In the case of open outcry auctions, the Commission may choose
not to impose any penalty for bid withdrawal during the course of an
auction and instead rely only on the default penalty to discourage
insincere bidding. The default penalty will be assessed if a bidder
fails to make the down payment on a license, fails to pay for a license
or is disqualified after the close of an auction. In connection with
single round bidding, only the basic penalty (and not the additional
three percent penalty) would generally apply.
18. Release of Bid Information. We will announce bidder
identification numbers and bid amounts during the course of an auction,
but not the identities of bidders, to avoid potential manipulation and
collusion among bidders.
19. Delay, Suspension or Cancellation of Auction. By Public Notice
or by announcement during an auction, the Commission may delay, suspend
or cancel an auction in the event of a natural disaster, technical
obstacle, evidence of auction security breach, unlawful bidding
activity, administrative necessity, or for any other reason that
affects the fair and competitive conduct of the competitive bidding. In
such cases, the Commission may, at its sole discretion, resume the
auction starting from the beginning of the current or some previous
round or may cancel the auction in its entirety.
Pre-Auction Procedures and Bidder and License Qualification
20. To streamline the processing of auction applications and ensure
that bidders and licensees are qualified, we are adopting the following
procedures. Usually, no less than 75 days before each scheduled
auction, the Commission will release a Public Notice announcing the
auction. The initial Public Notice will normally contain information
such as the licenses to be auctioned and the time, place and method of
competitive bidding to be used, including applicable bid withdrawal
procedures and penalties, stopping rules and activity rules.
21. The initial Public Notice will also specify filing windows for
short-form applications (no long form applications are to be filed at
this stage of the competitive bidding application procedure) and bidder
certifications, filing fees, upfront and down payments. Applications
filed before or after the dates specified in the Public Notice will not
be accepted by the Commission. Applications submitted after the
deadline specified will be dismissed with prejudice. An auction
information package will be made available to prospective bidders after
the release of the initial Public Notice. Slightly different procedures
will apply when the rules permit applicants to submit long form
applications after the occurrence or nonoccurrence of certain events
(e.g., passage of time and failure to serve a particular area).
22. The short-form applications and bidder certifications will
normally require applicants to provide the following information: (1)
The license(s) for which the applicant wishes to bid, (2) the
applicant's name, (3) the identity of the person(s) authorized to bid,
(4) certifications that the applicant is legally, technically,
financially, and otherwise qualified, and (5) certification that the
applicant satisfies any financial qualification requirements for the
service in question. Applicants seeking to file as designated entities
eligible for bidding preferences must indicate their status in the
short-form application and must certify that they are qualified to file
as designated entities. Bidders will also be required to identify all
parties with whom they have entered into partnerships, joint ventures,
consortium, or other arrangements or agreements. Bidders will also be
required to certify on their short-form applications that they have not
entered into any explicit or implicit agreements 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.
23. After reviewing the short-form applications, the Commission
will issue a Public Notice listing all defective applications and
notify applicants of the specific defect. If the Commission receives
only one application that is acceptable for filing for a particular
license, the Commission will issue a Public Notice cancelling the
auction for this license and establishing a date for the filing of a
long-form application, the acceptance of which would trigger the
relevant procedures permitting petitions to deny. Applicants whose
short-form applications are substantially complete but have minor
errors or defects will be provided an opportunity to correct their
applications prior to the auction. However, 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. Also, applications that are not signed or that
fail to make the requisite certifications will be dismissed as
unacceptable.
24. After reviewing the corrected applications, the Commission will
release another Public Notice announcing the names of all applicants
whose applications have been accepted for filing. Applicants identified
in the Public Notice will then be required to submit the full amount of
their upfront payment to the Commission's lock-box bank by a date to be
specified in that Public Notice which generally will be no later than
14 days before the scheduled auction.
25. Once the Commission has received from the lock-box bank the
names of all applicants who have submitted timely unfront payments, the
Commission will issue a fourth Public Notice announcing the names of
all applicants that have been determined to be qualified to bid. Each
of these applicants will be provided a bidder identification number and
further information and instructions regarding the auction procedures.
Competitive Bidding Payments
26. Upfront Payments. In most cases, some form of upfront payment
is necessary to deter frivolous or insincere bidding. We have
determined that the best approach is to retain flexibility to determine
the amount of upfront payment on an auction-by-auction basis.
Generally, a bidder must submit an upfront payment equal to $0.02 per
pop per MHz for the largest combination of MHz-pops the bidder
anticipates bidding on in any single round of bidding. A bidder may
file applications for every license being auctioned, but its actual
bidding in any round of an auction will be limited by the amount of its
upfront payment.
27. Upfront payments will provide the Commission with a source of
available funds in the event a penalty must be assessed for bid
withdrawal prior to further payments. In future Reports and Orders
establishing service-specific auction rules, we may determine that the
$0.02 per pop per MHz formula is inappropriate because of product
market or license characteristics or auction design choice. In some
circumstances, we may decide that it is more appropriate instead to set
a fixed upfront payment or eliminate the upfront payment. We therefore
reserve the option of revising or waiving the upfront payment. In such
cases, we will adopt an alternative upfront payment in service-specific
auction rules or in the Public Notice announcing the auction.
28. As a general rule, we will not cap upfront payments because we
need to ensure that those bidding on large numbers of licenses have the
financial capability to build out those licenses and are bidding in
good faith. However, we reserve the right to institute caps in specific
services if we are satisfied that an absolute dollar amount will
provide sufficient deterrence against frivolous bidding and pernicious
strategic bidding. Setting a minimum upfront payment may be appropriate
when use of our preferred formula would result in a payment that would
be too small. Although a general minimum upfront payment of $2,500 is
reasonable, we retain the flexibility to modify this amount.
29. As a general matter, to protect the integrity of the auction
process, all applicants should be required to tender their upfront
payments to the Commission prior to bidding. However, given the likely
magnitude of some upfront payments and the fact that there will be a
significant interval between the date that short-form applications are
filed and the auction date, we will not require the filing of upfront
payments with short-form applications. Upfront payments will be
required to be made to the Commission on a date to be announced by
Public Notice, generally no later than 14 days before the scheduled
auction.
30. Down Payment. A 20 percent down payment is appropriate to
ensure that auction winners have the necessary financial capabilities
to complete payment for the license and to pay for the costs of
constructing a system and protect against possible default, while at
the same time not being so onerous as to hinder growth and diminish
access. We therefore will require that winning bidders supplement their
upfront payments with a down payment sufficient to being their total
deposits up to 20 percent of their winning bid(s). The down payment by
cashier's check or wire transfer to our lock-box will generally be
required within five business days after the auction is over.
31. Remainder of License Payment. The Commission will not permit
licensees to satisfy their payment obligations to the Commission
through the payment of royalties. With the exception of certain
designated entities, we are requiring full payment of the remainder of
the winning bid in a lump sum. This will leave financing to the private
sector and eliminate the need for the Commission to conduct detailed
credit checks.
32. Default and Disqualification. It is critically important to the
success of our system of competitive bidding that potential bidders
understand that there will be a substantial penalty assessed if they
withdraw a high bid, are found not to be qualified to hold licenses, or
default on a balance due. We will require any auction winner who
defaults by failing to remit the required down payment within the
prescribed time 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.
33. A defaulting auction winner will also be assessed a penalty of
three percent of the subsequent winning bid. If the subsequent winning
bid exceeds the defaulting bidder's bid amount, the three percent
penalty will be calculated based on the defaulting bid's amount. This
additional penalty will also apply if an auction winner is disqualified
or fails to remit the balance of its winning bid after having made the
required down payment. We will hold deposits made by defaulting or
disqualified auction winners to help ensure that the penalty is paid.
34. If a default or disqualification involves gross misconduct,
misrepresentation, or bad faith by an applicant, the Commission also
may declare the applicant and its principals ineligible to bid in
future auctions, and may take any other action that it may deem
necessary. Where specific instances of collusion in the competitive
bidding process are alleged during the petition to deny process, the
Commission may conduct an investigation or refer such complaints to the
United States Department of Justice for investigation.
35. If the high bidder makes the down payment in a timely manner, a
long-form application will be required to be filed by a specified date,
generally within ten business days after the close of the auction. The
Commission will then review the long-form application to determine if
it is acceptable for filing. Upon acceptance for filing, the Commission
will release a Pubic Notice announcing acceptance for filing of the
long-form application thus triggering the filing window for petitions
to deny.
36. The long-form application must include as an exhibit a detailed
explanation of the terms and conditions and parties involved in any
bidding consortia, joint venture, partnership or other agreement they
have entered into relating to the competitive bidding process prior to
the close of bidding. All such arrangements must have been entered into
prior to the filing of the short-form application. If all petitions to
deny are dismissed or denied, the Commission is satisfied that the
applicant is qualified, the license(s) will be granted to the auction
winner.
37. The Commission need not conduct a hearing before denial if it
determines that an applicant is not qualified and no substantial issue
of fact exists concerning that determination. In the event that the
Commission identifies substantial and material issues of fact in need
of resolution, Sections 309 (j)(5) and (i)(2) of the Communications Act
permit in any hearing the submission of all or part of evidence in
written form and allows employees other than administrative law judges
to preside at the taking of written evidence.
38. As a general rule, when an auction winner defaults on its final
payment or is otherwise disqualified after having made the required
down payment, the best course of action is to re-auction the license.
Nevertheless, if a default occurs within five business days after the
end of bidding, the Commission retains the right to offer the license
to the second highest bidder at its final bid level, or if that bidder
declines the offer, to offer the license to other bidders at their
final bid levels. If a new auction becomes necessary because of a
disqualification or default more than five business days after the end
of bidding, we will afford new parties an opportunity to file
applications to assure that serious interested bidders are in the pool
of qualified bidders at any re-auction.
39. Reservation Prices. We will retain the flexibility to utilize a
reservation price below which a license would not be awarded if we
decide that it is appropriate in a particular auction. The reservation
price could be disclosed, in which case it would effectively constitute
a minimum bid, or it could be undisclosed.
Regulatory Safeguards
40. We will impose a transfer disclosure requirement on licenses
obtained through the competitive bidding process, whether by a
designated entity or not. We will give particular scrutiny to action
winners who have not yet begun commercial service and who seek approval
for a transfer of control or assignment of their licenses within three
years after the initial license grant, in order to determine if any
unforeseen problems relating to unjust enrichment have arisen outside
the designated entity context. The applicant will be required to file,
together with its application, the associated contracts for sale,
option agreements and all other documents disclosing the total
consideration received in return for the transfer of its license
41. We believe that it is unnecessary and undesirable to impose
performance requirements on all auctionable services in excess of those
set forth in service rules for most existing services. We do not
believe that additional, general requirements are needed to address
concerns over ``warehousing'' of spectrum. With respect to those
services where no performance requirements currently exist, however, we
will prescribe such performance rules as are necessary at the same time
we promulgate competitive bidding rules for each of those services.
Designated Entities
42. Definitions. We are adopting a menu of preferences from which
we will choose in service-specific auction rules. These preferences are
designed to ensure that small businesses, rural telephone companies,
and businesses owned by members of minority groups and women
(collectively ``designated entities'') are given the opportunity to
participate in both the competitive bidding process and in the
provision of spectrum-based services. To qualify as a ``small
business'' for the purposes of competitive bidding, an entity must be
an independently-owned business with a net worth not exceeding $6
million dollars and an average net income after Federal income taxes
for two preceding years not in excess of $2 million. In order to be
eligible for preferences, businesses owned by women or minorities will
be required to have at least 50.1 percent equity ownership and a 50.1
percent controlling interest owned by women or minorities. Rural
telephone companies will be eligible for preferences if they are
independently owned, have 50,000 access lines or fewer and serve
communities with no more than 10,000 inhabitants.
43. Installment payments. We may allow small businesses (including
rural telephone companies and businesses owned by women and minorities
and rural telephone companies) that are winning bidders for certain
blocks of spectrum to pay in installments over the term of their
licenses. As a general matter, we will only allow installment payments
for licenses in those smaller spectrum blocks that are most likely to
match the business objectives of bona fide small businesses. The down
payment for such designated entities will be 10 percent of the winning
bid instead of 20 percent. Once the license is granted we will require
that the remaining 10 percent of the down payment be made within five
business days of grant, thereby commencing the eligible entity's
installment payment plan, which will extend over the period of the
license.
44. We will impose interest of installment payments equal to the
rate for U.S. Treasury obligations of maturity equal to the license
term. The schedule of installment payments will begin with interest-
only payments for the first two years. After that, principal and
interest will be amortized over the remaining term of the license. An
eligible designated entity that elects installment payments will have
its license conditioned upon the full and timely performance of its
payment obligations under the installment plan. However, we will
consider (on a case-by-case basis) a grace period before a delinquent
payor's license cancels.
45. Bidding credits. Bidding credits (payment discounts) may be
available to designated entities on certain frequency blocks.
Competitive bidding rules applicable to individual services will
specify the designated entities eligible for bidding credits, the
licenses for which bidding credits are available, the amounts of
bidding credits and other procedures. We reserve the option to
determine, on a service-specific basis, whether certain auctionable
services should allow other bidding credits to a consortium of
companies organized to bid for auctionable services.
46. To further promote the investment and rapid deployment of new
technologies and services in rural areas, we will also institute a
system of bidding credits for rural telephone companies for licenses in
their rural service areas. The amount of the bidding credit for rural
telephone companies will be tied to their commitments to achieve
certain telecommunications infrastructure build-out milestones in their
rural service areas. The amount of the bidding credit will be
proportionately linked to the amount by which the rural telephone
company agrees to expand its built-out commitment. Failure to meet a
build-out commitment will result in liability for a penalty in the
amount of the bidding credit, plus interest. Grant of licenses to rural
telephone companies utilizing bidding credits will be conditioned upon
payment of this penalty, if and when it becomes applicable.
47. Set-aside spectrum. We may establish set-aside spectrum in
certain services in which eligibility to bid may be limited to some or
all designated entities. For any auctions of set-aside spectrum, we
anticipate that we will establish lower upfront payments. This lower
payment would serve to encourage participation by all eligible
designated entities in the auction.
48. Tax certificates, distress sales and royalties. We will not at
this time adopt a general tax certificate program for services subject
to competitive bidding because other available measures will generally
provide sufficient incentive to attract investors in designated entity
enterprises. We will examine the feasibility of utilizing tax
certificates in subsequent competitive bidding rules for particular
services, especially where the record demonstrates a need to further
stimulate designated entity participation in spectrum auctions and in
the after-market for auctioned services. Before we determine whether
distress sales to designated entities should be authorized, we will
evaluate the success of our other measures. We do not adopt royalties
as an alternative payment method for designated entities. Such a
procedure would prove extremely intrusive and difficult to implement.
49. Preventing unjust enrichment. If we employ set-asides to
benefit some or all of the designated entities, we will impose a
recapture provision, applicable in the event of a sale to a non-
designated entity, that would be designed to recoup for the government
a portion of the value of the benefit received by the designated entity
in the bidding. Such a recapture provision would require that licensees
seeking to transfer their licenses for profit must within a specified
time remit to the government a penalty equal to a portion of the total
value of the benefit conferred by the government. We will generally
reduce the penalty as time passes or construction benchmarks are met.
50. Any specific recapture provisions will be set forth in
competitive bidding rules applicable to any services in which we decide
to set aside licenses. In no event will recapture provisions apply to
the transfer or assignment of a license that has been held for more
than five years. If the transfer is made to another eligible designated
entity, there would be no penalty.
51. If a small business making installment payments sells its
license to an entity that does not qualify under the standards we have
set for small businesses, we will require payment of the full amount of
the remaining principal balance as a condition of the license transfer.
Also, where bidding credits are used, transfer of a license to a non-
designated entity or any action relating to ownership or control that
will result in loss of status as an eligible designated entity, will
require the designated entity to reimburse the government for the
amount of the bidding credit, plus interest.
Final Regulatory Flexibility Analysis
Need for and purpose of this action:
52. This rulemaking proceeding was initiated to implement Section
309(j) of the Communications Act, as amended. The rules adopted herein
will carry out Congress's intent to establish a system of competitive
bidding for choosing from among mutually exclusive applications for
initial licenses to use the electromagnetic spectrum principally for
the transmission or reception of communications signals to or from
subscribers for compensation. The rules adopted herein also will carry
out Congress's intent to ensure that small businesses, rural telephone
companies, and businesses owned by women and minorities are afforded an
opportunity to participate in the provision of spectrum-based services.
Issues raised in response to the Initial Regulatory Flexibility
Analysis:
53. The IRFA noted that the proposals under consideration in the
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 to the IFRA. We have made
some modifications to the proposed requirements as appropriate.
Significant alternatives considered and rejected:
54. All significant alternatives have been addressed in the Second
Report and Order.
List of Subjects in 47 CFR Part 1
Administrative practice and procedure, Reporting and recordkeeping
requirements, Telecommunications.
Amendatory Text
47 CFR part 1 is amended as follows:
PART 1--[AMENDED]
1. The authority citation for Part 1 is revised to read as follows:
Authority: 47 U.S.C. 151, 154, 303, and 309(j) unless otherwise
noted.
2. A new subpart (Q), consisting of Secs. 1.2101-1.2111, is added
to read as follows:
Subpart Q--Competitive Bidding Proceedings
General Procedures
Sec.
1.2101 Purpose.
1.2102 Eligibility of applications for competitive bidding.
1.2103 Competitive bidding design options.
1.2104 Competitive bidding mechanisms.
1.2105 Bidding application and certification procedures;
prohibition of collusion.
1.2106 Submission of upfront payments.
1.2107 Submission of down payment and filing of long-form
applications.
1.2108 Procedures for filing petitions to deny against long-form
applications.
1.2109 License grant, denial, default, and disqualification.
1.2110 Designated entities.
1.2111 Assignment or transfer of control: Unjust enrichment.
Subpart Q--Competitive Bidding Proceedings
General Procedures
Sec. 1.2101 Purpose.
The provisions of this subpart implement section 309(j) of the
Communications Act of 1934, as added by the Omnibus Budget
Reconciliation Act of 1993 (Pub. L. 103-66), authorizing the Commission
to employ competitive bidding procedures to choose from among two or
more mutually exclusive applications for certain initial licenses.
Sec. 1.2102 Eligibility of applications for competitive bidding.
(a) Mutually exclusive initial applications in the following
services or classes of services are subject to competitive bidding:
(1) Interactive Video Data Service (see 47 CFR part 95, subpart F);
(2) Marine Public Coast Stations (see 47 CFR part 80, subpart J);
(3) Multipoint Distribution Service and Multichannel Multipoint
Distribution Service (see 47 CFR part 21, subpart K). This subsection
does not apply to applications in these services that were filed prior
to July 26, 1993;
(4) Exclusive Private Carrier Paging above 900 MHz (see 47 CFR part
90, subpart P and the Private Carrier Paging Exclusivity Report and
Order, 8 FCC Rcd 8318 (1993));
(5) Public Mobile Services (see 47 CFR part 22), except in the 800
MHz Air-Ground Radiotelephone Service, and in the Rural Radio Service.
Paragraph (a)(g) of this section does not apply to certain applications
in the cellular radio service that were filed prior to July 26, 1993;
(6) Specialized Mobile Radio Service (SMR) (see 47 CFR part 90,
subpart S) including finder's preference requests for frequencies
allocated to the SMR service (see 47 CFR 90.173); and
(7) Personal Communications Services (PCS) (see 47 CFR part 24).
Note: To determine the rules that apply to competitive bidding
in the foregoing services, specific service rules should also be
consulted.
(b) The following types of license applications are not subject to
competitive bidding procedures:
(1) Applications for renewal of licenses;
(2) Applications for modification of license; provided, however,
that the Commission may determine in particular instances that
applications for modification that are mutually exclusive with other
applications should be subject to competitive bidding;
(3) Applications for subsidiary communications services. A
``subsidiary communications service'' is a class of service where the
signal for that service is indivisible from that of the main channel
signal and that main channel signal is exempt from competitive bidding
under other provisions of these rules. See, e.g., Sec. 1.2102(c)
(exempting broadcast services). Examples of such subsidiary
communications services are those transmitted on subcarriers within the
FM baseband signal (see 47 CFR 73.295), and signals transmitted within
the Vertical Blanking Interval of a broadcast television signal; and
(4) Applications for frequencies used as an intermediate link or
links in the provision of a continuous, end-to-end service were no
service is provided directly to subscribers over the frequencies.
Examples of such intermediate links are
(i) Point-to-point microwave facilities used to connect a cellular
radio telephone base station with a cellular radio telephone mobile
telephone switching office; and
(ii) Point-to-point microwave facilities used as part of the
service offering in the provision of telephone exchange or
interexchange service.
(c) Applications in the following services or classes of services
are not subject to competitive bidding:
(1) Alaska-Private Fixed Stations (see 47 CFR part 80, subpart O);
(2) Broadcast radio (AM and FM) and broadcast television (VHF, UHF,
LPTV) under 47 CFR part 73;
(3) Broadcast Auxiliary and Cable Television Relay Services (see 47
CFR part 74, subparts D, E, F, G, H and L and part 78, subpart B);
(4) Instructional Television Fixed Service (see 47 CFR part 74,
subpart I);
(5) Maritime Support Stations (see 47 CFR part 80, subpart N);
(6) Marine Operational Fixed Stations (see 47 CFR part 80, subpart
L);
(7) Marine Radiodetermination Stations (see 47 CFR part 80, Subpart
M);
(8) Personal Radio Services (see 47 CFR part 95), except
applications filed after July 26, 1993, in the Interactive Video Data
Service (see 47 CFR part 95, subpart F);
(9) Public Safety, Industrial/Land Transportation, General and
Business Radio categories above 800 MHz, including finder's preference
requests for frequencies not allocated to the SMR service (see 47 CFR
90.173), and including, until further notice of the Commission, the
Automated Vehicle Monitoring Service (see 47 CFR 90.239);
(10) Private Land Mobile Radio Services between 470-512 MHz (see 47
CFR part 90, subparts B through F) including finder's preference
requests, see 47 CFR 90.173;
(11) Private Land Mobile Radio Services below 470 MHz (see 47 CFR
part 90, subparts B through F) except in the 220 MHz band (see 47 CFR
part 90, subpart T), including finder's preference requests (see 47 CFR
90.173); and
(12) Private Operational Fixed Services (see 47 CFR part 94).
Sec. 1.2103 Competitive bidding design options.
(a) The Commission will select the competitive bidding design(s) to
be used in auctioning particular licenses or classes of licenses on a
service-specific basis. The Commission will choose from one or more of
the following types of auction designs for services or classes of
services subject to competitive bidding:
(1) Single round sealed bid auctions (either sequential or
simultaneous);
(2) Sequential oral auctions; or
(3) Simultaneous multiple round auctions.
(b) The Commission may use combinatorial bidding, which would allow
bidders to submit all or nothing bids on combinations of licenses, in
addition to bids on individual licenses. The Commission may require
that to be declared the high bid, a combinatorial bid must exceed the
sum of the individual bids by a specified amount. Combinatorial bidding
may be used with any type of auction.
(c) The Commission may use single combined auctions, which combine
bidding for two or more substitutable licenses and award licenses to
the highest bidders until the available licenses are exhausted. This
technique may be used in conjunction with any type of auction.
Sec. 1.2104 Competitive bidding mechanisms.
(a) Sequencing. The Commission will establish the sequence in which
multiple licenses will be auctioned.
(b) Grouping. In the event the Commission uses either a
simultaneous multiple round competitive bidding design or combinatorial
bidding, the Commission will determine which licenses will be auctioned
simultaneously or in combination.
(c) Reservation price. The Commission may establish a reservation
price, either disclosed or undisclosed, below which a license subject
to auction will not be awarded.
(d) Minimum bid increments. The Commission may, by announcement
before or during an auction, require minimum bid increments in dollar
or percentage terms.
(e) Stopping rules. The Commission may establish stopping rules
before or during multiple round auctions in order to terminate the
auctions within a reasonable time.
(f) Activities rules. The Commission may establish activity rules
which require a minimum amount of bidding activity.
(g) Withdrawal, default and disqualification penalties. As
specified below, when the Commission conducts a simultaneous multiple
round auction pursuant to Sec. 1.2103, the Commission will impose
penalties on bidders who withdraw high bids during the course of an
auction, or who default on payments due after an auction closes or who
are disqualified.
(1) 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 penalty 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 penalty would be assessed if the subsequent
winning bid exceeds the withdrawn bid. This penalty amount will be
deducted from any upfront payments or down payments that the
withdrawing bidder has deposited with the Commission.
(2) 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 penalty in paragraph
(g)(1) 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 penalty 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.
When the Commission conducts single round sealed bid auctions or
sequential oral auctions, the Commission may modify the penalties to be
paid in the event of bid withdrawal, default or disqualification;
provided, however, that such penalties shall not exceed the penalties
specified above.
(h) Bidder identification during auctions. During any auction, the
Commission may identify bidders and the bids only by bid numbers.
(i) The Commission may delay, suspend, or cancel an auction in the
event of a natural disaster, technical obstacle, evidence of security
breach, unlawful bidding activity, administrative necessity, or for any
other reason that affects the fair and efficient conduct of the
competitive bidding. The Commission also has the authority, at its sole
discretion, to resume the competitive bidding starting from the
beginning of the current or some previous round or cancel the
competitive bidding in its entirety.
Sec. 1.2105 Bidding application and certification procedures;
prohibition of collusion.
(a) Submission of Short Form Application (FCC Form 175). In order
to be eligible to bid, an applicant must timely submit a short-form
application (FCC Form 175), together with any appropriate filing fee
set forth in public notice. Unless otherwise provided by Public Notice,
the Form 175 need not be accompanied by an upfront payment (see
Sec. 1.2106).
(1) All Form 175s will be due:
(i) On the date(s) specified by public notice; or
(ii) In the case of application filing dates which occur
automatically by operation of law (see e.g., 47 CFR 22.902), on a date
specified by public notice after the Commission has reviewed the
applications that have been filed on those dates and determined that
mutual exclusivity exists.
(2) The Form 175 must contain the following information:
(i) Identification of each license on which the applicant wishes to
bid;
(ii) The applicant's name, if the applicant is an individual. If
the applicant is a corporation, then the short-form application will
require the name and address of the corporate office and the name and
title of an officer or director. If the applicant is a partnership,
then the application will require the name, citizenship and address of
all partners, and, if a partner is not a natural person, then the name
and title of a responsible person should be included as well. If the
applicant is a trust, then the name and address of the trustee will be
required. If the applicant is none of the above, then it must identify
and describe itself and its principles or other responsible persons;
(iii) The identity of the person(s) authorized to make or withdraw
a bid;
(iv) If the applicant applies as a designated entity pursuant to
Sec. 1.2110, a statement to that effect and a declaration, under
penalty of perjury, that the applicant is qualified as a designated
entity under Sec. 1.2110;
(v) Certification that the applicant is legally, technically,
financially and otherwise qualified pursuant to section 308(b) of the
Communications Act of 1934, as amended;
(vi) Certification that the applicant is in compliance with the
foreign ownership provisions of section 310 of the Communications Act
of 1934; as amended;
(vii) Certification that the applicant is and will, during the
pendency of its application(s), remain in compliance with any service-
specific qualifications applicable to the licenses on which the
applicant intends to bid including, but not limited to, financial
qualifications. The Commission may require certification in certain
services that the applicant will, following grant of a license, come
into compliance with certain service-specific rules, including, but not
limited to, ownership eligibility limitations;
(viii) An exhibit, certified as truthful under penalty of perjury,
identifying all parties with whom the applicant has entered into
partnerships, joint ventures, consortia or other agreements,
arrangements or understandings of any kind relating to the licenses
being auctioned, including any such agreements relating to the post-
auction market structure. All such arrangements must have been entered
into prior to the filing of Form 175 and no such arrangements may be
entered into after the filing of Form 175 until after the winning
bidder has made the required down payment;
(ix) Certification under penalty of perjury that is has not entered
and will not enter into any explicit or implicit agreements,
arrangements or understandings of any kind with any parties other than
those identified pursuant to paragraph (a)(2)(viii) of this section
regarding the amount of their bids, bidding strategies or the
particular licenses on which they will or will not bid;
Note: The Commission may also request applicants to submit
additional information for informational purposes to aid in its
preparation of required reports to Congress.
(b) Modification and Dismissal of Form 175. (1) Any Form 175 that
is not signed or otherwise does not contain all of the certifications
required pursuant to this section is unacceptable for filing and cannot
be corrected subsequent to any applicable filing deadline. The
application will be dismissed with prejudice and the upfront payment,
if paid, will be returned.
(2) The Commission will provide bidders a limited opportunity to
cure defects specified herein (except for failure to sign the
application and to make certifications) and to resubmit a corrected
application. Form 175 may be amended or modified to make minor changes
or correct minor errors in the application (such as typographical
errors). The Commission will classify all amendments as major or minor,
pursuant to rules applicable to specific services. An application will
be considered to be a newly filed application if it is amended by a
major amendment and may not be resubmitted after applicable filing
deadlines.
(3) Applicant who fail to correct defects in their applications in
a timely manner as specified by public notice will have their
applications dismissed with no opportunity for resubmission.
(c) Prohibition of Collusion. After the filing of short-form
applications, all bidders are prohibited from cooperating,
collaborating, discussing or disclosing in any manner the substance of
their bids or bidding strategies with other bidders until after the
high bidder makes the required down payment, unless such bidders are
members of a bidding consortium or other joint bidding arrangement
identified on the bidder's short-form application.
Sec. 1.2106 Submission of upfront payments.
(a) The Commission may require applicants for licenses subject to
competitive bidding to submit an upfront payment. In that event, the
amount of the upfront payment and the procedures for submitting it will
be set forth in a Public Notice. No interest will be paid on upfront
payments. In auctions for licenses set aside pursuant to
Sec. 1.2110(c), the Commission may establish lower upfront payments for
eligible designated entities.
(b) Upfront payments must be made either by wire transfer or by
cashier's check drawn in U.S. dollars from a financial institution
whose deposits are insured by the Federal Deposit Insurance Corporation
and must be made payable to the Federal Communications Commission.
(c) If an upfront payment is not in compliance with the
Commission's Rules, or if insufficient funds are tendered to constitute
a valid upfront payment, the applicant shall have a limited opportunity
to correct its submission to bring it up to the minimum valid upfront
payment prior to the auction. If the applicant does not submit at least
the minimum upfront payment, it will be ineligible to bid, its
application will be dismissed and any upfront payment it has made will
be returned.
(d) The upfront payment(s) of a bidder will be credited toward any
down payment required for licenses on which the bidder is the high
bidder.
(e) Notwithstanding the provisions of paragraph (d) of this
section, in the event a penalty is assessed pursuant to Sec. 1.2104 for
bid withdrawal or default, upfront payments or down payments on deposit
with the Commission will be used to satisfy the bid withdrawal or
default penalty before being applied toward any additional payment
obligations that the high bidder may have.
Sec. 1.2107 Submission of Down Payment and Filing of Long-Form
Applications
(a) After bidding has ended, the Commission will identify and
notify the high bidder and declare the bidding closed.
(b) Within five (5) business days after being notified that it is a
high bidder on a particular license(s), a high bidder must submit to
the Commission's lockbox bank such additional funds (the ``down
payment'') as are necessary to bring its total deposits (not including
upfront payments applied to satisfy penalties) up to twenty (20)
percent of its high bid(s). (In single round sealed bid auctions
conducted under Sec. 1.2103, however, bidders may be required to submit
their down payments with their bids.) This down payment must be made by
wire transfer or cashier's check drawn in U.S. dollars from a financial
institution whose deposits are insured by the Federal Deposit Insurance
Corporation and must be made payable to the Federal Communications
Commission. Winning bidders who are qualified designated entities
eligible for installment payments under Sec. 1.2110(d) are only
required to bring their total deposits up to ten (10) percent of their
winning bid(s). Such designated entities must pay the remainder of the
twenty (20) percent down payment within five (5) business days of grant
of their application. See Sec. 1.2110(e) (1) and (2). Down payments
will be held by the Commission until the high bidder has been awarded
the license and has paid the remaining balance due on the license, in
which case it will not be returned, or until the winning bidder is
found unqualified to be a licensee or has defaulted, in which case it
will be returned, less applicable penalties. No interest will be paid
on any down payment.
(c) A high bidder that meets its down payment obligations in a
timely manner must, within ten (10) business days after being notified
that it is a high bidder, submit an additional application (the ``long-
form application'') pursuant to the rules governing the service in
which the applicant is the high bidder (unless it has already submitted
such an application, as contemplated by Sec. 1.2105(a)(1)(b). For
example, if the applicant is a high bidder for a license in the
Interactive Video Data Service (see 47 CFR part 95, subpart F), the
long form application will be submitted on FCC Form 574 in accordance
with Section 95.815 of the Rules. Notwithstanding any other provision
in title 47 of the Code of Federal Regulations to the contrary, high
bidders need not submit an additional application filing fee with their
long-form applications. Notwithstanding any other provision in title 47
of the Code of Federal Regulations to the contrary, the high bidder's
long-form application must be mailed or otherwise delivered to: Office
of the Secretary, Federal Communications Commission, 1919 M Street NW.,
room 222, Washington, DC 20554, Attention: Auction Application
Processing Section.
An applicant that fails to submit the required long-form
application as required under this subsection, and fails to establish
good cause for any late-filed submission, shall be deemed to have
defaulted and will be subject to the penalties set forth in
Sec. 1.2104.
(d) As an exhibit to its 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 bidding was completed.
Such agreements must have been entered into prior to the filing of
short-form applications pursuant to Sec. 1.2105.
Sec. 1.2108 Procedures for filing petitions to deny against long-form
applications.
(a) Where petitions to deny are otherwise provided for under the
Act or the Commission's Rules, and unless other service-specific
procedures for the filing of such petitions are provided for elsewhere
in the Commission's Rules, the procedures in this section shall apply
to the filing of petitions to deny the long-form applications of
winning bidders.
(b) Within thirty (30) days after the Commission gives public
notice that a long-form application has been accepted for filing,
petitions to deny that application may be filed. Any such petitions
must contain allegations of fact supported by affidavit of a person or
persons with personal knowledge thereof.
(c) An applicant may file an opposition to any petition to deny,
and the petitioner a reply to such opposition. Allegations of fact or
denials thereof must be supported by affidavit of a person or persons
with personal knowledge thereof. The times for filing such opposition
and replies will be those provided in Sec. 1.45.
(d) If the Commission determines that:
(1) An applicant is qualified and there is no substantial and
material issue of fact concerning that determination, it will grant the
application.
(2) An applicant is not qualified and that there is no substantial
issue of fact concerning that determination, the Commission need not
hold an evidentiary hearing and will deny the application.
(3) Substantial and material issues of fact require a hearing, it
will conduct a hearing. The Commission may permit all or part of the
evidence to be submitted in written form and may permit employees other
than administrative law judges to preside at the taking of written
evidence. Such hearing will be conducted on an expedited basis.
Sec. 1.2109 License grant, denial, default, and disqualification.
(a) Unless otherwise specified in these rules, auction winners are
required to pay the balance of their winning bids in a lump sum within
five (5) business days following award of the license. Grant of the
license will be conditioned on full and timely payment of the winning
bid.
(b) If a winning bidder withdraws its bid after the Commission has
declared competitive bidding closed or fails to remit the required down
payment within five (5) business days after the Commission has declared
competitive bidding closed, the bidder will be deemed to have
defaulted, its application will be dismissed, and it will be liable for
the default penalty specified in Sec. 1.2104(g)(2). In such event, the
Commission may either re-auction the license to existing or new
applicants or offer it to the other highest bidders (in descending
order) at their final bids. The down payment obligations set forth in
Sec. 1.2107(b) will apply.
(c) A winning bidder who is found unqualified to be a licensee,
fails to remit the balance of its winning bid in a timely manner, or
defaults or is disqualified for any reason after having made the
required down payment, will be deemed to have defaulted and will be
liable for the penalty set forth in Sec. 1.2104(g)(2). In such event,
the Commission will conduct another auction for the license, affording
new parties an opportunity to file applications for the license.
(d) Bidders who are found to have violated the antitrust laws or
the Commission's rules in connection with their participation in the
competitive bidding process may be subject, in addition to any other
applicable sanctions, to forfeiture of their upfront payment, down
payment or full bid amount, and may be prohibited from participating in
future auctions.
Sec. 1.2110 Designated entities.
(a) Designated entities are small businesses, businesses owned by
members of minority groups and/or women, and rural telephone companies.
(b) Definitions.
(1) Small businesses. Unless otherwise provided in rules governing
specific services, a small business is an entity that, together with
its affiliates, has no more than a $6 million net worth and, after
federal income taxes (excluding any carry over losses), has no more
than $2 million in annual profits each year for the previous two years.
(2) Businesses owned by members of minority groups and/or women. A
business owned by members of minority groups and/or women is one in
which minorities and/or women who are U.S. citizens have at least 50.1
percent equity ownership and 50.1 percent controlling interest in the
applicant. For applicants that are limited partnerships, the general
partner either must be a minority and/or woman (or minorities and/or
women) who is a U.S. citizen and owns at least 50.1 percent of the
partnership equity, or an entity that is 100 percent owned and
controlled by minorities and/or women who are U.S. citizens. The
interests of minorities and women are to be calculated on a fully-
diluted basis; agreements such as stock options and convertible
debentures shall be considered to have a present effect on the power to
control an entity and shall be treated as if the rights thereunder
already have been fully exercised. However, upon a demonstration that
options or conversion rights held by non-controlling principals will
not deprive the minority and female principals of a substantial
financial stake in the venture or impair their rights to control the
designated entity, a designated entity may seek a waiver of the
requirement that the equity of the minority and female principals must
be calculated on a fully-diluted basis. The term minority includes
individuals of African American, Hispanic-surnamed, American Eskimo,
Aleut, American Indian and Asian American extraction.
(3) Rural telephone companies. A rural telephone company is an
independently owned and operated local exchange carrier with 50,000
access lines or fewer, and serving communities with 10,000 or fewer
inhabitants.
(c) The Commission may set aside specific licenses for which only
eligible designated entities, as specified by the Commission, may bid.
(d) The Commission may permit small businesses, including small
businesses owned by women and minorities and rural telephone companies
that qualify as small businesses, that are high bidders for licenses
specified by the Commission, to pay the full amount of their high bids
in installments over the term of their licenses pursuant to the
following:
(1) Unless otherwise specified, each eligible applicant paying for
its license(s) on an installment basis must deposit by wire transfer or
cashier's check in the manner specified in Sec. 1.2107(b) sufficient
additional funds as are necessary to bring its total deposits to ten
(10) percent of its winning bid(s) within five (5) business days after
the Commission has declared it the winning bidder and closed the
bidding. Failure to remit the required payment will make the bidder
liable to pay penalties pursuant to Sec. 1.2104(g)(2).
(2) Within five (5) business days of the grant of the license
application of a winning bidder eligible for installment payments, the
licensee shall pay another ten (10) percent of the high bid, thereby
commencing the eligible licensee's installment payment plan. Failure to
remit the required payment will make the bidder liable to pay penalties
pursuant to Sec. 1.2104(g)(2).
(3) Upon grant of the license, the Commission will notify each
eligible licensee of the terms of its installment payment plan. Such
plans will:
(i) Impose interest based on the rate of U.S. Treasury obligations
(with maturities closest to the duration of the license term) at the
time of licensing;
(ii) Allow installment payments for the full license term;
(iii) Begin with interest-only payments for the first two years;
and
(iv) Amortize principal and interest over the remaining term of the
license.
(4) A license granted to an eligible entity that elects installment
payments shall be conditioned upon the full and timely performance of
the licensee's payment obligations under the installment plan.
(i) If an eligible entity making installment payments is more than
ninety (90) days delinquent in any payment, it shall be in default.
(ii) Upon default or in anticipation of default of one or more
installment payments, a licensee may request that the Commission permit
a three to six month grace period, during which no installment payments
need be made. In considering whether to grant a request for a grace
period, the Commission may consider, among other things, the licensee's
payment history, including whether the licensee has defaulted before,
how far into the license term the default occurs, the reasons for
default, whether the licensee has met construction build-out
requirements, the licensee's financial condition, and whether the
licensee is seeking a buyer under an authorized distress sale policy.
If the Commission grants a request for a grace period, or otherwise
approves a restructured payment schedule, interest will continue to
accrue and will be amortized over the remaining term of the license.
(iii) Following expiration of any grace period without successful
resumption of payment or upon denial of a grace period request, or upon
default with no such request submitted, the license will automatically
cancel and the Commission will initiate debt collection procedures
pursuant to subpart O of this part.
(e) The Commission may award bidding credits (i.e., payment
discounts) to eligible designated entities.
(1) Competitive bidding rules applicable to individual services
will specify the designated entities eligible for bidding credits, the
licenses for which bidding credits are available, the amounts of
bidding credits and other procedures.
(2) Any bidding credit for rural telephone companies will be
available only for licenses in rural telephone company service areas
and only if eligible rural telephone companies make an infrastructure
build-out commitment beyond any standard performance requirement. The
amount of the bidding credit for rural telephone companies will be
based on the amount by which eligible applicants agree to expand or
accelerate the build-out commitment. If a rural telephone company fails
to meet an accelerated or expanded build-out commitment, it must make
payment to the Commission within ninety (90) days of a penalty equal to
the amount of the bidding credit. Grant of the license will be
conditioned upon payment of this penalty if and when it becomes
applicable.
(f) The Commission may offer designated entities a combination of
the available preferences or additional preferences.
Sec. 1.2111 Assignment or transfer of control: Unjust enrichment.
(a) Reporting requirement. An applicant seeking approval for a
transfer of control or assignment (otherwise permitted under the
Commission's Rules) 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 associated contracts for sale, option agreements, management
agreements, or other documents disclosing the total consideration that
the applicant would receive in return for the transfer or assignment of
its license. This information should include not only a monetary
purchase price, but also any future, contingent, in-kind, or other
consideration (e.g., management or consulting contracts either with or
without an option to purchase; below market financing).
(b) Unjust enrichment payment: set-asides. As specified in this
paragraph (b), an applicant seeking approval for a transfer of control
or assignment (otherwise permitted under the Commission's Rules) of a
license acquired by the transferor or assignor pursuant to a set-aside
for eligible designated entities under Sec. 1.2110(c), or who proposes
to take any other action relating to ownership or control that will
result in loss of status as an eligible designated entity, must seek
Commission approval and may be required to make an unjust enrichment
payment (Payment) to the Commission by cashier's check or wire transfer
before consent will be granted. The Payment will be based upon a
schedule that will take account of the term of the license, any
applicable construction benchmarks, and the estimated value of the set-
aside benefit, which will be calculated as the difference between the
amount paid by the designated entity for the license and the value of a
comparable non-set-aside license in the free market at the time of the
auction. The Commission will establish the amount of the Payment and
the burden will be on the applicants to disprove this amount. No
Payment will be required if:
(1) The license is transferred or assigned more than five years
after its initial issuance; or
(2) The proposed transferee or assignee is an eligible designated
entity under Sec. 1.2110(c), and so certifies.
(c) Unjust enrichment payment: installment financing. An applicant
seeking approval for a transfer of control or assignment (otherwise
permitted under the Commission's Rules) of a license acquired by the
transferor or assignor through a competitive bidding procedure
utilizing installment financing available to designated entities under
Sec. 1.2110(d) will be required to pay the full amount of the remaining
principal balance as a condition of the license transfer. No payment
will be required if the proposed transferee or assignee assumes the
installment payment obligations of the transferor or assignor, and if
the proposed transferee or assignee is itself qualified to obtain
installment financing under Sec. 1.2110(d), and so certifies.
(d) Unjust enrichment payment: bidding credits. An applicant
seeking approval for a transfer of control or assignment (otherwise
permitted under the Commission's Rules) of a license acquired by the
transferor or assignor through a competitive bidding procedure
utilizing bidding credits available to eligible designated entities
under Sec. 1.2110(e), or who proposes to take any other action relating
to ownership or control that will result in loss of status as an
eligible designated entity, must seek Commission approval and will be
required to make an unjust enrichment payment (Payment) to the
Government by wire transfer or cashier's check before consent will be
granted. The Payment will be the sum of the amount of the bidding
credit plus interest at the rate applicable for installment financing
in effect at the time the license was awarded. See Sec. 1.2110(e). No
payment will be required if:
(1) The proposed transferee or assignee is an eligible designated
entity under Sec. 1.2110(e), and so certifies; or
(2) The proposed transferor or assignor is a rural telephone
company as defined in Sec. 1.2110(b)(3), and the proposed transferee or
assignee is also a rural telephone company and agrees to meet the same
construction requirements as the transferor or assignor.
Federal Communications Commission.
William F. Caton,
Acting Secretary.
Editorial Note: This appendix will not appear in the Code of
Federal Regulations.
BILLING CODE 6712-01-M
Appendix--FCC Form 175
TR04MY94.000
TR04MY94.001
TR04MY94.002
TR04MY94.003
BILLING CODE 6712-01-C
Notice: The solicitation of personal information requested in this
form is authorized by the Communications Act of 1934, as amended. The
Commission will use the information provided in this form to determine
whether grant of this application is in the public interest. In
researching that determination, or for law enforcement purposes, it may
become necessary to refer personal information contained in this form
to another government agency. In addition, all information provided in
this form will be available for public inspection. If information
requested on the form is not provided, processing of the application
may be delayed or the application may be returned without action
pursuant to the Commission rules. Your response is required to obtain
the requested authority.
Public reporting burden for this collection of information is
estimated to average 15 minutes per response including the time for
reviewing instruction, searching existing data needed, and completing
and reviewing the collection. Send comments regarding this burden, to
the Federal Communications Commission, Office of Managing Director,
Washington, DC 20554, and to the Office of Management and Budget,
Office of Information and Regulatory Affairs, Washington, DC 20554.
The Notice is required by the Privacy Act of 1974, Public Law 93-
579, December 31, 1974, 5 U.S.C. 552a(e)(3) and the Paperwork Reduction
Act of 1980, Public Law 96-511, December 11, 1980.
[FR Doc. 94-10638 Filed 4-29-94; 4:43 pm]
BILLING CODE 6712-01-M
