[Federal Register Volume 60, Number 86 (Thursday, May 4, 1995)]
[Proposed Rules]
[Pages 22023-22034]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 95-11010]
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FEDERAL COMMUNICATIONS COMMISSION
47 CFR Part 90
[PR Docket No. 89-553, GN Docket No. 93-252, PP Docket No. 93-253, FCC
95-159]
Implementation of Section 309(j) of the Communications Act--900
MHz SMR
AGENCY: Federal Communications Commission.
ACTION: Proposed rule.
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SUMMARY: The Commission adopted a Second Further Notice of Proposed
Rule Making seeking comment on proposed licensing and auction rules to
complete the licensing of the 900 MHz Specialized Mobile Radio (SMR)
service. This Order implements the Commission's decision in the Third
Report & Order in GN Docket No. 93-252, 59 FR 59,945 (Nov. 21, 1994)
(CMRS Third Report & Order), to license the 900 MHz band on a Major
Trading Area (MTA) basis, and to use competitive bidding to select from
among mutually exclusive applicants. This Second Further Notice
requests comment on proposed new licensing rules and auction procedures
for the service, including special provisions for small businesses,
minority-owned and women-owned entities, and rural telephone companies.
DATES: Comments must be filed on or before May 24, 1995, and reply
comments must be filed on or before June 1, 1995.
ADDRESSES: Federal Communications Commission, 1919 M Street, N.W.,
Washington, D.C. 20554.
FOR FURTHER INFORMATION CONTACT:
Amy Zoslov, (202) 418-0620, Wireless Telecommunications Bureau,
Commercial Wireless Division.
SUPPLEMENTARY INFORMATION: This is a synopsis of the Commission's
Second Further Notice of Proposed Rule Making, in PR Docket No. 89-553,
FCC 95-159, adopted April 14, 1995, and released April 17, 1995. The
complete text of this Second Further Notice of Proposed Rule Making is
available for inspection and copying during normal business hours in
the FCC Dockets Branch, Room 239, 1919 M Street, N.W., Washington,
D.C., and also may be purchased from the Commission's copy contractor,
International Transcription Service, at (202) 857-3800, 2100 M Street,
N.W., Suite 140, Washington, D.C. 20037.
Synopsis of the Second Further Notice of Proposed Rule Making
I. Introduction
1. When the Commission established the 900 MHz SMR service in 1986,
it elected to use a two-phase licensing process. In Phase I, licenses
were assigned in 46 ``Designated Filing Areas'' (DFAs) comprised of the
top 50 markets. Phase II licensing, for facilities outside the DFAs,
was frozen after 1986, when the Commission opened its filing window for
the DFAs. In 1989, the Commission adopted a Notice of Proposed Rule
Making in PR Docket 89-553, 55 FR 00744, proposing to begin Phase II
licensing of SMR facilities nationwide. In 1993, the Commission adopted
a First Report & Order & Further Notice of Proposed Rule Making in PR
Docket 89-553, 58 FR 12176 (March 3, 1993) (Phase II First R&O &
Further Notice), modifying its Phase II proposal and seeking comment on
whether to license the 900 MHz SMR band to a combination of nationwide,
regional and local systems. 8 FCC Rcd 1469 (1993). Shortly thereafter,
Congress amended the Communications Act to reclassify most SMR
licensees as Commercial Mobile Radio Service (CMRS) providers and
establish the authority to use competitive bidding to select from among
mutually exclusive applicants for certain services. The Commission
deferred further consideration of Phase II and incorporated the 900 MHz
SMR docket into its CMRS proceeding.
2. In the CMRS Third Report & Order, FR 59,945 (Nov. 21, 1994), the
Commission further revised its Phase II proposals and established the
broad outlines for the completion of licensing in the 900 MHz SMR band.
The Commission left the specific auction rules for the Phase II
proceeding.
3. The Commission seeks comment on the following proposals:
adoption of a single simultaneous multiple round auction; establishment
of upfront payment requirements; adoption of the Milgrom-Wilson
activity rule; adoption of application procedures; adoption of
procedures governing timing and duration of auction rounds, stopping
rules and bid increments; adoption of bid withdrawal and default rules;
adoption of procedures governing down payment and full payment for
winning bidders; adoption of anti-collusion rules for bidders; and
adoption of transfer disclosure and performance requirements for
winning bidders.
4. With respect to rules for designated entities (i.e. small
businesses, women-owned and minority-owned entities, and rural
telephone companies), the Commission seeks comment on the following
proposals: insulating certain spectrum blocks from large bidders;
providing small businesses bidding credits, reduced down payment
requirements, and installment payment options; whether reduced upfront
payments are necessary; adoption of partitioning rule for rural
telephone companies; adoption of eligibility standards for small
business and rural telephone companies; and for small businesses,
adoption of restrictions on transfer or assignment of their licenses.
II. Discussion
A. Competitive Bidding
5. In the CMRS Third Report & Order, 59 FR 59,945 (Nov. 21, 1994),
the Commission determined that it would use competitive bidding to
select from among mutually exclusive applicants in [[Page 22024]] the
900 MHz SMR service. Accordingly, under the Commission's auction
authority, if mutually exclusive applications for an MTA 10-channel
block are accepted for filing, the Commission will award that license
through competitive bidding. The Commission requests comment on
specific bidding procedures, as set forth below.
6. Competitive Bidding Design. In the Second Report & Order, PP
Docket No. 93-253, 59 FR 22980 (May 4, 1994) (Auctions Second Report
and Order), the Commission stated that (1) licenses with strong value
interdependencies should be auctioned simultaneously; and (2) multiple
round auctions generally will yield more efficient allocations of
licenses and higher revenues by providing bidders with information
regarding other bidders' valuations of licenses, especially where there
is substantial uncertainty as to value. Thus, where the licenses to be
auctioned are interdependent and their value is expected to be high,
simultaneous multiple round auctions would best achieve the
Commission's goals for competitive bidding. Based on these factors, the
Commission tentatively concluded that simultaneous multiple round
auctions are appropriate for the 900 MHz SMR service. The expected
value of 900 MHz SMR licenses is high, the licenses are interdependent,
and licensees will likely aggregate across spectrum blocks and
geographic regions. Because, however, the presence of incumbents on
certain channels could affect the relative desirability and value of
otherwise identical MTA licenses, the Commission proposes to delegate
authority to the Wireless Telecommunications Bureau to revisit the
issue of whether another auction design would be more appropriate. The
Commission seeks comments on this tentative conclusion and proposal.
7. License Grouping. The Commission determined in the Auctions
Second Report & Order, 59 FR 22980 (May 4, 1994), that in a multiple
round auction, highly interdependent licenses should be grouped
together and put up for bid at the same time because such grouping
provides bidders with the most information about the prices of
complementary and substitutable licenses during the course of an
auction. The Commission also determined that the greater the degree of
interdependence among the licenses, the greater the benefit of
auctioning a group of licenses together in a simultaneous multiple
round auction. The Commission tentatively concludes that all 51 MTAs in
the 900 MHz band should be auctioned simultaneously. While this may
entail more administrative costs than breaking the licenses into
groups, the added cost will be outweighed by the informational and
bidding flexibility advantages afforded by a single auction. Moreover,
the 1020 MTA licenses to be auctioned are less than half the number of
broadband PCS licenses to be auctioned in Blocks A through F, and all
licenses will be for the same amount of spectrum and use a single
service area definition. The Commission also proposes to reserve the
discretion to inform applicants by Public Notice if the Commission
determines to hold more than one auction, on the basis that a single
auction proves administratively unworkable.
B. Bidding Issues
8. Bid Increments. The bid increment is the amount or percentage by
which a bid must be raised above the previous round's high bid in order
to be accepted as valid in the current bidding round. The Commission
proposes to start the 900 MHz auction with relatively large increments,
and adjust the increments as bidding activity indicates. In Stage I of
the auction, the minimum bid increment would be five percent of the
high bid in the previous round or $.02 per MHz-pop, whichever is
greater. In Stage II, the Commission would reduce the minimum bid
increment to the greater of five percent of $.01 per MHz-pop, and in
Stage III, the greater of five percent of $.01 per MHz-pop. The
Commission also proposes to retain the discretion to vary the minimum
bid increments for individual license 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. Finally,
the Commission proposes to retain the discretion to keep an auction
open if there is a round in which no bids are submitted.
9. Stopping Rules. In the CMRS Third Report & Order, 59 Fed. Reg.
59,945 (Nov. 21, 1994), the Commission noted that in multiple round
auctions, a stopping rule must be established for determining when the
auction is over. The Commission proposes to adopt a simultaneous
stopping rule for 900 MHz SMR. Under this approach, bidding remains
open on all licenses until there is no new acceptable bid for any
license. This approach also provides full flexibility to bid for any
license as more information becomes available during the course of the
auction. MTA licenses are expected to have relatively high values
because of the substantial amount of clear spectrum that remains
available, the high valuation of SMR spectrum in secondary market
transactions, the substitutability between licenses within the same MTA
and the ability to pursue back-up strategies. Likewise, the use of
MTAs, rather than BTAs or more numerous service areas, should reduce
complexity of a simultaneous stopping rule. Because the Commission
proposes to impose an activity rule, this approach will not lead to
excessively long auctions while affording bidders flexibility to pursue
back-up strategies.
10. The Commission also proposes to retain the discretion to
announce at any time during the auction that the auction will end after
a specified number of additional rounds. Bids would only be accepted on
licenses where the high bid has increased in the last three rounds.
This would deter bidders from continuing to bid on a few low value
licenses solely to delay the closing of the auction. It would also
enable the Commission to end the auction when it determines that the
benefits of terminating the auction and issuing licenses exceed likely
benefits of continuing to allow bidding. The Commission proposes that
this mechanism be used only in case of extremely dilatory bidding and
that final bidding procedures would be announced by public notice. The
Commission also proposes to retain the discretion to conduct market by
market closings, if circumstances so warrant, to be announced during
the auction. Finally, the Commission proposes to retain discretion to
keep an auction open in a round in which no new acceptable bids are
submitted if the Commission receives a ``proactive'' waiver of the
activity rules, and to retain discretion to keep an auction open even
if no proactive waivers are filed.
11. Duration of Bidding Rounds. The Commission reserves the
discretion to vary the duration of bidding rounds or the interval at
which bids are accepted (e.g. run more than one round per day) in order
to move the auction toward closure more quickly. The Commission will
announce any changes to the duration of and intervals between bidding
rounds either by public notice prior to the auction or by announcement
during the auction.
12. Activity Rules. The Milgrom-Wilson activity rule encourages
bidders to participate in early rounds by limiting their maximum
participation to some multiple of their minimum participation level.
The Commission tentatively concludes that the Milgrom-Wilson activity
rule should be used in conjunction with the simultaneous stopping rule
to award 900 MHz SMR [[Page 22025]] licenses. Under this approach, the
minimum activity level increases during the course of the auction.
Absent waivers, a bidder's eligibility in the current round is
determined by the bidder's activity level and eligibility in the
previous round; in the first round, however, eligibility is determined
by the bidder's upfront payment and is equal to the upfront payment
divided by $.02 per MHz-pop. Bidders are required to declare their
maximum eligibility in terms of MHz-pops, and made an upfront payment
equal to $0.02 per MHz-pop. In each round, bidders are limited to
bidding on licenses encompassing no more than the number of MHz-pops
covered by their upfront payment, and licenses on which a bidder is the
high bidder from the previous round count toward this bidding limit.
Bidders have flexibility to shift their bids among any license for
which they have applied so long as, within each round, the total MHz-
pops encompassed by those licenses does not exceed the total number of
MHz-pops on which they are eligible to bid. This approach would best
achieve the Commission's goals of affording bidders flexibility to
pursue backup strategies, while at the same time ensuring that
simultaneous auctions are concluded within a reasonable period of time.
The Commission seeks comment on these issues.
13. During Stage I, the Commission tentatively concludes that a
bidder must be active on licenses encompassing one-half of the MHz-pops
for which it is eligible. In Stage II and Stage III, the Commission
tentatively concludes that the bidder must be active on 75 and 95
percent, respectively, of the MHz-pops for which it is eligible. The
penalty for falling below the minimum activity level at any stage would
be a reduction in maximum eligibility to bid in future rounds. The
transition from one stage of the auction to the next would be
determined by the aggregate level of bidding activity, subject to the
Commission's discretion. Once an auction proceeds from one stage to the
next, it could not revert to any previous stage. Moreover, the
Commission proposes to reserve the discretion to increase or decrease
these activity levels as well as to vary the timing of stages and
activity levels for each stage through public notices issued after
applications are filed and before the auction begins, as circumstances
warrant. The Commission seeks comment on these proposals.
14. In the Fourth Memorandum Opinion & Order, PP Docket No. 93-253,
59 FR 53364 (October 24, 1994), the Commission clarified that it
retained the discretion to modify the method and timing of submitting
waivers and to allow for both ``proactive'' and ``automatic'' waivers.
Proactive waivers are submitted by the bidder, while automatic waivers
would be submitted automatically for a bidder whenever its eligibility
would be reduced because of insufficient bidding activity and a waiver
is available unless the bidder specifically chooses not to have the
automatic waiver apply. The Commission proposes to use these waiver
procedures with respect to the 900 SMR auctions.
15. Specifically, the Commission proposes to implement a waiver
procedure permitting each bidder to request and automatically receive a
certain number of waivers of the activity rule during the auction. The
Commission would announce by Public Notice how many waivers bidders
will receive. A waiver would permit a bidder to maintain its
eligibility at the same level as in the round for which the waiver is
submitted; it could not, however, be used to correct an error in the
amount bid. Under this proposal, a bidder may request a waiver either
in the round in which its bidding falls below the minimum required
level or prior to submitting a bid in the next round. If an activity
rule waiver is proactively requested in a round in which no other
bidding activity occurs, the auction would remain open. The Commission
seeks comment on these proposals. Finally, the Commission retains
discretion to use an alternative activity rule for 900 MHz SMR if it
determines that the Milgrom-Wilson rule is too complicated or costly to
administer. Any such change would be announced by public notice before
commencement of the auction.
16. Rules Prohibiting Collusion. Section 1.2105(c) of the
Commission's Rules, 47 CFR 1.2105(c) prohibits collusive conduct in the
context of competitive bidding. This rule prohibits bidders from
communicating with one another after short-form applications have been
filed regarding the substance of their bids or bidding strategies, and
also prohibits bidders from entering into consortium arrangements or
joint bidding agreements after the deadline for short-form applications
has passed. 47 C.F.R. 1.2105(c)(1)-(2). The Commission proposes to
apply Section 1.2105(c) to 900 MHz SMR auctions. Bidders who have not
filed form 175 applications for any of the same MTA licenses would be
permitted enter into such discussions, consortia, or arrangements, or
add equity partners, during the course of an auction. Also,
communications among bidders concerning matters unrelated to the
auctions would be permitted. The Commission seeks comment on this
proposal.
17. Under the collusion rules, bidders would also identify on their
Form 175 applications parties with whom they have entered into any
agreements relating to the competitive bidding process, and certify
that they will not enter into any such agreements with any parties
other than those identified. 47 CFR 1.2105(a)(2). Furthermore, winning
bidders in the 900 MHz SMR auctions would attach as an exhibit to the
Form 600 long-form application a detailed explanation of the terms and
conditions and parties involved in any such agreement entered into
prior to the close of bidding. All such arrangements would have been
entered into prior to filing of short-form applications to comply with
the Commission's rules. 47 CFR 1.2107. Allegations of specific
instances of collusion in violation of these rules would be
investigated by the Commission or referred to the Department of
Justice. The Commission also proposes that bidders found to have
violated the Commission's rules or the antitrust laws may be subject to
forfeiture of their down payment or their full bid amount, revocation
of their licenses, and prohibition from participation in future
auctions. The Commission seeks comment on these proposals.
C. Procedural, Payment and Penalty Issues
18. Pre-Auction Application Procedures. The Commission proposes to
follow generally the processing and procedural rules established in 47
CFR Part 1, Subpart Q with certain modifications designed to address
the particular characteristics of the 900 MHz SMR service. Unlike
incumbent 900 MHz SMR licensees that are essentially confined to the
smaller DFA region, MTA licensees will gain use of a large geographic
area and the freedom to locate base stations anywhere within that
larger geographic region. Thus, the Commission proposes to treat MTA
applicants as initial applicants for public notice, application
processing, and auction purposes, regardless of whether they are
already incumbent operators.
19. The 1993 Budget Act expressly provides the Commission authority
to require that bidders' applications contain all information and
documentation sufficient to demonstrate that the application is not in
violation of Commission rules, and to dismiss applications not meeting
those requirements prior to the competitive [[Page 22026]] bidding. 47
U.S.C. 309(j)(5). See also H. R. Rep. No. 111, 103d Cong., 1st Sess. 28
(1993). In furtherance of this policy, the Commission decided to
require only a short-form application prior to competitive bidding, and
determined that only winning bidders should be required to submit a
long-form license application after the auction. 47 CFR 1.2104, 1.207.
Because this procedure fulfills the statutory requirements and
adequately protects the public interest here, the Commission proposes
to extend application of these rules to the competitive bidding process
for 900 MHz SMR.
20. Under this proposal, the Wireless Telecommunications Bureau
would release an initial Public Notice announcing the auction. The
Public Notice would specify the following: licenses to be auctioned;
time and place of the auction method of competitive bidding to be used;
applicable bid submission procedures; stopping rules; activity rules;
the deadline by which short-form applications must be filed; and the
amounts and deadlines for submitting the unfront payment. Applications
submitted before the release of the Public Notice would be returned as
premature. Likewise, applications submitted after the deadline
specified by Public Notice would be dismissed, with prejudice, as
untimely.
21. All bidders would be required to submit short-form applications
on FCC Form 175 (and FCC Form 175-S, if applicable), by the date
specified in the initial Public Notice. See CFR 1.2105(a)(2).
Applications could be filed manually or electronically. Each applicant
would specify on its applications certain information, including its
status as a designated entity (if applicable), its classification
(i.e., individual, corporation, partnership, trust, or other), the
markets and frequency blocks for which it is applying, and the names of
persons authorized to place or withdraw a bid on its behalf. If there
is no mutual exclusivity for a particular license, and no petitions to
deny are filed, the application would be grantable after 30 days. The
Commission seeks comment on the proposals discussed above.
22. Amendments and Modifications. To encourage maximum bidder
participation, the Commission proposes to provide 900 MHz SMR
applicants with an opportunity to correct minor defects in their short
form applications prior to the auction. The Commission also proposes to
waive the ex parte rules as they apply to submission of amended short-
form applications to maximize applicants' opportunities to seek
Commission staff advice on making such amendments. Also, applicants
would be permitted to modify their applications to reflect formation of
consortia or changes in ownership at any time before or during an
auction, provided that (1) such changes do not result in a change in
control of the applicant, and (2) parties forming consortia or entering
into ownership agreements have not applied for licenses in any of the
same geographic licenses. Applicants would not, however, be permitted
to make major modifications to their applications, including changes in
markets, changes in control of the applicant, or additions of the other
bidders into the bidding consortia, until after the auction.
Applications that are not signed would be dismissed as unacceptable.
The Commission seeks comment on these proposals.
23. Applications with defects, minor or otherwise, would be listed
in a public notice. After reviewing corrected applications, the
Commission would release a second public notice announcing applicants
whose applications have been accepted or filing. This second public
notice would announce the date by which applicants must submit an
upfront payment to the Commission, generally no later than 14 days
before the scheduled auction. The Commission would release a third
public notice announcing the names of all applicants that have been
determined as qualified to bid. An applicant who fails to submit a
sufficient upfront payment to qualified it to bid on any license being
auctioned would not be identified on this Public Notice as a qualified
bidder. The Commission seeks comment on these proposals.
24. Upfront Payments. The Commission tentatively concludes that
applicants that have been determined as qualified to bid should be
required to submit a payment of $0.02 per MHz-pop, based on the number
of 10-channel blocks in each MTA identified by an applicant on its Form
175. This requirement would help ensure that only serious and qualified
bidders participate and that any bid withdrawal or default penalties
are paid. See Auctions Second Report & Order at para.171. This formula
would also afford bidders the flexibility to change their strategy
during an auction and bid on a larger number of smaller licenses or a
smaller number of larger licenses, so long as the total MHz-pops
combination does not exceed that amount covered by the upfront payment.
Population information for each license would be announced in the
initial Public Notice released prior to the auction. The Commission
seeks comment on these proposals.
25. Down payment and Full Payment. The Commission tentatively
concludes that winning bidders in 900 MHz SMR auctions should be
required to supplement their upfront payments with a down payment
sufficient to bring their total deposits up to 20 percent of their
winning bid(s). Under this proposal, if the upfront payment already
tendered by a winning bidder, after deducting any bid withdrawal and
default penalties due, amounts to 20 percent or more of its winning
bids, no additional deposit would be required. If the upfront payment
amount on deposit is greater than 20 percent of the winning bid amount
after deducting any bid withdrawal and default penalties due, the
additional monies would be refunded. If a bidder has withdrawn a bid or
defaulted but the amount of the penalty cannot yet be determined, the
bidder would 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 penalty, any excess deposit would be refunded. Upfront payments
would be applied to such deposits and to bid withdrawal and default
penalties due before being applied toward the bidder's down payment on
licenses the bidder has won and seeks to acquire. The Commission seeks
comment on these proposals.
26. The Commission proposes to require winning bidders to submit
the required down payment by cashier's check or wire transfer to its
lock-box bank by a date to be specified by Public Notice, generally
within five business days following the close of bidding. The balance
of their winning bids would be made within five business days following
public notice that the Commission is about to award the license, and
grant of the license would be conditioned on this payment. An auction
winner that is eligible to make payments through an installment plan,
however, would be required to submit a deposit up to five percent of
its winning bid, and would submit an additional five percent of its
winning bid after the license granted. This would ensure that auction
winners have the necessary financial capabilities to complete payment
for the license and pay for the costs of constructing a system, without
hindering growth or diminishing access to the auctions. The Commission
seeks comment on this proposal.
27. Bid Withdrawal, Default, and Disqualification. The Commission
proposes that bidders who withdraw a high bid, are found unqualified to
hold licenses, or default on payment of a [[Page 22027]] balance due,
would be assessed a substantial penalty. Any bidder that withdraws a
high bid during an auction before the Commission declares bidding
closed 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 this
subsequent winning bid is lower than the withdrawn bid. If a license is
re-offered by auction, the ``winning bid'' would refer to the high bid
in the auction in which the license is re-offered. If a license is re-
offered in the same auction, the ``winning bid'' would refer to the
high bid amount, made subsequent to the withdrawal, in that auction. If
the subsequent high bidder also withdraws its bid, that bidder would be
required to pay a penalty equal to the difference between its withdrawn
bid and the amount of the subsequent willing bid the next time the
license is offered by the Commission. If a license which is the subject
of withdrawal or default is not re-auctioned, but is instead offered to
the highest losing bidders in the initial auction, the ``winning bid''
would refer to the bid of the highest bidder who accepts the offer.
Losing bidders would not be required to accept the offer, and therefore
may decline without penalty. The Commission seeks comment on these
proposals.
28. The Commission also proposes that after bidding closes, a
defaulting winner would be assessed an additional penalty of three
percent of the subsequent winning bid or three percent of the amount of
the defaulting bid, whichever is less. See 47 CFR 1.2104(g), 1.2109. If
a default or disqualification involves an applicant's gross misconduct,
misrepresentation, or bad faith, the Commission would be able to
declare the applicant ineligible to bid in future auctions or take
other action. These penalties would adequately discourage default and
ensure that bidders have adequate financing and meet all eligibility
and qualification requirements.
29. Finally, the Commission proposes that if the MTA winner
defaults, is otherwise disqualified after having made the required down
payment, or the license is terminated or revoked, then the Commission
would re-auction the license. If the default occurs within five days
after bidding has closed, the Commission would retain the discretion to
offer the license to the second highest bidder at its final bid level,
and thereafter to other bidders (in descending order of their bid
amounts). If only a small number of relatively low-value licenses were
to be re-auctioned and only a short time has passed since the initial
auction, the Commission would have authority to choose to offer the
license to the highest losing bidders if the cost of running another
auction exceed the benefits. The Commission seeks comment on these
proposals.
30. Long-Form Applications. If the winning bidder makes the down
payment in a timely manner, the Commission proposes the following
procedures: A long-form application filed on FCC Form 600 must be filed
by a date specified by Public Notice, generally within ten business
days after the close of bidding. Designated entities must also submit
evidence to support their claim to any special provision, such as
bidding credits or installment payment options. Once the long-form is
accepted for filing, the Commission will issue a Public Notice
announcing this fact, triggering the filing window for petitions to
deny. If the Commission denies all petitions to deny, and is otherwise
satisfied that the applicant is qualified, the license(s) will be
granted to the auction winner. See generally 47 CFR 90.163-90.166. The
Commission seeks comment on this proposal.
31. Petitions to Deny and Limitations on Settlements. A party
filing a petition to deny will be required to demonstrate standing and
meet all other applicable filing requirements. 47 CFR 90.163. The
Commission also adopted ``greenmail'' restrictions to prevent filing of
speculative applications and pleadings (or threats of the same)
designed to extract money from 900 MHz SMR applicants. 47 CFR 90.162.
Thus, the consideration than an applicant or petitioner is permitted to
receive for agreeing to withdraw an application or petition to deny is
limited to the legitimate and prudent expenses of the withdrawing
party. Finally, the Commission need not conduct a hearing before
denying an application if it determines that an applicant is not
qualified and no substantial issue of fact exists concerning that
determination.
32. Transfer Disclosure Requirements. In the 1993 Budget Act
amendments to the Communications Act, Congress directed the Commission
to ``require such transfer disclosures and anti-trafficking
restrictions and payment schedules as may be necessary to prevent
unjust enrichment as a result of the methods employed to issue licenses
and permits. 47 U.S.C. 309(j)(4)(E)). To ensure that these statutory
requirements are met, the Commission concluded in the Auctions Second
Report & Order, 59 FR 22980 (May 4, 1994), that transfer disclosure
requirements will enable the Commission to accumulate the necessary
data to evaluate auction designs and judge whether licenses have been
issued for bids that fall short of the true market value of the
license. The Commission tentatively concludes to apply these same
requirements to all 900 MHz SMR licenses obtained through the
competitive bidding process. See 47 CFR 1.2111(a). Generally, licensees
transferring their licenses within three years after the initial
license grant would 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 the license. The
Commission would give particular scrutiny to auction winners who have
not yet begun commercial service and who seek approval for a transfer
of control or assignment of their licenses, so it may determine if any
unforeseen problems relating to unjust enrichment have arisen outside
the small business context. The Commission seeks comment on this
proposal.
33. Performance Requirements. The Communications Act requires the
Commission to ``include performance requirements, such as appropriate
deadlines and penalties for performance failures, to ensure prompt
delivery of service to rural areas, to prevent stockpiling or
warehousing of spectrum by licensees or permittees, and to promote
investment in and rapid deployment of new technologies and services. 47
U.S.C. 309(j)(4)(B). The Commission tentatively concludes that
additional performance requirements, beyond those already provided in
the service rules, and that coverage requirements adopted in this Order
will sufficiently prevent warehousing of spectrum. The Commission seeks
comment on this proposal.
D. Treatment of Designated Entities
34. Overview and Objectives. Congress provided that in establishing
eligibility criteria and bidding methodologies, the Commission shall
``promot[e] economic opportunity and competition and ensur[e] that new
and innovative technologies are readily accessible to the American
people by avoiding excessive concentration of licenses and by
disseminating licenses among a wide variety of applicants, including
small businesses, rural telephone companies, and businesses owned by
members of minority groups and women.'' 47 U.S.C. 309(j)(3). Congress
also provided that to promote these objectives, the Commission shall
``consider alternative payment schedules and methods of calculation,
including lump sums or [[Page 22028]] guaranteed installment payments,
with or without royalty payments, or other schedules or methods * * *
and combinations of such schedules and methods.'' 47 U.S.C.
309(j)(3)(B). The statute also requires the Commission to ``ensure that
small businesses rural telephone companies, and businesses owned by
members of minority groups and women are given the opportunity to
participate in the provision of spectrum-based services. Id.
Sec. 309(j)(4)(D). To achieve this goal, the statute indicates that the
Commission should ``consider the use of tax certificates, bidding
preferences, and other procedures.'' Id.
35. Congress was particularly concerned that difficulties in
accessing capital would prevent designated entities from meaningful
participation in auctions and spectrum-based services. See H.R. Rep.
No. 111, 103d Cong., 1st Sess. 254-55 (1993). In other services, the
Commission has employed a wide range of special provisions and
eligibility criteria designed to meet this statutory objective. See,
e.g., Third Report & Order. PP Docket No. 93-253, 59 FR 26741 (May 24,
1994). The Commission states its intention to meet this objective in
the 900 MHz SMR service, and tentatively concludes that it should
provide for bidding credits, installment payments and reduced down
payments to promote opportunities for small businesses, including small
businesses owned by women and minorities--on all channel blocks in each
MTA. These provisions would reduce barriers to accessing capital faced
by all small businesses. In addition, to facilitate the introduction of
service to rural areas, the Commission proposes to allow rural
telephone companies to obtain geographically partitioned 900 MHz SMR
licenses in areas where they provide telephone service.
36. Bidding Credits. Bidding credits allow eligible designated
entities to receive a payment discount (or credit) for their winning
bid in an auction. In the Auctions Second Report & Order, 59 FR 22980
(May 4, 1994), the Commission determined that competitive bidding rules
applicable to individual services would specify the designated entities
eligible for bidding credits and the amounts of the available bidding
credits for that particular service. The Commission has since adopted
bidding credits for narrowband PCS, broadband PCS, and Interactive
Video and Data Service. See Third Memorandum Opinion & Order & Further
Notice of Proposed Rule Making, PP Docket No. 93-253, 59 FR 44058
(August 26, 1994); Fifth Report & Order, PP Docket No. 93-253, 59 FR
37566 (July 22, 1994); Fourth Report & Order, PP Docket No. 93-253, 59
FR 24947 (May 13, 1994). For 900 MHz SMR service, the Commission
proposes to offer a 10 percent bidding credit to small businesses
bidding on any of the ten-channel blocks within each MTA. These bidding
credit designations would help achieve the objectives of the Budget Act
and provide small businesses with a meaningful opportunity to
participate in the 900 MHz SMR auction, while taking into account the
concerns of incumbents within the DFAs. Because of the large number of
licenses available in this service, the Commission states that a higher
bidding credit would be unnecessary.
37. The Commission seeks comment on this proposal. Specifically, is
a 10 percent credit sufficient to enhance bidding opportunities? Also,
how should the presence of incumbents on all channel blocks affect the
availability of bidding credits on all blocks? In previous auctions
where bidding credits for women and minorities have been available,
varying degrees of participation in spectrum-based services has
resulted, and the Commission's auction experience to date has not
included a small business bidding credit available on all blocks. Also,
the Commission proposes to limit eligibility for bidding credits to
small businesses. The Commission seeks comment on whether eligibility
should be expanded to include businesses owned by minorities and/or
women, even if they do not fall within the Commission's small business
size standards for 900 MHz SMRs.
38. In the event that the Commission modifies the bidding credit
eligibility proposal for minority- and women-owned entities, the
Commission also seeks comment on a second bidding credit alternative,
which would entitle small businesses and minority- and women-owned
entities to receive bidding credits on the five least encumbered blocks
in each MTA. In the event the Commission adopts a proposal to limit
bidding credits to small businesses, should it also limit availability
of the credit to the channel blocks with the fewest incumbents, or
would this limitation dilute the effectiveness of a small business
credit as a means of attracting broad designated entity participation
in the 900 MHz SMR service? What bidding credit amounts should apply to
women and minority-owned businesses and small businesses? Should women-
owned and minority-owned businesses that are also small businesses
receive an aggregate bidding credit? The Commission seeks comment on
the ramifications of each proposal for incumbents in each block.
Finally, the Commission seeks comment on any possible alternative
bidding credit schemes.
39. Reduced Down Payments/Installment Payments. The Commission
proposes to adopt an installment payment option for small businesses
that are winning bidders in the 900 MHz SMR auction. Under this
proposal, small businesses that are winning bidders in the 900 MHz SMR
auction would be entitled to pay their bid in installments over the
term of the license, with interest charges to be fixed at the time of
licensing at a rate equal to the rate for ten-year U.S. Treasury
obligations plus 2.5 percent. Under this proposed rule, qualified
licensees would make interest-only payments during the first two years
of the remaining license term. Timely payment of all installments would
be a condition of the license grant and failure to make such timely
payment would be grounds for revocation of the license. Additionally,
the Commission tentatively concludes that small businesses that are
eligible for installment payments also would be allowed to pay a
reduced down payment (five percent of the winning bid) five days after
the auction closes, with the remaining five percent down payment due
five days after Public Notice that the license is ready for grant. This
proposal would mitigate the effect of limited access to capital by
small businesses, especially those owned by minorities and/or women.
40. The Commission seeks comment on these payment procedures. If
the Commission expands its installment payment eligibility proposal for
women- and minority-owned entities, should those entities also receive
reduced down payment and installment payment provisions and, if so, on
what terms? In the event the Commission adopts provisions for minority-
and women-owned applicants, should enhanced installment payments be
made available?
41. Eligibility for Bidding Credits, Installment Payments and
Reduced Down Payments. The Commission proposes to limit eligibility for
bidding credits, installment payments and reduced down payments to
small businesses, including those owned by members of minority groups
and women and those rural telephone companies that meet the small
business size standards. The Commission proposes to define small
businesses as those entities with less than $3 million in average gross
revenues for each of the preceding [[Page 22029]] three years. The
Commission states that it is unnecessary to propose different
eligibility criteria for minority- and women-owned entities that do not
meet the small business size standards in order to achieve the goals of
Section 309(j) in the 900 MHz SMR service. Broadening the scope of
opportunities for very small businesses in all channel blocks still has
the potential to result in substantial participation by women and
minorities in the provision of 900 MHz SMR service. Moreover, the
Commission expects that because capital entry requirements are lower
than PCS, minority- and women-owned businesses will have greater
opportunities to participate.
42. To enhance the Commission's understanding, however, of the
capital requirements the 900 MHz service is likely to entail, the
Commission seeks comment on the projected costs associated with
acquisition, construction and operation of 900 MHz MTA licenses. In
addition, to gain insight into which the degree of small business
participation has resulted in opportunities for women and minority-
owned businesses, the Commission seeks comment on the composition of
existing 900 MHz SMR operators as well as providers in other similar
services such as 800 MHz SMR. For example, what proportion of existing
900 MHz SMR businesses are owned by women or minorities? To what extent
have participants in 900 MHz SMR networks been small businesses owned
by women and minorities? What is the likelihood that management
agreements are likely to serve as a vehicle for participation in the
900 MHz SMR service by minority and women-owned businesses? Finally,
regardless of whether the Commission adopts its proposal for small
businesses, the Commission proposes to request bidder information on
the short-form filings as to minority and/or women-owned status in
order to monitor the applicant pool and monitor participation by women
and minorities. The Commission seeks comment on this monitoring
proposal.
43. Small Business Definition. The Commission defines eligibility
requirements for small businesses on a service-specific basis, taking
into account capital requirements and other characteristics of each
particular service. Second Memorandum Opinion & Order, PP Docket No.
93-253, 59 FR 44272 (August 26, 1994). Because 900 MHz SMR is expected
to be less capital-intensive than PCS, a much lower gross revenue
threshold is warranted. Therefore, the Commission proposes to define a
small business as an entity that, together with affiliates and
attributable investors, has average gross revenues for the three
preceding years of less than $3 million. This standard appropriately
accounts for build-out costs, abundant license supply, and low
acquisition costs. The Commission seeks comment on this proposal. For
example, is it an appropriate threshold? Should it be higher or lower,
based on the types of companies that are likely to benefit from the
special provisions proposed here? The Commission also tentatively
concludes that it will consider the revenues of affiliates and certain
investors and it proposes to apply the 25 percent attribution threshold
and affiliation rules similar to those used in the PCS auction rules.
See 47 CFR 24.320(b)(2)(iv), 24.720(j)(1). The Commission seeks comment
on these issues.
44. Finally, if the Commission adopts separate provisions for
minority-owned and women-owned entities, it also seeks comment on
whether it should adopt the definition of minority-owned and women
owned businesses contained in Section 1.2110(b)(2) of the Commission's
rules, 47 CFR 1.2110(b)(2), i.e., businesses in which minorities and/or
women who control the applicant have at least 50.1 percent equity
ownership and, in the case of a corporate applicant, a 50.1% voting
interest. Every general partner in a partnership either must be a
minority and/or a woman who individually or together own at least 50.1
percent of the partnership equity.
45. Transfer Restrictions and Unjust Enrichment Provisions. In the
Fifth Report & Order, PP Docket No. 93-253, 59 FR 37566 (July 22 1994),
the Commission adopted restrictions on the transfer or assignment of
licenses to ensure that designated entities do not take advantage of
special provisions by immediately assigning or transferring control of
their licenses. The Commission proposes to adopt these restrictions on
transfer and assignment of 900 MHz SMR licenses won by designated
entities. Under this proposal, a designated entity would be prohibited
from voluntarily assigning or transferring control of its license to
any other entity during the three years after license grant. In the
fourth and fifth years of the license term, the designated entity would
only be able to assign or transfer control of its license to another
qualified designated entity, and no unjust enrichment could be gained
through the transfer. Thus, if the entity to which the designated
entity transfers or assigns the license were not eligible for the same
provisions, the difference would have to be paid back to the U.S.
Treasury as a condition of approval of the transfer or assignment. The
Commission seeks comment on these proposals.
46. For the remainder of the license term, the Commission proposes
to continue to impose unjust enrichment rules on designated entities.
These unjust enrichment provisions would deter speculation and
participation in the licensing process by those who do not intend to
offer service to the public, or who intend to use the Commission's
provisions to obtain a license at a lower cost than they otherwise
would have to pay, and later to sell it at the market price. Under this
proposal, 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.
Therefore, if a designated entity making installment payments sells its
license to an entity that does not qualify as a designated entity, the
Commission would require payment of the remaining principal and any
interest accrued through the date of assignment as a condition of the
license assignment or transfer. If a transfer is made to another
eligible designated entity, no penalty would be assessed against the
original designated entity license holder. If bidding credits were
awarded to a licensee, the Commission would require a designated entity
approval for a transfer of control or an assignment of license to a
non-designated entity, 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, to reimburse the government for the
amount for the amount of the bidding credit before transfer of the
license will be permitted. The Commission proposes to apply these
payment requirements for the entire license term. The Commission seeks
comment on this proposal.
47. Rural Telephone Company Partitioning. Congress directed the
Commission to ensure that rural telephone companies have the
opportunity to participate in the provision of spectrum-based services.
Rural areas tend to be less profitable to serve than more densely
populated urban areas. Therefore, service to these areas may not be a
priority or feasible for many licensees. Rural telephone companies,
however, are well positioned to serve these areas because of their
existing infrastructure. Therefore, the Commission proposes a
geographic partitioning scheme to encourage participation by rural
telephone companies.
48. Under this proposal, rural telephone companies would be
[[Page 22030]] permitted to acquire partitioned 900 MHz SMR licenses
either by: (1) forming bidding consortia consistent entirely of rural
telephone companies to participate in auctions, and then partition the
licenses won among consortia participants; or (2) acquiring partitioned
900 MHz SMR licenses from other licenses through private negotiation
and agreement either before or after the auction. The Commission would
require that partitioned areas conform to established geopolitical
boundaries and include all portions of the wireline service area of the
rural telephone company applicant that lies within the service area.
This partitioning scheme would prevent rural telephone companies from
having to bid on the entire MTA license to obtain licenses covering
their wireline service areas. In addition, rural telephone companies
would have the flexibility to serve areas in which they already provide
service, while the remainder of the service area could be served by
other providers. The Commission also proposes to use the definition for
rural telephone companies implemented in the Fifth Report & Order, PP
Docket No. 93-253, 59 FR 37566 (July 22, 1994), for broadband PCS.
Rural telephone companies would be defined as local exchange carriers
having 100,000 or fewer access lines, including all affiliates. The
Commission seeks comment on this proposal.
E. Other Provisions
49. Reduced Upfront Payments. The Commission proposes not to adopt
a reduced upfront payment option in the 900 MHz SMR service for
designated entities. The other provisions adopted here render a reduced
upfront payment option unnecessary and, in the absence of an
entrepreneurs' block, may be too costly to administer in the 900 MHz
SMR service. The Commission seeks comment on this proposal. Also, if
the Commission adopts provisions for minority and women-owned entities,
should the Commission apply a reduced upfront payment provision to
those entities only?
50. Set-aside Spectrum. In the Fifth Report & Order, PP Docket No.
93-253, 59 FR 37566 (July 22, 1994), the Commission established
entrepreneurs' blocks on which only qualified entrepreneurs, including
designated entities, could bid. See also 47 CFR 24.709. The Commission
tentatively concludes not to adopt an entrepreneurs' block for the 900
MHz SMR auction. First, the large numbers of licenses available and
relatively small spectrum allocations in the 900 MHz SMR service should
allow for extensive small business participation. Second, the
effectiveness of bidding credits and other provisions will be diluted,
due to the smaller capital outlay anticipated for this service. Third,
it may be impractical to choose particular blocks to set aside for
bidding solely by entrepreneurs due to incumbent 900 MHz SMR operators
in 19 of the 46 DFAs. The Commission seeks comment on this proposal.
Are the capital requirements of this service anticipated to be so
substantial that the Commission should insulate certain blocks from
very large bidders in order to provide meaningful opportunities for
designated entities?
III. Procedural Matters
Initial Regulatory Flexibility Analysis. As required by Section 603
of the Regulatory Flexibility Act, the Commission has prepared an
Initial Regulatory Flexibility Analysis (IRFA) of the expected impact
on small entities of the policies and rules proposed in this Further
Notice of Proposed Rule Making. Written public comments are requested
on the IRFA.
Reason for Action: This rule making proceeding was initiated to
secure comment on proposals for establishing a flexible regulatory
scheme for the 900 MHz Specialized Mobile Radio (SMR) service that
would promote efficient licensing and enhance the service's competitive
potential in the commercial mobile radio marketplace. The proposals
advanced in the Second Further Notice of Proposed Rule Making are also
designed to implement Congress's goal of regulatory symmetry in the
regulation of competing commercial mobile radio services as described
in Sections 3(n) and 332 of the Communications Act, 47 U.S.C. 153(n),
332, as amended by Title VI of the Omnibus Budget Reconciliation Act of
1993 (Budget Act). The Commission also seeks to adopt rules regarding
competitive bidding in the 900 MHz SMR service based on Section 309(j)
of the Communications Act, 47 U.S.C. 309(j), which delegates authority
to the Commission to use auctions to select among mutually exclusive
initial applications in certain services, including 900 MHz SMR.
Objectives: The Commission proposes to adopt rules for the 900 MHz
SMR service that are intended to promote the growth of incumbent 900
MHz SMR systems, and emerging MTA SMR licensees, and to enhance the
ability of all SMR providers to compete in the larger commercial mobile
services market. The Further Notice of Proposed Rule Making seeks to
establish competitive bidding procedures and a new licensing mechanism
for the 900 MHz SMR service that will expedite service to the public
and promote competition in the CMRS marketplace.
Legal Basis: The proposed action is authorized under the Budget
Act, Pub. L. No. 103-66, Title VI, 6002, and Sections 2(a), 3(n), 4(i),
302, 303(g), 303(r), 309(i), 309(j), 332(a), 332(c), and 332(d) of the
Communications Act of 1934, 47 U.S.C. 152(a), 153(n), 154(i), 302,
303(g), 303(r), 309(i), 309(j), 332(a), 332(c) and 332(d), as amended.
Reporting, Recordkeeping, and Other Compliance Requirements: Under
the proposal contained in the Further Notice of Proposed Rule Making,
SMR licensees who obtain MTA-based licenses may be required to report
information regarding location of their facilities and coverage of
their service areas. SMR applicants seeking treatment as ``designated
entities'' may also be subject to reporting and recordkeeping
requirements to demonstrate compliance with the Commission's
competitive bidding rules.
Federal Rules Which Overlap, Duplicate or Conflict With These
Rules: None.
Description, Potential Impact, and Number of Small Entities
Involved: The Further Notice of Proposed Rule Making potentially
affects numerous small entities already operating 900 MHz SMR systems
in Designated Filing Areas that will co-exist with 900 MHz SMR MTA
licensees. The competitive bidding proposals contained in the Further
Notice of Proposed Rule Making also could affect small entities seeking
initial licenses in the 900 MHz SMR service. The Further Notice of
Proposed Rule Making proposes special provisions in the Commission's
auction rules to benefit ``designated entity'' applicants, including
small businesses. After evaluating comments filed in response to the
Further Notice of Proposed Rule Making, the Commission will examine
further the impact of all rule changes on small entities and set forth
its findings in the Final Regulatory Flexibility Analysis.
Significant Alternatives Minimizing the Impact on Small Entities
Consistent with the Stated Objectives: This Further Notice of Proposed
Rule Making solicits comment on a variety of alternatives. Any
additional significant alternatives presented in the comments will also
be considered.
IRFA Comments: The Commission requests written public comment on
the foregoing Initial Regulatory Flexibility Analysis. Comments must
have a separate and distinct heading designating them as responses to
the IRFA and must be filed by the deadlines provided above.
[[Page 22031]]
List of Subjects in 47 CFR Part 90
Radio.
Federal Communications Commission,
William F. Caton,
Acting Secretary.
Amendatory Text
Part 90 of Chapter I of Title 47 of the Code of Federal Regulations
is proposed to be amended as follows:
1. The authority citation for Part 90 continues to read as follows:
Authority: 47 U.S.C. 154, 303, 309 and 332.
2. A new Subpart U consisting of Secs. 90.801 through 90.814 is
proposed to be added to Part 90 to read as follows:
PART 90--PRIVATE LAND MOBILE RADIO SERVICES
Subpart U--Competitive Bidding Procedures for 900 MHz Specialized
Mobile Radio
Sec.
90.801 900 MHz SMR subject to competitive bidding.
90.802 Competitive bidding for 900 MHz SMR licensing..
90.803 Competitive bidding mechanisms.
90.804 Aggregation of 900 MHz SMR licenses.
90.805 Withdrawal, default and disqualification payments.
90.806 Bidding application (FCC Form 175 and 175-S Short-form).
90.807 Submission of upfront payments and down payments.
90.808 Long-form applications.
90.809 License grant, denial, default, and disqualification.
90.810 Bidding credits for small businesses.
90.811 Reduced down payment for licenses won by small businesses.
90.812 Installment payments for licenses won by small businesses.
90.813 Procedures for partitioned licenses.
90.814 Definitions.
Sec. 90.801 900 MHz SMR subject to competitive bidding.
Mutually exclusive initial applications to provide 900 MHz SMR
service are subject to competitive bidding procedures. The general
competitive bidding procedures found in 47 CFR Part 1, Subpart Q will
apply unless otherwise provided in this part.
Sec. 90.802 Competitive bidding design for 900 MHz SMR licensing.
The Commission will employ a simultaneous multiple round auction
design when choosing from among mutually exclusive initial applications
to provide 900 MHz SMR service, unless otherwise specified by the
Wireless Telecommunications Bureau before the auction.
Sec. 90.803 Competitive bidding mechanisms.
(a) Sequencing. The Commission will establish and may vary the
sequence in which 900 MHz SMR licenses will be auctioned.
(b) Grouping. All 900 MHz SMR licenses for each of the MTAs will be
auctioned simultaneously, unless the Wireless Telecommunications Bureau
announces, by Public Notice prior to the auction, an alternative
auction scheme.
(c) Minimum Bid Increments. The Commission will, by announcement
before or during an auction, require minimum bid increments in dollar
or percentage terms.
(d) Stopping Rules. The Commission will establish stopping rules
before or during multiple round auctions in order to terminate an
auction within a reasonable time.
(e) Activity Rules. The Commission will establish activity rules
which require a minimum amount of bidding activity. In the event that
the Commission 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. 90.804 Aggregation of 900 MHz SMR licenses.
The Commission will license each 10-channel block in the 900 MHz
SMR spectrum separately. Applicants may aggregate across spectrum
blocks within the limitation specified in Sec. 20.6(b) of this Chapter.
Sec. 90.805 Withdrawal, default and disqualification payments.
(a) During the course of an auction conducted pursuant to
Sec. 90.802, 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 if 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. 90.806 Bidding application (FCC Form 175 and 175-S Short-form).
All applicants to participate in competitive bidding for 900 MHz
SMR licenses must submit applications on FCC Forms 175 and 175-S
pursuant to the provisions of Sec. 1.2105 of this Chapter. The Wireless
Telecommunications Bureau will issue a Public Notice announcing the
availability of 900 MHz SMR licenses and, in the event that mutually
exclusive applications are filed, the date of the auction for those
licenses. This Public Notice also will specify the date on or before
which applicants intending to participate in a 900 MHz SMR auction must
file their application 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 Forms, any filing fee that must accompany the application
or any upfront payment that will need to be submitted, and the location
where the application must be filed. In addition to identifying its
status as a small business or rural telephone company, each applicant
must indicate whether it is a minority-owned entity, as defined in
Sec. 90.814(g) and/or a women-owned entity.
Sec. 90.807 Submission of upfront payments and down payments.
(a) Bidders in the 900 MHz SMR auction will be required to submit
an upfront payment of $0.02 per pop per MHz, in accordance with
Sec. 1.2106 of this Chapter.
(b) Winning bidders in a 900 MHz SMR auction must submit a down
payment to the Commission in an amount sufficient to bring their total
deposits up to 20 percent of their winnings bids, and in accordance
with Sec. 1.2107(b) of this chapter, except for small businesses that
are winning bidders, which are governed by Sec. 90.811. [[Page 22032]]
Sec. 90.808 Long-form applications.
Each winning bidder will be required to submit a long-form
application on 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 90.119 of this Part and any associated Public Notices. Only auction
winners (and rural telephone companies seeking partitioned licenses
pursuant to agreements with auction winners under Sec. 90.813) will be
eligible to file applications on FCC Form 600 for initial 900 MHz SMR
licenses in the event of mutual exclusivity between applicants filing
Form 175.
Sec. 90.809 License grant, denial, default, and disqualification.
(a) Except with respect to entities eligible for installment
payments (see Sec. 90.812) 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 license is ready for
grant. The Commission will grant the license 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. 90.805 or Sec. 1.2109 of this
Chapter, as applicable.
(c) MTA licenses pursued through competitive bidding procedures
will be granted pursuant to the requirements specified in Sec. 90.166.
Sec. 90.810 Bidding credits for small businesses.
(a) A winning bidder that qualifies as a small business or a
consortium of small businesses, (as defined in Sec. 90.814) may use a
bidding credit of 10 percent to lower the cost of its winning bid on
any of the blocks identified in Sec. 90.617(d), Table 4B.
(b) Unjust Enrichment. (1) If a licensee that utilizes a bidding
credit under this section seeks to assign or transfer control of its
license to an entity not meeting the eligibility standards for bidding
credits or seeks to make any other change in ownership that would
result in the licensee no longer qualifying for bidding credits under
this section, the licensee must seek Commission approval of such
assignment, transfer or other ownership change.
(2) If a licensee that utilizes a bidding credit under this section
seeks to assign or transfer control of its license to an entity meeting
the eligibility standards for lower bidding credits or seeks to make
any other change in ownership that would result in the licensee
qualifying for a lower bidding credit under this section, the licensee
must seek Commission approval and reimburse the government for the
difference between the amount of the bidding credit obtained by the
licensee and the bidding credit for which the assignee, transferee or
licensee is eligible under this section as a condition of the approval
of such assignment, transfer or other ownership change.
Sec. 90.811 Reduced down payment for licenses won by small businesses.
Each winning bidder that qualifies as a small business shall make a
down payment equal to ten percent of its winning bid (less applicable
bidding credits); a winning bidder shall bring its total amount on
deposit with the Commission (including upfront payment) to five percent
of its net winning bid within five (5) business days after the auction
closes, and the remainder of the down payment (five percent) shall be
paid within five (5) business days following Public Notice that the
license is ready for grant. The Commission will grant the license
within ten (10) business days after receipt of the remainder of the
down payment.
Sec. 90.812 Installment payments for licenses won by small businesses.
(a) Each licensee that qualifies as a small business may pay the
remaining 90 percent of the net auction price for the license in
installment payments pursuant to Sec. 1.210(e) of this chapter.
(b) Interest shall be imposed based on the rate for ten-year U.S.
Treasury obligations applicable on the date the license is granted,
plus 2.5 percent; payments shall include interest only for the first
two years and payments of interest and principal amortized over the
remaining eight years of the license term.
(c) Unjust Enrichment. (1) If a licensee that utilizes installment
financing under this section seeks to assign or transfer control of its
license to an entity not meeting the eligibility standards for
installment payments, the licensee must make full payment of the
remaining unpaid principal and any unpaid interest accrued through the
date of assignment or transfer as a condition of approval.
(2) If a licensee that utilizes installment financing under this
section seeks to make any change in ownership structure that would
result in the licensee losing eligibility for installment payments, the
licensee shall first seek Commission approval and must make full
payment of the remaining unpaid principal and any unpaid interest
accrued through the date of such change as a condition of approval.
Sec. 90.813 Procedures for partitioned licenses.
(a) Notwithstanding Sec. 90.661, an applicant that is rural
telephone company, as defined in Sec. 90.814, may be granted a 900 MHz
SMR license that is geographically partitioned from a separately
licensed MTA, so long as the MTA applicant or licensee has voluntarily
agreed (in writing) to partition a portion of the license to the rural
telephone company.
(b) If partitioned licenses are being applied for in conjunction
with a license(s) to be awarded through competitive bidding
procedures--
(1) The applicable procedures for filing short-form applications
and for submitting upfront payments and down payments contained in this
Part and Part 1 of this Chapter shall be followed by the applicant, who
must disclose as part of its short-form application all parties to
agreement(s) with or among rural telephone companies to partition the
license pursuant to this section, if won at auction (see 47 CFR
Sec. 1.2105(a)(2)(viii) of this Chapter);
(2) Each rural telephone company that is a party to an agreement to
partition the license shall file a long-form application for its
respective, mutually agreed-upon geographic area together with the
application for the remainder of the MTA filed by the auction winner.
(c) If the partitioned license is being applied for as a partial
assignment of the MTA license following grant of the initial license,
request for authorization for partial assignment of a license shall be
made pursuant to Sec. 90.153.
(d) Each application for a partitioned area (long-form initial
application or partial assignment application) shall contain a
partitioning plan that must propose to establish a partitioned area to
be licensed that meets the following criteria:
(1) Conforms to established geopolitical boundaries (such as county
lines);
(2) Includes the wireline service area of the rural telephone
company applicant; and
(3) Is reasonable related to the rural telephone company's wireline
service area.
Note: A partitioned service area will be presumed to be
reasonably related to the rural telephone company's wireline service
area if the partitioned service area contains no more than twice the
population overlap between the rural telephone company's
[[Page 22033]] wireline service area and the partitioned area.
(e) Each licensee in each partitioned area will be responsible for
meeting the construction requirements in its area (see Sec. 90.665).
Sec. 90.814 Definitions.
(a) Scope. The definitions in this section apply to Secs. 90.810
through 90.813, unless otherwise specified in those sections.
(b) Small Business: Consortium of Small Businesses. (1) A small
business is an entity that, together with its affiliates and persons or
entities that hold attributable interests in such entity and their
affiliates, have average gross revenues for the three preceding years
of less than $3 million.
(2) A small business consortium is conglomerate organization formed
as a joint venture between or among mutually-independent business
firms, each of which individually satisfies the definition of a small
business in paragraphs (b)(1) and (b)(2) of this section.
(c) Rural Telephone Company. A rural telephone company is a local
exchange carrier having 100,000 or fewer access lines, including all
affiliates.
(d) Gross Revenues. Gross revenues shall mean all income received
by an entity, whether earned or passive, before any deductions are made
for costs of doing business (e.g., cost of goods sold), as evidenced by
audited financial statements for the relevant number of calendar years
preceding January 1, 1994, or, If audited financial statements were not
prepared on a calendar-year basis, of the most recently completed
fiscal years preceding the filing of the applicant's short-form
application (Form 175). For applications filed after December 31, 1994,
gross revenues shall be evidenced by audited financial statements for
the preceding relevant number of calendar or fiscal years. If an entity
was not in existence for all or part of the relevant period, gross
revenues shall be evidenced by the audited financial statements of the
entity's predecessor-in-interest or, if there is no identifiable
predecessor-in-interest, unaudited financial statements certified by
the applicant as accurate.
(e) Business 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 control the
applicant, have at least 50.1 percent equity ownership and, in the case
of a corporate applicant, a 50.1 percent voting interest. For
applicants that are partnerships, every general partner either must be
a minority and/or woman (or minorities and/or women) who are U.S.
citizens and who individually or together own 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
interest 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.
(f) Members of Minority Groups. Members of minority groups includes
Blacks, Hispanics, American Indians, Alaskan Natives, Asians, and
Pacific Islanders.
(g) Nonattributable Equity. Nonattributable equity shall mean:
(1) For corporations, voting stock or non-voting stock that
includes no more than 25 percent of the total voting equity, including
the right to vote such stock through a voting trust or other
arrangement;
(2) For partnerships, joint ventures and other non-corporate
entities, limited partnership interests and similar interests that do
not afford the power to exercise control of the entity.
(h) Affiliate. (1) Basis for Affiliation. An individual or entity
is an affiliate of an applicant or of a person holding an attributable
interest in an applicant (both referred to herein as ``the applicant'')
if such individual or entity:
(i) Directly or indirectly controls or has the power to control the
applicant, or
(ii) Is directly or indirectly controlled by the applicant, or
(iii) Is directly or indirectly controlled by a third party or
parties that also controls or has the power to control the applicant,
or
(iv) Has an ``identity of interest'' with the applicant.
(2) Nature of control in determining affiliation.
(i) Every business concern is considered to have one or more
parties who directly or indirectly control or have the power to control
it. Control may be affirmative or negative and it is immaterial whether
it is exercised so long as the power to control exists.
Example for paragraph (h)(2)(i). An applicant owning 50 percent
of the voting stock of another concern would have negative power to
control such concern since such party can block any action of the
other stockholders. Also, the bylaws of a corporation may permit a
stockholder with less than 50 percent of the voting to block any
actions taken by the other stockholders in the other entity.
Affiliation exists when the applicant has the power to control a
concern while at the same time another person, or persons, are in
control of the concern at the will of the party or parties with the
power of control.
(ii) Control can arise through stock ownership; occupancy of
director, officer or key employee positions; contractual or other
business relations; or combinations of these and other factors. A key
employee is an employee who, because of his/her position in the
concern, has a critical influence in or substantive control over the
operations or management of the concern.
(iii) Control can arise through management positions where a
concern's voting stock is so widely distributed that no effective
control can be established.
Example for paragraph (h)(2)(iii). In a corporation where the
officers and directors own various size blocks of stock totaling 40
percent of the corporation's voting stock, but no officer or
director has a block sufficient to give him or her control or the
power to control and the remaining 60 percent is widely distributed
with no individual stockholder having a stock interest greater than
10 percent, management has the power to control. If persons with
such management control of the other entity are persons with
attributable interests in the applicant, the other entity will be
deemed an affiliate of the applicant.
(3) Identity of interest between and among persons. Affiliation can
arise between or among two or more persons with an identity of
interest, such as members of the same family or persons with common
investments. In determining if the applicant controls or is controlled
by a concern, persons with an identity of interest will be treated as
though they were one person.
Example 1 for paragraph (h)(3) introductory text. Two
shareholders in Corporation Y each have attributable interests in
the same SMR application. While neither shareholder has enough
shares to individually control Corporation Y, together they have the
power to control Corporation Y. The two shareholders with these
common investments (or identity of interest) are treated as though
they are one person and Corporation Y would be deemed an affiliate
of the applicant.
Example 2 for paragraph (h)(3) introductory text. One
shareholder in [[Page 22034]] Corporation Y, shareholder A, has an
attributable interest in a SMR application. Another shareholder in
Corporation Y, shareholder B, has a nonattributable interest in the
same SMR application. While neither shareholder has enough shares to
individually control Corporation Y, together they have the power to
control Corporation Y. Through the common investment of shareholders
A and B in the SMR application, Corporation Y would still be deemed
an affiliate of the applicant.
(i) Spousal Affiliation. Both spouses are deemed to own or control
or have the power to control interests owned or controlled by either of
them, unless they are subject to a legal separation recognized by a
court of competent jurisdiction in the United States.
(ii) Kinship Affiliation. Immediate family members will be presumed
to own or control or have the power to control interests owned or
controlled by other immediate family members. In this context
``immediate family member'' means father, mother, husband, wife, son,
daughter, brother, sister, father- or mother-in-law, son- or daughter-
in-law, brother- or sister-in-law, step-father, or -mother, step-
brother, or -sister, step-son, or -daughter, half brother or sister.
This presumption may be rebutted by showing that
(A) The family members are estranged,
(B) The family ties are remote, or
(C) The family members are not closely involved with each in
business matters.
Example for paragraph (h)(3)(ii). A owns a controlling interest
in Corporation X. A's sister-in-law, B, has an attributable interest
in an SMR application. Because A and B have a presumptive kinship
affiliation, A's interest in Corporation X is attributable to B, and
thus to the applicant, unless B rebuts the presumption with the
necessary showing.
(4) Affiliation through stock ownership. (i) An applicant is
presumed to control or have the power to control a concern if he or she
owns or controls or has the power to control 50 percent or more of its
voting stock.
(ii) An applicant is presumed to control or have the power to
control a concern even though he or she owns, controls or has the power
to control less than 50 percent of the concern's voting stock, if the
block of stock he or she owns, controls or has the power to control is
large as compared with any other outstanding block of stock.
(iii) If two or more persons each owns, controls or has the power
to control less than 50 percent of the voting stock of a concern, such
minority holdings are equal or approximately equal in size, and the
aggregate of these minority holdings is large as compared with any
other stock holding, the presumption arises that each one of these
persons individually controls or has the power to control the concern;
however, such presumption may be rebutted by a showing that such
control or power to control, in fact, does not exist.
(5) Affiliation arising under stock options, convertible
debentures, and agreements to merge. Stock options, convertible
debentures, and agreements to merge (including agreements in principle)
are generally considered to have a present effect on the power to
control the concern. Therefore, in making a size determination, such
options, debentures, and agreements will generally be treated as though
the rights held thereunder had been exercised. However, neither an
affiliate nor an applicant can use such options and debentures to
appear to terminate its control over another concern before it actually
does so.
Example 1 for paragraph (h)(5). If company B holds an option to
purchase a controlling interest in company A, who holds an
attributable interest in an SMR application, the situation is
treated as though company B had exercised its rights and had become
owner of a controlling interest in company A. The gross revenues of
company B must be taken into account in determining the size of the
applicant.
Example 2 for paragraph (h)(5). If a large company, BigCo, holds
70% (70 of 100 outstanding shares) of the voting stock of company A,
who holds an attributable interest in an SMR application, and gives
a third party, SmallCo, an option to purchase 50 of the 70 shares
owned by BigCo, BigCo will be deemed to be an affiliate of company,
and thus the applicant, until SmallCo actually exercises its options
to purchase such shares. In order to prevent BigCo from
circumventing the intent of the rule which requires such options to
be considered on a fully diluted basis, the option is not considered
to have present effect in this case.
Example 3 for paragraph (h)(5). If company A has entered into an
agreement to merge with company B in the future, the situation is
treated as though the merger has taken place.
(6) Affiliation under voting trusts. (i) Stock interests held in
trust shall be deemed controlled by any person who holds or shares the
power to vote such stock, to any person who has the sole power to sell
such stock, and to any person who has the right to revoke the trust at
will or to replace the trustee at will.
(ii) If a trustee has a familial, personal or extra-trust business
relationship to the grantor or the beneficiary, the stock interests
held in trust will be deemed controlled by the grantor or beneficiary,
as appropriate.
(iii) If the primary purpose of a voting trust, or similar
agreement, is to separate voting power from beneficial ownership of
voting stock for the purpose of shifting control of or the power to
control a concern in order that such concern or another concern may
meet the Commission's size standards, such voting trust shall not be
considered valid for this purpose regardless of whether it is or is not
recognized within the appropriate jurisdiction.
(7) Affiliation through common management. Affiliation generally
arises where officers, directors, or key employees serve as the
majority or otherwise as the controlling element of the board of
directors and/or the management of another entity.
(8) Affiliation through common facilities. Affiliation generally
arises where one concern shares office space and/or employees and/or
other facilities with another concern, particularly where such concerns
are in the same or related industry or field of operations, or where
such concerns were formerly affiliated, and through these sharing
arrangements one concern has control, or potential control, of the
other concern.
(9) Affiliation through contractual relationships. Affiliation
generally arises where one concern is dependent upon another concern
for contracts and business to such a degree that one concern has
control, or potential control, of the other concern.
(10) Affiliation under joint venture arrangements. (i) A joint
venture for size determination purposes is an association of concerns
and/or individuals, with interests in any degree or proportion, formed
by contract, express or implied, to engage in and carry out a single,
specific business venture for joint profit for which purpose they
combine their efforts, property, money, skill and knowledge, but not on
a continuing or permanent basis for conducting business generally. The
determination whether an entity is a joint venture is based upon the
facts of the business operation, regardless of how the business
operation may be designated by the parties involved. An agreement to
share profits/losses proportionate to each party's contribution to the
business operation is a significant factor in determining whether the
business operation is a joint venture.
(ii) The parties to a joint venture are considered to be affiliated
with each other.
[FR Doc. 95-11010 Filed 5-2-95; 12:52 pm]
BILLING CODE 6712-01-M
