[Federal Register Volume 60, Number 136 (Monday, July 17, 1995)]
[Rules and Regulations]
[Pages 36524-36562]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 95-17237]
[[Page 36523]]
_______________________________________________________________________
Part III
Federal Communications Commission
_______________________________________________________________________
47 CFR Part 21
Filing Procedures; Multipoint Distribution Service and Instructional
Television Fixed Service, Including Electronic Filing and Competitive
Bidding; Final Rule
Federal Register Vol. 60, No. 136 / Monday, July 17, 1995 / Rules and
Regulations
[[Page 36524]]
FEDERAL COMMUNICATIONS COMMISSION
47 CFR Part 21
[MM Docket No. 94-131 and PP Docket No. 93-253, FCC 95-230]
Filing Procedures in the Multipoint Distribution Service and in
the Instructional Television Fixed Service, Including Electronic Filing
and Competitive Bidding
AGENCY: Federal Communications Commission.
ACTION: Final rule.
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SUMMARY: This Report and Order adopts a licensing plan under which we
will allot Multipoint Distribution Service (MDS) authorizations by
geographic areas, through a simultaneous multiple round bidding
process. The Report and Order also adopts a variety of measures to
streamline the application and implementation processes. It authorizes
the voluntary use of electronic filing for new MDS applications, as
well as electronic fee payments. It institutes computerized
interference studies utilizing new data elements to be included in a
revised MDS application form. It also makes clear that interference
disputes are to be resolved, in the first instance, through private
negotiations, with the FCC to serve only as a last resort. These
procedures are designed to expedite processing and facilitate
development of wireless cable, an industry that delivers video
programming to subscribers using MDS and Instructional Television Fixed
Service (ITFS) channels. This proceeding is intended to expedite more
service to the public and enhance opportunities for wireless cable to
reach its potential as a competitor to wired cable.
EFFECTIVE DATE: September 15, 1995.
FOR FURTHER INFORMATION CONTACT: Sharon Bertelsen at (202) 416-0892 or
Jerianne Timmerman at (202) 416-0881, Video Services Division, Mass
Media Bureau.
SUPPLEMENTARY INFORMATION:
Paperwork Reduction Act
The following collection of information has been submitted to the
Office of Management and Budget for review under Section 3504(h) of the
Paperwork Reduction Act. Copies of the submission may be purchased from
the Commission's copy contractor, International Transcription Service,
2100 M Street, N.W., Suite 140, Washington, D.C. 20037, (202) 857-3800.
Persons wishing to comment on this information collection should direct
their comments to Timothy Fain, (202) 395-3561, Office of Management
and Budget, Room 10102 NEOB, Washington, D.C. 20503. A copy of any
comments should also be sent to the Federal Communications Commission,
Office of Managing Director, Washington, D.C. 20554. For further
information contact Judy Boley, Federal Communications Commission,
(202) 418-0210.
OMB Numbers: None. This Report and Order adopts a new application
form, FCC Form 304, to be used for new MDS facilities, and several new
rules and amended rules. There is also a new FCC Form 304-A and FCC
Form 175-M.
Titles: Form 304: Application for a Multipoint Distribution Service
Authorization. Form 304-A: Certification of Completion of Construction
for a Multipoint Distribution Service. Form 175-M: Application to
Participate in an FCC MDS Auction. 47 CFR 21.930 (Five-year Build-out
Requirements), 21.931 (Partitioning of BTAs), 21.934 (Assignment or
Transfer of Control of BTA Authorizations), 21.937 (Negotiated
Interference Protections), 21.956 (Filing of Long-form Applications or
Statements of Intention) and 21.960 (Designated Entity Provisions for
MDS).
Action: New Collections.
Respondents: Businesses or other for-profit, small businesses or
organizations.
Frequency of Response: On occasion reporting requirements.
Estimated Annual Response: Form 304: 300 responses, 55 hours per
response; Form 304-A: 100 responses, .5 hours per response; Form 175-M:
1600 responses, .48 hours per response; Section 21.930: These filings
will not occur until FY 2001, 750 responses, 1 hour per response;
Section 21.931: 150 responses, 6 hours per response; Section 21.934:
200 responses, 1 hour per response; Section 21.937: 75 responses, 30
hours per response; Section 21.956: 200 responses, 3 hours per
response; Section 21.960: 550 responses, 2 hours per response.
Needs and Uses: FCC Form 304 will be used to ensure that the
respondent is qualified to become a Commission licensee. FCC Form 304-A
will be used to certify that the facilities as authorized have been
completed and that the station is ready to provide service to the
public. FCC Form 175-M will be used to determine whether the applicant
is legally, technically and otherwise qualified to participate in an
MDS auction. Section 21.930 will be used to determine whether the BTA
holder has met its construction requirements and to ensure that service
is promptly delivered to the public. Sections 21.931 and 21.937 will
ensure that the interference protection rules are complied with.
Section 21.934 is used to determine whether there has been unjust
enrichment to the party selling the station. Section 21.956 will be
used by the staff to determine whether to grant a BTA authorization.
Section 21.960 will prevent abuse of the special measures offered to
MDS auction winners claiming designated entity status.
A summary of the Report and Order follows. The complete text is
available for inspection and copying during normal business hours in
the MDS public reference room, Room 207, at the Federal Communications
Commission, 2033 M Street, N.W., Washington, D.C., and it may be
purchased from the Commission's copy contractor, International
Transcription Service, Inc., 2100 M Street, N.W., Suite 140,
Washington, D.C. 20037, (202) 857-3800. (Action by the Commission:
Chairman Hundt dissenting in part and issuing a statement;
Commissioners Quello and Barrett issuing separate statements; and
Commission Ness dissenting in part and issuing a statement.)
1. By this action, we adopt rules to facilitate the development and
rapid deployment of wireless cable services.\1\ As a result of our
actions in prior proceedings, wireless cable operators that use
spectrum in the Multipoint Distribution Service (MDS), often
supplemented with leased channels from the Instructional Television
Fixed Service (ITFS), have begun to provide a competitive alternative
to wired cable and other multichannel video programming
distributors.\2\ The rules we now adopt will accelerate that process by
setting streamlined measures to distribute unused MDS spectrum through
competitive bidding and by establishing a protected service area for
MDS stations that is large enough to allow operators flexibility they
need to design viable and competitive wireless cable systems. Adoption
of these rules will enable the Commission to lift the
[[Page 36525]]
current freeze on filing new MDS applications.\3\
\1\ Wireless cable programming to subscribers resembles cable
television, but instead of coaxial cable, wireless cable uses
microwave channels. Our use of the term ``wireless cable'' does not
imply that it constitutes cable television for statutory or
regulatory purposes.
\2\ Unless otherwise indicated, ``MDS'' includes single channel
Multipoint Distribution Service (MDS) and Multichannel Multipoint
Distribution Service (MMDS) applications and authorizations
collectively.
\3\ The Commission imposed a freeze on the filing of
applications for new MDS stations in Notice of Proposed Rulemaking
in PR Docket No. 92-80, 7 FCC Rcd 3266 (1992), 57 Fed. Reg. 24,006
(June 5, 1992).
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2. Specifically, we adopt in this order a licensing plan under
which we will allot, through a simultaneous multiple round bidding
process, one MDS authorization for each of the 487 Basic Trading Areas
(BTAs) and six additional BTA-like geographic areas.\4\ A BTA
authorization holder will be able to construct facilities to provide
wireless cable service over any usable MDS channels within the BTA, and
will have preferred rights to the available ITFS frequencies and ITFS
lease agreements within the BTA. A channel is usable if the proposed
station design is in compliance with the Commission's interference
standards.
\4\ Rand McNally defined 487 BTAs in the 1992 Commercial Atlas &
Marketing Guide. Since Rand McNally did not include a few areas, we
will add them to the list as BTA-like geographic areas, bringing the
total to 493 authorizations to be auctioned. See infra at para. 26.
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3. Under the new rules, the signals of a BTA authorization holder
cannot interfere with those of any other BTA authorization holder.
Recognizing, however, that BTA lines do not always track desired
service areas, the rules permit BTA authorization holders to negotiate
interference protection rights. In addition, the rules we adopt require
BTA authorization holders to honor the protected service areas of
incumbent MDS operators within their BTAs. In a companion order, also
adopted today, the Commission expanded the protected service areas of
existing MDS stations.\5\ These various licensees and applicants that
are authorized or proposed on or before the effective date of this
Report and Order, including those stations that are subsequently
modified, renewed or reinstated, are referred to throughout this Report
and Order as ``authorized or previously proposed facilities'' or
``incumbents.'' In order to facilitate the development of successful
wireless cable systems, the rules permit BTA authorization holders to
assign or transfer their entire BTAs, or partitioned portions of it, to
incumbents or other parties. (Unserved areas may be included as long as
the assignment or transfer takes place within the five-year build-out
period that the rules impose.) Because the BTA authorization holder may
be an incumbent, the rules permit the aggregation of existing and new
MDS and ITFS channels within a BTA.
\5\ Second Order on Reconsideration in Gen. Docket Nos. 90-54
and 80-113, FCC 95-231 (released June 21, 1995) (Secord Order on
Reconsideration).
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4. The Report and Order also adopts a variety of measures to
streamline the application and implementation processes. It authorizes,
for example, the voluntary use of electronic filing for new MDS
applications, as well as electronic fee payments. It institutes
computerized interference studies utilizing new data elements to be
included in a revised MDS application form. It also makes clear that
interference disputes are to be resolved, in the first instance,
through private negotiations, with the Commission to serve only as a
last resort.
5. We understand that the wireless cable industry has made
tremendous progress toward the transition to digital transmission.\6\
The rules we adopt today will facilitate that transition.
\6\ See, e.g., The Wireless Cable Association International,
Selected Papers from the First Annual Wireless Cable Technical
Symposium (February 4-6, 1995).
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6. Background. In 1983, to satisfy a growing demand for the
delivery of video entertainment programming to subscribers and to
provide competition to wired cable systems, the Commission reallocated
eight of the then twenty-eight ITFS channels for MDS use, and
authorized ITFS licensees to lease the excess capacity on their systems
to wireless cable operators.\7\ That action created wireless cable as a
multichannel video distribution medium, and in 1991, the Commission
made more channels available for wireless cable services.\8\ Today,
there are a maximum of thirty-three microwave channels used for
wireless cable in each market. These include thirteen MDS channels
(Channels 1, 2 or 2A, E1-E4, F1-F4 and H1-H3) and the excess capacity
on up to twenty ITFS channels (Channels A1-A4, B1-B4, C1-C4, D1-D4 and
G1-G4).\9\
\7\ Report and Order in Gen. Docket No. 80-112 and CC Docket No.
80-116, 94 FCC 2d 1203 (1983), 48 Fed. Reg. 33,873 (July 26, 1983).
Therein, the Commission also grandfathered interference protection
to existing ITFS applicants, permittees or licensees on these eight
E and F channels, resulting in twenty-eight ITFS channels in some
locales.
\8\ The Commission reallocated the H group channels from the
Operational Fixed Service to MDS and made MDS operators eligible for
authorization on vacant ITFS channels with specified restrictions.
Second Report and Order in Gen. Docket No. 90-54, 6 FCC Rcd 6792,
6793-94, 6801-06 (1991), 56 Fed. Reg. 57,808 (Nov. 14, 1991), recon.
denied, 7 FCC Rcd 5648 (1992). Last year, the Commission
consolidated processing of MDS and ITFS applications into one
organization. Amendment of Parts 0 and 1 of the Communication's
Rules to Reflect a Reorganization of Multipoint and Multichannel
Multipoint Distribution Services, 9 FCC Rcd 3661 (1994), 59 Fed.
Reg. 38,374 (July 28, 1994).
\9\ MDS channel 2A is only 4 MHz wide and lacks sufficient
bandwidth to transmit a standard television signal. Grandfathered
ITFS stations on the eight E and F channels also lease excess
capacity to wireless cable operators.
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7. Wireless cable is now similar to wired cable television in the
type of programming it provides, but differs from cable in how the
programming is transmitted to subscribers. Generally, a wireless cable
system may be described as a microwave station transmitting on a
combination of MDS and ITFS channels to numerous receivers with
antennas, such as single family residences, apartment complexes,
hotels, educational institutions, business entities and governmental
offices. The range of the transmission depends upon the transmitter
power, the type of receiving antenna and the existence of a line-of-
sight path between the transmitter or signal booster and the receiving
antenna.
8. Over the past few years, the wireless cable industry has
experienced substantial growth and has emerged as an effective
competitor to wired cable in many locations.\10\ This rapid growth is
due, in part, to program access provisions and changes in other
regulations that have increased access to financing. MDS is a heavily
encumbered service. Most of the thirteen MDS channels have already been
authorized in the largest metropolitan areas, especially for locations
in the eastern half of the country. Thus far, MDS has developed almost
entirely in large and medium-sized cities, though MDS systems also
serve many smaller communities in the western states. In addition to
the approximately 170 operating wireless cable systems, many
conditional licenses have been issued to entities that, presumably, are
in various stages of constructing their systems. Finally, the MDS
landscape includes MDS systems proposed in applications now being
processed at the Commission.
\10\ See Annual Assessment of the Status of Competition in the
Market for the Delivery of Video Programming, 9 FCC Rcd 7442, 7482-
88 (1994), 59 Fed. Reg. 64,657 (Dec. 15, 1994). The Commission is
required to file such reports pursuant to the Cable Television
Consumer Protection and Competition Act of 1992, Pub. L. No. 102-
385, Sec. 628(g), 106 Stat. 1460 (amending the Communications Act of
1934), codified at 47 U.S.C. Sec. 548(g). The Commission recently
adopted a Notice of Inquiry to obtain information needed to prepare
the annual assessment that will be released in 1995, FCC 95-186
(released May 24, 1995), 60 Fed. Reg. 29,533 (June 5, 1995).
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A. Filing Procedures and Service Rules
9. Proposals. On December 1, 1994, the Commission released a Notice
of Proposed Rulemaking in this proceeding which solicited comment on
proposals that would modify our MDS filing procedures and use
competitive bidding to select from among mutually exclusive
[[Page 36526]]
applicants.\11\ In the Notice, the Commission proposed that applicants
file short-form applications for established geographic service areas
to identify mutually exclusive applicants for competitive bidding
purposes and that the successful bidders file long-form applications.
Notice at 7669-71. The Notice suggested the use of predetermined
geographic areas, such as Metropolitan Statistical Areas (MSA) and
Rural Service Areas (RSA) or Areas of Dominant Influence (ADI).\12\
This proposal envisioned that we would release a public notice
announcing auctions by geographic area, specifying the filing period
for short-form applications (FCC Form 175) \13\ and the applicable
bidding procedures. Mutually exclusive applicants would bid for all
usable MDS channels in that area as a package and the auction winner
would be permitted to file long-form applications for conditional
licenses to operate stations anywhere throughout the service area
provided the specific engineering design of their MSD stations meets
the Commission's interference protection standards with respect to all
authorized or previously proposed MDS and ITFS facilities. Long-form
applications accepted for filing would be proposed for grant by a
Commission public notice, announcing that the applications are accepted
for filing and opening a thirty-day period for filing petitions to
deny. See 47 U.S.C. Sec. 309(b); 47 CFR 21.30. The Notice observed that
these filing procedures would enable operators to amass MDS channels,
would avoid the lengthy delay associated with licensing stations site-
by-site and therefore would allow operators to enhance their services
more rapidly. The Notice asked commenters to determine which type of
geographic areas would be most suitable for MDS and to address the
definition of protected service area. In particular, we requested
comment on whether the current definition of an MDS station's protected
service area would be appropriate,\14\ or whether the boundary of the
geographic area designed for auction purposes should become the
protected service area. We also asked commenters to discuss the
interference standards for service to the areas adjacent to the
boundaries between geographic areas. Although the Notice identified
this approach of licensing MDS channels as the preferred approach, we
also invited comment on alternative licensing procedures.
\11\ Notice of Proposed Rulemaking in MM Docket No. 94-131 and
PP Docket No. 93-253, 9 FCC Rcd 7665 (1994), 59 Fed. Reg. 63,743
(Dec. 9, 1994) (Notice). The only aspect of the Notice which applied
to ITFS was the electronic filing proposal. In a separate
proceeding, the Commission recently adopted improvements to the ITFS
licensing process, including a window filing procedure. Report and
Order, Amendment of Part 74 of the Commission's Rules With Regard to
the Instructional Television Fixed Service, MM Docket No. 93-24, 10
FCC Rcd 2907 (1995), 60 Fed. Reg. 20,241 (Apr. 25, 1995).
\12\ MSAs and RSAs are standard geographic areas used by the
Commission for administrative convenience in licensing cellular
radio systems. The Commission has also used MSAs since 1983 for
making mutually exclusive determinations for MDS applications filed
for the E or F channels under 47 C.F.R. Sec. 21.901(d)(5). ADIs are
standard geographic areas that were developed by Arbitron Ratings
Company. Each county in the United States is placed within one of
209 ADIs, the lowest numbered ADI having the highest population.
\13\ FCC Form 175 contains the applicant's name, the markets in
which the applicant wishes to bid, the persons authorized to make or
withdraw a bid, whether the applicant is qualified as a designated
entity under 47 C.F.R. Sec. 1.2110, certifications that the
applicant is legally, technically, financially and otherwise
qualified, and identification of all parties involved in agreements,
or certification that no agreements exist, relating to the
authorizations being auctioned or the bidding process.
\14\ 47 C.F.R. Sec. 21.902. In another order, also adopted
today, the Commission amends 47 C.F.R. Sec. 21.902, to expand the
protected service area for authorized or previously proposed MDS
facilities. Second Order on Reconsideration at Paras. 2-31.
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10. The Notice suggested an alternative approach that would limit
applications to predetermined sites where there are vacant E, F or H
channels. Notice at 7671-72. Under this approach, the Commission would
identify such sites based upon the location of an already authorized E,
F or H channel. The Commission would issue multiple public notices
specifying the filing period and applicants would file a short-form
application to identify mutually exclusive situations for purposes of
competitive bidding. The auction winner would be required to file a
long-form application containing a complete engineering proposal and
specifying a compatible station design with the Commission's
interference protection standards to all previously proposed or
authorized MDS and ITFS facilities.
11. Under another alternative presented in the Notice, the
Commission would periodically open national filing windows, with no
geographic restrictions on filing for available MDS channels. Notice at
7672-73. Pursuant to this proposal, we would release a public notice
announcing the filing window for available channels. This proposal
would initially require a long-form application, containing the
applicant's complete technical proposal, to determine mutual
exclusivity before competitive bidding procedures are implemented. The
Notice pointed out that this approach would likely result in a larger
number of mutually exclusive applications and increase the possibility
of ``daisy-chains'' (interlinking application proposals at different
locations), which would require a more complicated and time consuming
competitive bidding process, including subsequent rounds of auctions to
resolve all mutual exclusivities in a daisy-chain. We invited
commenters favoring a national window approach to recommend ways to
resolve the daisy-chains that might arise under this proposal.
12. As an option to the national filing window approach, the Notice
discussed limiting eligibility to file in the first window to existing
licensees and system operators who, at the time the application is
filed, are operating with a certain minimum number of channels. Notice
at 7673. In many situations the acquisition of a small number of
additional channels may be essential for launching a whole new wireless
cable system in a given area. This approach would allow existing
wireless cable operators to accumulate the critical mass of channels
necessary to operate competitive wireless cable systems. We asked
commenters favoring this option to suggest eligibility requirements to
govern the filing of applications in this first window.
13. Resolution. After careful consideration of the merits of the
various proposals we raised in the Notice, we continue to prefer a
filing approach where applicants file short-form applications and
auction winners file long-form applications. We have decided that BTAs
are the most appropriate geographic area for MDS. The boundaries of
each geographic area, with the exceptions of channels obtained through
leases with ITFS licensees, will become the protected service area for
the auction winner. The auction winners will be issued authorizations
for specific geographic areas and will be permitted to operate one or
more MDS transmitting stations and signal boosters anywhere inside the
service area, provided the specific engineering design meets the
Commission's interference protection standards to all authorized or
previously proposed MDS and ITFS facilities, and complies with the
limits we establish for signal strength along the perimeter of the
geographic area. See infra at Paras. 38-41. Following the auction,
there would be a five year build-out period in which an authorization
holder can expand service or initiate new service within their area
without competing applications. The authorization holder will also be
permitted to partition its area along established geopolitical
boundaries and enter into contracts with eligible parties, allowing
such parties to
[[Page 36527]]
file long-form applications for usable MDS channels within that
partitioned area. See infra Paras. 34-35. This will permit broad
participation from entities of all sizes. This framework provides the
most efficient system of disseminating MDS licenses because service
areas are easily identified and authorizations are promptly granted
with minimal administrative or judicial delays. This approach will also
provide operators sufficient flexibility to design systems that satisfy
consumer demand.
14. We emphasize that there is no perfect or simple filing approach
to adopt at this time for new MDS authorizations given the history of
the service, the characteristics of the technologies involved, the
implementation of competitive bidding procedures, and our goal to
rapidly enhance wireless cable systems as viable competitors in the
multichannel video marketplace. We also reiterate that MDS is a heavily
encumbered service. Although conditional licenses in some markets for
one or more channels have been forfeited for failure to comply with
express conditions or to timely construct, in a majority of the markets
only small portions are unserved and few channels are available. Of the
thirteen MDS channels, it is possible that no channel remains available
for prospective bidders for as many as 59 of the cities of the top 100
ranked television markets. There are possibly two or less channel
available in as many as 90 percent of these market cities. Moreover,
the fixed 35-mile protected service areas of MDS incumbents, adopted
today in a separate proceeding, will occupy substantial portions of
most BTAs and typically cross BTA boundaries, especially in the eastern
half of the country where BTAs are relatively geographically smaller.
By enabling incumbents to continue providing interference-free service
to subscribers within the expanded 35-mile areas, it is likely that in
a substantial number of BTAs, it may be difficult, if not impossible,
for an auction winner to locate a station anywhere in the BTA to
provide both interference-free service and the necessary interference
protection to protected areas of incumbents; unless either the auction
winner is the incumbent, negotiates an interference agreement with the
incumbent or would acquire the authorization of the incumbent.\15\ We
emphasize that prospective bidders must carefully ascertain the extent
of incumbent operations and authorized but unconstructed facilities in
any BTAs prior to bidding. Further, where there remains outstanding at
the time of auction a pending application, petition for
reconsideration, reinstatement request or application for review
affecting any BTA, winning bidders would acquire any authorization
conditioned upon the outcome of Commission actions on such applications
or pleadings. Prospective bidders must consider the total impact of
incumbents in their valuation of the auction areas for competitive
bidding purposes.
\15\ In assessing MDS channel availability, we assumed that each
authorized or previously proposed MDS station has a protected
service area of 35 miles, i.e., the expanded service area adopted
today in a related order. Second Order on Reconsideration.
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15. With regard to the definition of the service area to be
authorized for MDS, we conclude that issuing authorizations by Basic
Trading Areas (BTA) reflects the best balance of competing
considerations. We considered several service area options including
Metropolitan Statistical Areas (MSA) and Rural Service Areas (RSA),\16\
the television Areas of Dominant Influence (ADI) and the analytically
similar Designated Market Areas (DMA),\17\ Basic Trading Areas (BTA)
and a combination of service areas that vary in size. The record
reflects that because many MSAs are much smaller than actual service
areas existing today, wireless cable stations licensed to different
entities in adjacent MSAs would have great difficulty providing service
to their MSA without causing harmful interference to systems in
adjacent areas. In some cases, operators who designed their systems to
maximize population, are serving subscribers located beyond the MSA in
which the transmission facilities are located. Furthermore, the record
indicates that the use of MSAs and RSAs would result in unnecessary
fragmentation of natural markets and in order to protect the boundaries
of adjacent MSAs and RSAs, in many cases, stations would have to
operate at extremely low levels of power. While simultaneous multiple
round bidding would permit the consolidation of interdependent MSAs and
RSAs, and licensees could acquire additional markets after auctions
through the assignment and transfer process, we believe that these
options may result in unproductive regulatory and transaction costs for
the Commission and applicants. We believe that the use of larger
service areas would alleviate these problems and would reduce the need
for and cost of interference coordination between neighboring
licensees.
\16\ MSAs and RSAs are used by the Commission in licensing
cellular radio systems. All of the 306 MSAs and 428 RSAs and the
counties they comprise are listed in Public Notice, Report No. CL-
92-40, ``Common Carrier Public Mobile Services Information, Cellular
MSA/RSA Markets and Counties,'' 7 FCC Rcd 742 (1992). See also 47
CFR 22.909.
\17\ DMAs are standard geographic areas developed by A.C.
Neilsen Company in which each county in the continental United
States is placed within one of the 211 DMAs, the lowest numbered DMA
having the highest population.
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16. ADIs and DMAs, on the other hand, tend to be much larger than
the area in which reliable MDS service is available using today's
technology. One commenter indicates that ADIs tend to be over seven
times the size of actual wireless cable protected service areas (of 710
square miles) and therefore concludes that ADIs are the least
appropriate service area for MDS. It explains that ADIs are designed
for television advertising measurement purposes and unlike wireless
cable, the signal of television stations and hence the size of ADIs are
attributed to cable carriage of television signals. Furthermore, the
cost of acquiring an ADI authorization through competitive bidding,
building systems and marketing services in the larger ADIs may
unnecessarily restrict entry to a small number of applicants. BTAs
offer a compromise in size that may best approximate MDS service areas.
Although varying in geographic shape and size, BTAs are bigger than
MSAs generally since they often include the MSA and surrounding
counties, thus mitigating harmful interference among adjacent areas.
BTAs offer sufficiently large service areas to allow applicants
flexibility in designing a system to maximize population coverage and
take advantage of economies of scale necessary to support a successful
operation. Yet BTAs are generally smaller than ADIs, making the initial
cost of acquiring the authorization through competitive bidding lower,
and therefore providing greater opportunity for participation by small
businesses, female and minority entrepreneurs and rural telephone
companies. The use of BTAs combined with geographic partitioning will
encourage further participation by a wide variety of applicants. See 47
U.S.C. 307(j)(4)(C). Finally, BTAs provide a manageable number of
discrete filing areas for competitive bidding purposes.
17. We recognize that the majority of the commenting parties
express support for the national filing window approach. We believe,
however, that using national filing windows would most likely result in
more of the very substantial processing and administrative delays that
have long plagued the development of the wireless
[[Page 36528]]
cable service. Given the history of the service, we believe such delays
are inherent in site-specific licensing, which would require analysis
of long-form applications containing the applicant's complete
engineering proposal before the competitive bidding process begins.
Since the national filing window approach would likely result in a
larger number of mutually exclusive applications and daisy-chains,
implementation would likely require significant Commission resources
and a substantial amount of time to conduct the multi-part auctions (to
resolve the daisy-chains) recommended by some commenters or otherwise
complete the competitive bidding process. We acknowledge the concerns
of some commenters that the licensing approach should afford MDS
licensees flexibility to locate systems wherever necessary to maximize
coverage. The record reflects that the success of the wireless cable
industry thus far has been based upon negotiated agreements with
neighboring system operators and strong partnerships with ITFS
licensees. The filing system and procedures we adopt herein are
expected to facilitate such negotiations and afford wireless cable
operators the flexibility to improve existing systems, introduce new
systems and implement digital technologies.
18. Indeed, the record indicates that geographic licensing may be
the most efficient method to these ends in a digital environment,
toward which the wireless cable industry is moving. The nature of
digital transmissions will allow more flexibility to tailor signal
coverage to geographic boundaries using multiple transmitting
facilities. We believe that our rules will facilitate the transition to
digital transmissions. If modification of our rules become necessary,
we will act promptly to ensure that our rules in no way impede the
digital future.
19. In response to the concern about the protected service areas
for MDS (BTAs) and ITFS being different, we must emphasize that the two
services have differing purposes and authorization procedures. One is
intended primarily to provide educational and cultural development to
students enrolled in accredited schools and the authorization is issued
to the best qualified applicant, while the other is commercial in
nature and is subject to competitive bidding. Furthermore, unlike MDS
stations, the protection afforded to ITFS operators is based upon
receive sites and protected service area is defined in 47 CFR 74.903.
Pursuant to this rule, the protected service area associated with the
lease of excess channel capacity will also expand to a circle, 35 miles
in radius, centered about the transmitter site of the ITFS stations. We
note, however, that in a recent proceeding we adopted a 35-mile
protection distance for ITFS receivers, a protection distance that is
compatible with many BTAs,\18\ and with the 35-mile protected service
area for MDS stations which are authorized or previously proposed that
we have separately adopted today. Second Order on Reconsideration.
\18\ Report and Order in MM Docket No. 93-24, 10 FCC Rcd 2907,
2917, 60 Fed. Reg. 20,241 (Apr. 25, 1995).
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20. For the reasons stated above, we believe that licensing by
geographic areas is the best approach for issuing MDS authorizations.
We decide not to adopt the approach presented in the Notice limiting
applications to predetermined sites identified by the Commission based
upon the locations of already authorized E, F or H channels where there
are usable channels. We agree with the commenters that this approach is
inflexible. An approach in which the Commission identifies the specific
site sacrifices the business judgment of the operators when they are in
the best position to consider market forces. Further, where there is
more than one site, the Commission would have to establish criteria for
choosing among the available locations. In addition, where identified
sites are unavailable to the highest bidders, the Commission would have
to process modification applications, which would actually decrease
overall processing efficiency and would delay service to the public.
21. We decline to adopt a preference for existing licensees and
system operators because we believe that, rather than place
restrictions on eligibility to participate based upon an applicant
having access to a minimum number of channels, it is in the public
interest to encourage participation from a wide variety of applicants.
Indeed, a new entrant into the wireless cable industry may place a
higher value on the spectrum than an incumbent licensee or system
operator in a given area. While we recognize that in some areas, the
existing licensee or operator may be in the best position to
immediately introduce competition to wired cable, we further believe
that a new entrant with sufficient resources will be able to accumulate
a sufficient critical mass of channels to launch a system in a market
through the competitive bidding process and through the assignment or
transfer of previously authorized channels. Thus, market forces will
lead to the accumulation of channels into one operating system.
1. Service Areas
22. We therefore will award MDS authorizations for entire BTA
service areas under competitive bidding procedures. BTAs were designed
by Rand McNally to represent the natural flow of commerce, comprising
areas within which consumers have a community of interest. Like the
other types of predetermined geographical areas, BTAs vary in size and
shape. Typically, a BTA includes a population center(s) (city or large
town) and the surrounding rural area. BTA boundaries are based on
country lines because most statistical information relevant to
marketing is published in terms of counties. The specific boundaries
were drawn after a study of several factors, such as physiography,
population distribution, economic activities, newspaper distribution
and transportation facilities.\19\
\19\ See Rand McNally 1992 Commercial Atlas & Marketing Guide at
39.
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23. We note that Rand McNally & Company is the copyright owner of
the Basic Trading Area and Major Trading Area Listings, which list the
counties contained in each BTA, as embodied in Rand McNally's Trading
Area System Diskette and geographically represented in the map
contained in Rand McNally's Commercial Atlas & Marketing Guide. Rand
McNally has licensed the use of its copyrighted MTA/BTA listings and
maps for certain services such as Personal Communications Services
(PCS), 800 MHz Specialized Mobile Radio Services (SMR) and Local
Multipoint Distribution Services (LMDS). Rand McNally had also reached
an agreement in principle with the American Mobile Telecommunications
Association (AMTA) for a blanket copyright license for the conditional
use of the copyrighted material in the 900 MHz SMR service. These
agreements authorize the conditional use of Rand McNally's copyrighted
material in connection with these particular services, require
interested persons using the material to include a legend on
reproductions (as specified in the license agreement) indicating Rand
McNally's ownership, and provide for a payment of a license fee to Rand
McNally.
24. Currently, MDS is not covered by any blanket copyright license
agreement. While current and prospective MDS licensees and other
parties interested in using the copyrighted materials may negotiate
[[Page 36529]]
their own licensing arrangement with Rand McNally, as in other
services, we encourage interested parties and Rand McNally to explore
the possibility of entering into blanket license agreements similar to
those noted above to cover MDS. In any event, we note further that an
MDS BTA authorization grantee who does not obtain a copyright license
(either through a blanket license agreement or some other arrangement)
from Rand McNally for use of the copyrighted material may not rely on
grant of a BTA-based authorization from the Commission as a defense to
any claim of copyright infringement brought by Rand McNally against
such grantee. The MTA/BTA Listings, the MTA/BTA Map and the license
agreements noted above are available for public inspection at the MDS
public reference room, Room 207, 2033 M Street, N.W., Washington, D.C.
25. The Commission will consider awarding the 487 BTA
authorizations in the United States, with the following additions to be
authorized as BTA-like areas: American Samoa, Guam, Northern Mariana
Islands, San Juan, Puerto Rico, Mayaguez/Aguadilla-Ponce, Puerto Rico,
and the United States Virgin Islands. Thus, a total of 493
authorizations will encompass all land areas within the United States
and related territory. We reiterate that, based on its geographic size,
and the extent of encumbrances, it may not be possible in a particular
BTA to design and select a station site for any MDS station without
negotiating an agreement with one or more affected, previously
authorized or proposed, cochannel or adjacent channel MDS or ITFS
stations. However, we are going to hold auctions initially for all BTAs
for which mutually exclusive, short-form applications are filed. The
Commission will announce the time and place of the auction and the
applicable bidding procedures by a future public notice. Applicants
wishing to participate in the auction process will file a short-form
application indicating each BTA service area for which they desire to
bid. To determine eligibility to apply for a BTA service area, we will
apply the same general eligibility requirements for an MDS
authorization.\20\ There is no restriction on the number of BTA service
areas for which any entity may apply or on the number of BTA
authorizations awarded to one entity. Incumbent MDS licensees,
conditional licensees and applicants and new entrants will be eligible.
Accordingly, prospective bidders will be able to aggregate adjacent
BTAs to utilize economies of scale that currently benefit wired cable
competitors. Selection from among the mutually exclusive applicants
will be determined through a simultaneous multiple round bidding
process. The auction winner for each BTA service area, if qualified,
will be awarded a BTA authorization. The protected service area lies
within the geographic boundary of that BTA, except as excluded by any
35-mile circle protected service areas of previously authorized or
proposed MDS stations and except for channels related to ITFS lease
agreements.
\20\ See 47 CFR 21.4, 21.17, 21.900, 21.912. Because we are
amending our rules to implement competitive bidding, our rules
regarding random selection and comparative consideration would not
apply to applications for new stations filed after the lifting of
the freeze. See 47 CFR 21.31, 21.914.
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2. Rights and Responsibilities of BTA Authorization Holder
26. The following paragraphs describe the service rules regarding
the rights and responsibilities of the holder of a BTA authorization,
the duration of those rights and how an event will alter the boundaries
of a protected MDS service area. For purposes of clarity, the
chronology of the events would occur as follows: (1) the 35-mile
protected service areas of incumbents will become fixed in place upon
the effective date of the Second Order on Reconsideration; (2) issuance
of public notices announcing auctions by geographic area, and
specifying the filing periods for short-form applications and upfront
payments; (3) issuance of a public notice identifying all applicants
determined to be qualified to bid (i.e., submitted acceptable short-
form applications and sufficient upfront payments); (4) competitive
bidding rounds; (5) after bidding has ended, the Commission would
declare bidding closed and would notify the auction winners, who would
then have five business days to make down payments and thirty business
days to file at least one long-form application; \21\ (6) following
review of the long-form applications, the Commission would issue a
public notice identifying those accepted and opening a thirty-day
period for filing petitions to deny; and (7) if no petitions to deny
are filed or if they are dismissed or denied, the Commission would
issue a public notice stating that the BTA authorization and the MDS
station license are ready to be issued Assuming that the auction winner
made full payment of its winning bid within five business days of this
public notice, the Commission would grant one or more conditional
station licenses for individual stations within the auction winner's
BTA service area and issue the BTA authorization for the entire BTA
service area.
\21\ If the BTA is so heavily encumbered that the winning bidder
is unable to file a long-form application for a station within the
BTA while protecting incumbents from harmful interference, the
winning bidder must file a statement of intention of use of the BTA,
accompanied by a current License Qualification Report (FCC Form
430), before the Commission issues the BTA authorization. See infra
at Paras. 118-120.
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27. Description of Authorization. The holder of a BTA authorization
may file one or more long-form applications seeking authority to
construct stations anywhere inside their BTA on usable MDS channels,
provided the specific engineering design meets the Commission's
interference protection standards to all authorized or previously
proposed MDS and ITFS facilities, and complies with the prescribed
signal strength limits at the BTA boundary, i.e., at all points along
the perimeter of the BTA. A separate conditional station license will
be awarded for each single channel or channel group at each site
location.\22\ For example, separate licenses will be issued for the E
Group, F Group and each of the three H Channels. In this Report and
Order, the initial license for the BTA service area will be referred to
as a ``BTA authorization'' and individual channels will be separately
licensed. Thus, we will distinguish between three different types of
authorizations for MDS facilities: (1) a ``BTA authorization'' awarded
to an auction winner of a particular BTA following the requisite long-
form application or statement of intention and requisite payment, (2) a
``station license for each individual station within the BTA'' service
area held by an auction winner, and (3) a ``station license'' for an
MDS facility authorized or previously proposed under the rules
predating the effective date of this Report and Order. Accordingly,
under the Commission's rules, as amended herein, the holder of a BTA
authorization would file a long-form application for each usable single
channel or channel group at each transmitter site within the auction
winner's BTA service area, and will have a later opportunity to file
amendments to correct any defects in the application. The construction
period specified in each conditional station license granted for the
individual
[[Page 36530]]
stations within the auction winner's BTA service area will be the five
year build-out date which runs from the grant date of the first
conditional license within the auction winner's BTA (granted the same
date as the BTA authorization). When the portion of the system
represented by a particular long-form application is constructed and
ready to begin operation, the holder of the BTA authorization will file
a corresponding certification of completion of construction. The
license term for those stations will be the same ten-year term as MDS
stations licensed prior to the adoption of this Report and Order. See
47 CFR 21.45. The ten-year term for the new licenses will commence on
the date the Commission declares bidding in the MDS auction to be
closed. The holder of a BTA authorization has a protected service area
that is coterminous with the boundaries of their BTA service area,
subject to exclusion of the protected service areas and/or locations of
authorized or previously proposed MDS and ITFS facilities, as further
discussed infra in para. 42. Individual station licenses that are a
part of a BTA service area will not have a uniquely associated
protected service area. The common protected service area of all
individual stations within the BTA authorization will be the boundary
of that BTA.
\22\ This in no way should be interpreted to reflect on other
services where we are eliminating site licensing. See Further Notice
of Proposed Rule Making in PR Docket No. 93-144 and PP Docket No.
93-253, FCC 94-271 (released Nov. 4, 1994), 59 FR 60111 (Nov. 22,
1994); Second Report and Order and Second Further Notice of Proposed
Rule Making in PR Docket No. 89-553, PP Docket No. 93-253, and GN
Docket No. 93-252, FCC 95-159 (released April 17, 1995), 60 FR 21987
(May 4, 1995).
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28. We emphasize that the actual service areas can be tailored
through voluntary agreements among the affected parties. Although our
rules indicate that the holders of BTA authorizations must locate all
transmitter sites within the boundaries of the BTA and may not cause
interference in adjacent BTAs, the interference rights may be modified
through negotiation and written agreements. The MDS station facilities
within the auction winner's BTA may be expanded or modified throughout
the BTA service area so long as the system continues to be in
compliance with our technical rules and protects incumbent MDS and ITFS
facilities. The facilities may be expanded beyond the BTA or into the
protected service area of an incumbent with an agreement from the
entity that controls the adjacent BTA or the incumbent protected 35-
mile circular area.
29. Consistent with our goal of establishing filing procedures and
policies that will encourage the accumulation of a full complement of
channels necessary for a viable MDS system, only the BTA authorization
holder will be qualified to submit any new application for MDS use of
available ITFS frequencies within the BTA in accordance with 47 CFR
74.990(a), and the ITFS application procedures of Sec. 74.991. ITFS
station licensees and prospective ITFS applicants that seek to
construct and operate new ITFS facilities located within a BTA and that
choose to lease excess channel capacity will be free to negotiate with
any potential lessee, including the holder of the BTA. In furtherance
of our goal of accumulating a full complement of channels, however, the
holder of the BTA will be afforded the right to match the final offer
of any proposed lessee. Should the holder of the BTA decline to
exercise such right, then the ITFS applicant can enter into a lease
arrangement with any operator it so chooses. This is not intended to
interfere with present contractual rights that are in effect or renewal
of those rights. In the case where a BTA authorization holder is the
licensee of ITFS channels, the associated protected service area will
be the entire BTA, and interference protection will be governed in the
manner for protecting BTA service on MDS channels. However, in the case
where a BTA authorization holder leases excess channel capacity from an
ITFS licensee, the protected area will be a 35-mile circle centered
around the particular ITFS station in the BTA that leases the channels.
We will afford this area the same protection generally afforded under
our ITFS rules. BTA authorization holders in adjacent BTAs must protect
points on the 35-mile circle using cochannel and adjacent channel
desired-to-undesired signal strength rations of 45 dB and 0 dB,
respectively. A special case will occur whenever BTA authorization
holders in adjacent BTAs both lease the same ITFS channel group, such
that the 35-mile protected circle of each extends into the BTA of the
other. In this regard, we will expect the respective ITFS entities and
BTA holders to reach an agreement concerning interference protection
near their common boundary. Moreover, a BTA authorization holder will
not be required to protect that portion of the 35-mile circle
associated with the other authorization holder that falls on his or her
side of the boundary. We believe that this approach will promote our
policy objectives for this service and will similarly have only a
positive effect on the continued successful development of ITFS with
the ever expanding financial support for that service provided by
wireless cable operators.
30. The available MDS spectrum within a BTA authorization will
increase if the unconstructed facilities or unused channels held by an
MDS incumbent with transmitter site locations within a particular BTA
are forfeited or if previously proposed conditional licenses or
modifications are not granted. The holders of the BTA authorizations
obtain contingent rights to this spectrum when they receive their
authorizations, so that the forfeited channels will revert and become
part of the BTA authorization up to the boundary of the BTA. The holder
of the BTA authorization may subsequently file long-form applications
for the forfeited channels, provided the specific station design meets
the Commission's interference protection standards. Such a policy
provides an incentive for the holders of BTA authorizations to find and
document such warehousing violations, resulting in efficient use of
fallow spectrum. In addition, authorization rights may be revoked or
terminated because of gross misconduct, misrepresentation or bad faith
by an applicant. Other events may also change the protected service
area, such as the end of the five year build-out period, an assignment
or transfer or partitioning of the BTA. These events are discussed in
detail below.
31. Five Year Build-out Period. The build-out period in which the
holder of a BTA authorization is permitted to expand service or
initiate new service within their BTA service area will be five years.
Specifically, we will provide the BTA authorization holder five years
from the grant date of the initial BTA authorization to construct and
operate the system. The purpose of this requirement is to ensure that
service is promptly delivered to the public. See 47 U.S.C.
309(j)(4)(B). This five year build-out period is not extended by the
grant of subsequent authorizations, such as the grant of a long-form or
modification application for an individual station within the BTA
service area. We will require the holder of a BTA authorization to
submit a showing to the Commission five years after the BTA
authorization was issued demonstrating that it is providing a signal
level sufficient to provide adequate service to approximately two-
thirds of the population of the area within its control in the licensed
BTA. The holder of the BTA authorization must submit maps and other
supporting documents showing compliance with this construction
requirement. The Commission, in evaluating the showing, may consider
line-of-sight obstructions and the ability to provide service without
causing harmful interference to other MDS or ITFS facilities. If the
holder of the BTA fails to cover any of the BTA, it will forfeit the
authorization
[[Page 36531]]
and it will be ineligible to regain it. If the Commission determines
that there are usable channels in an unserved or underserved area of
the BTA, the Commission would partition the area along geopolitical
boundaries and issue a public notice establishing the reauction of the
partitioned area. This public notice would announce the auction or
auctions by geographic area, specifying the filing period for short-
form applications and the applicable bidding procedures. The holder of
the BTA will forfeit the partitioned service area and will be
ineligible to bid on it. We believe that this coverage policy is
reasonable and will result in the channels being made available to
applicants who will provide service to the public. We further believe
that this will deter the warehousing of channels and ensure that the
spectrum is being effectively utilized for MDS.
32. Assignment or Transfer of Control. The holders of BTA
authorizations and MDS incumbents may negotiate mergers, buyouts,
channel swaps, channel splits or make similar arrangements on a
voluntary basis, pursuant to the general assignment and transfer
provisions of 47 CFR 21.38. Both parties are generally permitted to buy
from and sell authorizations to each other and to third parties, with
few limitations.
33. Additional spectrum may be acquired by the holder of a BTA
authorization through buyouts of incumbent licensees within their
authorized BTA service area. As is the case with ITFS licensees,
wireless cable operators may also acquire spectrum through leasing
agreements with incumbents. In this case, the protected service area of
the acquired station will extend to the BTA boundary or the existing
35-mile protected circular area (from the incumbent), whichever is
larger. The holder of the BTA authorization may assign or transfer
control of its entire BTA, which will include all authorized stations,
subject to the unjust enrichment provisions for designated entities.
See infra at Paras. 147.152. Such an assignment or transfer of an
entire BTA may also include unserved areas so long as the five year
build-out period has not expired. If a BTA authorization is assigned or
transferred, the new holder of the BTA authorization is held to the
original build-out period. The holder of the BTA authorization may also
partition portions of the BTA along geopolitical boundaries under our
partitioning rules, discussed below, and contract with eligible
parties, allowing such parties to file long-form applications for the
usable MDS channels within that area. We believe that allowing the
partitioning of portions of the BTA service area will encourage
provision of service to rural areas, which will promote the most
efficient use of the spectrum. See 47 U.S.C. 309(j)(3)(A) (instructing
the Commission to promote the development and rapid deployment of new
technologies, products, and services for the benefit of the public,
including those residing in rural areas).
34. Partitioning. During the five year build-out period, we will
permit the holder of a BTA authorization to partition portions of its
BTA authorization and enter into contracts with eligible parties, allow
such parties to file long-form applications for the usable MDS channels
within that partitioned area. The BTA may be partitioned along
geopolitical boundaries, and the Commission may grant such
applications, provided they are in compliance with the rules. Also, a
holder of a BTA authorization will be permitted to add to its service
area by acquiring a partitioned service area from the holder of an
adjacent BTA. Following grant of such an application, the authorization
will be referred to as ``partitioned service area.'' The holder of a
partitioned service area would, in effect, then hold something similar
to a BTA authorization for the partitioned area. The protected service
area will become or expand to the boundaries partitioned along the
designated geopolitical boundaries and the same technical rules will
apply, including the limiting signal strength at the boundaries of the
partitioned area. Accordingly, the construction period for the
partitioned service area will be the remaining portion of the five year
build-out and at the end of this five year period, the holder of the
partitioned service area must demonstrate that it is providing
substantial service to the partitioned area. Once construction is
complete, the license term will run ten years from the date the
Commission declared bidding in the MDS auction to be closed.
35. We believe that allowing holders of the BTA authorizations to
partition will facilitate the provision of service to small markets and
rural areas, some of which currently have no source of multichannel
video programming. Partitioning will also promote the most efficient
use of the spectrum and encourage participation by a wide variety of
entities, including small businesses, rural telephone companies, and
businesses owned by members of minority groups and women. See 47 U.S.C.
309(j) (3)(B), (3)(D) and (4)(C).
36. Technical Rights and Responsibilities. In determining
interference protection standards and other technical provisions under
this new approach to MDS authorization of service, our objectives are
two-fold: (1) to provide maximum flexibility to allow both new BTA
authorization holders and current MDS licensees, conditional licensees,
and applicants to develop and expand service in the most rapid and
economically feasible manner, and (2) to assure that the introduction
of new MDS service will not result in objectionable interference to the
services of incumbent stations and will minimize insofar as possible
the extent of potential interference within BTA service areas. These
objectives and the provisions herein take into account the extent to
which the current service has been built around successful negotiations
among neighboring operators and/or licensees, as well as prospective
operators and licensees. We fully expect this spirit of cooperation and
accommodation to continue and, while we will adopt interference
protection provisions for BTA and incumbent service, we will allow and
indeed encourage the holders of BTA authorizations and incumbents to
work out mutually agreeable interference concerns with other
potentially affected parties whenever possible.
37. As a result of this Report and Order and a separate MDS order
we are adopting today, protected service areas for BTA authorization
holders and MDS incumbents will be defined differently. Second Order on
Reconsideration at Paras. 2-31. We believe this approach will best
facilitate the full development of incumbent wireless cable systems,
many of which already have secured the desired transmitting site, and
serve subscribers within a metropolitan area from a single site. In
addition, this approach may allow the rapid expansion of new MDS
service into other unserved portions of BTAs. We adopt an idea
contemplated in the Notice, that the perimeter of a predetermined
geographic area (BTA) generally defines its protected area. The holders
of BTA authorizations will not be permitted to cause interference
within the boundaries of an adjacent BTA, without the consent of the
affected authorization holder. When such interference occurs, an
offending party will be expected to act promptly to eliminate any
unwanted interference in another operator's BTA.
38. Interference among adjacent BTA operators will be partially
controlled by establishing an allowable limit for a station's predicted
signal strength at all points along a BTA boundary. The same
[[Page 36532]]
limiting signal strength will apply at the boundaries of every BTA,
regardless of its size or shape. An exception to this limit would be
justified where a single entity obtains authorization for adjacent
BTAs. While we recognize that several commenting parties are concerned
that an MDS signal simply does not stop at the area boundary, we
believe the level of limiting signal strength given below, together
with the multitude of available interferences abatement techniques,
will facilitate control of interference between BTA authorization
holders in adjoining BTAs. Interference levels to BTA holders from MDS
incumbent stations will be partially governed by establishing the same
maximum allowable signal strength along the boundary of incumbents' 35-
mile circular areas, the expanded area provided in the Second Order on
Reconsideration.
39. At first glance, it would appear that the approach to
interference control between adjacent BTAs would be ineffective, given
that the levels of desired (D) and undesired (U) could be the same at
the common boundary between BTAs. The resulting desired-to-undesired
signal strength ratio (D/U) of 0 dB falls well below the 45 dB standard
now governing interference between MDS stations operating on the same
channel. However, taking the signal suppressing effects of receiving
antennas into account and further assuming that the desired and
undesired signals are coming from opposite sides of the BTA boundary,
the D/U ratio improves to as much as 25 dB. If we further expect that,
in most cases, stations on opposite sides of the boundary would operate
with different antenna polarizations, then the D/U ratio further
improves to 45 dB. These numbers are based on the characteristics of
the standard MDS receiving antenna found in 47 CFR 21.902(f).
Alternatively, station operators on opposite sides of a BTA boundary
may design their facilities with agreements between affected parties to
operate on a frequency offset basis, with a less restrictive D/U ratio
of 28 dB necessary to prevent cochannel interference in this situation.
Indeed, a host of interference abatement techniques could be employed
to prevent interference near BTA boundaries. Admittedly, this approach
relies more on operator interference agreements and the honoring of
another's interference rights than it does on applying rigid
interference standards in the processing of applications. However, if
we were to mandate strict compliance with the 45 dB cochannel and 0 dB
adjacent channel D/U signal strength ratios (the current MDS
interference standards) to protect BTA service at the BTA boundary, we
believe there would be populated areas within a substantial number of
BTAs that may never be served due to the irregular sizes and shapes of
BTAs. Moreover, as we have indicated, given the nature and history of
the service, as well as the likelihood that auction participants will
be experienced in conducting negotiations, we believe that we can
prevent unwanted interference by relying primarily on negotiated
agreements and voluntary compliance with our interference right-of-
ways, which we will enforce as necessary. Thus, we consider our
limitation of signal strength at the BTA boundaries and incumbent
service areas as a secondary means of interference protection.
40. Inasmuch as incumbent stations lie within BTAs and authorized
BTA stations will not have their own protected service areas,
interference from incumbent stations can only be governed by agreements
between affected parties, and indirectly, by placing a limiting value
on the strength of the signal at the boundary of incumbent MDS
stations. A signal strength, regardless of its numerical value, will
not by itself eliminate the potential for interference from incumbent
stations. Terrain shielding and other abatement techniques will also be
helpful in this regard; however, the most effective means of
controlling interference will be the agreements between BTA
authorization holders and incumbent MDS licensees, which, for example,
may stipulate that an incumbent utilize a directional antenna pointed
away from the affected BTA.
41. We have selected as the limiting signal strength a power flux
density value of -73 dBw/m2. This value corresponds to a received
power level of approximately -83 dBw (decibels above 1 watt) or -53 dBm
(decibels above 1 milliwatt), given a receiver antenna with a maximum
gain of 20 dBi. A power flux density value is used because ``free
space'' propagation is the model long used in the MDS service. This
variable depends only on the level of power radiated from a
transmitting antenna and the distance between the transmitting and
receiving locations. The value of -73 dBw/m2 was selected because
it is the ``free space'' value of power flux density achieved with an
equivalent isotropically radiated power (EIRP) of 2,000 watts (the
maximum allowable EIRP in the MDS service where omni-directional
antennas are used) at a distance separation of 35 miles. This numerical
value is stronger than the power flux density achieved under standards
used in the MDS service for many years, i.e., a value of -75.6 dBw/
m2 is achieved with 200 watts of EIRP at a distance of 15 miles.
Moreover, based on the record in the Second Order on Reconsideration,
it is clear that many wireless cable systems serve a substantial
subscriber base at distances of 35 miles or even greater. Thus, we
conclude that the selection of this value of limiting signal strength
will generally enable service over unobstructed signal propagation
paths at the 35-mile boundary of an incumbent's transmitting
facilities. The ability to achieve this signal level at a BTA boundary
will vary considerably, depending on the size of the BTA and the
placement of a transmitting facility. Clearly, because of their large
size, service of many BTAs will require multiple transmitting
facilities.
42. In the Notice we stated our intention not to change the
interference protection standards applied ``at points along the service
contours of protected facilities.'' Notice at 7674. Accordingly, BTA
authorization holders will be required to design their transmitting
facilities to protect points along the 35-mile circles and points
within the protected service areas of incumbents' licensed stations,
conditionally licensed stations, or previously proposed applications.
Specifically, stations proposed in BTA long-form applications must meet
the 45 dB and 0 dB cochannel and adjacent channel desired-to-undesired
signal strength ratios at the boundary of each protected 35-mile
circle. We will also continue to use these stricter protection
standards within incumbents' protected service areas. Unlike BTA
service, which does not yet exist, incumbent stations have an
established subscriber base in many cities and rural areas throughout
the country. Wireless cable systems were carefully crafted, both
through engineering design, site location and negotiation among
affected parties, and in partial reliance on the Commission's
protection standards. To a considerable extent, these systems provide
interference-free reception to subscribers, many out to distances
beyond 35 miles. Because many wireless cable systems have been serving
subscribers well beyond their current 710 square mile protected service
area, we do not wish to disrupt existing service patterns which compete
with wired cable systems.
43. The holders of BTA authorizations within 80 kilometers (50
miles) of the Canadian or Mexican borders, may only operate on MDS
channels pursuant to the restrictions in international
[[Page 36533]]
agreements. Thus, applicants considering authorizations for these BTAs
should consider the impact of the additional border requirements in
their valuation of the service areas for competitive bidding purposes.
3. Treatment of Incumbents
44. As we have stated, a principal objective in this proceeding is
to allow incumbents to continue existing operations without
objectionable interference from new MDS operations and to allow them
sufficient flexibility to modify their facilities to respond to market
forces. Expansion of the protected service boundary to 35 miles will
increase an incumbents' service area from 710 square miles to 3848
square miles, which will allow for the future orderly development of
wireless cable systems, particularly as digital technology is
introduced. Second Order on Reconsideration at Paras. 2-31.
45. Incumbents, unless they also control the adjacent BTA territory
(either as BTA authorization holders or through interference
agreements) will not be free to expand further their service area into
the adjacent BTA. The manner we choose to prevent such occurrences is
to define a limiting power flux density of -73 dBw/m2, which may
not be exceeded at points along the 35-mile protected service area.
Subject only to this limitation, incumbents will be free to file long-
form applications at any time to modify their facilities or add
facilities such as signal boosters. In a small number of cases
involving directional antennas, an incumbent's power flux density may
already exceed -73 dBw/m2, for signal paths in some directions at
a distance of 35 miles. In such cases, we would not force the incumbent
to reduce the signal strength to the allowable limit, nor would we
allow the signal level to increase. Incumbents who propose to modify
their stations must continue to seek prior Commission approval pursuant
to 47 C.F.R. Secs. 21.40 through 21.42, and include any agreements with
the holder(s) of a BTA authorization(s). All other current rules
continue to apply to MDS incumbents unless specifically amended.
46. Finally, since the incumbents' 35-mile protected circles will
be embedded within one or more BTAs, to prevent additional encroachment
into a BTA we must at some point fix the 35-mile circles around a
permanent reference point, absent an interference agreement with a BTA
authorization holder. Accordingly, on the effective date of the rules
adopted in the Second Order on Reconsideration, we will permanently fix
the location of the protected 35-mile circles in the following manner.
For incumbent licensees with no conditional licenses or pending
applications, the ``protected reference coordinates'' will be those of
the current site. Subsequent changes in site location would be
permitted; however, the 35-mile circle would remain centered about the
previous site coordinates. For incumbents having only a conditional
license or a new station application pending before the effective date,
the site coordinates specified for the conditional license or pending
application will become the reference coordinates. In cases where an
incumbent has two or more authorizations and/or pending applications on
the effective date, the reference coordinates in each authorization
and/or application will be provisionally treated as the permanent
reference coordinates of the protected circle. Eventually, pending
applications will be disposed of and conditional licenses will either
become licenses or be forfeited for failure to construct.
4. Alternative Uses of MDS Frequencies
47. The principal use of MDS frequencies is wireless cable service.
Under Section 21.903(a) of the Commission's rules, 47 C.F.R.
Sec. 21.903(a), MDS stations are ``generally intended to provide one-
way radio transmission (usually in an omnidirectional pattern) from a
stationary transmitter to multiple receiving facilities located at
fixed points.'' At the same time, our rules permit use of MDS
frequencies for other kinds of services. Section 21.903(b), 47 C.F.R.
Sec. 21.903(b), states that ``[u]nless otherwise directed or
conditioned in the applicable instrument of authorization, Multipoint
Distribution Service stations may render any kind of communications
service consistent with the Commission's rules on a common carrier or
on a non-common carrier basis * * *.'' We wish to emphasize that
nothing in this Report and Order precludes either new licensees or
incumbents from using MDS frequencies for other kinds of services
pursuant to 47 C.F.R. Sec. 21.903(b). We note, however, that such
applicants may need to apply for waivers of certain MDS technical
rules, such as 47 C.F.R. Secs. 21.903(a) and 21.906.
B. Interference Criteria and Data Elements
48. Proposals. As a complement to the filing proposals and
electronic procedures, the Notice proposed to adopt a technical
equation as the basis for the ``free space'' interference protection
calculations. The Commission's MDS engineers currently utilize this
formula and it is recognized by engineering consulting firms in the
wireless cable industry:
The received signal power level (RSL)dBW at the output of the
FCC reference receiving antenna is obtained from the following:\23\
\23\ Leon W. Couch II, Digital and Analog Communication Systems,
p. 384 (3rd ed. 1990).
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(RSL)dBW=(EIRP)dBW-(LFS)dB+(GAR)dB
where the free space loss (LFS)dB is (LFS)dB=20 log
(4d/) dB
In these equations, (RSL)dBW is received power in decibels
referenced to one watt, (EIRP)dBW is equivalent isotropically
radiated power in decibels above one watt, d is the distance of the
signal path in meters, is the wavelength of the signal in
meters, and GAR is the gain of the reference receiving antenna, as
obtained in 47 C.F.R. Sec. 21.902(f)(3), Figure 1. The Notice proposed
to formalize the above equations by adopting them as a rule provision
as part of a plan to implement computerized interference studies.
Additionally, the Notice stated that we will require proposed
facilities to meet the 45 dB and 0 dB cochannel and adjacent channel
desired-to-undesired signal strength ratios at points along the service
contours of protected facilities which were authorized under the
current interference standards. With regard to long-form applications,
we proposed to retain the requirement in 47 C.F.R. Sec. 21.902, that an
applicant perform analyses of the potential for harmful interference
and serve such interference studies upon the authorized or previously
proposed station applicants, conditional licensees or licensees
required to be studied, but we would not require the submission of a
list of those served at the time the long-form application was filed.
We explained that, on the revised long-form application form, the
applicant would supply certain crucial data elements describing the
station parameters, such as antenna polarization and the station EIRP,
while the Commission staff would perform interference analyses using a
computer program. The Notice stated that, although the submission of
interference or other engineering analyses would not be required with
the long-form application, we would require the applicant to make the
records available for Commission inspection upon request. We also
questioned in the Notice whether we should eliminate signal contour
maps as a required part of the interference studies.
49. Pursuant to our streamlining effort, the Notice proposed to
improve the current application form used for
[[Page 36534]]
new MDS stations, FCC Form 494,\24\ by excluding certain data elements
which have yielded information that is no longer necessary or of only
marginal utility. Specifically, we proposed to eliminate queries
regarding the antenna vertical sketch and the narrative description of
why grant of the application would be in the public interest. We
further proposed to exclude the following parameters of the
transmission system: transmitter manufacturer and model number,
transmitter output power, transmitting antenna gain and the
specification of transmission line and other transmission losses. We
observed that with regard to transmitters, we are only concerned that
MDS licensees operate transmitters that are ``type-accepted'' by the
Commission for use in this service. Accordingly, we proposed to
eliminate the requirement that the applicant identify the transmitter
make and model, and simply require that the conditional licensee
certify that its transmitter is ``type-accepted'' in its certification
of completion of construction, currently FCC Form 494A. The MDS rules
now provide for a maximum EIRP, rather than a maximum value for
transmitter output power. See 47 CFR 21.904. Thus, the Notice stated,
so long as the EIRP remains within the limits of Section 21.904, it is
not necessary to require applicants to specify the equipment parameters
used to calculate EIRP. The Notice also proposed to allow changes to
these transmission parameters without notification to the Commission,
provided the resulting EIRP would not change. The station power to be
specified on the application form would be the maximum EIRP in the
horizontal plane, i.e., the EIRP at an angle of zero degrees in the
vertical plane. We proposed to permit electrical beam tilting of
antennas; however, in all cases, applicants would be required to
specify the EIRP in the zero degree vertical (horizontal) plane. Where
beam tilting is employed, the EIRP at the zero degree vertical angle
will be less than the maximum EIRP at the tilt angle, due to the
vertical suppression characteristic of the transmitting antenna. In
most instances, this value of EIRP closely approximates the power
radiated to the radio horizon which is most relevant to interference
analysis. By proceeding in this manner, we would not need to collect
data on antenna vertical radiation patterns.
\24\ Since Form 494 is a multi-purpose form that is used for
other services, to the extent that we are proposing changes, we
intend to create a different form to be used for MDS.
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50. The Notice proposed to further modify the long-form application
in an effort to make the form compatible with an electronic filing
system. At the present time, we propose to use a new long-form
application together with the current FCC Form 430, the Licensee
Qualification Report. An appendix to the Notice listed data elements
and other informational items for our proposed new electronic
application form, including general, engineering and legal elements.
For example, we proposed to retain engineering data elements necessary
for analysis of interference or possible air safety hazards, such as
transmitting antenna site coordinates, EIRP, antenna polarization, site
elevation and antenna structure height above ground. Other data would
be used to verify an applicant's compliance with a particular
Commission rule, such as when antenna beam width is used to calculate
the maximum allowable EIRP of a station using a directional
transmitting antenna. We also proposed to retain applicant responses
which demonstrate compliance with a particular statutory requirement,
such as an environmental assessment.
51. In reference to applicants locating stations in areas where
notification or coordination with Canada or Mexico is required by
international agreement, the Notice indicated that these applicants
would be required to submit the following additional technical data,
which were not proposed as standard data elements in the electronic
long-form application: transmitter output power, transmitting antenna
gain and transmission line loss. In addition to the EIRP at a vertical
angle of zero degrees, applicants in the border areas will be required
to specify the maximum EIRP at the vertical angle corresponding to the
beam tilt. The Notice explained that the additional data requirements
could be submitted in a textual exhibit to the electronic application
or a paper supplement.
52. Resolution. With some additional clarification, we will adopt
the proposals raised in the Notice, including the free space equation
and the proposed data elements for the long-form application. A draft
long-form application, FCC Form 304, is attached to the Report and
Order.\25\ We will develop computer programs that will help to
streamline the processing of the long-form and modification
applications of MDS incumbents and BTA authorization holders. A program
is being designed that will perform cochannel and adjacent channel
interference analysis at one degree intervals along the protected 35-
mile circle of incumbents' authorized stations or protected station
proposals. This program, as envisioned, will use the Commission's
three-second terrain data base to check for unobstructed signal paths
between the site of the station being studied and points along the
incumbent's protected contour. For those radials on which line-of-sight
conditions do not exist, either due to a terrain obstruction or the
earth's curvature, the program will conclude that interference would
not occur at that point. We note, following long-standing Commission
practice, that all line-of-sight determinations will assume a receiver
height of 30 feet and a standard 4/3 earth radius for determining the
electrical horizon. Where line-of-sight conditions exist, the program
would first determine the proposed station's EIRP in the pertinent
direction, based on the EIRP and horizontal relative field strength
tabulation given in the application. The received signal power level of
the proposed station, the ``undesired signal'' (U), will then be
calculated using the free space equation. The value of the receiver
antenna gain in this calculation will depend on the angular
relationship between the radial azimuth and the orientation of the
receiving antenna. We will assume that the latter is pointed toward the
station being received. The gain will also depend on whether the
proposed station is cross polarized or co-polarized with respect to the
protected station. The receiving antenna gain will be that of the
reference receiving antenna found in Section 21.902(f)(3), Figure 1 of
the Commission's rules. We here establish a fixed value for the
``desired signal'' level at the 35-mile boundary. Assuming a receiver
antenna gain of 20 dB above an isotropic antenna, an EIRP of 2000 watts
(33 dBw) and a frequency of 2638 MHz, the midpoint frequency between
channels E1 and H3, the free space propagation equation gives a value
of -82.9 dBw. Our computer program will therefore use a received power
level (``D'') of -83 dBw as the value of the desired signal strength.
Finally, the program will compute the value of the desired-to-undesired
signal strength ratio (``D/U''), which is logarithmic units is
expressed as D - U. This value will be tested against the minimum
standard of 45 dB.
\25\ The Office of Management and Budget has not yet approved
the FCC Form 304 pursuant to the Paperwork Reduction Act. A public
notice will be issued when the new form has been approved and is
available for use.
[[Page 36535]]
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53. Another program is being designed that will analyze the impact
of incumbents' modification applications. This program will analyze 360
radials spaced by one degree, first checking for unobstructed line-of-
sight paths to the 35-mile boundary and, for clear paths, calculating
the free space signal strength that would result from the modification
and comparing it to the maximum allowable limit; that is, a power flux
density value of -73 dBw/m \2\. To the extent that we are not
constrained by licensing agreements with third parties and to the
extent resources are available, we will make our computer programs
available to the public. This will be announced in a subsequent public
notice.
54. We emphasize that we will use computer models as application
processing tools. Similar processing tools have been successfully used
for Low Power Television Service with very few reported cases of
interference to television reception, none of which occurred inside of
a station's protected contour. The MDS interference standards should
not be confused with the processing methods, which can only approximate
the standard. For example, under the interference standards, incuments'
35-mile areas are to be protected not only at points along the
boundary, but also within the boundary.
55. Although, as applicable, we will require MDS applicants to
prepare interference analyses or notification of application filings,
and serve these on potentially affected parties, we will generally not
require that such studies or a list of the parties served be included
with applications. However, since electronic filing will be implemented
in this service on a voluntary basis, we will allow applicants to
submit interference studies with their applications on a voluntary
basis. Applicants may also submit negotiated agreements of tailored
interference protection or operation on the basis of frequency offset.
Applicants may submit terrain shielding studies based on methods of
their own choosing, including shadow maps. There are no universally
accepted methods for terrain shielding studies given the widely varying
characteristics of terrain features. Therefore, we believe it is
appropriate to afford applicants the flexibility to select a terrain
model suitable to the terrain being analyzed. Additionally, we are
persuaded by the comments that interference studies should no longer be
required to include contour maps. As Marshall points out, contour lines
can be used in several ways and are most useful when drawn on a terrain
shadow map, which is not a required element in the application process.
Applicants may continue to prepare interference studies with D/U
contour lines at their discretion. Given the structure and processing
tools associated with our new licensing approach for the MDS service,
we will not prescribe how applicants' interference studies are to be
conducted. Further, potentially affected parties who are served a study
and disagree with its conclusions may file a petition to deny an
application.
56. As contemplated in our Notice, we intended to streamline our
application forms in accordance with our actions herein. We are,
therefore, directing the staff to incorporate as appropriate those data
elements previously listed in the Notice into a revised and reformatted
long-form application for use in the future by MDS applicants seeking
to construct new stations or to make changes in their authorized
facilities.
C. Electronic Filing and Electronic Fee Payments
57. Proposals. In the Notice we invited comment on the feasibility
of utilizing mandatory electronic filing for new MDS applications, on
whether ITFS applicants should be required to file applications for new
stations electronically on a combined application form,\26\ and on
whether there should be a paper exception for those educators that are
not financially supported by a wireless cable operator. Notice at 7676-
77. The Notice suggested that communication links could be used to
exchange application date between applicants and the Commission, thus
minimizing the filing of paper with the Commission and allowing the
Commission to process MDS and ITFS applications more efficiently.
Pursuant to the proposal, an electronic form would be designed for
personal computers using a Windows based environment, and consisting of
a series of computer screens. One possible approach identified in the
Notice involves the use of electronic mailboxes such as that of a Value
Added Network (VAN). Applicants would transmit relevant data from their
personal computer to a VAN electronic mailbox. The VAN would, in turn,
convert the data into a format compatible with Commission files and
download the information to an electronic mailbox at the Commission. In
the Notice, we recognized the possible limitations of this approach
with respect to maps and other graphic representations. We envisioned
that the public would have on-line viewing access to our data bases,
perhaps through a third-party vendor in addition to access at the
Commission's public reference room.
\1\ In 1992, Congress amended the Communications Act of 1934 to
permit the electronic filing of license and construction permit
applications. See Telecommunications Authorization Act of 1992, Pub.
L. No. 102-538, Sec. 204, 106 Stat. 3533, 3543, codified at 47
U.S.C. Secs. 308(b) and 319(a). Such applications may be signed ``in
any manner or form, including by electronic means, as the Commission
may prescribed by regulation.'' Id.
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58. In the Notice, we also proposed expanding the acceptable
methods of payment for application fee to include electronic payment
under 47 C.F.R. Sec. 1.1109.\27\ We stated our intention of announcing
the procedures for the electronic payment of fees in a public notice,
pursuant to Section 1.1109(a)(1). We sought comment regarding a fee
system where applicants use a unique fee payor number together with an
appropriate service code and a suffix in cases where applicants file
multiple applications, in order to link the fee payment with the
electronically filed application.
\27\ The Commission recently amended 47 C.F.R. Secs. 1.1108 and
1.1109 to permit the electronic filing of fee payments, initially on
an experimental basis. Implementation of Section 9 of the
Communications Act, Report and Order in MD Docket No. 94-19, FCC No.
94-140 (released June 8, 1994). 59 Fed. Reg. 30,984 (June 16, 1994)
at Paras. 50-51.
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59. Resolution. We will authorize voluntary electronic filing for
new MDS applications. Use of an electronic filing system is not as
essential under the filing approach we adopt today because we
anticipate that fewer long-form applications will be filed. We also
considered the burden on educators and determined that applications for
new ITFS stations will not be included at this time. We appreciate the
concerns expressed by commenters, including the cost to applicants of
implementing and using electronic filing, data security and system
reliability issues. We will take these concerns into account in
deciding upon the software which will be used and the access method for
electronic filing. We agree with commenters who encourage the
Commission to evaluate carefully alternative electronic filing
approaches and who suggest a transition period from paper filing to
electronic filing. At the present time, we decline to accept the
proposal put forth by Pepper regarding the establishment of a committee
to recommend Commission-wide standards and procedures for all services,
noting that the merits associated with the formation of such a
committee would be outweighed by factors such as delayed decision
making and implementation of electronic filing. Through subsequent
public notices we will provide specific details concerning
[[Page 36536]]
the method for electronically filing MDS applications. We will also
authorize electronic fee payment for MDS applications. Current methods
of payment available under 47 CFR 1.1109 will continue to be accepted.
As our resources permit, we will work toward improved viewing access to
the data bases.
D. Competitive Bidding Procedures
1. Competitive Bidding Background
60. On August 10, 1993, the Omnibus Budget Reconciliation Act of
1993 (Budget Act) added a new section 309(j) to the Communications Act
of 1934, as amended, 47 U.S.C. 151-611 (Communications Act). This
amendment to the Communications Act gave the Commission express
authority to employ competitive bidding procedures to choose from among
mutually exclusive applications for certain initial licenses. The
Commission adopted a Notice of Proposed Rule Making in the competitive
bidding proceeding on September 23, 1993.\28\ In it March 8, 1994
Second Report and Order,\29\ the Commission established general rules
and procedures and a broad menu of competitive bidding methods to be
used for all auctionable services, including MDS. We indicated in the
Second Report and Order that in subsequent Reports and Orders we would
set forth specific competitive bidding rules that would be applicable
to individual services. To date, the Commission has established
competitive bidding rules specifically applicable to, and has conducted
auctions for, narrowband Personal Communications Services (PCS),\30\
the Interactive Video and Data Service (IVDS),\31\ and broadband
PCS.\32\ This Report and Order establishes competitive bidding rules
and procedures for MDS.
\28\ Notice of Proposed Rule Making in PP Docket No. 93-253, 8
FCC Rcd 7635 (1993), 58 Fed. Reg. 5389 (Oct. 15, 1993) (Competitive
Bidding Notice).
\29\ Second Report and Order in PP Docket No. 93-253, 9 FCC Rcd
2348 (1944), 59 Fed. Reg. 22980 (May 4, 1994) (Second Report and
Order), recon. granted in part, Second Memorandum Opinion and Order,
9 FCC Rcd 7245 (1994), 59 Fed. Reg. 44272 (Aug. 26, 1994) (Second
Memorandum Opinion and Order).
\30\ Third Report and Order in PP Docket No. 93-253, 9 FCC Rcd
2941 (1994), 59 Fed. Reg. 26741 (May 24, 1994) (Third Report and
Order), recon. granted in part, Third Memorandum Opinion and Order
and Further Notice of Proposed Rule Making, 10 FCC Rcd 175 (1995),
59 Fed. Reg. 44059 (Aug. 26, 1994) (Third Memorandum Opinion and
Order).
\31\ Fourth Report and Order in PP Docket No. 93-253, 9 FCC Rcd
2330 (1994), 59 Fed. Reg. 24947 (May 13, 1994) (Fourth Report and
Order), petition for recon. pending.
\32\ Fifth Report and Order in PP Docket No. 93-253, 9 FCC Rcd
5532 (1994), 59 Fed. Reg. 37566 (July 22, 1994) (Fifth Report and
Order), recon. granted in part, Fifth Memorandum Opinion and Order,
10 FCC Rcd 403 (1995), 59 Fed. Reg. 63210 (Dec. 7, 1994) (Fifth
Memorandum Opinion and Order).
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61. Given the interdependencies we believe exist between
authorizations for certain BTA service areas and the declining cost of
conducting simultaneous multiple round bidding, we choose this auction
method for use in MDS. We also adapt the general procedures set forth
in the Second Report and Order so as to be compatible with the
application procedures established for MDS in this Report and Order.
Finally, we set forth rules to deter possible abuses of the bidding and
application procedures, and establish special provisions for small
businesses, including those owned by minorities and women, to encourage
their participation in the competitive bidding process and in the
provision of MDS system offerings.
2. Auction Eligibility
62. The Commission has in the past employed a random selection
process (i.e., a lottery) to select from among mutually exclusive MDS
initial applications. See 47 CFR 1.824. However, Section 309(j) of the
Communications Act, as amended, permits auctions were (1) mutually
exclusive applications for initial licenses or construction permits are
accepted for filing by the Commission; (2) the principal use of the
spectrum will involve or is reasonably likely to involve the receipt by
the licensee of compensation from subscribers in return for enabling
those subscribers to receive or transmit communications signals; and
(3) the objectives set forth in Section 309(j) would be promoted. In
the Second Report and Order, we concluded that single and multichannel
MDS as classes of services would satisfy the Section 309(j) criteria
for auction ability, and, thus, new initial applications in MDS would
be eligible for competitive bidding. Id. at 2359. The Second Report and
Order did not, however, expressly resolve the question of the auction
ability of mutually exclusive MDS station applications filed prior to
July 26, 1993, the date specified in the Commission's auction authority
in the 1993 Budget Act. Id. For the reasons set forth in Section 3
below, we now determine to lottery these previously filed MDS
applications.
3. Disposition of Previously Filed MDS Applications
63. Before the Commission conducts competitive bidding for the BTA
service areas applied for under the revised procedures set forth
herein, we must first process the remaining acceptable, mutually
exclusive applications for MDS station licenses that were filed prior
to July 26, 1993.\33\ Under the procedures in effect prior to the
enactment of competitive bidding authority in the 1993 Budget Act,
these mutually exclusive MDS applications were to have been lotteried.
In September 1993, the Commission tentatively concluded to lottery
rather than auction pre-July 26, 1993 MDS applications. See Competitive
Bidding Notice at 7661. In reaching this decision, the Commission first
noted that these applications has already incurred substantial delays.
The Commission then tentatively decided to eschew auctions in favor of
lotteries for pending MDS applications to avoid ``further delay'' in
granting MDS station licenses and providing service to the public
during the time it would take for the Commission to promulgate
competitive bidding rules. Id. Subsequently, in the Second Report and
Order, the Commission concluded that new initial applications in MDS
would be eligible for competitive bidding, but did not resolve the
question of whether to employ lotteries or auctions to dispose of the
previously filed MDS applications. Second Report and Order at 2359.
Thus, due to processing delays and further delays resulting from the
consideration of issues raised in the Budget Act regarding competitive
bidding, this group of previously filed MDS applications, through no
fault of the applicants themselves, has never been lotteried.
\33\ Once we complete our processing, we expect that this group
of previously filed, acceptable MDS station applications will likely
be quite small, consisting of approximately 100 mutually exclusive
applications for five rural locations. The applications for these
five locations have been pending since 1991.
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64. The 1993 Budget Act empowers the Commission to either auction
or lottery these previously filed MDS applications.\34\ Consistent with
the statute, our tentative conclusion in the Competitive Bidding
Notice, and Commission precedent,\35\ we now exercise our discretion to
lottery this group of remaining previously filed, mutually exclusive
MDS applications. By employing lotteries for pre-July 26, 1993 MDS
applications, and by holding auctions for initial applications accepted
for filing after that date, we adopt a straightforward approach that is
[[Page 36537]]
easy to apply, fair to the applicants and serves the public interest.
\34\ See 47 U.S.C. Secs. 309 (i) & (j); Budget Act, Pub. L. No.
103-66, Sec. 6002(e) (Special Rule), 107 Stat. 312, 397 (1993).
\35\ See Memorandum Opinion and Order in PP Docket No. 93-253, 9
FCC Rcd 7387 (1994), 59 FR. 37 163 (July 21, 1994) (Cellular
Unserved Order) (determining to lottery previously filed
applications for cellular unserved areas).
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4. Competitive Bidding Design
65. In this Report and Order, we have attempted to design auction
rules and procedures that are compatible with the unique
characteristics of MDS and that meet the congressional objectives set
forth in the Communications Act. See 47 U.S.C. 309(j)(3). We believe
that these objectives are embodied in two basic Commission policy
goals: promoting economic growth and enhancing access to
telecommunications service offerings for consumers, producers and new
entrants. Second Report and Order at 2349-2350. In the paragraphs
below, we implement competitive bidding for MDS, pursuant to Section
309(j) of the Communication Act and based on the record in this
proceeding. The methodology and procedures we will utilize in
conducting MDS auctions are identified below, and additional details
about specific competitive bidding procedures will be provided by
public notice prior to the MDS auction.
66. General Competitive Bidding Designs. The Second Report and
Order established the criteria to be considered in selecting the
auction methodology for each auctionable service. We generally
concluded that awarding licenses to those parties that value them most
highly will best advance congressional policy goals. Id. at 2360. We
also indicated that, because a bidder's ability to introduce valuable
new services and to deploy them rapidly, intensively and efficiently
increases the value of the license to that bidder, an auction design
that awards licenses to those bidders who are willing to pay the
highest bid tends to promote the development and deployment of new
services and the efficient and intensive use of the spectrum. Id. at
2349-2350.
67. With regard to auction methodologies specifically, the
Commission previously determined that: (1) licenses with strong
interdependencies should be auctioned simultaneously; \36\ (2) multiple
round auctions, by providing bidders with information regarding other
bidders' valuations of licenses, generally will yield more efficient
allocations of licenses and higher revenues, especially where there is
substantial uncertainly as to value; and (3) because they are
relatively expensive to implement and time-consuming, simultaneous and/
or multiple round auctions become less cost-effective as the value of
licenses decreases. Second Report and Order at 2360. We also found that
simultaneous multiple round bidding facilitates the efficient
aggregation of licenses across spectrum bands and geographic areas, and
because of the superior information and flexibility this bidding
methodology provides, is likely to yield greater revenues than other
auction designs. Thus, we concluded in the Second Report and Order that
the use of simultaneous multiple round bidding would generally be
preferred. Id. at 2366.
\36\ Licenses are interdependent when the value of a license to
the bidder depends on the other licenses that the bidder acquires.
Second Report and Order at 2361. Licenses may be interdependent
because they are substitutes or because they are complements. Id. at
2364.
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68. We also recognized in the Second Report and Order that
simultaneous multiple round bidding may appear more complex to bidders
and could be more difficult and expensive to implement than other
auction methods. Id. at 2364. We have, however, in the past year gained
considerable experience in conducting simultaneous multiple round
bidding. This competitive bidding method has been utilized in several
narrowband and broadband PCS auctions,\37\ and has proved to be an
efficient and effective way to conduct spectrum auctions. In addition,
the cost to the Commission of conducting simultaneous multiple round
bidding has decreased considerably since the initial simultaneous
auctions because the computer software used in these auctions has now
been developed. We have also recently initiated procedures permitting
remote bidding from personal computers throughout the country.
Consequently, bidders may now participate in simultaneous multiple
round auctions in a variety of ways--on site, by personal computer
using remote bidding software, or via telephone.
\37\ The Commission has also recently proposed to utilize
simultaneous multiple round bidding for both the 800 and 900 MHz
Specialized Mobile Radio services. Further Notice of Proposed Rule
Making in PR Docket No. 93-144 and PP Docket No. 93-253, FCC 94-271
(released Nov. 4, 1994), 59 FR. 60111 (Nov. 22, 1994); Second Report
and Order and Second Further Notice of Proposed Rulemaking in PR
Docket No. 89-553, PP Docket No. 93-253, and GN Docket No. 93-252,
FCC 95-159 (released April 17, 1995), 60 FR. 21987 (May 4, 1995).
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69. MDS Competitive Bidding Design. Given our growing and
successful experience with this auction design, we conclude that the
generally favored method of simultaneous multiple round bidding is
appropriate for MDS. We accordingly adopt this method to auction the
BTA service areas.
70. In the Notice, we had tentatively concluded that simultaneous
multiple round bidding was less appropriate for MDS than other auction
methods primarily because the ``value of and interdependence between''
the geographic service areas might not be ``sufficiently high to
justify the use'' of the generally preferred auction method. Notice at
7678. After further consideration, and based upon our continuing
successful experience with simultaneous multiple round bidding, we now
conclude that simultaneous multiple round bidding is in fact
appropriate for MDS.
71. With regard to the expected value of the BTA service areas at
auction, we realize that some areas--particularly those with sparse
populations--may be auctioned for relatively modest amounts. The value
of any BTA service area at auction will, however, vary, depending in
large part upon the population of and the amount of usable spectrum in
that area. Heavily populated BTA service areas may therefore attract
more substantial sums, depending on the availability of spectrum within
such areas. Given the substantially decreased costs associated with
implementing simultaneous multiple round bidding, we believe that BTA
service area values are sufficient to justify the use of this auction
method.
72. With regard to the question of interdependence, we believe that
the BTA service area authorizations to be auctioned possess a degree of
interdependence. As explained in the Notice, ``[t]here appears to be
some geographic interdependence due to coordination of interference at
the borders.'' Id. at 7678. Indeed, because we have selected a filing
approach based on predetermined geographic areas, rather than a
national filing window, we emphasize that authorizations for adjacent
BTA service areas will be interdependent, as common ownership of such
areas will reduce problems of controlling interference at the borders
of the BTAs. See Second Report and Order at 2364. Interdependence
between the BTA authorization may also arise from economies of scale
achieved by wireless cable operators spreading of fixed costs over more
units of output. See Second Report and Order at 2364. We accordingly
conclude that there is some degree of interdependence between BTA
authorizations and that this interdependence may be significant for
geographically contiguous BTAs. Thus, the adoption of simultaneous
multiple round bidding should result in the most efficient award of
these BTA authorizations. See Second Report and Order at 2363. In
particular, we believe that potential bidders that operate (or are
planning to operate) MDS systems in
[[Page 36538]]
geographically adjacent BTAs and/or in several regions of the country
will be able to make more informed bidding decisions in a simultaneous
auction where all BTA service areas may be bid upon at the same time.
73. In addition to issues of cost and interdependence, other
considerations support the use of simultaneous multiple round bidding
for MDS. Compared with other bidding mechanisms, including open outcry
and sealed bidding, simultaneous multiple round bidding will generate
the most information about the value of BTA service areas during the
course of the auction. Thus, it is the most likely auction method to
award BTA authorizations to the bidders who value them most highly. We
also note that an auction method awarding BTA authorizations to the
parties who value them most highly should result in the award of
authorizations to bona fide wireless cable operators, rather than to
speculators, because bona fide operators will likely value
authorizations more highly than, and will therefore outbid,
speculators, who may be reluctant to pay up front the amounts necessary
to obtain authorizations through competitive bidding.\38\ Moreover,
given the uncertainty as to the value of the MDS spectrum, the
information generated by simultaneous multiple round bidding should
prove particularly valuable by giving bidders more flexibility to
pursue back-up strategies. Because of the superior information and
flexibility it provides, this auction method should also yield more
revenue for the MDS spectrum than other auction designs, including open
outcry.\39\ Although the raising of revenue is not our dominant
concern, we note that Congress directed the Commission, in designing
auction methodologies, to promote ``recovery for the public of a
portion of the value of the public spectrum resource.'' 47 U.S.C.
309(j)(3)(C). Finally, the employment of simultaneous multiple round
bidding for MDS, rather than open outcry, will eliminate the need for
the Commission to select the order in which the BTA service areas will
be auctioned. See Second Report and Order at 2360, 2363, 2366.
\38\ Sealed bidding is not supported by the Commission for MDS,
because this bidding method will generate no information about the
value of the BTA service areas during the course of an auction, and
thus may not award BTA authorizations to the parties who value them
the most. See Second Report and Order at 2362.
\39\ A simultaneous auction for MDS will tend to raise more
revenue than a sequential oral auction for two reasons. First, it
will increase the value of the BTA service areas by facilitating
efficient aggregation. Second, because it will provide more
information about the value of the BTA service areas, it will reduce
the propensity of sophisticated bidders to bid cautiously to avoid
the ``winner's curse''--the tendency for the winner to be the bidder
who most overestimates the value of the item up for bid.
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74. The simultaneous multiple round auction design adopted herein
also includes several features that should reduce the possible burdens
on bidders. We expect, for example, to have bidding rounds of shorter
duration than in other simultaneous multiple round auctions, such as
broadband PCS. This measure should shorten the MDS auction
substantially so that the length of the auction should not prove
burdensome to bidders. In addition, the burden on bidders will be
reduced by the variety of methods through which they may participate in
the MDS simultaneous multiple round auction. Bidders will be able to
submit bids on site, via personal computers using remote bidding
software, or via telephone; \40\ however, given the space limitations
for on site bidding and the uncertainty as to the exact number of
prospective bidders, the Commission reserves the right to have only
remote bidding--by personal computer and by telephone--for the MDS
auction. Thus, the expense to the bidders of participating in a
simultaneous multiple round auction should be less than in an open
outcry auction, where bidders (and/or their representative(s)) would
need to travel to and remain in Washington, DC for the duration of the
auction. Finally, the Commission will hold a seminar for prospective
bidders to acquaint them with this bidding design and all alternative
bid submission methods.
\40\ Telephonic bidding should, in particular, be a simple and
inexpensive method for bidders to submit bids. If submitting bids by
telephone, bidders may utilize the Internet to learn of the round-
by-round results of the auction; on-line services such as Compuserve
provide Internet access at low cost. Bidders may also, at negligible
cost, utilize a bulletin board service, accessible by long distance
telephone, from which auction results can be downloaded to a
personal computer.
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75. Given the numerous advantages of the generally preferred
auction method of simultaneous multiple round bidding, we believe that
this methodology will best serve for conducting MDS auctions. We note,
however, that the presence of incumbents in the BTA service areas could
affect the relative desirability and value of BTA authorizations in
ways we do not anticipate. In the event that the filings of short-form
applications indicate that the BTA authorizations have relatively
little interdependence and lower than expected value, we delegate
authority to the Mass Media Bureau and the Wireless Telecommunications
Bureau to reconsider the issue of whether another auction design would
be more appropriate.
76. MDS Bidding Procedures. There will be one authorization offered
in each BTA and the BTA authorizations will be awarded by simultaneous
multiple round bidding. All BTA service areas will be auctioned at the
same time. Bids will be accepted at the same time on all BTA service
areas in each round of the auction. High bid amounts will be posted
after the end of the bid submission period in each round of bidding.
With modifications to take account of the unique characteristics of MDS
and to reduce length, MDS auctions will follow the general bidding
procedures we have used to date to conduct the narrowband and broadband
PCS auctions.
77. In using simultaneous multiple round bidding to award the BTA
authorizations, it is important to 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 bidding round. The application of 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. Establishing an appropriate
minimum bid increment is especially important in a simultaneous auction
with a simultaneous stopping rule. In that case, all markets will
remain open until there is no bidding on any market, and a delay in
closing the bidding on one market will delay the closing of all
markets. Second Report and Order at 2369.
78. Because we plan to use simultaneous multiple round bidding with
a simultaneous stopping rule to award BTA authorizations, we believe
that it is necessary to impose a minimum bid increment to ensure that
the MDS auction conclude within a reasonable period of time. As we
recognized in the Second Report and Order, it is important to establish
the amount of the minimum bid increment as the greater of a percentage
and fixed dollar amount. This will ensure a timely completion of the
auction even if bidding begins at a very low dollar amount. Id. at
2369. Accordingly, we will impose a minimum bid increment of some
percentage of the high bid from the previous round or a fixed dollar
amount, whichever is greater, in MDS auctions where simultaneous
multiple round bidding is used. We will announce by public notice prior
to the
[[Page 36539]]
MDS auction the specific bid increment that generally will be utilized.
79. The Commission will also retain the flexibility to vary the
minimum bid increment during the course of the MDS auction by
announcement. We may, for example, begin the MDS auction with a sizable
minimum bid increment and reduce the bid increment as the auction
progresses. Starting with a sizable minimum bid increment will move the
auction quickly at the beginning, when prices have limited
informational content and there is little benefit to either bidders or
the Commission of refined price movements, while allowing bidders to
express small differences in valuation as the auction nears a close,
increasing both efficiency and auction revenues. Small bid increments
also reduce the chances of ties. Where a tie occurs, the high bidder
will be determined by the order in which the bids were received by the
Commission. See Second Report and Order at 2369. Adjustments in the bid
increment may be based in part on the level of bidding activity.
80. To gain the full benefit of the information generated by a
simultaneous multiple round auction, bidders will need some time
between bidding rounds to evaluate back-up strategies and consult with
their principals. Prior to the MDS auction, we will announce by public
notice the duration of bidding rounds for the auction. We also reserve
the discretion during the course of the auction to vary, by public
notice or announcement, the duration of bidding rounds or the interval
at which bids are accepted. We expect to allow more time for the
initial rounds in the MDS auction, while bidders familiarize themselves
with the bidding process, and then increase the frequency of rounds as
the auction progresses. Thus, we should be able to move the auction
toward closure in a reasonable period of time.\41\
\41\ Given our estimates of the value of the BTA service areas
and the likely number of bidders, we expect to hold more frequent
bidding rounds in the MDS auction than we have in certain other
simultaneous multiple round actions, particularly broadband PCS. See
Second Report and Order at 2368.
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81. To ensure that a simultaneous MDS auction with a simultaneous
stopping rule closes within a reasonable period of time and to increase
the information conveyed by bid prices during the auction, we believe
that it is necessary to impose an activity rule to prevent bidders from
waiting until the end of the auction before participating. Because
simultaneous stopping rules generally keep all markets open for bidding
as long as anyone wishes to bid, they also create an incentive for
bidders to hold back until prices approach equilibrium before making a
bid. As noted in the Second Report and Order, this could lead to very
long auctions. See id. at 2371. Delaying serious bidding until late in
an auction also reduces the information content of prices during the
course of the auction. Without an activity rule, bidders cannot know
whether a low level of bidding on a particular market means that the
market's price is near its final level or if instead many serious
bidders are holding back and may bid up the price later in the auction.
When bidding closes on a market-by-market basis, an activity rule is
less important. This is because failure to bid on a given market in any
round may result in loss of the opportunity to bid on that market, if
that round turns out to be the last one for that market.
82. In the Second Report and Order, we adopted the three-stage
Milgrom-Wilson activity rule as our preferred activity rule when a
simultaneous stopping rule is used. Id. at 2372. See also Fifth Report
and Order at 5553-5556. We plan to employ this activity rule in the MDS
auction as well. Under the Milgrom-Wilson activity rule, bidders are
required to declare their maximum eligibility in advance of the auction
and make an upfront payment proportional to that eligibility level. In
the PCS auctions, activity and eligibility are defined in terms of
``MHz-pops.'' See, e.g., Fifth Report and Order at 5553-5554.
Specifically, the number of MHz-pops associated with a PCS license is
calculated by multiplying the population of the license service area by
the amount of spectrum authorized by the license. We chose MHz-pops
because we anticipated that PCS license values would be closely related
to the number of MHz-pops in the license service areas. This choice
ensures that the measure of bidding activity used in the activity rule
is highly correlated with license values. In the MDS auction, bidding
activity and eligibility will be defined in terms of dollar values. The
Commission will assign an ``activity unit'' value to each BTA service
area for the purpose of measuring bidding activity and eligibility.
Specifically, the activity unit value for a BTA service area will be
equal to the upfront payment associated with that BTA service area. A
bidder's maximum eligibility (which is also the bidder's eligibility
for the first round of the auction) will be equal to its total upfront
payments.\42\ Because the upfront payments will be related to the value
of the BTA service areas (see infra para. 103), activity units will
fulfill the same function that MHz-pops have fulfilled in the previous
PCS auctions.
\42\ As explained in para. 105, however, a small business bidder
eligible for a reduction in its upfront payment requirement will not
have the number of its activity units decreased as a result of
submitting a reduced upfront payment.
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83. The Milgrom-Wilson activity rule provides a bidder's minimum
activity level, measured as a fraction of eligibility in the current
round, will increase during the auction. A bidder will be considered
``active'' on a BTA service area in the current round if it is either
the higher bidder at the end of the bid withdrawal period in the
previous round, or if it submits a bid in the current round which meets
or exceeds the minimum valid bid (i.e., a bid that exceeds the high bid
in the previous round by at least the minimum bid increment). A
bidder's activity level in a round is the sum of the activity units
associated with the BTA service areas on which the bidder is active.
84. The minimum required bidding activity levels for each stage of
the MDS auction are as follows. In each round of Stage One of the
auction, a bidder who wishes to maintain its current eligibly is
required to be active on BTA service areas encompassing at least fifty
percent of the activity units for which it is currently eligible.
Failure to maintain the requisite activity level will result in a
reduction in the amount of activity units associated with BTAs upon
which a bidder will be eligible to be active in the next round of
bidding (unless an activity rule waiver, as described below, is used).
During the first stage, if activity is below the required minimum
level, eligibility in the next round will be calculated by multiplying
the current round activity by two (2/1). Eligibility for each applicant
in the first round of Stage One is determined by the amount of the
unfront payment received and the BTAs identified in the applicant's
short-form application. In each round of Stage Two, a bidder who wishes
to maintain its current eligibility is required to be active on BTA
service areas encompassing at least eighty percent of the activity
units for which it is eligible in that particular round. During the
second stage, if activity is below the required minimum level,
eligibility in the next round will be calculated by multiplying the
current round activity by five-fourths (5/4). In each round of Stage
Three, a bidder who wishes to maintain its current eligibility is
required to be active on BTA service areas encompassing ninety-five
percent of the activity units for which it is eligible in that
particular round. In the
[[Page 36540]]
final stage, if activity in the current round is below ninety-five
percent of current eligibility, eligibility in the next round will be
calculated by multiplying the current round activity by twenty-
nineteenths (20/19).
85. In the PCS auction, we specified transition guidelines for
deciding when the auction would move from Stage One to Stage Two to
Stage Three. Those guidelines are based on the ``auction activity
level,'' the sum of the MHz-pops of PCS licenses for which the high bid
increased in the current round as a percentage of the total MHz-pops of
all licenses offered in the auction. See, e.g., Fifth Report and Order
at 5555. However, we also retained the discretion to move the PCS
auctions from one stage to another at a rate different from that set
out in the guidelines. See Fourth Memorandum Opinion and Order in PP
Docket No. 93-253, 9 FCC Rcd 6858, 6860 (1994), 59 Fed. Reg. 53364
(Oct. 24, 1994).
86. For the MDS auction, we shall employ an analogous procedure.
The ``auction activity level'' for a given round of the MDS auction
will be defined as the sum of the activity units associated with the
BTA service areas for which the high bid increases in that round,
divided by the sum of activity units associated with all of the BTAs
being auctioned. The following transition guidelines apply. The MDS
auction will begin in Stage One and move from Stage One to Stage Two
when the auction activity level is below ten percent for three
consecutive rounds in Stage One. The auction will move from Stage Two
to Stage Three when the auction activity level is below five percent
for three consecutive rounds in Stage Two. In no case can the auction
revert to an earlier stage. The Commission retains the discretion to
determine and announce during the course of an MDS auction when, and
if, to move from one auction stage to the next, based on a variety of
measures of bidder activity, including, but not limited to, the auction
activity level as defined above, the percentage of BTA service areas on
which there are new bids, the percentage of activity units on which
there are new bids, the number of new bids, and the percentage increase
in revenue.
87. To avoid the consequences of clerical errors and to compensate
for unusual circumstances that might delay a bidder's bid preparation
or submission in a particular round, we will provide bidders with a
limited number of waivers of the above-described activity rule. We
believe that some waiver procedure is needed because the Commission
does not wish to reduce a bidder's eligibility due to an accidental act
or circumstances not under the bidder's control. See Second Report and
Order at 2372.
88. In MDS auctions, bidders will be provided five activity rule
waivers that may be used in any round during the course of the auction.
See Second Report and Order at 2373. If a bidder's activity level is
below the required activity level, a waiver will automatically be
applied. That is, if a bidder fails to submit a bid in a round, and its
activity level from any standing high bids (high bids at the end of the
bid withdrawal period in the previous round) falls below its required
activity level, a waiver will be automatically applied. A waiver will
preserve current eligibility in the next round. An activity rule waiver
applies to an entire round of bidding and not to a particular BTA
service area. Bidders will be afforded an opportunity to override the
automatic waiver mechanism when they place a bid if they intentionally
wish to reduce their bidding eligibility and do not want to use a
waiver to retain their eligibility at its current level. See Fourth
Memorandum Opinion and Order in PP Docket No. 93-253, 9 FCC Rcd 6858,
6861 (1994), 59 Fed. Reg. 53364 (Oct. 24, 1994). If a bidder overrides
the automatic waiver mechanism, its eligibility will be permanently
reduced (according to the formulas specified in para.84), and it will
not be permitted to regain its bidding eligibility from a previous
round. An automatic waiver invoked in a round in which there are no new
valid bids will not keep the auction open. Bidders will have the option
of pro-actively entering an activity rule waiver during the bid
submission period.\43\ If a bidder submits a proactive waiver in a
round in which no other bidding activity occurs, the auction will
remain open.
\43\ Thus, a ``proactive'' waiver, as distinguished from the
automatic waiver described above, is one requested by the bidder.
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89. The Commission retains the discretion to issue additional
waivers during the course of an auction for circumstances beyond a
bidder's control. We also retain the flexibility to adjust prior to an
auction the number of waivers permitted, or to institute a rule that
allows one waiver during a specified number of bidding rounds or during
specified stages of the auction. See Second Report and Order at 2373.
We will announce by public notice before the MDS auction the number of
waivers that will be allowed in that particular auction.
90. As with other auctions, we reserve the right to impose for the
MDS auction an activity rule less complex than the Milgrom-Wilson rule.
See Second Report and Order at 2372; Fifth Report and Order at 5556. We
will announce by public notice before the MDS auction the activity rule
that will be employed in that particular auction.
91. We noted in the Second Report and Order that, with multiple
round auctions, a stopping rule must be established for determining
when the auction is over. Id. at 2369. In an MDS simultaneous multiple
round auction, bidding could close separately on individual BTA service
areas, simultaneously on all BTA service areas, or a hybrid approach
could be used. Under an individual approach, bidding would close on
each BTA service area after one round passed in which no new acceptable
bids were submitted for that particular service area. With a
simultaneous stopping rule, bidding would remain open on all BTA
service areas until there was no new acceptable bid on any service
area. This approach would have the advantage of providing bidders full
flexibility to bid for any BTA service area as more information became
available during the course of the MDS auction, but it could lead to a
very long auction, unless an activity rule were imposed. See id. at
2370. A hybrid approach would combine the individual and the
simultaneous approaches.\44\
\44\ For example, in a hybrid approach, we could use a
simultaneous stopping rule (along with an activity rule designed to
expedite closure) for higher valued BTA service areas. For lower
valued BTA service areas, where the loss from eliminating some back-
up strategies would be less, bidding on BTAs could be allowed to
close individually. See Second Report and Order at 2370.
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92. For MDS auctions, we intend to utilize a simultaneous stopping
rule, as we have successfully used in previous simultaneous multiple
round auctions. Bidding will accordingly remain open on all BTA service
areas until bidding stops on every BTA service area. The auction will
close after one round passes in which no new valid bids or proactive
waivers are submitted. The Commission retains the discretion, however,
to keep the MDS auction open even if no new valid bids and no proactive
waivers are submitted. In the event that the Commission exercises this
discretion, the effect will be the same as if a bidder had submitted a
proactive waiver.\45\ Since we are also imposing an activity rule (as
discussed
[[Page 36541]]
above), we believe allowing simultaneous closing for all BTA service
areas will afford bidders flexibility to purse back-up strategies
without running the risk that bidders will refrain from bidding until
the final rounds. We also believe that a simultaneous stopping rule
will best enable bidders to take account of any interdependencies that
exit between BTA authorizations (especially authorizations for adjacent
areas) and will allow bidders to make the most informed bidding
decisions. Thus, simultaneously closing bidding on BTA service areas
will most likely award licenses to the bidders who value them most
highly. See Second Report and Order at 2370.
\45\ This will help ensure that the MDS auction is completed
within a reasonable period of time, because it will enable the
Commission to utilize larger bid increments, which speed the pace of
the auction, without risking premature closing of the auction. See
Memorandum Opinion and Order in PP Docket No. 93-253, 9 FCC Rcd
7684, 7685 (1994), 59 Fed. Reg. 64159 (Dec. 13, 1994).
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93. Additionally, the Commission may also declare at any time after
forty rounds that the MDS auction will end after a specified number of
additional rounds. If the Commission invokes this stopping rule, it
will accept bids in the final round(s) only for BTA service areas on
which the high bid increased in at least one of the proceeding three
rounds. See Second Report and Order at 2370 n.106. Stopping the MDS
auction after a specified number of additional rounds will ensure
ultimate Commission control over the duration of the action. See id.
Thus, the Commission will have the means to prevent bidders from
continuing to bid on a few BTA service areas (or even a single service
area) solely to delay the closing of bidding for all BTA service areas
in an MDS auction with a simultaneous stopping rule. This will also
ensure that the Commission can end the MDS auction if it determines
that the benefits from ending the auction, and hence granting BTA
authorizations more rapidly, exceed the possible efficiency loss from
cutting off bidding on a few BTA service areas. If we exercise this
option, we favor the use of three final rounds. Allowing more than one
additional round provides some opportunity for counter-offers, thus
reducing the risk that a BTA authorization will not be awarded to the
party that values it most highly.
94. If this fail-safe mechanism is used in an MDS auction, there
are two reasons not to take bids on BTA service areas on which there
has been no recent bidding. First, the fact that bidding on an
individual BTA service area may close will provide an additional
incentive to bid actively and thus speed the conclusion of the MDS
auction. If bids are accepted on all BTA service areas in the final
round(s) there is less risk to a bidder in holding back. Second,
closing bidding on BTA service areas for which activity has ceased
ensures high bidders for those service areas that they will not lose a
BTA authorization without having an opportunity to make a counter-
offer.\46\ This reduces the uncertainty associated with aggregating BTA
authorizations (such as those for adjacent BTAs) that may be worth more
as a group than individually. If final bids are accepted on all BTA
service areas, a high bidder on an aggregation of BTA service areas may
unexpectedly lose a significant part of the aggregation and have no
chance to regain it except in the post-auction market, where bargaining
or other transaction costs may be high.
\46\ Either the MDS auction will close only when bidding ceases
on all BTA service areas, so the high bidder will have an
opportunity to respond to any new bids, or the Commission will call
for final bids but not accept new bids on BTA service areas on which
there have been no new bids in the previous three rounds, so no
other bidder will have the opportunity to outbid the high bidder in
a final round.
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95. The Commission does not intend to exercise this option except
in extreme circumstances, such as where the MDS auction is proceeding
very slowly, there is minimal overall bidding activity, and it appears
unlikely that the auction will close within a reasonable period of
time. Before exercising this option, however, the Commission would
first attempt to increase the pace of the auction by announcing that
the auction will more into the next stage, where bidders would be
required to maintain a higher level of bidding activity. Under these
circumstances, the Commission may also first increase the number of
bidding rounds per day an increase the amount of the minimum bid
increments for those limited number of BTA service areas where there is
still a high level of bidding activity.
96. Additionally, because of the large number of BTA service areas
to be auctioned at once, we will retain the discretion either to use a
hybrid stopping rule to allow bidding to close individually for these
service areas if, as we gain more experience with auctions, we
determine that simultaneous stopping rules are too complex to implement
for very large numbers of service areas. The specific stopping rule for
ending bidding on the BTA service areas will be announced by public
notice prior to the MDS auction.
5. Procedural and Payment Issues
97. Pre-Auction Application Procedures. The Second Report and Order
established general rules and procedures for participating in auctions.
Again, however, we noted that these might be modified on a service-
specific basis. As described below, we have determined that we will
follow for new MDS initial applications the procedural and payment
rules established in the Second and Report and Order and set forth at
47 CFR Chapter I, Part 1, Subpart Q, with modifications to fit MDS.
Certain procedural details will be supplied later by public notices.
Our objective has been to design rules and procedures that will reduce
administrative burdens and costs on bidders and the Commission, ensure
that bidders and licensees are qualified and able to construct their
systems, and minimize the potential for delay of service to the public.
See 47 U.S.C. 309(j)(3)(A) (in designing auction rules, Commission
should seek to promote development and rapid deployment of products and
services for public benefit, without administrative or judicial
delays).
98. Before an MDS auction, the Commission, or, pursuant to
delegated authority, the Mass Media Bureau, in conjunction with the
Wireless Telecommunications Bureau, will release public notices
concerning the auction. The public notices will specify the BTA service
areas to be auctioned, the filing deadline for short-form applications,
and the time, place and method of competitive bidding to be used, as
well as applicable bid submission and payment procedures.
99. Applicants will be required to submit short-form applications
by the date specified by public notice. Applicants should file a short-
form application identifying all BTA service areas specified by the
public notice in which they are interested in bidding.\47\ If the
Commission receives only one application that is acceptable for filing
for the same BTA service area and thus there is no mutual
exclusivity,\48\ the Commission will by public notice cancel the
auction for this BTA service area and establish a date for the filing
of either an initial long-form application for an MDS station license
or, for a heavily encumbered BTA, a statement of intention with regard
to the BTA.\49\
\47\ As described in detail below, the short-form applications
must also include an exhibit identifying any bidding consortia or
other arrangements relating to the BTA service areas being
auctioned. See infra para. 129.
\48\ Absent mutually exclusive applications, the Commission is
prohibited from conducting an auction. See 47 U.S.C. Sec. 309(j)(1).
\49\ See infra Paras. 116-120, for the procedures for filing
either a long-form application for a station license or a statement
of intention with regard to the BTA.
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100. To encourage maximum bidder participation, we will provide
applicants whose short-form applications are substantially complete,
but which contain minor errors or defects, with an opportunity to
correct
[[Page 36542]]
their applications prior to the auction. However, applicants will not
be permitted to make any major modifications to their applications; for
MDS, we classify all amendments to short-forms as major, except those
to correct minor errors or defects, such as typographical errors, or
those to reflect ownership changes or formation of bidding consortia
specifically permitted under the anti-collusion rules set forth below.
See infra para. 130. We note in particular that a change in control of
an applicant or a change in the BTAs upon which an applicant wishes to
bid will be regarded as a major amendment to the short-form
application. In addition, applications that are not signed in any
manner or form, including by electronic means, or that fail to make the
requisite certifications will be dismissed and may not be resubmitted.
See Second Report and Order at 2377; 47 CFR 1.2105(b).
101. After reviewing the short-form applications, the Commission
will issue another public notice listing all applications containing
minor defects, and applicants will be given an opportunity to cure and
resubmit defective applications. On the date set for submission of
corrected applications, applicants who on their own discover minor
errors in their applications, such as typographical errors, also will
be permitted to file corrected applications. Following a review of 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 this public notice
will then be required to submit the full amount of their upfront
payment. See Second Report and Order at 2377.
102. Upfront Payments. In the generic auction rules, we described
five types of payments: upfront payments, down payments, final
payments, bid withdrawal payments, and default and disqualification
payments. Given the history of speculators filing MDS applications, we
believe a substantial upfront payment is needed for MDS auctions to
discourage speculative bidding and increase the likelihood of
applicants who intend to provide service to the public obtaining the
remaining available MDS channels. Requiring a substantial upfront
payment provides some degree of assurance that only serious, qualified
bidders will participate and serves as a deterrent to the filing of
speculative applications, which may delay the provision of service to
the public. The upfront payments will also provide the Commission with
a source of funds to satisfy any bid withdrawal or default and
disqualification payments assessed. See Second Report and Order at
2378-2379. Therefore, we will require an upfront payment for the MDS
auction.
103. We believe the upfront payment should bear a relation to the
value of the BTA authorizations that a bidder hopes to be awarded. We
accordingly delegate to the Mass Media Bureau and the Wireless
Telecommunications Bureau the authority to determine an appropriate
upfront payment for each BTA service area being auctioned, taking into
account, at the Bureaus' discretion, such factors as the population and
the approximate amount of usable spectrum in each BTA. Bearing in mind
the uncertainties associated with valuing the BTA authorizations, we
expect that the Bureaus will follow the guidelines laid out in the
Second Report and Order and establish upfront payments equal to around
five percent of the expected amounts of winning bids for the various
BTA service areas. See id. at 2378-2379. In no event will the upfront
payment for any BTA service area be less than $2500, the minimum
suggested in the Second Report and Order, and we retain the flexibility
for the Bureaus to modify this minimum if we find that a higher amount
would better deter speculative filings. Id. at 2379.
104. Prior to the MDS auction, the Mass Media Bureau, in
conjunction with the Wireless Telecommunications Bureau, will public a
public notice listing the upfront payment amounts corresponding to each
BTA service area to be auctioned. The number of activity units
associated with a BTA service area (see para. 82) equals the amount of
the upfront payment for the BTA. A prospective bidder must submit an
upfront payment equal to the largest combination of activity units on
which the bidder anticipates being active in any single round. The
combination of activity units on which a bidder is active in a round
equals the sum of the activity units associated with the BTAs on which
the bidder has submitted a bid, or on which the bidder is the standing
high bidder. Although a bidder may file applications for every BTA
service area being auctioned, the total upfront payment submitted by
each applicant will determine the combinations of BTA service areas on
which the applicant will actually be permitted to be active in any
single round of bidding.\50\
\50\ Consider, for example, an applicant that submits a $100,000
total upfront payment. As explained above at para. 82, the maximum
number of activity units for that applicant is 100,000. In any
single round, the applicant could be active on two BTA service areas
with 50,000 activity units each, on five BTAs with 20,000 activity
units each, on ten BTAs with 10,000 activity units each, or on any
combination of BTA service areas for which the sum of associated
activity units totals 100,000 or less. As set forth above, a bidder
is ``active'' on a BTA service area if it is either the high bidder
on that BTA from the previous round (at the end of the bid
withdrawal period), or if it submits a bid on that BTA in the
current round which exceeds the previous round's high bid by at
least the minimum bid increment. See supra para. 83. Thus, a bidder
who begins the auction eligible to bid (based on the magnitude of
its upfront payment) on BTA service areas associated with 100,000
activity units and who, in the first round, is the high bidder on a
BTA service area associated with 50,000 activity units, may only, in
the second round, submit new bids on a combination of BTAs
associated with 50,000 or fewer activity units.
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105. A prospective bidder in the MDS auction that claims status as
a small business, as defined in para. 153, will be eligible for a
twenty-five percent reduction in its upfront payment requirements. See
infra Paras. 148-149 for a discussion of the reduced upfront payments
measure. A small business eligible for this reduction in its upfront
payment will not have the number of its activity units decreased as a
result of submitting a reduced upfront payment.\51\
\51\ For example, if a small business applicant is interested in
bidding on a BTA with an upfront payment of $100,000, it would be
required, under the reduced upfront payment measure, to submit only
$75,000 to qualify to bid on that BTA. This applicant would still,
however, receive 100,000 activity units--the number of activity
units equivalent to the full upfront payment amount associated with
that BTA.
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106. Applicants identified by public notice as those whose
applications have been accepted for filing will be required to submit
their upfront payments to the Commission's lock-box bank by the date
specified in the public notice, which generally will be no later than
fourteen days before the scheduled auction. Upfront payments may be
made 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. All payments, including upfront, down and
final payments, should be accompanied by FCC Form 159 (remittance
advice form). After the Commission receives from its lock-box bank the
names of all applicants who have submitted timely upfront payments, the
Commission will issue a public notice announcing the names of all
applicants that have been determined to be qualified to bid in the MDS
auction. Any applicant who fails to submit a sufficient upfront payment
to qualify it to bid on any BTA service area being auctioned will not
be identified on this public notice as a qualified bidder, will be
prohibited from
[[Page 36543]]
bidding in the MDS auction, and its application will be dismissed. See
Second Report and Order at 2377; 47 CFR 1.2106.
107. The upfront payments submitted by prospective bidders will
later be counted toward the down payments that winning bidders must
make. The upfront payments of bidders who are not the high bidder on
any BTA service area will be refunded as soon as possible after the MDS
auction. Prior to refunding the upfront payments of non-winning
bidders, however, we will determine whether they are subject to
withdrawal or default payments. In some circumstances, it may be
appropriate to retain upfront payments until after the winning bidders
have tendered their down payments because further rounds of competitive
bidding may be held if down payments are not made. No interest will be
paid on upfront payments. See Second Report and Order at 2380.
108. Down Payments and Full Payments. To provide further assurance
that winning bidders will be able to pay the full amount of their bids,
we decided generally in the Second Report and Order that each winning
bidder must tender a down payment sufficient to bring the total deposit
up to twenty percent of the winning bid. We believe a down payment
requirement is appropriate for MDS. Accordingly, winning bidders will
be required to supplement their upfront payments to bring their total
deposit with the Commission up to at least twenty percent of the final
payment due for the BTA authorization(s) won in the MDS auction. If the
upfront payment already tendered amounts to twenty percent or more of
the winning bid, no additional deposit will be required. To the extent
that any upfront payment not only covers, but exceeds, the required
down payment, the Commission will refund any excess amount after
determining that no bid withdrawal payments are owed by the bidder. To
simplify this process administratively, the Commission will not honor
requests that this excess amount be retained and applied toward later
payments or obligations. The down payment will be due within five
business days after the winning bidders have been notified by the
Commission, and may be made by cashier's check or by wire transfer to
the Commission's lock-box bank. The down payment will be held by the
Commission until the winning bidder has been issued its BTA
authorization and has paid the remaining balance of its winning bid, or
until the winning bidder is found unqualified to be a station license
or has defaulted, in which case it will be returned, less applicable
default payments. During the period that deposits are held pending
ultimate award of the BTA authorization, the interest that accrues, if
any, will be retained by the government. See Second Report and Order at
2381-2382; 47 CFR 1.2107(b).
109. Based upon our experience in conducting spectrum auctions, we
will require winning bidders to make full payment of the balance of
their winning bids prior to the issuance of their BTA authorizations.
Specifically, the Commission will, when a BTA authorization is ready to
be issued, release a public notice stating that fact. The auction
winner for that BTA will be required to make full payment of the
balance of its winning bid within five business days following this
public notice. The Commission will issue the BTA authorization to the
auction winner within ten business days following notification of
receipt of full payment. See Second Report and Order and Second Further
Notice of Proposed Rulemaking in PR Docket No. 89-553, PP Docket No.
93-253, and GN Docket No. 93-252, FCC 95-159 (released April 17, 1995),
60 Fed. Reg. 21987 (May 4, 1995), at para. 109.
110. Auction winners that are small businesses eligible for
installment financing will be subject to differing payment
requirements, however. See infra Paras. 153-154 for discussion of small
business eligibility. Specifically, a small business will be required
to bring its total deposit with the Commission up to ten percent of its
winning bid within five business days after having been notified by the
Commission of its winning bidder status. An additional ten percent will
be due within five business days following the public notice that its
BTA authorization is ready to be issued. The Commission will then issue
the BTA authorization to the small business within ten business days
following notification of receipt of this additional ten percent
payment.
111. Bid Withdrawal, Default and Disqualification Payments. In the
Second Report and Order, we concluded that strong incentives are needed
to ensure that potential bidders are financially and otherwise
qualified to participate in auction proceedings, so as to avoid delays
in the deployment of new services to the public. Id. at 2382. We
accordingly stated that we will, in simultaneous multiple round
auctions, impose a bid withdrawal payment requirement in instances
where a high bid is withdrawn during the course of the auction and an
additional default payment if a winning bid is withdrawn after the
auction has closed. Id. at 2373-2374.
112. In an MDS simultaneous multiple round auction, any bidder who
withdraws a high bid during an auction before the Commission declares
bidding closed will 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 BTA service area is offered by the
Commission, if this subsequent winning bid is lower than the withdrawn
bid.\52\ No withdrawal payment will be assessed if the subsequent
winning bid exceeds the withdrawn bid. After bidding closes, a
defaulting auction winner (i.e., a winner who fails to remit the
required down payment within the prescribed time, fails to submit a
long-form application or statement of intention, fails to make full
payment, or is otherwise disqualified) will be subject to an additional
payment 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) and 1.2109; Second Report and Order at 2373-2374. The
additional three percent payment is designed to encourage bidders who
wish to withdraw their bids to do so before bidding ceases. We will
hold deposits made by defaulting or disqualified auction winners until
full payment of these amounts. In rare cases in which it would be
inequitable to retain a down payment, we will entertain requests for
waiver of this provision. We believe that these payment requirements
will discourage insincere bidding and default and ensure that bidders
have adequate financing and that they meet all eligibility and
qualification requirements.
\52\ If a BTA service area is re-offered by auction, the
``winning bid'' refers to the high bid in the auction in which the
service area is re-offered. If a BTA service area is re-offered in
the same auction, the winning bid refers to the high bid amount,
made subsequent to the withdrawal, in that auction. If the
subsequent high bidder also withdraws its bid, that bidder will be
required to pay an amount equal to the difference between its
withdrawn bid and the amount of the subsequent winning bid the next
time the BTA service area is offered by the Commission. If a BTA
service area 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'' refers to the bid of the
highest bidder who accepts the offer. Losing bidders will not be
required to accept the offer. We wish to encourage losing bidders in
MDS simultaneous multiple round auctions to bid on other BTA service
areas, and therefore we will not hold them to their losing bids on a
service area for which a bidder has withdrawn a bid or on which a
bidder has defaulted.
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113. In addition, ``if a default or disqualification involves gross
misconduct, misrepresentation or bad
[[Page 36544]]
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, including institution of
proceedings to revoke any existing licenses held by the applicant.''
Second Report and Order at 2383. Parties who obtain their BTA
authorizations through the auction process are put on notice that if
their BTA authorizations are cancelled for any reason they will lose
all monies paid to the Commission regarding those authorizations. This
loss of monies paid is not intended as an exclusive remedy. Where such
BTA holder's conduct so warrants, additional sanctions, including
monetary fines and station license revocation, may be imposed.
114. In the event that an MDS auction winner defaults or is
otherwise disqualified, the Commission must determine whether to hold a
new auction or simply offer the BTA service area to the second-highest
bidder. As we stated in the Second Report and Order, we believe that,
as a general rule, when an auction winner defaults or is otherwise
disqualified after having made the required down payment, the best
course of action is to re-auction the BTA service area. Id. at 2383.
Although we recognize that this may cause a brief delay in the
initiation of service to the public, circumstances may change so
significantly during the time between the original auction and the
disqualification as to alter the value of the BTA service area to
auction participants, as well as to parties who did not participate. In
this situation, awarding BTA authorizations to the parties that value
them most highly can best be assured through a re-auction. If, however,
the default occurs within five business days after the bidding has
closed, the Commission retains the discretion to offer the BTA service
area to the second highest bidder at its final bid level, or if that
bidder declines the offer, to offer the BTA service area to other
bidders (in descending order of their bid amount) at the final bid
levels. Moreover, if only a small number of relatively low value BTA
service areas are to be re-auctioned and only a short time has passed
since the initial auction, the Commission may choose to offer the BTA
service areas to the highest losing bidders because the cost of holding
another auction for MDS may exceed the benefits. See id.; 47 CFR 1.2109
(b) and (c).
115. If a new MDS auction becomes necessary because of default or
disqualification more than five business days after bidding has ended,
the Commission will afford new parties an opportunity to file
applications. One of our primary goals in conducting auctions is to
assure that all serious interested bidders are in the pool of qualified
bidders at any re-auction. We believe that allowing new applications
will facilitate achieving this goal, and that the short delay that may
result from allowing new applications in a re-auction is warranted.
Indeed, if we were not to allow new applicants in a re-auction,
interested parties might be forced into an after-market transaction to
obtabtain the BTA authorizations, which would itself delay service to
the public and may prevent the public from recovering a reasonable
portion of the value of the spectrum resource. See Second Report and
Order at 2384; 47 CFR 1.2109(c).
116. Post-Auction Application Procedures. Unlike other services
where auction winners may file a single long-form application to obtain
a single license for the entire geographic area auctioned, the winning
bidder for each BTA service area will be required, in accordance with
our existing rules, to submit separate long-form applications for each
channel group and location within the BTA for which the bidder wants to
obtain an MDS station license. The winning bidder for each BTA service
area will therefore be required to submit a separate long-form
application for each Channel E group, for each Channel F group, and for
each Channel 1, 2 (or 2A), H1, H2, and H3 within the BTA for which the
winning bidder wishes to receive a license.
117. The long-form application for the initial MDS station license
within each BTA service area will be due from the winning bidder for
that BTA within thirty business days after such bidder has been
notified of its winning bidder status.\53\ After the Commission
receives the winning bidder's down payment and the long-form
application for the initial MDS station license within the BTA, we will
review the long-form application, which must include, among other
items, a FCC Form 430 and exhibits concerning the winning bidder's
involvement in bidding consortia and status as a designated entity.\54\
If the long-form application is found to be acceptable, the Commission
will release a public notice announcing this fact, triggering the
thirty day filing window for petitions to deny. If the Commission
denies or dismisses all petitions to deny (if any are filed), and is
otherwise satisfied that the applicant is qualified, the BTA
authorization will be issued and the initial conditional MDS station
license within the BTA service area of the auction winner will be
granted, assuming that the auction winner (except for a small business
making installment payments) has made full payment as set forth in
para. 109. See Second Report and Order at 2383; 47 C.F.R.
Secs. 1.2107(c), 1.2108. Subsequent long-form applications for MDS
station licenses within BTA service areas, which auction winners may
submit at any time during the five year build-out period, will be
reviewed by the Commission and granted in a similar manner, except, of
course, that the winning bidders will need to make no further payments.
\53\ We realize that other services have generally required the
filing of long-form applications within ten days of notification of
the winning bidders. However, given the need for MDS auction winners
to protect all previously authorized or proposed MDS and ITFS
facilities within their BTA service areas from harmful interference,
we believe that such winning bidders will likely require a longer
period of time to complete the requisite engineering studies and
interference analyses before filing their initial long-form
applications for MDS station licenses.
\54\ The content of these exhibits is set forth in Section
21.956(b) of our amended rules.
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118. However, we realize that a number of BTA service areas may be
so encumbered that the winning bidder for such a BTA may be unable to
file a long-form application proposing another MDS station within the
BTA while meeting the Commission's interference standards as to all
previously authorized or proposed MDS and ITFS facilities. The winning
bidder's objective in bidding on such a heavily encumbered BTA would
likely be to purchase the previously authorized or proposed MDS
stations within the BTA and to maintain full flexibility to make
modifications. It also seems likely that a winning bidder for a heavily
encumbered BTA may itself possess most or all of the previously
authorized or proposed MDS stations within that BTA, and the bidder's
goal in obtaining the authorization for the BTA in which it already had
MDS stations would similarly be to preserve full flexibility to make
modifications. The winning bidder for a BTA service area so heavily
encumbered that it believes it cannot file an acceptable long-form
application proposing an MDS station with average transmitted power
within its BTA should follow the post-auction procedures set forth
below.
119. After notification of its status as a winning bidder for a
heavily encumbered BTA service area, the bidder must make its down
payment within five business days in the normal manner. Within thirty
business days after notification of its winning bidder
[[Page 36545]]
status, the winning bidder must file with the Commission, in lieu of a
long-form application for an MDS station license, a statement of
intention with regard to the BTA service area, showing the encumbered
nature of the BTA, identifying the incumbents, and describing in detail
its plan for obtaining the previously authorized or proposed MDS
stations within the BTA. We do not intend to force winning bidders to
file long-form applications for MDS station licenses in BTAs so
encumbered that the only proposed station to not cause harmful
interference to incumbents would, for example, be a facility with a one
watt transmitter and a highly directional antenna, serving no
significant population. Winning bidders must, however, document in
their statements of intention that additional MDS stations with average
transmitted power could not be constructed in their BTAs without
causing harmful interference to previously authorized or proposed MDS
and ITFS facilities. If a winning bidder fails to file either this
statement of intention or a long-form application within the thirty day
period, it will be in default and will be subject to the appropriate
default payments. The statement of intention should also include a FCC
Form 430, a drug certification, and the same exhibits concerning the
winning bidder's involvement in bidding consortia and status as a
designated entity that must be attached to initial long-form
applications. See supra para. 117.
120. The Commission will, following its review of the winning
bidder's statement of intention, issue the BTA authorization to the
winning bidder. Such issuance of the BTA authorization will, of course,
be made only following full payment by the winning bidder as set forth
in para. 109, except for a small business making installment payments.
Parties wishing to comment on or oppose the issuance of a BTA
authorization issued in connection with the filing of a statement of
intention by a winning bidder must do so prior to the Commission's
issuance of the BTA authorization.
121. Period of MDS Station Licenses. Under the Commission's rules,
licenses for MDS stations are to be ``issued for a period not to exceed
10 years.'' 47 CFR 21.45(a). ``Unless otherwise specified by the
Commission,'' the expiration of MDS station licenses as a class is,
however, set on a single date (May 1) ``in the year of expiration''
(i.e., the year which is ten years from the last expiration date of the
class of MDS licenses, which was 1991). Id. Thus, the current term for
all MDS station licenses as a class will expire on May 1, 2001,
regardless of when these licenses are awarded. Because MDS station
licenses as a class are due to expire on this set date, an MDS licensee
who receives its station license on, for example, May 1, 1996 would in
effect have the license for only five years before the licensee must
apply for renewal.
122. For the reasons set forth herein, we believe that MDS auction
winners should not be subject to the fixed MDS station license renewal
cycle which, under existing rules, will expire on May 1, 2001, only
five years or so from the time that any auction winner could expect to
receive its initial station license in its BTA service area. We believe
all winning bidders in the MDS auction should be assured of receiving
station licenses of a duration sufficient so that they may have a
reasonable period of time to construct their systems and earn a return
on the amounts they invested in acquiring the BTA authorizations and
MDS station licenses by competitive bidding. In addition, we realize
that bidders who must arrange financing will need to assure lenders
that they will have possession of their MDS station licenses for a
reasonably lengthy period of time. We therefore determine that all MDS
station licenses granted in every BTA service area auctioned should be
for a ten year period (the maximum specified in Section 21.45(a)) to
run from the date that the Commission declares bidding in the MDS
auction to be closed.
123. We conclude that awarding MDS station licenses with definite
ten year terms, rather than much briefer, indeterminate terms dependent
on when the license is granted, serves both prospective bidders and the
Commission well. As described above, the set ten year period is of
sufficient certainty and length to be fair to parties who must now pay
considerable sums, and perhaps obtain outside financing, in order to
acquire BTA authorizations and MDS station licenses. In addition, we
note that granting MDS station licenses with set ten year terms will
allow small businesses eligible for installment financing to make
payments over a period comparable to the length of their initial
station licenses. Furthermore, specifying that MDS licenses for
stations located in BTA service areas acquired by competitive bidding
will be for ten year terms dated from the close of bidding in the MDS
auction, rather than from the actual date of issuance of each
individual station license, will be administratively convenient for the
Commission. Because all MDS station licenses granted within BTA service
areas acquired by competitive bidding will expire on the same date, the
Commission will be able to easily process those licenses and to deal
more expeditiously with their renewal. In accordance with Section
21.45(a), we hereby specify that all MDS station licenses granted in
every BTA service area auctioned will have ten year terms from the date
that the Commission declares bidding in the MDS auction closed.
6. Regulatory Safeguards
124. Unjust Enrichment and Anti-Trafficking Provisions. Congress
directed that we take steps to prevent unjust enrichment due to
trafficking in licenses that were obtained through competitive bidding.
See 47 U.S.C. 309(j)(4)(E). In Section 7 below, we adopt specific rules
to prevent designated entities from taking advantage of special
provisions for such entities by transferring control of their BTA
authorizations immediately following the MDS auction. Moreover, the MDS
rules already contain provisions to reduce trafficking. See 47 CFR
21.39 (generally prohibiting assignment or transfer of MDS conditional
station licenses prior to completion of construction of facility).
These existing anti-trafficking provisions will continue to apply to
MDS conditional station licenses granted prior to the institution of
competitive bidding procedures. Consistent with the Second Report and
Order, however, the existing MDS-specific anti-trafficking provisions
will not apply to BTA authorizations and MDS conditional station
licenses granted within auctioned BTA service areas.
125. With regard to BTA authorizations obtained by auction outside
of the designated entity context, an applicant seeking approval for an
assignment or transfer of control of a BTA authorization within three
years of receipt of such authorization by means of competitive bidding
must, together with its assignment or transfer application, file with
the Commission a statement indicating that its authorization 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 received in return for the assignment or transfer
of the authorization. We will give particular scrutiny to auction
winners who have not yet begun commercial service within their BTA
service areas and who seek approval for an assignment or transfer of
control of their authorizations within three years after
[[Page 36546]]
the receipt of such authorizations, in order to determine if any
unforeseen problems relating to unjust enrichment have arisen outside
the designated entity context. See Second Report and Order at 2385-
2386; 47 CFR 1.2111(a).
126. Construction Build-out Requirements. Congress has directed
that the Commission, in implementing auction procedures, ``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). In the Second
Report and Order, we decided that it was generally unnecessary to
impose additional construction build-out or other performance
requirements for auctionable services beyond those already provided in
service rules. Id. at 2386. However, following a review of our existing
MDS rules, we determined to alter the construction requirements that
will be applicable to the holders of BTA authorizations obtained by
competitive bidding.
127. Our current rules require the completion of construction of
MDS stations within twelve months from the date of the conditional
station license grant. 47 CFR 21.43. We will continue to apply this
existing requirement to MDS conditional station licenses granted prior
to the institution of competitive bidding procedures. We will not,
however, apply this twelve month construction requirement to MDS
conditional station licenses granted in the future in the BTA service
areas of auction winners. Instead, we will require the holders of BTA
authorizations to meet the five year build-out requirements set forth
at para. 31.
128. We believe that this change in our construction requirements
is necessitated by our decision to grant BTA-based authorizations to
MDS auction winners. Our goal in imposing any construction or other
performance requirement is to insure that each auction winner provides
service throughout its BTA. We believe that the imposition of a general
BTA-wide build-out requirement will better achieve this goal than our
continued imposition of a twelve month construction requirement on each
particular MDS facility within the BTA.
129. Rules Prohibiting Collusion. In the generic auction rules, we
adopted special provisions to prevent collusive conduct in the context
of competitive bidding. 47 CFR 1.2105(c). We indicated that such rules
would serve the objectives of the Budget Act by preventing parties,
especially larger firms, from agreeing in advance to bidding strategies
that might divide the market according to their strategic interests and
to the disadvantage of other bidders. Such rules could also strengthen
confidence in the bidding process. Second Report and Order at 2386.
These rules apply to all auctionable services, including MDS.
Applicants are required to identify in an exhibit to their short-form
applications any parties with whom they have entered into any
consortium arrangements, joint ventures, partnerships or other
agreements or understandings which relate to the BTA service areas
being auctioned. Applicants are also required to certify that they have
not entered into any explicit or implicit agreements, arrangements or
understandings with any parties, other than those identified, regarding
the amount of their bid, bidding strategies or the particular BTA
service areas on which they will or will not bid. See 47 CFR
1.2105(a)(2)(viii) and (ix). Except as otherwise provided in para.130,
after the short-form applications are filed and prior to the time the
winning bidder has made its required down payment, all applicants are
prohibited from cooperating, collaborating, discussing or disclosing in
any manner the substance of their bids or bidding strategies, or
discussing settlement agreements, with other applicants, unless such
applicants are members of a bidding consortium or other joint bidding
arrangement identified on the applicants' short-form application. See
47 CFR 1.2105(c)(1). Communications among applicants concerning matters
unrelated to the MDS auction will, however, be permitted after the
filing of short-form applications. See Fourth Memorandum Opinion and
Order in PP Docket No. 93-253, 9 FCC Rcd 6858, 6869 (1994), 59 Fed.
Reg. 53364 (Oct. 24, 1994).
130. Despite the restrictions set forth in para.129, applicants may
amend their short-form applications to reflect formation of bidding
consortia or changes in ownership after the short-form application
filing deadline has passed, provided such changes do not result in a
change in control of the applicant, and provided that the parties
forming consortia or entering into ownership agreements have not
applied to bid on the same BTA service areas. In addition, after the
filing of short-form applications, applicants may make agreements to
bid jointly for BTA service areas, provided the parties to the
agreement have not applied for the same BTA service areas. A holder of
a non-controlling attributable interest in an entity submitting a
short-form application may also, following the filing of the short-form
application and under certain conditions specified in 47 CFR
1.2105(c)(4), acquire an ownership interest in, form a consortium with,
or enter into a joint bidding arrangement with, other applicants for
the same BTA service areas. To reflect these changes in ownership or in
the membership of consortia or joint bidding arrangements, applicants
must amend their short-form applications by submitting a revised short-
form, filed within two business days of any such change; such
modifications will not be considered major amendments of the
applications. However, any amendment which results in the change of
control of an applicant will be considered a major amendment of the
short-form. See supra para.100; 47 CFR 1.2105(c)(2), (3) and (4);
Second Memorandum Opinion and Order at 7254; Memorandum Opinion and
Order in PP Docket No. 93-253, 9 FCC Rcd 7684, 7688-7689 (1994), 59
Fed. Reg. 64159 (Dec. 13, 1994). Finally the winning bidder for each
BTA service area must, as an exhibit to its initial long-form
application or statement of intention, explain the terms and conditions
and parties involved in any bidding consortia, joint venture,
partnership or other agreement it had entered into relating to the
competitive bidding process prior to the time bidding was completed.
See 47 CFR 1.2107(d).
131. Where specific instances of collusion in the competitive
bidding process are alleged, the Commission may conduct an
investigation or refer such complaints to the United States Department
of Justice for investigation. Bidders who are found to have violated
the antitrust laws or the Commission's rules in connection with
participation in the auction process may, among other remedies, be
subject to the loss of their up front payment, down payment or their
full bid amount, cancellation of their BTA authorizations, and may be
prohibited from participating in future auctions. See Second Report and
Order at 2388; 47 CFR 1.2109(c).
7. Treatment of Designated Entities
132. General Considerations. Section 309(j) of the Communications
Act provides that the Commission ``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.'' 47 U.S.C. 309(j)(4)(D). To achieve this
congressional goal, the
[[Page 36547]]
statute directs the Commission to ``consider the use of tax
certificates, bidding preferences, and other procedures.'' Id. In
addition, Section 309(j)(3)(B) instructs the Commission, in
establishing eligibility criteria and bidding methodologies, to promote
``economic opportunity and competition * * * 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,'' which are collectively referred to as ``designated
entities.'' 47 U.S.C. 309(j)(3)(B); 47 CFR 1.2110. Section 309(j)(4)(A)
further provides that to promote these objectives, the Commission shall
consider alternative payment schedules, including lump sums or
guaranteed installment payments. 47 U.S.C. 309(j)(4)(A).
133. In instructing the Commission to ensure the opportunity for
designated entities to participate in auctions and spectrum-based
services, Congress was aware of the problems that designated entities
would have in competing against large, well-capitalized companies in
auctions and the difficulties they encounter in accessing capital. For
example, the legislative history accompanying our grant of auction
authority states generally that the Commission's regulations ``must
promote economic opportunity and competition,'' and ``[t]he Commission
will realize these goals by avoiding excessive concentration of
licenses and by disseminating licenses among a wide variety of
applicants, including small businesses and businesses owned by members
of minority groups and women. H.R. Rep. No. 111, 103d Cong., 1st Sess.
254 (1993) (House Report). The House Report states that the House
Committee was concerned that, ``unless the Commission is sensitive to
the need to maintain opportunities for small businesses, competitive
bidding could result in a significant increase in concentration in the
telecommunications industries.'' Id. More specifically, the House
Committee was concerned that the adoption of competitive bidding should
not have the effect of ``excluding small businesses from the
Commission's licensing procedures,'' and anticipated that the
Commission would adopt regulations to ensure that small businesses
would ``continue to have opportunities to become Commission
licensees.'' Id. at 255.
134. Consistent with Congress' concern that auctions not operate to
exclude small businesses, the provisions relating to installment
payments in Section 309(j) were clearly intended to assist small
businesses. The House Report states that these provisions were drafted
to ``ensure that all small businesses will be covered by the
Commission's regulations, including those owned by members of minority
groups and women.'' Id. at 255. It also states that the provisions in
Section 309(j)(4)(A) pertaining to installment payments were intended
to promote economic opportunity by ensuring that competitive bidding
does not inadvertently favor incumbents with ``deep pockets'' ``over
new companies or start-ups.'' Id.
135. Moreover, with regard to access to capital, Congress had made
specific findings in the Small Business Credit and Business Opportunity
Enhancement Act of 1992, that ``small business concerns, which
represent higher degrees of risk in financial markets than do large
businesses, are experiencing increased difficulties in obtaining
credit.'' Small Business Credit and Business Opportunity Enhancement
Act of 1992, Pub. L. No. 102-366, Sec. 331(a)(3), 106 Stat. 986, 1007
(1992). As a result of these difficulties, Congress resolved to
consider carefully legislation and regulations ``to ensure that small
business concerns are not negatively impacted'' and to give priority to
passage of ``legislation and regulations that enhance the viability of
small business concerns.'' Id. at Sec. 331(b)(2) & (3).
136. In our initial implementation of Section 309(j), the
Commission established in the Second Report and Order eligibility
criteria and general rules that would govern the special measures for
small businesses, rural telephone companies, and businesses owned by
minorities and women. We also identified several measures, including
installment payments, bidding credits and spectrum set-asides, that we
could choose from in formulating the rules for auctionable spectrum-
based services. In addition, we established rules to prevent unjust
enrichment by designated entities seeking to assign or transfer
licenses obtained through use of one of these special measures. See
Second Report and Order at 2388-2400.
137. In adopting provisions to provide designated entities
opportunities in MDS, we note that, while Section 309(j) lists the
various designated entities together, the statute does not indicate
that each group must be afforded the same type of treatment. See
Competitive Bidding Notice at 7646. We have consistently emphasized
that the provisions applicable to particular designated entities would
vary depending on the nature of each individual service. In particular,
we have evaluated the capital requirements, the nature of the expected
pool of bidders, and other characteristics of each service to determine
the appropriate measures to achieve the objectives of the auction
statute. See Second Memorandum Opinion and Order at 7256; Fourth Report
and Order at 2336.
138. With regard to MDS, we note that this service differs from the
other services that have been auctioned to date in several important
ways. First, unlike PCS and IVDS, wireless cable is a heavily
encumbered service with many of the channels in most major markets
already occupied. Given the limited amount of remaining usable spectrum
and the need to protect incumbents from harmful interference, we
anticipate that the BTA service areas will be auctioned for relatively
modest amounts, particularly in comparison to the sums bid in the PCS
auctions. Second, it is necessary for MDS channels within a geographic
area to be aggregated under the control of a single wireless cable
operator, to allow it to compete with wired cable television systems in
the same area. Notice at 7667. Thus, our goal in this proceeding is not
to set the stage for the development of an entirely new industry, such
as PCS, but to allow the progression and rationalization of the
existing wireless cable industry. Accordingly, we cannot adopt
designated entity rules that would hinder the accumulation of MDS
channels within BTAs by entities financially capable of operating
wireless cable systems and providing competitive service to the public.
139. In this Report and Order we adopt specific designated entity
measures appropriate for MDS, based on the record in this proceeding
and on the unique characteristics of the service as identified above.
Specifically, we have determined to make installment payments, reduced
upfront payments and bidding credits available to small businesses,
including those owned by minorities and women, and to small business
consortia. We also adopt the unjust enrichment provisions set forth in
the Second Report and Order applicable to installment payments and
bidding credits. Id. at 2395; 47 CFR 1.2111(c) & (d). We decline to
adopt spectrum set-asides. Such a measure is inappropriate for MDS,
given the heavily encumbered nature of this
[[Page 36548]]
service and the lack of sizable, discrete blocks of spectrum to
auction.\55\
\55\ This decision is consistent with the Commission's previous
determination that, due to the small amount of spectrum available,
spectrum set-asides were not appropriate for IVDS. See Fourth Report
and Order at 2336.
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140. Entities Eligible for Special Measures. Although we will offer
installment financing, reduced upfront payments and bidding credits to
small businesses, we have concluded that the provision of additional
measures for rural telephone companies is unnecessary in the MDS
auction. Congress intended by including rural telephone companies in
the category of designated entities to ensure that rural consumers
received the benefit of new technologies. See 47 U.S.C. 309(j)(3)(A);
Fourth Report and Order at 2337 n.66. However, many rural consumers and
residents of smaller communities already receive the benefit of
wireless cable services. Numerous wireless cable operators focus on
uncabled rural areas and small towns, and rural states, such as North
and South Dakota, Oklahoma, and Nebraska, have among the highest
numbers of operating and planned wireless cable systems. Moreover,
given the anticipated modest auction prices of authorizations for
sparsely populated rural BTAs, we do not believe that rural telephone
companies will need either a special exemption from the MDS competitive
bidding process or additional measures provided to them in order to
compete in the auction process. Rural telephone companies will, of
course, be eligible for the incentives provided to small businesses
generally if they meet those eligibility requirements. This
determination not to provide additional measures for rural telephone
companies is consistent with the Commission's decisions in the PCS and
IVDS auction rules.
141. In addition, we expect rural telephone companies to take
advantage of the partitioning option described above at Paras. 34-35,
so they will not have to bid on entire BTAs to obtain authorizations
for the rural areas they are interested in serving. Thus, rural
telephone companies should be able to obtain authorizations for
partitioned BTAs by private negotiation and agreement with auction
winners. Rural telephone companies could also form bidding consortia to
participate in MDS auctions, and then partition the BTAs won among
consortia participants. In our opinion, the offering of this broad
partitioning option to all interested entities, including rural
telephone companies, also serves to make the provision of additional
measures for rural telephone companies unnecessary.
142. Although we will offer installment financing, reduced upfront
payments and bidding credits to minority and women-owned small
businesses, we have also for several reasons determined, in the absence
of evidence in the record to the contrary, that the provision of
special measures to minority and women-owned enterprises, regardless of
size, is unnecessary. First, we note that installment financing,
reduced upfront payments and bidding credits will not be limited to
certain BTA service areas, but will be available to small businesses
for every BTA service area to be auctioned. We believe that broadening
the scope of opportunity for small businesses in this manner should
also create substantial opportunity for minority and women-owned
enterprises. Census data has shown that approximately ninety-nine
percent of all women-owned and ninety-nine percent of all minority-
owned businesses generate annual receipts of one million dollars or
less.\56\ Thus, we expect that virtually all minority and women-owned
enterprises will be eligible for the special measures adopted herein
for small businesses. Moreover, we note that we are permitting
consortia of small businesses to utilize installment financing, reduced
upfront payments and bidding credits, if each member of the consortia
is individually eligible. Small minority and women-owned enterprises
may therefore join together in consortia to participate in MDS auctions
and still remain eligible for all special measures available to small
businesses individually.
\56\ See Women-Owned Businesses, WB 87-1, 1987 Economic Census,
at 144, Table 8; Survey of Minority-Owned Business Enterprises, MB
87-4, 1987 Economic Census, at 81-82, Table 8.
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143. Second, we believe that small minority and women-owned
entities, with the various incentives they will receive as small
businesses, should be able to participate successfully in competitive
bidding, given the anticipated relatively modest value of many of the
BTA service areas to be auctioned. Due to the heavily encumbered nature
of the wireless cable industry, the Commission has estimated that the
amounts bid in the MDS auction will not approach the levels reached in
earlier auctions, particularly PCS. Thus, additional incentives for
minority and women-owned enterprises, regardless of their size, appear
less necessary for MDS than for other auctionable services.
144. Moreover, we note that minority and women-owned entities may
also, like rural telephone companies, take advantage of the broad
partitioning option set forth above at Paras. 34-35. Unlike other
services that have limited the availability of partitioning to rural
telephone companies, we are allowing any type of entity to negotiate
with auction winners to obtain authorizations for partitioned BTAs.
Thus, minority and women-owned entities that do not wish to bid on
entire BTAs should be able to acquire authorizations for partitioned
portions of those service areas.
145. This determination not to provide additional measures for
minority and women-owned companies, regardless of their size, is
consistent with the Commission's position in other auction rules. In
the Fifth Report and Order, we specifically observed that, due to the
expected high auction value of the PCS spectrum and the substantial
build-out costs, it would be necessary to provide additional assistance
to women and minority enterprises to ensure their opportunity to
participate in broadband PCS than would be ``necessary in other, less
costly spectrum-based services.'' Id. at 5572-5573. We believe that the
installment financing, reduced upfront payments and bidding credits
available to all small businesses, along with the broad partitioning
option, should be sufficient to give minority and women-owned entities
the opportunity to participate in the ``less costly'' MDS auction.
146. Installment Payments. In this Report and Order, we approve
installment financing for small businesses. Permitting a winning bidder
to pay through installments is the equivalent of having the government
extend credit to the bidder. With this installment financing option, a
prospective bidder may not need to rely as heavily on private financing
either before or after an auction. Given the difficulties experienced
by small businesses in obtaining credit (see supra para. 135), this
governmental extension of credit should be particularly valuable to
small businesses that are winning bidders in spectrum auctions.
Installment payments should therefore be both an effective method of
promoting the participation of designated entities in the provision of
spectrum-based services and a means of distributing licenses and
services among geographic areas. Second Report and Order at 2389-2390.
In the Second Report and Order, we determined that installment payments
should be offered only to small businesses (including those owned by
minorities and women), and then only in instances where use of the
spectrum being auctioned was likely to match the business objectives of
bona
[[Page 36549]]
fide small businesses. Id. at 2390. We also specifically noted that the
legislative history of the Budget Act indicates that large enterprises
with established revenue streams are not intended the beneficiaries of
installment financing. Id. Given the considerable number of small
enterprises currently involved in the wireless cable industry, we
believe that MDS has offered, and will continue to offer, bona fide
business opportunities to small enterprises.
147. We will therefore permit the use of installment payment plans
in all MDS auctions, and follow the general procedures set forth in the
Second Report and Order. The installment payment option will allow a
small business to pay the full amount of its winning bid in
installments (less the upfront payment and the down payment, half of
which is due five business days after notification to the winning
bidder and the other half five days after the public notice stating
that the BTA authorization is ready for issuance). Only interest
payments will be due for the first two years, with principal and
interest both being amortized over the remaining years of the ten year
period running from the date that the BTA authorization is issued.
Also, interest charges will be fixed at the time of issuance of the BTA
authorization at a rate equal to that of ten year U.S. Treasury notes,
plus two and one half (2.5) percent. See Second Report and Order at
2390. Timely payments of all installments will be a condition of the
issuance of the BTA authorization. Failure to make such timely payments
on or before the date due is also grounds for cancellation of the BTA
authorization, although limited grace periods for defaulting small
businesses may be considered on a case-by-case basis. See id. at 2391.
If a small business making installment payments seeks to assign or
transfer its BTA authorization to a non-small business entity, we will
require payment of any remaining unpaid principal balance, and of any
unpaid interest accrued, as a condition of the assignment or transfer.
See id. at 2395.
148. Reduced Upfront Payments. Upfront payment requirements are
designed to ensure that bidders are qualified and serious and to
provide the Commission with a source of funds in the event that it
becomes necessary to assess default or bid withdrawal payments. See
Second Report and Order at 2377-2379. Although the Commission has not
chosen to create a general exception to our upfront payment
requirements for designated entity applicants (see id. at 2380), we
have previously allowed designated entities to make reduced upfront
payments. See, e.g., Fifth Report and Order at 5600. We believe that
allowing small businesses to make reduced upfront payments should
facilitate auction participation by capital-constrained wireless cable
operators (see infra para. 153), and permit them to conserve resources
for building out their systems after the MDS auction.
149. Specifically, we will for the MDS auction reduce the upfront
payment requirement by twenty-five percent for small businesses and for
small business consortia. See Fifth Report and Order at 5600 (reducing
upfront payment for bidders in entrepreneurs' block PCS auction by
twenty-five percent). As discussed in para. 104, prior to the MDS
auction, the Mass Media Bureau, in conjunction with the Wireless
Telecommunications Bureau, will publish a public notice listing the
upfront payment amount corresponding to each BTA service area to be
auctioned. A prospective bidder claiming eligibility as a small
business and wishing to bid on a particular BTA service area will thus
be required to submit an upfront payment equal to seventy-five percent
of the upfront payment specified in the public notice for that BTA. We
believe that this reduction in the upfront payments for small
businesses will properly permit wireless cable operators to conserve
their capital for building out their systems and adding subscribers,
while still serving to discourage insincere or speculative bidding.
150. Bidding Credits. Given the difficulties faced by small
businesses in accessing capital (see supra para. 135), and based upon
our expectations as to the numbers and types of bidders that will
participate in the MDS auction, we conclude that a bidding credit is
appropriate for small businesses in the MDS auction. A bidding credit,
in effect, functions as a discount on the bid price a bidder will
actually have to pay to obtain a BTA authorization and, thus, will
address directly the financing obstacles encountered by small
businesses. A bidding credit should accordingly ``level the playing
field'' by helping small businesses, particularly incumbent wireless
cable operators, to compete effectively in the MDS auction against
larger enterprises, such as the large telecommunications carriers. We
also believe the offering of a bidding credit may aid small businesses
to more easily attract capital; specifically, outside investors may be
more eager to invest in a small wireless cable operator if that
operator will be benefited by a bidding credit in the MDS auction. For
these reasons, we believe that a bidding credit will have a significant
positive effect ,on the ability of small businesses to participate
successfully in an MDS auction.
151. We will offer a fifteen percent bidding credit to small
businesses, and to consortia of small businesses, bidding on any of the
BTA service areas available in the MDS auction. Given the encumbered
nature of MDS and the presence of incumbents in most BTAs, it appears
impractical to restrict the availability of bidding credits to certain
channels or spectrum blocks. Additionally, we believe that we would
greater opportunities for small businesses, including incumbent
wireless cable operators, if we offer bidding credits on all BTA
service areas. We feel that these bidding credits will help achieve the
objectives of Congress by providing small businesses, including women-
owned and minority-owned small businesses, with a meaningful
opportunity to obtain BTA authorizations and to conserve scarce capital
for building out their wireless cable systems after the auction.
Although other services have provided larger bidding credits to certain
designated entities, we believe that the fifteen percent credit is
sufficient for MDS because, unlike these other services, we will offer
this bidding credit on all authorizations to be awarded to small
businesses.\57\
\57\ See, e.g., Third Report and Order at 2970 (providing
twenty-five percent bidding credit on specified channels to certain
designated entities in nationwide narrowband PCS auction); Third
Memorandum Opinion and Order at 201 (providing forty percent bidding
credit on specified channels to certain designated entities in
regional narrowband PCS auction); Fourth Report and Order at 2337
(offering twenty-five percent bidding credit on one of two IVDS
licenses available in each geographic license area). See also Second
Report and Order and Second Further Notice of Proposed Rulemaking in
PR Docket No. 89-553, PP Docket No. 93-253, and GN Docket No. 93-
252, FCC 95-159 (released April 17, 1995), 60 FR 21987 (May 4,
1995), at para. 130 (proposing to provide ten percent bidding credit
on all 900 MHz Specialized Mobile Radio channel blocks to be
auctioned).
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152. To prevent unjust enrichment by small businesses trafficking
in BTA authorizations acquired through the use of bidding credits, we
will require small businesses to reimburse the government, as set forth
below, if BTA authorizations are transferred or assigned to entities
that do not fulfill the small business eligibility requirements. See
Second Report and Order at 2395. Small businesses seeking to transfer
or assign a BTA authorization to an entity not meeting the definition
of small business will be required to reimburse the government for the
amount of the bidding credit, plus interest at the rate
[[Page 36550]]
imposed for installment financing at the time the authorization was
awarded, before transfer or assignment will be permitted. The amount of
the required reimbursement will be reduced over time. A transfer or
assignment in the first two years after issuance of the authorization
will result in a reimbursement of one hundred percent of the value of
the bidding credit; during year three, of seventy-five percent of the
bidding credit; in year four, of fifty percent; in year five, of
twenty-five percent; and thereafter, no reimbursement.
153. Eligibility for Installment Payments, Reduced Upfront Payment
and Bidding Credits. In the Second Memorandum Opinion and Order, the
Commission amended its generic auction rules to replace the small
business definition used by the Small Business Administration (SBA)
with a provision enabling the Commission to establish a small business
definition in the context of each particular service, taking into
consideration the characteristics and capital requirements of the
particular service. See 47 CFR 1.2110(b)(1). We conclude that the
definition adopted for the narrowband and broadband PCS is also
appropriate for MDS. Under this approach, a small business is an entity
that, together with its affiliates, has annual average gross revenues
for the three preceding years not in excess of $40 million. We will
also allow consortia of small businesses, each member of which
individually meets the $40 million gross revenue standard, to qualify
for installment payments, reduced upfront payments and bidding credits.
See 47 CFR 1.2110(j). Consideration of the capital requirements of MDS
has persuaded us to adopt this definition of small business. Wireless
cable, although significantly less capital intensive than traditional
coaxial cable, is not inexpensive. Tower and head end expenses may
range from under $1 million for a small rural system to $2 to $3
million per system in major markets, and the cost of adding each new
subscriber has been estimated to be $400 to $600. Thus, even though the
cost of acquiring BTA authorizations at auction are estimated to be
relatively modest in comparison to other services, considerable capital
is nonetheless required to construct a competitive wireless cable
system. Moreover, the wireless cable industry has historically had
difficulty in obtaining financing, and the future success of wireless
cable is crucially dependent upon its ability to obtain additional
financing.\58\
\58\ See Gerard Klauer Mattison & Co., Inc., The Wireless Cable
Industry: Summary of 1994 and Outlook for 1995 (Dec. 22, 1994) at 2;
Dillon Read & Co. Inc., The Wireless Cable Industry (Aug. 22, 1994)
at 10; Gerard Klauer Mattison & Co., Inc., The Wireless Cable
Industry (Jan. 21, 1993) at 4.
154. Given the capital requirements of the wireless cable industry
and its past difficulties in attracting capital, we believe that the
$40 million gross revenue standard is appropriate for MDS. If the
Commission were to adopt a significantly lower standard for the
definition of small business, we would exclude companies with the
financial wherewithal to operate wireless cable systems competitive
with cable television from eligibility for installment payments,
reduced upfront payments and bidding credits. See Second Memorandum
Opinion and Order at 7268. We also believe that the standard SBA
definition of small business--an entity with no more than $6 million
net worth and no more than $2 million in annual profits--is similarly
overly restrictive,\59\ and we accordingly decline to adopt such
definition of small business for MDS. We therefore conclude that the
$40 million gross revenue standard utilized by other services is
appropriate, as it would not exclude enterprises in need of special
incentives to compete successfully in the wireless cable industry, but
would not provide such incentives to larger telecommunications
enterprises with well-established revenue streams and easier access to
capital.
\59\ See Second Memorandum Opinion and Order at 7268; Third
Memorandum Opinion and Order at 195; Fifth Report and Order at 5606-
5608.
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155. Records Maintenance and Audits. All holders of BTA
authorizations acquired by auction that claim designated entity status
will be required to maintain, at their principal place of business or
with their designated agent, and updated documentary file of ownership
and revenue information necessary to establish their status. Holders of
BTA authorizations or their successors in interest must maintain such
files for a ten year period running from the date that their BTA
authorizations are issued. The files must be made available to the
Commission upon request.
156. BTA authorization holders claiming eligibility under
designated entity provisions will be subject to audits by the
Commission, using in-house or contract resources. Selection for an
audit may be random, on-information, or on the basis of other factors.
Consent to such audits is part of the certification included in the
short-form application. Such consent will include consent to the audit
of the holders' books, documents and other material (including
accounting procedures and practices), regardless of form or type,
sufficient to confirm that such holders' representations are, and
remain, accurate. Such consent will also include inspection at all
reasonable times of the facilities, or parts thereof, engaged in
providing and transacting business or keeping records regarding
licensed MDS offerings, and will also include consent to the
interviewing of principals, employees, customers, and suppliers of the
BTA authorization holders.
157. We believe that the above records maintenance and audit
provisions are necessary to prevent abuse of the special measures
offered to those MDS auction winners claiming designated entity status.
These provisions requiring the retention of records should not prove
overly burdensome, and they will help to ensure that only entities
eligible under the auction rules will be able to take advantage of the
designated entity measures.
158. Accordingly, it is ordered that, pursuant to the authority of
Sections 4(i) and (j), 301, 303(f), 303(g), 303(h), 303(j), 303(r),
307(c), 308(b), 309(j) and 403 of the Communications Act of 1934, as
amended, 47 U.S.C. Secs. 154(i), 154(j), 301, 303(f), 303(g), 303(h),
303(j), 303(r), 307(c), 308(b), 309(j), and 403, this Report and Order
is adopted, and Part 21 of the Commission's Rules are amended as set
forth herein.
159. It is further ordered that the rule amendments set forth
herein will become effective September 15, 1995.
160. It is further ordered that, upon approval by the Office of
Management and Budget, FCC Form 304 will supersede FCC Form 494.
List of Subjects in 47 CFR Part 21
Communications common carriers, Reporting and recordkeeping
requirements, Television.
Federal Communications Commission.
William F. Caton,
Acting Secretary.
Amendatory Text
Part 21 of Chapter I of Title 47 of the Code of Federal Regulations
is amended as follows:
PART 21--DOMESTIC PUBLIC FIXED RADIO SERVICES
1. The authority citation for Part 21 continues to read as follows:
Authority: Secs. 1, 2, 4, 201-205, 208, 215, 218, 303, 307, 313,
314, 403, 404, 410, 602;
[[Page 36551]]
48 Stat. 1064, 1066, 1070-1073, 1076, 1077, 1080, 1082, 1083, 1087,
1094, 1098, 1102, as amended; 47 U.S.C. 151, 154, 201-205, 208, 215,
218, 303, 307, 313, 314, 403, 602; 47 U.S.C. 552, 554.
Sec. 21.2 [Amended]
2. In Sec. 21.2, the following definitions are added in
alphabetical order to read as follows:
Sec. 21.2 Definitions.
* * * * *
Basic Trading Area (BTA). The geographic areas by which the
Multipoint Distribution Service is licensed. BTA boundaries are based
on the Rand McNally 1992 Commercial Atlas and Marketing Guide, 123rd
Edition, pp. 36-39, and include six additional BTA-like areas as
specified in Sec. 21.924(b).
BTA authorization holder. The individual or entity authorized by
the Commission to provide Multipoint Distribution Service to the
population of a BTA.
BTA service area. The area within the boundaries of a BTA to which
a BTA authorization holder may provide Multipoint Distribution Service.
This area excludes the protected service areas of incumbent MDS
stations and the registered receive sites of previously authorized and
proposed ITFS stations.
* * * * *
Incumbent. An MDS station that was authorized or proposed before
September 15, 1995, including those stations that are subsequently
modified, renewed or reinstated.
* * * * *
Partitioned service area authorization holder. The individual or
entity authorized by the Commission to provide Multipoint Distribution
Service to the population of a partitioned service area.
Partitioned service area (PSA). The area within the coterminous
boundaries of one or more counties or other geopolitical subdivisions,
drawn from a BTA, to which an authorization holder may provide
Multipoint Distribution Service or the area remaining in a BTA upon
partitioning any portion of that BTA. This area excludes the protected
service areas of incumbent MDS stations and the registered receive
sites of previously authorized and proposed ITFS stations.
* * * * *
3. Section 21.7 is amended by revising the first sentence of the
section to read as follows:
Sec. 21.7 Standard application form for domestic public fixed radio
service licenses.
Except for the Multipoint Distribution Service, FCC Form 494 (
``Application for a New and Modified Microwave Radio Station License
Under Part 21'' ) shall be submitted and a license granted for each
station prior to commencement of any proposed station construction.* *
*
Sec. 21.13 [Amended]
4. Section 21.13 is amended by revising paragraphs (a)(4) and (b)
introductory text to read as follows:
Sec. 21.13 General application requirements.
(a) * * *
(4) Except for applications in the Multipoint Distribution Service
filed on or after September 15, 1995, state specifically the reasons
why a grant of the proposal would serve the public interest,
convenience, and necessity.
* * * * *
(b) Applications in the Multipoint Distribution Service, the
Digital Electronic Message Service (DEMS) and the Point-to-Point
Microwave Service shall not cross-reference previously filed material.
Applications other than for the Multipoint Distribution Service, DEMS
and Point-to-Point Microwave Services may cross-reference previously
filed material where documents, exhibits or the lengthy showings
already on file with the Commission contain information which is
required by an application form and may specifically refer to such
information, if:
* * * * *
Sec. 21.15 [Amended]
5. Section 21.15 is amended by revising the first sentence of
paragraph (a)(1) and by revising paragraphs (a)(3),(c), (e),
introductory text and (g) to read as follows:
Sec. 21.15 Technical content of applications.
* * * * *
(a) (1) Except in the case of applicants for Multipoint
Distribution Service, applicants proposing a new station location
(including receive-only stations and passive repeaters) must indicate
whether the station site is owned. * * *
* * * * *
(3) Except for BTA and PSA authorization holders, Multipoint
Distribution Service applicants proposing a new station location must
certify the proposed station site will be available to the applicant
for timely construction of the facilities during the initial
construction period.
* * * * *
(c) Each application involving a new or modified antenna supporting
structure or passive facility, the addition or removal of an antenna,
or the repositioning of an authorized antenna for a station or receive-
only facility (except receive-only facilities in Multipoint
Distribution Service and the Digital Electronic Message Service) must
be accompanied by a vertical profile sketch of the total structure
depicting its structural nature and clearly indicating the ground
elevation (above sea level) at the structure site, the overall height
of the structure above ground (including obstruction lights when
required, lightning rods, etc. and, if mounted on a building, its
overall height above the building. The proposed antenna on the
structure must be clearly identified and its height above-ground
(measured to the center of radiation) clearly indicated. Alternatively,
applicants in the Multipoint Distribution Service who filed
applications on or after September 15, 1995 may provide this
information in the MDS long-form application.
* * * * *
(e) Except for applicants in the Multipoint Distribution Service
who filed applications on or after September 15, 1995, an applicant
proposing construction of one or more new stations or modification of
existing stations where substantial changes in the operation or
maintenance procedures are involved must submit a showing of the
general maintenance procedures involved to insure the rendition of good
public communications service. The showing should include but need not
be limited to the following.
* * * * *
(g) Except for applications in the Multipoint Distribution Service
filed on or after September 15, 1995, each application in the Point-to-
Point Radio, Local Television Transmission and Digital Electronic
Message Service (excluding user stations) proposing a new or
replacement antenna (excluding omni-directional antennas) shall include
and antenna radiation pattern showing the antenna power gain
distribution in the horizontal plane expressed in decibels, unless such
pattern is known to be on file with the Commission in which case the
applicant may reference in its application the FCC-ID number that
indicates that the pattern is on file with the Commission, Multipoint
Distribution Service applicants who filed applications on or after
September 15, 1995 must provide related information in completing an
MDS long-form application.
* * * * *
[[Page 36552]]
Sec. 21.27 [Amended]
6. In Sec. 21.27 paragraphs (a)(7) and (8) are added to read as
follows:
Sec. 21.27 Public notice period.
(a) * * *
(7) The BTAs designated for licensing through the competitive
bidding process and the filing date for short-form applications for
those areas;
(8) the auction winners in the competitive bidding process;
* * * * *
7. Section 21.35 is amended by revising paragraph (a) introductory
text to read as follows:
Sec. 21.35 Comparative evaluation of mutually exclusive applications.
(a) In order to expedite action on mutually exclusive applications
in services under this rules part where the competitive bidding process
or random selection process do not apply, the applicants may request
the Commission to consider their applications without a formal hearing
in accordance with the summary procedure outlined in paragraph (b) in
this section if:
* * * * *
Sec. 21.41 [Amended]
8. In Sec. 21.41, paragraph (b)(7) is added to read as follows:
Sec. 21.41 Special processing of applications for minor facility
modifications.
* * * * *
(b) * * *
(7) In the Multipoint Distribution Service, the modified facility
would not produce a power flux density that exceeds--73 dBW/m2,
pursuant to Secs. 21.902 and 21.939 of this subpart, at locations on
the boundaries of protected service areas to which there is an
unobstructed signal path.
* * * * *
Sec. 21.42 [Amended]
9. Section 21.42 is amended by revising paragraphs (a), (b)(3),
(c)(3)(ii) and (d), and by adding paragraphs (b)(4) and (c)(3)(iii) to
read as follows:
Sec. 21.42 Certain modifications not requiring prior authorization.
(a) Equipment in an authorized radio station may be replaced
without prior authorization or notification if:
(1) The replacement equipment is identical (i.e., same manufacturer
and model number) with the replacement equipment;
(2) For the Multipoint Distribution Service, the replacement
transmitter, transmitting antenna, transmission line loss and/or
devices between the transmitter and antenna, or combinations of the
above, do not change the EIRP of a station in any direction.
(b) * * *
(3) The Commission is notified of changes made to facilities by the
submission of a completed FCC Form 494, or for the Multipoint
Distribution Service, and MDS long-form application, as applicable,
within thirty days after the changes are made.
(4) In the Multipoint Distribution Service, the modified facility
would not produce a power flux density at the protected service area
boundary that exceeds--73 dBW/m2, pursuant to Secs. 21.902 and 21.939
of this subpart.
(c) * * *
(3) * * *
(i) * * *
(ii) For Digital Electronic Message Service, the new antenna
conforms with Sec. 21.906 and the gain of the new antenna does not
exceed that of the previously authorized antenna by more than one dB in
any direction.
(iii) For the Multipoint Distribution Service, the new antenna
conforms with Sec. 21.906 and the EIRP resulting from the new antenna
does not exceed that resulting from the new antenna does not exceed
that resulting from the previously authorized antenna by more than one
dB in any direction.
* * * * *
(d) Licensees may be correct erroneous information on a license
which does not involve a major change (i.e., a change that would be
classified as a major amendment as defined Sec. 21.23) without
obtaining prior Commission approval by filing a completed FCC Form 494,
or for the Multipoint Distribution Service licensees, by filing the MDS
long-form application.
Sec. 21.43 [Amended]
10. Section 21.43 is amended by revising the first sentence of
paragraph (a) to read as follows:
Sec. 21.43 Period of Construction; certification of completion of
construction.
(a) Except for Multipoint Distribution Service Station licenses
granted to BTA and PSA authorization holders, each license for a radio
station for the services included in this Part shall specify as a
condition therein the period during which construction of facilities
will be completed and the station made ready for operation. * * *
* * * * *
Sec. 21.44 [Amended]
11. Section 21.44 is amended by revising paragraph (a)(1) to read
as follows:
Sec. 21.44 Forfeiture and termination of station authorization.
(a) * * *
(1) The expiration of the construction period specified therein,
where applicable, or after such additional time as may be authorized by
the Commission, unless within 5 days after that date certification of
completion of construction has been filed with the Commission pursuant
to Sec. 21.43;
* * * * *
Sec. 21.900 [Amended]
12. Section 21.900 is amended by revising the concluding text to
read as follows:
Sec. 21.900 Eligibility.
* * * * *
(c) * * *
The applicant shall state whether or not service will be provided on a
common carrier or non common carrier basis. In addition, a common
carrier applicant shall state whether there is any affiliation or
relationship to any intended or likely subscriber or program
originator.
Sec. 21.901 [Amended]
13. Section 21.901 is amended by revising the first sentence of
paragraph (d)(5) and by revising paragraph (d)(7) to read as follows:
Sec. 21.901 Frequencies.
* * * * *
(d) * * *
* * * * *
(5) Notwithstanding the provision of Sec. 21.31(a) all
applications, except for those filed on or after September 15, 1995,
that propose to locate transmission facilities within or within 24.1
kilometers (15 miles) of the border of a Standard Metropolitan
Statistical Area (SMSA) will be considered together. * * *
* * * * *
(7) All applications for frequencies in this band, except for those
filed on or after September 15, 1995, must contain a showing of how
interference with the operation of adjacent channels will be avoided
and what steps the applicant has taken to comply with Sec. 21.902(a) of
this part.
* * * * *
Sec. 21.902 [Amended]
14. Section 21.902 is amended by revising paragraphs (a), (b)
introductory text, (b)(1), (b)(3), (b)(4), (c) introductory text,
(c)(1), (c)(1)(i), (c)(2), (c)(3), (d), (f) introductory text, (g) and
(h), by removing paragraph (c)(5), and by adding paragraphs (b)(5),
(b)(6), (f)(4), (f)(5), (f)(6), and (f)(7), and by amending
[[Page 36553]]
paragraphs (f)(1) and (f)(2) by revising the second sentence to read as
follows:
Sec. 21.902 Frequency interference.
(a) All applicants, conditional licensees, and licensees shall make
exceptional efforts to avoid harmful interference to other users and to
avoid blocking potential adjacent channel use in the same city and
cochannel use in nearby cities. In areas where major cities are in
close proximity, careful consideration should be given to minimum power
requirements and to the location, height, and radiation pattern of the
transmitting antenna. Licensees, conditional licensees, and applicants
are expected to cooperate fully in attempting to resolve problems of
potential interference before bringing the matter to the attention of
the Commission.
(b) As a condition for use of frequency in this service, each
applicant, conditional licensee, and licensee is required to:
(1) Not enter into any lease or contract or otherwise take any
action that would unreasonably prohibit location of another station's
transmitting antenna at any given site inside its own protected service
area.
* * * * *
(3) Engineer the system to provide at least 45 dB of cochannel
interference protection within the 56.33 km (35 mile) protected service
area of any authorized or previously proposed station that transmit, or
may transmit, signals for standard television reception.
(4) Engineer the station to provide at least 0 dB of adjacent
channel interference protection within the 56.33 km (35 mile) protected
service area of any authorized or previously proposed station that
transmits, or may transmit, signals for standard television reception.
(5) (i) Engineer the station to limit the calculated free space
power flux density to -73 dBW/m2 at the boundary of a 56.33 km (35
mile) protected service area, where there is an unobstructed signal
path from the transmitting antenna to the boundary; or alternatively,
obtain the written consent of the entity authorized for the adjoining
area to exceed the -73 dBW/m2 limiting signal strength at the
common boundary.
(ii) In determining signal path conditions, the following shall be
used: a 9.1 meter (30 feet) receiving antenna height, the transmitting
antenna height, terrain elevations and 4/3 earth radius propagation
conditions.
(6) If a proposed station is within 80 km (50 miles) of the
Canadian or Mexican border, the station must be designed to meet the
requirements set forth in international treaties. (c) The following
interference studies must be prepared, must be available to the
Commission upon request, and may be submitted as part of any
application:
(1) An analysis of the potential for harmful interference within
the 56.33 km (35 mile) protected service areas of any authorized or
previously proposed incumbent station:
(i) if the coordinates of the applicant's proposed transmitter are
within 160.94 km (100 miles) of the center coordinates of any
authorized or previously proposed incumbent station with protected
service area of 56.33 km (35 miles) as specified in Sec. 21.902(d); or
* * * * *
(2) Applicants may design interference studies in any manner that
demonstrates the avoidance of harmful interference, as defined in this
subpart.
(i) In lieu of interference studies, applicants may submit in
accordance with Sec. 21.938 a written statement of no objection to the
operation of the MDS station.
(ii) The Commission may direct applicants to submit interference
studies of a specific nature.
(3) Except for new stations proposed in applications filed after
September 15, 1995, in the case of a proposal to operate a non-
colocated station within the protected service area of an authorized,
or previously proposed, adjacent channel station, an analysis that
identifies the areas within the protected service areas of both the
authorized or previously proposed adjacent channel station and the
proposed station that cannot be protected as specified in
Sec. 21.902(b)(4) and an explanation of why the proposed station cannot
be colocated with the existing or previously proposed station.
* * * * *
(d) (1) Subject to the limitations contained in paragraph (e) of
this section, each MDS station licensee shall be protected from harmful
electrical interference, as determined by the theoretical calculations,
for a protected service area of which the boundary will be 56.3255
kilometers (35 miles) from the transmitter site.
(2) As of September 15, 1995, the location of these protected
service area boundaries shall become fixed. The center of the circular
area shall be the geographic latitude and longitude of the transmitting
antenna site specified in station authorizations or previously proposed
applications filed at the Commission before September 15, 1995.
Subsequent transmitter site changes will not change the location of the
56.3255 kilometers (35 mile) protected service area boundaries.
* * * * *
(f) In addressing potential harmful interference in this service,
the following definitions, procedures and other criteria shall apply:
(1) * * * Harmful interference will be considered present when a
free space calculation for an unobstructed signal path determines that
this ratio is less than 45 dB.
(2) * * * Harmful interference will be considered present when a
free space calculation for an unobstructed signal path determines that
this ratio is less than 0 dB. * * *
* * * * *
(4) For purposes of this section, the received signal power level
(RSL)dBW at the output of the FCC reference receiving antenna is
obtained from the following formulas (or an equivalent adaptation):
(RSL)dBW=(EIRP)dBW-(LFS)dB+(GAR)dB
where the free space loss (LFS) is
(LFS)dB=20 log (4d/)dB
in which the parameters are defined as follows:
(RSL)dBW is the received power in decibels referenced to one
watt.
(EIRP)dBW is the equivalent isotropically radiated power in
decibels above one watt.
d is the distance of the signal path in meters.
is the wavelength of the signal in meters.
GAR is the dB gain of the reference receiving antenna above an
isotropic antenna (obtained from Figure 1 of this section.)
(5) A determination of signal path conditions shall use a 9.1
meters (30 feet) receiving antenna height, the transmitting antenna
height, terrain elevation, and assume 4/3 earth radius propagation
conditions.
(6) An application will not be accepted for filing if cochannel or
adjacent channel interference is predicted at the boundary of the 56.33
km (35 mile) protected service area of an authorized or previously
proposed incumbent station based on the following criteria:
(i) interference calculations shall be made only for directions
where there is an unobstructed signal path from the site of a proposed
station to the boundary of any protected area.
(ii) calculations of received power levels in units of dBW from the
proposed station will be made at one degree intervals around the
protected service area.
(iii) the assumed value of the desired signal level at the boundary
of an
[[Page 36554]]
incumbent station shall be -83 dBW, which is the calculated received
power in free space at a distance of 56.33 km (35 miles), given at EIRP
of 2000 watts and a receiver antenna gain of 20 dBi.
(iv) harmful interference will be considered to occur at locations
along the boundary wherever the ratio between the desired signal level
of -83 dBw and the received power from a proposed cochannel or adjacent
channel station is less than 45 dB or 0 dB for cochannel or adjacent
channel proposals, respectively.
(7) Alternatively, MDS applications will be accepted on the basis
of an executed written interference agreement between potentially
affected parties filed in accordance with Sec. 21.938.
(g)(1) All interference studies submitted pursuant to paragraph (c)
of this section must be served on all licensees, conditional licensees,
and applicants for the stations required to be studied by this section.
This service must include a copy of the FCC application and occur on or
before the date the application is filed with the Commission.
(2) MDS licensees, conditional licensees and applicants of
facilities with 56.33 km (35 mile) protected service areas shall notify
in writing the holders of authorizations for adjoining BTAs or PSAs of
application filings for modified station licenses, provided the
proposed facility would produce an unobstructed signal path to any
location within the adjoining BTA or PSA. This service must include a
copy of the FCC application and occur on or before the date the
application is filed with the Commission.
(h) For purposes of Sec. 21.31(a), an MDS application, except for
those applications filed on or after September 15, 1995, filed for a
facility that would cause harmful electrical interference within the
protected service area of any authorized or previously proposed station
will be presumed to be mutually exclusive with the application for such
authorized or previously proposed station.
* * * * *
Sec. 21.904 [Amended]
15. Section 21.904 is amended by revising paragraph (c) to read as
follows:
Sec. 21.904 Transmitter power.
* * * * *
(c) An increase in station transmitter power, above currently-
authorized or previously proposed values, to the maximum values
provided in paragraphs (a) and (b) of this section, may be authorized,
if the requested power increase would not cause harmful interference to
any authorized or previously proposed co-channel or adjacent-channel
station with a transmitter site within 80.5 kilometers (50 miles) of
the applicant's transmitter site, or if an applicant demonstrates that:
(1) A station, that must be protected from interference,
potentially could suffer interference that would be eliminated by
increasing the power of the interfered-with station; and
(2) The applicant requesting authorization of a power increase
agrees to pay all expenses associated with the increase in power to the
interfered-with station.
* * * * *
Sec. 21.913 [Amended]
16. Section 21.913 is amended by revising paragraphs (b), (c), (d),
(e) and (g)(8) to read as follows:
Sec. 21.913 Signal booster stations.
* * * * *
(b) In addition to the other application requirements of this part,
each application for a signal booster station that would retransmit an
MDS signal must certify that the proposed booster station site is
within the protected service area, as defined in Secs. 21.902(d) and
21.933, of the MDS station.
(c) In addition to the other application requirements of this part,
each application for a signal booster station that would retransmit an
MDS signal must state in the application that it has prepared a study
which demonstrates that the power flux density at the edge of the MDS
protected service area does not exceed -73.0 dBW/m2 at locations
for which there is an unobstructed signal path to the boundary.
(d) In addition to the other application requirements of this part,
each application for a signal booster station must state in the
application that is has prepared a study which demonstrates that the
proposed booster station will cause no harmful interference to co-
channel and adjacent-channel existing or previously-proposed ITFS and
MDS stations with transmitters within 80.5 kilometers (50 miles) of the
proposed booster station's transmitter site.
(e) In addition to the other application requirements of this part,
each application must include a written consent statement of the
licensee of each MDS, ITFS, and OFS station whose signal is
retransmitted.
* * * * *
(g) * * *
* * * * *
(8) The power flux density at the edge of the MDS station's
protected service area does not exceed -73.0 dBW/m2, if the signal
of an MDS station is repeated;
* * * * *
17. Sections 21.921 through 21.939 are added, Sections 21.940
through 21.949 are reserved, and Sections 21.950 through 21.961 are
added to read as follows: Subpart K--Multipoint Distribution Service
* * * * *
Sec.
21.921 Basis and purpose for electronic filing and competitive
bidding process.
21.922 Authorized frequencies.
21.923 Eligibility.
21.924 Service areas.
21.925 Applications for BTA authorizations and MDS station
licenses.
21.926 Amendments to long-form applications.
21.927 Sole bidding applicants.
21.928 Acceptability of short- and long-form applications.
21.929 Authorization period for station licenses.
21.930 Five-year build-out requirements.
21.931 Partitioned service areas (PSAs).
21.932 Forfeiture of incumbent MDS station licenses.
21.933 Protected service areas.
21.934 Assignment or transfer of control of BTA authorizations.
21.935 Assignment or transfer of control of station licenses within
a BTA.
21.936 Cancellation of authorization.
21.937 Negotiated interference protection.
21.938 BTA and PSA technical and interference provisions.
21.939 Harmful interference abatement.
21.940 through 21.949 [Reserved.]
21.950 MDS subject to competitive bidding.
21.951 MDS competitive bidding procedures.
21.952 Bidding application procedures.
21.953 Prohibition of collusion.
21.954 Submission of upfront payments.
21.955 Submission of down payments.
21.956 Filing of long-form applications or statements of intention.
21.957 Petitions to deny against long-form applications; comments
on statements of intention.
21.958 Full payment and issuance of BTA authorizations.
21.959 Withdrawal, default and disqualification.
21.960 Designated entity provisions for MDS.
21.961 Definitions applicable to designated entity provisions.
Sec. 21.921 Basis and purpose for electronic filing and competitive
bidding process.
(a) Basis. The rules for competitive biding procedures for the
Multipoint Distribution Service (MDS) in this part are promulgated
under the provisions of the Communications Act of 1934, as amended,
which vests authority in the Federal Communications Commission to
regulate radio transmission and to issue licenses for radio stations,
and Sec. 309(j) of the Act, which vests authority
[[Page 36555]]
in the Commission to conduct competitive bidding.
(b) Purpose. This part states the conditions under which portions
of the radio spectrum are made available and licensed for Multipoint
Distribution Service via the competitive bidding procedures.
(c) Scope. The rules in this part apply only to authorizations and
station licenses granted under the competitive bidding procedures of
this section. This subpart contains some of the procedures and
requirements for the issuance of authorizations to construct and
operate multipoint distribution services. One also should consult Part
1, Subpart Q of the Commission's rules, Secs. 21.1 through 21.406 and
21.900 through 21.920 of this Part, and other Commission rules of
importance with respect to the licensing and operation of MDS stations.
Sec. 21.922 Authorized frequencies.
The frequencies in the MDS service through the competitive bidding
process are in the frequency allocations table of Sec. 21.901 of this
Part.
Sec. 21.923 Eligibility.
Any individual or entity, other than those precluded by Secs. 21.4
and 21.912 of this Part, is eligible to receive a Basic Trading Area
(BTA) authorization and a station license for each individual MDS
station within the BTA. There is no restriction on the number of BTA
authorizations or MDS station licenses, including multiple cochannel
station licenses, sought by or awarded to a qualified individual or
entity.
Sec. 21.924 Service areas.
(a) MDS service areas are regional Basic Trading Areas (BTAs) which
are based on the Rand McNally 1992 Commercial Atlas & Marketing Guide,
123rd Edition, at pages 38-39. The BTA Map is available for public
inspection at the public reference room, Multipoint Distribution
Service, Video Services Division, Mass Media Bureau, Room 207, 2033 M
Street, NW., Washington, DC.
(b) The following additions will be available for licensing
separately as BTA-like areas: American Samoa; Guam; Northern Mariana
Islands; San Juan, Puerto Rico; Mayaguez/Aguadilla-Ponce, Puerto Rico;
and the United States Virgin Islands.
(c) The area within the boundaries of a BTA to which a BTA
authorization holder may provide Multipoint Distribution Service
excludes the protected service areas of any incumbent MDS stations and
the registered receive sites of previously authorized or proposed ITFS
stations.
Sec. 21.925 Applications for BTA authorizations and MDS station
licenses.
(a) (1) An applicant must file a short-form application and, when
necessary, the short-form application supplement, identifying each BTA
service authorization sought.
(2) For purposes of conducting competitive bidding procedures,
short-form applications are considered to be mutually exclusive with
each other if they were filed for, and specified the same, BTA service
area.
(b) Separate long-form applications must be filed for each
individual MDS station license sought within its the protected service
area of a BTA or PSA, including:
(1) an application for each E-channel group, F-channel group, and
single H, 1, and 2A channel station license sought;
(2) an application for authority to operate at an MDS station in
the area vacated by an MDS station incumbent that has forfeited its
station license; and
(3) an application for each ITFS-channel group station license
sought in accordance with Secs. 74.990 and 74.991.
(c) The Commission shall grant BTA authorizations to auction
winners as set forth in Sec. 21.958.
(d) No long-form application filed by the BTA authorization holder
will be accepted prior to completion of the competitive bidding process
and no long-form application will be granted until expiration of the
30-day petition to deny period following the public notice listing of
the application as being accepted for filing
(e) Applicants may use the electronic filing procedures to file
both the Multipoint Distribution Service short-form and long-form
applications with the Commission.
Sec. 21.926 Amendments to long-form applications.
(a) A Multipoint Distribution Service long-form application may be
amended as a matter of right up to the date of the public notice
announcing the application has been accepted for filing provided that:
(1) the proposed amendments do not amount to more than a pro forma
change of ownership and control;
(2) the Commission has not otherwise forbidden the amendment of
pending applications.
(b) Requests to amend a long-form application placed on public
notice as being accepted for filing may be granted only if a written
petition demonstrating good cause is submitted and properly served on
the parties of record.
Sec. 21.927 Sole bidding applicants.
Where the deadline for filing MDS short-form applications has
expired and a particular BTA service area has been specified in a
single short-form application only, the applicant shall be named the
auction winner for that BTA authorization.
Sec. 21.928 Acceptability of short- and long-form applications.
The acceptability of short- and long-form applications will be
determined according to the requirements of Secs. 21.13, 21.15, 21.20,
21.21 and 21.952.
Sec. 21.929 Authorization period for station licenses.
Notwithstanding Sec. 21.45, each new MDS station licensed within a
BTA or PSA will be granted for a term of ten years, terminating ten
years from the date the Commission declared bidding closed in the MDS
auction.
Sec. 21.930 Five-year build-out requirements.
(a) (1) A BTA authorization holder has a five-year build-out
period, beginning on the date of the grant of the BTA authorization and
terminating on the 5th year anniversary of the grant of the
authorization, within which it may develop and expand MDS station
operations within its service area.
(2) This period is not extended by the grant of subsequent
authorizations (i.e., grant of a station license or modification).
(3) Timely certifications of completion of construction for each
MDS station within a BTA or partitioned service area must be filed upon
completion of construction of a station.
(b) Each BTA authorization holder has the exclusive right to build,
develop, expand and operate MDS stations within its BTA service area
during the five-year build-out period. The Commission will not accept
competing applications for MDS station licenses within the BTA service
area during this period.
(c) (1) Within five years of the grant of a BTA authorization, the
authorization holder must construct MDS stations to provide signals
pursuant to Sec. 21.907 that are capable of reaching at least two-
thirds of the population of the applicable service area, excluding the
populations within protected service areas of incumbent stations.
(2) Sixty days prior to the end of the five-year build out period,
the BTA authorization holder must file with the Commission proof that
demonstrates the holder has met the requirements of Sec. 21.930(c)(1).
The most recent census figures available from the U.S. Department of
Commerce, Bureau of Census prior to the expiration of the
[[Page 36556]]
authorization holder's five-year build-out period will be used to
determine compliance with population-based requirements. In no event
shall census figures gathered prior to 1990 be used.
(d)(1) If the Commission finds that the BTA authorization holder
has demonstrated that it has met the requirements of Sec. 21.930(c)(1),
the Commission will issue a declaration that the holder has met such
requirements.
(2) If the Commission finds that the BTA authorization holder has
not provided a signal as required in Sec. 21.930(c)(1), the Commission
shall partition from the BTA any unserved area, using county lines as a
guide, and shall re-authorize service to the unserved area pursuant to
the MDS competitive bidding procedures of this subpart. Applications
for such unserved areas are not acceptable for filing until a filing
date is announced through a public notice.
(i) The competitive bidding procedures set forth in Secs. 21.950 to
21.961 shall be followed by applicants seeking authority to provide MDS
service to the unserved partitioned area.
(ii) The BTA authorization holder originally authorized to provide
service is ineligible to participate in the competitive bidding process
for the unserved areas partitioned from its BTA.
Sec. 21.931 Partitioned service areas (PSAs).
(a) (1) The holder of a BTA authorization may enter into contracts
with eligible parties to partition any portion of its service area
according to county boundaries, or according to other geopolitical
subdivision boundaries, or multiple contiguous counties or geopolitical
subdivisions within the BTA service area.
(2) (i) Partitioning contracts must be filed with the Commission
within 30 days of the date that such agreements are reached.
(ii) The contracts must include descriptions of the areas being
partitioned and include any documentation necessary to convey to the
Commission the precise boundaries of the partitioned area.
(3) Parties to partitioning contracts must file concurrently with
such contracts one of the following, where appropriate:
(i) an MDS long-form application for authority to operate a new MDS
station within the PSA;
(ii) applications for assignment or transfer of existing stations
with the PSA; or
(iii) a statement of intention as defined in Sec. 21.956(a) along
with a completed FCC Form 430.
(b) The eligibility requirements applicable to BTA authorization
holders also apply to those individuals and entities seeking PSA
authorizations.
(c) Any individual or entity acquiring the rights to a partitioned
area of a BTA also acquires the rights to any previously authorized
individual stations located within the partitioned area that were held
by the previous authorization holder, provided that grantable
applications for assignment and transfer of control, FCC Forms 702 and
704, are filed for existing stations and that acceptable amendments to
pending long-form applications are filed. Pending long-form
applications filed by the previous authorization holder for transmitter
sites within the PSA may also be dismissed without prejudice at the
applicant's request.
(d) Authorizations for PSAs will be issued in accordance with
Sec. 21.958; however, when individual stations within an PSA are
assigned along with the partitioned area, the authorization will be
granted concurrently with the grant of the applications for assignment
and transfer of the existing stations.
(e) Subsequent to issuance of the authorization for a PSA, thee
partitioned area will be treated as a separate protected service area.
(f) (1) When any area within a BTA becomes a PSA, the remaining
counties and other geopolitical subdivisions within that BTA will also
be subsequently treated and classified as a PSA(s).
(2) At the time a BTA is partitioned, the Commission shall cancel
the BTA authorization initially issued and issue a PSA authorization to
the former BTA authorization holder.
(g) The duties and responsibilities imposed upon BTA authorization
holders in this part and throughout the Commission's rules, such as
Sec. 21.930(c)(1), apply to the holders of PSA authorizations.
(h) The build-out period for PSAs voluntarily partitioned shall be
the remainder of the five-year build-out period applicable to the BTA
or PSA from which the PSA was drawn. For PSA authorizations issued
pursuant to Sec. 21.930(d)(2) and the competitive bidding process, the
build-out period is five years, beginning on the date of the grant of
the PSA authorization. The requirements of Sec. 21.930(c)(1) also apply
to the holders of authorizations for PSAs.
Sec. 21.932 Forfeiture of incumbent MDS station licenses.
(a) If the license for a incumbent MDS station is forfeited, absent
the filing and grant of a petition for reinstatement pursuant to
Sec. 21.44(b), the 56.33 km (35 mile) protected service area of the
incumbent station shall dissolve and the protected service area shall
become part of the BTA or PSA surrounding it.
(b) If upon forfeiture the protected service area of a forfeited
license extends across the boundaries of more than one BTA or PSA, the
portions of the protected service area of the incumbent station shall
merge with the overlapping BTAs or PSAs.
(c) The holder of the authorization for the BTA or PSA with which
the service area of the forfeited incumbent station has merged has the
exclusive right to file a long-form application to operate a station
within the merged area and may modify the locations of its stations to
serve the forfeited area.
Sec. 21.933 Protected service areas.
(a) The stations licensed to the holder of a BTA authorization
shall have a protected service area that is coterminous with the
boundaries of that BTA, subject to the exclusion of the 56.33 km (35
mile) protected service area of incumbent MDS stations and the
registered sites of previously proposed and authorized ITFS facilities
within that BTA.
(b) The stations licensed to the holder of a PSA authorization
shall have a protected service area that is coterminous with the
boundaries of the counties or other geopolitical subdivisions
comprising the PSA, subject to the exclusion of the 56.33 km (35 mile)
protected service area of incumbent MDS stations and the registered
receive sites of previously proposed and authorized ITFS facilities
within that PSA.
Sec. 21.934 Assignment or transfer of control of BTA authorizations.
(a) (1) A BTA or PSA authorization holder seeking approval for a
transfer of control or assignment of its authorization within three
years of receiving such authorization 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
authorization was obtained through competitive bidding.
(2) 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
[[Page 36557]]
receive in return for the transfer or assignment of its authorization.
This information should include not only a monetary 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) Transfers of control or assignments of BTA or PSA
authorizations are subject to the limitations of Secs. 21.4, 21.900 and
21.912 of this subpart.
(c) The anti-trafficking provision of Sec. 21.39 does not apply to
the assignment or transfer of control of a BTA or PSA authorization,
which was granted pursuant to the Commission's competitive bidding
procedures.
Sec. 21.935 Assignment or transfer of control of station licenses
within a BTA.
Licenses for individual stations within a BTA or PSA area issued to
authorization holders may not be transferred or assigned unless they
are acquired as part of a PSA.
Sec. 21.936 Cancellation of authorization.
(a) The Commission may revoke or cancel a BTA or PSA authorization
for gross misconduct, misrepresentation or bad faith on the part of the
authorization holder.
(b) Cancellation of a BTA or PSA authorization shall result in
termination of any rights the authorization holder holds in individual
proposed or authorized stations within the BTA or PSA.
Sec. 21.937 Negotiated interference protection.
(a) The level of acceptable electromagnetic interference that
occurs at or within the boundaries of BTAs, PSAs, or an incumbent MDS
station's 56.33 km (35 mile) protected service area can be negotiated
and established by an agreement between the appropriate parties,
provided that:
(1) the parties to such an agreement file with the Commission a
written statement of no objection, acknowledging that the parties have
agreed to accept a level of interference that does not meet the
protection standards set forth in Secs. 21.902 or 21.938 of the
Commission's rules;
(2) the statement bears the signatures of all parties to the
agreement, or the signatures of their representative agents; and
(3) the statement is filed with the Commission within 30 days of
its ratification or file in conjunction with an application with which
the agreement is associated, whichever is earliest.
Sec. 21.938 BTA and PSA technical and interference provisions.
(a) BTA or PSA authorization holders are expected to cooperate with
one another by designing their stations in a manner that protects
service in adjoining BTAs and PSAs including consideration of
interference abatement techniques such as cross polarization, frequency
offset, directional antennas, antenna beam tilt, EIRP decrease,
reduction of antenna height, and terrain shielding.
(b) Unless the affected parties have executed a written
interference agreement in accordance with Sec. 21.937, stations
licensed to a BTA or PSA authorization holder must not cause harmful
electromagnetic interference to the following:
(1) the protected service area of other authorization holders in
adjoining BTAs or PSAs.
(2) the 56.33 km (35 mile) protected service areas of authorized or
previously proposed MDS stations (incumbents).
(3) registered receive sites and protected service areas of
authorized or previously proposed stations in the Instructional
Television Fixed Service pursuant to the manner in which interference
is defined in Sec. 74.903(a).
(c) Unless the affected parties have executed a written
interference agreement in accordance with Sec. 21.937, it shall be the
responsibility of a BTA or PSA authorization holder to correct at its
expense any condition of harmful electromagnetic interference caused to
authorized MDS service at locations within other BTAs or PSAs or within
the 56.33 km (35 mile) protected service areas of authorized or
previously proposed MDS stations (incumbents).
(d) Unless specifically expected, BTA or PSA authorization holders
are governed by the interference protection and other technical
provisions applicable to the Multipoint Distribution Service.
(e) The calculated free space power flux density from a station may
not exceed -73 dBW/m2 at locations on BTA or PSA boundaries for
which there is an unobstructed signal path from the transmitting
antenna to the boundary, unless the applicant has obtained the written
consent of the authorization holder for the adjoining BTA or PSA.
(f) (1) Authorization holders for BTAs or PSAs must notify
authorization holders of adjoining areas of their application filings
for new or modified stations; provided the proposed facility would
produce an unobstructed signal path anywhere within the adjoining BTA
or PSA.
(2) This service of written notification must include a copy of the
FCC application and occur on or before the date the application is
filed with the Commission.
(3) With regard to incumbent MDS stations, authorization holders
for BTAs or PSAs must comply with the requirements of Sec. 21.902.
(g) Where a PSA adjoins a BTA and both authorizations are held by
the same individual or entity, the PSA shall be considered an extension
of the protected service area of the BTA regarding the interference
protection, limiting signal strength, and notification provisions of
this section.
Sec. 21.939 Harmful interference abatement.
In the event harmful interference occurs or appears to occur, after
notice and an opportunity for a hearing, Commission staff may require
any Multipoint Distribution Service conditional licensee or licensee
to:
(a) modify the station to use cross polarization, frequency offset
techniques, directional antenna, antenna beam tilt, or
(b) order an equivalent isotropically radiated power decrease, a
reduction of transmitting antenna height, a change of antenna location,
a change of antenna radiation pattern, or a reduction in aural signal
power.
Secs. 21.940 through 21.949 [Reserved]
Sec. 21.950 MDS subject to competitive bidding.
Mutually exclusive MDS initial applications are subject to
competitive bidding. The general procedures set forth in 47 C.F.R.
Chapter I, Part 1, Subpart Q are applicable to competitive bidding
proceedings used to select among mutually exclusive MDS applicants,
unless otherwise provided in 47 C.F.R. Chapter I, Part 21, Subpart K.
Sec. 21.951 MDS competitive bidding procedures.
(a) The following competitive bidding procedures will generally be
used in MDS auctions. Additional, specific procedures may be set forth
by public notice. The Commission may also design and test alternative
procedures. See 47 C.F.R. Secs. 1.2103 and 1.2104.
(1) Competitive bidding design. Simultaneous multiple round bidding
will be used in MDS auctions, unless the Commission specifies by public
notice the use of sequential oral (open outcry) bidding or sealed
bidding (either sequential or simultaneous). Combinatorial bidding may
also be used with any type of auction design.
(2) Competitive bidding mechanisms. The Commission may utilize the
following mechanisms in MDS auctions:
[[Page 36558]]
(i) Sequencing. The Commission will establish and may vary the
sequence in which the BTA service areas will be auctioned.
(ii) Grouping. In the event the Commission uses either a
simultaneous multiple round competitive bidding design or combinational
bidding, the Commission will determine which BTA service areas will be
auctioned simultaneously or in combination.
(iii) Reservation price. The Commission may establish a reservation
price, either disclosed or undisclosed, below which a BTA service area
subject to auction will not be awarded.
(iv) Minimum bid increments. The Commission will, by announcement
before or during an MDS auction, require minimum bid increments in
dollar or percentage terms.
(v) Stopping rules. The Commission will establish stopping rules
before or during multiple round MDS auctions in order to terminate an
auction within a reasonable time.
(vi) 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, the Commission will allow bidders
to request and to receive automatically waivers of such rule, the
number of which will be determined by the Commission.
(vii) Suggested minimum bid. The Commission may establish suggested
minimum bids on each BTA service area subject to auction. Bids below
the suggested minimum bid would count as activity under the activity
rule only if no bids at or above the suggested minimum bid are
received.
(b) Identities of bidders. The Commission will generally release
information concerning the identities of bidders before each auction
but may choose, on an auction-by-auction basis, to withhold the
identity of the bidders associated with bidder identification numbers.
The Commission will announce by public notice before the MDS auction
where the bidders' identities will be revealed.
(c) Commission control of auction. The Commission may delay,
suspend, or cancel an MDS 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. 21.952 Bidding application procedures.
(a) Short-form applications. To participate in MDS auctions, all
applicants must submit short-form applications, along with all required
certifications and exhibits specified by such forms, pursuant to the
provisions of Sec. 1.2105(a) and any Commission public notices. See 47
CFR 1.2105(a).
(b) Filing of short-form applications. Prior to any MDS auction,
the Commission will issue a public notice announcing the availability
of BTA service areas and, in the event that mutually exclusive short-
form applications (as defined by Sec. 21.925(a)(2)) are filed, the date
of the auction for those BTA service areas. This public notice also
will specify the date on or before which applicants intending to
participate in an MDS auction must file their short-form applications
in order to be eligible for that auction, and it will contain
information necessary for completion of the application as well as
other important information such as the material 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.
(c) Modification and dismissal of short-form applications.
(1) Any short-form application that is not signed in some manner or
form, including by electronic means, and does not contain all requisite
certifications is unacceptable for filing and cannot be corrected
subsequent to any applicable filing deadline. Such short-form
application will be dismissed with prejudice.
(2) The Commission will provide bidders a limited opportunity to
cure certain defects specified herein and to resubmit an amended short-
form application. For MDS, we classify all amendments to a short-form
application as major, except those to correct minor errors or defects,
such as typographical errors, or those to reflect ownership changes or
formation of bidding consortia or joint bidding arrangements
specifically permitted under Sec. 21.953. A short-form application may
be modified to make minor amendments. However, applicants who fail to
correct defects in their short-form applications in a timely manner as
specified by public notice will have their applications dismissed with
no opportunity for resubmission.
(3) A short-form 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.
Sec. 21.953 Prohibition of collusion.
(a) Except as provided in paragraphs (b), (c) and (d) of this
section, after the filing of short-form applications, all applicants in
an MDS auction are prohibited from cooperating, collaborating,
discussing or disclosing in any manner the substance of their bids or
bidding strategies, or discussing or negotiating settlement agreements,
with other applicants until after the winning bidder makes the required
down payment, unless such applicants are members of a bidding
consortium or other joint bidding arrangement identified on the
applicant's short-form application. Communications among applicants
concerning matters unrelated to the MDS auction will be permitted after
the filing of short-form applications.
(b) Applicants may modify their short-form applications to reflect
formation of consortia or changes in ownership at any time before or
during an auction, provided such changes do not result in a change in
control of the applicant, and provided that the parties forming
consortia or entering into ownership agreements have not applied for
the same BTA service area.
(c) After the filing of short-form applications, applicants may
make agreements to bid jointly for BTA service areas, provided the
parties to the agreement have not applied for the same service areas.
(d) After the filing of short-form applications, a holder of a non-
controlling attributable interest in an entity submitting a short-form
application may, under the circumstances specified in
Sec. 1.2105(c)(4), acquire an ownership interest in, form a consortium
with, or enter into a joint bidding arrangement with, other applicants
for the same BTA service areas. See 47 CFR 1.2105(c)(4).
(e) To reflect the changes in ownership or in the membership of
consortia or joint bidding arrangements specified in paragraphs (b),
(c) and (d) of this section, applicants must amend their short-form
applications by submitting a revised short-form application, filed
within two business days of any such change; such modifications will
not be considered major amendments of the applications within the
meaning of Sec. 21.952(c)(2). However, any amendment which results in
the change of control of an applicant will be considered a major
amendment of the short-form.
[[Page 36559]]
(f) For purposes of this section, the terms ``applicant'' and
``bids or bidding strategies'' are defined as set forth in 47 CFR
1.2105(c)(5).
Sec. 21.954 Submission of up front payments.
(a) The Commission will require applicants to submit an upfront
payment prior to the MDS auction. The amount of the upfront payment for
each BTA service area being auctioned and the procedures for submitting
it will be set forth in a public notice. Upfront payments may be made
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. No interest will be paid on upfront
payments.
(b) For MDS auctions, the Commission will require each applicant to
submit an upfront payment equal to the largest combination of activity
units (as defined in the Commission's activity rules established
pursuant to Sec. 21.951(a)(2)(vi)) associated with the BTAs on which
the applicant anticipates being active in any single round or bidding.
Applicants who are small businesses eligible for reduced upfront
payments will be required to submit an upfront payment amount in
accordance with Sec. 21.960(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. An applicant
who fails to submit a sufficient upfront payment to qualify it to bid
on any BTA service area being auctioned will be ineligible to bid, its
application will be dismissed, and any upfront payment it has made will
be returned.
(c) The upfront payment(s) of a bidder will be credited toward any
down payment required for the BTA service areas on which the bidder is
the winning bidder. Where the upfront payment amount exceeds the
required down payment of a winning bidder, the Commission may refund
the excess amount after determining that no bid withdrawal payments are
owned by that bidder. In the event a payment is assessed pursuant to
Sec. 21.959(a) 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 payment before being applied toward any
additional payment obligations that the winning bidder may have.
Sec. 21.955 Submission of down payments
(a) After bidding has ended on all BTA service areas, the
Commission will identify and notify the winning bidders and declare the
bidding closed in the MDS auction. Within five (5) business days after
being notified that it is a winning bidder on a particular BTA service
area(s), a winning bidder must submit to the Commission's lockbox bank
such additional funds as are necessary to bring its total deposits
(upfront payment plus down payment) up to twenty (20) percent of its
winning bid(s). This down payment may be made by wire transfer or by
cashier's check 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.
(b) Winning bidders who are small businesses eligible for
installment payments under Sec. 21.960(b) are only required to bring
their total deposits up to ten (10) percent of their winning bids. Such
small businesses must pay the remainder of the twenty (20) percent down
payment within five (5) business days following release of the public
notice stating that their BTA authorizations are ready to be issued.
(c) Down payments will be held by the Commission until the winning
bidder has been issued its BTA authorization and has paid the remaining
balance of its winning bid, in which case it will not be returned, or
until the winning bidder is found unqualified to be a station licensee
or has defaulted, in which case it will be returned, less applicable
default payments. No interest will be paid on any down payment.
Sec. 21.956 Filing of long-form applications or statements of
intention.
(a) (1) Within 30 days of being notified of its status as a winning
bidder, each winning bidder for a BTA service area will be required to
submit either:
(i) an initial long-form application for an MDS station license,
along with any required exhibits; or
(ii) a statement of intention with regard to the BTA service area,
along with any required exhibits, showing the encumbered nature of the
BTA, identifying all previously authorized or proposed MDS and ITFS
facilities, and describing in detail the winning bidder's plan for
obtaining the previously authorized and/or proposed MDS stations within
the BTA.
(2) A winning bidder that fails to submit either the initial long-
form application or statement of intention as required under this
section, and fails to establish good cause for any late-filed
application or statement, shall be deemed to have defaulted and will be
subject to the payments set forth in Sec. 21.959(a).
(b) Each initial long-form application for an MDS station license
within an auction winner's BTA service area, and each statement of
intention with regard to an auction winner's BTA service area, must
also include the following:
(1) FCC Form 430;
(2) an exhibit detailing the terms and conditions and parties
involved in any bidding consortia, joint venture, partnership or other
agreement or arrangement the winning bidder had entered into relating
to the competitive bidding process prior to the time bidding was
completed (see 47 CFR 1.207(d));
(3) an exhibit complying with 47 CFR Secs. 1.2110(i) and 21.960(e),
if the winning bidder submitting the long-from application or statement
of intention claims status as a designated entity. (c) Subsequent long-
form applications for additional MDS station licenses within the BTA
service areas of winning bidders may be submitted at any time during
the five year build-out period and need not contain the exhibits
specified in paragraph (b)(2) through (3) of this section.
Sec. 21.957 Petitions to deny against long-from applications; comments
on statements of intention.
(a) Within thirty (30) days after the Commission gives public
notice that a long-form application for an MDS station license
submitted by a winning bidder within its BTA service area has been
accepted for filing, petitions to deny that application may be filed.
Any such petitions and oppositions thereto must comply with the
requirements of Secs. 47 CFR 1.2108 and 21.30.
(b) Parties wishing to comment on or oppose the issuance of a BTA
authorization issued in connection with the filing of a statement of
intention by a winning bidder must do so prior to the Commission's
issuance of the BTA authorization.
Sec. 21.958 Full payment and issuance of BTA authorizations.
Each winning bidder, except for small businesses eligible for
installment payments under Sec. 21.960(b), must pay the balance of its
winning bid for its BTA service area(s) in a lump sum within five (5)
business days following the release of the public notice stating
[[Page 36560]]
that the BTA authorization(s) is ready to be issued. A winning bidder
who submitted a long-form application for an MDS station license within
its BTA service area pursuant to Sec. 21.956(a) will receive its BTA
authorization concurrent with the grant of its MDS conditional station
license within its BTA service area. A winning bidder who submitted a
statement of intention with regard to its BTA service area pursuant to
Sec. 21.956(a) will receive its BTA authorization following the
Commission's review of its statement of intention. The Commission will
issue a BTA authorization to a winning bidder within ten (10) business
days following notification of receipt of full payment of the amount of
the winning bid.
Sec. 21.959 Withdrawal, default and disqualification.
(a) When the Commission conducts an MDS simultaneous multiple round
auction, the Commission will impose additional payment requirements on
bidders who withdraw high bids during the course of an auction, who
default on down or full payments due after an auction closes, or who
are disqualified. The withdrawal and default payments set forth below
will be deducted from any upfront payments or down payments that the
withdrawing, defaulting or disqualified bidder has deposited with the
Commission.
(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 payment equal to the difference between the amount bid and the amount
of the winning bid the next time the license is offered by the
Commission. No withdrawal payment will be assessed if the subsequent
winning bid exceeds the withdrawn bid.
(2) Default or disqualification after close of auction. If a
winning bidder defaults or is disqualified after the close of such an
auction, the defaulting bidder will be subject to the payment in
paragraph (1) above, plus an additional payment equal to three (3)
percent of the subsequent winning bid. If the subsequent winning bid
exceeds the defaulting bidder's bid amount, the three percent payment
will be calculated based on the defaulting bidder's bid amount.
(b) If the Commission were to conduct a sequential oral (open
outcry) auction or sealed bid auction for MDS, the Commission may
modify the payments set forth in paragraph (a) of this section to be
paid in the event of bid withdrawal, default or disqualification;
provided, however, that such payments shall not exceed the payments
specified in paragraph (a) of this section.
(1) In the case of sealed bidding:
(i) If a bid is withdrawn before the Commission releases the
initial public notice announcing the winning bidder(s), no bid
withdrawal payment will be assessed.
(ii) If a bid is withdrawn after the Commission release the initial
public notice announcing the winning bidder(s), the bid withdrawal
payment will be equal to the difference between the high bid amount and
the amount of the next highest bid. Losing bidders will only be subject
to this bid withdrawal payment for a period of thirty (30) days after
the Commission release the initial public notice announcing the winning
bidders.
(2) In the case of oral sequential (open outcry) bidding:
(i) If a bid is withdrawn before the bidder has declared the
bidding to be closed for the BTA service area bid on, no bid withdrawal
payment will be assessed.
(ii) If a bid is withdrawn after the Commission has declared the
bidding to be closed for the BTA service area bid on, the bid
withdrawal payment of paragraphs (a)(1) and (2) of this section will
apply.
(c) If a winning bidder withdraws it 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 payment specified in paragraph (a)(2) of this section. In
such event, the Commission may either re-auction the BTA service area
to existing or new applicants or offer it to the other highest bidders
(in descending order) at their final bids.
(d) A winning bidder who is found unqualified to be an MDS station
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 payment set forth in paragraph (a)(2) of this section.
In such event, the Commission will generally conduct another auction
for the BTA service area, affording new parties an opportunity to file
applications for such service area.
(e) Bidders who are found to have violated the antitrust laws or
the Commission's rules in connection with their participation in the
MDS competitive bidding process may be subject, in addition to any
other applicable sanctions, to loss of their upfront payment, down
payment or full bid amount, and may be prohibited from participating in
future auctions.
Sec. 21.960 Designated entity provisions for MDS.
(a) Designated entities. As specified in this section, designated
entities that are winning bidders for BTA service areas are eligible
for special incentives in the auction process. See 47 CFR 1.2110.
(b) Installment payments. Small businesses and small business
consortia may elect to pay the full amount of their winning bids for
BTA service areas in installments over a ten (10) year period running
from the date that their BTA authorizations are issued.
(1) Each eligible winning bidder paying for its BTA
authorization(s) on an installment basis must deposit by wire transfer
or cashier's check in the manner specified in Sec. 21.955 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 for the payments set forth in Sec. 21.959(a)(2).
(2) Within five (5) business days following release of the public
notice stating that the BTA authorization of a winning bidder eligible
for installment payments is ready to be issued, the winning bidder
shall pay another ten (10) percent of its winning bid, thereby
commencing the eligible bidder's installment payment plan. The
Commission will issue the BTA authorization to the eligible winning
bidder within ten (10) business days following notification of receipt
of this additional ten (10) percent payment. Failure to remit the
required payment will make the bidder liable for the payments set forth
in Sec. 21.959(a)(2).
(3) Upon issuance of a BTA authorization to a winning bidder
eligible for installment payments, the Commission will notify such
eligible BTA authorization holder of the terms of its installment
payment plan. For MDS, such installment payment plans will:
(i) impose interest based on the rate of ten (10) year U.S.
Treasury obligations at the time of issuance of the BTA authorization,
plus two and one half (2.5) percent;
(ii) allow installment payments for a ten (10) year period running
from the date that the BTA authorization is issued;
(iii) begin with interest-only payments for the first two (2)
years; and
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(iv) amortize principal and interest over the remaining years of
the ten (10) year period running from the date that the BTA
authorization is issued.
(4) A BTA authorization issued to an eligible winning bidder that
elects installment payments shall be conditioned upon the full and
timely performance of the BTA authorization holder's payment
obligations under the installment plan.
(i) If an eligible holder 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 holder may request that the Commission permit a
three (3) to six (6) 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
holder's payment history, including whether the holder has defaulted
before, how far into the payment period the default occurs, the reasons
for default, whether the holder has met construction build-out
requirements within its BTA service area, the holder's financial
condition, and whether the holder is seeking an eligible buyer. 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 years of the ten (10) year payment
period.
(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 BTA authorization will
automatically cancel and the Commission will initiate debt collection
procedures pursuant to Part 1, Subpart O of the Commission's rules.
(5) Unjust enrichment.
(i) If an eligible BTA authorization holder that utilizes
installment financing under this subsection seeks to assign or transfer
control of its BTA authorization to an entity not meeting the
eligibility standards for installment payments, the holder 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.
(ii) If a BTA authorization holder that utilizes installment
financing under this subsection seeks to make any change in ownership
structure that would result in the holder losing eligibility for
installment payments, the holder shall first seek Commission approval
and must make full payment of the remaining unpaid principal and any
unpaid interest accrued through the date of the change in ownership
structure as a condition of approval. Increases in gross revenues that
result from revenues from operations, business development or expanded
service shall not be considered changes in ownership structure under
this paragraph.
(c) Reduced upfront payments. A prospective bidder that qualifies
as a small business, or as a small business consortia, is eligible for
a twenty-five (25) percent reduction in the amount of the upfront
payment required by Sec. 21.954. To be eligible to bid on a particular
BTA, a small business will be required to submit an upfront payment
equal to seventy-five (75) percent of the upfront payment amount
specified for that BTA in the public notice listing the upfront payment
amounts corresponding to each BTA service area being auctioned.
(d) Bidding credits. A winning bidder that qualifies as a small
business, or as a small business consortia, may use a bidding credit of
fifteen (15) percent to lower the cost of its winning bid on any of the
BTA authorizations awarded in the MDS auction.
(1) Unjust enrichment.
(i) If a BTA authorization holder that utilizes a bidding credit
under this subsection seeks to assign or transfer control of its BTA
authorization to an entity not meeting the eligibility standards for
bidding credits, the authorization holder must reimburse the government
for the amount of the bidding credit, plus interest at the rate imposed
for installment financing at the time the authorization was awarded,
before assignment or transfer will be permitted. The amount of the
required reimbursement will be reduced over time. An assignment or
transfer in the first two years after issuance of the BTA authorization
will result in a reimbursement of one hundred (100) percent of the
value of the bidding credit; during year three, of seventy-five (75)
percent of the bidding credit; in year four, of fifty (50) percent; in
year five, twenty-five (25) percent; and thereafter, no reimbursement.
(ii) If a BTA authorization holder that utilizes a bidding credit
under this subsection seeks to make any change in ownership structure
that would result in the holder losing eligibility for bidding credits,
the holder shall first seek Commission approval and must reimburse the
government for the amount of the bidding credit, plus interest at the
rate imposed for installment financing at the time the authorization
was awarded, as a condition of approval. The amount of the required
reimbursement will be reduced over time. Such a change in ownership
structure in the first two years after issuance of the BTA
authorization will result in the reimbursement of one hundred (100)
percent of the value of the bidding credit; during year three, of
seventy-five (75) percent of the bidding credit; in year four, of fifty
(50) percent; in year five, twenty-five (25) percent; and thereafter,
no reimbursement. Increases in gross revenues that result from revenues
from operations, business development or expanded service shall not be
considered changes in ownership structure under this paragraph.
(e) Short-form application certification; Long-form application or
statement of intention disclosure. An MDS applicant claiming designated
entity status shall certify on its short-form application that it is
eligible for the incentives claimed. A designated entity that is a
winning bidder for a BTA service area(s) shall, in addition to
information required by Sec. 21.956(b), file an exhibit to either its
initial long-form application for an MDS station license, or to its
statement of intention with regard to the BTA, which discloses the
gross revenues for each of the past three years of the winning bidder
and its affiliates. This exhibit shall describe how the winning bidder
claiming status as a designated entity satisfies the designated entity
eligibility requirements, and must list and summarize all agreements
that affect designated entity status, such as partnership agreements,
shareholder agreements, management agreements and other agreements,
including oral agreements, which establish that the designated entity
will have both de facto and de jure control of the entity. See 47 CFR
1.2110(i).
(f) Records maintenance. All holders of BTA authorizations acquired
by auction that claim designated entity status shall maintain, at their
principal place of business or with their designated agent, an updated
documentary file of ownership and revenue information necessary to
establish their status. Holders of BTA authorizations or their
successors in interest shall maintain such files for a ten (10) year
period running from the date that their BTA authorizations are issued.
The files must be made available to the Commission upon request.
(g) Audits. BTA authorization holders claiming eligibility under
designated entity provisions shall be subject to audits by the
Commission, using in-house or contract resources. Selection for an
audit may be random, on information, or on the basis of other factors.
Consent to such audits is part of
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the certification included in the short-form application. Such consent
shall include consent to the audit of the holders' books, documents and
other material (including accounting procedures and practices),
regardless of form or type, sufficient to confirm that such holders'
representations are, and remain, accurate. Such consent shall also
include inspection at all reasonable times of the facilities, or parts
thereof, engaged in providing and transacting business or keeping
records regarding licensed MDS offerings, and shall also include
consent to the interviewing of principals, employees, customers, and
suppliers of the BTA authorization holders.
Sec. 21.961 Definitions applicable to designated entity provisions.
(a) Scope. The definitions in this section apply to Sec. 21.960,
unless otherwise specified in that section.
(b) Small business; consortium of small businesses
(1) A small business is an entity that together with its affiliates
has average annual gross revenues that are not more than $40 million
for the preceding three calendar years.
(2) Attribution and aggregation of gross revenues
(i) Except as specified in paragraph (b)(2)(ii) of this section,
the gross revenues of the applicant (or BTA authorization holder) and
its affiliates shall be considered on a cumulative basis and aggregated
for purposes of determining whether the applicant (or holder) is a
small business.
(ii) Where an applicant (or BTA authorization holder) is a
consortium of small businesses, the gross revenues of each small
business shall not be aggregated.
(3) A small business consortium is a conglomerate organization
formed as a joint venture between mutually-independent business firms,
each of which individually satisfies the definition of a small
business.
(c) 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 preceding relevant number of calendar
years, or, if audited financial statements were not prepared on a
calendar-year basis, for the preceding relevant number of 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.
(d) The definition of an affiliate of an applicant is set forth in
47 CFR 1.2110(b)(4).
[FR Doc. 95-17237 Filed 7-14-95; 8:45 am]
BILLING CODE 6712-01-M
