[Federal Register Volume 63, Number 184 (Wednesday, September 23, 1998)]
[Rules and Regulations]
[Pages 50791-50801]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 98-25344]
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FEDERAL COMMUNICATIONS COMMISSION
47 CFR Parts 1 and 24
[WT Docket No. 97-82; FCC 98-176]
Installment Payment Financing for Personal Communications
Services (PCS) Licensees
AGENCY: Federal Communications Commission.
ACTION: Final rule.
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SUMMARY: This Order amends the Commission's Rules Regarding Installment
Payment Financing for Personal Communications Services (PCS) Licenses.
In this C Block Fourth Report and Order, the Commission resolves its
proposals in its C Block Further Notice of Proposed Rule Making. In so
doing, the Commission sets forth the rules that will govern reauctions
of C block spectrum surrendered to the Commission pursuant to the C
Block Second Report and Order and the C Block Order on Reconsideration
of the Second Report and Order, as well as any other C block spectrum
available for reauction.
EFFECTIVE DATE: November 23, 1998.
FOR FURTHER INFORMATION CONTACT: Audrey Bashkin at (202) 418-0660.
SUPPLEMENTARY INFORMATION: This Fourth Report and Order, in WT Docket
No. 97-82, adopted July 27, 1998 and released August 19, 1998, is
available for inspection and copying during
[[Page 50792]]
normal business hours in the FCC Dockets Branch, Room 230, 1919 M
Street, N.W., Washington, D.C. The complete text may be purchased from
the Commission's copy contractor, International Transcription Service,
Inc., 1231 20th Street, N.W., Washington, D.C. 20036, (202) 857-3800.
Synopsis of Fourth Report and Order
I. Background
A. C. Block Proceedings
1. Consistent with Congress' mandate to promote the participation
of small business and other ``designated entities'' in the provision of
spectrum-based services, the Commission limited eligibility in the
initial C block auctions to entrepreneurs and small businesses. The C
block auction concluded on May 6, 1996, and the subsequent reauction of
defaulted licenses concluded on July 16, 1996, with a total of 90
bidders winning 493 licenses. The winning bidders were permitted to pay
90 percent of their net bid price over the ten-year license term.
2. The Commission decided in the C Block Second Report and Order,
62 FR 55348 (October 24, 1997) (as modified by the C Block Order on
Reconsideration of the Second Report and Order (``C Block
Reconsideration Order''), 63 FR 17111 (April 8, 1998)) to allow each C
block licensee to elect one of four options for each of its licenses:
resumption of payments under the licensee's original installment
payment plan, disaggregation, amnesty, or prepayment. The array of
choices was intended to provide limited relief to financially troubled
licensees without harming the integrity of the auction process. The
Commission required C block licensees to file a written election
notice, specifying whether they would resume payments under the terms
of the original installment payment plan or would proceed under one of
the alternative options. Included with the C Block Second Report and
Order was the C Block Further Notice of Proposed Rule Making (``C Block
Further Notice''), 62 FR 55375 (October 24, 1997), in which the
Commission sought comment on proposed changes to the C block rules to
govern the reauction of surrendered spectrum in the C block. The
Wireless Telecommunications Bureau (the ``Bureau'') announced by public
notice on April 17, 1998 an election date of June 8, 1998 and a payment
resumption date for C block licensees of July 31, 1998.
B. Part 1 Proceedings
3. On December 31, 1997, the Commission released a Third Report and
Order and Second Further Notice of Proposed Rule Making, 63 FR 2315
(January 15, 1998), (Part 1 Third Report and Order), which adopts
general competitive bidding rules to supplant, wherever practicable,
auction rules that were specific to each auctionable service or class
of service. The Commission's purpose was to streamline competitive
bidding regulations, eliminate unnecessary rules, and increase the
overall efficiency and consistency of the auction process. In the
process, the Commission resolves many of the issues that had been
raised in the C Block Further Notice. Accordingly, future C block
reauctions will adhere to Part 1 rules, as amended, to the extent
applicable. Where the Commission's rules in Part 1 are not
determinative, bidders will continue to look to Part 24 rules, as
amended in this C Block Fourth Report and Order.
II. Licenses to be Reauctioned
A. Background
4. In the C Block Further Notice, the Commission proposed that it
reauction: (1) all licenses representing C block spectrum returned
pursuant to the disaggregation, prepayment, or amnesty options; and (2)
all C block licenses held as a result of defaults. The Commission
believed that including all available licenses in a reauction would
allow it fairly and efficiently to facilitate the rapid provision of
service to the public and also would allow for the most efficient
aggregation of licenses.
B. Discussion
5. The Commission adopts its proposal in the C Block Further Notice
to reauction all available C block licenses held by the Commission.
Several commenters agree, and no commenter disagrees, with this
proposal. The Commission's recent modifications to the C block payment
options in the C Block Reconsideration Order provide no reason to
deviate from this basic approach. Any C block license that becomes
available for reauction after the next C block reauction will be
reauctioned in a subsequent reauction as soon as practicable.
6. Some Commenters argue that the next reauction should include
licenses owned by entities that have filed for bankruptcy protection.
One commenter maintains that if licenses held by C block bankruptcy
petitioners are excluded from the next reauction, the uncertainty
surrounding the fate of those licenses will make business planning
difficult for other C block entities. Another commenter urges the
Commission to amend its rules in order to be able to revoke
automatically the licenses of licensees that have declared bankruptcy.
7. In the Part 1 Third Report and Order, the Commission addressed
the issue of whether it can immediately reclaim and reauction licenses
held by a licensee that declares bankruptcy. As the Commission stated
there, it is confident of its position that the Commission can reclaim
licenses quickly since the Commission conditions licenses upon payment
and requires automatic cancellation in the event of nonpayment.
Nevertheless, until controlling precedent is established by the courts,
or legislation addressing conflicting rights is enacted, a delay in the
reauction of licenses in bankruptcy litigation may occur. The pendency
of bankruptcy proceedings involving certain C block licenses makes it
impossible for the Commission to resolve at this time whether those
licenses will be available in the next C block reauction. The
Commission does not intend, however, to delay a reauction of other
available C block licenses because of such litigation. Such a delay
easily could become the first in an interminable series of delays,
undermining the Commission's primary goal of getting licenses into the
hands of parties that will provide service to the public and
competition in the market. For this reason, the Commission believes
that the public will realize a greater benefit if the Commission
auctions all available C block spectrum as soon as practicable than the
public will realize if the Commission postpones a reauction until it
has resolved all issues connected with every bankruptcy proceeding.
Licenses made available in any bankruptcy proceeding will be included
in the next appropriate reauction.
III. Eligibility for Participation
A. Background
8. In the C Block Second Report and Order, the Commission decided
that the public interest considerations mandated by Section 309(j) of
the Communications Act, 47 U.S.C. 309(j), would be furthered by
applying to a C block reauction the same eligibility rules that had
been used for the original C block auction. The Commission, therefore,
deemed eligible to participate in a C block reauction: (1) all
applicants qualifying, as of the start of the reauction, as
entrepreneurs under the Commission's rules; and (2) all entities that
had filed a short-form application (FCC Form 175) to participate in,
and had been eligible to participate in, the original C block auction.
Accordingly,
[[Page 50793]]
the Commission decided that all entities that had participated in the
original C block auction would be eligible to participate in the next
reauction; however, the Commission prohibited C block licensees that
return spectrum pursuant to the disaggregation or prepayment options
from reacquiring their returned spectrum for a period of two years from
the start date of the next C block reauction. This prohibition extended
to qualifying members of the licensee's control group, and their
affiliates.
9. In the C Block Further Notice, the Commission sought comment on
whether it should restrict participation in the C block reauction to
entities that have not defaulted on any payments owed the Commission.
The Commission asked for comment on possible alternatives to excluding
defaulters from participation in a reauction. One possibility was for
the Commission to have an expedited hearing on a winning defaulter's
financial qualifications, allowing the defaulter to attempt to rebut a
presumption that it is not financially qualified. Another idea was for
the Commission to require defaulters to submit either more detailed
financial information at the application stage or a larger upfront
payment. The Commission observed that C block licensees would not be in
default simply by virtue of having elected the alternative payment
options established in the C Block Second Report and Order.
10. In the C Block Reconsideration Order, the Commission modified
the alternative payment options to, inter alia, divide the amnesty
option into two categories: ``pure amnesty'' and ``amnesty/
prepayment.'' The Commission decided that, while licensees returning
spectrum pursuant to the ``pure amnesty'' option would not be
prohibited from reacquiring their returned spectrum, licensees
returning spectrum pursuant to the ``amnesty/prepayment'' option would
have to forgo, for a period of two years from the start date of next C
block reauction, eligibility to reacquire their spectrum. This
prohibition extends to qualifying members of a licensee's control
group, and their affiliates. In addition, the Commission retained the
two-year prohibition on the reacquisition of spectrum returned pursuant
to the disaggregation or prepayment options established in the C Block
Second Report and Order. The Commission also responded to petitions for
reconsideration of the C Block Second Report and Order which disagreed
with a comment filed in response to the C Block Further Notice, asking
that the Commission open eligibility for a reauction to ``all qualified
bidders.'' The Commission disagreed with that proposal, affirming its
ruling in the C Block Second Report and Order to limit eligibility for
participation in C block reauctions to applicants meeting the
Commission's definition of entrepreneur.
B. Discussion
11. The Commission retains the C block eligibility parameters
established in the C Block Second Report and Order. The following
entities will be eligible for C block reauctions: (1) entities that
filed an FCC Form 175 short-form application for, and were eligible
for, the original C block auction and (2) entities qualifying as
entrepreneurs under Section 24.709 of the Commission's rules, as of the
deadline for the filing of short-form applications for the reauction.
While, under these rules, entities that participated in the original C
block reauction will be eligible for C block reauctions, the Commission
retains the eligibility restriction established in the C Block Second
Report and Order, as modified in the C Block Reconsideration Order, for
licensees that surrender licenses pursuant to the disaggregation,
prepayment, and/or ``amnesty/prepayment'' options. Such licensees will
be ineligible to reacquire their surrendered licenses through reauction
or by any other means for a period of two years from the start date of
the next C block reauction.
12. The Commission's decision in the C Block Second Report and
Order to impose a two-year bar on the eligibility of licensees to
reacquire licenses they return pursuant to the disaggregation and
prepayment options sparked comment. A commenter wants all licensees to
be permitted to participate in a reauction, regardless of their
election of an alternative payment option. Another commenter, on the
other hand, urges the Commission to bar licensees electing the amnesty
option from bidding on their surrendered spectrum in a reauction. The
Commission dealt with both of these requests in the C Block
Reconsideration Order. As the Commission stated there, it believes that
the modified approach the Commission adopted in that order addresses
the concerns of both of these parties. Therefore, the Commission
affirms the decision it made in that order. Another commenter asks that
the qualifications of licensees electing any of the alternative payment
options be subjected to a higher level of scrutiny regarding their
financial qualification to deal with the requirements of additional
licenses. The Commission believes that a higher level of scrutiny is
not warranted. As noted above, C block licensees that have elected
alternative payment options are not defaulters. Moreover, all
applicants for C block reauctions will be required to pay a substantial
upfront payment, which should help ensure that only serious, qualified
bidders participate.
13. Because the Commission is not planning to include C block
licenses that remain involved in bankruptcy proceedings in the next C
block reauction, there likely will be more than one reauction for C
block. Accordingly, the Commission must evaluate whether to allow
applicants for and participants in the original C block auction to
remain eligible to participate in all future C block reauctions,
regardless of whether they still qualify as entrepreneurs under the
Commission's rules at the deadline for filing a short-form application.
While the Commission believes that flexibility in this regard is
appropriate, it also believes that fairness to other future bidders
prevents its providing an open eligibility standard indefinitely.
Consequently, in order to be eligible for any C block reauction that
begins more than two years from the start date of the next C block
reauction, an applicant must qualify as an entrepreneur under the
Commission's rules at the time of filing its short-form application.
14. Several parties commented on the eligibility rules established
in C Block Second Report and Order, with most commenters supporting the
Commission's decision. As mentioned, however, one commenter urges the
Commission not to limit a reauction just to entrepreneurs but rather to
allow ``all qualified bidders'' to participate. That commenter argues
that a restricted auction skews the marketplace and that the increasing
level of competition in the wireless arena makes it less likely that
small business entrepreneurs can survive. According to the commenter,
the Commission could enable small businesses to bid competitively by
providing them bidding credits and permitting them to partition and
disaggregate 30 MHz licenses after the auction. No other commenter
supports these views, and several parties oppose them. As stated, the
Commission recently denied this request in the C Block Reconsideration
Order, and the record in this proceeding provides the Commission with
no basis to alter its decision.
15. The Commission's FCC Form 175 short-form application for all
auctions requires applicants to certify that they are not in default on
any Commission licenses and that they are not
[[Page 50794]]
delinquent on any non-tax debt owed to any Federal agency. The
Commission believes that, in order to preserve the integrity of C block
reauctions and to support its ongoing effort to streamline the
licensing process, it is necessary to limit participation in C block
reauctions to entities that can make the certification. Consequently,
to be eligible to participate in any future C block reauction, an
applicant must certify on its short-form application that it is not in
default on any Commission licenses and not delinquent on any non-tax
debt owed to any Federal agency. At the same time, the Commission
believes that past business misfortunes do not inevitably preclude an
entity from being able to meet its present and future responsibilities
as a Commission licensee. Therefore, the Commission will allow ``former
defaulters,'' i.e., applicants that have defaulted or been delinquent
in the past, but have since paid all of their outstanding non-Internal
Revenue Service Federal debts and all associated charges or penalties,
to be eligible to participate in C block reauctions, provided that they
are otherwise qualified.
IV. Application of General Auction Rules to C Block
A. Background
16. The Commission tentatively concluded in the C Block Further
Notice that the next reauction will be conducted in conformity with the
general competitive bidding rules in Part 1, Subpart Q, of the
Commission's rules, as revised, consistent with other auctions for
wireless services. The Commission also proposed to use Part 24 rules to
the extent they do not conflict with the Commission's Part 1 rules or
with rules specifically adopted or proposed in the C Block Second
Report and Order and C Block Further Notice. The Commission sought
comment on the application of Part 1 rules to the following aspects of
the C block reauction: competitive bidding mechanisms; bidding
application and certification procedures and prohibition of collusion;
submission of upfront payment, down payment and filing of long-form
applications; procedures for filing long-form applications; and
procedures regarding license grant, denial, and default.
17. Subsequently, in the Part 1 Third Report and Order, the
Commission adopted general competitive bidding rules that apply to each
auctionable service or class of service, including the C block of
broadband personal communications services. In that order, the
Commission addressed, and in some cases completely or partly resolved,
the issues raised in the C Block Further Notice, except for the two
issues discussed above in this C Block Fourth Report and Order, i.e.,
licenses to be reauctioned and eligibility for participation in C block
reauctions. The Commission also clarified that specific auction
procedures not established by its rules will be established by the
Bureau in advance of each auction, pursuant to public notice and
comment. However, the Commission received sufficient comment in
response to the C Block Further Notice to make further comment
unnecessary for many of the C block reauction procedures. Consequently,
in the remainder of this C Block Fourth Report and Order, the
Commission reviews the issues raised in the C Block Further Notice and
addressed in the Part 1 Third Report and Order. Where necessary, the
Commission clarifies the effect of the Part 1 Third Report and Order on
the rules for future C block reauctions. In cases where C block auction
rules are the same as or parallel to F block auction rules, the
Commission also clarifies the effect of the Part 1 Third Report and
Order on the rules for F block reauctions.
B. Discussion
1. Competitive Bidding Design
18. The Commission tentatively concluded in the C Block Further
Notice that it would award all licenses and spectrum in the C block
reauction by means of a simultaneous multiple-round electronic auction.
This type of auction would facilitate any aggregation strategies of
bidders and provide the most information about license values during
the auction. The Commission further tentatively concluded that
telephonic bidding (instead of electronic bidding) should be permitted
only in exceptional circumstances, and that those circumstances would
be determined by the Bureau in each instance. This tentative conclusion
was prompted by the Commission's desire to conduct the reauction
quickly, as well as by recent improvements in its electronic bidding
software. In the Part 1 Third Report and Order, the Commission
clarified that the Bureau, consistent with its existing delegated
authority, would seek comment in advance of each auction on auction-
specific issues, including the competitive bidding design of the
auction. The Commission notes, as previously mentioned, that there
likely will be more than one C block reauction.
19. Even though the Bureau normally would determine the bidding
design of an auction, because no commenter opposed the proposal for a
simultaneous multiple-round auction, the Commission believes that the
simultaneous multiple-round design is appropriate for the next C block
reauction. If, however, in preparing for a C block reauction, the
Bureau determines that another design might be warranted, it remains
within the Bureau's authority to seek comment on, and to modify, the
competitive bidding design of the reauction. The Commission received
two comments addressing the subject of telephonic bidding, with one
party supporting the proposal that telephonic bidding be permitted only
in exceptional circumstances and the other party asking that telephonic
bidding remain an option. The Commission has decided, on further
consideration, to permit the use of telephonic bidding as an
alternative to electronic bidding in the next C block reauction. In the
recent local multipoint distribution service (LMDS) auction (Auction
No. 17), telephonic bidding was a viable option; and telephonic bidding
is being made available to bidders in the upcoming Phase II 220 MHz
service auction (Auction No. 18). The Commission believes that allowing
parties to use either electronic or telephonic bidding, as their
circumstances dictate, will promote auction participation by as many
qualified applicants as possible and is not inconsistent with the
Commission decision to require that, beginning January 1, 1999, all
short and long-form applications for auctionable services be filed
electronically.
2. Activity Rules
20. In the C Block Further Notice, the Commission tentatively
concluded that a reauction should be conducted in three stages, as the
Commission has done in other simultaneous multiple-round auctions. The
Commission proposed to use high activity requirements in C block
reauctions, with bidders required to be more active in each subsequent
stage than they had been in the last. These activity levels would be
similar to those used in other auctions, such as requiring bidders to
be active on eighty percent of their eligible licenses in Stage I,
ninety percent in Stage II, and ninety-eight percent in Stage III. The
Commission also proposed requiring the Bureau to use its delegated
authority to schedule bidding rounds aggressively, to move quickly into
the next stage of the auction when bidding activity falls, and to use
higher minimum bid increments for very active licenses. In the Part 1
Third Report and Order, the Commission directed the
[[Page 50795]]
Bureau to seek comment prior to the start of each auction on activity
requirements for each stage of the auction and activity rule waivers.
21. The Commission believes that the proposal to conduct reauctions
in three stages is reasonable for the next C block reauction,
particularly in the absence of opposing comment and in light of the
general interest in beginning the reauction as soon as possible. The
Bureau normally would determine this structure, however; and it remains
within the Bureau's discretion to deviate from the proposed three-stage
structure if, after appropriate notice and comment, it determines that
a different structure would better serve the public interest. Given
that the C Block Further Notice mentioned the eighty, ninety, and
ninety-eight percent activity levels as an example, the Commission
continues to delegate to the Bureau determination of the specific
activity levels to employ for each C block reauction. As proposed, the
Bureau will use its delegated authority to schedule bidding rounds
aggressively, move quickly into the next stage of the auction when
bidding activity falls, and use higher minimum bid increments for very
active licenses.
3. Reserve Price, Minimum Opening Bid, and Minimum Bid Increments
22. The Balanced Budget Act of 1997 requires the Commission to
prescribe methods by which a reasonable reserve price will be required
or a minimum opening bid established, unless the Commission determines
that neither is in the public interest. In the C Block Further Notice,
the Commission stated that, in the C block reauction, employing a
minimum opening bid would help make certain that the public is fairly
compensated, the auction is expedited, and the Commission is able to
make adjustments based on the competitiveness of the auction. The
Commission sought comment on its proposal to use a minimum opening bid
for a reauction, as well as on which methodology to employ and factors
to consider in establishing minimum opening bids. The Commission
proposed minimum opening bids for each market equal to ten percent of
the corresponding net high bid for the market in the original C block
auction. The Commission asked commenters to explain whether this
proposal would be reasonable or would result in a substantial number of
unsold licenses. The Commission asked further whether the amount of the
minimum opening bid should be capped and whether the Commission should
establish a different amount.
23. After requesting comment on minimum opening bids in the C Block
Further Notice, the Commission clarified in the Part 1 Third Report and
Order that the Bureau has the authority to seek comment on minimum
opening bids and reserve prices and to establish such mechanisms for
each auction, consistent with the Bureau's role in managing the auction
process and setting valuations for other purposes. The Commission
instructed the Bureau to consider such factors as the amount of
spectrum being auctioned, levels of incumbency, the availability of
technology to provide service, the size of the geographic service
areas, issues of interference with other spectrum bands, and any other
relevant factors that could reasonably affect valuation of the spectrum
being auctioned.
24. For the next C block reauction, the Commission believes that
the proposal of a minimum opening bid for each market equal to ten
percent of the corresponding net high bid for the market in the
original C block auction is appropriate. Because the Commission has
already sought and received comment on this issue, and because there is
a strong public interest in beginning the next C block reauction as
soon as possible, the Bureau will not seek further comment on a
specific amount for a minimum opening bid for the next reauction.
Instead, the specific amount of the minimum opening bid for each market
will be listed in a public notice to be released by the Bureau in
advance of the next C block reauction. The Bureau may exercise its
discretion to set forth a minimum opening bid smaller than ten percent
if, based upon further evaluation, the Bureau believes that a smaller
amount is warranted.
4. Electronic Filing
25. In the C Block Further Notice, the Commission sought comment on
its tentative conclusion to require electronic filing of all short-form
applications in a reauction. The Commission believed that electronic
filing of applications would serve the best interests of auction
participants and members of the public monitoring a reauction.
Commission policies have consistently encouraged electronic filing. In
the Part 1 Third Report and Order, the Commission pointed out that
electronic filing helps ensure the accuracy and completeness of
applications prior to submission, and the Commission required
electronic filing of all short-form and long-form applications by
January 1, 1999, unless operationally infeasible. More recently, the
Commission proposed mandatory electronic filing of applications for all
wireless services, whether auctionable or non-auctionable. Accordingly,
the Commission will require electronic filing of both short-form and
long-form applications for C block reauctions.
5. Upfront Payment
26. In accordance with Sec. 1.2106 of the Commission's rules, 47
CFR 1.2106, which requires submission of an upfront payment as a
prerequisite to participation in spectrum auctions, the Commission
proposed in the C Block Further Notice to set an upfront payment for
the next C block reauction at $.06 per MHz per pop. The Commission
determined that this amount was appropriate to further its goal of
allowing only serious, qualified applicants to participate in a
reauction. The Commission noted that it had adopted the same upfront
payment for its most recent broadband PCS auction, the D, E, and F
block auction. The Commission explained that, in the Competitive
Bidding Second Report and Order, 59 FR 22980 (May 4, 1994), it had
indicated that the upfront payment should be set using a formula based
upon the amount of spectrum and population (``pops'') covered by the
license(s) for which the parties intend to bid. It had also concluded
that the best approach would be to determine the amount of the upfront
payment on an auction-by-auction basis. In the C Block Further Notice,
the Commission sought comment on its $.06 per MHz per pop proposal, as
well as on alternative methods of establishing an upfront payment and,
in particular, on how the Commission may estimate the present market
value of the spectrum to be auctioned. Subsequently, in the Part 1
Third Report and Order, the Commission affirmed its reasoning in the
Competitive Bidding Second Report and Order, stating the Commission's
belief that it should maintain the current competitive bidding rules,
which allow the amount of the upfront payment and the terms under which
it is assessed to be determined on an auction-by-auction basis.
27. Deciding the amount and terms of the upfront payment amount on
an auction-by-auction basis pursuant to the Part 1 rule is consistent
with past auction procedure. The Bureau normally establishes the
upfront payment after public notice and comment. The Commission,
therefore, finds that specific provisions contained in Part 24 of the
its rules addressing the upfront payment amount for C block (and F
block) auctions are unnecessary. Accordingly, and consistent with its
ongoing streamlining effort, the Commission removes those Part 24
[[Page 50796]]
provisions as of the effective date of this order.
28. There is support among the commenters for setting the upfront
payment amount at the proposed $.06 per MHz per pop, and the Commission
believes that in the next C block reauction the upfront payment should
be no higher than this amount. The Bureau may establish a lower upfront
payment if it deems a lower amount to be reasonable. Because the
Commission has already sought and received comment on this issue, and
because there is a strong public interest in beginning the next C block
reauction as soon as possible, there is no need for the Bureau to seek
further comment on the upfront payment amount for the next reauction.
Instead, the specific upfront payment amount for each market will be
listed in a public notice to be released by the Bureau in advance of
the next C block reauction.
29. While the Commission has decided not to prohibit ``former
defaulters'' from participating in C block reauctions, it believes that
the integrity of the auctions program and the licensing process
dictates requiring a more stringent financial showing from applicants
with a poor Federal financial track record. Consequently, the
Commission amends its rules to require that the upfront payment amount
for ``former defaulters'' be fifty percent more than the normal amount
set by the Bureau for any given license in a C block reauction. So that
the Bureau may implement this rule, the Commission will require
applicants to make an additional certification on their short-form
applications revealing whether they have ever been in default on any
Commission licenses or have ever been delinquent on any non-tax debt
owed to any Federal agency. The Commission's policy here is analogous
to the Congressional policy reflected in the Debt Collection
Improvement Act, which bars delinquent Federal debtors from obtaining
Federal loans, loan insurance, or guarantees.
6. Down Payment and Full Payment
30. The Commission tentatively concluded in the C Block Further
Notice that each winning bidder should be required to tender a down
payment sufficient to bring its total amount on deposit with the
Commission up to twenty percent of its winning bid within ten business
days after issuance of a public notice announcing the winning bidder
for the license. The Commission also proposed to require a winning
bidder to file an FCC Form 600 long-form application (since renumbered
FCC Form 601) with a timely down payment, pursuant to Section 1.2107 of
the Commission's rules, 47 CFR 1.2107. Upon review of the long-form
applications and receipt of the down payments, the Commission would
announce the applications that were accepted for filing, triggering the
filing window for petitions to deny. If any or all petitions to deny
were dismissed or denied, a public notice announcing that the
Commission was prepared to grant the license conditioned upon final and
full payment would be issued. The winning bidder would then have ten
days following release of that public notice to submit the balance of
its winning bid in order to be awarded its license(s). The C Block
Further Notice proposed having a period of fifteen days, following the
issuance of the public notice announcing that an application had been
accepted for filing, in which to file petitions to deny.
31. The Part 1 Third Report and Order adopted a standard down
payment of twenty percent of an applicant's high bids, which is similar
to the proposal in the C Block Further Notice. It also amended Sections
1.2109(a) of the Commission's rules, 47 CFR 1.2109(a), to permit
auction winners to make their final payments within ten business days
after the designated deadline, provided that they also pay a late fee
equal to five percent of the amount due. In accordance with the 1997
Balanced Budget Act, the Part 1 Third Report and Order amended
Secs. 1.2108(b) and (c), 47 CFR 1.2108(b), (c), to prohibit the
Commission from granting a license earlier than seven days following
issuance of the public notice announcing the application is accepted
for filing. Additionally, the Part 1 Third Report and Order established
that the filing periods for petitions to deny, oppositions, and replies
are to be no shorter than five days.
32. The conclusions the Commission reached in the Part 1 Third
Report and Order do not conflict with its proposals in the C Block
Further Notice. Accordingly, the Commission will apply the Part 1
rules, as amended. The Bureau will announce by public notice the
deadline for petitions to deny. As discussed in the Part 1 Third Report
and Order, in order to preserve the integrity of the auction process,
it is important to use an indicator of potential licensees' financial
capability to attract capital to build out and operate systems. The
Commission believes that the use of one substantial down payment is a
necessary tool to gauge an applicant's financial viability, its
seriousness in building its system, and the likelihood of default. For
these reasons, the Commission repeals the Part 24 C block rules on down
payment and full payment. Pursuant to the same rationale, the
Commission also repeals the Part 24 F block rules on down payment and
full payment.
7. Amendments and Modifications of Applications
33. In the C Block Further Notice, the Commission proposed to allow
applicants to amend or modify their short-form applications at any time
before or during the auction, pursuant to Section 1.2105 of the
Commission's rules, 47 CFR 1.2105. In the Part 1 Third Report and
Order, the Commission created a uniform definition of minor and major
amendments to an applicant's short-form application (FCC Form 175). The
Commission also amended Section 1.2105 of the Commission's rules so
that it would mirror the Part 24 rule, Sec. 24.822, 47 CFR 24.822, and
allow applicants, after the short-form filing deadline, to make minor
amendments to their short-form applications both prior to and during
the auction. The amendment to Sec. 1.2105 of the Commission's rules has
rendered Sec. 24.822 unnecessary. Accordingly, the Commission repeals
Sec. 24.822 of the rules.
34. The Commission also proposed in the C Block Further Notice to
create an exception to the general rule prohibiting major amendments
and permit short-form amendments to reflect the departure of a
consortium member. In the Part 1 Third Report and Order, the Commission
determined that, under Part 1 of its rules, major amendments to the
short-form include changes in license areas, ownership changes
constituting a change in control, and the addition of members to a
bidding consortium. Minor amendments include, inter alia, any amendment
not identified as major. The Commission did not identify the deletion
of members to a bidding consortium as a major amendment. Consequently,
such a change would be a minor amendment under the Part 1 rules, as
amended, and permitted after the short-form filing deadline.
Accordingly, the Commission's proposal in the C Block Further Notice to
allow short-form amendments reflecting the departure of a consortium
member is no longer necessary.
8. Bid Withdrawal, Default, and Disqualification
35. The Commission tentatively concluded in the C Block Further
Notice that the withdrawal, default, and disqualification rules for a
reauction should be based upon the procedures established in the
Commission's general
[[Page 50797]]
competitive bidding rules. In the Part 1 Third Report and Order, the
Commission recognized that bidders sometimes improperly withdraw bids
(e.g., to delay the close of an auction for strategic purposes), and
the Commission suggested that the Bureau exercise its discretion to
prevent such abuses of the auction process. The Commission is
considering limiting the number of rounds in which bids may be
withdrawn, thereby preventing any entities that violate the
Commission's withdrawal procedures from continuing to bid on that
particular market. The Bureau has announced that, in the upcoming Phase
II 220 MHz service auction (Auction No. 18), it will limit the number
of rounds in which bids may be withdrawn, and it has proposed such a
limitation for the upcoming 156-162 MHz VHF public coast station
spectrum auction. Similarly, the Bureau will seek comment in advance of
the next C block reauction on limiting the number of rounds in that
reauction in which bids may be withdrawn.
36. For bids submitted in error, the Commission proposed in the C
Block Further Notice to follow the guidelines it had developed to
provide relief from the bid withdrawal payment requirements under
certain circumstances. In the Part 1 Third Report and Order, the
Commission decided that when a winning bidder or licensee defaults, and
its license has yet to be reauctioned, the Commission will assess an
initial default payment of at least three percent, but not exceeding
twenty percent, of the defaulted bid amount. Once the license has been
reauctioned, when the total default payment can be determined, the
Commission will either assess the balance of the remaining default
payment or refund any amounts due. As a result of ``click box bidding''
and other mechanisms employed to reduce erroneous bids, the Commission
concluded that a decreased bid withdrawal payment rule, meant to
provide some bidders relief from full application of bid withdrawal
payments, is not necessary. The Commission directs the Bureau to follow
the Part 1 rule on bid withdrawal, default, and disqualification,
Sec. 1.2104(g), 47 CFR 1.2104(g), to the extent applicable.
9. Anti-Collusion Rules
37. The Commission proposed in the C Block Further Notice to apply
the anti-collusion rules enumerated in the Competitive Bidding Second
Report and Order. In the Part 1 Third Report and Order, the Commission
created an exception to its general anti-collusion rules. Under this
exception, a non-controlling attributable interest holder in an
applicant may obtain an ownership interest in, or enter into a
consortium arrangement with, another applicant for a license in the
same geographic area, provided that the original applicant has
withdrawn from the auction, is no longer placing bids, and has no
further eligibility. The exception provides flexibility for non-
controlling investors to invest in other auction applicants if their
original applicant fails to complete the auction.
38. Although one commenter to the C Block Further Notice raised the
issue of creating a ``safe harbor'' for discussions of non-auction
related business matters between applicants in the same license area,
the Commission determined in the Part 1 Third Report and Order that
there was no need to create a ``safe harbor.'' Section 1.2105(c) of the
Commission's rules, 47 CFR 1.2105(c), places significant limitations on
applicants seeking business opportunities in geographic license areas
where they plan to bid. The Commission concluded that interpretations
of the anti-collusion rules provided by the Bureau instruct the public
as to permissible non-auction discussions, obviating the need for a
``safe harbor'' in the auction process.
39. As the Commission noted in the Third Report and Order, however,
auction applicants should be aware that communications concerning, but
not limited to, issues such as management, resale, roaming,
interconnection, partitioning and disaggregation may all raise
impermissible subject matter for discussion because they may convey
pricing information and bidding strategy. Because auction applicants
should avoid all communication with each other that will likely affect
bids or bidding strategies, the Commission believes that individual
applicants, and not the Commission, are in the best position to
determine in the first instance which communications are permissible
and which are not. Bidders should familiarize themselves with
Commission rules and rule interpretations regarding unauthorized
communications in auction proceedings, and they should report any such
communications to the Bureau. As always, the Commission retains the
right to investigate possible instances of collusion or to refer any
allegations of collusion to the United States Department of Justice for
investigation.
10. Bidding Credits
40. The original C block auction offered winning bidders qualifying
as a small business or a consortium of small businesses a bidding
credit of twenty-five percent of winning bids. The Commission's rules
defined a small business as ``an entity that, together with its
affiliates and persons or entities that hold interest in such entity
and their affiliates, has average annual gross revenues that are not
more than forty million dollars for the preceding three years.''
Subsequent to that auction, the Commission amended its rules to define
also a very small business in the C or F blocks as ``an entity that,
together with its affiliates and persons or entities that hold interest
in such entity and their affiliates, has average annual gross revenues
that are not more than fifteen million dollars for the preceding three
years.'' The Commission proposed in the C Block Further Notice to have
two tiers of bidding credits for the next C block reauction, a twenty-
five percent bidding credit for small businesses and a thirty-five
percent bidding credit for very small businesses.
41. In order to provide continuity and certainty for auction
participants, the Commission adopted a schedule of bidding credits in
the Part 1 Third Report and Order to be used in future auctions for all
services. The schedule sets the bidding credit percentage according to
the average annual gross revenues of the designated entity. Applying
the Part 1 schedule to the gross revenue thresholds for small and very
small businesses under its rules for C and F block auctions, the
Commission concludes that a small business will receive a fifteen
percent bidding credit, and a very small business will receive a
bidding credit of twenty-five percent. The Commission recognizes that
the amount of bidding credits differs from its proposal in the C Block
Further Notice; however, use of the Part 1 schedule benefits potential
bidders by providing them with certainty about the size of available
bidding credits well in advance of C block reauctions. The Commission
will amend Secs. 24.712 and 24.717 of its rules, 47 CFR 24.712, 24.717,
to reflect its application of the Part 1 bidding credits schedule to C
and F block reauctions.
42. Eligibility for bidding credits will be determined at the
deadline for filing short-form applications. Thus, if an entity no
longer qualifies as a small business as of the deadline for filing
short-form applications, but is eligible to participate in the next C
block reauction because it was eligible to participate in the original
C block auction, it will not be eligible for bidding credits. Because
of the complex issues involved in the original C block auction, the
Commission is willing to allow former C block auction participants and
eligible applicants to
[[Page 50798]]
participate in the next reauction (and in reauctions for the ensuing
two years). However, the Commission does not feel that it is in the
best interests of the public and, in particular, of competing small
business bidders and licensees to provide a discount to applicants that
no longer meet the small business size standards.
43. The Commission reminds applicants that, under Sec. 1.2111(d) of
its rules, as amended, 47 CFR 1.2111(d), C block licensees that utilize
a bidding credit, and during their initial license term seek to make a
change in the ownership or control of a license that would result in
the license's being owned or controlled by an entity that does not meet
the eligibility criteria for a bidding credit, or that is eligible for
a lower bidding credit, will have to reimburse the U.S. Government for
a percentage of the amount of the bidding credit. This percentage, in
some circumstances, will be as high as the full amount of the bidding
credit plus interest.
11. Installment Payment Program
44. The Commission tentatively concluded in the C Block Further
Notice that it would not provide an installment payment program in the
next reauction. Subsequently, in the Part 1 Third Report and Order, the
Commission suspended the installment payment program for the immediate
future.
45. The Commission will apply its decision in the Part 1 Third
Report and Order and not offer installment payments in the next
reauction. It is the Commission's responsibility to balance the
competing goals in Section 309(j) that require, inter alia, that it
promote the development and rapid deployment of new spectrum-based
services, while ensuring that designated entities are given an
opportunity to participate in the provision of such services. The
Commission recognizes that conditioning receipt of a license upon
payment requires greater financial resources. However, many C block
licensees have requested relief from their installment payment
obligations and three have sought bankruptcy protection. The objective
of Section 309(j) to speed service to the public cannot be achieved
when licenses are held in abeyance in bankruptcy court. Other financing
alternatives, such as the provision of bidding credits, will help to
ensure meaningful small business participation.
VI. Procedural Matters and Ordering Clauses
A. Final Regulatory Flexibility Analysis
46. The Final Regulatory Flexibility analysis, pursuant to the
Regulatory Flexibility Act, see 5 U.S.C. 604, is attached.
B. Paperwork Reduction Act Analysis
47. This Order contains a modified information collection that was
submitted to the Office of Management and Budget requesting clearance
under the Paperwork Reduction Act of 1995.
C. Ordering Clauses
48. Accordingly, it is ordered that, pursuant to Sections 4(i),
5(b), 5(c)(1), 303(r), and 309(j) of the Communications Act of 1934, as
amended, 47 U.S.C. 154(i), 155(b), 156(c)(1), 303(r), and 309(j), this
Fourth Report and Order is hereby adopted, and Secs. 1.2105, 24.703,
24.704, 24.705, 24.706, 24.707, 24.709, 24.711, 24.712, 24.716, 24.717,
24.822 of the Commission's rules, 47 CFR 1.2105, 24.703, 24.704,
24.705, 24.706, 24.707, 24.709, 24.711, 24.712, 24.716, 24.717, 24.822,
are amended as set forth in the rule changes, effective November 23,
1998.
49. It is further ordered that the Commission's Office of Public
Affairs, Reference Operations Division, shall send a copy of this
Fourth Report and Order, including the Final Regulatory Flexibility
Analysis, to the Chief Counsel for Advocacy of the Small Business
Administration.
50. It is further ordered that, pursuant to 47 U.S.C. 155(c) and 47
CFR 0.331, the Chief of the Wireless Telecommunications Bureau is
granted delegated authority to prescribe and set forth procedures for
the implementation of the provisions adopted herein.
Paperwork Reduction Act
Notice of Public Information Collections Submitted to the Office of
Management and Budget for Emergency Review and Approval
SUMMARY: The Federal Communications Commission, as part of its
continuing effort to reduce paperwork burden invites the general public
and other Federal agencies to take this opportunity to comment on the
following proposed and/or continuing information collections, as
required by the Paperwork Reduction Act of 1995, Public Law 104-13. An
agency may not conduct or sponsor a collection of information unless it
displays a currently valid control number. No person shall be subject
to any penalty for failing to comply with a collection of information
subject to the Paperwork Reduction Act (PRA) that does not display a
valid control number. Comments are requested concerning (a) whether the
proposed collection of information is necessary for the proper
performance of the functions of the Commission, including whether the
information shall have practical utility; (b) the accuracy of the
Commission's burden estimates; (c) ways to enhance the quality,
utility, and clarity of the information collected; and (d) ways to
minimize the burden of the collection of information on the
respondents, including the use of automated collection techniques or
other forms of information technology.
Please Note: The Commission is seeking emergency approval for
these information collections by October 9, 1998, under the
provisions of 5 CFR 1320.13.
DATES: Written comments should be submitted on or before October 7,
1998. If you anticipate that you will be submitting comments, but find
it difficult to do so within the period of time allowed by this notice,
you should advise the contact listed below as soon as possible.
ADDRESSES: Direct all comments to Judy Boley, Federal Communications
Commission, Room 234, 1919 M St., N.W., Washington, DC 20554, or via
internet to jboley@fcc.gov, and Timothy Fain, OMB Desk Officer, 10236
NEOB 725 17th Street, N.W., Washington, DC 20503 or fain__t@a1.eop.gov.
FOR FURTHER INFORMATION CONTACT: For additional information or copies
of the information collections, contact Judy Boley at 202-418-0214 or
via internet at jboley@fcc.gov.
SUPPLEMENTARY INFORMATION:
OMB Control Number: 3060-0801.
Title: Amendment of the Commission's Rules Regarding Installment
Payment Financing for Personal Communications Services (PCS) Licensees.
Type of Review: Emergency Revision.
Respondents: Businesses or other for-profit entities.
Number of Respondents: 750.
Estimated Time for Response: 0.25 hours.
Total Annual Burden: 187.5 hours.
Total Cost to Respondents: $0.
Needs and Uses: The C Block Fourth Report and Order requires each
applicant for C block spectrum to attach to its short-form application
a statement made under penalty of perjury indicating whether or not the
applicant has ever been in default on any Commission licenses or has
ever been delinquent on any non-tax debt owed to
[[Page 50799]]
any Federal agency. This information collection allows the Federal
Communications Commission to ascertain whether or not applicants for C
block PCS spectrum have ever been in default on any Commission licenses
or have ever been delinquent on any non-tax debt owed to any Federal
agency. The information will allow the Commission to determine the
amount of the upfront payment to be paid by each applicant and will
help ensure that C block reauctions are conducted fairly and
efficiently, thereby speeding the flow of payments to the U.S. Treasury
and accelerating the provision of PCS to the public.
List of Subjects
47 CFR Part 1
Practice and procedure, Competitive bidding proceedings,
Telecommunications.
47 CFR Part 24
Personal communications services, Competitive bidding procedures
for broadband PCS, Telecommunications.
Federal Communications Commission.
Magalie Roman Salas,
Secretary.
Rule Changes
Parts 1 and 24 of Title 47 of the Code of Federal Regulations are
amended as follows:
PART 1--PRACTICE AND PROCEDURE
1. The authority citation for part 1 continues to read as follows:
Authority: 15 U.S.C. 79 et seq.; 47 U.S.C. 151, 154(i), 154(j),
155, 225, and 303(r), unless otherwise noted.
2. Section 1.2105 is amended by adding (a)(2)(xi) to read as
follows:
Sec. 1.2105 Bidding application and certification procedures;
prohibition of collusion
(a) * * *
(2) * * *
(xi) For C block applicants, an attached statement made under
penalty of perjury indicating whether or not the applicant has ever
been in default on any Commission licenses or has ever been delinquent
on any non-tax debt owed to any Federal agency.
* * * * *
PART 24--PERSONAL COMMUNICATIONS SERVICES
3. The authority citation for part 24 continues to read as follows:
Authority: 47 U.S.C. 154, 301, 302, 303, 309, and 332, unless
otherwise noted.
Sec. 24.703 [Removed]
4. Section 24.703 is removed.
5. Section 24.704 is revised to read as follows:
Sec. 24.704 Withdrawal, default and disqualification penalties.
See Sec. 1.2104 of this chapter.
Sec. 24.705 [Removed]
6. Section 24.705 is removed.
7. Section 24.706 is amended by revising paragraph (a) to read as
follows:
Sec. 24.706 Submission of upfront payments and down payments.
(a) All auction participants are required to submit an upfront
payment in accordance with Sec. 1.2106 of this chapter. Any C block
applicant that has previously been in default on any Commission
licenses or has previously been delinquent on any non-tax debt owed to
any Federal agency must submit an upfront payment equal to 50 percent
more than that set for each particular license.
* * * * *
Sec. 24.707 [Removed]
8. Section 24.707 is removed.
9. Section 24.709 is amended by adding paragraphs (a)(4) and (a)(5)
and revising paragraphs (b)(9)(i) and (e) to read as follows:
Sec. 24.709 Eligibility for licenses for frequency Blocks C and F.
(a) * * *
(4) In order to be eligible for participation in a C block auction,
an applicant must certify that it is not in default on any Commission
licenses and that it is not delinquent on any non-tax debt owed to any
Federal agency. See Sec. 24.706 of this part.
(5) An applicant for participation in a C block auction must state
under penalty of perjury whether or not it has ever been in default on
any Commission licenses or has ever been delinquent on any non-tax debt
owed to any Federal agency. See Sec. 24.706 of this part.
(b) * * *
(9) * * *
(i) In addition to entities qualifying under this section, any
entity that was eligible for and participated in the auction for
frequency block C, which began on December 18, 1995, or the reauction
for frequency block C, which began on July 3, 1996, will be eligible to
bid in any reauction of block C spectrum that begins within two years
of the start date of the first reauction of C block spectrum following
the effective date of this rule.
* * * * *
(e) Definitions. The terms affiliate, business owned by members of
minority groups and/or women, and gross revenues used in this section
are defined in Sec. 1.2110 of this chapter. The terms consortium of
small businesses, control group, existing investor, institutional
investor, nonattributable equity, preexisting entity, publicly traded
corporation with widely dispersed voting power, qualifying investor,
small business, and total assets used in this section are defined in
Sec. 24.720 of this chapter.
10. Section 24.711 is amended by revising paragraphs (a)(1) and
(a)(2) to read as follows:
Sec. 24.711 Upfront payments, down payments and installment payments
for licenses for frequency Block C.
(a) * * *
(1) Each eligible bidder for licenses subject to auction on
frequency Block C shall pay an upfront payment as set forth in a Public
Notice pursuant to the procedures in Sec. 1.2106 of this chapter.
(2) Each winning bidder shall make a down payment and pay the
balance of its winning bids pursuant to Sec. 1.2107 and Sec. 1.2109 of
this chapter.
* * * * *
11. Section 24.712 is revised to read as follows:
Sec. 24.712 Bidding credits for licenses for frequency Block C.
(a) A winning bidder that qualifies as a small business or a
consortium of small businesses as defined in Sec. 24.720(b)(1) or
Sec. 24.720(b)(4) of this part may use a bidding credit of fifteen
percent, as specified in Sec. 1.2110(e)(2)(iii) of this chapter, to
lower the cost of its winning bid.
(b) A winning bidder that qualifies as a very small business or a
consortium of very small businesses as defined in Sec. 24.720(b)(2) or
Sec. 24.720(b)(5) of this part may use a bidding credit of twenty-five
percent as specified in Sec. 1.2110(e)(2)(ii) of this chapter, to lower
the cost of its winning bid.
(c) Unjust enrichment. See Sec. 1.2111 of this chapter.
12. Section 24.716 is amended by revising paragraphs (a)(1) and
(a)(2) to read as follows:
Sec. 24.716 Upfront payments, down payments and installment payments
for licenses for frequency Block F.
(a) * * *
(1) Each eligible bidder for licenses subject to auction on
frequency Block F shall pay an upfront payment as set forth in a Public
Notice pursuant to the procedures in Sec. 1.2106 of this chapter.
(2) Each winning bidder shall make a down payment and pay the
balance of
[[Page 50800]]
its winning bids pursuant to Sec. 1.2107 and Sec. 1.2109 of this
chapter.
* * * * *
13. Section 24.717 is revised to read as follows:
Sec. 24.717 Bidding credits for licenses for frequency Block F.
(a) A winning bidder that qualifies as a small business or a
consortium of small businesses as defined in Sec. 24.720(b)(1) or
Sec. 24.720(b)(4) of this part may use a bidding credit of fifteen
percent, as specified in Sec. 1.2110(e)(2)(iii) of this chapter, to
lower the cost of its winning bid.
(b) A winning bidder that qualifies as a very small business or a
consortium of very small businesses as defined in Sec. 24.720(b)(2) or
Sec. 24.720(b)(5) of this part may use a bidding credit of twenty-five
percent, as specified in Sec. 1.2110(e)(2)(ii) of this chapter, to
lower the cost of its winning bid.
(c) Unjust enrichment. See Sec. 1.2111 of this chapter.
Sec. 24.822 [Removed]
14. Section 24.822 is removed.
Note: This attachment will not appear in the Code of Federal
Regulations.
Attachment--Final Regulatory Flexibility Analysis
As required by the Regulatory Flexibility Act (RFA), an Initial
Regulatory Flexibility Analysis (IRFA) was incorporated into the C
Block Further Notice of Proposed Rule Making in WT Docket No. 97-82
(``C Block Further Notice''). The Commission sought written public
comment on the proposals in the C Block Further Notice, including
comment on the IRFA. This present Final Regulatory Flexibility
Analysis (FRFA) conforms to the RFA.
A. Need for, and Objectives of, the C Block Fourth Report and Order
in WT Docket No. 97-82
This C Block Fourth Report and Order sets forth the rules that
will govern reauctions of C block spectrum surrendered to the
Commission pursuant to the C Block Second Report and Order and the C
Block Order on Reconsideration of the Second Report and Order (``C
Block Reconsideration Order''), as well as any other C block
spectrum available for reauction. The C Block Fourth Report and
Order also reflects the Commission's ongoing effort to streamline
auction procedures by eliminating overlapping or redundant rules and
simplifying procedures for auction participants.
B. Summary of Significant Issues Raised by Public Comments in
Response to the IRFA
There were no comments filed directly in response to the IRFA.
The Commission, however, has considered the economic impact on small
businesses of the rules adopted herein. See section E, infra.
C. Description and Estimate of the Number of Small Entities to
Which the Rules Will Apply
The RFA directs agencies to provide a description of and, where
feasible, an estimate of the number of small entities that will be
affected by our rules. The RFA generally defines the term ``small
entity'' as having the same meaning as the terms ``small business,''
``small organization,'' and ``small governmental jurisdiction.'' In
addition, the term ``small business'' has the same meaning as the
term ``small business concern'' under the Small Business Act. Under
the Small Business Act, a ``small business concern'' is one which:
(1) is independently owned and operated; (2) is not dominant in its
field of operation; and (3) meets any additional criteria
established by the Small Business Administration (``SBA'').
The rule changes effected by this C Block Fourth Report and
Order affect all small businesses that participate in future
reauctions of C block and F block spectrum, including small
businesses currently holding C block and F block broadband personal
communications services (PCS) licenses that choose to participate
and other small businesses that may acquire licenses through
reauction. The Commission grants C block and F block licenses only
to applicants that, together with their affiliates and persons or
entities that hold interests in the applicants and their affiliates,
have gross revenues of less than $125 million in each of the last
two years and total assets of less than $500 million. The
Commission, with respect to broadband PCS, defines small businesses
as entities that, together with their affiliates and persons or
entities that hold interest in such entities and their affiliates,
have average annual gross revenues that are not more than forty
million dollars for the preceding three years. This definition has
been approved by the SBA.
On May 6, 1996, the Commission concluded the broadband PCS C
block auction. The broadband PCS D, E, and F block auction closed on
January 14, 1997. Ninety bidders (including the C block reauction
winners, prior to any defaults by winning bidders) won 493 C block
licenses and 88 bidders won 491 F block licenses. Small businesses
placing high bids in the C and F block auctions were eligible for
bidding credits and installment payment plans. For purposes of its
evaluations and conclusions in this RFA, the Commission assumes that
all of the 90 C block broadband PCS licensees and 88 F block
broadband PCS licensees, a total of 178 licensees potentially
affected by this C Block Fourth Report and Order, are small
entities. In addition to the 178 current small business licensees
that may participate at the reauction of C block licenses, a number
of additional small business entities may seek to acquire licenses
through reauction and would thus be affected by these rules.
In addition, the Commission will provide small business bidders
and very small business bidders in C block and F block reauctions
with bidding credits, with a greater discount given to very small
businesses. Under Commission rules, very small businesses in the C
block and F block are entities that, together with their affiliates
and persons or entities that hold interest in such entities and
their affiliates, have average annual gross revenues of not more
than fifteen million for the preceding three years. As discussed
below, small businesses will receive a fifteen percent bidding
credit, and very small businesses will receive a bidding credit of
twenty-five percent.
D. Description of Reporting, Recordkeeping, and Other Compliance
Requirements
As a result of the C Block Fourth Report and Order, each
applicant for a C block reauction will be required to attach to its
short-form application a statement indicating whether or not the
applicant has ever been in default on any Commission licenses or has
ever been delinquent on any non-tax debt owed to any Federal agency.
E. Steps Taken To Minimize Significant Economic Impact on Small
Entities, and Significant Alternatives Considered
The Commission will include in the next C block reauction all
licenses representing C block spectrum returned to the Commission
under the disaggregation, prepayment, or amnesty options established
in the C Block Second Report and Order, as modified in the C Block
Reconsideration Order, as well as all C block licenses held by the
Commission as a result of defaults. While some commenters argue that
the next reauction should include licenses that have filed for
bankruptcy protection, the Commission believes that the public and C
block reauction applicants will realize a greater benefit if the
Commission auctions all available C block spectrum as soon as
practicable than they will if the Commission postpones a reauction
until it has resolved all issues connected with ongoing bankruptcy
proceedings.
The following two types of entities will be eligible to
participate in C block reauctions: (1) Entities that filed an FCC
Form 175 short-form application for, and were eligible for, the
original C block auction, and (2) entities qualifying under Section
24.709 of the Commission's rules, 47 CFR 24.709, as of the deadline
for the filing of short-form applications for the reauction. All but
two of the entities that applied for and were eligible to
participate in the original C block auction qualified as small
businesses under Section 24.720 of the Commissions rules, 47 CFR
24.720. In order to ensure the integrity of C block reauctions, the
Commission retains the eligibility restriction established in the C
Block Second Report and Order, as modified in the C Block
Reconsideration Order, for licensees that surrender licenses
pursuant to the disaggregation, prepayment, and/or ``amnesty/
prepayment'' options. Such licensees will be ineligible to reacquire
their surrendered licenses through reauction or by any other means
for a period of two years from the start date of the next C block
reauction.
To further ensure auction integrity for the benefit of
applicants as well as the general public, the Commission will
restrict C block reauctions to entities not in default on any
Commission debt and not delinquent on any non-tax debt owed to any
Federal agency.
[[Page 50801]]
However, the Commission believes that past business misfortunes do
not inevitably preclude an entity from being able to meet its
present and future responsibilities as a Commission licensee.
Therefore, the Commission will allow ``former defaulters,'' i.e.,
applicants that have defaulted or been delinquent in the past, but
have since paid all of their outstanding non-Internal Revenue
Service Federal debts and all associated charges or penalties, to be
eligible to participate in C block reauctions, provided that they
are otherwise qualified.
In the Part 1 Third Report and Order, the Commission adopted
general competitive bidding rules to supplant, wherever practicable,
specific auction rules for each auctionable service or class of
service. Accordingly, future C block reauctions will adhere to Part
1 rules, insofar as applicable. Part 1 rules are determinative for
the following aspects of C block reauctions: competitive bidding
design; activity rules; reserve price, minimum opening bid, and
minimum bid increments; electronic filing; upfront payment; down
payment and full payment; amendments and modifications of
applications; bid withdrawal, default, and disqualification; anti-
collusion, and installment payment financing. Based upon the record
in this proceeding, the Commission sets a ceiling for minimum
opening bids that is no more than ten percent of the amount of the
net high bid for the corresponding market in the original C block
auction. The Commission also sets the upfront payment amount for the
next C block reauction at no higher than $.06 per MHz per pop. The
Commission will require that the upfront payment for ``former
defaulters'' be 50 percent more than that required from applicants
that do not have a history of default. This increased upfront
payment formula reflects the increased risk associated with these
parties.
In the Part 1 Third Report and Order, the Commission adopted a
schedule of bidding credits to be used in future auctions for all
services. Applying the Part 1 schedule to the gross revenue
thresholds under the Part 24 rules for small and very small C block
and F block businesses, gives small business applicants in C block
reauctions a fifteen percent bidding credit and very small business
applicants a twenty-five percent bidding credit. Eligibility for
bidding credits will be determined by the size of the applicant as
of the deadline for filing short-form applications.
Section 309(j) of the Communications Act of 1934, 47 U.S.C.
309(j), as amended, directs the Commission to disseminate licenses
among a wide variety of applicants, including small businesses and
other designated entities. Section 309(j) also requires that the
Commission ensure the development and rapid deployment of new
technologies, products, and services for the benefit of the public,
and recover for the public a portion of the value of the public
spectrum resource made available for commercial use. The Commission
believes that the C Block Fourth Report and Order promotes these
goals while maintaining the fair and efficient execution of the
auctions program.
F. Report to Congress
The Commission will send a copy of the C Block Fourth Report and
Order, including this FRFA, in a report to Congress pursuant to the
Small Business Regulatory Enforcement Fairness Act of 1996. See 5
U.S.C. 801(a)(1)(A). A copy of the C Block Fourth Report and Order
and this FRFA (or summary thereof) will be published in the Federal
Register. See 5 U.S.C. 604(b). A copy of the C Block Fourth Report
and Order and this FRFA will also be sent to the Chief Counsel for
Advocacy of the Small Business Administration.
[FR Doc. 98-25344 Filed 9-22-98; 8:45 am]
BILLING CODE 6712-01-P
