Federal Register / Vol. 63, No. 10 / Thursday, January 15, 1998 / Rules and Regulations 2315

FEDERAL COMMUNICATIONS the Commission’s regulations and determines that with regard to particular COMMISSION eliminate unnecessary rules wherever matters the adoption of service-specific possible, increase the efficiency of the rules is warranted. As the Commission 47 CFR Parts 1, 21, 24, 26, 27, 90 and competitive bidding process, and indicated in the Notice, the Commission 95 provide more specific guidance to has gained significant experience in the [WT Docket No. 97±82, ET Docket No. 94± auction participants. The changes also course of the 15 auctions conducted to 32; FCC 97±413] advance the Commission’s auction date. In particular, the Commission has program by reducing the burden on the found that much of the auction process Competitive Bidding Proceeding Commission and the public of can be standardized and that adopting conducting service-by-service auction service-specific rules for many aspects AGENCY: Federal Communications rule makings. In the Competitive Commission. of the competitive bidding process is Bidding Second Report and Order in PP both unnecessary and confusing. The ACTION: Final rule. Docket No. 93–253, the Commission Commission also finds that conducting stated that we would ‘‘issue further SUMMARY: separate rule makings for each In this Third Report and Reports and Orders * * * to adopt Order, the Commission adopts uniform individual service often slows the auction rules for each auctionable delivery of service to the public because competitive bidding rules for all future service or class of service,’’ and we it results in regulatory delays before the auctions. The Commission believes that identified criteria that would govern our licensing process begins. The majority these rule changes will simplify and choice of service-specific auction rules of commenters addressing this issue streamline its regulations in order to and procedures, which may be found in increase the overall efficiency of the subpart Q of part 1 of our rules. agree, emphasizing that the adoption of competitive bidding process. These rule Implementation of Section 309(j) of the uniform auction procedures will (1) changes are necessary to further the Communications Act—Competitive shorten the rule making process for Commission’s goals of simplifying and Bidding, PP Docket No. 93–253, Second future auctions by narrowing the issues streamlining its regulations, and to Report and Order, 59 FR 22980 (May 4, on which the Commission must seek develop uniform auction rules and 1994) (‘‘Competitive Bidding Second comment in service-specific rule procedures for all future auctions. The Report and Order’’), on recon., Second makings; (2) decrease uncertainty for intended effect of this action is to adopt Memorandum Opinion and Order, 59 auction participants; (3) benefit small uniform final rules and procedures FR 44272 (August 26, 1994) businesses because uniform rules are applicable to the Commission’s (‘‘Competitive Bidding Second more easily understood and complied spectrum auction program. Memorandum Opinion and Order’’). with, particularly by those with limited EFFECTIVE DATE: March 16, 1998. These rule changes result from the resources and those that participate in FOR FURTHER INFORMATION CONTACT: Josh Commission’s proposals in Amendment different auctions; and (4) enable the Roland or Mark Bollinger, Auctions and of Part 1 of the Commission’s Rules— Commission to develop a consistent Industry Analysis Division, Wireless Competitive Bidding Proceeding, Order, body of law and precedent governing Telecommunications Bureau, at (202) Memorandum Opinion and Order, and the auction process. 418–0660. Notice of Proposed Rule Making, WT 4. The Balanced Budget Act of 1997, SUPPLEMENTARY INFORMATION: This is a Docket No. 97–82, 62 FR 13570 (March Pub. L. 105–33, 111 Stat. 251 (1997), to summary of the Third Report and Order 21, 1997) (‘‘Notice’’). be codified in relevant part at 47 U.S.C. in WT Docket No. 97–82, ET Docket No. 2. The Commission also released a 309(j)(2)(E) and 309(j)(4)(F) (‘‘Balanced 94–32, adopted on December 18, 1997 Second Further Notice of Proposed Rule Budget Act’’), expands the and released on December 31, 1997. The Making in this Docket, in which it Commission’s auction authority. Section complete Third Report and Order is sought comment on additional changes 309(j)(2) formerly stated that mutually to its general competitive bidding rules. available for inspection and copying exclusive applications for initial The Second Further Notice of Proposed during normal business hours in the licenses or construction permits were Rule Making was published in the FCC Reference Center, Room 239, 1919 auctionable if the principal use of the Federal Register on January 7, 1998. See M Street, NW., Washington, DC 20554. spectrum was for subscription-based Amendment of Part 1 of the The complete text may be purchased services and competitive bidding would Commission’s Rules—Competitive from the Commission’s copy contractor, Bidding Procedures, Allocation of promote the expressed objectives. As International Transcription Service, Spectrum Below 5 GHz Transferred amended, Section 309(j)(2) provides Inc., 1231 20th Street, N.W., from Federal Government Use, 4660– that, in cases of mutually exclusive Washington, D.C. 20036, (202) 857– 4685 MHz, Second Further Notice of applications, all spectrum is auctionable 3800. The complete Third Report and Proposed Rule Making, WT Docket No. except licenses or construction permits Order also is available on the 97–82, ET Docket No. 94–32 (rel. for (1) public safety services; (2) digital Commission’s Internet home page January 7, 1998) (‘‘Second Further television service given to existing (http://www.fcc.gov). Notice of Proposed Rule Making’’). broadcasters to replace their analog SUMMARY OF ACTION: license; and (3) non-commercial II. Applicability of General Competitive educational or public broadcast stations. I. Background Bidding Rules In addition, the Balanced Budget Act 1. On December 18, 1997, the Federal 3. With some exceptions, the authorizes the Commission to assign Communications Commission Commission adopts its proposal in the pending broadcast license applications (Commission) adopted a Third Report Notice to apply the general competitive filed before July 1, 1997 by means of and Order making substantive bidding rules adopted herein to all competitive bidding pursuant to Section amendments and modifications to its future auctions, regardless of whether 309(j). Because these legislative changes general competitive bidding rules for all service-specific auction rules have significantly increase the number of auctionable services. These changes to previously been adopted. The Part 1 services that will be licensed by the Commission’s general competitive rules will apply to all auctionable competitive bidding, we believe that bidding rules are intended to streamline services, unless the Commission adopting uniform competitive bidding

VerDate 02-DEC-97 16:40 Jan 14, 1998 Jkt 010199 PO 00000 Frm 00011 Fmt 4700 Sfmt 4700 E:\FR\FM\P15JA0.PT1 15jar1 2316 Federal Register / Vol. 63, No. 10 / Thursday, January 15, 1998 / Rules and Regulations rules for all auctionable services is even be appropriate in some circumstances. small businesses and individual users, more necessary. In a related argument, some commenters which would require a significant 5. With limited exceptions, the rules believe that, in certain instances, the adjustment in the Commission’s the Commission adopts today will not rules adopted in this proceeding should traditional auction rules; (3) industry apply to the initial auction of licenses not be applied retroactively to participation would be crucial in in the paging, 220 MHz, and Local supersede previously adopted service- crafting appropriate auction and service Multipoint Distribution (‘‘LMDS’’) specific rules. For example, AirTouch rules; and (4) in light of the public services. The Commission previously and WWC suggest that when service- safety services provided using Part 90 adopted service-specific auction rules specific rules have been adopted after spectrum, auctioning such spectrum is for the auction of these services, and industry participation and based upon not in the public interest. AICC and believes that this decision is in the best particular characteristics of a specific AAA further suggest that those interest of prospective applicants for industry or spectrum to be auctioned, commenters who favor the adoption of these auctions, who may have relied those service-specific rules should general competitive bidding procedures upon the service-specific rules govern. for all spectrum might not have previously adopted by the Commission 7. With regard to the auction of considered the possibility of auctions in formulating business plans and licenses to provide paging services, for shared channels, since the making early efforts to obtain financing. AirTouch opposes the Commission’s Commission is not currently authorized As discussed below, however, the proposal to apply general auction rules to award licenses for such spectrum by Commission retains the discretion to to all future auctions, regardless of means of competitive bidding. The use the revised general competitive whether service specific rules have been Commission agrees that shared bidding procedures adopted in this adopted. AirTouch argues in particular spectrum is, by definition, not proceeding for any reauction of licenses that the Commission should not adopt auctionable under Section 309(j) due to in these services. The Commission also a general stopping rule for the paging the lack of mutual exclusivity. notes that while service-specific rules auction which would be contrary to the 10. Similarly, Hughes suggests that in exist for the auction of the 220 MHz comments received in that proceeding the event the Commission decides to service, many of these rules are similar, and the stopping rule that the auction satellite services, it should or refer to the Part 1 rules. To apply the Commission ultimately adopted. As conduct a service-specific rule making existing rules for the most part is also discussed above, the Commission will specially tailored to the capital strongly supported by those commenters use previously-adopted, service-specific intensive nature of the satellite industry, addressing the issue. For example, rules for the paging auction. instead of employing the general AMTA states that the 220 MHz industry 8. The rule changes the Commission competitive bidding procedures adopted has encountered extraordinary delays in adopts today streamline and simplify its in this proceeding. Although the achieving regulatory certainty, and that general competitive bidding procedures. Commission does not decide that issue amending or altering the auction rules The majority of the rules the now, as the Commission suggested in for this service would create further Commission adopts today address the Notice, the Commission will uncertainty. Consistent with the aspects of the Commission’s spectrum continue to adopt service-specific Commission’s discussion below, the auction program that affect future auction procedures where it finds that Commission’s decision regarding the auction applicants only. These rules its general competitive bidding establishment of minimum opening bids include application procedures (e.g., procedures are inappropriate. will apply to the initial auction of electronic filing, short-form application III. Rules Governing Designated Entities licenses in the paging and 220 MHz amendments, ownership disclosure services. In addition, the Commission requirements), upfront and down 11. Section 309(j)(4)(D) of the notes that several petitions for payment issues, issues relating to Communications Act of 1934 provides reconsideration are pending in these competitive bidding design, procedure that in prescribing rules for a proceedings. In resolving these and timing (e.g., alternate bidding competitive bidding system, the petitions, the Commission will address methodologies, minimum opening bids, Commission shall ‘‘ensure that small installment payment financing for and bid withdrawal), and rules businesses, rural telephone companies, licenses in these services in a manner prohibiting collusion during the and businesses owned by members of consistent with our decision herein to auction. However, some of the minority groups and women are given temporarily suspend the use of provisions the Commission adopts the opportunity to participate in the installment payments. today address aspects of its rules that provision of spectrum-based services.’’ 6. Many of the commenters who govern current licensees as well. 47 U.S.C. 309(j)(4)(D). The statute support the Commission’s proposal to Specifically, these minor rule changes further directs the Commission to adopt general competitive bidding affect certain license-related payment consider the use of tax certificates, procedures for all auctionable services terms (e.g., installment payments, grace bidding preferences, alternative argue that the Commission should, in its periods, and unjust enrichment). payment schedules and methods of discretion, adopt or retain service- 9. Two commenters, AICC and AAA, calculations and other procedures as specific rules in particular instances. argue that the general competitive means of accomplishing this statutory Airadigm argues that the Commission bidding procedures adopted in this objective. See 47 U.S.C. 309(j)(3)(B) and should use existing service-specific proceeding would be wholly (j)(4)(D). rules where it would be unfair to allow inappropriate for auctions of shared 12. The Commission adopts the rules one group of licensees in the same frequencies governed by Part 90 of the in this Third Report and Order in order service to benefit or be disadvantaged by Commission’s rules. In support of this to facilitate broad-based participation in operating under a different set of rules position, these commenters argue that: auctions. The Commission believes that than its competitors in the same service (1) None of the Commission’s auctions standardizing the rules regarding (e.g., in the case of a reauction of have involved shared frequencies; (2) definitions of eligible entities, unjust licenses following bidder default). any auction of Part 90 shared spectrum enrichment and bidding credits will Similarly, NextWave contends that the would involve participants ranging in assist small, minority and women- adoption of service-specific rules may size from very large corporations to very owned businesses because the rules’

VerDate 02-DEC-97 16:40 Jan 14, 1998 Jkt 010199 PO 00000 Frm 00012 Fmt 4700 Sfmt 4700 E:\FR\FM\P15JA0.PT1 15jar1 Federal Register / Vol. 63, No. 10 / Thursday, January 15, 1998 / Rules and Regulations 2317 predictability will facilitate the business average gross revenues over the seeking to qualify for small business planning and capital fundraising preceding three years ‘‘not to exceed’’ status. A majority of these commenters process. While the Commission particular amounts. The Commission supported the Commission’s tentative suspends the use of installment also continues to believe that average conclusion that where audited financial payments, the Commission seeks gross revenues provide an accurate, statements are not available, they comment in the Second Further Notice equitable, and easily ascertainable should not be required. In particular, of Proposed Rule Making in this docket measure of business size. As the these commenters argue that any strict on whether installment payments Commission has discussed in the past, requirement that financial statements be should be adopted in the future. a single gross revenues size standard is audited is unduly burdensome for most 13. The Commission also notes that an established method for determining small business applicants. In addition, pursuant to Section 309(j)’s obligations size eligibility for various kinds of AMTA contends that the certification to ensure opportunities for participation federal programs that aid smaller requirement already present on the by small enterprises, rural telephone businesses. NextWave, in its comments, short-form (FCC Form 175) application companies, and minority- and women- agrees, stating that gross revenues are a is sufficient to ensure that small owned businesses, and Section 257 of generally reliable measure of whether a business applicants submit only the Telecommunications Act, requiring company is indeed small. In addition, accurate information, both financial and that the Commission identify and while the Commission has used a total otherwise, as part of their applications. eliminate market entry barriers for small assets test in determining eligibility for Only two commenters, ISTA and and entrepreneurial entrepreneur blocks, see, e.g., 47 CFR PageNet advocate that applicants use telecommunications businesses, the 709(a), the Commission has not used audited financial statements in order to Commission has commenced a series of such a test for determining small qualify for small business status. After studies, and has other studies in the business eligibility. The Commission review of the comments on this issue, planning process, to examine barriers also notes that the Small Business Act’s the Commission concludes that such a encountered by minorities and women statutory definition of small business requirement would be onerous to small in the auctions process and the does not use a total assets test. See 15 business. The Commission also agrees secondary market for licenses. When U.S.C. 632(c). Thus, the Commission with AMTA’s observation that the those studies are completed, the declines to adopt any other measure of certification requirement on the FCC Commission will examine whether business size, such as a total assets test, Form 175 acts to ensure that applicants additional measures are warranted to at this time. submit accurate information. promote the objectives of giving small 16. Definition of Gross Revenues. All Furthermore, as discussed below, the businesses, rural telephone companies, commenters addressing the issue Commission also will retain the and women- and minority-owned support the Commission’s proposal in authority to audit applicants businesses the chance to provide the Notice to adopt a uniform definition individually if there is any question spectrum-based services, as required in of gross revenues for all auctionable concerning small business status. The Section 309(j). services. The Commission believes that Commission therefore declines to 14. Small Business Size Standards. a uniform definition of gross revenues, require all applicants to use audited The Commission adopts its proposal to as the essential element of our small financial statements to support their continue to define small businesses, as business definitions, furthers the gross revenue calculations. Audited it has in the past, based on the Commission’s goal of establishing financial statements, however, are characteristics and capital requirements uniform definitions and is necessary if they exist. The Commission of the specific service. The Commission administratively efficient. Thus, the also notes that, consistent with the believes that this approach has given it Commission adopts a uniform definition Small Business Act, 15 U.S.C. flexibility that will continue to benefit of gross revenues in the Part 1 rules. 632(c)(ii)(II), where an entity has been small businesses in future auctions. The 17. Various commenters addressed in existence for less than three years, the Commission also notes that this specific aspects of the Commission’s entity’s gross revenues should be approach is consistent with the Small proposed definition of gross revenues. averaged for the relevant number of Business Administration’s practice of CII supports the Commission’s proposal years the entity, or its predecessor in approving small business size standards that applicants be permitted to use interest (affiliate), has been in existence. on a service-by-service basis. either fiscal year or calendar year figures 19. Accordingly, as proposed in the Commenters addressing this issue for calculation purposes. No Notice, and consistent with the support this conclusion. For example, commenters opposed this proposal. The Commission’s broadband PCS rules, the AMTA and NextWave both believe that Commission is persuaded that Commission will define gross revenues the determination of appropriate small permitting use of either of these figures for all auctionable services as: business size standards should be made will assist applicants in providing the on a case-by-case basis. most current information available on all income received by an entity, whether 15. No commenters addressed the their applications. The Commission earned or passive, before any deductions are Commission’s proposal in the Notice to concludes that its general gross revenue made for costs of doing business (e.g., cost of goods sold), as evidenced by audited create size standards that require small definition should permit applicants to financial statements for the three (3) most businesses to have gross revenues ‘‘not support their gross revenue calculations recent calendar years or, if audited financial to exceed,’’ as opposed to ‘‘less than’’ a using either fiscal or calendar years. statements were not prepared on a calendar- certain amount. Nevertheless, the 18. Several commenters responded to year basis, for the most recently completed Commission believes that adoption of the Commission’s tentative conclusion fiscal years preceding the filing of the this proposal is important to further its in the Notice to accept the use of applicant’s short-form (FCC Form 175). If an objective of establishing uniform unaudited financial statements where entity was not in existence for all or part of definitions relating to small business audited financial statements are the relevant period, gross revenues shall be evidenced by the audited financial standards for future auctions. From this unavailable, if prepared in accordance statements of the entity’s predecessor-in- point forward, the Commission’s with Generally Accepted Accounting interest or, if there is no identifiable service-specific small business Principles, for gross revenue predecessor-in-interest, unaudited financial definitions will be expressed in terms of calculations by auction applicants statements certified by the applicant as

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The of determining the gross revenues of an services to rural areas. the Commission Commission adopts its proposal to applicant seeking to qualify for status as also noted that adopting the 1996 Act adopt a uniform definition of the term a small business. See 47 CFR definition would promote uniformity of ‘‘affiliate’’ for all future auctions. As the 1.2110(b)(4)(x). In the past, however, the regulations and is therefore consistent Commission discussed in the Notice, term ‘‘consortium’’ has been defined on with the mandate of that legislation to the term affiliate is defined by the a service-by-service basis as ‘‘a ease regulatory burdens and eliminate Commission’s Part 1 rules as an conglomerate organization formed as a unnecessary regulation. The individual or entity that directly or joint venture between or among Commission believes that the same indirectly controls or has the power to mutually independent business firms, reasons for amending this definition in control the applicant; is directly or each of which individually satisfies the the broadband PCS rules justify indirectly controlled by the applicant; is definition of a very small business, amending the definition in Part 1 for all directly or indirectly controlled by a small business or entrepreneur.’’ See, services subject to competitive bidding. third person(s) that also controls or has e.g., 47 CFR 101.1112(f) (defining the 25. Thus, the Commission amends the power to control the applicant; or term ‘‘consortium’’ for LMDS). This § 1.2110(b)(3) to define the term rural has an ‘‘identity of interest’’ with the results in each member of a consortium telephone company as a local exchange applicant. The Commission has found being defined as an affiliate of each carrier operating entity to the extent that that this definition, which also contains other member. The resulting attribution such entity—(A) provides common detailed discussion and examples of of gross revenues of each member of the carrier service to any local exchange relevant terms such as ‘‘control’’ and consortium is inconsistent with our carrier study area that does not include ‘‘identity of interest,’’ has proven intention to permit small or very small either (i) any incorporated place of workable and is broad enough to businesses to form consortia as a means 10,000 inhabitants or more, or any part address a wide variety of business of increasing the capital available to thereof, based on the most recently structures. In particular, this definition participate in the Commission’s available population statistics of the has helped to ensure that businesses auctions, while still being eligible for Bureau of the Census, or (ii) any seeking small business status are truly status as a small business. territory, incorporated or small. The Commission also believes 23. The Commission therefore amends unincorporated, included in an that this definition, by focusing on § 1.2110(b)(4)(x) to provide that a urbanized area, as defined by the ‘‘indicia of control,’’ is consistent with ‘‘consortium’’ as defined on a service- Bureau of the Census as of August 10, our proposals regarding attribution of by-service basis for purposes of 1993; (B) provides telephone exchange gross revenues of investors and affiliates determining status as a designated service, including exchange access, to discussed in the Second Further Notice entity will not be treated as a ‘‘joint fewer than 50,000 access lines; (C) of Proposed Rule Making in this docket. venture’’ under our attribution provides telephone exchange service to 21. CIRI requests that the Commission standards. As a result, when two or any local exchange carrier study area include in its general definition of the more entities form an association that with fewer than 100,000 access lines; or term ‘‘affiliate’’ an exemption for Indian meets the service-specific definition of a (D) had less than 15 percent of its access tribes and Alaska Regional or Village ‘‘consortium,’’ the gross revenues of lines in communities of more than Corporations, as the Commission did for each entity will not be attributed to each 50,000 on the date of enactment of the broadband PCS, and more recently, for entity in determining eligibility for Telecommunications Act of 1996. LMDS. The Commission agrees with designated entity status. The 26. Installment Payments. After CIRI that entities owned and controlled Commission believes that this careful review of the comments in this by Indian tribes and Alaska Regional or clarification to the general definition of docket, and the Commission’s recent Village Corporations should be eligible the term ‘‘affiliate’’ will enhance the decisions in the broadband PCS C block, to bid in future auctions as small ability of small businesses to form LMDS and 800 MHz SMR services, the businesses, notwithstanding their associations that will permit them to bid Commission has determined that affiliation with other entities owned by for licenses that would be too expensive installment payments should not be tribes or Alaska Native Corporations for them individually. Auction winners used in the immediate future as a means whose gross revenues cause the have successfully used consortium of financing small business combined average gross revenues of the structures to acquire licenses and ‘‘spin- participation in the Commission’s entity and its affiliates to exceed the off’’ licenses post-auction, and the auction program. See also ‘‘FCC general limits for eligibility for bidding Commission wishes to continue to make Announces Spectrum Auction Schedule as such a business. As the Commission this option available. for 1998,’’ Public Notice, DA 97–2497 stated in support of a similar exemption 24. Definition of Rural Telephone (rel. November 25, 1997), announcing from the affiliation rules in LMDS, this Company. The National Telephone the following upcoming auctions: exception will ensure that these entities Cooperative Association (‘‘NTCA’’) and LMDS, 220 MHz, broadband C block will have a meaningful opportunity to the Rural Telecommunications Group Reauction, 39 GHz, Paging, 800 MHz participate in spectrum-based services (‘‘RTG’’), commented in support of the SMR (Lower 80 and General Category from which they would otherwise be Commission’s proposal in the Notice to Channels), Location Monitoring precluded. Furthermore, the adopt the definition of a rural telephone Services (LMS), Public Coast Stations, Commission does not believe that this company contained in the Pending Analog Broadcast Licenses for exemption for the specified entities will Telecommunications Act of 1996 as the Commercial Radio and Television entitle them to an unfair advantage over single definition of the term to be used Stations, and ‘‘FCC Announces Auction entities that are otherwise eligible for in all auctionable services. No Schedule for the General Wireless small business status. commenters opposed this proposal. As Communications Service,’’ Public

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Notice, DA 97–2634 (rel. December 17, Consistent with this decision, the 309(j) requires the Commission to 1997). The Commission must balance Commission hereby eliminates consider alternative methods to allow competing objectives in Section 309(j) installment payments in the auction of for dissemination of licenses among that require, inter alia, that it promote the lower 80 and General Category designated entities, including small the development and rapid deployment channels in the 800 MHz SMR service. businesses. The Commission believes of new spectrum-based services and Although Merlin submits that the that the rules it adopts below regarding ensure that designated entities are given elimination of the Commission’s the use of bidding credits for small the opportunity to participate in the installment payment provisions in any business applicants in future auctions provision of such services. The service would be contrary to the will both fulfill the mandate of Section Commission notes that its experience Commission’s conclusions in previous 309(j) to provide small businesses with has demonstrated that installment rule makings, the Commission believes the opportunity to participate in payments may not be necessary to that this decision is consistent with auctions and ensure that new services ensure a meaningful opportunity for suggestions of CIRI, as well as the are offered to the public without delay. small businesses to participate Commission’s general experience in 30. Merlin contends that while successfully in our auction program. For examining the success of the installment significant bidding credits can be useful example, in the cellular auction of payment program to date. As the in helping smaller entities win licenses licenses for unserved areas, which had Commission recently recognized in when they bid against larger companies, no special bidding provisions, 36 eliminating installment payments for bidding credits alone do not help percent of the licenses went to small or LMDS licensees, Congress did not smaller entities access the capital very small businesses. The Commission require the use of installment payments required to build a spectrum-based also stated that in assessing the public in all auctions, but rather recognized service. In addition, Merlin states that interest, we must try to ensure that all them as one means of promoting the eliminating the installment payment the objectives of Section 309(j) are objectives of Section 309(j)(3) of the plan would raise the cost of capital for considered. The Commission has found, Communications Act. The Commission small businesses which would be forced for example, that obligating licensees to continues to experiment with different to borrow additional funds from pay for their licenses as a condition of means of achieving its obligations under commercial lenders at higher interest receipt requires greater financial the statute, and has offered installment rates. Merlin also argues that because accountability from applicants. payments to licensees in several many small businesses have relied on 27. In addition, questions have been auctioned wireless services. Installment the current installment plan terms in raised in bankruptcy litigation about payments are not the only tool available formulating business plans necessary to whether the Commission can quickly to assist small businesses. Indeed, the bid in upcoming auctions, any decision reclaim licenses should a licensee Commission have conducted auctions to eliminate the installment payment declare bankruptcy (even though without installment payments. program could effectively preclude licenses are expressly conditioned upon Moreover, Section 3007 of the Balanced small business participation in future payment and cancel automatically in Budget Act requires that the auctions altogether. The Commission the event of non-payment) resulting in Commission conduct certain future disagrees with Merlin’s assertions. As significant delays in the provision of auctions in a manner that ensures that the Commission has discussed, the service to the public. While the all proceeds from such bidding are Commission believes that the increased Commission is confident of prevailing deposited in the U.S. Treasury not later in any litigation, until controlling bidding credits it adopts below will than September 30, 2002. Although the precedent is established or legislation help fulfill the mandate of Section Commission seeks comment in the addressing the conflicting rights is 309(j)(4)(D) of the Communications Act Second Further Notice of Proposed Rule enacted, such delays may occur. In this to provide small businesses with the Making on offering installment payment regard, the Commission has strongly opportunity to participate in spectrum- plans in the future, the Commission urged Congress to adopt legislation that based services. As noted above, this believes that Section 3007 may require would clarify that provisions of the approach was successful in enabling that these auctions be conducted Bankruptcy Code (1) are not applicable small businesses to participate in the without offering long-term installment to any FCC license for which a payment WCS auction, in which the Commisison payments. See Balanced Budget Act of obligation is owed; (2) do not relieve was unable to employ installment any licensee from payment obligations; 1997. The Conference Report on the payments because of the statutory and (3) do not affect the Commission’s Balanced Budget Act of 1997 indicates deadline for depositing auction authority to revoke, cancel, transfer or that the deadline set forth in Section revenues in the U.S. Treasury. The assign such licenses. The Commission 3007 ‘‘applies to all competitive bidding Commission also recently used this also notes that, in order to balance the provisions in this title of the conference approach in establishing rules for the impact on small businesses of its agreement and any amendments to other auction of licenses for 800 MHz SMR decision to discontinue the use of law made in this title.’’ Conference and LMDS. installment payments in the near future, Report on H.R. 2015, Balanced Budget 31. The Commission recognizes that it the Commission is adopting higher Act of 1997, Congressional Record— previously adopted rules for both the bidding credits than those proposed in House, Vol. 143, No. 109—Part II, at 220 MHz and paging services that the Notice. H6176. permit eligible small businesses to pay 28. Therefore, subject to the 29. In this regard, the Commission for their licenses in installments. Commission’s proposals in the Second agrees with commenters such as CIRI, Several petitions for reconsideration Further Notice of Proposed Rule that contend that increased bidding have been filed in these proceedings Making, the Commission concludes that credits will allow responsible small that remain pending before the until further notice, installment bidders with appropriately tailored Commission. The Commission will payments should not be offered in business plans to secure adequate resolve these petitions separately in a auctions as a means of financing small private financing to be successful in manner consistent with our decision businesses and other designated entities future auctions. Further, as the herein to suspend the use of installment seeking to secure spectrum licenses. Commission has already noted, Section payment plans at least until our rights

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For example, Pocket states that years not exceeding $40 million be auctions, there is disagreement among bidders often ‘‘bid through’’ bidding eligible for bidding credits of 25 commenters as to whether a standard credits and that bidding credits tend to percent. As discussed above, the schedule of bidding credits for small result in higher bids and, in general, Commission believes that higher businesses is desirable. For example, CII higher auction prices. The Commission bidding credits than those proposed in supports our proposal to standardize the believes that without installment the Notice are necessary now that our sliding scale of bidding credits that is payments, bidding credits, coupled with installment payment program is available to an applicant. Specifically, providing bidders sufficient time to suspended. The Commission believes CII believes that granting businesses of raise financing, will enable small that the schedule of bidding credits it different sizes different levels of bidding businesses to successfully compete in adopts is reasonable in light of our credits in different services threatens to future auctions. Also, tiered bidding decision to suspend installment result in inconsistent participation by credits have proven to work well and payments for services auctioned in the small businesses in spectrum auctions. provide for more competition between immediate future, and expect that it will In contrast, some commenters oppose small business participants of different any set schedule of bidding credits, and sizes. The use of tiered bidding credits prove sufficient to enable small believe that the Commission should was successful in enabling small businesses to obtain spectrum licenses specify appropriate bidding credits for businesses to participate in the WCS through our auction program. Thus, the each auctionable service. Among these, auction, in which the Commission was Commission declines to adopt Merlin’s PCIA and AMTA believe that the unable to employ installment payments proposal. The Commission also notes Commission should continue to because of the statutory deadline for that it seeks comment in the Second examine what constitutes an effective depositing auction revenues in the U.S. Further Notice of Proposed Rule Making bidding credit on a service-by-service Treasury. Finally, while the on means other than bidding credits and basis because the financing Commission recognizes Pocket’s installment payments by which the requirements of different spectrum- concerns about the possibility that Commission might facilitate the based services may necessitate use of bidders ‘‘bid through’’ bidding credits, participation of small businesses in our different size bidding credits to provide the Commission does not believe that spectrum auction program. the proper assurances that small this problem is significant where not all 36. Unjust Enrichment. The businesses will be able to effectively bidders are eligible for bidding credits, Commission adopts its proposal to compete. As the Commission stated in and the size of the bidding credit varies conform the Part 1 unjust enrichment the Notice, the Commission believes among those who are eligible. rules to the broadband PCS rules. The that an approach in which the 34. Consistent with this reasoning, the Commission believes that effective Commission provides certainty for Commission adopts the following unjust enrichment rules are necessary to future auctions about the size of schedule of bidding credits for use in ensure that meaningful small business available bidding credits will benefit future auctions in which provisions for participation in spectrum-based services small businesses because potential designated entities are offered: is not thwarted by transfers of licenses bidders will have more information well to non-designated entities. As the Bidding in advance of the auction than Commission stated in the Notice, the previously about how such levels will credits Average annual gross revenues broadband PCS unjust enrichment rules be set. Once a small business definition (per- cent) are preferable to our current general is adopted for a particular service, unjust enrichment rules because they eligible businesses will benefit they are Not to exceed $3 million ...... 35 provide greater specificity about funds able to refer to a schedule in our Part 1 Not to exceed $15 million ...... 25 due at the time of transfer or assignment rules to determine the level of bidding Not to exceed $40 million ...... 15 credit available to them. The and specifically address changes in Commission therefore adopts its The Commission recognizes that these ownership that would result in loss of proposal to create a standard schedule credits are higher than some previously eligibility for installment payments, of bidding credits. adopted for specific services. Based on which the current general rules do not 33. In light of the Commission’s the Commission’s past auction address. The broadband PCS rules also decision to suspend installment experience and the suspension of address assignments and transfers payment financing for the near future, installment payments, however, the between entities qualifying for different the Commission has determined that Commission believes that the approach tiers of installment payments or bidding higher bidding credits than those taken here will provide adequate credits, thus supplying clearer guidance proposed in the Notice would better opportunities for small businesses of for auctions in which tiered installment effectuate our statutory mandate. varying sizes to participate in spectrum payment plans or bidding credits are Airadigm supports larger bidding auctions. provided. Commenters addressing this credits than those proposed by the 35. The Commission recognizes that issue largely support this decision. For Commission. Similarly, CIRI contends Merlin recommends providing higher example, Pocket and Ericsson both that unless the Commission is prepared bidding credits than those which the argue that modified unjust enrichment to establish the creditworthiness of Commission adopts. Specifically, rules would still deter transfers installment payment applicants, the Merlin suggests that (1) businesses with designed to subvert the Commission’s Commission should offer substantial average gross revenues for the preceding rules, but would provide businesses bidding credits to small businesses in three years not exceeding $3 million be with more flexibility in situations of lieu of government financing. The eligible for bidding credits of 40 financial distress and permit the transfer

VerDate 02-DEC-97 16:40 Jan 14, 1998 Jkt 010199 PO 00000 Frm 00016 Fmt 4700 Sfmt 4700 E:\FR\FM\P15JA0.PT1 15jar1 Federal Register / Vol. 63, No. 10 / Thursday, January 15, 1998 / Rules and Regulations 2321 of individual licenses that no longer eligibility for installment payments, the that its general rule resembles those comport with their business plans. licensee must first seek Commission rules the Commission has adopted in 37. Current as well as future licensees approval and must make full payment of specific services (e.g., MDS, narrowband will be governed by the rules the the remaining unpaid principal and any PCS, and 900 MHz SMR ) that reduce Commission adopts providing for unjust unpaid interest accrued through the the amount of unjust enrichment enrichment payments upon assignment, date of such change as a condition of payments due on transfer based upon transfer, partitioning and disaggregation. approval. If a licensee seeks to make any the amount of time the initial license While the Commission did not receive change in ownership that would result has been held. Consistent with the rules significant comment on this issue, the in the licensee qualifying for a less that exist in these services, the amount Commission notes that in awarding favorable installment plan, the licensee of this payment will be reduced over licenses in the past, the Commission has must seek Commission approval and time as follows: A transfer in the first emphasized that the terms associated must adjust its payment plan to reflect two years of the license term will result with the continued grant of a license its new eligibility status. in a forfeiture of 100 percent of the will be governed by current Commission value of the bidding credit (or, in the Unjust Enrichment and Bidding Credits rules and regulations. For example, in case of very small businesses awarding licenses to C block licensees 39. For existing and future licensees transferring to small businesses, 100 paying for their licenses in installments, who qualified or qualify in the future for percent of the difference between the the Commission indicated in the a bidding credit in paying for their bidding credit received by the former associated ‘‘Note’’ and ‘‘Security winning bid, the Commission also and the bidding credit for which the Agreement’’ that the terms of the amends § 1.2111(c) to provide for unjust latter is eligible); in year three of the installment plan would be governed by enrichment payments similar to those license term the payment will be 75 and construed in accordance with then- contained in the Commission’s percent; in year four the payment will applicable Commission orders and broadband PCS rules. Specifically, be 50 percent; and in year five the regulations, as amended. Therefore, the during the term of the initial license payment will be 25 percent, after which Commission concludes that the unjust grant, if a licensee seeks to assign or there will be no payment. These enrichment rules it adopts apply to transfer control of its license to an entity assessments will have to be paid to the existing licensees, and supersede not meeting the eligibility standards for U.S. Treasury as a condition of approval service-specific rules where applicable. bidding credits, or seeks to make any of the assignment, transfer, or Specifically, these rules will supersede other change in ownership that would ownership change. All current and existing unjust enrichment provisions in result in the licensee no longer future licensees, with the exception of the narrowband and broadband PCS, qualifying for a bidding credit, the entrepreneur block licensees subject to WCS, 900 MHz, and IVDS services. See licensee must seek Commission restrictions on assignments and 47 CFR 24.309(f) (narrowband PCS), approval and must reimburse the transfers of licenses, will be governed by 24.711 (C block), 24.716(d) (F block), government for the amount of the this modification to our general rules. 27.209(d)(1), (2) (WCS), 90.812(b) (900 bidding credit, plus interest based on The Commission believes that our MHz), 95.816(e) (IVDS). As discussed the rate for U.S. Treasury obligations decision to maintain the original above, the Commission suspends the applicable on the date the license is transfer restrictions for such licensees is use of installment payments for the granted, as a condition of the approval proper in light of the special provisions immediate future as a means of of such assignment, transfer or other which were made available for licensees financing small business participation ownership change. Similarly, if the in the Commission’s entrepreneur in the Commission’s auction program. licensee seeks to assign or transfer blocks. As a result, the Commission’s decision control of its license to an entity with regard to unjust enrichment meeting the eligibility standards for Unjust Enrichment and Partitioning and payments as they relate to licensees lower bidding credits, or seeks to make Disaggregation paying for their licenses in installment any other change in ownership that 41. Also as proposed in the Notice, payments will apply only to existing would result in the licensee qualifying the Commission will adopt a general licensees, their transferees and assignees for a lower bidding credit under this rule modeled on the Commission’s (until the Commission reinstates section, the licensee must seek broadband PCS rules to determine the installment payments). Commission approval and must pay to amount of unjust enrichment payments the United States Treasury the assessed for all current and future Unjust Enrichment and Installment difference between the amount of the licensees. Thus, the Commission adopts Payments bidding credit obtained by the licensee a general unjust enrichment rule that 38. For existing licensees who make and the bidding credit for which the treats partitioning and disaggregation by use of Commission installment payment assignee, transferee or licensee is licensees in the same manner as the financing, the Commission amends eligible as a condition of the approval of broadband PCS rule. Specifically, if the § 1.2111(c) to conform to the such assignment, transfer or other licensee seeks to partition any portion of Commission’s broadband PCS rules. ownership change. These provisions its geographic service area, the amount Specifically, if a licensee seeks to assign also will apply to licensees who of the unjust enrichment payment or transfer control of its license to an partition or disaggregate their licenses. discussed above will be calculated entity not meeting the eligibility 40. The Commission also adopts its based upon the ratio of population in standards for installment payments, the proposal in the Notice to provide for the partitioned area to the overall licensee must make full payment of the decreasing unjust enrichment payments population of the licensed area. remaining unpaid principal and any for licensees that utilized a bidding Similarly, if a licensee seeks to unpaid interest accrued through the credit when paying for their licenses disaggregate spectrum, the amount of date of the assignment or transfer as a and that make transfers and assignments the unjust enrichment payment will be condition of Commission approval. occurring later in the license term. This determined based upon the ratio of the Similarly, if the licensee seeks to make decision also is supported by the amount of spectrum disaggregated to the any change in ownership structure that commenters. In amending the rule in amount of spectrum held by the would result in the licensee losing this manner, the Commission ensures disaggregating licensee.

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IV. Application Issues required for the grant of a waiver, in size that would affect an applicant’s 42. Electronic Filing. The Commission provide adequate assurance that eligibility for designated entity believes that electronic filing of all requests for waiver relating to the provisions. In contrast, Metrocall short-form and long-form applications electronic filing of applications will contends that all changes in ownership for auctionable services is in the best receive proper consideration. In incidental to mergers and acquisitions, interest of auction participants, as well addition, the Commission emphasizes non-substantial pro forma changes, and as members of the public monitoring that it has typically responded rapidly involuntary changes in ownership Commission auctions. Therefore, the to time-sensitive waiver requests filed should be categorized as minor. Commission amends §§ 1.2105(a) and by auction applicants, and intends to Metrocall also states that an applicant 1.2107(c) of its rules to require continue to do so in the future. should not be permitted to upgrade its 44. Only one commenter, Airadigm, electronic filing of all short-form and designated entity status after the short opposes an electronic filing long-form applications, beginning form filing deadline (i.e., go from a requirement. Airadigm states that the January 1, 1999, unless it is not ‘‘small’’ to ‘‘very small’’ business), but Commission experienced difficulties in operationally feasible. Although in the should be permitted to lose its processing electronic filings during the Notice the Commission proposed to designated entity status as a result of a IVDS auction and argues that removing require electronic filing commencing minor change in control (i.e., exceed the the option of manual filing could result January 1, 1998, the Commission threshold for eligibility as a small in similar problems in future auctions. believes that this additional phase-in business). The Commission believes that the period before the requirement becomes 47. After careful consideration of the system enhancements discussed above, comments addressing the issue, the effective will benefit potential bidders. most of which were not in place during Commission concludes that a definition The majority of the comments the IVDS auction, adequately respond to of major and minor amendments similar addressing the issue support the Airadigm’s concerns. The Commission to that provided in the Commission’s decision to require electronic filing. For also notes that its experiences from PCS rules, 47 CFR 24.822, is example, PageNet contends that recent auctions demonstrate that the appropriate. After the short-form filing electronic filing promotes access to electronic bidding system is reliable. deadline, applicants will be permitted applications by competing bidders, as For example, in the broadband PCS D, to make minor amendments to their well as the general public, by making it E, and F block auction, 94 percent of the short-form applications both prior to possible to review and download qualified bidders filed their short-form applications without traveling to FCC applications electronically. In the and during the auction. However, headquarters or contracting for recently completed 800 MHz SMR applicants will not be permitted to make photocopying of paper applications. To auction, 93 percent of the qualified major amendments or modifications to facilitate public access, the Commission bidders filed their short-form their applications after the short-form has developed user-friendly electronic applications electronically. The filing deadline. Major amendments will filing software and Internet World Wide Commission did not experience include, but will not be limited to, Web forms to give auction applicants problems with its electronic filing changes in license areas designated on the ability to conveniently file and procedures. the short-form application, changes in review applications. This software helps 45. Finally, as the Commission stated ownership of the applicant which applicants ensure the accuracy of their in the Notice, the Commission would constitute a change in control, applications as they are filling them out, recognizes that there is a need for a and the addition of other applicants to and enables them to correct errors and period of time before a comprehensive any bidding consortia. Consistent with omissions prior to submitting their electronic filing requirement becomes the weight of the comments addressing applications. To assist the public, the effective in order for bidders to prepare the issue, major amendments will also Commission provides technical support and be completely comfortable with this include any change in an applicant’s personnel to answer questions and work process. The effective date of January 1, size which would affect an applicant’s with callers using the electronic auction 1999, will provide potential bidders eligibility for designated entity system. In addition, the Commission has with adequate time in which to adapt to provisions. For example, if Company A, demonstrated its auction software at electronic filing requirements. Finally, an applicant that qualified for special conferences organized by potential although the Commission concludes provisions as a small business, merges bidders and members of the industry in that electronic filing is the preferred with Company B during the course of an order to familiarize interested parties filing method, the Commission auction, and if, as a result of this with our recent software enhancements. nevertheless reserves the right to merger, the merged company would not 43. AT&T is generally supportive of provide for manual filing in the event of qualify as a small business, the electronic filing, but proposes that the technical failure or other difficulties. amendment reflecting the change in Commission create a waiver process 46. Short-form Application ownership of Company A would be whereby an applicant that has missed a Amendments. The majority of considered a major amendment. filing deadline due to technical commenters support the Commission’s Otherwise, the new entity could receive problems can obtain a waiver quickly or proposal in the Notice to create a small business bidding credits and be permitted to submit a paper original uniform definition of major and minor installment payments when it does not of the application by hand or mail the amendments to applicants’ short-form qualify for them. As is the case in the same day. In addition, AT&T requests (FCC Form 175) applications for all Commission’s PCS rules, however, that a Commission staff member be future auctions. However, commenters’ applicants will be permitted to amend provided with the authority to grant opinions differ on what types of their short-form applications to reflect such a waiver in the event of electronic amendments the Commission should the formation of bidding consortia or filing difficulties. The Commission does categorize as major or minor. For changes in ownership that do not result not believe that a specific waiver example, AT&T and ISTA argue that in a change in control of the applicant, provision is necessary. The major amendments should include all provided that the parties forming Commission’s existing waiver changes in ownership that constitute a consortia or entering into ownership provisions, which specify the showing change in control, as well as all changes agreements have not applied for licenses

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As noted above, the Commission actually bidding for licenses in the same business status qualify for such status, has generally refused to grant requests geographic license areas. Because of the and to ensure compliance by all to add or delete markets on an potential anti-competitive results of applicants with spectrum caps and applicant’s short-form application in allowing bidders to delete markets after other ownership limits. Disclosure of order to prevent collusive conduct or the short-form filing deadline, however, ownership information also aids bidders gaming that would reduce the the Commission believes that this type by providing them with information competitiveness of the auction. While of error can be more effectively about their auction competitors and the Commission recognizes that there addressed by other means, including alerting them to entities subject to our may be some circumstances in which increased awareness on the part of anti-collusion rules. Therefore, the the competitiveness of the auction prospective auction applicants of the Commission adopts standard ownership might be enhanced by allowing consequences of choosing ‘‘all markets,’’ disclosure requirements for all applicants to add markets to their short- as well as software enhancements that auctionable services that will avoid the form applications, the Commission make specifying particular markets on variations found in the Commission’s concludes that the risks of encouraging the FCC Form 175 less burdensome. current service-specific ownership or facilitating conduct that negatively 50. The Commission also emphasizes disclosure requirements. affects the competitiveness of the that, pursuant to § 1.65 of the 53. This decision is widely supported auction and the post-auction market Commission’s rules, each auction by the majority of comments in this structure outweigh the benefits of applicant is required to assure the proceeding. Most commenters categorizing such amendments as continuing accuracy and completeness addressing the issue of ownership minor. Several commenters support this of information furnished in a pending disclosure support requiring some level conclusion that the addition or deletion application. See 47 CFR 1.65. Each of ownership information at the short- of markets on the short-form application applicant is therefore under a form application stage. For example, PCIA believes that full disclosure of should always be deemed a ‘‘major’’ continuing obligation to update its amendment. Specifically, PageNet states bidder ownership information is short-form and long-form applications that because the only new information necessary if competing bidders are to as appropriate to reflect any changes that an applicant could be deemed to accurately assess the legitimacy of their that would make a pending application possess at this stage would be licenses auction opponents and their respective inaccurate or incomplete, or that are on which other applicants intend to bid, bids. PCIA contends that there can be no necessary to determine that an applicant amendment of the short-form valid reason for legitimate bidders to is in compliance with our rules. As in application in this regard could only hide their ownership. Such information, all prior auctions, an application that is lead to auction abuses. Those according to PCIA, is crucial for amended by a major amendment will be commenters supporting defining the purposes of the Commission’s anti- considered newly filed, and therefore addition or deletion of markets after the collusion rules, spectrum caps, and short-form filing deadline as a minor will not be accepted after the short-form other ownership limits. Similarly, amendment argue that such an filing deadline. The Commission further PageNet contends that full ownership amendment should only be permitted notes that it has waived its ex parte disclosure is important to aid bidders in prior to the upfront payment deadline or rules as they apply to the submission of compiling information about their the release of the Public Notice amended short-form applications to auction competitors and, most announcing qualified bidders. After this maximize applicants’ opportunities to importantly, to alert them to any point, the overall competitiveness of the seek the advice of Commission staff conduct that might be a violation of the auction may be threatened. when making amendments at any time Commission’s anti-collusion rules. In 49. AT&T proposes that the deletion after the short-form filing deadline. the satellite context, Hughes argues that of markets to avoid specifying markets 51. Finally, the Commission notes the submission of detailed ownership that overlap with another auction that in the context of cellular unserved information is essential because of the applicant (and thus preventing area licensing, WWC contends that the extreme costs associated with the build- discussion on potentially non-auction- rules adopted in this proceeding out of a satellite system. In contrast, related matters such as interconnection, addressing major and minor only CII argues that the Commission’s resale, and equipment orders that do not amendments to short-form applications objectives with regard to the rules affect bids or bidding strategies) be should not apply to cellular unserved governing designated entity status, deemed a minor amendment. The area applications filed in 1994 as these spectrum caps, and other ownership Commission notes that in previous applications were to be governed by a limitations would be fully satisfied by auctions some applicants have ‘‘letter-perfect’’ standard and applicants deferring the filing of comprehensive inadvertently placed themselves at risk were given no opportunity to cure ownership information until the long- of violating the Commission’s anti- minor defects. While the Commission form application stage. collusion rule by choosing to specify has considered WWC’s argument, the 54. For all future auctions, therefore, ‘‘all markets’’ on their short-form Commission believes that it is the Commission will model our applications when they intended to bid inapplicable. WWC addresses the initial reporting requirements on the general only on a particular license or group of application procedures for cellular application requirements contained in licenses. As a general matter, the anti- unserved area licenses, while the Part 1 our broadband PCS rules. Under this collusion rule does not prohibit non- rules, in contrast, address application standard, all auction applicants will be auction-related business negotiations procedures for participation in an required to disclose the real party or between auction applicants that have auction once a finding of mutual parties in interest by including as an applied for the same geographic service exclusivity has been made. exhibit to their short-form applications

VerDate 02-DEC-97 16:40 Jan 14, 1998 Jkt 010199 PO 00000 Frm 00019 Fmt 4700 Sfmt 4700 E:\FR\FM\P15JA0.PT1 15jar1 2324 Federal Register / Vol. 63, No. 10 / Thursday, January 15, 1998 / Rules and Regulations detailed ownership information. this term is defined in § 1.2110 of our which blind bidding is used, PageNet Although the Commission’s current Part rules; (6) if the applicant is a general contends that a competitor is often able 1 rules require auction applicants to list partnership, the name, address and to bid up the price of a license that it all owners of a five percent or greater citizenship of each partner, and the never intends to win in order to force interest in the applicant, the share or interest participation in the the incumbent to buy the license at a Commission agrees with commenters partnership; (7) if the applicant is a higher price. PageNet further contends such as CII that argue that applicants limited partnership, the name, address that this higher price is then reflected in should not be required to list all holders and citizenship of each general partner higher rates for services, which in turn of this small an interest in the applicant, and each limited partner whose interest affect the incumbent’s ability to unless they are in a position of control in the applicant is equal to or greater compete. As discussed above, the by virtue of other factors (i.e., voting than 10 percent (as calculated according Commission agrees that it is important agreements, management structure), or to the percentage of equity paid in and that auction applicants disclose certain hold a significant passive ownership the percentage of distribution of profits ownership information prior to the start interest (i.e., 20 percent). Thus, the and losses); (8) if the applicant is a of an auction. At the same time, Commission amends its rules to require limited liability corporation, the name, however, the Commission believes that that applicants list controlling interests address and citizenship of each of its in certain circumstances, the as well as all parties holding a 10 members; and (9) a list of all parties competitiveness of an auction may be percent or greater interest in the holding indirect ownership interests in increased if less bidder information is applicant and any affiliates of these the applicant, as determined by made available. In the Competitive interest holders. See 47 CFR successive multiplication of the Bidding Second Memorandum Opinion 1.2110(b)(4). A 10 percent or greater ownership percentages for each link in and Order, the Commission retained the interest reporting requirement is the vertical ownership chain, that equal flexibility to conceal bidder identities if consistent with the revised definition of 10 percent or more of the applicant, further experience showed that it would the term ‘‘applicant’’ we adopt for except that if the ownership percentage be desirable to do so. More recently, in purposes of the anti-collusion rule. The for an interest in any link in the chain the auction rules for geographic area Commission notes that PageNet exceeds 50 percent or represents actual paging licenses, the Commission contends that the Commission should control, it shall be treated and reported concluded that the advantages of require disclosure of entities and as if it were a 100 percent interest. See, limiting information disclosed to individuals that own more than five e.g., 47 CFR 20.6(d)(8). bidders outweigh the disadvantages of percent of the applicant or who have 56. In addition, consistent with the this approach, and reserved the provided more than five percent of the reporting requirements set forth in the discretion to announce by Public Notice applicant’s equity. However, as 900 MHz SMR rules, the Commission prior to the auction the precise suggested above, the Commission will require that applicants claiming information to be revealed to bidders believes that the detailed reporting small business status disclose on their during that auction. The Commission requirement we create today, in short-form applications the names of believes that the uniform rules adopted combination with our comprehensive each controlling interest and affiliate, as today provide the Commission with the affiliation rules, permits us to determine these terms are defined in this necessary flexibility to tailor the amount the ‘‘real party or parties in interest’’ proceeding, and to provide gross of bidder information made available to revenues calculations for each. On their when parties apply to participate in an applicants to ensure the long-form applications, such applicants auction. competitiveness of each auction. The will be required to disclose any Commission therefore declines to adopt 55. Specifically, all auction applicants additional gross revenues calculations, a provision prohibiting non-disclosure will be required to disclose: (1) A list of any agreements that support small of bidder identities in all future any FCC-regulated business, 10 percent business status, and any investor auctions. or more of whose stock, warrants, protection agreements. The Commission options or debt securities are owned by believes that these reporting 58. Ownership Disclosure Filings. The the applicant; (2) a list of any party requirements will help to assure that Commission believes that permitting holding a 10 percent or greater interest only qualifying applicants obtain the applicants to file ownership information in the applicant, including the specific benefits of our small business when they apply for their first auction, amount of the interest; (3) a list of any provisions, without being unduly which would then be stored in a central party holding a 10 percent or greater burdensome. database and updated each time the interest in any entity holding or 57. Finally, in a related proposal, information changes during or after the applying for any FCC-regulated business PageNet states that Commission should first auction and when applicants in which a 10 percent or greater interest expressly prohibit ‘‘blind bidding’’ (i.e., participate in a subsequent auction, will is held by another party which holds a bidding in which auction participants streamline our application processes 10 percent or greater interest in the do not know the identities or ownership and minimize the burden on auction applicant (e.g., if company A owns 10% information of the other bidders in the applicants. This concept is supported by of company B (the applicant) and 10% auction) in any pending and future the record. For example, CII and of company C, a company holding or auction because it (1) is unfair to Airadigm argue that this approach will applying for an FCC-regulated business, auction participants; (2) encourages benefit auction applicants by reducing the companies A and C must be listed auction abuses; and (3) encourages the time spent preparing auction in company B’s application); (4) the speculation. PageNet contends that applications, and will benefit the name, address and citizenship of any these factors can have a significant Commission by eliminating the need to party holding 10 percent or more of impact upon the competitiveness of the review and analyze duplicative filings. each class of stock, warrants, options or auction and the post-auction The Commission believes that by debt securities, together with the marketplace. In situations in which an requiring ownership disclosure filings, amount and percentage held; (5) the incumbent has already met the we ensure that we receive all the name, address and citizenship of all Commission’s build-out requirements information necessary to evaluate an controlling interests of the applicants, as and must still bid in an auction in applicant’s qualifications. As the

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Commission indicated in the Notice, simplify the bidding process and auction design and to the characteristics however, these requirements could minimize implementation costs of the licenses being auctioned. This result in duplicative filings. For imposed on bidders. The Commission determination can be made in a variety example, where licenses for a service concluded that the best approach would of ways and using a variety of are offered in a series of blocks, as in the be to maintain the flexibility to techniques to estimate the value of the case of broadband PCS, an entity may determine the amount of the upfront spectrum being auctioned; however, as wish to participate in several auctions, payment on an auction-by-auction basis, a general rule we have required an and would be required to disclose the because this balancing may yield upfront payment equal to $0.02 per pop same information a number of times. different results depending upon the per megahertz. As discussed infra, Under the system the Commission particular licenses being auctioned. under the current competitive bidding envisions, when applying to participate 61. Many commenters make specific rules the Commission maintains the in subsequent auctions, applicants will proposals regarding the proper size and discretion to alter the amount of the be permitted to update the database or terms for assessing upfront payments in required upfront payment or to modify certify that there have been no changes future auctions. For example, PageNet the terms under which the upfront in ownership and that the information and CII suggest that the Commission payment is assessed. The Commission contained in the database remains adopt a standard upfront payment rule believes that retaining this discretion correct. The Commission will look to requiring separate upfront payments for provides the Commission with the implement this process in the near each license identified in an applicant’s greatest level of flexibility to determine future as part of our Universal Licensing short-form application. CII contends the appropriate upfront payment System. that this would reduce the number of amount on an auction-by-auction basis. 59. Audits. The only commenters to ‘‘phantom’’ mutual exclusivities (i.e., 63. Refund of Upfront Payments. After address this proposal, PageNet and theoretical frequency conflicts caused considering the issue in light of Airadigm, support this proposal. by the fact that the current auction rules Congress’s 1996 amendment to Section Airadigm requests that applicants and create no financial disincentive to list 309(j)(8)(C) and the comments received licensees subject to audit be afforded licenses in an application on which the in this proceeding, the Commission will sufficient time to provide information to applicant has no bona fide intention to continue our current practice of the Commission and that the bid). In contrast, Airadigm and NPCS returning the upfront payments of Commission issue written findings argue that the Commission should not bidders who have completely following its examination. The require a separate upfront payment for Commission therefore adopts its each license on which an entity elects withdrawn from an auction prior to the proposal, and will modify our rules to bid, as this would limit bidders’ conclusion of competitive bidding. As governing status as a designated entity flexibility to change strategy and force the Commission suggested in the Notice, to expressly provide that applicants and them to reveal their bidding strategy it is unclear whether Congress intended, licensees claiming eligibility for special prior to the start of the auction. In an in amending Section 309(j)(8)(C), to provisions shall be subject to audits by alternate proposal, AirTouch and CII require the Commission to change its the Commission. Such audits will be suggest that the Commission require practice of refunding upfront payments governed by the standards set forth in applicants to increase their upfront to bidders who withdraw during the Sections 403 and 308(b) of the payments as an auction progresses to course of an auction. The Commission Communications Act. 47 U.S.C. 403, equal a percentage of their total bids. continues to believe, however, that the 308(b). The Commission believes that AirTouch argues that this requirement prompt return of upfront payments is in these provisions, as well as the general would reduce the risk of defaults and the public interest, because it prevents provisions of the Administrative discourage parties from submitting unnecessary encumbrances on the funds Procedure Act, will adequately address ‘‘jump bids’’ where they have no of auction bidders, many of whom may Airadigm’s concerns, and the intention of actually winning a be small businesses, after they have Commission therefore declines at this particular license. Similarly, to reduce withdrawn from the auction. In time to adopt specific rules to govern the risk of default, CII recommends that addition, we believe that this practice audits of applicants and licensees when an applicant’s upfront payment minimizes the financial burdens of conducted in the future. drops below a specific percentage of its participating in an auction, because high bid amount, the Commission allow auction participants earn no interest on V. Payment Issues the applicant to increase its deposit to upfront payment funds on deposit with 60. Determination of Upfront Payment a certain percentage of its high bid total the Commission. Moreover, all Amount. In the Competitive Bidding within ten business days. In contrast to commenters addressing the issue Second Report and Order, the these two proposals, Airadigm opposes support our proposal to continue this Commission indicated that the upfront increasing the upfront payment practice. AirTouch proposes that the payment should be set using a formula requirement once a bidder’s bid amount Commission retain an administrative fee based upon the amount of spectrum and exceeds a certain multiple of the based upon the number of rounds an population (or ‘‘pops’’) covered by the original upfront payment amount applicant has remained in the auction license or licenses for which parties because this would create a significant when it refunds upfront payments to intend to bid. The Commission reasoned barrier to small businesses. bidders who have withdrawn. Airadigm that this method of determining the 62. The Commission agrees with and AT&T state that not returning required upfront payment would enable Airadigm and NPCS that it is upfront payments in a prompt manner prospective bidders to tailor their unnecessary to adopt additional rules in circumstances where a bidder has upfront payment to their bidding governing the amount of the upfront withdrawn is akin to a ‘‘fee’’ that strategies. At the same time, however, payment and the terms under which it Congress did not intend to authorize, the Commission noted that determining is assessed. The Commission believes its and that may work to discourage an appropriate upfront payment reasoning in the Competitive Bidding participation in the Commission’s involved balancing the goal of Second Report and Order remains valid, auction program. The Commission encouraging bidders to submit serious, and that the required upfront payment agrees with Airadigm and AT&T, and qualified bids with the desire to should be tailored to the particular conclude that such a fee is

VerDate 02-DEC-97 16:40 Jan 14, 1998 Jkt 010199 PO 00000 Frm 00021 Fmt 4700 Sfmt 4700 E:\FR\FM\P15JA0.PT1 15jar1 2326 Federal Register / Vol. 63, No. 10 / Thursday, January 15, 1998 / Rules and Regulations inappropriate, and therefore, rejects the Commission recognizes in the payment period because we believe that AirTouch’s proposal. Notice, in past auctions there have been extensive relief from initial payment cases where a winning bidder missed obligations could threaten the integrity, 64. Down Payment and Full Payment for the applicable second down payment fairness, and efficiency of the auction Licenses deadline but subsequently made its process. As observed in the Notice, a Level of Down Payments down payment and filed a request late fee of five percent is consistent with 65. The Commission created the down seeking a waiver of the deadline. In general commercial practice and payment requirement in the Competitive some of these cases, the Bureau granted provides some recompense to the Bidding Second Report and Order, in the waivers, subject to payment of a five federal government for the delay and which the Commission concluded that percent late fee. In granting the waivers, administrative or other costs incurred. at the conclusion of the auction, a the Bureau recognized the licensee’s In addition, we believe that a five bidder must tender a significant and good faith and ability to pay as percent fee is large enough to deter non-refundable down payment to the evidenced by its timely remittance of all winning bidders from making late Commission over and above its upfront earlier payments and prompt action to payments and yet small enough so as payment in order to provide further cure the delinquency. not to be punitive. Therefore, applicants 68. The Commission recognizes that who do not submit the required final assurance that the winning bidder will applicants may encounter unexpected payment and five percent late fee within be able to pay the full amount of its or unforeseeable difficulties when trying the 10-day late payment period will be winning bid. The Commission believes to arrange financing and make declared in default, and will be subject that a substantial down payment is substantial payments under strict to the default payment specified in required to ensure that licensees have deadlines. In circumstances that may § 1.2104(g) of our rules. 47 CFR the financial capability to attract the warrant favorable consideration of a 1.2104(g). capital necessary to deploy and operate waiver request or an extension of the 70. Finally, the Commission their systems, and to protect against payment date, the Commission must emphasizes that its decision to permit default. Because it is due soon after the also evaluate the fairness to other late payments is limited to payments close of the auction, the down payment licensees who made their payments in owed by winning bidders who have is a valuable indicator of a license a timely fashion. Two commenters, submitted timely initial down applicant’s financial viability. In Mountain Solutions, Ltd. (‘‘Mountain payments. The Commission continues addition, the Commission believes that Solutions’’) and AirTouch, the only to believe that the strict enforcement of it is important it learns early on in the commenters to address this issue in payment deadlines enhances the licensing process when an applicant detail, support our proposal to permit integrity of the auction and licensing might be unable to finance its winning late payment subject to a standard late process by ensuring that applicants have bid or bids. fee for any licensee not able to make a the necessary financial qualifications. In 66. Several commenters oppose any timely payment. The Commission this connection, the Commission increase in the down payment beyond agrees, and amends § 1.2109(a) to permit believes that the bona fide ability to pay 20 percent of the high bid amount. winning bidders who are required to demonstrated by a timely initial down Airadigm opposes granting the Bureau make final payment on their licenses payment is essential to a fair and the discretion to establish a down within a certain period of time as efficient auction process. Thus, the payment amount because it believes that announced by public notice, to submit Commission has not proposed to modify the Bureau could unfairly disadvantage their payment 10 business days after the its approach of requiring timely small businesses by requiring payment deadline, provided that they submission of initial down payments disproportionately large down payments also pay a late fee equal to five percent that immediately follow the close of an for auctions of particularly capital- of the amount due. Although the auction. The Commission did not intensive services. In addition, Commission suspends the use of propose to adopt a late payment period Airadigm states that granting the Bureau installment payments for the immediate for down payments that are due soon this discretion could complicate future, in the event the Commission after the close of the auction as the applicants’ financing arrangements once again offers installment payments, Commission believes it is reasonable to because down payment amounts could the Commission will also amend expect that winning bidders timely vary with each auction. After § 1.2110(e) to permit auction winners remit their down payments, given that consideration of these comments, the paying for the licenses in installments to it is their first opportunity to Commission concludes that a standard submit their second down payment 10 demonstrate to the Commission their down payment amount of 20 percent is business days after the payment ability to make payments toward their appropriate. Finally, if unusual deadline, provided they also pay a late licenses. Further, if a winning bidder circumstances present themselves in the fee equal to five percent of the amount defaults on its down payment on a context of a particular service, the due. license, the Commission can take action Commission reserves the right to adopt 69. As discussed above, the under § 1.2109(b) relatively soon after a different amount by rule in that Commission’s rules provide that the auction has closed, by, for example, service. winning bidders have ten business days re-auctioning the license or offering it to to make timely payment following Untimely Second Down Payments and the other highest bidders (in descending notification that their licenses are ready Full Payments order) at their final bids. Similarly, the to be granted. The Commission believes Commission will not allow for any late 67. The Commission will amend that in establishing this additional ten submission of upfront payments, as to sections 1.2109(a) and 1.2110(e) of its business day period, during which do so would slow down the licensing rules to permit auction winners to make winning bidders will not be considered process by delaying the start of an their second down payments or final in default, the Commission will provide auction. payments within ten business days after an adequate amount of time to permit the applicable deadline, provided that winning bidders to adjust for any last- Full Payment and Petitions To Deny they also pay an appropriate late fee, minute problems. The Commission 71. The Commission will suspend the without being considered in default. As declines to provide for a lengthier late use of installment payments as a means

VerDate 02-DEC-97 16:40 Jan 14, 1998 Jkt 010199 PO 00000 Frm 00022 Fmt 4700 Sfmt 4700 E:\FR\FM\P15JA0.PT1 15jar1 Federal Register / Vol. 63, No. 10 / Thursday, January 15, 1998 / Rules and Regulations 2327 of financing small business regardless of whether petitions to deny between three percent (3%) and twenty participation in our auction program for their applications have been filed. percent (20%) of the defaulted bid the immediate future. As a result, all 73. Default Payments. The amount where a winning bidder or auction winners, including small Commission adopts its proposal to licensee defaults and the defaulted businesses, will be required to submit delete the words ‘‘simultaneous license has yet to be reauctioned. Once the full payment owed on their winning multiple-round’’ from § 1.2104(g), and the license has been reauctioned by the bids shortly after a license is ready to be will apply the default/withdrawal Commission and the total default granted. The Commission will recognize payment procedure to all auction payment can be determined, the that in the past the filing of petitions to designs. Several commenters support Commission will either assess the deny against a winning bidder’s this decision, maintaining that rigorous balance of the appropriate default application(s) has often had the effect of enforcement of the Commission’s payment, or refund any amounts due, as significantly delaying the grant of the payment deadlines is critical to necessary. applicant’s license(s), and as a result, preserving the integrity of the auction 75. Installment Payments the deadline for that applicant to submit and licensing process by ensuring that the balance of its winning bid. However, applicants possess the necessary Late Payments financial qualifications. These in the Balanced Budget Act Congress 76. In order to add certainty to the commenters also suggest that default granted the Commission the authority to installment payment process, the payments are an effective and necessary shorten the petition to deny period, and Commission adopts its proposals from method of discouraging defaults and as a result, to grant licenses much more the Notice to modify its grace period encouraging private market solutions to rapidly. Balanced Budget Act, § 3008. provisions. As discussed above, the licensee financing difficulties. The As an initial matter, consistent with this Commission declines to use installment Commission believes that this legislation, the Commission amends payments for the immediate future as a modification to our general rules §§ 1.2108(b) and (c) of its rules to means of financing small business provide that the Commission shall not governing bidder default will help to maintain the integrity of the auction participation in our auction program. As grant a license earlier than seven days a result, the Commission’s decision with following issuance of a public notice by process by discouraging defaults on the part of bidders, encouraging bidders to regard to late payment fees for the Commission that long-form installment payments effectively will applications have been accepted for make secondary or back-up financial arrangements, and ensuring that default apply only to existing licensees who are filing. 47 CFR 1.2108(b), (c). Also currently paying for their licenses in consistent with the Balanced Budget payments are made in a timely manner. The Commission also believes this installments. From this point forward, Act, the Commission amends this instead of considering individual grace section to provide that in all cases the modification will help to discourage insincere bidding and ensure that period requests, the following system period for filing petitions to deny shall will apply: A licensee who does not be no shorter than five days. In this licenses end up in the hands of those parties that value them the most and make payment on an installment regard, the Commission seeks comment obligation will automatically have an in the Second Further Notice of have the financial qualifications necessary to construct operational additional 90 days in which to submit Proposed Rule Making on whether there its required payment without being are instances in which the Commission systems and provide service. See 47 U.S.C. 309(j)(5). considered delinquent, but will be should provide for a longer period for 74. Our rules provide that where a assessed a five percent late payment fee the filing of petitions to deny or for the winning bidder defaults on a license, as discussed above. If the licensee fails grant of initial licenses in auctionable the bidder becomes subject to a default to make the required payment at the services. payment equal to the difference between close of this first 90-day non- 72. In light of this change in our rules, the amount bid and the winning bid the delinquency period, the licensee will the Commission believes that the next time the license is offered by the automatically be provided a subsequent concerns discussed in the Notice Commission, plus a payment equal to 90-day grace period, this time subject to regarding delays in the granting of three percent of the subsequent winning a second, additional late fee equal to ten licenses and, as a result, in the deadline bid or the amount bid, whichever is percent of the initial required payment. for full payment are substantially lower. See 47 CFR 1.2104(g)(2). In the 77. As proposed in the Notice, under reduced. While applications that are the Competitive Bidding Fifth Report and this system, licensees will not be subject of petitions to deny ordinarily Order, the Commission stated that required to submit a filing to take take longer to resolve than uncontested where the default payment cannot be advantage of these provisions. During applications, the Commission believes determined, the Commission may assess this 90-to-180-day period, the these changes in procedure will reduce an initial default payment ‘‘of up to 20 Commission or its designated collection the risk of frivolous petitions being filed percent’’ of the defaulting bidder’s agent will continue to pursue collection solely for purposes of delay, and will winning bid. We adopt our proposal in of past-due installments and fees. Also enhance our ability to resolve petitions the Notice to employ this practice for all during this time, the licensee will have expeditiously. Finally, the Commission auctionable services. No commenter the opportunity to raise necessary believes that concerns regarding delayed addressed this issue. Although the capital, continue service and payment are outweighed by the risk and Commission provided that this deposit construction efforts, or seek a buyer for uncertainty that would be imposed on amount will be up to 20 percent of the its license(s) that will resume payments. an applicant if it were required to make defaulted bid amount, we note that if a These late payment provisions will its full auction payment while a petition license is reauctioned for an amount apply independently to all installment against its application was still pending greater than the defaulted bid for the payments. Therefore, the late payment and could potentially result in denial of license, the default payment due will be provisions and accompanying late fees the application. As a result, the only three percent of the defaulted bid. will not affect the payment schedule for Commission declines to amend its rules 47 CFR 24.704(a)(2). See also 47 CFR future payments. Thus, even if a to require all winning bidders to make 1.2104(g). Thus, in the future we will licensee elects to take advantage of the their full payments at the same time, assess an initial default deposit of late payment provisions, the licensee

VerDate 02-DEC-97 16:40 Jan 14, 1998 Jkt 010199 PO 00000 Frm 00023 Fmt 4700 Sfmt 4700 E:\FR\FM\P15JA0.PT1 15jar1 2328 Federal Register / Vol. 63, No. 10 / Thursday, January 15, 1998 / Rules and Regulations will still be responsible for remitting all considered in default and its license days should face the automatic future installment payments in a timely will automatically cancel on November cancellation of its license. AirTouch manner, unless the licensee elects to 30 without further action by the contends that once a certain number of take advantage of the late payment Commission. installment payments have been provisions for any future installment As proposed in the Notice, the late submitted late, the Commission should payment. The following example fees the Commission adopts will accrue declare the licensee in default and illustrates how this system will operate: on the next business day following the subject to the default payments ABC Corp. has a $100,000 installment payment due date and will be payable proposed in the Notice. In contrast, only interest payment due on March 1. If ABC with the next quarterly installment CIRI opposes this liberalization of the Corp. is able to make its payment on March payment obligation. The Commission current grace period rules, requesting 1, then it must remit $100,000 to the emphasizes that at the close of non- instead that grace period relief be made Commission. If ABC Corp. makes its payment delinquency or grace period, a licensee available only when a licensee can anytime from March 2 until May 30 (the end must submit the required late fee(s), all demonstrate that such relief is of the non-delinquency period), then ABC interest accrued during the non- warranted and the public debt will Corp. must remit $105,000 to the delinquency period, and the appropriate Commission to be considered current on its ultimately be satisfied. Although March 1 installment payment. If ABC Corp. scheduled payment with the first Hughes recommends the imposition of a does not make its March 1 payment by May payment made following the conclusion ‘‘significant’’ late fee to the extent that 30, then it must remit $115,000 on or before of the non-delinquency period or grace an applicant misses a payment deadline, August 28. If ABC Corp. does not remit the period. Payments made at the close of Hughes believes that a five to ten required $115,000 by August 29 (the end of any grace period will first be applied to percent late fee is large enough to the 90-day grace period), then it will be satisfy any lender advances as required considered in default and its license will discourage late payments and to ensure under each licensee’s ‘‘Note and that the government is compensated for automatically cancel on August 30 without Security Agreement.’’ Afterwards, further action by the Commission. See 47 its administrative expenses in recouping CFR 1.2110(e)(4)(iii). payments will be applied in the the payment. As an alternative to our following order: late charges, interest proposal in the Notice, GWI proposes ABC Company’s June 1 installment charges, principal payments. As part of payment of $100,000 remains due on that any such late payment fee should the Commission’s spectrum be pro-rated over the 90-day payment June 1 regardless of the payment status management responsibilities, the of the March 1 payment. The late period instead of accruing all at once Commission wishes to ensure that regardless of when the late payment is payment terms apply to June spectrum is put to use as soon as installment payment independently of made, in order to provide an economic possible. The Commission also believes incentive for licensees who are overdue the March payment. Thus, if ABC that licensees should be working to Company does not make its March 1 in their payment obligations to retire the obtain the funds necessary to meet their payment quickly instead of waiting payment until June 1, the total amount payment obligations before they are due due to the Commission on June 1 is until the end of the payment period. In and, accordingly, that the non- addition, GWI suggests that such a pro- $215,000 which consists of the March delinquency and grace periods the payment, the March 5% non- rated payment is fairer to licensees who Commission adopts should be used only inadvertently miss a required payment delinquency late fee, the March 10% in extraordinary circumstances. Thus, as grace period late fee and the June through administrative error or other the Commission emphasized in the unavoidable, unforeseen circumstances. payment. Assuming the licensee remits Notice, a licensee who fails to make the March 1 payment and payment within 180 days sufficient to 79. As an alternative to the accompanying March late fees of pay the late fees, interest, and principal, Commission’s proposals in the Notice, $115,000 to the Commission by August will be deemed to have failed to make Airadigm contends that following the 29, then the total amount due to the full payment on its obligation and will first 90-day non-delinquency period, Commission on September 1 will be be subject to license cancellation licensees should be given a second 90- $215,000 which consists of the June pursuant to § 1.2104(g)(2) of the day period with a five percent late fee, installment payment of $100,000, the Commission’s rules. followed by a third 90-day grace period June 5% non-delinquency late fee, the 78. Several commenters support the with a 10 percent late fee. ISTA believes June 10% grace period late fee and Commission’s efforts to provide that a rule whereby any license is September installment payment of licensees with predetermined non- cancelled at the close of the second 90- $100,000. delinquency periods without requiring day grace period is draconian, and that ABC Company may elect to make late the submission of a formal grace period such a ‘‘hard-and-fast’’ automatic payments and pay the accompanying request. In addition, many of the cancellation rule would doom many late fees on the March and June commenters addressing this issue, small businesses. GWI opposes the payments. However, ABC Company including AMTA, Hughes, AirTouch, imposition of an additional 10 percent must remit $115,00 representing the Mountain Solutions and CII support the late payment fee where licensees require required March payment and imposition of a late payment fee similar an additional 90-day late payment accompanying March late fees by to that imposed in the broadband F period. The Commission declines to August 29 (the end of March’s 90-day block auction, in order to create a adopt these alternate proposals. As the grace period) or it will be considered in significant incentive for timely payment Commission indicated in the Notice, the default and its license will of installment obligations. CII believes grant of a grace period is an automatically cancel on August 30 that modifying our current grace period extraordinary remedy and we wish to without further action by the procedures will provide licensees with encourage licensees to seek private Commission. Furthermore, ABC knowledge in advance of the extent of market solutions to their capital Company must remit and additional any relief that will be forthcoming from problems before the payment due date. $115,000 representing the required June the Commission to a licensee who In this regard, the Commission notes payment and accompanying June late misses an installment payment. that it has an obligation under the Debt fees by November 29 (the end of June’s AirTouch believes that any licensee Collection Improvement Act to enforce 90-day grace period) or it will be who fails to make payment within 180 payment obligations owed to the federal

VerDate 02-DEC-97 16:40 Jan 14, 1998 Jkt 010199 PO 00000 Frm 00024 Fmt 4700 Sfmt 4700 E:\FR\FM\P15JA0.PT1 15jar1 Federal Register / Vol. 63, No. 10 / Thursday, January 15, 1998 / Rules and Regulations 2329 government. See Debt Collection has emphasized that the terms of the to § 0.459 of the Commission’s rules, Improvement Act, Pub. L. 104–134, installment payment program will be and that such confidential treatment § 3100(j)(i), 110 Stat. 1321 (1996), governed by current Commission rules should be sufficient to safeguard the codified at 31 U.S.C. 3711(a) (‘‘DCIA’’). and regulations, as amended. For privacy interests of licensees, while still 80. The Commission believes that the example, in awarding licenses to C making the terms of any workout automatic grace period provisions we block licensees paying for their licenses available for public scrutiny. As an adopt today provide licensees with in installments, the Commission initial matter, because the Commission adequate financial incentives to make indicated in the associated ‘‘Note and adopts its proposals providing for installment payments on time, while at Security Agreement’’ that the terms of automatic grace periods, the the same time creating increased the installment plan would be governed Commission does not envision licensees certainty that will help licensees pursue by and construed in accordance with filing grace period requests under private market solutions to their then-applicable Commission orders and normal circumstances from this point financing difficulties. These provisions regulations, as amended. The forward. As a result, the Commission also will discourage licensees from Commission also believes that these believes that CIRI’s concerns about the attempting to maximize their cash flow licensees should obtain the benefit of Commission making public a licensee’s at the government’s expense by increased certainty that provisions for request for grace period relief are moot. submitting a required installment automatic grace periods provide. This Moreover, because from this point payment after it is due. Several decision is supported by Mountain forward a licensee’s taking advantage of commenters agree with this assessment. Solutions, who requests that current our late payment provisions will be an At the same time, these provisions will licensees obtain the benefits of any administrative matter processed by the eliminate uncertainty for many loosening of the late payment fee and Commission’s loan servicer, and not a licensees who are seeking to restructure grace period rules. formal waiver request, aside from other debt contingent upon the results 82. As provided in the Second Report instances where a licensee is declared in of the Commission’s installment and Order and Further Notice of default, there will be no public notice of payment provisions. In addition, this Proposed Rule Making in this docket, a licensee’s payment status. The license system will ease the burden on the installment payments for C and F block is cancelled automatically under such Commission of considering individual licensees will resume effective March circumstances. In contrast, for licensees grace period requests where 31, 1998. See Amendment of the who have previously filed grace period Commission or its designee may not Commission’s Rules Regarding requests consistent with the have the necessary resources to evaluate Installment Payment Financing for Commission’s current rules and a licensee’s financial condition, Personal Communications Services procedures, the Commission will business plans, and capital structure (PCS) Licensees, Second Report and continue its current practice of making proposals. The Commission recognizes Order and Further Notice of Proposed the request public when a decision is that some commenters oppose the Rule Making, WT Docket No. 97–82 62 released granting or denying the request, imposition of a late fee on overdue FR 55348 (October 24, 1997) (‘‘Second except to the extent that any request by installment payment, and in particular Report and Order and Further Notice of the licensee for confidential treatment is on the 90-day non-delinquency period. Proposed Rule Making’’). Under the granted pursuant to § 0.459 of the However, this approach is consistent Commission’s decision to reinstate Commission’s rules. See 47 CFR 0.459. with the standard commercial practice installment payments for these The Commission further clarifies that of establishing late payment fees and licensees, the Commission provided such licensees are not deemed to be in developing financial incentives for them with one automatic 60-day non- default on these licenses until such time licensees to resolve capital issues before delinquency period following the March as the Bureau issues a decision on these payment due dates. This approach also 31, 1998, deadline, during which time grace period requests. Licensees whose is consistent with the provisions of the they will not be considered delinquent requests for a grace period are denied DCIA, which requires that the in their payment obligations. As the will have ten (10) business days to make Commission notify the Secretary of the Commission indicated in the Second the required payment or be considered Treasury and commence debt collection Report and Order and Further Notice of in default. procedures where a party is more than Proposed Rule Making, the Commission 180 days past due on any outstanding will not entertain any requests for Defaults on Installment Payments debt owed to a federal agency. See 31 extension of the March 31, 1998 84. The Commission will not adopt its CFR 3711(g)(1). deadline beyond an automatic 60-day tentative conclusion to apply the default 81. The Commission recognizes that a non-delinquency period, so that for C provisions of § 1.2104(g) to licensees number of commenters oppose the and F block licensees all required who default on an installment payment. application of these provisions to payments must be submitted no later Most commenters addressing the issue current licensees. In particular, GWI and than May 30, 1998. Only those licensees oppose this proposal. For example, IVDS Enterprises argue that to the extent making a timely payment of all amounts Pocket submits that default payments the Commission adopts a late payment due, as set forth in the Second Report assessed later in the license term fee, it should limit the imposition of and Order will be permitted to take become highly arbitrary and unduly such a fee to licenses issued in future advantage of the late payment burdensome. Pocket also contends that auctions. However, the Commission’s provisions the Commission adopts such payments are greater than those recent experience with the installment today. See 47 CFR 1.2110. traditionally required for secured payment program has shown the 83. In commenting on these creditors and create substantial importance of ensuring that all modifications to the grace period disincentives for investors and creditors licensees, including current licensees, provisions, CIRI also proposes that the who might otherwise be interested in have adequate financial incentives to Commission make public the terms of providing financing for licensees. make installment payments on time. any workouts or debt relief provided to Pocket also notes that any default The Commission notes that in awarding licensees. CIRI notes that parties may payment assessed disadvantages a licenses in the past to entities choosing request confidential treatment of licensee’s other creditors, which also to pay in installments, the Commission sensitive financial information pursuant makes it more difficult for licensees to

VerDate 02-DEC-97 16:40 Jan 14, 1998 Jkt 010199 PO 00000 Frm 00025 Fmt 4700 Sfmt 4700 E:\FR\FM\P15JA0.PT1 15jar1 2330 Federal Register / Vol. 63, No. 10 / Thursday, January 15, 1998 / Rules and Regulations raise capital. Finally, Pocket states that eliminate the use of installment will strike an appropriate balance default payments assessed later in the payments as a means of financing small between our conflicting roles as both license term have no deterrent effect as business participation in its auction ‘‘lender’’ and ‘‘regulator.’’ Accordingly, there is no basis to believe that licensees program for the foreseeable future, the upon default on an installment that have paid substantial sums to the Commission notes that in practice this payment, a license will automatically Treasury will willingly default. In decision will apply only to existing cancel without further action by the contrast, AirTouch supports our licensees who are currently paying for Commission, the licensee will become tentative conclusion that licensees that their licenses in installments. subject to the default payment set forth ultimately fail to fulfill their installment 87. The Commission’s decision not to in § 1.2104(g) of our rules, and the payment obligations despite the pursue cross default remedies against Commission will initiate debt collection availability of a 90-day non-delinquency current licensees who default on an procedures against the licensee and period and a subsequent, automatic 90- installment payment is supported by the accountable affiliates. 47 CFR 1.2104(g), day grace period, should be declared in majority of commenters. For example, 1.2110(e)(4)(iii). See also 31 U.S.C. default, and in turn be made subject to Airadigm contends that it is unfair to Chapter 37; 4 CFR Parts 101–105; 47 the default payments proposed in the jeopardize an entire business because of CFR Part 1, Subpart O. Notice. a default on one license. Similarly, ISTA 85. The Commission has considered argues for separate treatment of separate VI. Competitive Bidding Design, the comments of those who oppose the services, regardless of ownership, lest a Procedure, and Timing Issues proposed assessment, and find that an failure in one business cause failure in 89. Balanced Budget Act of 1997 additional payment requirement for unrelated businesses. IVDS Enterprises Notice and Comment Procedures. The licensees defaulting on installments is proposes that licensees be able to Commission believes that in the past not necessary to achieve our stated discontinue installment payments on a our service-specific rule making process objectives. The Commission’s current particular license and allow that license has served the purpose of adequately rules and installment payment terms are to be cancelled or revoked. IVDS ensuring that interested parties have adequate to discourage defaults and Enterprises believes that such a decision sufficient time to familiarize themselves encourage licensees to find private should not affect the licensee’s other with the rules and procedures to be market solutions when they face licenses, whether in the same or other employed in an auction prior to the financial difficulties. The Commission services, where the licensee has made application deadlines and start date of also believes that the rules it adopts timely installment payments. that auction. The Commission providing for a 90-day non-delinquency Alternatively, Pocket believes that the nevertheless believes that this period followed by a subsequent, Commission should reserve the legislation requires that the Commission automatic 90-day grace period, subject authority to impose cross defaults on a provide an additional opportunity for to appropriate late fees of five percent case-by-case basis only for licensees that input from potential bidders prior to the for the 90-day non-delinquency period have demonstrated bad faith. issuance of detailed auction-specific and 10% for automatic 90-day grace 88. The Commission recognizes that information by the Bureau. To date, the period, payable at the conclusion of some commenters strongly advocate a Bureau has served as the primary point these periods serve these goals without policy of cross defaults in this context. of contact with potential bidders and substantially risking delays or These commenters suggest that such a other parties interested in issues relating disruption in service to the public. In policy (1) prevents speculation during to each upcoming auction, and this has particular, the Commission believes that the auction and cherry-picking (e.g., worked well. In light of the typically this certainty regarding the selectively defaulting on some licenses time-sensitive nature of most issues Commission’s treatment of licensees while keeping others) after the auction arising in the weeks prior to the start of needing extra time to make their concludes, (2) encourages auction an auction, the Bureau has been installment payments will increase the participants to find private market equipped to make determinations and likelihood that licensees and potential solutions to financial shortfalls, and (3) respond rapidly to potential bidders’ investors will find solutions to capital is consistent with commercial lending concerns. Consistent with the problems before a default occurs. The policies. The Commission believes, provisions of the Balanced Budget Act, risk of losing its license should provide however, that the default provisions and to ensure that potential bidders a licensee a strong incentive to avoid contained in § 1.2104(g)(2) serve as an have adequate time to familiarize default. If, however, a default does adequate incentive to discourage themselves with the specific provisions occur, the conditions on the face of each speculation and encourage licensees to that will govern the day-to-day conduct license and the terms of the notes and pursue non-default solutions to of an auction, the Commission directs security agreements executed by financial difficulties. The Commission the Bureau, under its existing delegated licensees provide the Commission also emphasizes that our decision on authority, see 47 CFR 0.131(c), 0.331, appropriate remedies that will ensure this matter only addresses default in the 0.332, to seek comment on a variety of that defaulted licenses are returned to context of installment payments, and auction-specific issues prior to the start the Commission for reauction and that does not affect our policy with regard to of each auction. all outstanding debts, as well as the defaults on down payments. In addition, 90. The Commission directs the Commission’s costs, are recoverable. by making licensees who default on an Bureau to seek comment on specific installment payment subject to the mechanisms relating to day-to-day Cross Default in the Context of default payment set forth in auction conduct including, for example, Installment Payments § 1.2104(g)(2), the Commission created the structure of bidding rounds and 86. After consideration of the an additional deterrent to licensees stages, establishment of minimum comments in this proceeding, The considering default as a solution to opening bids or reserve prices, Commission concludes that it will not financing shortfalls. The Commission minimum acceptable bids, initial pursue a policy of cross default (either believes that this policy will promote maximum eligibility for each bidder, within or across services) where the goals of section 309(j) by not activity requirements for each stage of licensees default on an installment punishing otherwise successful the auction, activity rule waivers, payment. Because the Commission will licensees for failures in one market, and criteria for determining reductions in

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The Commission delegates to the discrete bidding period during which of each auction and relevant pre-auction Bureau the authority to determine bidders cannot see the actions of other filing deadlines, to comment on auction- whether the public interest will be bidders. Bidders must wait until the end specific issues. In this regard, the served by ‘‘real time’’ bidding in a of each round to see the bids placed by Commission notes that it has been the particular auction. Most commenters other bidders and determine their status Bureau’s practice to release the public oppose the use of ‘‘real time’’ bidding, as high bidder. In contrast, an open, notice providing details concerning arguing it may be difficult for bidders to continuous bidding round—in which each upcoming auction sufficiently in react quickly enough to ensure that in bidders know when their bid has been advance of the short-form filing each bidding round they make new high exceeded and are free to bid again—can deadline (e.g., 30 days prior to the bids on the necessary percentage of their be used to reduce the delay inherent in deadline) to provide interested parties bidding eligibility to meet their activity the current design where a bidder must with an opportunity to develop business requirement. These commenters also wait until the next discrete round to plans, assess market conditions and believe that the somewhat accelerated react to the actions of other bidders. evaluate the availability of equipment. pace of ‘‘real time’’ bidding may leave 95. The Commission notes that some Also consistent with previous practice, less time to craft informed bidding commenters express concern that the the Commission recognizes that the strategies during the auction. widespread use of ‘‘real time’’ bidding Bureau needs the flexibility to 93. As mentioned above, the ‘‘click- would increase the administrative costs announce, at any time in the weeks box bidding’’ format should of participating in the auction due to the leading up to the start date of each significantly improve a bidder’s ability incentive to stay on-line during the auction, any minor, non-substantive to react quickly. Further, should the continuous bidding period and thereby amendments or clarifications to the Commission determine to employ ‘‘real- work to exclude smaller entities that specific mechanisms set forth in time’’ bidding in the future, the may lack the resources to devote to a auction-related public notices or the Commission believes that the issues concentrated bidding period or to stay Bidder Information Package. The involving meeting activity requirements on-line during the entire bidding period. Commission believes that this process is will be alleviated by our proposal in the The Commission agrees with Notice to open a discrete closed bidding consistent with the requirements of commenters that under some period after each fixed period of ‘‘real section 3002(a)(1)(B)(iv) of the Balanced circumstances the costs of participating time’’ bidding (when only standing high Budget Act, and will afford potential in an auction in which bidders are bids from the previous round and new bidders adequate notice, as well as an required to be ‘‘on-line’’ may discourage high bids from the current round count opportunity to comment on the Bureau’s the participation of small businesses. in determining the bidder’s activity intentions regarding issues relating to The Commission therefore concludes level). During this closed bidding the day-to-day conduct of each auction. that the per minute charge for bidding period, bidders will be able to submit ‘‘on-line’’ should be reexamined, and 91. ‘‘Real time’’ Bidding. The valid bids (bids that meet or exceed the delegate to the Bureau that authority to Commission will adopt its proposal in minimum accepted bid) to ensure that implement such a reduced fee in the the Notice to allow for ‘‘real time’’ they have the opportunity to meet their future, if appropriate. bidding as an alternate design activity requirements for the round. 96. No commenters addressed the methodology in our rules. After careful Following the discrete closed bidding Commission’s tentative conclusion in consideration of the comments received period, the Commission will post the that Notice that because ‘‘real time’’ in this proceeding, as well as its final round results for the period and auctions are a variation of the experience in conducting 15 auctions to make all bids available to the public. simultaneous multiple-round auction date, the Commission concludes that This discrete period should help to design established in our rules, many of ‘‘real time’’ bidding will allow auctions eliminate any risks of not meeting the same procedures (i.e., upfront to proceed more rapidly because it will eligibility requirements or having time payments to determine eligibility, allow bidders immediate feedback on to formulate bidding strategies which activity requirements that apply to each new high bids. The Commission also commenters suggest may be associated round, minimum bid increments, and a notes that in an effort to simplify the with ‘‘real time’’ electronic bidding. In stopping rule) should apply. These auction process and prevent ‘‘gaming’’ particular, this period will help to procedures have proven workable and of bids, the Commission has recently provide bidders sufficient time to meet easily understood by bidders in the modified its electronic bidding process eligibility requirements and will context of our simultaneous multiple- by implementing ‘‘click-box bidding.’’ minimize the risks, suggested by some round auction design, but some This feature, which replaces the field commenters, of the submission of modifications to these procedures may where bidders previously typed their erroneous bids. be necessary if the Commission employs dollar bid amount with a ‘‘click on 94. One of the greatest advantages to ‘‘real time’’ bidding. The Commission check box to bid’’ field (where the only ‘‘real time’’ bidding is that it allows concludes that the Bureau should bid amount allowed is at the minimum bidders to obtain immediate feedback undertake this task. acceptable bid) no longer allows bidders on new high bids, withdrawn high bids 97. Consistent with section 3002 of to type a bid amount on the Bid and minimum accepted bids, and the Balanced Budget Act, the Submission screen. As such, ‘‘click-box thereby provides them with the Commission directs the Bureau to seek bidding’’ can work well in a ‘‘real-time’’ opportunity to immediately respond to comment from the public on auction- bidding context because bidders can this information and move licenses specific issues (i.e., duration of bidding more rapidly respond to the bids of toward their final valuations more rounds and activity requirements) prior other bidders, permitting an auction to quickly. The Commission believes that, to the start of each auction. The

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Commission believes that this practice 100. Minimum Opening Bids and technologies and services and of seeking comment on such issues prior Reserve Prices. Several commenters promoting economic opportunity and to the start of each auction will oppose the use of minimum opening competition (see 47 U.S.C. 309(j)(3)) adequately address any additional bids. However, the Balanced Budget Act have not been eliminated, and the concerns associated with the use of establishes a presumption in favor of a Commission must continue to balance ‘‘real time’’ bidding. The Commission required minimum opening bid or and pursue them all. Therefore, the also notes that it seeks, on an ongoing reserve price. Balanced Budget Act, Commission concludes that the new basis, to enhance and improve our section 3002(a)(1)(C)(iii). The provision does not call for traditional bidding processes. The Commission Commission therefore adopts its reserve prices. Rather, it calls for an believes that the Bureau should explore proposal in the Notice to delete the term added protection that licenses will not ‘‘real time’’ bidding consistent with the ‘‘suggested’’ from § 1.2104(d). The be assigned at unacceptably low prices. requirement under section 309(j) that Commission also clarifies that the 102. The Commission believes that the Commission experiment with Bureau has the authority to seek the Bureau should have the discretion to different bidding methodologies. See 47 comment on minimum opening bids employ either or both of these U.S.C. 309(j)(3). and reserve prices and to establish such mechanisms for future auctions. The 98. Combinatorial Bidding. The mechanisms for each auction, consistent Commission directs the Bureau to seek Commission did not specifically seek with its role in managing the auction comment on the use of a minimum comment in the Notice on the use of process and setting valuations for other opening bid and/or reserve price, as it combinatorial bidding as an auction purposes (e.g., setting upfront payment will do for a variety of auction-specific design methodology. The Commission’s amounts). The Bureau shall establish a issues, prior to each auction. In current Part 1 rules already provide for minimum opening bid and/or reserve addition, the Bureau should seek the use of combinatorial bidding as one price for each auction, unless, after comment on the methodology to be of our competitive bidding design comment is sought prior to a particular employed in establishing each of these options. See 47 CFR 1.2103(b). In auction, it is determined that a mechanisms. Among other factors, the addition, the Commission was directed minimum opening bid or reserve price Bureau should consider the amount of by Congress in the Balanced Budget Act would not be in the public interest. spectrum being auctioned, levels of of 1997 to consider the use of 101. The terms ‘‘minimum opening incumbency, the availability of combinatorial bidding as an alternative bid’’ and ‘‘reserve price’’ are technology to provide service, the size auction design that could be used, in of the geographic service areas, issues of certain instances, as a means of traditionally different, and are interference with other spectrum bands, speeding the auction process. employed for different purposes. A and any other relevant factors that could Specifically, the Balanced Budget Act reserve price is defined as an absolute reasonably have an impact on valuation requires the Commission, for testing minimum price below which an of the spectrum being auctioned. purposes, to design and conduct an auctioneer will not sell an object being auction in which a system of auctioned. It may be disclosed to 103. Maximum Bid Increments. combinatorial bidding is used. Balanced bidders before an auction or during an Several commenters suggest that jump Budget Act; 47 U.S.C. 309(j)(3)(i). auction, or it may be kept secret, so that bidding is not a problem of serious 99. The Commission has insufficient a ‘‘winning’’ bidder does not actually concern. Some theoretical literature, information to determine how this find out if the object has been won until however, suggests that bidders could relatively new bidding methodology after the auction has closed. Auctioneers use jump bidding to manipulate the might be used to improve our spectrum generally employ reserve prices to order auction process and potentially reduce auction program. The Commission will to maximize the revenue earned from an efficiency of the auction. For example, seek comment on a number of issues auction. A minimum bid is a minimum a general principle of auction theory is relating to combinatorial bidding, and value below which bids will not be that the auction mechanisms that will more thoroughly address this issue accepted in the first round of an perform the best are those which are once the record is complete. The auction. The level of a minimum able to induce bidders to reveal the most Commission has also awarded a opening bid is not unchangeable like a information. To the extent that jump research and development contract to a reserve price, but may be reduced at the bids enable bidders to conceal private sector consultant to examine discretion of the auctioneer if no bids information, the phenomenon moves us theoretical and applied combinatorial are made at the existing level. The away from the informational advantages bidding approaches where licenses primary purpose of a minimum opening of an ascending bid (multiple round) exhibit strong synergies and bidders bid is to speed up the course of an auction in the direction of a first-price have overlapping preferences (i.e., auction. However, a minimum bid also sealed bid (single round) auction. As prefer different packages of licenses). can serve as a revenue-enhancing ISTA recognizes, jump bidding can The contractor will also evaluate the function like a reserve price, because if complicate bidding strategy and deny most appropriate of the theoretical and bids will not be accepted below a bidders information about the number applied approaches to combinatorial certain level, they will also not be sold of bidders who would be willing to pay bidding for spectrum auctions and below that level. That is, a minimum prices between the minimum acceptable address a number of concerns raised by opening bid effectively functions as a bid and the jump bid. In the absence of the Commission and other interested reserve price unless or until it is information about the bidders who parties. The Commission’s goal in reduced. Regarding the level of reserves would be willing to participate at awarding the contract is to allow private or minimum bids, the Commission does intermediate bids, other bidders may sector and government auction experts not believe that the Balanced Budget feel compelled to shade their bids more to address these concerns and Act provision means that it should now than they would otherwise. This investigate the possible effects of the use be attempting to maximize the revenue behavior is an attempt to avoid the of combinatorial bidding on the auction earned in all future spectrum license ‘‘winner’s curse,’’ that is, the tendency process, including the Commission’s auctions. The other auction goals in the for the winner to be the bidder who fulfillment of the objectives of Section Act, such as ensuring the deployment most overestimates the value of the item 309(j) of the Communications Act. and rapid deployment of new being auctioned.

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104. As an initial matter, the withdrawals as they are critical to Commission will modify § 1.2109(b) to Commission notes that recent changes providing applicants with the flexibility reserve the discretion to either reauction designed to improve the Commission’s to correct bids that are placed in error a defaulted license or offer it to the electronic auction bidding process and to quickly change bidding strategy. other highest bidders (in descending eliminate the dangers that a maximum PageNet contends that concerns about order) at their final bids. 47 CFR bid increment is designed to avoid (e.g., strategic withdrawals intended to 1.2109(b). Several commenters support jump bidding). In an effort to speed the produce anti-competitive results are not the reauction of defaulted licenses auction process and eliminate sufficient to eliminate the bidding because it helps to ensure that the price unwarranted ‘‘gaming’’ of our processes, flexibility that bid withdrawals provide. paid for a license is the current price, the Commission has simplified the Finally, AirTouch suggests that the rather than the price that was applicable electronic auction bidding process by Commission permit bid withdrawals at at the time the original auction implementing ‘‘click-box bidding.’’ As any time, subject to certain conditions. occurred. Only two commenters oppose discussed above, this feature permits In particular, AirTouch recommends reauction in all circumstances. bidders to enter a bid only at the that: (1) All bid withdrawals should be Airadigm and AMTA oppose providing maximum bid increment as determined subject to applicable bid withdrawal the Commission with the discretion to by the Commission, and thus makes payments; (2) a bidder withdrawing a reauction defaulted licenses because bidding tactics such as jump bidding bid should not be permitted to regain they believe that awarding licenses to impossible. Nevertheless, the eligibility on any bidding units lost as the next highest bidder will be faster Commission will reserve the discretion a result of the withdrawal; and (3) the than reauctioning. However, as the to employ a maximum bid increment high bidder in the round prior to the Commission stated in the Notice, the should it return to an auction format in withdrawn bid should be permitted to Commission has developed a which jump bidding can in any way bid again on the license, and to computerized auction system and decrease the competitiveness of an reacquire eligibility for bidding units conducted numerous auctions and now auction. In this regard, the Commission necessary to resubmit the new bid. believes that the costs of a reauction, disagrees with NextWave’s suggestion 107. In contrast, NextWave supports a even for a small number of relatively that by disallowing jump bids as one limitation on bid withdrawals. low value licenses, is generally method by which bidders may obtain NextWave states that bid withdrawals minimal. The Commission also believes information about each other the are a necessary tool, but in some that the planned use of regularly Commission risks prolonging an instances, bid withdrawals are used for scheduled quarterly auctions will auction. On the contrary, the insincere bidding designed to ‘‘game’’ ensure rapid reauction. Commission has alternate methods (e.g., the auction. To protect against such 109. Further, the Commission notes ‘‘click-box bidding,’’ employing misuse, NextWave proposes, for that re-offering a defaulted license to the minimum bid increments and activity example, that the Commission create a next highest bidder (in descending rules and increasing the number of fourth stage of the auction, during order) at their final bids may not ensure rounds per day) to ensure that auctions which a bidder who has withdrawn that the license will be awarded to the close within a reasonable time. from a particular market would be bidder who values it the most highly. In 105. Bid Withdrawal Payments. As prohibited from re-bidding in the same particular, as the license is offered to discussed above, the Commission market. In the past, the Commission has bidders at the next highest bids, other recently implemented ‘‘click-box recognized that allowing bid parties can argue that they would pay bidding’’ in an effort to improve the withdrawals facilitates efficient more for the license if given the auction process and eliminate erroneous aggregation of licenses and pursuit of opportunity. In addition, when more bids. The Commission also recently efficient backup strategies as than one license is being auctioned, modified the electronic bidding format information becomes available during aggregation strategies may shift during to limit withdrawals. As a result of such the course of an auction. Nevertheless, the course of the auction, affecting the changes, the types of erroneous bids the Commission also has recognized value placed on any individual license discussed in the Notice cannot occur that bidders may, in some instances, by a particular bidder. As the under our new bidding format. The seek to remove bids for improper Commission discussed in the Notice, Commission therefore concludes that its purposes, such as to delay the close of when it first adopted rules governing proposal regarding decreased bid the auction for strategic purposes. For the licensing of defaulted licenses, the withdrawal payments in cases of this reason, the Bureau has traditionally Commission stated that ‘‘[i]n the event erroneous bids is moot. retained the discretion to limit that a winning bidder in a simultaneous 106. Misuse of Bid Withdrawals. withdrawals as part of the management multiple-round auction defaults on its Several commenters oppose the of an auction. To prevent strategic down payment obligations, the Commission’s proposal to place limits delays to the close of the auction, or Commission will generally reauction the on bid withdrawals in certain other abuses, the Bureau should license either to existing or new circumstances as a means of avoiding exercise its discretion assertively. In applicants.’’ Noting that in some strategic withdrawals that are intended addition, the Bureau should consider circumstances the costs of conducting a for anti-competitive purposes. Both limiting the number of rounds in which reauction may not always be justified, AT&T and Merlin argue that the ability bidders may withdraw bids, and to the Commission reserved the discretion to withdraw bids is critical to a bidder’s prevent bidders from bidding on a in cases in which the winning bidder auction strategy. While they recognize particular market if the Bureau finds defaults on its down payment obligation the difficulty in determining the true that a bidder is abusing the to offer a defaulted license to the highest intent behind a withdrawn bid, these Commission’s bid withdrawal losing bidders (in descending order of commenters suggest that the procedures. These are among the types their bids) at their final bids if ‘‘only a Commission continue to monitor each of issues on which the Bureau will seek small number of relatively low value auction carefully, and address abusive comment prior to the start of each future licenses are to be reauctioned * * *.’’ behavior on a case-by-case basis. auction. 110. Nextel and others suggest that Similarly, PageNet states that the 108. Reauction Versus Offering to the Commission should retain the Commission should not limit bid Second Highest Bidder. The discretion to award defaulted licenses to

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As discussed significant change in market price, and filed in response to our proposals in the infra, the Commission also reminds no risk of encouraging frivolous Notice, the Commission has decided to prospective applicants that the petitions to deny. The Commission is adopt a second exception to our general Commission will conduct a detailed aware of the dangers of adopting a rule rules prohibiting collusion. See 47 CFR investigation in the event it becomes which could have the unfortunate 1.2105(c). Specifically, the Commission aware of a possible violation of the anti- consequence of encouraging the filing of will permit a holder of a non-controlling collusion rule, and that violations may frivolous petitions to deny. attributable interest in an applicant to result in the loss of the down payment Nevertheless, the Commission believes obtain an ownership interest in or enter or full bid amount, the cancellation of that by reserving the discretion to either into a consortium arrangement with licenses, and preclusion from reauction defaulted licenses or award another applicant for a license in the participation in future auctions. them to the next highest bidder, the same geographic area provided that the 115. Commenters in both the Paging Commission will be in the best possible original applicant has withdrawn from proceeding and in this proceeding position to determine which option the auction, is no longer placing bids, support the creation of a safe harbor for serves the public interest in each and has no further eligibility. To meet discussions of certain non-auction particular situation. the requirements of this exception, the related business matters between attributable interest holder will be applicants for the same license areas. In VII. Anti-Collusion Rules required to certify to the Commission general, these commenters argue that (1) 111. The Commission has taken this that it did not communicate with the the Commission’s anti-collusion rules opportunity in revisiting our general new applicant prior to the date the cause unnecessary confusion in their competitive bidding procedures to original applicant withdrew from the current form, (2) the purposes of the examine the effectiveness of the anti- auction, and that it will not convey anti-collusion rules would not be collusion rule in the 15 auctions the bidding information, or otherwise serve threatened by such a safe harbor, and (3) Commission has conducted to date. The as a nexus between the previous existing antitrust laws and policies will Commission continues to believe that its applicant and the new applicant. As adequately accomplish the goal of anti-collusion rules are necessary to stated in the Notice, this additional protecting the competitiveness of the deter bidders from engaging in anti- exception will further facilitate the flow bidding process. As the auction program competitive behavior. Nevertheless, of capital to auction applicants by has evolved, the Commission has after careful review of the comments encouraging, and providing the continued to refine and clarify for received in this proceeding, the flexibility necessary for, non-controlling bidders the operation and impact of the Commission has determined that some investors to invest in other auction anti-collusion rule upon bidder conduct modifications to § 1.2105(c) can be applicants if their original applicant during the course of an auction. Prior to made which will benefit bidders in fails to complete the auction. The the start of the broadband PCS D, E and several respects, without jeopardizing majority of commenters addressing this F block auction, the Bureau received the competitiveness and overall proposal agree that it will encourage numerous inquiries concerning the integrity of our auction program. investment in auction applicants impact of these rules upon business 112. In the Collusion MO&O, the without threatening the overall contacts between current broadband Commission revisited the anti-collusion competitiveness of the auction process. PCS licensees and auction winners and rules prior to the start of the PCS 114. Only Nextel and PageNet oppose eligible participants in the ongoing auctions, and concluded that allowing this exception, citing the potential for broadband PCS D, E and F Block holders of non-controlling attributable collusive activity when an investor in auction. In response to these inquiries, interests in an applicant greater an applicant that has chosen to the Bureau released a Public Notice flexibility to form agreements with other withdraw from the auction explores providing guidance on these business applicants would help applicants to possible investments in other negotiations in the context of our anti- acquire the additional capital necessary applicants, thus learning bidding collusion rules. The Bureau emphasized to bid successfully for licenses. See strategies of multiple auction that § 1.2105(c) may affect the way in Implementation of Section 309(j) of the participants. In addition, PageNet which auction applicants conduct their Communications Act—Competitive contends that this exception could routine business during an auction by Bidding, WT Docket No. 93–253, encourage speculation which would placing significant limitations upon Memorandum Opinion and Order, 59 threaten the integrity of the auction their ability to pursue business FR 64159 (December 13, 1994) process and ultimately result in lower opportunities involving services in the (‘‘Collusion MO&O’’). The Commission prices paid for the spectrum. However, geographic areas for which they have therefore created an exception to the after balancing these factors, the applied to bid for licenses. These general rule contained in § 1.2105 to Commission believes that the benefits of interpretations have provided sufficient permit a holder of a non-controlling this certification requirement, in guidance concerning the types of non- attributable interest in one applicant for particular the likelihood that auction auction related communications which a particular license or licenses to obtain applicants will be able to attract are permitted under § 1.2105(c), and the ownership interests in or enter into increased investment, exceed any Commission therefore declines to create consortium arrangements with a second possible disadvantages. The such a safe harbor. applicant for a license in the same Commission requires that auction 16. The Commission affirms the geographic service area. See 47 CFR applicants certify to the truthfulness Bureau’s interpretation of this aspect of 1.2105(c)(4). The attributable interest and accuracy of a number of issues on the anti-collusion rule. As a general holder must certify to the Commission their Form 175 applications, and to matter, the anti-collusion rule does not that it has observed and will observe make minor amendments when prohibit non auction-related business

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Any applicant engaging in such as management, resale, roaming, scrutinize carefully any instances in pre-grant construction activity does so interconnection, partitioning and which bidding patterns suggest that entirely at its own risk, and the disaggregation may all raise collusion may be occurring. Commission will not take such activity impermissible subject matter for 119. Finally, the Commission into account in ruling on any petition to discussion because they may convey reemphasizes that the Commission will deny. Finally, the Commission notes pricing information and bidding aggressively investigate any allegations that it expects its licensing process to be strategy. Because auction applicants that an auction participant has violated more rapid generally in light of the should avoid all discussions with each § 1.2105(c). Bidders who are found to shortened petition to deny period other that will likely affect bids or have violated the Commission’s anti- permitted by the Balanced Budget Act. bidding strategies, the Commission collusion rules may, among other Balanced Budget Act, section 3008. believes that individual applicants, and sanctions, be subject to the loss of their IX. Conclusion not the Commission, are in the best down payment or their full bid amount, position to determine in the first face the cancellation of their licenses, 122. Based on the experience the instance which communications are and may be prohibited from Commission has gained from its 15 permissible and which are not. participating in future auctions. In completed auctions, as well as the 117. As discussed above, the Notice addition, where allegations appear to feedback it has received from bidders, also invited comment on any other give rise to violations of the federal the Commission believes the time has changes to our rules prohibiting antitrust laws, the Commission may come to streamline its competitive collusion that commenters believe are investigate and/or refer such cases to the bidding rules in order to make our warranted. Section 1.2105(c)(6)(i) of the United States Department of Justice for licensing process more efficient. In the Commission’s rules provide that, for investigation. past, the Commission has adjusted its purposes of the anti-collusion rule, an auction procedures for different services VIII. Pre-grant Construction applicant is defined as an entity and has gained experience with the submitting a short-form application, as 120. The Commission will adopt its process, resulting in the adoption of well as all holders of partnership, proposal in the Notice to permit different procedures for different ownership, and any stock interest applicants for all licenses awarded by auctionable services. This Third Report amounting to five percent or more of the competitive bidding to begin and Order amends subpart Q of part 1 entity. 47 CFR 1.2105(c)(6)(i). One construction of facilities prior to the of the Commission’s rules to reflect commenter, the Coalition of grant of their applications. All substantive amendments and Institutional Investors (‘‘CII’’), states that commenters addressing the issue modifications intended to simplify these defining any holder of five percent or support our proposal to permit license regulations, supersede unnecessary more of an auction applicant as part of applicants to begin construction of their rules wherever possible, and eliminate the applicant for purposes of the facilities, at their own risk, upon release the need to conduct separate, Commission’s anti-collusion rules of a public notice announcing the comprehensive rule making proceedings unnecessarily restricts applicants’ acceptance for filing of post-auction prior to each auction. The Commission abilities to obtain financing from a long-form applications. These believes that the rules it adopts today variety of sources. After careful commenters agree that allowing pre- will benefit bidders and the auction consideration of the issue, the grant construction furthers the statutory process generally. The Commission also Commission agrees with CII. Therefore, objective of rapidly deploying new believes these rules will help to provide the Commission will increase the technologies, products, and services for more specific guidance and flexibility attribution standard contained in the benefit of the public. 47 U.S.C. on a number of issues that will increase § 1.2105(c)(6)(i) to 10 percent, or any 309(j)(3)(A). the overall effectiveness of our auctions. 121. Commenters also support our holder of a controlling interest in the X. Final Regulatory Flexibility Analysis applicant. proposal to permit license applicants 118. A higher attribution standard with petitions to deny filed against their 123. As required by the Regulatory will facilitate the flow of capital to long-form applications to begin Flexibility Act (RFA), 5 U.S.C. 603, the applicants by enabling parties to make construction of their facilities at the Commission has prepared a Final investments in multiple applicants, same time as license applicants whose Regulatory Flexibility Analysis (FRFA) including applicants for licenses in the licenses are not the subject of pending of the expected impact on small entities same geographic areas. The petitions to deny. While the of the rules adopted in the Third Report Commission’s decision to use an Commission’s current service-specific and Order. The Commission will send attribution threshold of 10 percent is rules require as a condition for pre-grant a copy of the Third Report and Order, consistent with the change the construction no pending petitions to including this FRFA, to the Chief Commission makes to the general deny, the Commission concludes that Counsel for Advocacy of the Small reporting requirement. The Commission the merits of petitions to deny may be Business Administration. (In addition, recognizes that some potential for judged by an applicant and factored into the Third Report and Order and FRFA collusion exists whenever an entity is its assessment of the risk of proceeding (or summaries thereof) will be permitted to hold an interest in more with construction before license grant. published in the Federal Register.) As than one applicant for licenses in the The Commission therefore adopts a pre- required by the Regulatory Flexibility same geographic service area. However, grant construction rule for all services Act (RFA), an Initial Regulatory the Commission reemphasizes that subject to competitive bidding that Flexibility Analysis (IRFA) was auction applicants and their owners permits construction by applicants that incorporated in the Notice of Proposed continue to be subject to existing are subject to petitions to deny. Of Rulemaking in WT Docket No. 97–82.

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See 5 U.S.C. 604. The RFA is codified may require that these auctions be suspend installment payment financing at 5 U.S.C. 601 et seq. See also, conducted without offering long-term for the near future, the Commission Amendment of Part 1 of the installment payments. Thus, there determined that higher bidding credits Commission’s Rules—Competitive probably will be no reporting would better fulfill the mandate of Bidding Proceeding, WT Docket No. 97– requirements or fees for future section 309(j)(4)(D) of the 82, Order, Memorandum Opinion and installment payments. Communications Act to provide small Order, and Notice of Proposed (2) Merlin contends that including businesses the opportunity to Rulemaking, 62 FR 13570 (March 21, past affiliates in the proposed new participate in spectrum-based services. 1997). The Commission sought written definition of affiliate would require Therefore, the Commission adopts public comment on the proposals in the small businesses to keep more extensive bidding credits of 35 percent for Notice of Proposed Rulemaking, records and would be unduly designated entities with average gross including comment on the IRFA. This burdensome. This Order adopts a revenues not to exceed $3 million, 25 Final Regulatory Flexibility Analysis uniform definition of ‘‘affiliate’’ for all percent for designated entities with (FRFA) in this Third Report and Order future auctions. The term ‘‘affiliate’’ is average gross revenues not to exceed (Order) conforms to the RFA, as defined in the Part 1 rules as an $15 million, and 15 percent for amended by the Contract With America individual or entity that directly or designated entities with average gross Advancement Act of 1996 (CWAAA), indirectly controls or has the power to revenues not to exceed $40 million. Pub. L. 104–121, 110 Stat. 847 (1996). control the applicant; is directly or With respect to down payments, the indirectly controlled by the applicant; is Commission adopts the proposal in the A. Need for, and Objectives of, the directly or indirectly controlled by a Order in WT Docket No. 97–82 Notice to delegate to the Bureau the third person(s) that also controls or has discretion to determine the down 124. This Order makes substantive the power to control the applicant; or payment amount on a service-by-service amendments and modifications to the has an ‘‘identity of interest’’ with the basis. The Commission believes that a Commission’s general competitive applicant. The Commission concludes substantial down payment is required to bidding rules for all auctionable that this definition has helped to ensure ensure that licensees have the financial services. These changes to the that businesses seeking small business capability to attract the capital competitive bidding rules are intended status are truly small. In addition, the necessary to deploy and operate their to simplify the Commission’s rules and Commission finds that this definition is systems and to protect against default. regulations and eliminate unnecessary consistent with the decision to adopt a rules wherever possible, increase the controlling interest threshold for (5) Merlin argues that the proposal to efficiency of the competitive bidding purposes of attribution of gross revenues require auction winners to pay their process, and provide more specific of investors and affiliates of an second down payment regardless of a guidance to auction participants while applicant. pending petition to deny would increase also giving them more flexibility. (3) Merlin argues that the the defaults by small businesses. In this Commission’s proposal to lower the Order, the Commission is suspending B. Summary of Significant Issues Raised financial caps which permit small the use of installment payments as a by Public Comments in Response to the businesses to take advantage of special means of financing small business IRFA benefits would limit the number of participation in the auction program for 125. One party, Merlin Telecom, Inc. small businesses eligible for benefits the immediate future. As a result, all (Merlin), filed comments directly in and thus increase the barriers to entry auction winners, including small response to the IRFA. Merlin raises six that small businesses face. This Order businesses, will be required to submit arguments: adopts the proposal in the Notice to the full payment owed on their winning (1) Merlin urges the Commission not continue to define small businesses bids shortly after the license is ready to to impose additional reporting based on the characteristics and capital be granted. The Commission notes that requirements or additional fees on requirements of a specific service, in in the Balanced Budget Act Congress applicants seeking installment order to reduce the barriers to entry granted the Commission authority to payments. In this Order, the faced by small businesses. shorten the petition to deny period, and Commission concludes that installment (4) Merlin argues that the as a result, to grant licenses much more payments should not be offered in Commission’s proposals to reduce rapidly. Sections 1.2108 (b) and (c) of auctions as a means of financing small bidding credits, raise the interest rate on the rules are amended to provide that businesses and other designated entities installment payments, raise down the Commission shall not grant a license seeking to secure spectrum licenses. The payments, and eliminate installment less than seven days after public notice Commission eliminates installment payments will have a negative effect on that long-form applications have been payments in the auction of the lower 80 the ability of small businesses to accepted for filing. In addition, the and General Category channels in the compete effectively in the Commission amends this section to 800 MHz SMR service. The Commission telecommunications industry. In this provide that in all cases the period for notes that installment payments are not Order, the Commission concludes that filing petitions to deny shall be no the only tool available to assist small installment payments should not be shorter than five days. Applications that businesses. Section 3007 of the offered in auctions as a means of are the subject of petitions to deny will Balanced Budget Act requires that the financing small businesses and other ordinarily take longer to resolve than Commission conduct certain future designated entities seeking to secure uncontested applications, these changes auctions in a manner that ensures that spectrum licenses. In the Further in procedure will reduce the risk of all proceeds from such bidding are Notice, the Commission seeks comment frivolous petitions being filed solely for deposited in the U.S. Treasury not later on offering installment payments in the the purpose of delay and will enhance than September 30, 2002. The future; however, section 3007 of the the Commission’s ability to resolve Commission seeks comment in the Balanced Budget Act may require that petitions expeditiously. The Further Notice on offering installment these auctions be conducted without Commission declines to require all payments in the future; however, offering long-term installment winning bidders to make their full section 3007 of the Balanced Budget Act payments. In light of the decision to payments at the same time regardless of

VerDate 02-DEC-97 16:40 Jan 14, 1998 Jkt 010199 PO 00000 Frm 00032 Fmt 4700 Sfmt 4700 E:\FR\FM\P15JA0.PT1 15jar1 Federal Register / Vol. 63, No. 10 / Thursday, January 15, 1998 / Rules and Regulations 2337 whether petitions to deny their Commission anticipates that current definition. Consequently, the applications have been filed. wireless services licensees are Commission estimates that there are (6) Finally, Merlin contends that the representative of future auction fewer than 804 small cellular service Commission should not adopt a cross- participants. The following is our carriers. default rule. In this Order, the estimate of the number of small entities Estimates for Broadband and Commission concludes that it will not who are current wireless licensees: pursue a policy of cross-default (either Narrowband PCS Licensees within or across services) where Estimates for Cellular Licensees Broadband PCS. The broadband PCS licensees default on an installment The Commission has not developed a spectrum is divided into six frequency payment. The Commission is definition of small entities applicable to blocks designated A through F. The eliminating the use of installment cellular licensees. Therefore, the Commission has defined ‘‘small entity’’ payments as a means of financing small applicable definition of small entity is in the auctions for Blocks C and F as a business participation in the auction the definition under the Small Business firm that had average gross revenues of program for the foreseeable future. Administration (SBA) rules applicable less than $40 million in the three Therefore, in practice this decision will to radiotelephone companies. This previous calendar years. This definition apply only to existing licensees who are definition provides that a small entity is of ‘‘small entity’’ in the context of currently paying for their licenses in a radiotelephone company employing broadband PCS auctions has been installments. no more than 1,500 persons. The size approved by the SBA. The Commission data provided by the SBA does not has auctioned broadband PCS licenses C. Description and Estimate of the enable us to make a meaningful estimate in Blocks A through F. Of the qualified Number of Small Entities to Which of the number of cellular providers bidders in the C and F block auctions, Rules Will Apply which are small entities because it all were entrepreneurs—defined for 126. The RFA directs agencies to combines all radiotelephone companies these auctions as entities together with provide a description of, and, where with 500 or more employees. The 1992 affiliates, having gross revenues of less feasible, an estimate of the number of Census of Transportation, than $125 million and total assets of less small entities that will be affected by Communications, and Utilities, than $500 million at the time the FCC our rules. The RFA generally defines the conducted by the Bureau of the Census, Form 175 application was filed. Ninety term ‘‘small entity’’ as having the same is the most recent information available. bidders, including C block reauction meaning as the terms ‘‘small business,’’ This document shows that only 12 winners, won 493 C block licenses and ‘‘small organization,’’ and ‘‘small radiotelephone firms out of a total of 88 bidders won 491 F block licenses. governmental jurisdiction.’’ A small 1,178 such firms which operated during For purposes of this FRFA, the organization is generally ‘‘any not-for- 1992 had 1,000 or more employees. Commission assumes that all of the 90 profit enterprise which is independently Therefore, even if all 12 of these firms C block broadband PCS licensees and 88 owned and operated and is not were cellular telephone companies, F block broadband PCS licensees, a total dominant in its field.’’ Nationwide, nearly all cellular carriers were small of 178 licensees, are small entities. there are 275,801 small organizations. businesses under the SBA’s definition. Narrowband PCS. The Commission ‘‘Small governmental jurisdiction’’ The Commission assumes, for purposes has auctioned nationwide and regional generally means ‘‘governments of cities, of its evaluations and conclusions in licenses for narrowband PCS. There are counties, towns, townships, villages, this FRFA, that all of the current 11 nationwide and 30 regional licensees school districts, or special districts, with cellular licensees are small entities, as for narrowband PCS. The Commission a population of less than 50,000.’’ As of that term is defined by the SBA. In does not have sufficient information to 1992, there were 85,006 such addition, the Commission notes that determine whether any of these jurisdictions in the United States. there are 1,758 cellular licenses; licensees are small businesses within 127. In addition, the term ‘‘small however, the Commission does not the SBA-approved definition for business’’ has the same meaning as the know the number of cellular licensees, radiotelephone companies. At present, term ‘‘small business concern’’ under since a cellular licensee may own there have been no auctions held for the Section 3 of the Small Business Act. several licenses. The most reliable major trading area (MTA) and basic Under the Small Business Act, a ‘‘small source of information regarding the trading area (BTA) narrowband PCS business concern’’ is one which: (1) Is number of cellular service providers licenses. The Commission anticipates a independently owned and operated; (2) nationwide appears to be data the total of 561 MTA licenses and 2,958 is not dominant in its field of operation; Commission publishes annually in its BTA licenses will be awarded in the and (3) meets any additional criteria Telecommunications Industry Revenue auctions. Given that nearly all established by the Small Business report, regarding the radiotelephone companies have no more Administration (SBA). Telecommunications Relay Service than 1,500 employees, and that no 128. The rules adopted in this Order (TRS). The report places cellular reliable estimate of the number of will allow all entities, including existing licensees and Personal Communications prospective MTA and BTA narrowband cellular, PCS, paging, and other small Service (PCS) licensees in one group. licensees can be made, the Commission communications entities, to obtain According to the data released in assumes, for purposes of this FRFA, that licenses in auctionable services through November, 1997, there are 804 all of the licenses will be awarded to competitive bidding. These rules companies reporting that they engage in small entities, as that term is defined by generally apply to future auctions, but, cellular or PCS service. Although it the SBA. with limited exceptions, will not apply seems certain that some of these carriers to the initial auctions of licenses in the are not independently owned and Estimates for 220 MHz Radio Services paging, 220 MHz, 800 MHz Specialized operated, or have more than 1,500 Since the Commission has not yet Mobile Radio (SMR), and Local employees, the Commission is unable at defined a small business with respect to Multipoint Distribution (LMDS) this time to estimate with greater 220 MHz radio services, it will utilize services. In estimating the number of precision the number of cellular service the SBA definition applicable to small entities who may participate in carriers that would qualify as small radiotelephone companies—an entity future auctions of wireless services, the business concerns under the SBA’s employing no more than 1,500 persons.

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With respect to the 220 MHz services, the SBA definition applicable to is eligible to hold a PLMR license, the Commission has proposed a two- radiotelephone companies, i.e., an therefore, these rules could potentially tiered definition of small business for entity employing no more than 1,500 impact every small business in the purposes of auctions: (1) For Economic persons. There are approximately 100 United States if PLMR licenses are Area (EA) licensees, a firm with average licensees in the Air-Ground subject to auction under these new annual gross revenues of not more than radiotelephone service, and the auction rules. $6 million for the preceding three years; Commission estimates that almost all of Aviation and Marine Radio Service and (2) for regional and nationwide them qualify as small under the SBA licensees, a firm with average annual definition. Small entities in the aviation and gross revenues of not more than $15 marine radio services use a marine very Specialized Mobile Radio Licensees million for the preceding three years. high frequency (VHF) radio, any type of Since this definition has not yet been The Commission awards bidding emergency position indicating radio approved by the SBA, the Commission credits in auctions for geographic area beacon (EPIRB) and/or radar, a VHF will utilize the SBA definition 800 MHz and 900 MHz SMR licenses to aircraft radio, and/or any type of applicable to radiotelephone companies. two tiers of firms: (1) ‘‘Small entities,’’ emergency locator transmitter (ELT). Given that nearly all radiotelephone those with revenues of no more than The Commission has not developed a companies employ no more than 1,500 $15 million in each of the three definition of small entities specifically employees, the Commission will previous calendar years; and (2) ‘‘very applicable to these small businesses. consider the approximately 3,800 small entities,’’ those with revenues of Therefore, the applicable definition of incumbent licensees as small businesses no more than $3 million in each of the small entity is the definition under the under the SBA definition. three previous calendar years. The SBA rules applicable to a small regulations defining ‘‘small entity’’ and organization, generally ‘‘any not-for- Common Carrier Paging ‘‘very small entity’’ in the context of 800 profit enterprise which is independently The Commission has proposed a two- MHz SMR and 900 MHz SMR have been owned and operated and is not tier definition of small businesses in the approved by the SBA. The Commission dominant in its field.’’ Nationwide, context of auctioning geographic area does not know how many firms provide there are 275,801 small organizations. paging licenses in the Common Carrier 800 MHz or 900 MHz geographic area ‘‘Small governmental jurisdiction’’ Paging and exclusive Private Carrier SMR service pursuant to extended generally means ‘‘governments of cities, Paging services. Under the proposal, a implementation authorizations, nor how counties, towns, townships, villages, small business will be defined as either many of these providers have annual school districts, or special districts, with (1) an entity that, together with its revenues of no more than $15 million. a population of less than 50,000.’’ As of affiliates and controlling principals, has One firm has over $15 million in 1992, there were 85,006 such average gross revenues for the three revenues. The Commission assumes for jurisdictions in the United States. The preceding years of not more than $3 purposes of this FRFA that all of the Commission is unable at this time to million; or (2) an entity that, together remaining existing extended make a meaningful estimate of the with affiliates and controlling implementation authorizations are held number of potential small businesses principals, has average gross revenues by small entities, as that term is defined under these size standards. Most for the three preceding calendar years of by the SBA. The Commission has held applicants for individual recreational not more than $15 million. Since the auctions for geographic area licenses in licenses are individuals. Approximately SBA has not yet approved this the 900 MHz SMR band, and recently 581,000 ship station licensees and definition for paging services, the completed an auction for geographic 131,000 aircraft station licensees operate Commission will utilize the SBA area 800 MHz SMR licenses. There were domestically and are not subject to the definition applicable to radiotelephone 60 winning bidders who qualified as radio carriage requirements of any companies—an entity employing no small and very small entities in the 900 statute or treaty. Therefore, for purposes more than 1,500 persons. At present, MHz auction. In the recently concluded of the evaluations and conclusions in there are approximately 24,000 Private 800 MHz SMR auction there were 524 this FRFA, the Commission estimates Paging licenses and 74,000 Common licenses won by winning bidders, of that there may be at least 712,000 Carrier Paging licenses. According to which 38 licenses were won by small potential licensees which are Telecommunications Industry Revenue and very small entities. individuals or are small entities, as that data, there were 172 ‘‘paging and other Private Land Mobile Radio Licensees term is defined by the SBA. mobile’’ carriers reporting that they (PLMR) engage in these services. See FCC, Offshore Radiotelephone Service Telecommunications Industry Revenue: The Commission has not developed a This service operates on several UHF TRS Fund Worksheet Data, Figure 2 definition of small entities specifically TV broadcast channels that are not used (Number of Carriers Paying Into the TRS applicable to PLMR licensees. For the for TV broadcasting in the coastal area Fund by Type of Carrier) (Nov. 1997). purpose of determining whether a of the states bordering the Gulf of Consequently, the Commission licensee is a small business as defined Mexico. At present, there are estimates that there are fewer than 172 by the SBA, each licensee would need approximately 55 licensees in this small paging carriers. The Commission to be evaluated within its own business service. The Commission is unable at estimates that the majority of private area. The Commission is unable at this this time to estimate the number of and common carrier paging providers time to estimate the number of small licensees that would qualify as small would qualify as small businesses under businesses which could be impacted by entities under the SBA definition for the SBA definition. the rules. However, the Commission’s radiotelephone communications. 1994 Annual Report on PLMRs Air-Ground Radiotelephone Service indicates that at the end of fiscal year General Wireless Communication The Commission has not adopted a 1994 there were 1,087,267 licensees Service definition of small business specific to operating 12,481,989 transmitters in the This service was created by the the Air-Ground radiotelephone service. PLMR bands below 512 MHz. Any Commission on July 31, 1995 by Accordingly, the Commission will use entity engaged in a commercial activity transferring 25 MHz of spectrum in the

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4660–4685 MHz band from the federal general competitive bidding rules are policy of refunding upfront payments government to private sector use. The inappropriate. before the end of an auction to bidders Commission has announced that an 132. The Commission also received that lose eligibility; adopts uniform auction of 875 GWCS licenses will begin numerous comments with respect to the default rules to all auctionable services; on May 27, 1998. The Commission is issue of eliminating installment permits auction winners who have unable at this time to estimate the payments. The Commission has submitted a timely down payment to number of licensees that would qualify reviewed all of the comments in submit final payments 10 business days as small entities under the SBA response to the Notice of Proposed after the applicable deadline, provided definition for radiotelephone Rulemaking in this docket, as well as the appropriate late fee is paid; adopts communications. the comments filed in response to one 90-day non-delinquency period and Installment Public Notice (see ‘‘Wireless one automatic 90-day grace period, and D. Description of the Projected Telecommunications Bureau Seeks a late payment fee, similar to the rules Reporting, Recordkeeping, and Other Comment on Broadband PCS C and F for broadband PCS F block for licensees Compliance Requirements Block Installment Payment Issues,’’ currently paying under installments; 129. All license applicants will be Public Notice, DA 97–82, 62 FR 31777 and clarifies that the Commission will subject to reporting and recordkeeping (June 11, 1997) (‘‘Installment Public not pursue a policy of cross-default, requirements to comply with the Notice’’)) and concludes that either within or across services, where competitive bidding rules. Specifically, installment payments should not be licensees default on an installment applicants will apply for license offered in auctions as a means of payment. auctions by filing a short-form financing small businesses and other 135. Finally, this Order delegates application and will file a long-form designated entities seeking to secure authority to the Wireless application at the conclusion of the spectrum licenses. In this Order, Telecommunications Bureau to seek auction. Additionally, entities seeking Commission eliminates installment comment on specific mechanisms treatment as ‘‘small businesses’’ will payments in the auction of the lower 80 relating to auction conduct; allows for need to submit information pertaining and General Category channels in the real-time bidding in simultaneous to the gross revenues of the small 800 MHz SMR service. The Commission multiple-round auctions; provides that business applicant, its affiliates, and notes that installment payments are not the Bureau will seek comment on and certain investors in the applicant. the only tool available to assist small specify a minimum opening bid and/or businesses, and that section 3007 of the reserve price in future auctions; adopts, E. Steps Taken to Minimize the Balanced Budget Act requires that the for all auctionable services, the Economic Impact on Small Entities and Commission conduct certain future broadband PCS rules for bid withdrawal Significant Alternatives Considered auctions in a manner that ensures that payments in the event of erroneous bids; all proceeds from such bidding are modifies the attributable investor 130. Among other goals, Section deposited in the U.S. Treasury not later threshold of the anti-collusion rule to 309(j) directs the Commission to than September 30, 2002. The include controlling interests and/or disseminate licenses among a wide Commission seeks comment in the holders of a 10 percent or greater variety of applicants, including small Further Notice on offering installment interest in the applicant and to permit businesses and other designated payments in the future; however, an entity that has invested in an entities. At the same time, Section 309(j) section 3007 of the Balanced Budget Act applicant that withdraws from an requires that the Commission ensure the may require that these auctions be auction to invest in other applicants that development and rapid deployment of conducted without offering long-term have applied to bid in the same markets; new technologies, products, and installment payments. and permits all auction winners to begin services for the benefit of the public, 133. In assessing the public interest, construction at their own risk upon and recover for the public a portion of the Commission must try to ensure that issuance of a public notice announcing the value of the public spectrum all the objectives of section 309(j) are the auction winners. resource made available for commercial considered. In this Order, the 136. The Commission believes that use. Commission continues the practice of the objectives of section 309(j) are met 131. The Commission received defining small business standards on a by the rule changes in this Order. In numerous comments addressing the service-specific basis; adopts uniform addition, this Order serves the public applicability of general competitive definitions of ‘‘gross revenues’’ and interest by simplifying regulations, bidding rules for future auctions. Many ‘‘affiliate’’; eliminates the use of eliminating unnecessary rules, commenters support general installment payments for the 800 MHz increasing the efficiency of the competitive bidding rules, but argue Lower 80 channels and General competitive bidding process, and that the Commission should adopt Category channels services; suspends providing more specific guidance to service-specific rules in particular the use of installment payments for auction participants while also giving instances, such as a reauction. For other services to be auctioned in the them more flexibility. example, two commenters, AICC and immediate future; provides for higher AAA, argue that shared channels should bidding credits, in lieu of installment F. Report to Congress not be auctioned under the general payments, to encourage and facilitate 137. The Commission shall send a competitive bidding procedures. Hughes the participation of designated entities copy of this Final Regulatory Flexibility contends that if satellite services are in future auctions; and modifies the Analysis, along with this Order, in a auctioned, the Commission must unjust enrichment rule. report to Congress pursuant to the Small conduct a service-specific rulemaking 134. In addition, this Order requires Business Regulatory Enforcement tailored to the nature of the satellite electronic filing of all short-form and Fairness Act of 1996, 5 U.S.C. industry. The Commission does not long-form applications, beginning 801(a)(1)(A). A copy of the Order and address the issue of the auctionability of January 1, 1999; adopts a uniform this FRFA (or a summary thereof) will particular services in this proceeding; definition of major amendments to the be published in the Federal Register. however, service-specific auction rules short-form; adopts general ownership See 5 U.S.C. 604(b). A copy of the Order will be adopted in the future where the disclosure requirements; affirms the and this FRFA will also be sent to the

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Chief Counsel for Advocacy of the Small Proposed Rulemaking in CC Docket No. Federal Communications Commission. Business Administration. 92–297. Magalie Roman Salas, Type of Review: Revised Collection. XII. Paperwork Reduction Act Analysis Secretary. Respondents: Businesses or Other Notice of Public Information Collections For-profit entities. Rule Changes Submitted to OMB for Emergency Number of Respondents: 44,000. Parts 1, 21, 24, 27, 90 and 95 of Title Review and Approval Total Annual Burden: 773,000 hours. 47 of the Code of Federal Regulations are amended as follows: Paperwork Reduction Act Total Cost to Respondents: $46,347,350. The Federal Communications PART 1ÐPRACTICE AND Commission, as part of its continuing Needs and Uses PROCEDURE effort to reduce paperwork burden, The Commission is adopting a general 1. The authority citation for part 1 invites the general public and other rule to determine the amount of unjust continues to read as follows: federal agencies to take this opportunity enrichment payments to be assessed to comment on the following emergency upon assignment, transfer, partitioning Authority: 47 U.S.C. 151, 154, 207, 303 and 309(j), unless otherwise noted. information collection, as required by and disaggregation of licenses. The new the Paperwork Reduction Act of 1995, rule, applicable to all current and future 2. Section 1.2101 is revised to read as Pub. L. 104–13. An agency may not licensees, is based upon the unjust follows: conduct or sponsor a collection of enrichment rule currently applicable to § 1.2101 Purpose. information unless it displays a broadband PCS licensees. Therefore, currently valid control number. No transfer disclosure requirements will The provisions of this subpart person shall be subject to any penalty apply in all these license transactions. implement Section 309(j) of the for failing to comply with a collection Second, the Commission is amending Communications Act of 1934, as added of information subject to the Paperwork its general anti-collusion rules, by the Omnibus Budget Reconciliation Reduction Act (PRA) that does not permitting the holder of a non- Act of 1993 (Pub. L. 103–66) and the display a valid control number. controlling attributable interest in an Balanced Budget Act of 1997 (Pub. L. Comments are requested concerning applicant to obtain an ownership 105–33), authorizing the Commission to whether the proposed collection of interest in or enter into a consortium employ competitive bidding procedures information is necessary for the proper arrangement with another applicant for to choose from among two or more performance of the functions of the a license in the same geographic area mutually exclusive applications for Commission, including whether the provided that the original applicant has certain initial licenses. 3. Section 1.2102 is amended by information shall have practical utility, withdrawn from the auction, is no revising paragraphs (a) and (b) and the accuracy of the Commission’s longer placing bids, and has no further adding a note to the section to read as burden estimate, ways to enhance the eligibility. To meet the requirements of follows: quality, utility and clarity of the the exception, the attributable interest information collected, and ways to holder will be required to certify to the § 1.2102 Eligibility of applications for minimize the burden of the collection of Commission that it did not competitive bidding. information on the respondents, communicate with the new applicant (a) Mutually exclusive initial including the use of automated prior to the date the original applicant applications are subject to competitive collection techniques or other forms of withdrew from the auction, and that it bidding. information technology. The will not convey bidding information, or (b) The following types of license Commission is seeking emergency otherwise serve as a nexus between the applications are not subject to approval for this information collection previous and the new applicant. competitive bidding procedures: by March 2, 1998 under the provisions These requirements are being added (1) Public safety radio services, of 5 CFR 1320.13. to the existing requirements. The including private internal radio services DATES: Persons wishing to comment on number of respondents will not increase used by state and local governments and this information collection should but the annual burden hours and costs non-government entities and including submit comments by February 25, 1998. will increase by an estimated 8,500 emergency road services provided by hours and $612,650. not-for-profit organizations, that ADDRESSES: Direct all comments to Judy (i) Are used to protect the safety of Boley, Federal Communications List of Subjects life, health, or property; and Commission, Room 234, 1919 M St., 47 CFR Part 1 (ii) Are not commercially available to NW., Washington, DC 20554 or via Communications common carriers, the public; internet to [email protected] and Timothy (2) Initial licenses or construction Reporting and recordkeeping Fain, OMB Desk Officer, 10236 NEOB permits for digital television service 725 17th Street, NW., Washington, DC requirements. l given to existing terrestrial broadcast 20503 or fain [email protected]. 47 CFR Part 21 licensees to replace their analog FOR FURTHER INFORMATION CONTACT: for Communications common carriers, television service licenses; or additional information or copies of the Reporting and recordkeeping (3) Noncommercial educational and information collection contact Judy requirements. public broadcast stations described Boley at (202) 418–0217 or via Internet under 47 U.S.C. 397(6). at [email protected]. 47 CFR Part 90 * * * * * SUPPLEMENTARY INFORMATION: OMB Reporting and recordkeeping Note to § 1.2102: To determine the rules approval Number 3060–0767 Title: requirements. that apply to competitive bidding, specific Auction Forms and License Transfer service rules should also be consulted. Disclosures: Supplement For the Second 47 CFR Part 95 4. Section 1.2103 is amended by Report and Order, Order on Reporting and recordkeeping revising paragraph (a) and adding Reconsideration and Fifth Notice of requirements. paragraph (d) to read as follows:

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§ 1.2103 Competitive bidding design (2) Default or disqualification after name and title of a responsible person options. close of auction. If a high bidder should be included as well. If the (a) The Commission will choose from defaults or is disqualified after the close applicant is a trust, then the name and one or more of the following types of of such an auction, the defaulting bidder address of the trustee will be required. auction designs for services or classes of will be subject to the payment in If the applicant is none of the above, services subject to competitive bidding: paragraph (g)(1) of this section plus an then it must identify and describe itself (1) Simultaneous multiple-round additional payment equal to 3 percent of and its principals or other responsible auctions (using remote or on-site the subsequent winning bid. If the persons; and electronic bidding); subsequent winning bid exceeds the (B) Applicant ownership information, (2) Sequential multiple round defaulting bidder’s bid amount, the 3 as set forth in § 1.2112. auctions (using either oral ascending or percent payment will be calculated (iii) The identity of the person(s) remote and/or on-site electronic based on the defaulting bidder’s bid authorized to make or withdraw a bid; bidding); amount. If either bid amount is subject (iv) If the applicant applies as a (3) Sequential or simultaneous single- to a bidding credit, the 3 percent credit designated entity pursuant to § 1.2110, a round auctions (using either sealed will be calculated using the same bid statement to that effect and a paper or remote and/or on-site amounts and basis (net or gross bids) as declaration, under penalty of perjury, electronic bidding); and in the calculation of the payment in that the applicant is qualified as a (4) Combinatorial (package/ paragraph (g)(1) of this section. Thus, designated entity under § 1.2110. contingent) bidding auctions. (v) Certification that the applicant is for example, if gross bids are used to legally, technically, financially and * * * * * calculate the payment in paragraph otherwise qualified pursuant to section (d) The Commission may use real (g)(1) of this section, the 3 percent will 308(b) of the Communications Act of time bidding in all electronic auction be applied to the gross amount of the 1934, as amended. The Commission will designs. subsequent winning bid, or the gross 5. Section 1.2104 is amended by accept applications certifying that a amount of the defaulting bid, whichever revising paragraphs (d) and (g) to read request for waiver or other relief from is less. as follows: the requirements of section 310 is * * * * * pending; § 1.2104 Competitive bidding mechanisms. 6. Section 1.2105 is revised to read as (vi) Certification that the applicant is * * * * * follows: in compliance with the foreign (d) Minimum Bid Increments, § 1.2105 Bidding application and ownership provisions of section 310 of Minimum Opening Bids and Maximum certification procedures; prohibition of the Communications Act of 1934, as Bid Increments. The Commission may, collusion. amended; by announcement before or during an (a) Submission of Short-Form (vii) Certification that the applicant is auction, require minimum bid Application (FCC Form 175). In order to and will, during the pendency of its increments in dollar or percentage be eligible to bid, an applicant must application(s), remain in compliance terms. The Commission also may timely submit a short-form application with any service-specific qualifications establish minimum opening bids and (FCC Form 175), together with any applicable to the licenses on which the maximum bid increments on a service- appropriate upfront payment set forth applicant intends to bid including, but specific basis. by Public Notice. Beginning January 1, not limited to, financial qualifications. * * * * * 1999, all short-form applications must The Commission may require (g) Withdrawal, Default and be filed electronically. certification in certain services that the Disqualification Payment. As specified (1) All short-form applications will be applicant will, following grant of a below, when the Commission conducts due: license, come into compliance with an auction pursuant to § 1.2103, the (i) On the date(s) specified by public certain service-specific rules, including, Commission will impose payments on notice; or but not limited to, ownership eligibility bidders who withdraw high bids during (ii) In the case of application filing limitations; the course of an auction, or who default dates which occur automatically by (viii) An exhibit, certified as truthful on payments due after an auction closes operation of law (see, e.g., 47 CFR under penalty of perjury, identifying all or who are disqualified. 22.902), on a date specified by public parties with whom the applicant has (1) Bid withdrawal prior to close of notice after the Commission has entered into partnerships, joint auction. A bidder who withdraws a high reviewed the applications that have ventures, consortia or other agreements, bid during the course of an auction is been filed on those dates and arrangements or understandings of any subject to a payment equal to the determined that mutual exclusivity kind relating to the licenses being difference between the amount bid and exists. auctioned, including any such the amount of the winning bid the next (2) The short-form application must agreements relating to the post-auction time the license is offered by the contain the following information: market structure. Commission. The bid withdrawal (i) Identification of each license on (ix) Certification under penalty of payment is either the difference which the applicant wishes to bid; perjury that it has not entered and will between the net withdrawn bid and the (ii)(A) The applicant’s name, if the not enter into any explicit or implicit subsequent net winning bid, or the applicant is an individual. If the agreements, arrangements or difference between the gross withdrawn applicant is a corporation, then the understandings of any kind with any bid and the subsequent gross winning short-form application will require the parties other than those identified bid, whichever is less. No withdrawal name and address of the corporate office pursuant to paragraph (a)(2)(viii) payment is assessed if the subsequent and the name and title of an officer or regarding the amount of their bids, winning bid exceeds the withdrawn bid. director. If the applicant is a bidding strategies or the particular This payment amount is deducted from partnership, then the application will licenses on which they will or will not any upfront payments or down require the name, citizenship and bid. payments that the withdrawing bidder address of all general partners, and, if a Note to paragraph (a): The Commission has deposited with the Commission. partner is not a natural person, then the may also request applicants to submit

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(1) Any short-form application formation of consortia or changes in entity, or outstanding stock, or (FCC Form 175) that does not contain all ownership at any time before or during outstanding voting stock of the entity of the certifications required pursuant to an auction, provided such changes do submitting a short-form application, and this section is unacceptable for filing not result in a change in control of the all officers and directors of that entity; and cannot be corrected subsequent to applicant, and provided that the parties and the applicable filing deadline. The forming consortia or entering into (ii) The term bids or bidding strategies application will be dismissed with ownership agreements have not applied shall include capital calls or requests for prejudice and the upfront payment, if for licenses in any of the same additional funds in support of bids or paid, will be returned. geographic license areas. Such changes bidding strategies. (2) The Commission will provide will not be considered major Example: Company A is an applicant in bidders a limited opportunity to cure modifications of the application. area 1. Company B and Company C each own defects specified herein (except for (3) After the filing of short-form 10 percent of Company A. Company D is an failure to sign the application and to applications, applicants may make applicant in area 1, area 2, and area 3. make certifications) and to resubmit a agreements to bid jointly for licenses, Company C is an applicant in area 3. Without corrected application. During the provided the parties to the agreement violating the Commission’s Rules, Company resubmission period for curing defects, have not applied for licenses in any of B can enter into a consortium arrangement a short-form application may be the same geographic license areas. with Company D or acquire an ownership amended or modified to cure defects (4) After the filing of short-form interest in Company D if Company B certifies applications, a holder of a non- either (1) that it has communicated with and identified by the Commission or to will communicate neither with Company A make minor amendments or controlling attributable interest in an or anyone else concerning Company A’s bids modifications. After the resubmission entity submitting a short-form or bidding strategy, nor with Company C or period has ended, a short-form application may acquire an ownership anyone else concerning Company C’s bids or application may be amended or interest in, form a consortium with, or bidding strategy, or (2) that it has not modified to make minor changes or enter into a joint bidding arrangement communicated with and will not correct minor errors in the application. with, other applicants for licenses in the communicate with Company D or anyone Major amendments cannot be made to a same geographic license area, provided else concerning Company D’s bids or bidding short-form application after the initial that: strategy. filing deadline. Major amendments (i) The attributable interest holder 7. Section 1.2107 is amended by include changes in ownership of the certifies to the Commission that it has revising paragraphs (b) and (c) to read applicant that would constitute an not communicated and will not as follows: assignment or transfer of control, communicate with any party concerning changes in an applicant’s size which the bids or bidding strategies of more § 1.2107 Submission of down payment and filing of long-form applications. would affect eligibility for designated than one of the applicants in which it entity provisions, and changes in the holds an attributable interest, or with * * * * * license service areas identified on the which it has a consortium or joint (b) Unless otherwise specified by short-form application on which the bidding arrangement, and which have public notice, within ten (10) business applicant intends to bid. Minor applied for licenses in the same days after being notified that it is a high amendments include, but are not geographic license area(s); and bidder on a particular license(s), a high limited to, the correction of (ii) The arrangements do not result in bidder must submit to the Commission’s typographical errors and other minor any change in control of an applicant; lockbox bank such additional funds (the defects not identified as major. An or ‘‘down payment’’) as are necessary to application will be considered to be (iii) When an applicant has bring its total deposits (not including newly filed if it is amended by a major withdrawn from the auction, is no upfront payments applied to satisfy bid amendment and may not be resubmitted longer placing bids and has no further withdrawal or default payments) up to after applicable filing deadlines. eligibility, a holder of a non-controlling, twenty (20) percent of its high bid(s). (In (3) Applicants who fail to correct attributable interest in such an applicant single round sealed bid auctions defects in their applications in a timely may obtain an ownership interest in or conducted under § 1.2103, however, manner as specified by public notice enter into a consortium with another bidders may be required to submit their will have their applications dismissed applicant for a license in the same down payments with their bids.) Unless with no opportunity for resubmission. geographic service area, provided that otherwise specified by public notice, (c) Prohibition of collusion. (1) Except the attributable interest holder certifies this down payment must be made by as provided in paragraphs (c)(2), (c)(3) to the Commission that it did not wire transfer in U.S. dollars from a and (c)(4) of this section, after the filing communicate with the new applicant financial institution whose deposits are of short-form applications, all prior to the date that the original insured by the Federal Deposit applicants are prohibited from applicant withdrew from the auction. Insurance Corporation and must be cooperating, collaborating, discussing or (5) Applicants must modify their made payable to the Federal disclosing in any manner the substance short-form applications to reflect any Communications Commission. Down of their bids or bidding strategies, or changes in ownership or in membership payments will be held by the discussing or negotiating settlement of consortia or joint bidding Commission until the high bidder has agreements, with other applicants until arrangements. been awarded the license and has paid after the high bidder makes the required (6) For purposes of this paragraph: the remaining balance due on the down payment, unless such applicants (i) The term applicant shall include license or authorization, in which case are members of a bidding consortium or all controlling interests in the entity it will not be returned, or until the other joint bidding arrangement submitting a short-form application to winning bidder is found unqualified to

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No interest on any down read as follows: definition of a small business on a payment will be paid to the bidders. service-specific basis, taking into (c) A high bidder that meets its down § 1.2109 License grant, denial, default, and disqualification. consideration the characteristics and payment obligations in a timely manner capital requirements of the particular must, within ten (10) business days after (a) Unless otherwise specified by service. being notified that it is a high bidder, public notice, auction winners are required to pay the balance of their (2) Businesses owned by members of submit an additional application (the minority groups and/or women. Unless ‘‘long-form application’’) pursuant to winning bids in a lump sum within ten (10) business days following the release otherwise provided in rules governing the rules governing the service in which specific services, a business owned by the applicant is the high bidder. of a public notice establishing the payment deadline. If a winning bidder members of minority groups and/or Notwithstanding any other provision in women is one in which minorities and/ title 47 of the Code of Federal fails to pay the balance of its winning bids in a lump sum by the applicable or women who are U.S. citizens control Regulations to the contrary, high the applicant, have at least 50.1 percent bidders need not submit an additional deadline as specified by the equity ownership and, in the case of a application filing fee with their long- Commission, it will be allowed to make corporate applicant, a 50.1 percent form applications. Specific procedures payment within ten (10) business days voting interest. For applicants that are for filing applications will be set out by after the payment deadline, provided partnerships, every general partner Public Notice. Beginning January 1, that it also pays a late fee equal to five either must be a minority and/or woman 1999, all long-form applications must be percent of the amount due. When a (or minorities and/or women) who are filed electronically. An applicant that winning bidder fails to pay the balance U.S. citizens and who individually or fails to submit the required long-form of its winning bid by the late payment together own at least 50.1 percent of the application under this paragraph and deadline, it is considered to be in partnership equity, or an entity that is fails to establish good cause for any late- default on its license(s) and subject to filed submission, shall be deemed to the applicable default payments. 100 percent owned and controlled by have defaulted and will be subject to the Licenses will be awarded upon the full minorities and/or women who are U.S. payments set forth in § 1.2104. and timely payment of winning bids citizens. The interests of minorities and and any applicable late fees. women are to be calculated on a fully- * * * * * diluted basis; agreements such as stock 8. Section 1.2108 is amended by (b) If a winning bidder withdraws its options and convertible debentures revising paragraphs (b) and (c) to read bid after the Commission has declared shall be considered to have a present as follows: competitive bidding closed or fails to remit the required down payment effect on the power to control an entity § 1.2108 Procedures for filing petitions to within ten (10) business days after the and shall be treated as if the rights deny against long-form applications. Commission has declared competitive thereunder already have been fully * * * * * bidding closed, the bidder will be exercised. However, upon a (b) Within a period specified by deemed to have defaulted, its demonstration that options or Public Notice, and after the Commission application will be dismissed, and it conversion rights held by non- by public notice announces that long- will be liable for the default payment controlling principals will not deprive form applications have been accepted specified in § 1.2104(g)(2). In such the minority and female principals of a for filing, petitions to deny such event, the Commission, at its discretion, substantial financial stake in the venture applications may be filed. In all cases, may either re-auction the license to or impair their rights to control the the period for filing petitions to deny existing or new applicants or offer it to designated entity, a designated entity shall be no shorter than five (5) days. the other highest bidders (in descending may seek a waiver of the requirement Any such petitions must contain order) at their final bids. The down that the equity of the minority and allegations of fact supported by affidavit payment obligations set forth in female principals must be calculated on of a person or persons with personal § 1.2107(b) will apply. a fully-diluted basis. The term minority knowledge thereof. (c) A winning bidder who is found includes individuals of African (c) An applicant may file an unqualified to be a licensee, fails to American, Hispanic-surnamed, opposition to any petition to deny, and remit the balance of its winning bid in American Eskimo, Aleut, American the petitioner a reply to such a timely manner, or defaults or is Indian and Asian American extraction. opposition. Allegations of fact or denials disqualified for any reason after having (3) Rural telephone companies. A thereof must be supported by affidavit made the required down payment, will rural telephone company is any local of a person or persons with personal be deemed to have defaulted and will be exchange carrier operating entity to the knowledge thereof. The time for filing liable for the payment set forth in extent that such entity— such oppositions shall be at least five (5) § 1.2104(g)(2). In such event, the (i) provides common carrier service to days from the filing date for petitions to Commission may either re-auction the deny, and the time for filing replies any local exchange carrier study area license to existing or new applicants or that does not include either shall be at least five (5) days from the offer it to the other highest bidders (in filing date for oppositions. The descending order) at their final bids. (A) any incorporated place of 10,000 Commission may grant a license based inhabitants or more, or any part thereof, on any long-form application that has * * * * * based on the most recently available 10. Section 1.2110 is revised to read been accepted for filing. The population statistics of the Bureau of the as follows: Commission shall in no case grant Census, or licenses earlier than seven (7) days § 1.2110 Designated entities. (B) any territory, incorporated or following issuance of a public notice (a) Designated entities are small unincorporated, included in an announcing long-form applications have businesses, businesses owned by urbanized area, as defined by the been accepted for filing. members of minority groups and/or Bureau of the Census as of August 10, * * * * * women, and rural telephone companies. 1993;

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(ii) provides telephone exchange director has a block sufficient to give him or (iv) Affiliation through stock service, including exchange access, to her control or the power to control and the ownership. (A) An applicant is fewer than 50,000 access lines; remaining 60 percent is widely distributed presumed to control or have the power (iii) provides telephone exchange with no individual stockholder having a to control a concern if he or she owns stock interest greater than 10 percent, service to any local exchange carrier management has the power to control. If or controls or has the power to control study area with fewer than 100,000 persons with such management control of the 50 percent or more of its voting stock. access lines; or other entity are persons with attributable (B) An applicant is presumed to (iv) has less than 15 percent of its interests in the applicant, the other entity control or have the power to control a access lines in communities of more will be deemed an affiliate of the applicant. concern even though he or she owns, than 50,000 on the date of enactment of controls or has the power to control less the Telecommunications Act of 1996. (iii) Identity of interest between and than 50 percent of the concern’s voting (4) Affiliate. (i) An individual or among persons. Affiliation can arise stock, if the block of stock he or she entity is an affiliate of an applicant or between or among two or more persons owns, controls or has the power to of a person holding an attributable with an identity of interest, such as control is large as compared with any interest in an applicant if such members of the same family or persons other outstanding block of stock. individual or entity— with common investments. In (C) If two or more persons each owns, (A) Directly or indirectly controls or determining if the applicant controls or controls or has the power to control less has the power to control the applicant, has the power to control a concern, than 50 percent of the voting stock of a or persons with an identity of interest will concern, such minority holdings are (B) Is directly or indirectly controlled be treated as though they were one equal or approximately equal in size, by the applicant, or person. and the aggregate of these minority (C) Is directly or indirectly controlled Example. Two shareholders in Corporation holdings is large as compared with any by a third party or parties that also Y each have attributable interests in the same other stock holding, the presumption controls or has the power to control the PCS application. While neither shareholder arises that each one of these persons applicant, or has enough shares to individually control individually controls or has the power (D) Has an ‘‘identity of interest’’ with Corporation Y, together they have the power to control the concern; however, such to control Corporation Y. The two presumption may be rebutted by a the applicant. shareholders with these common (ii) Nature of control in determining investments (or identity in interest) are showing that such control or power to affiliation. treated as though they are one person and control, in fact, does not exist. (A) Every business concern is Corporation Y would be deemed an affiliate (v) Affiliation arising under stock considered to have one or more parties of the applicant. options, convertible debentures, and who directly or indirectly control or agreements to merge. Stock options, have the power to control it. Control (A) Spousal affiliation. Both spouses convertible debentures, and agreements may be affirmative or negative and it is are deemed to own or control or have to merge (including agreements in immaterial whether it is exercised so the power to control interests owned or principle) are generally considered to long as the power to control exists. controlled by either of them, unless they have a present effect on the power to are subject to a legal separation Example. An applicant owning 50 percent control the concern. Therefore, in recognized by a court of competent making a size determination, such of the voting stock of another concern would jurisdiction in the United States. In have negative power to control such concern options, debentures, and agreements are since such party can block any action of the calculating their net worth, investors generally treated as though the rights other stockholders. Also, the bylaws of a who are legally separated must include held thereunder had been exercised. corporation may permit a stockholder with their share of interests in property held However, an affiliate cannot use such less than 50 percent of the voting stock to jointly with a spouse. options and debentures to appear to block any actions taken by the other (B) Kinship affiliation. Immediate terminate its control over another stockholders in the other entity. Affiliation family members will be presumed to concern before it actually does so. exists when the applicant has the power to own or control or have the power to control a concern while at the same time Example 1. If company B holds an option another person, or persons, are in control of control interests owned or controlled by to purchase a controlling interest in company the concern at the will of the party or parties other immediate family members. In A, who holds an attributable interest in a PCS with the power to control. this context ‘‘immediate family application, the situation is treated as though member’’ means father, mother, company B had exercised its rights and had (B) Control can arise through stock husband, wife, son, daughter, brother, come owner of a controlling interest in ownership; occupancy of director, sister, father- or mother-in-law, son- or company A. The gross revenues of company officer or key employee positions; daughter-in-law, brother- or sister-in- B must be taken into account in determining contractual or other business relations; the size of the applicant. law, step-father or -mother, step-brother Example 2. If a large company, BigCo, or combinations of these and other or -sister, step-son or -daughter, half factors. A key employee is an employee holds 70% (70 of 100 outstanding shares) of brother or sister. This presumption may the voting stock of company A, who holds an who, because of his/her position in the be rebutted by showing that the family attributable interest in a PCS application, and concern, has a critical influence in or members are estranged, the family ties gives a third party, SmallCo, an option to substantive control over the operations are remote, or the family members are purchase 50 of the 70 shares owned by or management of the concern. not closely involved with each other in BigCo, BigCo will be deemed to be an affiliate (C) Control can arise through business matters. of company A, and thus the applicant, until management positions where a SmallCo actually exercises its option to concern’s voting stock is so widely Example. A owns a controlling interest in purchase such shares. In order to prevent distributed that no effective control can Corporation X. A’s sister-in-law, B, has an BigCo from circumventing the intent of the attributable interest in a PCS application. be established. rule which requires such options to be Because A and B have a presumptive kinship considered on a fully diluted basis, the Example. In a corporation where the affiliation, A’s interest in Corporation Y is option is not considered to have present officers and directors own various size blocks attributable to B, and thus to the applicant, effect in this case. of stock totaling 40 percent of the unless B rebuts the presumption with the Example 3. If company A has entered into corporation’s voting stock, but no officer or necessary showing. an agreement to merge with company B in

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An not exceeding $3 million are eligible for holds or shares the power to vote such agreement to share profits/losses bidding credits of 35 percent; stock, to any person who has the sole proportionate to each party’s (ii) Businesses with average gross power to sell such stock, and to any contribution to the business operation is revenues for the preceding years, 3 years person who has the right to revoke the a significant factor in determining not exceeding $15 million are eligible trust at will or to replace the trustee at whether the business operation is a joint for bidding credits of 25 percent; and will. venture. (iii) Businesses with average gross (B) If a trustee has a familial, personal (B) The parties to a joint venture are revenues for the preceding years, 3 years or extra-trust business relationship to considered to be affiliated with each not exceeding $40 million are eligible the grantor or the beneficiary, the stock other. Nothing in this subsection shall for bidding credits of 15 percent. interests held in trust will be deemed be construed to define a small business (f) Installment payments. The controlled by the grantor or beneficiary, consortium, for purposes of determining Commission may permit small as appropriate. status as a designated entity, as a joint businesses (including small businesses (C) If the primary purpose of a voting venture under attribution standards owned by women, minorities, or rural trust, or similar agreement, is to separate provided in this section. telephone companies that qualify as voting power from beneficial ownership (xi) Exclusion from affiliation small businesses) and other entities of voting stock for the purpose of coverage. For purposes of this section, determined to be eligible on a service- shifting control of or the power to Indian tribes or Alaska Regional or specific basis, which are high bidders control a concern in order that such Village Corporations organized pursuant for licenses specified by the concern or another concern may meet to the Alaska Native Claims Settlement Commission, to pay the full amount of the Commission’s size standards, such Act (43 U.S.C. 1601 et seq.), or entities their high bids in installments over the voting trust shall not be considered owned and controlled by such tribes or term of their licenses pursuant to the valid for this purpose regardless of corporations, are not considered following: whether it is or is not recognized within affiliates of an applicant (or licensee) (1) Unless otherwise specified by the appropriate jurisdiction. that is owned and controlled by such public notice, each eligible applicant (vii) Affiliation through common tribes, corporations or entities, and that paying for its license(s) on an management. Affiliation generally arises otherwise complies with the installment basis must deposit by wire where officers, directors, or key requirements of this section, except that transfer in the manner specified in employees serve as the majority or gross revenues derived from gaming § 1.2107(b) sufficient additional funds otherwise as the controlling element of activities conducted by affiliate entities as are necessary to bring its total the board of directors and/or the pursuant to the Indian Gaming deposits to ten (10) percent of its management of another entity. Regulatory Act (25 U.S.C. 2701 et seq.) winning bid(s) within ten (10) days after (viii) Affiliation through common will be counted in determining such the Commission has declared it the facilities. Affiliation generally arises applicant’s (or licensee’s) compliance winning bidder and closed the bidding. where one concern shares office space with the financial requirements of this Failure to remit the required payment and/or employees and/or other facilities section, unless such applicant will make the bidder liable to pay a with another concern, particularly establishes that it will not receive a default payment pursuant to where such concerns are in the same or substantial unfair competitive advantage § 1.2104(g)(2). related industry or field of operations, because significant legal constraints (2) Within ten (10) days of the or where such concerns were formerly restrict the applicant’s ability to access conditional grant of the license affiliated, and through these sharing such gross revenues. application of a winning bidder eligible arrangements one concern has control, (c) The Commission may set aside for installment payments, the licensee or potential control, of the other specific licenses for which only eligible shall pay another ten (10) percent of the concern. designated entities, as specified by the high bid, thereby commencing the (ix) Affiliation through contractual Commission, may bid. eligible licensee’s installment payment relationships. Affiliation generally (d) The Commission may permit plan. Failure to remit the required arises where one concern is dependent partitioning of service areas in payment will make the bidder liable to upon another concern for contracts and particular services for eligible pay default payments pursuant to business to such a degree that one designated entities. § 1.2104(g)(2). concern has control, or potential (e) Bidding credits. (1) The (3) Upon grant of the license, the control, of the other concern. Commission may award bidding credits Commission will notify each eligible (x) Affiliation under joint venture (i.e., payment discounts) to eligible licensee of the terms of its installment arrangements. (A) A joint venture for designated entities. Competitive bidding payment plan and that it must execute size determination purposes is an rules applicable to individual services a promissory note and security association of concerns and/or will specify the designated entities agreement as a condition of the individuals, with interests in any degree eligible for bidding credits, the licenses installment payment plan. Unless other or proportion, formed by contract, for which bidding credits are available, terms are specified in the rules of express or implied, to engage in and the amounts of bidding credits and particular services, such plans will: carry out a single, specific business other procedures. (i) Impose interest based on the rate venture for joint profit for which (2) Size of bidding credits. A winning of U.S. Treasury obligations (with purpose they combine their efforts, bidder that qualifies as a small business maturities closest to the duration of the property, money, skill and knowledge, or a consortium of small businesses may license term) at the time of licensing; but not on a continuing or permanent use the following bidding credits (ii) Allow installment payments for basis for conducting business generally. corresponding to their respective the full license term;

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(iii) Begin with interest-only (g) The Commission may establish any deductions are made for costs of payments for the first two years; and different upfront payment requirements doing business (e.g., cost of goods sold), (iv) Amortize principal and interest for categories of designated entities in as evidenced by audited financial over the remaining term of the license. competitive bidding rules of particular statements for the relevant number of (4) A license granted to an eligible auctionable services. most recently completed calendar years entity that elects installment payments (h) The Commission may offer or, if audited financial statements were shall be conditioned upon the full and designated entities a combination of the not prepared on a calendar-year basis, timely performance of the licensee’s available preferences or additional for the most recently completed fiscal payment obligations under the preferences. years preceding the filing of the installment plan. (i) Designated entities must describe applicant’s short-form (FCC Form 175). (i) Any licensee that fails to submit on their long-form applications how If an entity was not in existence for all payment on an installment obligation they satisfy the requirements for or part of the relevant period, gross will automatically have an additional eligibility for designated entity status, revenues shall be evidenced by the ninety (90) days in which to submit its and must list and summarize on their audited financial statements of the required payment without being long-form applications all agreements entity’s predecessor-in-interest or, if considered delinquent. Any licensee that effect designated entity status, such there is no identifiable predecessor-in- making its required payment during this as partnership agreements, shareholder interest, unaudited financial statements period will be assessed a late payment agreements, management agreements certified by the applicant as accurate. fee equal to five percent (5%) of the and other agreements, including oral When an applicant does not otherwise amount of the past due payment. Late agreements, which establish that the use audited financial statements, its designated entity will have both de fees assessed under this paragraph will gross revenues may be certified by its facto and de jure control of the entity. accrue on the next business day chief financial officer or its equivalent Such information must be maintained at following the payment due date. and must be prepared in accordance the licensees’ facilities or by their Payments made at the close of any grace with Generally Accepted Accounting designated agents for the term of the period will first be applied to satisfy any Principles. license in order to enable the lender advances as required under each 11. Section 1.2111 is amended by Commission to audit designated entity licensee’s ‘‘Note and Security revising paragraphs (c) and (d) and eligibility on an ongoing basis. adding paragraph (e) to read as follows: Agreement.’’ Afterwards, payments will (j) The Commission may, on a service- be applied in the following order: late specific basis, permit consortia, each § 1.2111 Assignment or transfer of control: charges, interest charges, principal member of which individually meets unjust enrichment. payments. the eligibility requirements, to qualify * * * * * (ii) If any licensee fails to make the for any designated entity provisions. (c) Unjust enrichment payment: required payment at the close of the 90- (k) The Commission may, on a installment financing. (1) If a licensee day period set forth in paragraph (i) of service-specific basis, permit publicly- that utilizes installment financing under this section, the licensee will traded companies that are owned by this section seeks to assign or transfer automatically be provided with a members of minority groups or women control of its license to an entity not subsequent 90-day grace period. Any to qualify for any designated entity meeting the eligibility standards for licensee making a required payment provisions. installment payments, the licensee must during this subsequent period will be (l) Audits. (1) Applicants and make full payment of the remaining assessed a late payment fee equal to ten licensees claiming eligibility under this unpaid principal and any unpaid percent (10%) of the amount of the past section shall be subject to audits by the interest accrued through the date of due payment. Licensees shall not be Commission, using in-house and assignment or transfer as a condition of required to submit any form of request contract resources. Selection for audit approval. in order to take advantage of the initial may be random, on information, or on (2) If a licensee that utilizes 90-day non-delinquency period and the basis of other factors. installment financing under this section subsequent automatic 90-day grace (2) Consent to such audits is part of seeks to make any change in ownership period. All licensees that avail the certification included in the short- structure that would result in the themselves of the automatic grace form application (FCC Form 175). Such licensee losing eligibility for installment period must pay the required late fee(s), consent shall include consent to the payments, the licensee shall first seek all interest accrued during the non- audit of the applicant’s or licensee’s Commission approval and must make delinquency and grace periods, and the books, documents and other material full payment of the remaining unpaid appropriate scheduled payment with (including accounting procedures and principal and any unpaid interest the first payment made following the practices) regardless of form or type, accrued through the date of such change conclusion of the grace period. sufficient to confirm that such as a condition of approval. A licensee’s (iii) If an eligible entity making applicant’s or licensee’s representations (or other attributable entity’s) increased installment payments is more than one are, and remain, accurate. Such consent gross revenues or increased total assets hundred and eighty (180) days shall include inspection at all due to nonattributable equity delinquent in any payment, it shall be reasonable times of the facilities, or investments, debt financing, revenue in default. parts thereof, engaged in providing and from operations or other investments, (iv) Any eligible entity that submits transacting business, or keeping records business development or expanded an installment payment after the due regarding FCC-licensed service and service shall not be considered to result date but fails to pay any late fee, interest shall also include consent to the in the licensee losing eligibility for or principal at the close of the 90-day interview of principals, employees, installment payments. non-delinquency period and subsequent customers and suppliers of the (3) If a licensee seeks to make any automatic grace period will be declared applicant or licensee. change in ownership that would result in default, its license will automatically (m) Gross revenues. Gross revenues in the licensee qualifying for a less cancel, and will be subject to debt shall mean all income received by an favorable installment plan under this collection procedures. entity, whether earned or passive, before section, the licensee shall seek

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Commission approval and must adjust percent of the value of the bidding applicant, including the specific amount its payment plan to reflect its new credit; of the interest; eligibility status. A licensee may not (D) A transfer in year 5 of the license (3) A list of any party holding a 10 switch its payment plan to a more term will result in a forfeiture of 25 percent or greater interest in any entity favorable plan. percent of the value of the bidding holding or applying for any FCC- (d) Unjust enrichment payment: credit; and regulated business in which a 10 bidding credits. (1) A licensee that (E) for a transfer in year 6 or percent or more interest is held by utilizes a bidding credit, and that during thereafter, there will be no payment. another party which holds a 10 percent the initial term seeks to assign or (ii) These payments will have to be or more interest in the applicant (e.g., If transfer control of a license to an entity paid to the United States Treasury as a company A owns 10 percent of that does not meet the eligibility criteria condition of approval of the assignment, Company B (the applicant) and 10 for a bidding credit, will be required to transfer, or ownership change. percent of Company C then Companies reimburse the U.S. Government for the (e) Unjust enrichment: partitioning A and C must be listed on Company B’s amount of the bidding credit, plus and disaggregation. (1) Installment application; interest based on the rate for ten year payments. Licensees making installment (4) A list of the names, addresses, and U.S. Treasury obligations applicable on payments, that partition their licenses or citizenship of any party holding 10 the date the license was granted, as a disaggregate their spectrum to entities percent or more of each class of stock, condition of Commission approval of not meeting the eligibility standards for warrants, options or debt securities the assignment or transfer. If, within the installment payments, will be subject to together with the amount and initial term of the license, a licensee that the provisions concerning unjust percentage held; utilizes a bidding credit seeks to assign (5) A list of the names, addresses, and enrichment as set forth in this section. or transfer control of a license to an citizenship of all controlling interests of (2) Bidding credits. Licensees that entity that is eligible for a lower bidding the applicants, as set forth in § 1.2110; credit, the difference between the received a bidding credit that partition (6) In the case of a general bidding credit obtained by the assigning their licenses or disaggregate their partnerships, the name, address and party and the bidding credit for which spectrum to entities not meeting the citizenship of each partner, and the the acquiring party would qualify, plus eligibility standards for such a bidding share or interest participation in the interest based on the rate for ten year credit, will be subject to the provisions partnership; U.S. treasury obligations applicable on concerning unjust enrichment as set (7) In the case of a limited the date the license is granted, must be forth in this section. partnerships, the name, address and paid to the U.S. Government as a (3) Apportioning unjust enrichment citizenship of each limited partner condition of Commission approval of payments. Unjust enrichment payments whose interest in the applicant is equal the assignment or transfer. If, within the for partitioned license areas shall be to or greater than 10 percent (as initial term of the license, a licensee that calculated based upon the ratio of the calculated according to the percentage utilizes a bidding credit seeks to make population of the partitioned license of equity paid in and the percentage of any ownership change that would result area to the overall population of the distribution of profits and losses); in the licensee losing eligibility for a license area and by utilizing the most (8) In the case of a limited liability bidding credit (or qualifying for a lower recent census data. Unjust enrichment corporation, the name, address and bidding credit), the amount of the payments for disaggregated spectrum citizenship of each of its members; and bidding credit (or the difference shall be calculated based upon the ratio (9) A list of all parties holding between the bidding credit originally of the amount of spectrum disaggregated indirect ownership interests in the obtained and the bidding credit for to the amount of spectrum held by the applicant, as determined by successive which the restructured licensee would licensee. multiplication of the ownership qualify), plus interest based on the rate 12. Section 1.2112 is added to read as percentages for each link in the vertical for ten year U.S. treasury obligations follows: ownership chain, that equals 10 percent applicable on the date the license is or more of the applicant, except that if § 1.2112 Ownership disclosure the ownership percentage for an interest granted, must be paid to the U.S. requirements for short- and long-form Government as a condition of applications. in any link in the chain exceeds 50 Commission approval of the assignment percent or represents actual control, it or transfer. (a) Each application for a license or shall be treated and reported as if it (2) Payment schedule. (i) The amount authorization or for consent to assign or were a 100 percent interest. of payments made pursuant to transfer control of a license or (b) In addition to the information paragraph (d)(1) of this section will be authorization shall disclose fully the required under paragraph (a) of this reduced over time as follows: real party or parties in interest and must section, each applicant for a license or (A) A transfer in the first two years of include in an exhibit the following authorization claiming status as a small the license term will result in a information: business shall, as an exhibit to its long- forfeiture of 100 percent of the value of (1) A list of any FCC-regulated form application: the bidding credit (or in the case of very business 10 percent or more of whose (1) Disclose separately and in the small businesses transferring to small stock, warrants, options or debt aggregate the gross revenues, computed businesses, 100 percent of the difference securities are owned by the applicant or in accordance with § 1.2110, for each of between the bidding credit received by an officer, director, attributable the following: the applicant and its the former and the bidding credit for stockholder or key management affiliates, the applicant’s attributable which the latter is eligible); personnel of the applicant. This list investors, affiliates of its attributable (B) A transfer in year 3 of the license must include a description of each such investors, and, if a consortium of small term will result in a forfeiture of 75 business’s principal business and a businesses, the members comprising the percent of the value of the bidding description of each such business’s consortium; credit; relationship to the applicant; (2) List and summarize all agreements (C) A transfer in year 4 of the license (2) A list of any party holding a 10 or instruments (with appropriate term will result in a forfeiture of 50 percent or greater interest in the references to specific provisions in the

VerDate 02-DEC-97 16:40 Jan 14, 1998 Jkt 010199 PO 00000 Frm 00043 Fmt 4700 Sfmt 4700 E:\FR\FM\P15JA0.PT1 15jar1 2348 Federal Register / Vol. 63, No. 10 / Thursday, January 15, 1998 / Rules and Regulations text of such agreements and (d) Conditions. Except as indicated, PART 24ÐPERSONAL instruments) that support the all pre-grant construction is subject to COMMUNICATIONS SERVICES applicant’s eligibility as a small the following conditions: business under the applicable (1) The application does not include 17. The authority citation for part 24 designated entity provisions, including a request for a waiver of one or more continues to read as follows: the establishment of de facto and de jure FCC rules; Authority: 47 U.S.C. Sections 154, 301, control; such agreements and (2) For any construction or alteration 302, 303, and 332, unless otherwise noted. instruments include articles of that would exceed the requirements of 18. Section 24.304 is amended by incorporation and bylaws, shareholder § 17.7 of this chapter, the licensee has revising paragraph (a)(2) to read as agreements, voting or other trust notified the appropriate Regional Office follows: agreements, franchise agreements, and of the Federal Aviation Administration any other relevant agreements (FAA Form 7460–1), filed a request for § 24.304 Withdrawal, default and (including letters of intent), oral or antenna height clearance and disqualification penalties. written; and obstruction marking and lighting (a) * * * (3) List and summarize any investor specifications (FCC Form 854) with the (2) Default or disqualification after protection agreements, including rights FCC, PRB, Support Services Branch, close of auction. See § 1.2104(g)(2) of of first refusal, supermajority clauses, Gettysburg, PA 17325; this chapter. options, veto rights, and rights to hire (3) The applicant has indicated in the * * * * * and fire employees and to appoint application that the proposed facility 19. Section 24.309 is amended by members to boards of directors or would not have a significant revising paragraphs (b) and (f) to read as management committees. environmental effect, in accordance follows: with §§ 1.1301 through 1.1319; 13. Section 1.2113 is added to read as § 24.309 Designated entities follows: (4) Under applicable international agreements and rules in this part, * * * * * § 1.2113 Construction prior to grant of individual coordination of the proposed (b) Designated entities will be eligible application. channel assignment(s) with a foreign for certain special narrowband PCS Subject to the provisions of this administration is not required; and provisions as follows: section, applicants for licenses awarded (5) Any service-specific restrictions (1) Installment payments. (i) Small by competitive bidding may construct not listed herein. businesses, including small businesses facilities to provide service prior to owned by members of minority groups grant of their applications, but must not PART 21ÐDOMESTIC PUBLIC FIXED and women, will be eligible to pay the operate such facilities until the FCC RADIO SERVICES full amount of their winning bids on grants an authorization. If the any regional, MTA or BTA license in 14. The authority citation for part 21 installments over the term of the license conditions stated in this section are not continues to read as follows: met, applicants must not begin to pursuant to the terms set forth in construct facilities for licenses subject to Authority: Secs. 1, 2, 4, 201–205, 208, 215, § 1.2110(g) of this chapter. competitive bidding. 218, 303, 307, 313, 403, 404, 410, 602, 48 (ii) Businesses owned by members of Stat. as amended, 1064, 1066, 1070–1073, minority groups and women that are (a) When applicants may begin 1076, 1077, 1080, 1082, 1083, 1087, 1094, construction. An applicant may begin winning bidders for the regional 1098, 1102; 47 U.S.C. 151, 154, 201–205, 208, licenses indicated by an (**) in § 24.129 construction of a facility upon release of 215, 218, 303, 307, 313, 314, 403, 404, 602; the Public Notice listing the post- 47 U.S.C. 552, 554, unless otherwise noted. may pay the full amount of their winning bids (less the applicable auction long-form application for that 15. Section 21.959 is amended by facility as acceptable for filing. bidding credit and down payment) in revising paragraph (a)(2) to read as installments with (b) Notification to stop. If the FCC for follows: any reason determines that construction (A) Interest imposed based on the rate for ten-year U.S. Treasury obligations should not be started or should be § 21.959 Withdrawal, default, and stopped while an application is disqualification. applicable on the date the license is pending, and so notifies the applicant, granted, plus 2.5 percent; * * * * * (B) Interest-only payments for the first orally (followed by written (a) * * * two years; and confirmation) or in writing, the (2) Default or disqualification after (C) Principal and interest payments applicant must not begin construction close of auction. See § 1.2104 (g)(2) of amortized over the remaining eight or, if construction has begun, must stop this chapter. years of the license. construction immediately. * * * * * (2) Bidding credits. Businesses owned (c) Assumption of risk. Applicants 16. Section 21.960 is amended by by member of minority groups and that begin construction pursuant to this revising paragraphs (b)(4) and (d)(1) to women, including small businesses section before receiving an read as follows: owned by members of minority groups authorization do so at their own risk and women, will be eligible for a and have no recourse against the United § 21.960 Designated entity provisions for MDS. twenty-five (25) percent bidding credit States for any losses resulting from: when bidding on the following licenses: (1) Applications that are not granted; * * * * * (i) The nationwide licenses on (2) Errors or delays in issuing public (b) * * * Channel 5, Channel 8 and Channel 11; (4) Conditions and obligations. See notices; and (3) Having to alter, relocate or § 1.2110(f)(4) of this chapter. (ii) All MTA licenses on Channel 19, dismantle the facility; or * * * * * Channel 22, Channel 24; and (4) Incurring whatever costs may be (d) * * * (iii) All BTA licenses on Channel 26. necessary to bring the facility into (1) Unjust enrichment. See § 1.2111 of This bidding credit will reduce by 25 compliance with applicable laws, or this chapter. percent the bid price that businesses FCC rules and orders. * * * * * owned by members of minority groups

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In § 24.129, ten-year U.S. Treasury obligations noted. the licenses that will be eligible for 25 applicable on the date the license is 26. Section 27.203 is amended by percent bidding credits are indicated by granted, plus 2.5 percent; payments revising paragraph (b) to read as follows: an (*); the licenses that will be eligible shall include interest only for the first for 40 percent bidding credits are two years and payments of interest and § 27.203 Withdrawal, default and indicated by an (**). principal amortized over the remaining disqualification payments. * * * * * eight years of the license term. * * * * * (f) Unjust enrichment. Designated (4) For an eligible licensee that (b) Default or disqualification after entities using installment payments, qualifies as a business owned by close of auction. See § 1.2104(g)(2) of bidding credits or tax certificates to members of minority groups and/or this chapter. obtain a narrowband PCS license will be women, interest shall be imposed based 27. Section 27.209 is amended by subject to the unjust enrichment on the rate for ten-year U.S. Treasury revising paragraph (d) to read as provisions contained in § 1.2111 of this obligations applicable on the date the follows: chapter. license is granted; payments shall 20. Section 24.704 is amended by § 27.209 Designated entities; bidding include interest only for the first three credits; unjust enrichment. revising paragraph (a)(2) to read as years and payments of interest and follows: principal amortized over the remaining * * * * * seven years of the license term. (d) Unjust enrichment. See § 1.2111 of § 24.704 Withdrawal, default and this chapter. disqualification penalties. (5) For an eligible licensee that (a) * * * qualifies as a small business owned by PART 90ÐPRIVATE LAND MOBILE (2) Default or disqualification after members of minority groups and/or RADIO SERVICES close of auction. See § 1.2104(g)(2) of women or as a consortium of small this chapter. business owned by members of minority 28. The authority citation for part 90 groups and/or women, interest shall be continues to read as follows: * * * * * imposed based on the rate for ten-year 21. Section 24.711 is amended by Authority: Secs. 4, 251–2, 303, 309 and U.S. Treasury obligations applicable on revising paragraphs (b) and (c) to read 332, 48 Stat. 1066, 1082, as amended; 47 the date the license is granted; payments as follows: U.S.C. 154, 251–2, 303, 309 and 332, unless shall include interest only for the first otherwise noted. § 24.711 Upfront payments, down six years and payments of interest and 29. Section 90.805 is amended by payments and installment payments for principal amortized over the remaining revising paragraph (c) to read as follows: licenses for frequency Block C. four years of the license term. * * * * * (c) Unjust enrichment. See § 1.2111 of § 90.805 Withdrawal, default and (b) Installment payments. Each this chapter. disqualification payments. eligible licensee of frequency Block C or 22. Section 24.712 is amended by * * * * * F may pay the remaining 90 percent of adding paragraph (c) to read as follows: (c) Default or disqualification after the net auction price for the license in close of auction. See § 1.2104 (g)(2) of installment payments pursuant to § 24.712 Bidding credits for licenses for this chapter. frequency Block C. § 1.2110(g) of this chapter and under the 30. Section 90.812 is amended by following terms: * * * * * revising paragraphs (a) and (b) to read (1) For an eligible licensee with gross (c) Unjust enrichment. See § 1.2111 of as follows: revenues exceeding $75 million this chapter. (calculated in accordance with 23. Section 24.716 is amended by § 90.812 Installment payments for § 24.709(a)(2) and (b)) in each of the two revising paragraph (c) and (d) to read as licensees won by small businesses. preceding years (calculated in follows: (a) Installment payments. See accordance with § 24.720(f)), interest § 1.2110(f)(4) of this chapter. shall be imposed based on the rate for § 24.716 Upfront payments, down (b) Unjust enrichment. See § 1.2111(c) ten-year U.S. Treasury obligations payments, and installment payments for of this chapter. applicable on the date the license is licenses for frequency Block F. granted, plus 3.5 percent; payments * * * * * PART 95ÐPERSONAL RADIO shall include both principal and interest (c) Late installment payments. See SERVICES amortized over the term of the license. § 1.2110(f)(4) of this chapter. 31. The authority citation for part 95 (2) For an eligible licensee with gross (d) Unjust enrichment. See § 1.2111 of continues to read as follows: revenues not exceeding $75 million this chapter. (calculated in accordance with 24. Section 24.717 is amended by Authority: Secs. 4, 303, 48 Stat. 1066, § 24.709(a)(2) and (b)) in each of the two revising paragraph (c) to read as follows: 1082, as amended; 47 U.S.C. 154, 303. preceding years, interest shall be 32. Section 95.816 is amended by imposed based on the rate for ten-year § 24. 717 Bidding credits for licenses for revising paragraphs (c)(6) and (e) to read frequency Block F. U.S. Treasury obligations applicable on as follows: the date the license is granted, plus 2.5 * * * * * percent; payments shall include interest (c) Unjust enrichment. See § 1.2111 of § 95.816 Competitive bidding proceedings. only for the first year and payments of this chapter. * * * * *

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(c) * * * 3800, 1231 20th Street, NW, FOR FURTHER INFORMATION CONTACT: Pam (6) Default or disqualification. See Washington, DC 20036. Blumenthal, Mass Media Bureau, (202) § 1.2104 (g)(2) of this chapter. 418–2180. List of Subjects in 47 CFR Part 73 * * * * * SUPPLEMENTARY INFORMATION: This is a (e) Unjust enrichment. See § 1.2111 of Radio broadcasting. synopsis of the Commission’s Report this chapter. Part 73 of title 47 of the Code of and Order, MM Docket No. 97–184, * * * * * Federal Regulations is amended as adopted December 17, 1997, and [FR Doc. 98–823 Filed 1–14–98; 8:45 am] follows: released January 9, 1998. The full text of this Commission decision is available BILLING CODE 6712±01±P PART 73Ð[AMENDED] for inspection and copying during normal business hours in the FCC 1. The authority citation for Part 73 Reference Center (Room 239), 1919 M FEDERAL COMMUNICATIONS continues to read as follows: COMMISSION Street, NW, Washington, DC. The Authority: 47 U.S.C. 154, 303, 334, 336. complete text of this decision may also 47 CFR Part 73 § 73.202 [Amended] be purchased from the Commission’s copy contractor, ITS, Inc., (202) 857– 2. Section 73.202(b), the Table of FM [MM Docket No. 97±183; RM±9119] 3800, 1231 20th Street, NW, Allotments under Kansas, is amended Washington, DC 20036. Radio Broadcasting Services; by adding Channel 269C3 at Lindsborg. List of Subjects in 47 CFR Part 73 Lindsborg, KS Federal Communications Commission. John A. Karousos, Radio broadcasting. AGENCY: Federal Communications Part 73 of title 47 of the Code of Commission. Chief, Allocations Branch, Policy and Rules Division, Mass Media Bureau. Federal Regulations is amended as ACTION: Final rule. [FR Doc. 98–1030 Filed 1–14–98; 8:45 am] follows: SUMMARY: The Commission, at the BILLING CODE 6712±01±P PART 73Ð[AMENDED] request of Michael D. Law, allots Channel 269C3 to Lindsborg, Kansas, as 1. The authority citation for Part 73 the community’s second local FM FEDERAL COMMUNICATIONS continues to read as follows: COMMISSION service. See 62 FR 45785, August 29, Authority: 47 U.S.C. 154, 303, 334, 336. 1997. Channel 269C3 can be allotted to 47 CFR Part 73 Lindsborg in compliance with the § 73.202 [Amended] Commission’s minimum distance 2. Section 73.202(b), the Table of FM separation requirements with a site [MM Docket No. 97±184; RM±9120] Allotments under Mississippi, is restriction of 8.6 kilometers (5.4 miles) amended by adding New Augusta, Radio Broadcasting Services; New Channel 269A. north in order to avoid short-spacing Augusta, MS conflicts with the licensed operations of Federal Communications Commission. Station KFDI–FM, Channel 267C, AGENCY: Federal Communications John A. Karousos, Wichita, Kansas; Station KVOE–FM, Commission. Chief, Allocations Branch, Policy and Rules Channel 269A, Emporia, Kansas; and ACTION: Final rule. Division, Mass Media Bureau. Station KZSN–FM, Channel 271C, [FR Doc. 98–1029 Filed 1–14–98; 8:45 am] Hutchinson, Kansas. The coordinates for SUMMARY: The Commission, at the BILLING CODE 6712±01±P Channel 269C3 at Lindsborg are 38–39– request of Community Broadcasting 03 NL and 97–42–12 WL. With this Company, allots Channel 269A to New action, this proceeding is terminated. Augusta, Mississippi, as the FEDERAL COMMUNICATIONS EFFECTIVE DATE: February 23, 1998. A community’s first local aural COMMISSION filing window for Channel 269C3 at transmission service. See 62 FR 45784, Lindsborg, Kansas, will not be opened at August 29, 1997. Channel 269A can be 47 CFR Part 73 this time. Instead, the issue of opening allotted to New Augusta, Mississippi, in [MM Docket No. 97±65; RM±9002] a filing window for this channel will be compliance with the Commission’s addressed by the Commission in a minimum distance separation Radio Broadcasting Services; subsequent order. requirements with a site restriction of Chewelah, WA FOR FURTHER INFORMATION CONTACT: Pam 7.8 kilometers (4.9 miles) northwest in AGENCY: Federal Communications order to avoid a short-spacing conflict Blumenthal, Mass Media Bureau, (202) Commission. 418–2180. with the site specified in Station ACTION: Final rule. SUPPLEMENTARY INFORMATION: This is a WTKX–FM’s construction permit for synopsis of the Commission’s Report Channel 268C, Pensacola, Florida. The SUMMARY: The Commission, at the and Order, MM Docket No. 97–183, coordinates for Channel 269A at New request of LifeTalk Broadcasting adopted December 17, 1997, and Augusta are 31–13–41 NL and 89–06–47 Association, allots Channel *274C3 at released January 9, 1998. The full text WL. With this action, this proceeding is Chewelah, Washington, and reserves the of this Commission decision is available terminated. channel for noncommercial educational for inspection and copying during EFFECTIVE DATE: February 23, 1998. A use as the community’s first local aural normal business hours in the FCC filing window for Channel 269A at New transmission service. See 62 FR 7981, Reference Center (Room 239), 1919 M Augusta, Mississippi will not be opened February 21, 1997. Channel *274C3 can Street, NW, Washington, DC. The at this time. Instead, the issue of be allotted to Chewelah in compliance complete text of this decision may also opening a filing window for this with the Commission’s minimum be purchased from the Commission’s channel will be addressed by the distance separation requirements with a copy contractor, ITS, Inc., (202) 857– Commission in a subsequent order. site restriction of 21.8 kilometers (13.6

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