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FCC 94-61 Federal Communications Commission Record 9 FCC Red No. 11 C. Alternative Competitive Bidding Designs 79 Before the 1. Multiple v. Single Round Bidding 80 Federal Communications Commission Washington, D.C. 20554 2. Sequential v. Simultaneous Bidding 86 3. Combinatorial Bidding 98 D. Preferred Competitive Bidding Designs 106 PP Docket No. 93-253 1. Primary Method: Simultaneous Multiple Round Bidding 106 In the Matter of 2. Alternative Methods 112 Implementation of Section 309(j) E. Bidding Procedures 116 of the Communications Act - 1. Sequencing 117 Competitive Bidding 2. Duration of Bidding Rounds 121 3. Bid Increments 124 SECOND REPORT AND ORDER 4. Stopping Rules for Multiple Round Auctions 127 Adopted: March 8, 1994; Released: April 20, 1994 5. Activity Rules 133 By the Commission: 6. Bid Withdrawal and Default 146 7. Releasing Bid Information 158 TABLE OF CONTENTS 8. Delay, Suspension or Cancellation of Auction 159 IV. PROCEDURAL, PAYMENT AND PENALTY Paragraph ISSUES 160 A. Pre-Auction Procedures and Bidder and Licensee I. INTRODUCTION 1 Qualifications 161 A. Policy Objectives 3 B. Upfront Payment 169 B. Summary 8 II. PRINCIPLES FOR DETERMINING WHETHER C. Payment for Licenses Awarded by Competitive LICENSES MAY BE AUCTIONED 11 Bidding 189 A. General Requirement for Mutual Exclusivity D. Default and Disqualification 195 Among Applications for Initial Licenses or E. Minimum Bids and Reservation Prices 206 Construction Permits Accepted for Filing 12 F. Procedures in Other Auction Designs 208 1. Shared Spectrum 13 V. REGULATORY SAFEGUARDS 210 2. Licenses Awarded on a "First-Come. A. Unjust Enrichment and Transfer Disclosure First-Served" Basis 15 Requirements 211 3. Mutual Exclusivity Unknown 18 B. Performance Requirements 216 B. General Requirement of Subscribers 20 C. Rules Prohibiting Collusion 221 1. Broadcast Services Exclusion 21 VI. TREATMENT OF DESIGNATED ENTITIES 227 2. "Private Services" Exclusion 23 A. Introduction 227 C. Principal Use Requirement 30 B. Overview and Objectives 229 D. Initial and Modification Applications 37 C. Specific Preferences 231 E. Intermediate Links 41 1. Installment Payments 231 F. Services For Which Competitive Bidding Would 2. Bidding Credits 241 Not Further Section 309(j)(3) Objectives 44 3. Spectrum Set-asides 245 G. Specific Services Subject to Competitive Bidding 48 4. Tax Certificates 249 1. Interactive Video Data Service 49 5. Royalty Payments 252 2. Personal Communications Services 54 6. Innovator©s Preference 254 3. Common Carrier and Commercial 7. Distress Sales to Designated Entities 257 Mobile Radio Services 59 D. Preventing Unjust Enrichment 258 III. COMPETITIVE BIDDING DESIGN 68 A. Introduction 68 B. Effect of Design on Policy Objectives 70 2348 9 FCC Red No. 11 Federal Communications Commission Record FCC 94-61 E. Definitions 266 (C) recovery for the public of a portion of the value of the public spectrum made available for commer 1. Small Business 267 cial use and avoidance of unjust enrichment through 2. Minority- and Female-Owned the methods employed to award uses of that resource; and Businesses 274 (D) efficient and intensive use of the electromagnetic 3. Rural Telephone Companies 279 spectrum. 4. Designated Entities and Consortia 283 F. Constitutional Issues 289 A. Policy Objectives VII. CONCLUSION. PROCEDURAL MATTERS AND 3. Our purpose in this Second Report and Order is to ORDERING CLAUSES 298 promulgate competitive bidding rules that, in conjunction with our spectrum allocation rules, promote the public A. Final Regulatory Flexibility Analysis 299 policy objectives set forth by Congress. We believe these B. Ordering Clauses 303 objectives are embodied in two broad, basic Commission APPENDIX A - LIST OF COMMENTERS AND REPLY policy goals: promoting economic growth and enhancing COMMENTERS access to telecommunications service offerings for consum APPENDIX B - FINAL RULES ers, producers, and new entrants. Structuring our rules to promote opportunity and competition should result in the rapid implementation of new and innovative services and I. INTRODUCTION encourage efficient spectrum use. thus fostering economic growth. We also can help to ensure access to new tele 1. On August 10, 1993, the Omnibus Budget Reconcili communications offerings by ensuring that all customer ation Act of 1993 (the "Budget Act") added Section 309(j) segments are served, that there is not an excessive con to the Communications Act of 1934. as amended, 47 U.S.C. centration of licenses, and that small businesses, rural tele §§ 151-713 (the "Communications Act"). Section 309(j) phone companies, and businesses owned by women and gives the Commission express authority to employ competi minorities will have genuine opportunities to participate in tive bidding procedures to choose among mutually exclu the provision of service. Providing new and innovative sive applications for initial licenses. The Budget Act also services on spectrum acquired via auction will offer li requires the Commission to prescribe regulations to imple censees the opportunity to earn substantial.,revenues. We ment Section 309(j) within 210 days after enactment therefore anticipate that our auctions will recover a portion (March 8. 1994). The Commission adopted its Notice of of the value of the public spectrum. Proposed Rule Making in this proceeding on September 23, 1993.© This Second Report and Order complies with 4. Promoting Economic Growth. The new wireless ser the Budget Act©s requirements.2 vices that will be licensed by competitive bidding, such as Personal Communications Services ("PCS"), have great po 2. Under Section 309(j)(2)(B) of the Communications tential to stimulate economic growth and create thousands Act. the Commission must determine that use of a system of jobs for Americans. To advance our statutory goals and of competitive bidding will promote the objectives de to realize this potential, we seek to design a competitive scribed in Section 309(j)(3). which, in addition to those in bidding system that will: 1) award licenses through a pro Section 1 of the Communications Act. 1 are cess that will promote competition among a diverse group of service providers: 2) award licenses to the parties who (A) the development and rapid deployment of new will provide service and use spectrum most efficiently; and technologies, products, and services for the benefit of 3) award licenses expeditiously. We seek to implement a the public, including those residing in rural areas, licensing system that maximizes the competitiveness of ser without administrative or judicial delays; vice provision among new licensees and existing providers (B) promoting economic opportunity and competi and avoids creating barriers to efficient license aggrega tion and ensuring that new and innovative technol tions. Achieving procompetitive economies is particularly ogies are readily accessible to the American people important where new entrants (such as broadband PCS by avoiding excessive concentration of licenses and providers) will have to compete with existing services (such by disseminating licenses among a wide variety of as cellular telephone providers). applicants, including small businesses, rural tele 5. Awarding licenses to those who value them most phone companies, and businesses owned by members highly, while maintaining safeguards against anti of minority groups and women; competitive concentration, will likely encourage growth and competition for wireless services and result in the 1 Notice of Proposed Rule Making in PP Docket No. 93-253. 8 random selection. See First Report and Order in PP Docket No. FCC Red 7635 (1993) (hereinafter "NPRM" or "Notice"). The 93-253, FCC 94-32, released February 4, 1994 ("First Report and Commission received 222 comments, 169 reply comments and Order"), petitions for reconsideration pending. numerous ex pane presentations relating to this proceeding. A s Section 1 of the Communications Act established the Com list of commenters and reply commenters is attached as Appen mission, inter alia, "so as to make available, so far as possible, to dix A to this Second Report and Order. Commenters may be all the people of the United States a rapid, efficient, Nation referred to herein by the abbreviations noted in Appendix A. wide, and world-wide wire and radio communications service 2 To comply with the requirements of new Section 3(W(i)(4)(C) with adequate facilities at reasonable charges . ." 47 U.S.C. § of the Communications Act, the Commission prescribed trans 151. fer disclosure requirements with respect to licenses awarded by 2349 FCC 94-61 Federal Communications Commission Record 9 FCC Red No. 11 rapid deployment of new technologies and services. Be sional directive that we "design and test multiple alter cause firms have different views of the value of the licenses native methodologies under appropriate circumstances." to be awarded, a firm that expects to be able to offer new See Section 309(j)(3). In Section IV, we address procedural or much lower cost services might be willing to pay more and payment issues regarding announcement of auctions for a license than another firm that does not believe it can and the filing of applications, bidder and licensee qualifica offer services as competitively. Under other licensing tions, pre-auction upfront payment and post-auction down mechanisms, licenses may be more likely to change hands payment, and penalties in the event of default or disquali in the post-licensing market (as was true in past cases of fication. These rules are intended to ensure
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