[Federal Register Volume 59, Number 159 (Thursday, August 18, 1994)]
[Unknown Section]
[Page 0]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 94-20228]


[[Page Unknown]]

[Federal Register: August 18, 1994]


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FEDERAL COMMUNICATIONS COMMISSION

47 CFR Part 1

[GEN Docket No. 90-314; ET Docket No. 93-266; FCC 94-209]

 

New Personal Communications Services; Pioneer's Preference Review

AGENCY: Federal Communications Commission.

ACTION: Final rule.

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SUMMARY: By this Memorandum Opinion and Order on Remand (MO&O) the 
Commission amends its rules regarding pioneer's preferences to provide 
that any person receiving pioneer's preferences in proceedings where 
tentative (but not final) decisions had been reached as of August 10, 
1993, will be required to pay for their licenses. The amount of payment 
shall be determined in each proceeding on a case-by-case basis.

EFFECTIVE DATE: September 19, 1994.

FOR FURTHER INFORMATION CONTACT:
Sally J. Novak, Common Carrier Bureau, (202) 418-1310 or David H. 
Solomon, Office of General Counsel, (202) 418-1720.

SUPPLEMENTARY INFORMATION: This is a summary of the Commission's 
Memorandum Opinion and Order on Remand, adopted and released August 9, 
1994. The full text of the Commission decision is available to 
inspection and copying during regular business hours in the FCC 
Reference Center (Room 239), 1919 M Street NW, Washington, DC. The 
complete text of this decision also may be purchased from the 
Commission's duplication contractor, International Transcription 
Service, Inc., 2100 M Street NW., Washington, DC 20037, (202) 857-3800.

Summary of Memorandum Opinion and Order on Remand

Introduction and summary

    1. In this order, we amend our pioneer's preference rules to 
require that recipients of pioneer's preferences in proceedings where 
tentative decisions on preference requests had been made at the time 
Congress enacted auction legislation must pay for their licenses. This 
decision applies to three proceedings--2 GHz personal communications 
services (Broadband PCS), local multipoint distribution service (LMDS) 
and low earth orbital satellite services in the 1.6/2.4 GHz band (so-
called Big LEOs).\1\ Because we have reached a decision awarding final 
preferences in only one of these proceedings--broadband PCS--that is 
the only proceeding for which we will determine now the appropriate 
amount of payment to be made. Broadband PCS pioneer's preference 
winners will have a choice of paying either (i) ninety percent (90%) of 
the winning bid for the 30 MHz license in the same market; or (ii) 
ninety percent (90%) of the adjusted value of the license calculated 
based upon the average per population price for the 30 MHz licenses in 
the top 10 markets as established at auction.
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    \1\While we name the three current recipients of broadband PCS 
preferences for ease of reference, we emphasize that by doing so in 
no way do we intend to indicate prejudgment of the petitions for 
reconsideration of our broadband PCS pioneer's preference decision. 
The payment rule we adopt here will apply to the three proceedings 
in which a tentative (but not final) decision regarding preferences 
had been made as of August 10, 1993 in the three proceedings.
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Background

    2. The pioneer's preference rules provide a means by which an 
applicant that demonstrates that it has developed a new communications 
service or technology may obtain a license to provide the new service 
or technology without being subject to mutually exclusive 
applications.\2\ Under the pioneer's preference rules, an applicant may 
be granted a preference for a license if it demonstrates that it has 
developed the capabilities or possibilities of a new technology or 
service, or has brought the technology or service to a more advanced or 
effective state. The applicant for a preference must also demonstrate 
that the new service or technology is technically feasible by 
submitting either the results of an experiment or a technical showing. 
The preference will be granted only if the final service rules adopted 
by the Commission are a reasonable outgrowth of the applicant's 
proposal and the new technology can be used to provide the service. An 
applicant who meets these standards and is granted a pioneer's 
preference is not subject to competing applications, and if otherwise 
qualified will receive a license.
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    \2\The pioneer's preference rules are codified at 47 CFR 1.402, 
1.403, 5.207 (1993).
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    3. In October 1992, the Commission tentatively granted pioneer's 
preferences to American Personal Communications (APC) for its 
development and demonstration of technologies that facilitate spectrum 
sharing by PCS and microwave users at 2 GHz, to Cox Enterprises, Inc. 
(Cox) for its development and demonstration of PCS/cable plant 
interface technology and equipment that result in a spectrum-efficient 
application of PCS services, and to Omnipoint Communications, Inc. 
(Omnipoint) for its development of 2 GHz equipment that utilizes 
advanced techniques that will facilitate the continued development and 
implementation of PCS services and technologies.\3\ In December 1993, 
the Commission granted final pioneer's preferences to APC, Cox, and 
Omnipoint.\4\ The Commission determined that, if otherwise qualified, 
APC would be licensed to use Channel Block A in the Major Trading Area 
(MTA) that includes Washington, DC and Baltimore, Maryland (Washington-
Baltimore MTA); Cox would be licensed to use Channel Block A in the MTA 
that includes San Diego, California (Los Angeles-San Diego MTA); and 
Omnipoint would be licensed to use Channel Block A in the MTA that 
includes northern New Jersey (New York MTA (including northern New 
Jersey)). In granting these pioneer's preferences, the Commission 
directed the licensing bureau to condition any 2 GHz PCS license 
obtained through the pioneer's preference process upon the licensee's 
building a system that substantially uses the design and technologies 
upon which the preference award was based; and upon the licensee's 
holding the license for a minimum of three years or until the 
construction requirements applicable to the five-year build-out period 
have been satisfied, whichever occurs first.\5\ In December 1992, the 
Commission also awarded a tentative preference to Suite 12 Group in the 
LMDS service.\6\ In August 1992, the Commission tentatively denied all 
requests for preferences in the Big LEO service.\7\
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    \3\Amendment of the Commission's Rules to Establish New Personal 
Communications Services, GEN Docket No. 90-314, Tentative Decision 
and Memorandum Opinion and Order, 7 FCC Rcd 7794, 7797-7804 (1992); 
57 FR 57,458 (Dec. 4, 1992).
    \4\Amendment of the Commission's Rules to Establish New Personal 
Communications Services, GEN Docket No. 90-314, Third Report and 
Order, 9 FCC Rcd 1337, paras. 10-36 (APC), paras. 37-50 (Cox); and 
paras. 51-74 (Omnipoint) (1994): 59 FR 9,419 (Feb. 28, 1994) 
(``Broadband Report and Order''), recon. pending; petitions for 
review filed, Pacific Bell v. FCC, D.C. Circuit Nos. 94-1148 et al., 
remanded on the Commission's own motion, July 26, 1994.
    \5\Id. at para. 9. This is consistent with the conditions that 
the Commission directed the licensing bureau to place upon the 
license granted to the narrowband PCS (900 Mhz) pioneer's preference 
recipient. See Amendment of the Commission's Rules to Establish New 
Narrowband Personal Communications Services, GEN Docket No. 90-314 
and ET Docket No. 92-100, Memorandum Opinion and Order, 9 FCC Rcd 
1309, 1316, paras. 47-48 (1994); 59 FR 32,830 (Jun. 24, 1994) 
(Narrowband Reconsideration), recon. pending (unrelated to pioneer's 
preference).
    \6\Establishment of Local Multipoint Distribution Service, CC 
Docket No. 92-297, Notice of Proposed Rulemaking, Order, Tentative 
Decision and Order on Reconsideration, 8 FCC Rcd 557 (1993); 58 FR 
6,400 (Jan. 28, 1993).
    \7\Amendment of Sec. 2.106 of the Commission's rules to Allocate 
the 1610-1626.5 MHz and 2483.5-2500 MHz Bands for Use by the Mobile-
Satellite Service, Including Non-Geostationary Satellites, ET Docket 
No. 92-28, Notice of Proposed Rule Making and Tentative Decision, 7 
FCC Rcd 6414 (1992); 57 FR (Sep. 21, 1992).
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    4. After these tentative decisions, Congress gave the Commission 
authority to award licenses by auction.\8\ The Commission then issued a 
Notice of Proposed Rule Making in ET Docket No. 93-266 to evaluate 
whether it should change the pioneer's preference rules in light of 
this landmark change in its statutory authority. The Commission was 
concerned that the competitive bidding authority may have undermined 
the basis for the pioneer's preference rules:

    \8\See Omnibus Budget Reconciliation Act of 1993, Pub. L. 103-
66, Title IV, section 6002, 107 Stat. 387 (enacted Aug. 10, 1993).
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    Establishment of competitive bidding authority creates a new 
dynamic for the assignment of licenses. Specifically, a bidder, who 
may also happen to be an innovator, through its bidding efforts 
would primarily control whether it obtains the desired license. It 
may obtain the license directly by outbidding other mutually 
exclusive applicants, whether by using its own financial resources 
or by soliciting the aid of financial institutions and venture 
capitalists. One may conclude, therefore, that under this new scheme 
the value of innovation may be considered in the marketplace and 
measured by the ability to raise the funds necessary to obtain the 
desired license(s). Thus, we are concerned that competitive bidding 
authority may have undermined the basis for our pioneer's preference 
rules.\9\

    \9\Review of the Pioneer's Preference Rules, ET Docket No. 93-
266, Notice of Proposed Rulemaking, 8 FCC Rcd 7692, 7693, para. 7 
(1993); 58 FR 57,578 (Oct. 26, 1993) (``Pioneer's Preference Review 
NPRM'').
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    The Commission asked for comment on how any changes in the 
pioneer's preference rules as a result of auction authority should 
apply to the three proceedings in which tentative preference decisions 
had been issued.
    5. Several commenters argued that, at the very least, preference 
recipients in these proceedings should be required to pay for their 
licenses. Specifically, for example, Pacific Bell and Nevada Bell 
argued that an ``outright grant of a license would confer a significant 
cost advantage in a highly competitive market over firms which will be 
required to expend financial resources to successfully bid in auctions 
to acquire spectrum.'' Nextel argued that, to prevent anticompetitive 
inequities in the cost of obtaining Commission licenses, the preference 
winners should have to pay for their licenses. PageMart, Inc. argued 
that the pioneer's preferences were designed to provide ``regulatory 
certainty for an innovator; they were not intended to result in a 
financial windfall.'' PageMart further argued that non-pioneer 
licensees would be handicapped (without any public benefit) if they had 
to take on a substantial financial burden that was not imposed on 
preference grantees. Southwestern Bell argued that ``allowing the 
pioneers to be licensed without making a similar investment [as those 
who bid] not only would subvert the intentions of Congress in setting 
up the auction process, it would also grossly distort the competitive 
dynamics of the new market the Commission is creating.'' NYNEX argued 
that requiring all licenses (including pioneer's licenses) to be 
competitively awarded would promote economic efficiency by allowing the 
competitive market to determine the value of the pioneer's innovation. 
Other commenters including APC, Cox, and Omnipoint argued that any such 
charge would be inequitable. In the Pioneer's Preference Review Report 
and Order, while not reaching the overall question of what changes, if 
any, should be made in its preference rules, the Commission decided 
that it would be ``inequitable'' to apply any such rule changes to the 
three proceedings at issue here.\10\ Its explanation, in full, for this 
decision was as follows:

    \10\Review of the Pioneer's Preference Rules, ET Docket No. 93-
266, First Report and Order, 9 FCC Rcd 605, 610-11 (1994); 59 FR 
8,413 (Feb. 22, 1994) (``Pioneer's Preference Review Report and 
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Order'').

    We conclude that it would be inequitable to apply any changes in 
our rules to pending proceedings in which Tentative Decisions have 
been issued. Notwithstanding that other licensees in the three 
proceedings at issue may have to pay for their licenses, preference 
applicants in these proceedings have submitted their requests and 
publicly disclosed substantial detail of their system designs in 
reliance on the continued applicability of the pioneer's preference 
rules. We have evaluated their requests based on existing rules and 
issued Tentative Decisions, and parties have expended not 
inconsiderable resources to further argue the merits or demerits of 
the requests and our tentative conclusions addressing the requests. 
Had the rules been different, these applicants might have structured 
their requests differently; or conducted research, development, and 
experimentation differently; or elected not to disclose detailed 
information about their systems. We conclude that notwithstanding 
our legal authority to treat 2 GHz broadband PCS pending applicants 
differently than the 900 MHz narrowband PCS pioneer (Mtel) and also 
to apply changed rules prospectively to pending applicants in the 28 
GHz LMDS and 1.6/2.4 GHz MSS proceedings, to do so would be 
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inequitable in these three proceedings.\11\

    \11\Pioneer's Preference Review Report and Order, 9 FCC Rcd 605, 
610-11 at para. 9 (footnotes omitted).
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    As a result of that decision, APC, Cox, and Omnipoint (as well as 
any preference winners in the LMDS and Big LEOs/MSS proceedings) would 
not be required to pay for their licenses.
    6. Subsequent to the decisions awarding final pioneer's preferences 
to APC, Cox, and Omnipoint and requiring no payment for the pioneer's 
licenses, a number of applicants whose broadband PCS pioneer's 
preference requests had been denied petitioned for judicial review 
raising a number of challenges to the awards. A primary argument of the 
petitioners to the court was that the Commission had not adequately 
explained its decision to retain the pioneer's preference program and 
to award the broadband PCS preference licenses for free. The 
petitioners asked the court to vacate the Broadband Report and Order 
and the Pioneer's Preference Review Report and Order. On July 8, 1994, 
the Commission's General Counsel, on instruction by the Commission, 
filed a motion in the District of Columbia Circuit asking the court to 
remand the broadband PCS cases to the Commission for further 
consideration.\12\ The Commission stated that it intended ``to 
reconsider the substance of the decision not to charge these pioneer's 
preference winners for licenses in circumstances where other licensees 
in the same service would pay substantial amounts in order to prevail 
in competitive bidding procedures,'' and that it would issue a decision 
within two weeks of any remand.\13\
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    \12\Commission Instructs General Counsel to Seek Remand of 
Broadband Personal Communications Service Pioneer's Preference 
Cases, FCC 94-182, Public Notice (released Jul. 8, 1994) (``July 8 
Public Notice'').
    \13\Id.
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    7. By order dated July 26, 1994, the court granted the Commission's 
motion and remanded the cases for further consideration. Due to our 
commitment to the court to act expeditiously on such further 
consideration, we are not addressing here petitions for reconsideration 
of the Broadband Report and Order or the Pioneer's Preference Review 
Report and Order.\14\
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    \14\We deny the Emergency Request for Oral Argument filed by 
APC. We note that oral argument would not be useful in this instance 
since the parties have had ample opportunity to brief the issues 
considered here, and APC itself filed supplemental comments on 
remand after filing its emergency request. We would not be able to 
schedule or and hold oral argument in any event within the deadline 
for action specified in our request for remand.
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Discussion

Payment Requirement

    8. Arguments that APC, Cox, and Omnipoint (as well as any 
preference recipients in LMDS and Big LEOs) should pay for their 
licenses were considered in the Pioneer's Preference Review Report and 
Order.\15\ In that order we decided, as a matter of equity, not to 
charge APC, Cox, and Omnipoint for the licenses that they may receive 
pursuant to their pioneer's preference awards. The Commission noted 
that APC, Cox, and Omnipoint had publicly disclosed substantial details 
of their system designs in reliance on the continued applicability of 
the rules and had expended resources to argue the ``merits or demerits 
of the requests and our tentative conclusions addressing the 
requests.''\16\ In this order, we revisit the question of payment for 
the licenses.
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    \15\While our discussion here focuses on broadband PCS because 
that is the proceeding on which the parties focused and the only one 
of the three at issue that has progressed to final award of 
pioneer's preferences, our discussion applies to the LMDS and Big 
LEO proceedings as well, unless otherwise indicated.
    \16\Pioneer's Preference Review Report and Order, 9 FCC Rcd at 
610, para. 9.
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    9. At the outset, we note that, since the adoption of the Pioneer's 
Preference Review Report and Order and the Broadband Report and Order 
in December 1993, we have adopted four reports and orders in the 
Competitive Bidding proceeding setting forth general auction rules and 
specific auction rules for narrowband PCS, interactive video and data 
services (IVDS), and broadband PCS. This has led to a greater 
understanding on our part of how the competitive bidding process will 
work in the context of the award of spectrum for various services and, 
in particular, broadband PCS. It has also resulted in concern over the 
award of free licenses to some parties when other licensees competing 
in the same markets must bid and pay substantial amounts of money for 
their licenses. In particular, we are concerned that the award of free 
licenses to APC, Cox, and Omnipoint would result in unjust enrichment 
of the parties and give them a financial advantage over licensees who 
may pay significant sums for their licenses. We also are concerned 
about the effect that granting free licenses to these applicants might 
have on the auction process.
    10. In adopting the pioneer's preference procedures, the Commission 
sought to foster the development of new services and to improve 
existing services by reducing the delays and risks for innovators 
associated with the Commission's allocation and licensing processes as 
they existed then. In particular, the Commission was concerned that an 
innovator facing a lottery had no assurance of receiving a license and 
therefore no confidence in its ability to obtain a license as a reward 
for its efforts. We decided to offer a significant reward to encourage 
innovators to present proposals for new technologies and services to 
the Commission in a timely manner. In crafting this ``reward,'' our 
intention was to assure innovators that they would be able to obtain 
licenses so as to implement their innovations. We did not contemplate 
rewarding an innovator by giving it a license for free while its 
competitors had to pay, because at that time no one paid for initial 
licenses. Rather, we decided to permit an otherwise qualified pioneer's 
preference recipient to apply for a license without facing competing 
applications:

    Our objective in establishing a pioneer's preference is to 
reduce the risk and uncertainty innovating parties face in our 
existing rule making and licensing procedures, and therefore to 
encourage the development of new services and new technologies. The 
essence of this risk and uncertainty is that they may not be awarded 
a license and, therefore, may not be able to take their 
developmental work into full business operation. The most workable 
action we can take to reduce this risk is effectively to guarantee 
an otherwise qualified innovating party that it will be able to 
operate in the new service by precluding competing applications.\17\
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    \17\6 FCC Rcd at 3492, para. 32 (emphasis supplied).

    11. The Commission concluded that it has the authority to grant a 
dispositive preference as a reward for innovation.\18\ The text of the 
Commission's decisions make clear that the overriding objective of the 
pioneer's preference rules was to ensure the award of a license to an 
otherwise-qualified pioneer's preference recipient. Nowhere did the 
Commission suggest that it wished to give the preference recipient a 
financial or competitive advantage over other licensees. Indeed, in 
rejecting proposals to give preference recipients a formal headstart 
over other licensees, the Commission explicitly rejected that goal.\19\ 
We have recognized from the outset that pioneer's preference recipients 
may receive a de facto headstart because of the nature of our licensing 
process, but we specifically declined to provide a headstart beyond any 
such de facto headstart. In light of this background, the arguments of 
the petitioners to the court, and our further understanding of the 
auction process, we now conclude that our pioneer's preference rules 
should be amended to require preference recipients in those proceedings 
where tentative decision had been reached at the time of the auction 
statute's enactment to pay for licenses.
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    \18\6 FCC Rcd at 3492, para. 33; 56 FR 24,011 (May 28, 1991). 
Upon reconsideration, the Commission affirmed that the preference 
will be dispositive. 7 FCC Rcd 1808, 1809 at para. 8; 57 FR 7,897 
(Mar. 5, 1992). On further reconsideration, the Commission discussed 
at length its legal authority to award a dispositive preference. See 
8 FCC Rcd 1659 (1993); 58 FR 14,328 (Mar. 5, 1992).
    \19\Pioneer's Preference Report and Order, 6 FCC Rcd at 3492, 
para. 34:
    We further have decided not to provide a headstart for the 
pioneering entity beyond the de facto headstart that may occur due 
to the time it may take other entities to apply for and receive a 
license. The commenting parties have convinced us that no additional 
headstart is necessary. As Southwestern Bell points out, the main 
effect of a headstart would be to give the pioneer a temporary 
service monopoly. As Southwestern Bell, Geller and Lampert, and 
others note, the key public interest benefit of a preference is the 
assurance to the pioneering entity that, if otherwise qualified, it 
will receive a license. For the Commission to go beyond this and 
guarantee the pioneer a temporary service monopoly would not appear 
to be justified at this time.
    [footnote omitted.]
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    12. We do not decide in this order whether the pioneer's preference 
policy remains useful, and choose not to do so in this order, which 
involves pioneer's preference awards in proceedings where tentative 
decisions were made prior to the legislation granting authority to 
conduct auctions. We do reconsider how the pioneer's preference policy 
should be implemented in the auction environment with respect to 
proceedings where tentative preference decisions were made before 
section 309(j) was enacted. This decision thus addresses only the 
transitional question of appropriate changes in our pioneer's 
preference rules for those three proceedings where tentative decisions 
already had been adopted when auctions were authorized.
    13. At the time the pioneer's preference rules were adopted, all 
licenses were awarded at the same price--for free. We see no sound 
public interest reason to award some licenses for free when other 
licensees who will compete in the same markets will have to pay for 
them. Pioneers were never promised a free license, or even a discount 
or a bonus, but instead were assured that they would be able to obtain 
a license if they developed valuable technological innovations. 
Moreover, we fail to advance Congress's objective, set out in section 
309(j)(3)(C) of the Act, of ``avoidance of unjust enrichment'' if we 
award pioneer's preference licenses to these applicants for free.\20\ 
We recognize that Congress has instructed us not to seek to maximize 
auction revenues at the cost of other important objectives. 
Nonetheless, we do not interpret that admonition to require us to award 
pioneer's preference licenses for free if that would serve no valid 
public interest purpose and in fact would disserve other important 
objectives. Accordingly, we conclude that the proper application of the 
pioneer's preference policy in the auction environment where tentative 
decisions were made prior to the auction statute is to guarantee that 
the pioneers receive licenses, but on roughly the same terms as other 
licensees. That is no less than the pioneers were promised when the 
pioneer's preference policy was adopted.
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    \20\See Joint Response at 12-15. We recognize this purpose 
relates specifically only to auction winners. Nevertheless, given 
the close relationship of our decision here to the auction process, 
we believe it is appropriate to take this purpose into account here.
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    14. Our decision here is buttressed by our concerns about 
introducing financial inequalities into the broadband PCS market. We 
recognize, as APC's economic experts argue, that profit-maximizing 
firms in a competitive market will not base their pricing and output 
decisions on ``sunk costs,'' but on marginal or incremental costs. We 
nevertheless believe it self-evident that awarding licensees for free 
to some parties while requiring others to pay substantial sums is 
likely to provide the pioneers with a financial advantage over their 
competitors. We do not seek to equalize the financial status of 
competitors or to handicap those that obtain advantages by virtue of 
their other activities or holdings. Here we see no legitimate basis for 
creating financial advantages for some parties over their competitors. 
We would not charge pioneer's preference winners for their licenses 
simply to enhance the government's revenues or to ensure that pioneer's 
preference recipients do not have lower debt payments than their 
competitors, if there were a good public interest reason to award 
licenses to pioneers without requiring payment. But based on the record 
here, and in light of our experience with auctions, we conclude that 
our public interest mandate requires that pioneers not obtain licenses 
for free of charge while their competitors must purchase licenses at 
auction. Providing licenses to preference winners for free would give a 
financial advantage to some competitors with no public interest 
benefit. We believe such action would disserve important public policy 
objectives.
    15. As the Joint Response points out, moreover, the auction process 
itself was designed in large part to promote competition by assigning 
spectrum to users that are most likely to offer new, better, and lower 
cost services. Congress enacted our statutory auction authority in 
large measure based upon the theory that awarding licenses to those who 
value them most will encourage growth and competition in the 
development of new services. Granting some licenses free necessarily 
would undermine this purpose to the extent that the recipients of free 
licenses might not have valued them as much as the other bidders. Our 
decision to require a payment tied to the actual auction results 
permits the competitive bidding process to identify--as it was intended 
to do--those applicants who value the licenses most and thus can be 
expected to compete vigorously in the development of new services. If 
the pioneers are unwilling to pay even the discounted charges we order, 
the licenses will be awarded to those who value them most highly.
    16. On further reflection, we are convinced that the equities, 
considered more broadly, favor a policy requiring payment. In making 
equitable determinations, we must balance the interests of all affected 
parties and of the public.\21\ The public would not be favored by free 
grants, which might frustrate, at least in part, the Commission's 
efforts to recover for the public a part of the value of the spectrum 
the pioneers will use.\22\ Our decision here avoids the ``unjust 
enrichment'' that free licenses would provide in the new auction 
environment that did not exist when these parties applied for 
preferences.\23\ Charging them for their licenses thus is ``equitable'' 
to the pioneers as well. We conclude on further review of this issue 
that requiring payment is an equitable decision as well as a sound 
legal and policy decision.
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    \21\E.g., McElroy Elec. Corp. v. FCC, 990 F.2d 1351, 1365 (D.C. 
Cir. 1993) (Commission must balance ``all relevant interests'').
    \22\See 47 U.S.C. 309(j)(3)(C).
    \23\Id.
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    17. We recognize that preference recipients have argued that the 
public interest would be served by granting them free licenses as a 
reward for investments and disclosure of information they have made in 
reliance on their expectation of a preference. There is, however, no 
evidence in the record to suggest that such investment and information 
disclosure would not have been made if the preference recipients had 
known they would have to pay for a guaranteed license. We believe it is 
reasonable to conclude that, to the extent this investment and 
disclosure related to Commission rules at all, it related to the 
expectation of a guaranteed license, not a guaranteed license without 
payment where other competitors must pay for their licenses.
    18. Our decision to require payment also is driven by concern for a 
rational and fair auction process. The Commission has issued a number 
of orders relating to auctions since we decided initially that the 
pioneers in these three proceedings would not have to pay for their 
licenses, and our understanding of the auction process has grown as we 
have resolved various issues relating to the auctions. For example, in 
the Competitive Bidding Second Report and Order, we concluded that, 
where the licenses to be auctioned are interdependent and their value 
is expected to be high, simultaneous multiple round auctions would best 
achieve our goals for competitive bidding and would award 
interdependent licenses to the bidders who value them the most. In 
addition, we concluded that highly interdependent licenses should be 
grouped together and put up for bid at the same time in multiple round 
auctions. We later expressed our belief that the values of most 
broadband PCS licenses will be significantly interdependent. In 
addition, while we believe that all broadband PCS licenses are 
interdependent, we decided not to auction them all simultaneously due 
to the cost and complexity of auctioning a very large number of 
interdependent licenses simultaneously. Instead, we decided to ``divide 
the licenses into three groups by combining those licenses that are 
most closely related so that there will be limited interdependence 
across groups.'' We determined to auction the 99 available 30 MHz MTA 
licenses in Blocks A and B in the first auction. We now have a clearer 
understanding of the interdependence of the broadband PCS MTA licenses 
and the significant impact that the free award of some of those 
licenses might have on the rationality and fairness of the auction 
process. In light of this interdependence, the degree to which a free 
license could result in uneconomic allocation of the spectrum is 
increased. Indeed, the entire bidding process might be distorted by 
awarding a pioneer's preference recipient a license without payment 
requirements.
    19. In sum, based on our re-evaluation of the record, and our own 
understanding of the relevant issues, we conclude that pioneer's 
preference recipients in proceedings where tentative decisions had been 
reached at the time of the auction statute's enactment should be 
required to pay for their licenses.\24\ The amount of payment will be 
determined in the context of each proceeding. We amend our pioneer's 
preference rules accordingly.
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    \24\The Commission has undertaken a negotiated rulemaking 
procedure in an attempt to adopt rules for Big LEOs that will avoid 
mutual exclusivity. Our decision regarding payment for any Big LEO 
preference awards would only be relevant if mutually exclusive 
applications can not be avoided and an auction becomes necessary.
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Amount of Payment in Broadband PCS

    20. In our recent narrowband PCS decision awarding a license to a 
pioneer, we required the recipient, Mtel, to pay either ninety percent 
(90%) of the lowest winning bid for a comparable license or $3 million 
less than the lowest winning bid, whichever is less. We decided not to 
require Mtel to pay the full value of the license, as determined at the 
auction, because we had imposed more stringent build-out requirements 
on Mtel than on other narrowband PCS licensees and because we had 
disrupted Mtel's business plans by deciding to charge for the license 
after earlier deciding that Mtel would not have to pay. The first of 
those circumstances is not applicable here because we have imposed no 
additional build-out requirement on pioneers receiving broadband PCS 
licenses. On the other hand, we did conclude previously that APC, Cox, 
and Omnipoint would receive their licenses without charge. And we have 
decided to condition the broadband PCS grants on the licensees holding 
their licenses for a minimum of three years or until the five-year 
construction requirements have been satisfied.
    21. In spite of the differences, we have decided to adhere to a 
similar formula in this case that we applied to Mtel, which also 
involved a party that had been tentatively awarded pioneer's preference 
before we were granted authority to auction licenses. We believe the 
formula set forth below should adequately compensate APC, Cox, and 
Omnipoint for any transaction costs incurred in reliance on our prior 
determination that they would receive their licenses for free, 
particularly since that determination remained subject to challenge in 
court. At the same time, we are not concerned that a discount of that 
amount will provide these pioneers with an excessive financial 
advantage over their competitors, since the discount will amount to a 
small fraction of the cost of the license, which in turn is only one 
part of the cost of building a system. Nor do we believe that this 
discount will affect the auction process adversely.
    22. The Joint Response argues that the Commission can choose one of 
two ways to implement the payment requirement: (i) Require the 
pioneer's preference recipients to participate in the auction, but give 
them a discount; or (ii) withhold the licenses from the auction but 
condition their award on payment of a sum discounted from auction 
prices as was done with Mtel. The parties filing the Joint Response 
favor the former method. For this transition period, we will withhold 
the licenses from the auction, but require a discounted payment. This 
result is closer to the original intent of the pioneer's preference 
programs' guarantee of a license. A bidding credit, in contrast, would 
put the pioneer at risk that it might not receive a license. We reserve 
the right, for pioneer's awards made entirely in the post-auction 
environment, to revisit this issue in the ongoing Pioneer's Preference 
Review proceeding.
    23. We note that a variety of mechanisms for determining the 
pioneer's payment have been proposed to the Commission. APC argues 
that, if there is to be a payment, a 25 percent discount below the 
national average price of licenses for broadband PCS MTA licenses is 
appropriate because the auction price of the second license in the 
pioneer's MTA is likely to be higher in a market where it is the only 
30 MHz license available. Basing payment on a ``national average'' 
would result in significantly undervaluing the licenses at issue here. 
As the Joint Response points out, the three broadband PCS licenses 
involved here are all for major markets. We note that the preference 
holders in broadband PCS would receive licenses for three of the most 
populous MTAs. The New York MTA is ranked No. 1; the Los Angeles-San 
Diego MTA is ranked No. 2; and the Washington-Baltimore MTA is ranked 
No. 10 in the Rand McNally 1992 Commercial Atlas & Marketing Guide. The 
auction prices paid for licenses in much smaller markets should not be 
averaged in with the prices paid in those large markets to determine 
what the pioneers should pay. At the same time, we recognize that using 
the other comparable MTA licenses (i.e., the other 30 MHz license in 
each region) in the market may not be the most appropriate measure. 
Unlike the situation with narrowband PCS, where several other 
comparable licenses in the nationwide market existed as a basis for 
calculating the payment amount for the preference winner, the use of 
what is now only one other comparable license in the market might lead 
to a somewhat distorted result. To address this problem, broadband PCS 
pioneer's preference winners will have a choice of payment methods. 
They may pay either ninety percent (90%) of the winning bid for the 
other 30 MHz license in the MTA or ninety percent (90%) of the adjusted 
value of the license which is calculated based on the average per 
population price for the 30 MHz licenses in the top 10 MTAs as 
established at the auction.\25\ This latter amount would be calculated 
by adding together the winning bids for the other 30 MHz MTA licenses 
for the top 10 markets offered at auction\26\ and dividing by the total 
population covered by those licenses.\27\ This would establish an 
average per population (per pop) price for the top 10 MTAs. The 
preference recipient would then multiply the average per pop price by 
the population of its MTA to establish the pre-discount value of its 
license. The preference recipient would be required to pay ninety 
percent (90%) of that amount. Taking into account all of the top 10 
markets in the latter payment method will help avoid any such 
distortion without the problem of including substantially smaller 
markets which would itself distort the result. We will not include the 
$3 million dollar option that we had in the narrowband context. We 
believe that the options here will cover the costs discussed in para. 
21, supra.
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    \25\Should the spectrum or market size of the pioneer's 
preference recipients' tentative awards be changed due to the 
pending reconsideration of these awards, the payment would be based 
on the then comparable license.
    \26\A total of twenty 30 Mhz MTA licenses in the top 10 markets 
are available in Blocks A and B for broadband PCS--two per each 
market. See 47 CFR 24.202 (Service Areas) and 47 CFR 24.229 
(Frequencies).
    \27\Population should be calculated based on the 1990 U.S. 
census figures as published in the Rand McNally 1992 Commercial 
Atlas & Marketing Guide. Total population means the population 
covered by each of the other MTA licenses, e.g., the population of 
the Chicago MTA (Market No. 3) would be included twice because two 
licenses for that MTA will be auctioned.
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    24. One party has proposed, as an option to a price based on 
auction results, that pioneers pay a royalty of 3%-5% on gross revenues 
over 10 years as the appropriate payment mechanism. First, we find that 
this payment method is too speculative because the amount of the 
payment can not be determined until years after the fact. Second, this 
method may result in a payment amount that is not commensurate with the 
present market value of the license itself because it is based on a 
different measure. It also fundamentally departs from the auction 
concept because it is based upon after-the-fact results rather than 
forecasts of revenues which other potential licensees must develop and 
rely on in determining the amount they are willing to bid for their 
license. We conclude that the payment options imposed here strike the 
correct balance between the avoidance of unjust enrichment on the part 
of some broadband PCS licensees and the transition to auctions to award 
broadband PCS licenses.
    25. Any broadband PCS licenses awarded to pioneer's preference 
recipients will be conditioned upon their making the required payments. 
Their payments must be received no later than thirty (30) days after 
the orders granting their licenses and their pioneer's preferences have 
become final, as well as the decision here to require payment, that is, 
30 days after the orders are no longer subject to administrative 
reconsideration or judicial review.

Authority To Require Payment

    26. Our decision requires us to determine whether we have authority 
to amend our pioneer's preference rules to require pioneer's preference 
recipients to pay for their licenses. The question of our authority to 
require payment from pioneers was raised in the rulemaking notice that 
began our Review of Pioneer's Preference Rules;\28\ but we did not 
resolve the question in that proceeding because we decided at that time 
not to require payment by narrowband or broadband PCS preference 
recipients.\29\ Now that we have decided to require payment by the 
preference winners in these proceedings, we must consider our authority 
to do so. Our analysis in this case is similar to that in our order 
granting Mtel's narrowband PCS license subject to a payment 
condition.\30\
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    \28\Pioneer's Preference Review NPRM, 8 FCC Rcd 7692, 7693, 
para. 10.
    \29\Id. at 7694-5, para. 18. Pioneer's Preference Review Report 
and Order, 9 FCC Rcd at 610, para. 9. We did, however, conclude that 
any such rule change would not constitute retroactive rulemaking. 
Id., 9 FCC Rcd at 610-11, n.24.
    \30\See Mtel Order, supra, note?.
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    27. Section 309(j) of the Communications Act,\31\ the source of our 
authority to select licensees by auction, applies only when the 
Commission has accepted ``mutually exclusive applications'' for 
licenses or construction permits. APC, Cox, and Omnipoint, by operation 
of our pioneer's preference rules, are the only entities eligible to 
apply for the licenses at issue, and there can be no mutually exclusive 
applications for those licenses.\32\ Thus, we could not require APC, 
Cox, and Omnipoint to bid in an auction under section 309(j) unless we 
amended our pioneer's preference rules to change the nature of the 
pioneer's preference award,\33\ which we do not do here.
---------------------------------------------------------------------------

    \31\47 U.S.C. 309(j).
    \32\We reiterate that while we name the three current recipients 
of broadband PCS preferences for ease of reference, we emphasize 
that by doing so we do not prejudge the petitions for 
reconsideration of our broadband PCS pioneer's preference decision. 
The payment rule we adopt here will apply to all proceedings in 
which we made a tentative (but not final) decision regarding 
preferences as of August 10, 1993 in the three proceedings.
    \33\See Pioneer's Preference Review NPRM.
---------------------------------------------------------------------------

    28. Some parties at various stages of these proceedings have 
contended that section 309(j) is the only source of authority for the 
Commission to assess a charge (other than a generally applicable fee) 
for a license, and that we have no choice but to grant APC, Cox, and 
Omnipoint's licenses without requiring payment.\34\ We disagree, and 
for the reasons that follow, we find such authority under section 
4(i),\35\ in conjunction with sections 1, 303(r), 307, 309, and 
214,\36\ of the Communications Act.
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    \34\See, e.g., Narrowband Reconsideration, 9 FCC Rcd 1315-16, 
para. 44.
    \35\47 U.S.C. 154(i).
    \36\47 U.S.C. 151, 303(r), 307, 309, 214(c).
---------------------------------------------------------------------------

    29. Section 4(i), which has been called the ``necessary and proper 
clause'' of the Communications Act,\37\ authorizes the Commission to

    \37\See New England Telephone & Telegraph Co. v. FCC, 826 F.2d 
1101, 1108 (D.C. Cir. 1987), cert. denied, 490 U.S. 1039 (1989) 
(quoting North American Telecomm. Ass'n v. FCC, 772 F.2d 1282, 1292 
(7th Cir. 1985)). The reference is to Article I, Section 8, Clause 
18 of the Constitution, which authorizes Congress to make all laws 
that shall be ``necessary and proper'' for carrying out the 
enumerated powers ``and all other powers'' vested in the federal 
---------------------------------------------------------------------------
government.

perform any and all acts, make such rules and regulations, and issue 
such orders, not inconsistent with this Act, as may be necessary in 
---------------------------------------------------------------------------
the execution of its functions.

    We could not rely upon section 4(i) to contravene an express 
prohibition or requirement of the Act, as the language of section 4(i) 
itself makes clear. Thus, if any provision of the Act prohibited the 
Commission from imposing a charge on a pioneer's preference recipient, 
section 4(i) would not be an independent basis for such authority. But 
no provision of the Act addresses this issue, either expressly or 
implicitly. Therefore, requiring preference recipients to pay for their 
licenses is ``not inconsistent with the Act.''\38\
---------------------------------------------------------------------------

    \38\See North American Telecomm. Ass'n v. FCC, 772 F.2d at 1292-
93.
    Assessing an auction-based charge is not contrary to the Supreme 
Court's decision in National Cable Television Ass'n v. FCC, 415 U.S. 
336 (1974) (NCTA). In that case, as subsequently described, the 
Supreme Court struck down Commission fees that the Court perceived 
as an effort ``to recover from regulated parties costs for benefits 
inuring to the public generally.'' Skinner v. Mid-American Pipeline 
Co., 490 U.S. 212, 223-24 (1989) (Skinner). The Court in NCTA said 
that the only proper measure of the fee was ``value to the 
recipient.'' 415 U.S. at 342-43, 344. In this instance, we do not 
seek to recover from APC, Cox, and Omnipoint (and, by extension, 
from other licensees who pay auction-based charges) ``costs for 
benefits inuring to the public generally.'' Skinner, 490 U.S. at 
224. Indeed, the ``measure'' of the charge for APC, Cox, and 
Omnipoint is precisely the one identified in NCTA as the only proper 
measure--the value of the license to the recipient. That value is 
determined by the auction price--the value that bidders are willing 
to pay--discounted for APC, Cox, and Omnipoint's special 
circumstances. See para. 20, supra. This assessment thus does not 
raise concerns that the Commission may have used an incorrect 
standard in setting the charge. 415 U.S. at 343. Moreover, because 
the action the Commission takes here does not put it ``in search of 
revenue in the manner of an Appropriation Committee of the House,'' 
NCTA, 415 U.S. at 341, no issue of impermissible delegation of 
taxing authority arises. Id. The charge here is determined directly 
by the auction process, and not by any concern for raising revenues 
``to recover administrative costs not insuring directly to the 
benefit of the parties * * *.'' Skinner, 490 U.S. at 224.
---------------------------------------------------------------------------

    30. The remaining inquiry under section 4(i) is whether the action 
the Commission proposes to take ``may be necessary in the execution of 
its functions.'' In application, section 4(i) has been held to justify 
FCC orders that were not within explicit grants of authority, where the 
orders reasonably could be found to be ``necessary and proper'' for the 
execution of the agency's enumerated powers. In Nader v. FCC,\39\ for 
example, the court held that an FCC order prescribing a rate of return 
for AT&T ``was in the public interest, necessary for the Commission to 
carry out its functions in an expeditious manner, and within its 
section 4(i) authority.''\40\ This was so even though the 
Communications Act gave the Commission express authority, in section 
205(a),\41\ to prescribe ``any charge, classification, regulation, or 
practice of any carrier  * * *,'' but did not mention any authority to 
prescribe a rate of return.
---------------------------------------------------------------------------

    \39\520 F.2d 182 D.C. Cir. 1975).
    \40\Id. at 204.
    \41\47 U.S.C. 205.
---------------------------------------------------------------------------

    Similarly, in Lincoln Telephone & Telegraph Co. v. FCC,\42\ the 
court affirmed an order of the Commission requiring the telephone 
company, which was a ``connecting carrier'' within the meaning of the 
Act, to file tariffs with the FCC offering certain services. The order 
was upheld even though the only provision in the Act requiring carriers 
to file tariffs, section 203(a),\43\ specifically exempted connecting 
carriers from that requirement. The court held:
---------------------------------------------------------------------------

    \42\659 F.2d 1092 (D.C. Cir. 1981) (Lincoln Telephone).
    \43\47 U.S.C. 203(a).

    Section 203(a)'s terms do not * * * in any way suggest that the 
section provides the exclusive authority under which the Commission 
can require a tariff to be filed. Thus, while section 203(a) did not 
grant the Commission the requisite authority for its action, section 
154(i) did.\44\
---------------------------------------------------------------------------

    \44\Lincoln Telephone, 659 F.2d at 1108-09.

    31. In North American Telecomm. Ass'n v. FCC,\45\ the Seventh 
Circuit affirmed an order requiring the Bell holding companies to file 
capitalization plans for subsidiary companies organized to sell 
telephone equipment, even though the Act conferred no authority on the 
FCC over holding companies and the legislative history of the Act 
suggested that Congress had considered granting such authority but 
ultimately had denied it.\46\ The court held that the Commission's 
authority to require the capitalization plans arose under ``a separate 
grant of power''--section 4(i).\47\ The only real question, the court 
said, was
---------------------------------------------------------------------------

    \45\772 F.2d 1282 (7th Cir. 1985) (North American).
    \46\Id. at 1291-92.
    \47\Id. at 1292.

    whether the Commission could reasonably conclude that requiring 
the regional (holding) companies to submit plans of capitalization  
* * * was necessary and proper to the effectuation of (the 
Commission's order requiring the separation of equipment sales from 
the companies' telephone operations).\48\
---------------------------------------------------------------------------

    \48\Id. at 1293. It is noteworthy that the order requiring 
structural separation of equipment sales from telephone operations 
is itself an action not expressly authorized by the Act. Structural 
separations requirements have been affirmed as proper exercises of 
the Commission's ``ancillary jurisdiction.'' See Computer and 
Communications Industry Ass'n v. FCC, 693 F.2d 198, 211 (D.C. Cir. 
1982), cert. denied, 461 U.S. 938 (1983).

    The court answered that question in the affirmative in holding that 
section 4(i) authorized this action
    32. In New England Telephone & Telegraph Co. v. FCC,\49\ the D.C. 
Circuit affirmed the Commission's order requiring AT&T (along with its 
former operating companies) to refund rates it had collected in excess 
of its authorized rate of return, rejecting the telephone companies' 
argument that the Commission's only statutory authority to require 
refunds, under section 204(a)(1),\50\ did not apply to their situation. 
Agreeing with the telephone companies that section 204 ``does not apply 
to the circumstances of this case.''\51\ the court held that the 
Commission had ``properly exercised its authority under section 4(i) to 
remedy the violation'' of its rate of return order.\52\ The court found 
that the Commission's choice of the refund remedy, ``(i)n a strictly 
technical sense,'' was ``absolutely necessary'' to the effectuation of 
its rate of return prescription.\53\ But it made clear that the 
Commission was not required to show that it had selected ``the only 
conceivable remedy in order to invoke its 4(i) powers.''\54\ It was 
enough that the action chosen by the agency ``was appropriate and 
reasonable.''\55\
---------------------------------------------------------------------------

    \49\826 F.2d 1101 (D.C. Cir. 1978) (New England).
    \50\47 U.S.C. 204(a)(1).
    \51\New England, 826 F.2d at 1107.
    \52\Id. at 1109.
    \53\Id. at 1107-08.
    \54\Id. at 1108.
    \55\Id.
---------------------------------------------------------------------------

    33. The rule that emerges from the cases described above is that 
section 4(i), although ``not infinitely elastic,''\56\ is a ``wide 
ranging source of authority.''\57\
---------------------------------------------------------------------------

    \56\North American, 772 F.2d at 1292.
    \57\New England, 826 F.2d at 1109.
---------------------------------------------------------------------------

    Section 4(i) empowers the Commission to deal with the 
unforeseen--even if that means straying a little way beyond the 
apparent boundaries of the Act--to the extent necessary to regulate 
effectively those matters already within the boundaries.\58\
---------------------------------------------------------------------------

    \58\North American, 772 F.2d at 1292. See also U.S. v. 
Southwestern Cable Co., 392 U.S. 157, 181 (1968); Rural Telephone 
Coalition v. FCC, 838 F.2d 1307, 1315 (D.C. Cir. 1988); FTC 
Communications, Inc. v. FCC, 750 F.2d 226, 232 (2d Cir. 1984).
---------------------------------------------------------------------------

    If an action taken by the agency does not contravene another 
provision of the Act, it may be justified under section 4(i) if the 
Commission ``could reasonably conclude that (the action) was necessary 
and proper to the effectuation'' of its functions.\59\
---------------------------------------------------------------------------

    \59\North American, 772 F.2d at 1293.
---------------------------------------------------------------------------

    34. Applying this rule here, we find authority under section 4(i) 
to amend our pioneer's preference rules to condition any licenses 
granted to APC, Cox, and Omnipoint, on the basis of their pioneer's 
preferences, on the payment of an appropriate charge. First, requiring 
payment by APC, Cox, and Omnipoint is ``necessary'' if we are properly 
to carry out our public interest mandate in licensing broadband PCS 
providers.\60\ An important aspect of the public interest is promoting 
competition to the extent feasible and taking appropriate regulatory 
steps to ensure that the competition is fair.\61\ Our development of 
PCS and of the pioneer's preference policies appropriately has 
emphasized competition at ever step. Granting APC, Cox, and Omnipoint a 
license free of charge, we have found in this order, would likely give 
APC, Cox, and Omnipoint a financial advantage over other licensees 
competing in the same markets, who would have to pay auction prices--a 
result that would not serve the public interest.
---------------------------------------------------------------------------

    \60\See 47 U.S.C. 307(a), 309(a), 214 (a) and (c). See also 47 
U.S.C. 151.
    \61\See National Ass'n of Regulatory Util. Comm'rs v. FCC, 525 
F.2d 630, 636 and n. 25 (D.C. Cir.), cert denied, 425 U.S. 992 
(1976). See also McLean Trucking Co. v. U.S. ., 321 U.S. 67, 86-88 
(1944).
---------------------------------------------------------------------------

    35. Second, requiring payment by APC, Cox, and Omnipoint is 
``necessary and proper'' in the execution of our function under section 
309(j) to implement a rational, fair system of competitive bidding. We 
have found elsewhere that the values of broadband PCS licenses will be 
significantly interdependent. The prices a bidder might be willing to 
pay--or even the willingness to bid at all--might be affected in 
various ways by the fact that some of the licenses are available free 
to applicants who will be competing with the auction winners. Awards to 
APC, Cox, and Omnipoint free of charge thus might distort significantly 
the auction of other broadband PCS licenses and, thereby, defeat or at 
least undermine some or all of the purposes of having the auction. In 
this regard, we note that the auction statute itself does not limit our 
authority to require pioneer's preference recipients to pay for their 
licenses; it is neutral on this point.\62\ And third, as noted above, 
requiring payment will serve section 309(j)'s purpose of avoiding 
unjust enrichment.
---------------------------------------------------------------------------

    \62\See 47 U.S.C. 309(j)(6)(b); H.R. Rep. No. 111, 103d Cong., 
1st Sess. 257 (1993).
---------------------------------------------------------------------------

    36. We recognize that our decision here is a reversal of the course 
we took initially with respect to payments made by the broadband PCS 
pioneers. In this regard, it is similar to our recent decision to 
require payment by Mtel for its narrowband PCS license after first 
deciding not to require payment. We asked the court for a remand of the 
pioneer's preference review order and the broadband PCS pioneer's 
preference order to give further consideration to this important 
issue.\63\ We believe that this change is well supported by the record 
and best serves the public interest. When we first considered the 
payment question these pioneers had only their tentative preferences 
and, even now, their preferences are the subject of petitions for 
reconsideration and petitions for review. Thus, not only do we believe 
that our change of course is legal and best serves the public interest, 
we also believe it does not undermine any legitimate reliance interests 
of APC, Cox, and Omnipoint.
---------------------------------------------------------------------------

    \63\The question of payment was still technically before the 
Commission as a result of a timely filed petition for 
reconsideration of the Pioneer's Preference Review Report and Order. 
47 U.S.C. 405. See Wrather-Alvarez Broadcasting v. FCC, 248 F.2d 646 
(D.C. Cir. 1957) (where petition for agency reconsideration if 
filed, agency has jurisdiction even though other parties have sought 
judicial review).
---------------------------------------------------------------------------

Ex Parte Rules

    37. We note that in their briefs to the court, petitioners and 
amicus curiae raised allegations of violations of the Commission's ex 
parte rules. These issues were addressed in a letter by the Managing 
Director;\64\ and our General Counsel reviewed the contacts in depth in 
preparing a response to a congressional inquiry.\65\ We have thus had 
an opportunity to consider, with substantial staff analysis, the 
allegations. While the matter has not been formally brought to the 
Commission, e.g., through an application for review of the Managing 
Director's letter, we take this opportunity to affirm the Managing 
Director's letter.
---------------------------------------------------------------------------

    \64\Letter from Andrew S. Fishel to Michael K. Kellogg, Esquire 
(May 27, 1994).
    \65\Letter from William E. Kennard to Hon. John D. Dingell (June 
3, 1994).
---------------------------------------------------------------------------

Final Regulatory Flexibility Statement

    38. Pursuant to the Regulatory Flexibility Act of 1980, an Initial 
Regulatory Flexibility Analysis (IRFA) was incorporated in the Notice 
of Proposed Rule Making in ET Docket No. 93-266. Written comments with 
a separate and distinct heading designating them as a response to the 
IRFA were requested. The Commission's final analysis is as follows:
    A. Need for and purpose of this action. This proceeding was 
initiated to obtain comment regarding possible modifications to, or 
repeal of, the pioneer's preference rules. The rule adopted here will 
serve the public interest by modifying the pioneer's preference rules 
in light of the statutory authority to assign licenses by competitive 
bidding.
    B. Issues raised in response to the IRFA. The IRFA noted that the 
proposed changes could affect small businesses if they have pioneer's 
requests pending, if they contemplate filing pioneer's preference 
requests, or if they intend to file applications for services in which 
others might receive a pioneer's preference. No commenters responded 
specifically to the issues raised in IRFA. We note that, with regard to 
PCS, small businesses receive certain competitive bidding preferences 
as set forth in the Third Report and Order, 9 FCC Rcd 2941 (1994) and 
the Fifth Report and Order, FCC 94-178 (released Jul. 15, 1994) in PP 
Docket No. 93-253.
    C. Significant alternatives considered. All significant 
alternatives have been addressed in the Memorandum Opinion and Order on 
Remand.

Ordering Clauses

    39. Accordingly, it is ordered, pursuant to sections 1, 4(i), 
303(r), 307, 309, and 214 of the Communications Act of 1934, as 
amended, 47 U.S.C. 151, 154(i), 303(r), 307, 309, and 214, that 
Sec. 1.402 of the Commission's rules, 47 CFR 1.402, is amended as set 
forth below to be effective thirty (30) days after publication in the 
Federal Register.
    40. Accordingly, it is further ordered that the relevant licensing 
bureau shall impose the following additional condition on any licenses 
received by pioneer's preference recipients for broadband PCS (GEN 
Docket No. 90-314) based upon their pioneer's preference awards:

    Each licensee shall pay to the United States Treasury an amount 
equal to either ninety percent (90%) of the winning bid for the 30 
MHz broadband MTA license in the same market or ninety percent (90%) 
of the adjusted value of the license calculated based on the average 
per population price for the 30 MHz licenses in the top 10 MTAs as 
established at auction, thirty (30) days after an order granting any 
such license based upon a pioneer's preference, the order granting 
the preferences, and this order become final orders, that is, thirty 
(30) days after the order is no longer subject to administrative 
reconsideration or judicial review, appeal, or stay.

    41. It is further ordered that the Emergency Request for Oral 
Argument filed by American Personal Communications on July 21, 1994 is 
denied.

List of Subjects in 47 CFR Part 1

    Administrative practice and procedure, Reporting and recordkeeping 
requirements, Telecommunications.

Federal Communications Commission.
William F. Caton,
Acting Secretary.

Final Rule

    Part 1 of chapter 1 of title 47 of the Code of Federal Regulations 
is amended as follows:

PART 1--PRACTICE AND PROCEDURE

    1. The authority citation for part 1 continues to read as follows:

    Authority: Secs. 4, 303, 48 Stat. 1066, 1082, as amended; 47 
U.S.C. 154, 303.

    2. Section 1.402 is amended by adding new paragraph (g) to read as 
follows:


Sec. 1.402  Pioneer's preference.

* * * * *
    (g) Any person receiving pioneer's preferences in proceedings where 
tentative (but not final) decisions had been reached as of August 10, 
1993, will be required to pay for their licenses. The amount of payment 
shall be determined in each proceeding on a case-by-case basis.

[FR Doc. 94-20228 Filed 8-17-94; 8:45 am]
BILLING CODE 6712-01-M