[Federal Register Volume 60, Number 244 (Wednesday, December 20, 1995)]
[Rules and Regulations]
[Pages 65587-65597]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 95-30938]



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FEDERAL COMMUNICATIONS COMMISSION
47 CFR Part 100

[IB Docket No. 95-168; PP Docket No. 93-253; FCC 95-507]


Direct Broadcast Satellite Service

AGENCY: Federal Communications Commission.

ACTION: Final rule.

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SUMMARY: On December 14, 1995, the Federal Communications Commission 
adopted a Report and Order in which it adopted a number of new rules 
and policies for the Direct Broadcast Satellite (``DBS'') service, 
including the use of competitive bidding to resolve mutually exclusive 
applications for DBS resources. As part of its decision in Advanced 
Communications Corporation, FCC 95-428 (released October 18, 1995), the 
Commission reclaimed for the public 51 channels of DBS spectrum at two 
orbital locations (27 channels at 110 deg. W.L. and 24 channels at 
148 deg. W.L.) that had previously been assigned to Advanced 
Communications Corporation (``ACC''). The Commission adopts rules and 
policies in the DBS service in order to update the current ``interim'' 
rules and to reassign, through a competitive bidding process, channels 
at orbital locations previously assigned to ACC.

EFFECTIVE DATE: January 19, 1996.

FOR FURTHER INFORMATION CONTACT: Suzanne Hutchings or Bill Wiltshire, 
International Bureau, (202) 418-0420; or Diane Conley, Wireless 
Telecommunications Bureau, (202) 418-0660.

SUPPLEMENTARY INFORMATION: This summarizes the Commission's Report and 
Order in IB Docket No. 95-168; PP Docket No. 93-253; FCC 95-507, 
adopted on December 14, 1995, and released on December 15, 1995. The 
complete text of this Report and Order (``Order'') is available for 
inspection and copying during normal business hours in the FCC 
Reference Center (Room 239), 1919 M Street NW., Washington, D.C., and 
also may be purchased from the Commission's copy contractor, 
International Transcription Service, (202) 857-3800, 2100 M Street NW., 
Suite 140, Washington, D.C. 20037. This Order contains new or modified 
information collections subject to the Paperwork Reduction Act of 1995 
(``PRA''), Pub. L. 104-13, which were proposed in the NPRM and 
submitted to the Office of Management and Budget (``OMB'') for 
approval. The Commission received no comments on the proposed 
information collections, and therefore adopts them as originally 
proposed. The effective date of the new and modified rules being 
adopted falls after the deadline for OMB action under the PRA.

Synopsis of the Report and Order

I. Introduction

    1. Over six years ago, in Continental Satellite Corporation, 4 FCC 
Rcd 6292 (1989), the Commission stated that existing DBS permittees 
would have first right to additional channel assignments upon surrender 
or cancellation of a DBS construction permit. The Notice of Proposed 
Rulemaking (``NPRM'') in this proceeding, 60 FR 55822 (Nov. 3, 1995), 
tentatively concluded that this reassignment policy no longer serves 
the public interest, and accordingly proposed to use competitive 
bidding when the Commission has received mutually exclusive 
applications for reassignment of such DBS resources. Specifically, the 
NPRM proposed to auction two large blocks of channels that are 
currently available at two orbital locations. In addition, the NPRM 
proposed new service rules that would: (1) impose performance criteria 
intended to ensure that DBS resources are utilized in a timely manner; 
(2) guard against potential anticompetitive conduct by DBS providers; 
and (3) ensure timely DBS service to Alaska and Hawaii. The NPRM also 
requested comment on our existing policy governing the extent to which 
DBS resources may be put to alternative uses.
    2. The Commission concludes that the public interest is no longer 
served by the pro rata methodology established in Continental for 
reassigning reclaimed DBS channels. Accordingly, the Commission adopts 
new rules for reassigning DBS resources. In the Order, the Commission 
finds that it has the statutory authority to auction DBS construction 
permits if the Commission receives mutually exclusive applications, and 
that the objectives of Section 309(j) of the Communications Act, 47 
U.S.C. 309(j), would be served by doing so. Specifically, under the 
Order the Commission will auction two DBS construction permits: one for 
all 28 channels now available at the 110 deg. W.L. orbital location (27 
channels from ACC plus 1 channel that was never assigned), and another 
for all 24 channels now available at the 148 deg. W.L. orbital 
location. The NPRM proposed to employ an oral outcry auction to award 
construction permits for these channel blocks. The Commission has 
instead determined that these two permits should be awarded through a 
sequential multiple round electronic auction. Other auction designs may 
be used for future DBS auctions. 

[[Page 65588]]

    3. The Commission also adopts three new service rules and revises 
an existing policy. First, a person receiving a new or additional DBS 
construction permit will be required to complete construction of its 
first satellite within four years of receiving its permit, and to 
complete all satellites in its DBS system within six years. Second, new 
permittees will be required to provide DBS service to Alaska and Hawaii 
from any orbital location where such service is technically feasible, 
and existing permittees will be required to provide such service from 
either or both of their assigned orbital locations in order to retain 
their channel assignments at western orbital locations. Third, the term 
for non-broadcast DBS licenses will be lengthened from five years to 
ten years, to encourage investment and innovation in the service and to 
better match the useful life of DBS satellites. In addition, the 
existing policy restricting non-DBS use of DBS resources will be 
restated in terms of capacity rather than time in order to allow DBS 
licensees to configure their systems more efficiently. The Commission 
believes that these rules are well designed to spur swift development 
of DBS spectrum resources to the benefit of the American public.

II. Proposed Service Rules

A. Performance Objectives
    4. The Commission finds that combining existing due diligence 
requirements with additional milestones for construction and operation 
of DBS systems by new permittees will prevent unnecessary delays in the 
commencement of service. Accordingly, the Commission adopts, as 
proposed in the NPRM, two additional performance criteria for those 
receiving DBS construction permits after the effective date of the 
proposed rule: (1) completion of construction of the first satellite in 
a DBS system within four years of authorization; and (2) launch and 
operation of all satellites in a DBS system within six years of 
authorization.
B. Use of DBS Capacity
    5. At present, Commission policy requires each DBS licensee to 
begin DBS operations before the end of its first five-year license 
term, but allows otherwise unrestricted use during that term. After 
expiration of the first term, a DBS operator may continue to provide 
non-DBS service only on those transponders on which it also provides 
DBS service, and only up to half of the use of each transponder each 
day. The Commission finds that capacity-based restrictions would allow 
DBS permittees and licensees more flexibility in how they configure 
their satellites as a matter of technical efficiency in complying with 
the limitations we have imposed. Accordingly, the Order restates 
existing restrictions on the use of DBS resources as a function of 
capacity rather than time, but otherwise retains the existing use 
policy. Thus, the new policy will be that a DBS licensee must begin DBS 
operations within five years of receipt of its license, but may 
otherwise make unrestricted use of the spectrum during that time. After 
that five-year period, such a licensee may continue to provide non-DBS 
service so long as at least half of its total capacity at a given 
orbital location is used for DBS service.
    6. The NPRM noted the possibility that, as a result of a separate 
proceeding, operators using DBS channels and orbital locations may be 
permitted to provide both domestic and international service. See 
Amendment to the Commission's Regulatory Policies Governing Domestic 
Fixed Satellites and Separate International Satellite Systems, Notice 
of Proposed Rulemaking, FCC 95-146, para. 38 (released April 25, 
1995)(``Transborder/Separate Systems''), 60 FR 24817 (May 10, 1995). 
The Commission notes that the construction permits available at auction 
currently authorize only DBS service to the United States, and finds 
that the potential for international DBS service is no basis for 
delaying the auction pending resolution of international satellite 
service issues in the Transborder/Separate Systems proceeding.
C. Rules and Policies Designed to Promote Competition
    1. Spectrum Aggregation Limitations. 7. The NPRM proposed certain 
rules intended to prevent strategic use of DBS resources for 
anticompetitive purposes and also requested comment on whether 
additional steps were necessary to achieve the desired goal of 
fostering competition among multichannel video programming distributors 
(``MVPDs''), such as DBS and cable systems. Two of the rules proposed 
were structural, in that they placed limits on the number of full-CONUS 
DBS channels a person could hold or use. The NPRM also proposed rules 
aimed at preventing specific types of potentially anticompetitive 
conduct, and requested comment on the degree to which existing rules 
might address those same concerns.
    8. The Commission rejects both of the spectrum caps proposed in the 
NPRM, and instead adopts a one-time spectrum limitation applicable to 
the upcoming auction. Under this one-time auction rule, a party 
currently holding an attributable interest in full-CONUS channels at 
one location may bid at auction for channels currently available at the 
110 deg. location, but if successful must divest its existing full-
CONUS channels at any other location within twelve months. The 
Commission finds that the rule is necessary given the scarcity of full-
CONUS DBS spectrum and the impact that concentration of this spectrum 
into the hands of any single provider might have on the overall MVPD 
market. The resulting intra-DBS competition will best serve the public 
interest by ensuring a level of rivalry between and among DBS firms and 
other MVPDs that should constrain any potential there might be for 
strategic anticompetitive conduct. The Commission also finds that 
twelve months should be sufficient to allow an orderly divestiture, if 
necessary, and strikes a proper balance between the time necessary for 
negotiation and the desire to ensure that spectrum not remain idle.
    9. For purposes of implementing the spectrum aggregation limitation 
adopted in the Order, the Commission will only consider three orbital 
locations--101 deg., 110 deg., and 119 deg.--to be capable of full-
CONUS service. A fourth orbital location, at 61.5o W.L, should not be 
deemed to be capable of delivering full-CONUS service at this time 
since an operator serving customers in the western United States from 
that location would face interference from tall objects that an 
operator from the other three locations would not face due to their 
better look angles, and therefore would be at a qualitative 
disadvantage in attracting customers.
    10. In applying the auction spectrum rule adopted in the Order, 
interests will be attributed to their holders and deemed cognizable 
under criteria similar to those used in the context of the broadcast, 
newspaper and cable television cross ownership rules. The rules adopted 
in the Order attribute the following interests: (1) any voting interest 
of five percent or more; (2) any general partnership interest and 
direct ownership interest; (3) any limited partnership interest, unless 
the limited partnership agreement provides for insulation of the 
limited partner's interest and the limited partner in fact is insulated 
from and has no material involvement, either directly or indirectly, in 
the management or operation of the DBS activities of the partnership; 
and (4) officers and directors. As with the broadcast rules, the 
attribution threshold for institutional investors is ten percent, and a 
multiplier will be used to 

[[Page 65589]]
calculate interests held through successive and multiple layers of 
ownership.
    2. Conduct Rules. 11. In addition to the structural solutions 
designed to promote competition by preventing the potential for undue 
concentration of DBS and MVPD resources, the NPRM also proposed conduct 
limitations on the use of DBS resources in order to address a number of 
specific forms of potential anticompetitive behavior. In the Order, the 
Commission finds that the one-time auction rule described above will 
significantly promote rivalry among DBS systems and encourage the 
development of competition in markets for the delivery of video 
programming. The Order states that there is little direct evidence of 
anticompetitive behavior specific to the DBS context. Accordingly, the 
Commission has decided to rely upon the competitive effect of its one-
time spectrum rule to prevent the range of anticompetitive conduct 
discussed in the NPRM, and thus refrains from adopting conduct rules at 
this stage in the development of the DBS industry.
    12. In view of the market structure set in motion by the Order's 
one-time spectrum rule, the Commission does not find it necessary to 
adopt rules prohibiting DBS services from being offered as 
``ancillary'' to cable services. Thus, there is no reason to extend to 
all non-DBS MVPDs the restrictions imposed in the DBS construction 
permit issued to Tempo Satellite, Inc., or to maintain those 
restrictions with respect to Tempo. Similarly, the Commission finds no 
compelling need at this time for adopting rules designed to ensure that 
a cable-affiliated DBS operator will compete against other DBS 
providers for subscribers in cabled areas, or for determining that all 
joint marketing arrangements between DBS operators and other MVPDs will 
a fortiori reduce competition. Further, the Commission declines to 
amend the existing program access and carriage rules to address 
specific conduct by DBS operators. The Order states that there is no 
evidence in this record that exclusive agreements currently pose any 
anticompetitive concern or will do so in the future.
    13. The NPRM identified as another area of concern program access 
issues related to the development of systems such as TCI's proposed 
``Headend in the Sky'' (``HITS'') service for satellite delivery of 
programming to terrestrial MVPD systems. It appears that a HITS-like 
service that provides most of the available programming, and provides 
it in a digital format that could be passed through to subscribers, 
could offer substantial efficiencies for many MVPDs. The benefits of 
this service cannot materialize if competing DBS operators are unable 
to provide such service because, for example, programmers refuse to 
authorize MVPDs to receive programming services from the competing 
operator's DBS satellite. However, the Commission has no evidence 
before it of firms presently supplying HITS-like service, and the 
actual characteristics of such a service remain unclear. Moreover, 
resolution of the issues surrounding such a service is not necessary to 
the proceeding at hand. Accordingly, the Commission has decided that it 
would be imprudent to consider rules governing HITS service absent a 
better understanding of the nature of the service.

Other Concerns

    14. The NPRM observed that in the Advanced Communications 
Corporation proceeding, commenters raised a number of other concerns 
about potential strategic conduct that could arise from cable-
affiliated ownership of full-CONUS DBS spectrum. Those commenters 
argued that cable-affiliated ownership of full-CONUS DBS spectrum 
should be prohibited, or in the alternative, that several remedial 
conditions should be imposed. The NPRM sought comment on the extent to 
which those and related concerns are implicated by the proposed auction 
of DBS construction permits, and if so, whether additional DBS service 
rules might be appropriate to address those concerns. For the time 
being, the Commission has decided to rely upon the one-time auction 
spectrum limitation, the rivalry that rule should promote throughout 
the MVPD market, and the Commission's ongoing ability to monitor 
developments in the DBS and MVPD markets through its Title III 
authority, as adequate restraints on anticompetitive conduct. The 
Commission remains committed to fostering a vibrant DBS service and 
recognizes that periodic reviews will be necessary to ensure that the 
benefits of rivalry are available to the public. It intends to keep a 
watchful eye on developments in the service to ensure that DBS systems 
have an opportunity to develop into truly competitive MVPDs.

East/West Paired Assignments

    15. The NPRM tentatively concluded that progress in the DBS service 
has rendered unnecessary the Continental policy of assigning DBS 
channels only in east/west pairs. The commenters supported this 
conclusion, and accordingly the Commission will no longer require DBS 
permittees and licensees to retain their assigned channels in east/west 
pairs.
D. Service to Alaska and Hawaii
    16. The Commission adopts the rules proposed in the NPRM to: (1) 
require that all new permittees must provide service to Alaska and 
Hawaii if such service is technically feasible from their orbital 
locations; and (2) condition the retention of channels assigned to 
current permittees at western orbital locations on provision of such 
service, from either or both of their assigned orbital locations. These 
rules should help achieve the important goal of bringing service to 
underserved regions of the United States. The Commission declined the 
proposal of some commenters that the first rule be applied to existing 
as well as new permittees. The Commission notes that service to Alaska 
and Hawaii has already been shown to be feasible from all but the 
101 deg.W.L. and 61.5 deg.W.L. orbital locations, and that any party 
acquiring channels at those two locations that desires not to provide 
service to Alaska or Hawaii will bear the burden of showing that such 
service is not feasible as a technical matter, or that while 
technically feasible such service would require so many compromises in 
satellite design and operation as to make it economically unreasonable.
E. License Term
    17. The Commission adopts the NPRM's proposal to increase the term 
of a non-broadcast DBS license from 5 years to 10 years, the maximum 
allowed under the Communications Act, which better reflects the useful 
life of a DBS satellite, is consistent with the current proposal for 
extending the term of satellite licenses in other services, and should 
encourage investment and innovation in the DBS service.

III. Adoption of a New Methodology for Reassigning DBS Resources

    18. Over six years ago, in the Continental decision, the Commission 
stated that existing DBS permittees would have first right to 
additional channel assignments upon surrender or cancellation of a DBS 
construction permit. The NPRM tentatively concluded that this 
reassignment policy, adopted in an era before Congress explicitly 
authorized the Commission's use of auctions and well before any DBS 
system actually went into operation, no longer serves the public 
interest, and therefore should be abandoned.
    19. After reviewing the comments received in response to the NPRM, 
the Commission remains convinced that the pro rata distribution of 
reclaimed 

[[Page 65590]]
channels to existing permittees no longer serves the public interest. 
The historic policy of assigning a relatively small number of channels 
to each permittee was based upon a conception of DBS service that has 
not been put into practice. Instead, the service has experienced a move 
toward channel consolidation, an understandable trend given that DBS 
systems must compete in the MVPD market with cable systems that are 
promising a 500-channel service in the future. Under Continental, the 
channels available for reassignment would be divided pro rata to assign 
five pairs of channels at two orbital locations to each of six 
permittees. The result would be a piecemeal assignment of valuable 
spectrum, requiring the permittees to negotiate either joint operations 
or channel swaps. The process necessary in either case is often a time 
consuming one that is not always successful, which is further 
complicated by the time required for Commission consideration and 
approval of the resulting transactions. There is also no guarantee that 
the permittees eligible for this distribution value the channels most 
highly and can put them to use most efficiently.
    20. By contrast, competitive bidding procedures are specifically 
designed and intended to assign scarce resources to those who value 
them most highly and can make the most efficient use of them. By 
offering the available channels in two large blocks, the Commission 
obviates the need for reaggregation and allows the auction winners to 
proceed directly to acquisition or construction of satellites and 
system operation of their systems. Since the Commission intends to hold 
an auction in January 1996, it concludes that an auction method is 
better suited to achieving expedited service from the channels 
available than is the existing policy under Continental. In addition, 
the Commission concludes that since it has determined that the public 
interest supports a change in its regulatory approach, it has full 
authority to modify existing DBS permits through notice and comment 
rulemaking, even if doing so frustrates the expectations of existing 
permittees.
    21. All potential auction participants should be aware that the 
decision cancelling ACC's construction permit is currently on appeal, 
and that others may seek judicial review of this Order as well. In the 
unlikely event that a court either overturns the Advanced order and 
ACC's permit with its associated orbital/channel authorizations is 
ultimately reinstated, or overturns this rulemaking and the Continental 
reassignment methodology is ultimately maintained, the Commission would 
rescind any permit awarded through the auction process and move with 
all deliberate speed to refund money paid up to that point. 
Participants in the auction are hereby put on notice of this 
possibility, and should be willing to facilitate that process if it 
becomes necessary.

IV. Adoption of Rules for Auctioning DBS Permits

A. Authority to Conduct Auctions
    The Commission has authority under Section 309(j) of the 
Communications Act, 47 U.S.C. 309(j), to employ auctions to choose 
among mutually exclusive applications for initial licenses or 
construction permits where the principal use of the spectrum is likely 
to involve the licensee receiving compensation from subscribers. Having 
reviewed the comments received in response to the NPRM in this 
proceeding, the Commission concludes that it has the authority under 
Section 309(j) to award DBS construction permits for the spectrum 
reclaimed from ACC, as well as other available spectrum, by means of 
competitive bidding.
    Given that both DBS licensees now providing service to the public 
operate on a subscription basis, and all other permittees planning to 
initiate service in the near future also plan to offer subscription-
based service, the Commission believes that it is a reasonable 
assumption that a majority of the use of DBS spectrum is likely to 
involve the licensee receiving compensation from subscribers, and the 
``principal use'' requirement of the statute is therefore satisfied. In 
light of current licensees' subscription-based operations, and all 
other permittees' plans for such operations, the Commission disagrees 
with the claim made by one commenter that competitive bidding will 
force DBS operators to offer all-subscription service.
    The Commission also disagrees with the argument made by another 
commenter that construction permits awarded for the channels reclaimed 
from ACC are not initial. When channels are reclaimed from existing 
permittees, the construction permits for them are cancelled and cannot 
be modified. Thus, any construction permits awarded for reclaimed 
channels will be ``initial'' under Section 309(j) because they will be 
new permits for the channels in question.
    With respect to the requirement of mutual exclusivity, the 
Commission does not accept the claim that it could have avoided mutual 
exclusivity by applying the spectrum reassignment policy in 
Continental. The Commission has determined that this policy would delay 
the development of DBS service and would squander valuable spectrum, 
and thus would not be in the public interest. The Commission also notes 
that where it has scheduled an auction and it turns out that only one 
application is filed for a particular construction permit, the auction 
will be cancelled and the application will be processed. In addition, 
the Commission will consider mutual exclusivity to exist only when the 
number of DBS channels sought at a given orbital location exceeds the 
number available there.
    The Commission further concludes that the use of competitive 
bidding to assign DBS spectrum will promote the statutory objectives of 
the rapid deployment of service and the efficient use of spectrum more 
effectively than any other spectrum assignment method. An auction is 
likely to promote the rapid deployment of service because those parties 
that are in the best position to deploy technologies and services are 
also likely to be the highest bidders. In addition, abandonment of the 
Commission's Continental policy opens the DBS industry to a wide range 
of potential new entrants and thus is consistent with the statutory 
objective of disseminating licenses among a wide variety of licensees. 
The possibility that auction costs will be passed on to consumers does 
not mean, as certain commenters assert, that auctions will not serve 
the statutory objective of recovering a portion of the value of DBS 
spectrum for the public. DBS operators may also pass on other costs to 
consumers. Moreover, auction winners will be constrained from charging 
rates higher than those of competitors who have not paid for spectrum. 
Finally, the auctioning of DBS channels will ensure that the ultimate 
holder of the channels has paid market value to the U.S. Treasury and 
thus will serve the statutory goal of avoiding unjust enrichment. The 
Commission will therefore award construction permits for the channels 
available at 110 deg. and 148 deg., as well as DBS construction permits 
that become available in the future, by means of competitive bidding.
B. Competitive Bidding Design
    The Commission will auction one construction permit for the block 
of 28 channels at 110 deg. and one construction permit for the block of 
24 channels at 148 deg.. The Commission believes that designating two 
permits for these channels will best serve the public interest and the 
objectives of Section 309(j)(4)(B), 47 U.S.C. 309(j)(4)(B), 

[[Page 65591]]
especially the promotion of investment in and rapid deployment of the 
DBS service. The construction permits available for auction include 
authority to transmit pursuant to allocations in accordance with the 
ITU feeder link plan allocating frequencies for establishing uplinks 
and downlinks. The Commission recognizes that there may be legitimate 
reasons for auctioning spectrum in smaller blocks; therefore, in the 
future, the Commission may auction DBS spectrum either channel by 
channel or in small blocks.
    The Commission proposed in the NPRM to award the construction 
permits for the channels available at 110 deg. and 148 deg. by means of 
an oral outcry auction. However, the Commission is persuaded by the 
comments submitted that the auction for these channels should have more 
structure. The Commission concludes that a sequential multiple round 
electronic auction would be the best way of providing such structure. 
The primary benefit of additional structure is the reduced risk of 
bidders making errors in submitting bids, and bid submission errors are 
far less likely with electronic bidding than in a traditional oral 
auction. Multiple round electronic bidding also provides bidders more 
time to analyze previous bids, confer with decision makers, and refine 
their bidding strategy than a continuous oral auction. Multiple round 
electronic bidding with the activity rule adopted by the Commission 
also provides bidders with more information about other bidders' 
valuations. Finally, given the Commission's experience with electronic 
auctions, such an auction is likely to be easier for the Commission to 
implement.
    In anticipation of a rapid auction pace, the Commission will 
provide for electronic bidding at an FCC auction site. The Commission 
does not anticipate allowing telephone bids and remote electronic 
bidding, but the Wireless Telecommunications Bureau will announce by 
Public Notice whether such bidding will be permitted. In the event that 
telephone bids and remote electronic bidding are not allowed, all 
bidders will be required to have an authorized bidding representative 
at the auction site. The channels at 110 deg. and 148 deg. will be 
auctioned separately since no commenter has made the case that there is 
significant interdependence between the channels available at these two 
orbital locations. The Commission may auction one channel block 
immediately after the other, but also reserves the discretion to hold 
two separate auctions for the two blocks.
    Although the Commission will not use simultaneous multiple round 
bidding, oral outcry bidding, sealed bidding, or a combined sealed bid-
oral outcry auction to award construction permits for the spectrum 
available at 110 deg. and 148 deg., such auction designs could be 
suitable for DBS under certain circumstances. The Commission therefore 
adopts rules providing for these auction designs, and reserves the 
discretion to employ such auction designs for DBS in the future. The 
Commission also delegates to the Wireless Telecommunications Bureau the 
authority to implement and modify auction procedures--including the 
general design and timing of an auction, the number of authorizations 
to be offered in any one auction, the manner of submitting bids, and 
procedures such as minimum opening bids and bid increments, activity 
and stopping rules, and application and payment requirements--and to 
announce such procedures by Public Notice.
C. Bidding Procedures
    Sequencing. The 28 channels available at 110 deg. will be auctioned 
first. The sequence of future DBS auctions will be determined in 
keeping with the Commission's general finding that the highest value 
licenses should be auctioned first because the greater the value of the 
licenses, the greater the cost to the public of delaying licensing. See 
Second Report and Order, PP Docket No. 93-253, 59 FR 22980 (May 4, 
1994). In the event that the Commission needs to assign separate blocks 
of channels that it believes to be interdependent, it may choose to 
utilize a simultaneous multiple round auction.
    Bid Increments and Tie Bids. The Commission reserves the discretion 
to establish, raise and lower minimum bid increments in the course of 
DBS auctions. The Commission anticipates using larger percentage 
minimum bid increments early in the auction and reducing the minimum 
increment percentage as bidding activity falls. The Commission also 
reserves the discretion to establish and change maximum bid increments 
in the course of DBS auctions. Where a tie bid occurs, the high bidder 
will be determined by the order in which the bids were received by the 
Commission.
    Minimum Opening Bid. The Commission believes that it would be 
useful to have a minimum opening bid for the channels at 110 deg. to 
help move the auction along and to increase the likelihood that the 
public receives fair market value for the spectrum. A minimum opening 
bid therefore will be established for the channels available at 
110 deg., the amount of which will be announced by Public Notice. The 
amount of this minimum opening bid will be determined using all 
available information and taking into consideration the uncertainty as 
to the value of the spectrum. No commenter has suggested a minimum 
opening bid for the channels available at 148 deg., and it appears that 
the value of these channels is substantially lower than the value of 
the channels at 110 deg.. The Commission therefore will not set a 
minimum opening bid for the channels at 148 deg.. The Commission also 
reserves discretion to decide whether to set minimum opening bids for 
individual auctions in the future as circumstances warrant.
    Activity Rules. A bidder must be active in each round of the 
auction or use an activity rule waiver. To be active in the current 
round, a bidder must submit an acceptable bid in the current round or 
have the high bid from the previous round. Bidders will be provided 
with five activity rule waivers that may be used in any round during 
the course of the auction. A bidder who is not active in a round and 
has no remaining activity rule waivers will no longer be eligible to 
bid on the construction permit being auctioned.
    If a bidder is not active in a round, a waiver will be applied 
automatically. An automatic waiver applied in a round in which there 
are no new valid bids will not keep the auction open. A proactive 
activity rule waiver is a waiver invoked by a bidder during the bid 
submission period. If a bidder submits a proactive waiver in a round in 
which no other bidding activity occurs, the auction will remain open. 
The Commission retains the discretion to issue additional waivers 
during the course of an auction for circumstances beyond a bidder's 
control or in the event of a bid withdrawal, as discussed below. The 
Commission also retains the flexibility to adjust by Public Notice 
prior to an auction the number of waivers permitted.
    Stopping Rules. A stopping rule specifies when an auction is over. 
The auction will close after one round passes in which no new valid 
bids or proactive activity rule waivers are submitted. The Commission 
retains the discretion, however, to keep the auction open even if no 
new valid bids and no proactive waivers are submitted. In the event 
that the Commission exercises this discretion, the effect will be the 
same as if a bidder had submitted a proactive waiver. 

[[Page 65592]]

D. Procedural and Payment Issues
    Application Procedures, Permittee Qualifications, and Payment for 
Construction Permits Awarded by Competitive Bidding. The Commission's 
general procedural and payment rules for auctions will be applied to 
the DBS service, along with certain modifications. Applicants for DBS 
auctions will be required to file a short-form application, FCC Form 
175, prior to the auction in which they wish to participate. Filing 
deadlines will be announced by Public Notice. If administratively 
feasible, electronic filing of FCC Form 175 for the auction of spectrum 
available at 110 deg. and 148 deg. will be allowed; filing procedures 
will be announced by Public Notice. For subsequent DBS auctions, the 
Commission will also announce by Public Notice how such forms should be 
filed.
    As discussed below, every DBS auction participant will be required 
to submit to the Commission an upfront payment prior to commencement of 
the auction. In addition, every auction winner will be required to 
submit an amount sufficient to bring its total deposit up to 20 percent 
of its winning bid within 10 business days of the announcement of 
winning bidders. Winning bidders will be required to file information 
in conformance with Part 100 of the Commission's Rules within 30 days 
of the announcement of winning bidders. Winning bidders must submit, as 
part of this post-auction application process, a signed statement 
describing their efforts to date and future plans to come into 
compliance with any applicable spectrum limitations, if they are not 
already in compliance.
    After reviewing a winning bidder's information supplied in 
conformance with Part 100 and determining that the bidder is qualified 
to be a permittee, and after verifying receipt of the bidder's 20 
percent down payment, the Commission will announce the application's 
acceptance for filing, thus triggering the filing window for petitions 
to deny. If the Commission dismisses or denies any and all petitions to 
deny, the Commission will issue an announcement to this effect, and the 
winning bidder will then have five (5) business days to submit the 
balance of its winning bid. If the bidder does so, the permit will be 
granted subject to a condition, if necessary, that the permittee come 
into compliance with any applicable spectrum limitations within twelve 
(12) months of the final grant. The permittee may come into compliance 
with applicable spectrum caps by either surrendering to the Commission 
its excess channels or filing an application that would result in 
divestiture of the excess channels. If the bidder fails to submit the 
balance of the winning bid or the permit is otherwise denied, the 
Commission will assess a default payment as set forth below and re-
auction the permit.
    Upfront Payment. The Commission's approach to upfront payments 
varies from auction to auction depending on a balancing of the goal of 
encouraging bidders to submit serious bids with the desire to simplify 
the bidding process and minimize implementation costs imposed on 
bidders. In the Second Report and Order in the Competitive Bidding 
proceeding, the Commission outlined a rationale for setting upfront 
payments at roughly five percent of the estimated value of a winning 
bid. Second Report and Order, PP Docket No. 93-253, 59 FR 22980 (May 4, 
1994). A year ago, Tempo would have paid ACC $45 million for its 
channels at 110 deg. and 148 deg.. In view of the fact that MCI has 
stated it would bid $175 million for the channels at 110 deg., and in 
the absence of any specific expression of interest in bidding on the 
channels at 148 deg., it seems clear that the channels at 110 deg. are 
more valuable than those at 148 deg.. Moreover, the Commission strongly 
believes that the value of the channels has increased over the past 
year. These considerations lead the Commission to set an upfront 
payment of $10 million for the channels at 110 deg. and $2 million for 
the channels at 148 deg.. The figure of $10 million is well above five 
percent of $45 million (it is actually 22.2 percent). This reflects a 
balancing of the assumed increase in value of the spectrum with the 
fact that the channels at 110 deg. and 148 deg. were included in the 
Tempo-ACC arrangement.
    The magnitude of the upfront payment also reflects the Commission's 
concern that, if the upfront payment is too low, there is a risk of 
encouraging insincere bidding. Moreover, a $10 million payment should 
not be an excessive burden for bidders because it will not be held for 
a significant amount of time. In addition, $10 million is the lowest of 
the specific upfront payment suggestions in the comments. With respect 
to procedures for collecting upfront payments, the Commission will 
accept only wire transfers for the auction of the channels available at 
110 deg. and 148 deg..
    Bid Withdrawal, Default and Disqualification. Any bidder who 
withdraws a high bid during an auction before the Commission declares 
bidding closed will be required to reimburse the Commission in the 
amount of the difference between its high bid and the amount of the 
winning bid the next time the construction permit is offered by the 
Commission, if this subsequent winning bid is lower than the withdrawn 
bid. No withdrawal payment will be assessed if the subsequent winning 
bid exceeds the withdrawn bid. To prevent multiple withdrawals by the 
same party, the Commission will bar a bidder who withdraws a bid from 
continued participation in the auction of the withdrawn construction 
permit.
    In the event of a bid withdrawal, the Commission will reoffer the 
construction permit in the next round. The offer price will be the 
highest price at or above which bids were made in previous rounds by 
three or more bidders. The Commission may at its discretion reduce this 
price in subsequent rounds if it receives no bids at this price. Prior 
to restarting the auction, the Commission will also restore the 
eligibility of all bidders who have not withdrawn. After a withdrawal 
the Commission will also issue each eligible bidder one activity rule 
waiver in addition to any remaining waivers to provide additional time 
for bid preparation and to avoid accidental disqualification.
    A default payment will be assessed if a winning bidder fails to pay 
the full amount of its 20 percent down payment or the balance of its 
winning bid in a timely manner, or is disqualified after the close of 
an auction. The amount of this default payment will be equal to the 
difference between the defaulting auction winner's ``winning'' bid and 
the amount of the winning bid the next time the construction permit is 
offered for auction by the Commission, if the latter bid is lower. In 
addition, the defaulting auction winner will be required to submit a 
payment of three (3) percent of the subsequent winning bid or three (3) 
percent of its own ``winning'' bid, whichever is less. If withdrawal, 
default or disqualification involves gross misconduct, 
misrepresentation or bad faith by an applicant, the Commission retains 
the option to declare the applicant and its principals ineligible to 
bid in future auctions, or take any other action the Commission deems 
necessary, including institution of proceedings to revoke any existing 
licenses held by the applicant.
E. Regulatory Safeguards
    Transfer Disclosure Provisions. In order to accumulate data to 
evaluate whether DBS authorizations are being issued for bids that fall 
short of market value, the Commission will require any entity that 
acquires a DBS license through competitive bidding and seeks 

[[Page 65593]]
to transfer that license within six years of the initial license grant, 
to file, together with its application for FCC consent to the transfer, 
the associated contracts for sale, option agreements, management 
agreements, or other documents disclosing the total consideration 
received in return for the transfer of its license. Thus, the 
information submitted should include not only a monetary purchase 
price, but also any future, contingent, in-kind, or other 
consideration. Any competitive concerns raised by the possible 
disclosure of sensitive information can be addressed by the provisions 
in Sections 0.457 and 0.459 of the Commission's rules, 47 CFR 
Secs. 0.457, 0.459, providing for the nondisclosure of information.
    Performance Requirements. In implementing auction procedures, the 
Commission is required under Section 309(j) to include performance 
requirements ``to ensure prompt delivery of service to rural areas, to 
prevent stockpiling or warehousing of spectrum by licensees or 
permittees, and to promote investment in and rapid deployment of new 
technologies and services.'' 47 U.S.C. Sec. 309(j)(4)(B). The 
Commission concludes that the performance requirements adopted as part 
of the DBS service rules are sufficient to achieve these goals, and it 
is unnecessary to adopt any further performance rules in connection 
with auction procedures.
    Rules Prohibiting Collusion. The Commission adopts the anti-
collusion rules proposed in the NPRM with one modification, as 
explained below. Under these rules, bidders must identify on their 
short-form applications any parties with whom they have entered into 
any consortium arrangements, joint ventures, partnerships or other 
agreements or understandings which relate in any way to the competitive 
bidding process. Bidders are also required to certify on their short-
form applications that they have not entered into any explicit or 
implicit agreements, arrangements or understandings of any kind with 
any parties, other than those identified, regarding the amount of their 
bid, bidding strategies or the particular properties on which they will 
or will not bid. In the NPRM, the Commission proposed that after short-
form applications are filed, and prior to the time the winning bidder 
has submitted the balance of its bid, all applicants should be 
prohibited from cooperating, collaborating, discussing or disclosing in 
any manner the substance of their bids or bidding strategies with other 
applicants for construction permits serving the same or overlapping 
geographic areas, unless such bidders are members of a bidding 
consortium or other joint bidding arrangement identified on the 
bidder's short-form application. The Commission adopts this 
prohibition, but extends it only until the winning bidder has submitted 
its 20 percent down payment, and not until the winning bidder has 
submitted the balance of its bid. Even when an applicant has withdrawn 
its application after the short-form filing deadline, the applicant may 
not enter into a bidding agreement with another applicant bidding on 
the same or overlapping geographic areas from which the first applicant 
withdrew. In addition, once the short-form application has been filed, 
a party with an attributable interest in one bidder may not acquire a 
controlling interest in another bidder bidding for construction permits 
in any of the same or overlapping geographic areas.
    DBS applicants may (1) modify their short-form applications to 
reflect formation of consortia or changes in ownership at any time 
before or during an auction, provided that such changes do not result 
in a change in control of the applicant, and provided that the parties 
forming consortia or entering into ownership agreements have not 
applied for construction permits for channels that may be used to cover 
the same or overlapping geographic areas; and (2) make agreements to 
bid jointly for construction permits after the filing of short-form 
applications, provided that the parties to the agreement have not 
applied for construction permits that may be used to serve the same or 
overlapping geographic areas. In addition, the holder of a non-
controlling attributable interest in an entity submitting a short-form 
application may acquire an ownership interest in, form a consortium 
with, or enter into a joint bidding arrangement with other applicants 
for construction permits that may be used to serve the same or 
overlapping geographic areas after the filing of short-form 
applications, provided that (1) the attributable interest holder 
certifies to the Commission that it has not communicated and will not 
communicate with any party concerning the bids or bidding strategies of 
more than one of the applicants in which it holds an attributable 
interest, or with which it has a consortium or joint bidding 
arrangement, and which have applied for construction permits that may 
be used to serve the same or overlapping geographic areas, and (2) the 
arrangements do not result in any change in control of an applicant.
    Winning bidders are required to submit a detailed explanation of 
the terms and conditions and parties involved in any bidding consortia, 
joint venture, partnership or other agreement or arrangement they have 
entered into relating to the competitive bidding process prior to the 
close of bidding. Such arrangements must have been entered into prior 
to the filing of short-form applications as provided in the Order.
    In adopting these rules, the Commission reminds potential bidders 
for DBS construction permits that allegations of collusion in a 
petition to deny may be investigated by the Commission or referred to 
the U.S. Department of Justice for investigation. Bidders who are found 
to have violated the antitrust laws or the Commission's rules while 
participating in an auction may be subject to forfeiture of their down 
payment or their full bid amount, as well as revocation of their 
license, and may be prohibited from participating in future auctions.
F. Designated Entities
    Because of the extremely high implementation costs associated with 
satellite-based services, the Commission tentatively concluded in the 
NPRM that no special provisions should be made for designated 
entities--i.e., small businesses, rural telephone companies, and 
businesses owned by members of minority groups and women--for the 
channels currently available at 110 deg. and 148 deg.. The Commission 
noted, however, that the expeditious implementation of DBS service at 
the two orbital locations in question might indirectly benefit 
designated entities by providing new opportunities for them to supply 
programming and equipment. Having reviewed the comments submitted in 
this proceeding, the Commission concludes that competition in the 
delivery of DBS service requires auction rules that will allow 
expedient assignment of the channels at 110 deg. and 148 deg.. Given 
the fact that these channels offer enough capacity to provide full DBS 
service in competition with current video providers, auction rules that 
put these two construction permits in the hands of entities that can 
quickly provide competition are in the public interest. No commenters 
assert that small businesses could attract the capital necessary to 
provide service on all the channels available at either 110 deg. or 
148 deg..
    Accordingly, the Commission will not adopt special provisions for 
designated entities in the DBS auction for the channels at 110 deg. and 
148 deg., and will not set aside spectrum in this auction for 

[[Page 65594]]
``independents,'' as suggested by one commenter. Another commenter's 
statement that small and minority businesses are developing services 
for the DBS industry confirms the Commission's belief that a wide 
variety of businesses will be involved in the DBS industry; however, 
the Commission does not have a record before it sufficient to support 
adoption of this commenter's suggestion that the Commission provide 
incentives to encourage companies to team up with small and minority-
owned businesses. However, designated entity provisions for future DBS 
auctions may be appropriate, particularly if spectrum is auctioned in 
small blocks.

Paperwork Reduction Act

    22. The Order contains new or modified information collections 
subject to the Paperwork Reduction Act of 1995 (``PRA''), Pub. L. No. 
104-13, which were proposed in the NPRM and were submitted to the 
Office of Management and Budget (``OMB'') for approval. The Commission, 
as part of its continuing effort to reduce paperwork burdens, also 
invited the general public to comment on the information collections 
proposed. The Commission received no comments on the proposed 
collections, and adopts them as originally proposed. The effective date 
of the new and modified rules that have been adopted falls after the 
deadline for OMB action under the PRA.

47 CFR Part 100

    OMB Approval Number: None.
    Title: Direct Broadcast Satellite Service.
    Form No.: None.
    Type of Review: Approval of existing collection.
    Respondents: Businesses or other for profit.
    Number of Respondents: 8.
    Estimated Time Per Response: 400 hours.
    Total Annual Burden: 3200 hours.
    Needs and Uses: In accordance with the Communications Act, the 
information collected will be used by the Commission in granting DBS 
authorizations, and in determining the technical and legal 
qualifications of a satellite applicant, permittee or licensee. 
Existing information collection requirements are set forth in Part 100 
of the Commission's Rules and in Commission orders. See e.g., Inquiry 
Into the Development of Regulatory Policy in Regard to Direct Broadcast 
Satellites for the Period Following the 1983 Regional Administrative 
Radio Conference, 90 FCC 2d 676 (1982), recon. denied, 53 RR 2d 1637 
(1983); CBS, Inc., 98 FCC 2d 1056 (1983); Tempo Enterprises, Inc., 1 
FCC Rcd 20, 21 (1986); and United States Satellite Broadcasting Co., 3 
FCC Rcd 6858, 6861-62 (1988). Under the existing information collection 
requirements in the Commission's Rules, an entity awarded a DBS 
authorization would be required to submit the information required 
pursuant to 47 CFR 100.13, 100.19, 100.21, 100.51. The Commission 
proposed to require that DBS auction winners submit: (1) Ownership 
information to determine compliance with Parts 1 and 100 of the 
Commission's Rules; (2) a statement describing their efforts to comply 
with the proposed spectrum aggregation limitations; (3) an explanation 
of the terms and conditions and parties involved in any bidding 
consortia, joint venture, partnership, or other agreement or 
arrangement they enter into relating to the competitive bidding process 
prior to the close of bidding; and (4) any agreements or contracts 
pertaining to the transfer of the DBS authorization acquired through 
auction during the six years following grant of the authorization.

Final Regulatory Flexibility Analysis

    Pursuant to Section 603 of the Regulatory Flexibility Act, 5 U.S.C. 
Sec. 603, an initial Regulatory Flexibility Analysis was incorporated 
in the Notice of Proposed Rulemaking in IB Docket No. 95-168/PP Docket 
No. 93-253. Written comments on the proposals in the Notice, including 
the Regulatory Flexibility Analysis, were requested.

A. Need and Purpose of Rules

    This rulemaking proceeding modifies the licensing and service rules 
for the DBS service. It also adopts rules for competitive bidding in 
the DBS service based on Section 309(j) of the Communications Act, 47 
U.S.C. Sec. 309(j), which authorizes the Commission to use auctions to 
select among mutually exclusive applications for authorizations under 
certain circumstances. Our objectives have been to promote efficiency 
and innovation in the licensing and use of the electromagnetic 
spectrum, to develop competitive and innovative communications systems, 
and to promote effective and adaptive regulations.

B. Issues Raised by the Public in Response to the Initial Analysis

    No comments were received specifically in response to the Initial 
Regulatory Flexibility Analysis. We have, however, taken into account 
all issues raised by the public in response to the proposed rules. In 
certain instances, we have eliminated or modified rules in response to 
those comments.

C. Significant Alternatives Considered

    We have attempted to balance all the commenters' concerns with our 
public interest mandate under the Communications Act in order to update 
the existing ``interim'' rules in the DBS service. We will continue to 
examine these rules in an effort to eliminate unnecessary regulations 
and to minimize significant economic impact on small businesses.

Ordering Clauses

    Accordingly, IT IS ORDERED that Part 100 of the Commission's Rules 
is amended as specified below.
    24. It is Further Ordered that the one-time auction spectrum 
limitation discussed above Will be Implemented in connection with the 
auction of the construction permits for the use of 28 DBS channels at 
the 110 deg. orbital location and 24 channels at the 148 deg. orbital 
location.
    25. It is Further Ordered that the amendments to Part 100 adopted 
herein and the one-time auction spectrum limitation discussed above 
Will Become Effective January 19, 1996. This action is taken pursuant 
to Sections 1, 4(i), 4(j), 7, and 309(j) of the Communications Act of 
1934, as amended, 47 U.S.C. Secs. 151, 154(i), 154(j), 157, and 309(j).
    26. It is Further Ordered that, pursuant to 47 U.S.C. Sec. 155(c), 
the Chief, Wireless Telecommunications Bureau, is granted Delegated 
Authority to implement and modify auction procedures in the DBS 
service, including the general design and timing of an auction, the 
number of authorizations to be offered in an auction, the manner of 
submitting bids, minimum opening bids and bid increments, activity and 
stopping rules, and application and payment requirements, and to 
announce such procedures by Public Notice.
    27. It is Further Ordered that condition (a) placed on the 
construction permit of Tempo Satellite, Inc. in Tempo Satellite, Inc., 
7 FCC Rcd 2728, 2732 (1992), which imposed certain marketing 
restrictions, is Rescinded.
    28. It is Further Ordered that the proceeding in IB Docket No. 95-
168 is hereby terminated.

List of Subjects in 47 CFR Part 100

    Radio, Satellites.


[[Page 65595]]

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

Rule Changes

    Part 100 of Chapter I of Title 47 of the Code of Federal 
Regulations is amended as follows:

PART 100--DIRECT BROADCAST SATELLITE SERVICE

    1. The authority citation for Part 100 is revised to read as 
follows:

    Authority: 47 U.S.C. 154, 303, 309, and 554, unless otherwise 
noted.

    2. Section 100.17 is revised to read as follows:


Sec. 100.17  License term.

    (a) Licenses for non-broadcast facilities governed by this part 
will be issued for a period of ten (10) years. Licenses for broadcast 
facilities governed by this part will be issued for a period of five 
(5) years.

    3. Section 100.19 is revised to read as follows:


Sec. 100.19  Due diligence requirements.

    (a) All persons granted DBS authorizations shall proceed with 
diligence in constructing DBS systems. Permittees shall be required to 
complete contracting for construction of the satellite station(s) 
within one year of the grant of the construction permit. The satellite 
stations shall also be required to be in operation within six years of 
the construction permit grant.
    (b) In addition to the requirements stated in paragraph (a) of this 
section, all persons who receive new or additional DBS construction 
permits after January 19, 1996 shall complete construction of the first 
satellite in their respective DBS systems within four years of the 
grant of the construction permit. All satellite stations in such a DBS 
system shall be in operation within six years of the grant of the 
construction permit.
    (c) DBS permittees and licensees shall be required to proceed 
consistent with all applicable due diligence obligations, unless 
otherwise determined by the Commission upon proper showing in any 
particular case. Transfer of control of the construction permit shall 
not be considered to justify extension of these deadlines.
    4. A new Section 100.53 is added to Subpart D to read as follows:


Sec. 100.53  Geographic service requirements.

    (a) Those holding DBS permits or licenses as of January 19, 1996 
must either:
    (1) Provide DBS service to Alaska and Hawaii from one or more 
orbital locations before the expiration of their current 
authorizations; or
    (2) Relinquish their western DBS orbital/channel assignments at the 
following orbital locations: 148 deg. W.L., 157 deg.W.L., 166 deg. 
W.L., and 175 deg. W.L.
    (b) Those acquiring DBS authorizations after January 19, 1996 must 
provide DBS service to Alaska and Hawaii where such service is 
technically feasible from the acquired orbital location.
    A new subpart E consisting of Secs. 100.71 through 100.80 is added 
to Part 100 to read as follows:

Subpart E--Competitive Bidding Procedures for DBS

Sec.
100.71  DBS subject to competitive bidding.
100.72  Competitive bidding design for DBS construction permits.
100.73  Competitive bidding mechanisms.
100.74  Withdrawal, default and disqualification payments.
100.75  Bidding application (FCC Form 175 and 175-S Short-form).
100.76  Submission of upfront payments and down payments.
100.77  Long-form applications.
100.78  Permit grant, denial, default, and disqualification.
100.79  Prohibition of collusion.
100.80  Transfer disclosure.


Sec. 100.71  DBS subject to competitive bidding.

    Mutually exclusive initial applications to provide DBS service are 
subject to competitive bidding procedures. The general competitive 
bidding procedures found in Part 1, Subpart Q of this chapter, will 
apply unless otherwise provided in this part.


Sec. 100.72  Competitive bidding design for DBS construction permits.

    (a) The Commission will employ the following competitive bidding 
designs when choosing from among mutually exclusive initial 
applications to provide DBS service:
    (1) Single round sealed bid auctions (either sequential or 
simultaneous);
    (2) Sequential oral auctions;
    (3) Combined sealed bid-oral auctions;
    (4) Sequential multiple round electronic auctions; or
    (5) Simultaneous multiple round auctions.
    (b) The Wireless Telecommunications Bureau may design and test 
alternative procedures. The Wireless Telecommunications Bureau will 
announce by Public Notice before each auction the competitive bidding 
design to be employed in a particular auction.
    (c) The Wireless Telecommunications Bureau may use combinatorial 
bidding, which would allow bidders to submit all or nothing bids on 
combinations of construction permits, in addition to bids on individual 
construction permits. The Commission may require that to be declared 
the high bid, a combinatorial bid must exceed the sum of the individual 
bids by a specified amount. Combinatorial bidding may be used with any 
type of auction design.
    (d) The Wireless Telecommunications Bureau may use single combined 
auctions, which combine bidding for two or more substitutable 
construction permits and award construction permits to the highest 
bidders until the available construction permits are exhausted. This 
technique may be used in conjunction with any type of auction.


Sec. 100.73  Competitive bidding mechanisms.

    (a) Sequencing. In sequential auctions, the Wireless 
Telecommunications Bureau will generally auction DBS construction 
permits in order of their estimated value, with the highest value 
construction permit being auctioned first. The Wireless 
Telecommunications Bureau may vary the sequence in which DBS 
construction permits will be auctioned.
    (b) Grouping. All DBS channels available for a particular orbital 
location will be auctioned as a block, unless the Wireless 
Telecommunications Bureau announces, by Public Notice prior to the 
auction, an alternative auction scheme. In the event the Wireless 
Telecommunications Bureau uses either a simultaneous multiple round 
competitive bidding design or combinatorial bidding, the Wireless 
Telecommunications Bureau will determine which construction permits 
will be auctioned simultaneously or in combination.
    (c) Bid Increments and Tie Bids. The Wireless Telecommunications 
Bureau may, by announcement before or during an auction, establish, 
raise or lower minimum bid increments in dollar or percentage terms. 
The Wireless Telecommunications Bureau may establish and change maximum 
bid increments during an auction. The Wireless Telecommunications 
Bureau may also establish by Public Notice a suggested opening bid or a 
minimum opening bid on each construction permit. Where a tie bid 
occurs, the high bidder will be determined by the order in which the 
bids were received by the Commission.
    (d) Stopping Rules. The Wireless Telecommunications Bureau may 
establish stopping rules before or during multiple round auctions in 
order to terminate an auction within a reasonable time. 

[[Page 65596]]

    (e) Activity Rules. The Wireless Telecommunications Bureau may 
establish activity rules which require a minimum amount of bidding 
activity. In the event that the Wireless Telecommunications Bureau 
establishes an activity rule in connection with a simultaneous multiple 
round auction or sequential multiple round electronic auction, each 
bidder will be automatically granted a certain number of waivers of 
such rule during the auction.


Sec. 100.74  Withdrawal, default and disqualification payments.

    (a) When the Commission conducts a sequential multiple round 
electronic auction or simultaneous multiple round auction pursuant to 
Sec. 100.72, the Wireless Telecommunications Bureau will impose 
payments on a bidder who withdraws a high bid during the course of the 
auction, who defaults on payments due, or who is disqualified.
    (b) A bidder who withdraws a high bid during the course of such an 
auction will be assessed a payment equal to the difference between the 
amount bid and the amount of the winning bid the next time the 
construction permit is offered for auction by the Commission. No 
withdrawal payment will be assessed if the subsequent winning bid 
exceeds the withdrawn bid. This payment amount will be deducted from 
any upfront payments or down payments that the withdrawing bidder has 
deposited with the Commission.
    (c) If a high bidder defaults or is disqualified after the close of 
such an auction, the defaulting bidder will be subject to the payment 
in paragraph (b) of this section plus an additional payment equal to 
three (3) percent of the subsequent winning bid. If the subsequent 
winning bid exceeds the defaulting bidder's bid amount, the 3 percent 
payment will be calculated based on the defaulting bidder's bid amount. 
These amounts will be deducted from any upfront payments or down 
payments that the defaulting or disqualified bidder has deposited with 
the Commission.
    (d) When the Commission conducts a sequential multiple round 
electronic auction, the Wireless Telecommunications Bureau will bar a 
bidder who withdraws a bid from continued participation in the auction 
of the withdrawn construction permit. When the Commission conducts any 
other type of auction, the Wireless Telecommunications Bureau may bar a 
bidder who withdraws a bid from continued participation in the bidding 
for the same construction permit or other construction permits offered 
in the same auction.
    (e) When the Commission conducts any type of auction other than 
those provided for in paragraphs (a), (b), (c), and (d) of this 
section, the Wireless Telecommunications Bureau may modify the payments 
to be paid in the event of bid withdrawal, default or disqualification; 
provided, however, that such payments shall not exceed the payments 
specified above.


Sec. 100.75  Bidding application (FCC Form 175 and 175-S Short-form).

    All applicants to participate in competitive bidding for DBS 
construction permits must submit applications on FCC Form 175 pursuant 
to the provisions of Sec. 1.2105 of this chapter. The Wireless 
Telecommunications Bureau will issue a Public Notice announcing the 
availability of DBS construction permits and the date of the auction 
for those construction permits. This Public Notice also will specify 
the date on or before which applicants intending to participate in a 
DBS auction must file their applications in order to be eligible for 
that auction, and it will contain information necessary for completion 
of the application as well as other important information such as any 
upfront payment that must be submitted, and the location where the 
application must be filed.


Sec. 100.76  Submission of upfront payments and down payments.

    (a) Bidders in DBS auctions will be required to submit an upfront 
payment in accordance with Sec. 1.2106 of this chapter, the amount of 
which will be announced by Public Notice prior to each auction.
    (b) Winning bidders in a DBS auction must submit a down payment to 
the Commission in an amount sufficient to bring their total deposits up 
to 20 percent of their winning bids within ten (10) business days of 
the announcement of winning bidders.


Sec. 100.77  Long-form applications.

    Each winning bidder will be required to submit the information 
described in Secs. 100.13, 100.21, and 100.51 within thirty (30) days 
after being notified by Public Notice that it is the winning bidder. 
Each winner also will be required to file, by the same deadline, a 
signed statement describing its efforts to date and future plans to 
come into compliance with any applicable spectrum limitations, if it is 
not already in compliance. Such information shall be submitted pursuant 
to the procedures set forth in Sec. 100.13 and any associated Public 
Notices. Only auction winners will be eligible to file applications for 
DBS construction permits in the event of mutual exclusivity between 
applicants filing a short-form application.


Sec. 100.78  Permit grant, denial, default, and disqualification.

    (a) Each winning bidder will be required to pay the balance of its 
winning bid in a lump sum payment within five (5) business days 
following Public Notice that the construction permit is ready for 
grant.
    (b) A bidder who withdraws its bid during the course of an auction, 
defaults on a payment due, or is disqualified, will be subject to the 
payments specified in Sec. 100.74.


Sec. 100.79  Prohibition of collusion.

    (a) Bidders are required to identify on their short-form 
applications any parties with whom they have entered into any 
consortium arrangements, joint ventures, partnerships or other 
agreements or understandings which relate in any way to the competitive 
bidding process. Bidders are also required to certify on their short-
form applications that they have not entered into any explicit or 
implicit agreements, arrangements or understandings of any kind with 
any parties, other than those identified, regarding the amount of their 
bid, bidding strategies or the particular properties on which they will 
or will not bid.
    (b)(1) Except as provided in paragraphs (b)(2), (b)(3) and (b)(4) 
of this section, after the filing of short-form applications, all 
applicants are prohibited from cooperating, collaborating, discussing 
or disclosing in any manner the substance of their bids or bidding 
strategies, or discussing or negotiating settlement agreements, with 
other applicants until after the high bidder submits its downpayment, 
unless such applicants are members of a bidding consortium or other 
joint bidding arrangement identified on the bidder's short-form 
application.
    (2) Applicants may modify their short-form applications to reflect 
formation of consortia or changes in ownership at any time before or 
during an auction, provided that such changes do not result in a change 
in control of the applicant, and provided that the parties forming 
consortia or entering into ownership agreements have not applied for 
construction permits that may be used to serve the same or overlapping 
geographic areas. Such changes will not be considered major 
modifications of the application. 

[[Page 65597]]

    (3) After the filing of short-form applications, applicants may 
make agreements to bid jointly for construction permits, provided that 
the parties to the agreement have not applied for construction permits 
that may be used to serve the same or overlapping geographic areas.
    (4) After the filing of short-form applications, a holder of a non-
controlling attributable interest in an entity submitting a short-form 
application may acquire an ownership interest in, form a consortium 
with, or enter into a joint bidding arrangement with, other applicants 
for construction permits that may be used to serve the same or 
overlapping geographic areas, provided that:
    (i) The attributable interest holder certifies to the Commission 
that it has not communicated and will not communicate with any party 
concerning the bids or bidding strategies of more than one of the 
applicants in which it holds an attributable interest, or with which it 
has a consortium or joint bidding arrangement, and which have applied 
for construction permits that may be used to serve the same or 
overlapping geographic areas; and
    (ii) The arrangements do not result in any change in control of an 
applicant.
    (5) Applicants must modify their short-form applications to reflect 
any changes in ownership or in the membership of consortia or joint 
bidding arrangements.
    (c) Winning bidders are required to submit a detailed explanation 
of the terms and conditions and parties involved in any bidding 
consortia, joint venture, partnership or other agreement or arrangement 
they have entered into relating to the competitive bidding process 
prior to the close of bidding. Such arrangements must have been entered 
into prior to the filing of short-form applications pursuant to 
paragraphs (a) and (b) of this section.


Sec. 100.80  Transfer disclosure.

    Any entity that acquires a DBS license through competitive bidding, 
and seeks to transfer that license within six years of the initial 
license grant, must file, together with its application for FCC consent 
to the transfer, the associated contracts for sale, option agreements, 
management agreements, or other documents disclosing the total 
consideration received in return for the transfer of its license. The 
information submitted must include not only a monetary purchase price, 
but also any future, contingent, in-kind, or other consideration.

[FR Doc. 95-30938 Filed 12-19-95; 8:45 am]
BILLING CODE 6712-01-P