[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