[Federal Register Volume 61, Number 65 (Wednesday, April 3, 1996)]
[Rules and Regulations]
[Pages 14672-14676]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 96-7965]



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FEDERAL COMMUNICATIONS COMMISSION

47 CFR Chapter I

[FCC 96-94]


Pioneers' Preference Payments for Initial Authorizations in the 
Broadband Personal Communications Service

AGENCY: Federal Communications Commission.


[[Page 14673]]

ACTION: Final rule.

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SUMMARY: The Commission released this Order specifying the payment 
obligations and procedures for the Pioneers' preference recipients in 
the Broadband Personal Communications Service. This Order is necessary 
to inform the parties to this action of their obligations and to 
explain the procedures for payments. The intended effect of this action 
is to ensure the parties have the information they require for timely 
and accurate payments.

EFFECTIVE DATE: June 3, 1996.

FOR FURTHER INFORMATION CONTACT: Lisa Warner, (202) 418-0620, Wireless 
Telecommunications Bureau, Commercial Wireless Division.

SUPPLEMENTARY INFORMATION: This is the text of the Order, adopted March 
8, 1996, released March 11, 1996 concerning: American Personal 
Communications, File No. 15000-CW-L-94, Call Sign: KNLF200; Cox Cable 
Communications, Inc., File No. 15001-CW-L-94, Call Sign: KNLF201; 
Omnipoint Communications, Inc., File No. 15002-CW-L-94, Call Sign: 
KNLF202. This order is available for inspection and copying during 
normal business hours the Commercial Wireless Division Legal Branch, 
Room 7130, 2025M Street, N.W., Washington, D.C., and also may be 
purchased from the Commission's copy contractor, International 
Transcription Service, at (202) 857-3800, 2100 M Street, N.W., Suite 
140, Washington, D.C. 20037.

Order

I. Introduction and Background

    1. By this action we specify the payment obligations and procedures 
for the Pioneers' preference recipients in the Broadband Personal 
Communications Service (``PCS''): American Personal Communications 
(``APC''), Cox Cable Communications, Inc. (``Cox''), and Omnipoint 
Communications, Inc. (``Omnipoint'') (collectively, ``Pioneers''). The 
Pioneers will pay to the United States Treasury a sum of $701,780,378, 
plus interest, over the next five years. The action is taken pursuant 
to legislation implementing the General Agreement on Tariffs and Trade 
(``GATT legislation''), enacted December 8, 1994.
    2. In December 1993, the Commission granted Pioneers' preferences 
to APC, Cox and Omnipoint for their innovative work in the development 
of PCS in the 2 GHz band. The Commission determined that, if otherwise 
qualified, APC would be licensed to use Channel Block A in the 
Washington-Baltimore Major Trading Area (``MTA''); Cox would be 
licensed to use Channel Block A in the Los Angeles-San Diego MTA; and 
Omnipoint would be licensed to use Channel Block A in the New York MTA.
    3. On December 13, 1994, we granted the Broadband PCS license 
applications filed by APC, Cox, and Omnipoint based upon their 
Pioneers' preference awards (``Pioneers Licensing Order''). Each grant 
is conditioned on, inter alia, each licensee paying to the United 
States Treasury an amount equal to 85 percent of the adjusted value of 
its license calculated in accordance with Section 801 of the GATT 
legislation. The adjusted value of the licenses are based on the high 
bids for comparable licenses in the broadband PCS auction for the A and 
B frequency blocks. The GATT legislation provides that payments are not 
to commence until that auction is completed and after the Pioneers' 
license grants have become final and no longer subject to 
administrative or judicial review. At the time we adopted the Pioneers 
Licensing Order, the auction for the A and B block licenses was not 
completed and the Pioneers' preferences and license grants, as well as 
the constitutionality of the GATT legislation, had become the subject 
of several judicial challenges. The A and B block auction was completed 
on March 13, 1995, and the litigation has concluded. Accordingly, the 
Pioneers' license conditions are subject to this subsequent Order 
specifying payment procedures and amounts.

II. Discussion

A. Payment Amounts
    4. Section 801 of the GATT legislation amended Section 309(j) of 
the Communications Act of 1934 to require that the Commission recover a 
portion of the value of a pioneer's preference recipient's license, and 
establishes a payment formula of 85 percent of the adjusted value of 
the license. Based on the formula in the GATT legislation, we 
calculated the average per population price established by competitive 
bidding for frequency blocks A and B in the twenty largest MTAs, 
excluding the MTAs awarded to the Pioneers, to be $15.48. We then 
reduced this average per capita bid amount by 15 percent to obtain the 
adjusted per capita value of the Pioneers' licenses, which we 
determined to be $13.16. Finally, we multiplied this discounted per 
population figure by the 1990 Census population figures for the 
respective service areas of the Pioneers' licenses. As a result of this 
calculation, we have determined that the Pioneers are required to pay 
the following amounts for their licenses: APC for the Washington-
Baltimore MTA--$102,343,539; Cox for the Los Angeles-San Diego MTA--
$251,918,526; and Omnipoint for the New York MTA--$347,518,309. We note 
that these amounts compare with $211,771,000 paid for the competitive B 
block license in Washington-Baltimore (a 52 percent difference); 
$493,500,000 paid for the Los Angeles-San Diego MTA B block license (a 
49 percent difference); and $442,712,000 paid for the New York MTA B 
block license (a 22 percent difference).
B. Commencement of Payments
    5. The GATT legislation further directs that the Pioneers are to 
commence their payments no later than either the date of completion of 
the auction of comparable licenses, or thirty days after Pioneers' 
preferences are awarded and the licenses are no longer subject to 
administrative or judicial review. The Commission commenced its auction 
of licenses for broadband PCS operations on frequency blocks A and B on 
December 5, 1994, and completed this auction on March 13, 1995. At the 
time the auction was completed, however, several judicial challenges to 
both the GATT legislation and the Pioneers' awards remained pending, 
delaying the finality of the licenses awarded to the Pioneers. That 
litigation has ended. Pursuant to the GATT legislation, the license 
grants (and the underlying pioneer's preferences) are not subject to 
further administrative or judicial review. Accordingly, Pioneers' 
installment payments will commence 30 days after the adoption of this 
Order, on April 8, 1996.
C. Interest Rate
    6. The GATT legislation states that the Pioneers shall be permitted 
to pay for the licenses through guaranteed installment payments over a 
period of five years subject to: (1) The payment only of interest on 
unpaid balances during the first two years; and (2) payment of the 
unpaid balance and interest thereon after the end of such two years in 
accordance with the regulations prescribed by the Commission. The text 
of the statute is silent on the interest rate to be charged except for 
its reference to the Commission's regulations. The House Committee 
Report describing this provision states that payment of the principal 
and interest should be ``in a manner consistent with the installment 
payment rules adopted by the Commission as part of its general 
competitive bidding regulations.'' The

[[Page 14674]]

House Committee Report also states that ``[t]he Committee anticipates 
that the Commission will calculate interest payments based on the 
prevailing prime rate.'' The overall goal of the pioneer's preference 
provisions in the GATT legislation was to ``ensure that holders of a 
pioneer's preference pay an equitable amount for use of their 
spectrum.''
    7. Based on the language and legislative history, we conclude that 
the GATT legislation provides the Commission discretion to establish an 
interest rate for the Pioneer's payments that is ``in accordance with 
[our] regulations,'' and that the legislative history indicates that 
Congress intended that the Commission would use certain established 
guidelines in setting the rate; i.e., the ``general'' competitive 
bidding regulations and the prevailing prime rate. The Commission's 
general competitive bidding regulations establish guidelines for 
imposing installment payment plans for auctioned licenses. These rules 
provide the Commission, on a service-by-service basis, the flexibility 
to ``vary the interest rate and the payment schedule for installment 
payments.'' Specifically, Section 1.2110(e)(3) of the Commission's 
rules provides that, unless other terms are specified in the rules of 
particular services, installment plans will: (1) impose interest based 
on the rate of U.S. Treasury obligations (with maturities close to the 
duration of the license term); (2) allow installments to be paid over 
the full license term; (3) begin with interest-only payments for the 
first two years; and (4) amortize principal and interest over the 
remaining term of the license.
    8. In applying these general rules to specific services, the 
Commission has adopted a range of interest rates for installment plans 
based on the circumstances of the service and the objectives behind 
permitting installment payments--typically to small businesses. For 
example, in the Interactive Video and Data Service auction rules, the 
Commission adopted an interest rate for small business installment 
payments based on the five-year U.S. Treasury note rate. In the auction 
for narrowband PCS regional licenses, we permitted certain designated 
entities to pay installments at the 10-year U.S. Treasury Note rate, 
plus 2.5 percent. Our competitive bidding rules for frequency block C 
in broadband PCS (smaller Basic Trading Area licenses) make available 
three different interest rates depending on the economic size of the 
winning bidder: 10-year U.S. Treasury Note, plus 3.5 percent; 10-year 
U.S. Treasury Note, plus 2.5 percent; and 10-year U.S. Treasury Note. 
Eligibility for the lower, flat 10-year Treasury Note interest rate is 
limited to small businesses in the ``entrepreneurs' block'' auction. We 
have no specific installment payment rules for frequency blocks A and B 
in broadband PCS.
    9. For each of the Pioneer's installment payments, we have decided, 
within our discretion, to impose an interest rate equal to the five-
year Treasury Note, plus 2.5 percent, as of the date of adoption of 
this Order. We typically use the U.S. Treasury obligations of maturity 
equal to the license term because the license and payment terms are of 
the same duration. Here the license and payment term are different, and 
we will use the rate for U.S. Treasury obligations with maturity at the 
end of the payment term. Thus, starting with the five-year Treasury 
Note rate as a basis for the Pioneers' interest rate is consistent with 
the operation of our general installment payment rules and the GATT 
legislation.
    10. We add 2.5 percent to the base Treasury Note rate for several 
reasons. First, we believe that this interest rate will help fulfill 
the purpose of the GATT legislation by ensuring that the pioneer's 
preference recipients pay an ``equitable amount'' for use of the 
spectrum. Although the Pioneer's licenses were granted over 13 months 
ago, and one Pioneer has begun operating, none of the Pioneer's have 
paid for their use of the spectrum. In comparing similarly situated 
licensees, the Pioneers received a discount on the value of the license 
and can pay over time, supra para. 4, whereas the other A and B block 
licenses in broadband PCS were required to make their payments in full 
shortly after license grant. The Pioneers have been adequately rewarded 
for their innovations by receiving guaranteed licenses at discount. 
Second, this rate is below the prime rate benchmark referenced in the 
legislative history, which is currently 8.5 percent. Assuming that the 
prime rate is what the Pioneers would be able to obtain if private 
financing is sought, this rate for government financing of the license 
costs will further benefit the Pioneers, who will avoid the higher 
interest rates and other transactional costs associated with using 
private sources to finance their license payment. Finally, this 
approach to establishing an interest rate is fully consistent with our 
``general'' rules for imposing installment payment plans and our 
experience in fashioning an interest rate that best fits the 
circumstances.
    11. With respect to the actual interest rate, the five-year T-Note 
rate on the adoption date of this Order, with maturity in February of 
2001 (the closest to the duration of the payment term) is 5.25 percent. 
Accordingly, the amounts to be paid by the Pioneers will be subject to 
5.25 plus 2.5 percent, for a total interest rate of 7.75 percent. 
Interest will begin accruing as of the adoption of this Order.
D. Installment Payment Terms and Conditions
    12. As to the other aspects of the installment payments, the 
statute leaves us little discretion to establish different terms. As 
noted above and contrary to our ``general'' installment payment rules, 
the statute precludes the Commission from allowing installment payments 
for the duration of the 10-year license term. The GATT legislation 
specifically provides for a five-year payment period. In addition, like 
our general installment payment rules, interest-only payments are 
permitted for the first two years. Thereafter, unpaid principal balance 
and interest will be amortized over the remaining three years.
    13. The first interest payment will be due on April 8, 1996, thirty 
(30) days after the adoption of this Order. The first payments will be 
the following: APC--$660,968.69; Cox--$1,626,973.81; and Omnipoint--
$2,244,389.08. Thereafter the Pioneers' payments will be due on a 
quarterly basis on the last day of each quarter. Thus, the second 
payment will be due on April 30, 1996. The second payment will be the 
following: APC--$1,321,937.38; Cox--$3,253,947.62; and Omnipoint--
$4,488,778.16. The remaining payment dates and amounts are established 
in the attached schedule.
    14. In addition, the Pioneers' installment payments will be 
``guaranteed'' by their licenses. Consistent with our general 
competitive bidding rules, the Pioneers' licenses will continue to be 
conditioned upon the full and timely performance of their respective 
payment obligations under their installment plans. The license 
conditions will be modified to reflect the specific terms of the 
payments set forth above. If a Pioneer is more than ninety (90) days 
delinquent in any payment, it shall be deemed to be in default and the 
Commission's general rules will apply.
E. Omnipoint's Request for Special Installment Terms
    15. We have decided not to differentiate among the three Pioneers 
when establishing the installment

[[Page 14675]]
payment terms and not to compare their situation to that of applicants 
for the broadband PCS entrepreneurs' block licenses. Omnipoint recently 
suggested that the Commission's new rules for small business pioneers 
should be applied to it and has requested that its payment terms be as 
equivalent as possible to the block C small business installment 
payment plan. Omnipoint specifically asks for interest-only payments 
for five years and a single, lump-sum payment due at the end of the 
fifth year. We deny this request for the following reasons.
    16. First, we do not believe that the GATT legislation contemplates 
different treatment for the Pioneers or the type of deferred-principal 
payment plan requested by Omnipoint. As noted above, the text of the 
statute states that the installment payment terms shall be ``the 
payment only of interest on unpaid balances during the first 2 years * 
* * and * * * payment of the unpaid balance and interest thereon after 
the end of such 2 years in accordance with the regulations prescribed 
by the Commission.'' The House Commerce Committee Report's section-by-
section analysis says, ``[t]he pioneers shall pay interest only for the 
first two years, and interest and principal for the next three years, 
pursuant to the Commission's regulations.'' The House Report also 
states that payment of the principal and interest should be ``in a 
manner consistent with the installment payment rules adopted by the 
Commission as part of its general competitive bidding regulations.'' 
These rules referenced in the statute and the legislative history are 
found in Section 1.2110(e)(3) of the Commission's rules and state:
    Unless other terms are specified in the rules of particular 
services, such [installment] plans will
* * * * *
    (iii) begin with interest-only payments for the first two years; 
and
    (iv) amortize principal and interest over the remaining term of the 
license.
There are no Commission rules that would allow an entity making 
installment payments to wait until the end of the payment term to make 
one lump sum principal payment. We believe that the text of the statute 
and its legislative history, read in conjunction with the Commission's 
rules, shows that Congress intended that each Pioneer, including 
Omnipoint, shall begin paying principal in the third year.
    17. Second, we do not believe that Congress or the Commission's 
rule cited by Omnipoint contemplate a comparison of Omnipoint with the 
C-Block small business applicants. Congress determined in the GATT 
legislation that ````the most reasonably comparable licenses'' for 
purposes of determining the value of the Pioneers'' licenses were ``the 
broadband licenses in the personal communications service for blocks A 
and B for the 20 largest markets (ranked by population) in which no 
applicant has obtained preferential treatment.'''' The broadband PCS 
Pioneers' installment payments are governed by the provisions in 
Section 309(j)(13)(E) of the Act discussed above. Thus, our new rules, 
adopted pursuant to Section 309(j)(13)(C) of the Act, governing 
installment payments for future pioneer's preference recipients that 
are similarly situated to designated entities participating in an 
auction do not apply here.
    18. However, even if the new rules did apply to Omnipoint, we 
believe that Omnipoint has misconstrued the purpose of the rule it 
cites, which states ``a pioneer that qualifies as a designated entity 
will be eligible for installment payments under the same terms and 
conditions as other designated entities in that service. In the order 
adopting this rule, the Commission rejected a similar deferred payment 
proposal offered by Omnipoint. The Commission, instead, adopted its 
proposal ``that if an entity receiving a pioneer's preference would be 
eligible for installment payments in the auction for that service, the 
entity could pay for its pioneer's preference license in installments 
under comparable terms and conditions to similarly situated licensees 
over a period not to exceed five years. In the auction in which 
Omnipoint would have had to participate to obtain its MTA license, 
installment payments were not available to small businesses. While the 
auction rules in the broadband PCS ``service'' provide an installment 
payment option to small businesses obtaining smaller C-Block, BTA 
licenses, Omnipoint received a substantially larger A Block MTA license 
for its pioneer's preference. This situation was expressly contemplated 
when the Commission had earlier rejected Omnipoint's deferred payment 
proposal, stating, ``if a small business pioneer chooses, it may apply 
for a license in a service as a designated entity either in addition to 
or in lieu of its acceptance of a guaranteed pioneer's preference 
license.'' We note that an affiliate of Omnipoint's is currently 
actively participating in the C-block auction.
    19. Finally, as a policy matter, we have previously determined that 
the pioneer's preference rule and the rules for the entrepreneurs' 
blocks were designed to meet different goals. The Commission permitted 
entrepreneurs and small businesses to pay for their licenses in 
installments in order to assist businesses who are likely to have 
difficulty obtaining adequate financing to obtain licenses in a 
competitive bidding environment. We determined that installment 
payments would be an effective way to efficiently promote the 
participation of small businesses in the provision of broadband PCS. 
The pioneer's preference program, on the other hand, is designed to 
reward a particular entity for its innovative contributions to a new 
service by guaranteeing it a license, at a discounted price, without 
requiring it to participate in an auction. When we provided that future 
small business pioneers could obtain similar payment terms as similarly 
situated licensees, we did not intend to merge these two separate 
policy objectives. Rather, we clarify that, as a matter of fairness and 
convenience, a small business pioneers preference recipient should get 
the same or similar installment payment terms that are available to 
other small businesses that obtained comparable licenses in an auction.
F. Other Matters
    As a final matter, we note that, on September 22, 1995, a pleading 
styled ``Petition to Deny'' was filed against Omnipoint by Whitestone 
Wireless, L.P., Southern Personal Communications Systems, and Minco, 
P.C.S. The 30-day period to file petitions to deny against the Pioneers 
expired on September 26, 1994. Moreover, the GATT legislation states 
that the grant of Omnipoint's license and underlying pioneer's 
preference awards shall not be subject to administrative or judicial 
review. We therefore dismiss the Whitestone Petition as untimely and 
moot.
G. Payment Schedule Attention: Pioneer's Preference Recipients 
Broadband Personal Communications Service
    The first interest payment will be due on April 8, 1996, (30) 
thirty days after the adoption of this Order. The first payment will be 
the following: APC $660,968.69; Cox $1,626,973.81; Omnipoint 
$2,244,389.08. Thereafter, the Pioneer's payments will be due on a 
quarterly basis on the last day of each quarter. Thus, the second 
payment will be due on April 30, 1996. The second payment will be the 
following: APC $1,321,937.38; Cox $3,253,947.62; Omnipoint 
$4,488,778.16.
    The remaining payment dates and amounts are established in the 
attached

[[Page 14676]]
schedule. Mailed remittances must be actually received no later than 
April 8, 1996. Hand-carried or couriered remittances can be delivered 
up through 11:59 P.M. on Monday, April 8, 1996. Remittances received 
after 11:59 P.M. on Monday, April 8, 1996, will be considered late 
filed.
H. Instructions for the First and Second Installment Payments
    Payments must be made in U.S. dollars, must be in the form of a 
wire transfer or cashier's check, and must be made payable to the 
``Federal Communications Commission'' or ``FCC''. Installment payments 
whether being paid by wire transfer or cashier's check, must be 
accompanied by a completed FCC Remittance Advice, Form 159.

A. Form 159

    Pioneers must submit an FCC Form 159 when making any payments to 
the Commission's lockbox bank. Failure to accurately complete your FCC 
Form 159 could result in a delay in processing your remittance. Before 
completing an FCC Form 159, read the instructions below. Also, a 
correctly completed sample FCC Remittance Advice (Form 159) is 
attached.
    (1) You must complete all of the blocks in the Payor Information 
Section, (Blocks 1 through 10). It is extremely important that you 
enter your taxpayer identification number (TIN) in with a prefix of 
``0'' in block number 1. Blocks 2 through 10 are self explanatory.
    (2) You must complete the following blocks for each ``Item Number 
Information'' in accordance with the Instructions For Using FCC Form 
159 (but only if the names of the ``payor'' and the ``applicant'' are 
different): Block numbers 11, 13, 19, 20, and 21.
    (3) You must complete the following auction-specific information in 
blocks 12(A), 14(A), 15(A), 16(a) and 17(A). Block 12(A)--FCC Call 
Sign,enter your respective call sign; block 14(A)--Payment Type Code, 
enter the letters ``ACHD''; block 15(A)--Quantity, enter ``1''; block 
16(A)--Fee Due, enter the amount remitted; and block 17(A)--FCC Code 1, 
enter ``P''.

B. Paying by Cashier's Check

    Each cashier's check and corresponding FCC Remittance Advice (Form 
159) must be in an individual envelope and specifically addressed to: 
Mellon Bank, P.O. Box #358850, Pittsburgh, PA 15251-5850, Attn: Auction 
Payment. If delivering an auction payment in person or by courier, the 
check and FCC Remittance Advice (Form 159) must be delivered to Mellon 
Bank, Three Mellon Bank Center, 525 William Penn Way, 27th Floor, Room 
153-2713, Pittsburgh, PA 15259-0001, (Attn: Wholesale Lockbox Shift 
Supervisor).

C. Paying by Wire Transfer

    If making an auction payment by wire transfer, fax a completed FCC 
Remittance Advice (Form 159) to Mellon Bank at (412) 236-5702 at least 
one hour before placing the order for the wire transfer. On the cover 
sheet of the fax indicate ``Wire Transfer--Auction Payment for Auction 
Event # ``P''. When wiring funds, please give your bank the following 
information:
    ABA Routing Number: 043000261;
    Receiving Bank: Mellon Pittsburgh;
    BNF: FCC/AC--9116106;
    OBI Field: (Skip one space between each information item) 
``AUCTIONPAY'';
    FCC Account No. (Exactly as on Form 159, Block #1);
    Payor Name (Exactly as on Form 159, Block #3);
    Payment Type Code (Exactly as on Form 159, Block #14);
    FCC Code 1 (Exactly as on Form 159, Block #17.
    For further information, please contact Regina W. Dorsey, Chief, 
Billings and Collections Branch at (202) 418-1995 (voice) or (202) 418-
2843 (fax).

Remaining 19 Quarterly Payments

    Please see the attached Auction Installment Payment Program (AIP). 
Inside the program package you will find the Masterfile Maintenance 
Form (Page 19). Please read the package information and complete this 
form. Return the form to the address listed on the form. Beginning with 
payment number 2 (payment number one was split into two payments, both 
of which are due in the month of April) due July 31, 1996, use the AIP 
program.
III. Ordering Clauses
    20. Accordingly, it is ordered that, effective April 8, 1996, the 
payment condition on American Personal Communications' license, call 
sign KNLF200, is modified as follows:

    This authorization requires that American Personal 
Communications shall pay to the United States Treasury $102,343,539, 
plus interest, pursuant to the terms and procedures in the above 
schedule of payments (and accompanying instructions).

    21. It is further ordered that, effective April 8, 1996, the 
payment condition on Cox Cable Communications, Inc.'s license, call 
sign KNLF201, is modified as follows:

    This authorization requires that Cox Cable Communications, Inc. 
shall pay to the United States Treasury $251,918,526, plus interest, 
pursuant to the terms and procedures in the above schedule of 
payments (and accompanying instructions).

    22. It is further ordered that, effective April 8, 1996, the 
payment condition on Omnipoint Communications, Inc.'s license, call 
sign KNLF202, is modified as follows:

    This authorization requires that Omnipoint Communications, Inc. 
shall pay to the United States Treasury $347,518,309, plus interest, 
pursuant to the terms and procedures in the above schedule of 
payments (and accompanying instructions).

    23. It is further ordered that the pleading styled a ``Petition to 
Deny the Award of a Pioneer Preference License to Omnipoint 
Corporation'', filed by Whitestone Wireless, L.P., Southern Personal 
Communications Systems; and Minco P.C.S., on September 22, 1995, is 
hereby dismissed.

Federal Communications Commission.
William F. Caton,
Acting Secretary.
[FR Doc. 96-7965 Filed 4-2-96; 8:45 am]
BILLING CODE 6712-01-P