[Federal Register Volume 61, Number 182 (Wednesday, September 18, 1996)]
[Rules and Regulations]
[Pages 49066-49076]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 96-23939]


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FEDERAL COMMUNICATIONS COMMISSION

47 CFR Parts 1 and 95

[PP Docket No. 93-253; FCC 96-330]


Interactive Video and Data Service

AGENCY: Federal Communications Commission.

ACTION: Final rule.

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SUMMARY: The Sixth Memorandum Opinion and Order affirms the competitive 
bidding procedures adopted in the Fourth Report and Order, with several 
exceptions. Specifically, the Sixth Memorandum Opinion and Order 
proposes to: clarify the Commission's anti-collusion rules; permits use 
of simultaneous multiple round bidding for interactive video and data 
service (IVDS) auctions; and eliminates the tax certificate program 
available to investors in women- and minority-owned businesses in 
accordance with Congressional action. The Sixth Memorandum Opinion and 
Order also grants a petitioner's request that bidding credits be made 
available for both licenses in each IVDS service area. The intended 
effect of this action is to resolve petitions for reconsideration and

[[Page 49067]]

to clarify or modify the competitive bidding rules governing the 
methodology and procedure for auctions for IVDS licenses.

EFFECTIVE DATE: November 18, 1996.

FOR FURTHER INFORMATION CONTACT: Eric Malinen, Wireless 
Telecommunications Bureau, (202) 418-0680 or Christina Eads Clearwater, 
Wireless Telecommunications Bureau, (202) 418-0660.

SUPPLEMENTARY INFORMATION: This is a summary of the Commission's Sixth 
Memorandum Opinion and Order and Further Notice of Proposed Rule Making 
in PP Docket No. 93-253; FCC 96-330, adopted August 6, 1996 and 
released September 10, 1996. The complete text of the Sixth Memorandum 
Opinion and Order and Further Notice of Proposed Rule Making is 
available for inspection and copying during normal business hours in 
the FCC Reference Center (Room 239), 1919 M Street, N.W., Washington, 
D.C. and also may be purchased from the Commission's copy contractor, 
International Transcription Service, (202) 857-3800, 2100 M Street, 
N.W., Suite 140, Washington, D.C. 20037.
    Title: In the Matter of Implementation of Section 309(j) of the 
Communications Act--Competitive Bidding.

I. Sixth Memorandum Opinion and Order

    1. In the Fourth Report and Order, Implementation of Section 309(j) 
of the Communications Act--Competitive Bidding, PP Docket No. 93-253, 
59 FR 24947 (May 13, 1994), 9 FCC Rcd 2330 (1994), the Commission 
adopted competitive bidding rules for selecting between mutually 
exclusive applicants for IVDS spectrum. By Public Notices issued on May 
23, June 17, and July 5, 1994, the Commission provided additional 
information concerning the IVDS auctions.
    2. Petitioner Phase One argues that, because the Commission may 
only conduct an auction if there are mutually exclusive applications, 
it should not have established IVDS auction dates until mutual 
exclusivity had been determined. Petitioner also maintains that 
interested parties did not have adequate time to plan their competitive 
bidding strategy for the IVDS auction.
    3. The Commission disagrees with petitioner's assertion that the 
Commission may not establish auction dates or publicize auctions until 
it has determined that mutual exclusivity exists. While the Commission 
recognizes that it cannot conduct an auction for licenses for which 
there are not mutually exclusive applications, it notes that scheduling 
and announcing auction dates are no more than preparatory measures. The 
Fourth Report and Order, states, that in the event the Commission 
receives only one application that is acceptable for filing for a 
particular frequency segment, then the pre-scheduled auction would be 
cancelled. Moreover, the Commission conducted the July 1994 auction for 
IVDS licenses only after mutual exclusivity had been established in all 
markets. Thus, it concludes that the pre-auction application procedures 
ensure that spectrum auctions will be conducted only in those 
circumstances authorized by the Communications Act.
    4. The Commission also disagrees with allegations that its auction 
schedule did not provide applicants adequate time to prepare for the 
IVDS auction. The Commission received more than 500 applications by the 
June 27, 1994 filing deadline for short-form applications (FCC Form 
175). The large number of timely applications it received, along with 
its outreach efforts to disseminate information to the public about the 
IVDS auctions, through the initial May 23, 1994 Public Notice and 
subsequent public notices issued during the five week period prior to 
the filing deadline, evidence that a substantial number of parties 
found themselves aptly prepared to participate in the IVDS auction. As 
a result, the Commission finds petitioner's contention to be 
unpersuasive.
    5. In the Second Report and Order, Implementation of Section 309(j) 
of the Communications Act--Competitive Bidding, PP Docket No. 93-253, 
59 FR 22980 (May 4, 1994), 9 FCC Rcd 2348 (1994)(Second Report and 
Order), the Commission adopted rules prohibiting collusive conduct in 
the context of competitive bidding. See 47 CFR Sec. 1.2105(c); see also 
Second Memorandum Opinion and Order, 59 FR 44272 (August 26, 1994), 9 
FCC Rcd 7245, erratum, Mimeo No. 50278 (October 19, 1994)(Second 
Memorandum Opinion and Order). Specifically, the Commission determined 
that bidders would be prohibited from discussing the substance of their 
bids or bidding strategies with other bidders, unless such bidders are 
members of a bidding consortium or other joint bidding arrangement 
identified on their short-form application. It also required bidders to 
identify on their short-form applications all parties with whom they 
have entered into any consortium arrangements, joint ventures, 
partnerships or other agreements relating to the competitive bidding 
process. Second Report and Order. It also determined that auction 
applicants would not be permitted to make any ownership changes or 
changes in the identification of parties to bidding consortia once a 
short-form application is filed. Id.
    6. The Commission rejected Petitioner ITV's contention that the 
Commission lacks the authority under the Communications Act to preclude 
settlements between mutually exclusive applicants for licenses in 
auctionable services. While the Commission has an established policy of 
favoring settlements in some contexts, it is within its statutory 
authority to restrict settlements if the Commission finds such 
agreements would not be in the public interest. See, e.g., Report and 
Order, MM Docket No. 90-263, 6 FCC Rcd 85 (1990), modified in part, 
Memorandum Opinion and Order, MM Docket 90-253, 6 FCC Rcd 2901 (1991) 
(limiting settlements between mutually exclusive applicants for 
broadcast construction permits). At this time, the Commission finds 
that prohibiting settlements after the short form filing deadline 
between mutually exclusive applicants for the same license in the IVDS 
competitive bidding process is necessary to deter collusive conduct and 
ensure a competitive auction, and is thereby in the public interest. 
The anti-collusion rules also prevent entities from filing applications 
solely for the purpose of demanding payment from other bidders in 
exchange for settlement or withdrawal.
    7. Nevertheless, the Commission takes this opportunity to clarify 
certain aspects of the anti-collusion rules. 47 CFR Sec. 1.2105(c). It 
clarifies that the anti-collusion rules apply where one applicant has a 
common ownership interest with another applicant. Second Memorandum 
Opinion and Order. Specifically, unless the second applicant is 
expressly identified as an entity with whom the first applicant has an 
agreement concerning bidding, these parties may not communicate with 
each other concerning their bids or bidding strategies. This 
prohibition holds even where the other bidder is identified on the 
applicant's short-form application as having a common ownership 
interest with the applicant. Id. See also Public Notice, Wireless 
Telecommunications Bureau Clarifies Spectrum Auction Anti-Collusion 
Rules, DA 95-2244 (October 26, 1995); and further clarification in 
Order, Amendment of Parts 21 and 74 of the Commission's Rules with 
Regard to Filing Procedures in the Multipoint Distribution Service and 
in the Instructional Television Fixed Service and Implementation of 
Section 309(j) of the Communications

[[Page 49068]]

Act--Competitive Bidding, DA 95-2292 (released November 3, 1995). 
Further, consistent with the Wireless Telecommunications Bureau's 
(Bureau) approach in the Broadband PCS C Block auction, amendments to 
the short-form application must be filed with the Commission within ten 
business days of any such change. See Public Notice, Qualified Bidders 
and Bidding Instructions For December 18, 1995 Broadband PCS C Block 
Auction, Report No. AUC-95-05, Auction No. 5 at 3 (December 8, 1995).
    8. In the Second Report and Order, the Commission established the 
criteria to be used in selecting the competitive bidding methodology 
for each auctionable service. Generally, it concluded that awarding 
licenses to those parties that value them most highly will promote the 
rapid development and deployment of new services, and the efficient and 
intensive use of the spectrum. In the Fourth Report and Order, the 
Commission adopted an oral outcry competitive bidding methodology for 
auctioning 594 MSA licenses in IVDS. For the remaining RSA licenses, 
the Commission concluded that a sealed bid competitive bidding 
mechanism was appropriate. The Commission observed that both methods 
appear suited to IVDS because they are relatively inexpensive for the 
Commission to administer and the costs of bidder participation are 
fairly low. The Commission reserved discretion, however, to reconsider 
this competitive bidding design if, in view of its actual auctions 
experience, a change appears warranted.
    9. The Commission anticipates that it will auction the remaining 
IVDS licenses using the oral outcry method. It used this method 
successfully to auction 594 MSA licenses on July 28 and 29, 1994 and 
finds that auctioning IVDS licenses in this manner continues to serve 
the public interest. The Commission amends its IVDS rules, however, to 
permit use of simultaneous multiple round bidding as well. This method, 
with its remote bidding capabilities, has been successful in PCS, 
Multipoint and/or Multichannel Distribution Service (MDS), and 900 MHz 
Specialized Mobile Radio (900 MHz SMR) auctions. As the Commission 
continues to gain experience in conducting simultaneous multiple round 
auctions, the costs associated with this methodology decline. As a 
result, the Commission reserves the option of using a simultaneous 
multiple round auction methodology for future IVDS auctions. It 
delegates authority to the Bureau to announce the type of auction and 
the procedures by public notice.
    10. In the event that the Commission uses the simultaneous multiple 
round auction methodology, it will specify minimum bid increments. See 
Second Report and Order. The bid increment is the amount or percentage 
by which the bid must be raised above the previous round's high bid in 
order to be accepted as valid in the current bidding round. The 
application of a minimum bid increment speeds the auction progress and, 
along with activity and stopping rules, helps to ensure that the 
auction closes within a reasonable period of time. Establishing an 
appropriate minimum bid increment is important in a simultaneous 
auction with a simultaneous closing rule, because all markets remain 
open until there is no bidding on any license and a delay in closing 
one market will delay the closing of all markets.
    11. If the Commission elects to use simultaneous multiple round 
auctions, it will conduct the auction in three stages and start the 
auction with large bid increments, reducing the increments as bidding 
activity falls. The minimum bid increment in Stage I of the auction 
will be 5 percent of the high bid in the previous round or $.02 per 
bidding unit, whichever is greater. The Commission will reduce the 
minimum bid increment as the auction moves through its stages, with a 
minimum bid increment of the greater of two percent or $.01 per bidding 
unit in Stage II, and the greater of one percent or $.005 per bidding 
unit in Stage III. The Commission, however, retains the discretion in 
IVDS auctions to vary the minimum bid increments for individual 
licenses, or groups of licenses, at any time before or during the 
course of an auction. The Commission delegates to the Bureau the 
authority to exercise such discretion. See 47 CFR Sec. 0.331; see also 
Order, Amendment of Part 0 of the Commission's Rules to Reflect a 
Reorganization Establishing the Wireless Telecommunications Bureau and 
to Make Changes in the Delegated Authority of Other Bureaus, 60 FR 
35503 (July 10, 1995), 10 FCC Rcd 12751 (1995).
    12. If the Commission decides to use simultaneous multiple round 
bidding for the IVDS auction, it intends to use a simultaneous stopping 
rule. Because of the large number of licenses likely to be auctioned at 
once, however, it will retain the discretion either to use a hybrid 
stopping rule or to allow bidding to close individually for these 
licenses. The specific stopping rule to conclude bidding on IVDS 
licenses will be announced by Public Notice prior to auction. The 
Commission also retains the discretion to declare at any point after 40 
rounds that the auction will end after some specified number of 
additional rounds. The Commission believes this number of rounds will 
ensure that the auction will not close prematurely, while providing 
bidders with fair assurance that the auction will be conducted as 
intended. See Fifth Report and Order, 59 FR 37566 (July 22, 1994), 9 
FCC Rcd 5532 (1994). Bids will be accepted only on licenses where the 
high bid has increased in the last three rounds. This will deter 
bidders from continuing to bid on a few low value licenses solely to 
delay the closing of the auction. It will also enable the Commission to 
end the auction when it determines that the benefits of terminating the 
auction and issuing licenses exceed the likely benefits of continuing 
to allow bidding. The Commission will announce by Public Notice the 
number of remaining rounds and other final bidding procedures. The 
Commission delegates to the Bureau the authority to exercise such 
discretion.
    13. Duration of Bidding Rounds. In simultaneous multiple round 
auctions, bidders may need a certain amount of time to evaluate back-up 
strategies and develop their bidding plans. In the event the Commission 
uses the simultaneous multiple round auction methodology, it delegates 
to the Bureau the discretion to vary the duration of the bidding rounds 
or the interval at which bids are accepted (e.g., run more than one 
round per day) in order to move the auction toward closure more 
quickly. The Bureau will announce any changes to the duration of, and 
intervals between, bidding rounds, either by Public Notice prior to the 
auction or by announcement during the auction.
    14. As discussed above, in order to ensure that simultaneous 
auctions with simultaneous stopping rules close within a reasonable 
period of time and to increase the information conveyed by bid prices 
during the auction, it is necessary to impose an activity rule to 
prevent bidders from waiting until the end of the auction before 
participating. In the Second Report and Order, the Commission adopted 
the Milgrom-Wilson activity rule as its preferred activity rule where a 
simultaneous stopping rule is used. The Milgrom-Wilson approach 
encourages bidders to participate in early rounds by limiting their 
maximum participation to some multiple of their minimum participation 
level. Bidders are required to declare their maximum eligibility in 
terms of bidding units, and to make an upfront payment proportional to 
that eligibility level. In each round, bidders are limited

[[Page 49069]]

to bidding on licenses encompassing no more than the number of bidding 
units covered by their upfront payment. Licenses on which a bidder is 
the high bidder at the end of the withdrawal period in the previous 
round, as well as licenses on which a new valid bid is placed, count 
toward this limit. Under this approach, bidders have the flexibility to 
shift their bids among any license for which they have applied so long 
as, within each round, the total bidding units encompassed by those 
licenses does not exceed the total number of bidding units on which 
they are eligible to bid.
    15. In general, the auction will start in Stage I and move to Stage 
II if the auction activity level is below 10 percent for three 
consecutive rounds in Stage I, and move from Stage II to Stage III if 
the auction activity level is below five percent for three consecutive 
rounds in Stage II. In no case can the auction revert to an earlier 
stage. However, the Commission retains the discretion to announce 
during the course of an auction when, and if, the auction will move 
from one auction stage to the next. These determinations will be based 
on a variety of measures of bidder activity including, but not limited 
to, the auction activity level defined above, the percentage of 
licenses (measured in terms of bidding units) on which there are new 
bids, the number of new bids, and the percentage increase in revenue. 
The Commission delegates to the Bureau the authority to exercise such 
discretion.
    16. To avoid the consequences of clerical errors and to compensate 
for unusual circumstances that might delay a bidder's bid preparation 
or submission on a particular day, the Commission will provide bidders 
with five activity rule waivers that may be used in any round during 
the course of the auction. If a bidder's activity level is below the 
required activity level a waiver automatically will be applied. That 
is, if a bidder fails to submit a bid in a round, and its activity 
level from any standing high bids (high bids at the end of the bid 
withdrawal period in the previous round) falls below its required 
activity level, a waiver will be applied automatically. A waiver will 
preserve current eligibility in the next round, but cannot be used to 
correct an error in the amount bid. An activity rule waiver applies to 
an entire round of bidding and not to a particular MSA or RSA service 
area.
    17. Bidders will be afforded an opportunity to override the 
automatic waiver mechanism when they place a bid, if they intentionally 
wish to reduce their bidding eligibility and do not want to use a 
waiver to retain their eligibility at its current level. If a bidder 
overrides the automatic waiver mechanism, its eligibility will be 
reduced permanently (according to the formulas specified above), and it 
will not be permitted to regain its bidding eligibility from a previous 
round. An automatic waiver invoked in a round in which there are no 
valid bids will not keep the auction open. Bidders will have the option 
to enter an activity rule waiver proactively during the bid submission 
period. Thus, a ``proactive'' waiver, as distinguished from an 
automatic waiver, is one requested by the bidder. If a bidder submits a 
proactive waiver in a round in which no other bidding activity occurs, 
the auction will remain open.
    18. If a simultaneous multiple round auction is employed, the 
Commission retains the discretion to issue additional waivers during 
the course of an auction for circumstances beyond a bidder's control 
and delegates to the Bureau the authority to exercise such discretion. 
The Bureau also retains the flexibility to adjust, by Public Notice 
prior to an auction, the number of waivers permitted, or to institute a 
rule that allows one waiver during a specified number of bidding rounds 
or during specified stages of the auction.
    19. A waiver may be submitted either in the round in which bidding 
falls below the minimum required level to maintain (for the next round) 
the same eligibility as in that round, or prior to submitting a bid in 
the next round. If an activity rule waiver is entered in a round in 
which no other bidding activity occurs, the auction will remain open. 
However, an activity rule waiver entered after a round in which no 
other bidding activity occurs will not reopen the auction. In addition, 
to help ensure that the auctions are not closed prematurely, the 
Commission will retain the discretion to keep an auction open even if 
no new acceptable bids and no proactive waivers are submitted in a 
single round. In such an instance, the Commission would, in effect, be 
submitting its own proactive waiver, thus keeping the auction open. At 
such time, the Commission could also advance to larger bid increments, 
speeding the pace of the auction.
    20. If the Commission chooses to use a simultaneous multiple round 
auction methodology, it intends to apply bid withdrawal provisions. In 
the Second Report and Order, the Commission determined that bid 
withdrawal provisions were needed to discourage insincere bidding. The 
Commission observed that insincere bidding, whether frivolous or 
strategic, distorts the price information generated by the auction 
process and reduces its efficiency. Accordingly, the Commission adopts 
the bid withdrawal provisions established in the Second Report and 
Order. 47 CFR Sec. 1.2104(g)(1). Pursuant to these rules, any bidder 
who withdraws a high bid during an auction will be required to 
reimburse the Commission the amount of the difference between its high 
bid and the amount of the winning bid the next time the license 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. If a license is 
reoffered by auction, the ``winning bid'' refers to the high bid in the 
auction in which the license is reoffered. If a license is reoffered in 
the same auction, the winning bid refers to the high bid amount, made 
subsequent to the withdrawal, in that auction. If the subsequent high 
bidder also withdraws its bid, that bidder will be required to pay an 
amount equal to the difference between its withdrawn bid and the amount 
of the subsequent winning bid the next time the license is offered by 
the Commission. If a license which is the subject of withdrawal is not 
re-auctioned but is instead offered to the highest losing bidders in 
the initial auction, the ``winning bid'' refers to the bid of the 
highest bidder who accepts the offer. Losing bidders would not be 
required to accept the offer, i.e., they may decline without penalty. 
The payment amount will be deducted from any upfront payments or down 
payments that the withdrawing bidder has deposited with the Commission. 
[But see Order, Atlanta Trunking Associates, Inc. v. MAP Wireless 
L.L.C. Requests to Waive Bid Withdrawal Payment Provisions, FCC 96-203, 
(released May 3, 1996) (summarized in 61 FR 25807 (May 23, 1996)), 
recon. pending; the Atlanta Trunking guidelines were formally 
incorporated into and adopted by Report and Order, 61 FR 33859 (July 1, 
1996), FCC 96-278 (released June 24, 1996) which amended Sec. 24.704 of 
the competitive bidding rules.]
    21. In establishing its auction methodology for IVDS, the 
Commission set forth several provisions to ensure that winning bidders 
have the resources needed to obtain their licenses and construct their 
systems and to discourage insincere bidding. In the Fourth Report and 
Order, the Commission required applicants to show a cashier's check in 
the amount of $2,500 for each five licenses sought in order to obtain a 
bidding number and

[[Page 49070]]

participate in the auction. Immediately following the auction, winning 
bidders were required to submit a $2,500 upfront payment for every five 
licenses won. The Commission anticipated that this amount would ensure 
that only serious, qualified applicants would be eligible to bid at 
auction. In addition, it required winning bidders to make a substantial 
down payment within five business days after the close of bidding. 
Generally, the Commission required that the down payment be sufficient 
to bring the winning bidder's total deposit with the Commission up to 
20 percent of the amount bid. Small business applicants were permitted 
to pay 10 percent at that time and the remaining 10 percent within five 
days of the grant of the license.
    22. Petitioner ITV requests that the Commission refund upfront 
payment amounts to the extent that they not only cover, but exceed, the 
required down payment. Petitioner maintains that this policy would 
ensure that winning bidders are not penalized by prevailing with a low 
bid. Petitioner alleges that this modification is especially important 
to applicants that qualify as a small business, who need to conserve 
their financial resources for other auctions, and when the Commission 
cannot pay interest on collected funds.
    23. The Commission grants the petition on this issue. The 
Commission agrees with petitioner that winning bidders should not be 
penalized because their winning bid was lower than the amount the 
upfront payment would suggest. The Commission will issue a refund to 
any qualified applicants after determining that no bid withdrawal or 
default payments are owed. Due to administrative constraints, however, 
the Commission will not honor requests that any excess amount be 
retained and applied toward later payments or obligations. Additional 
instructions for obtaining a refund will be provided in a Bidder 
Information Package prior to auction.
    24. In the Fourth Report and Order, the Commission adopted default 
payments to discourage insincere bidding and to compensate the 
government for the cost of reauctioning a license. Specifically, the 
Commission determined that the defaulting auction winner would be 
assessed an additional payment of three percent of the subsequent 
winning bid or three percent of its own bid, whichever is less.
    25. Petitioner ITV requests that, where the new bid on a license 
(upon reauction) exceeds the defaulting applicant's bid by 3 percent or 
more, no default payment be applied. In the event that the subsequent 
bid exceeds the defaulting bid by less than 3 percent, petitioner 
requests that the defaulting applicant should only be responsible for 
payment of the difference between the subsequent winning bid and 103 
percent of the defaulting applicant's bid. Petitioner maintains that 
this proposal will prevent any windfall to the U.S. Treasury.
    26. The Commission believes that its existing default provisions 
serve an important purpose by helping to deter insincere or speculative 
bidding, and providing an incentive for bidders wishing to withdraw 
their bids to do so before bidding ceases. In the Second Report and 
Order, the Commission observed that it is appropriate to create such an 
incentive because a withdrawal that occurs after an auction closes 
(default) is likely to be more harmful than one that occurs before 
closing. The Commission noted, for example, that default reduces the 
likelihood that licenses will be assigned to those who value them the 
most and imposes additional costs on the government. Therefore, it 
determined that an additional 3 percent payment would discourage 
bidders from defaulting on licenses won at auction. The Commission 
continues to believe that this amount is appropriate and will 
reasonably compensate the government for costs associated with 
reauctioning the license. Thus, petitioner's proposal is rejected.
    27. In the Fourth Report and Order, the Commission established 
several special provisions to ensure that designated entities, i.e., 
small businesses, rural telephone companies, and businesses owned by 
members of minority groups and women, are given the opportunity to 
participate both in the competitive bidding process for, and in the 
provision of, IVDS. The Commission's rules provide that on one of the 
two licenses in each market, a 25 percent bidding credit would be 
awarded to a winning bidder that is a business owned by women or 
minorities. 47 CFR Secs. 95.816(d)(1). It declined to provide bidding 
credits to rural telephone companies, however, because the Commission 
concluded that the relatively modest build-out costs for systems in 
this service would make such special provisions unnecessary to ensure 
that they had the opportunity to participate in the provision of IVDS 
offerings to rural areas. The Commission also made tax certificates 
available to initial investors in minority and women-owned businesses, 
and to licensees that transfer their authorizations to minority and 
women-owned enterprises. Id. Finally, because installment payments are 
an effective way to promote the participation of designated entities 
and to distribute licenses and services among geographic areas, and 
because use of IVDS spectrum is very likely to match the business 
objectives of bona fide small businesses, the Commission allowed small 
businesses to pay for their licenses using installment payments. Id.
    28. Also, to ensure that its special provisions for designated 
entities would benefit only the parties to whom they were directed, the 
Commission adopted ``unjust enrichment'' provisions designed to 
discourage trafficking in licenses obtained using these special 
provisions. 47 CFR Secs. 1.2111, 95.816(e). For example, the unjust 
enrichment provisions require reimbursement of the bidding credit plus 
interest when the licensee assigns or transfers the license to a 
business not owned by minorities and/or women. In addition, the 
Commission requires small business licensees to pay back the full 
amount of the remaining principal balance upon transfer or assignment 
of a license to a non-qualifying entity. 47 CFR Sec. 1.2110(c).
    29. Petitioner ITV requests that a bidding credit be made available 
for both licenses in each IVDS service area. Petitioner asserts that 
the Commission did not adequately explain why it restricted the use of 
bidding credits to one license per service area, and that any interest 
in ``maximizing'' auction revenue would be contrary to statutory 
authority.
    30. The Commission grants the petition on this issue. In the Fourth 
Report and Order, the Commission stated that providing bidding credits 
in the IVDS auctions was ``necessary to provide [the pertinent] 
designated entities with a significant enough advantage to ensure their 
ability to compete successfully for some IVDS licenses.'' Fourth Report 
and Order. The Commission notes, however, that it is not required to 
provide all potential special provisions to all designated entities in 
all auction contexts. The Commission also notes, contrary to 
petitioner's assertions, that it did not limit the application of 
bidding credits to only half of the available licenses solely to 
maximize auction revenues, but rather considered many other factors. 
The Commission chose to make bidding credits available to only half of 
the available licenses, rather than all of them, because the Commission 
believed that this substantial level of assistance, coupled with the 
special provision of tax certificates, fulfilled its statutory mandate 
to ensure that businesses owned by minorities and/or women would have a 
meaningful opportunity to

[[Page 49071]]

participate in the competitive bidding process for, and in the 
provision of, IVDS offerings. The Commission notes that these 
provisions achieved a high degree of designated entity participation in 
the initial IVDS auction. Of the 594 licenses, 195 (32.8%) were won by 
bidders claiming minority-owned status, 282 (47.5%) by bidders claiming 
woman-owned status, and 557 (93.8%) by bidders claiming small business 
status. Since that time, however, the tax certificate program has been 
discontinued by Congress, and, as discussed infra, the Commission is 
reconsidering the eligibility criteria for bidding credits in the IVDS 
context in light of the Supreme Court's recent decision in Adarand. 
Accordingly, to the extent bidding credits are retained for IVDS, the 
Commission will provide bidding credits for both licenses in each 
service area. In view of the discontinuation of the tax certificate 
program, the Commission believes that extending the bidding credit to 
both licenses is appropriate to increase the participation 
opportunities available for designated entities.
    31. The Commission eliminates the tax certificate program available 
to investors in women-and minority-owned firms. The Commission adopted 
the tax certificate program in the Fourth Report and Order pursuant to 
authority granted in 26 U.S.C. Sec. 1071. Congress has since repealed 
Section 1071. As a result, the Commission is compelled to eliminate the 
tax certificate provision in the IVDS rules.
    32. Petitioner ITV asserts that the unjust enrichment provision for 
the transfer of a license obtained using bidding credits should not 
apply when the license is assigned or transferred at a loss. Petitioner 
also asserts that, when the license is profitably assigned or 
transferred, the forfeiture should be based on profits directly 
attributable to the license, rather than on the government's cost in 
providing the bidding credit.
    33. The petition is denied on this issue. The Commission does not 
believe that the unjust enrichment provisions should take into account 
the profits or losses of particular businesses. The recapture 
provisions are designed not only to repay the government for the cost 
of the benefit conferred, but also to ensure that the special 
provisions adopted for designated entities benefit the parties to whom 
they were directed. Special treatment of designated entities is 
intended to further the statutory policy of ensuring that these 
entities have the opportunity to participate in spectrum-based 
services. The repayment provisions the Commission adopted help to 
promote the long-term holding of licenses by those parties benefitting 
from bidding credits and installment payment provisions.
    34. Petitioners RCA and USIN request that rural telephone companies 
be provided all the special provisions extended to small businesses and 
businesses owned by women or minorities. They assert that the 
Communications Act requires that special provisions be provided to 
rural telephone companies, and that, without bidding credits and other 
special provisions, it is unlikely that IVDS offerings will be 
available in rural areas. They further assert that it will take more 
than build-out capability for rural telephone companies to provide IVDS 
offerings. They maintain the financial ability is required to obtain 
the license at auction in the first place.
    35. The petitions are denied on this issue. As noted supra, the 
Commission has discretion to tailor the use of special provisions as 
necessary for each particular service. For IVDS, the Commission expects 
that the cost of winning licenses and subsequently building-out systems 
will be relatively modest, compared to the costs associated with other 
services subject to auctions. Petitioner notes that the Fourth Report 
and Order lacks discussion of the expected actual build-out costs of 
IVDS systems and the economic characteristics of rural telephone 
companies. While the Commission cannot yet determine with precision any 
average cost figures for building and operating an IVDS system, it is 
familiar with the technical and operational parameters of the service, 
and believes its assumption is reasonable that build-out costs will be 
modest relative to such costs for other auctionable services. In 
addition, the Commission has previously assessed the economic 
characteristics of rural telephone companies in this proceeding. As a 
result, the Commission expects that rural telephone companies, even 
without special provisions, will be able to compete effectively both 
during the auction and in providing service.
    36. With respect to bidding credits, as discussed infra, the 
Commission is proposing to eliminate bidding credits for minority and 
women-owned businesses and extend a 25 percent bidding credit to small 
businesses only. A rural telephone company would be eligible for the 
bidding credit to the extent that it also qualifies as a small 
business. The Commission also affirms its decision not to provide 
installment payments for those rural telephone companies that are not 
also small businesses. The Commission continues to believe that 
qualification for installment payments should be limited to businesses 
that qualify as small.
    37. Further, the Commission anticipates that rural areas will be 
served despite the lack of special provisions for rural telephone 
companies, because other companies can also serve these areas at 
relatively low cost. While rural telephone companies possess 
infrastructure that might place them initially at an advantage over 
other applicants intending to serve rural areas, they do not, in the 
IVDS context, require an additional advantage in the form of a separate 
special provision before it is economically advantageous for them to 
serve rural customers. Whether or not the Commission establishes 
special provisions in this context is not why rural telephone companies 
will elect to provide or not provide service to these rural areas. 
Therefore, consistent with the Fourth Report and Order, the Commission 
denies petitioners' request that it adopt special provisions 
specifically for rural telephone companies.
    38. Audits. Since the initial IVDS auction, the Commission has 
revised the short-form application to place applicants on notice of the 
Commission's authority to audit licensees and license applicants. See 
Public Information Collection Requirement Submitted to Office of 
Management and Budget for Review. The Commission believes the use of 
audits and other enforcement tools is necessary to maintain the 
integrity of the self-certification process it has used to the 
designated entity provisions. The Commission has specified this 
authority in its revised IVDS rules.
    39. Long-Form Application. While IVDS applicants have previously 
provided their financial information by filing Form 574 as their long-
form application, the Commission now requires that they use Form 600. 
See Notice of Public Information Collections Submitted to OMB for 
Review and Approval, 61 FR 3699 (February 1, 1996). While Form 600 
contains certain instructions that IVDS applicants would be instructed 
to ignore, it is a more complete form than the current Form 574.
    40. Divestiture Provisions. In establishing rules for IVDS, the 
Commission concluded that the best way to promote competition in the 
IVDS marketplace is to make at least two licenses available in each 
market. Notice of Proposed Rule Making, GEN Docket No. 91-2, 56 FR 
10222 (March 11, 1991), 6 FCC Rcd 1368, 1371 (1991). The Commission's 
rules therefore

[[Page 49072]]

prohibit an IVDS licensee from acquiring an interest in another IVDS 
license in the same service area where it is licensed. 47 CFR 
Sec. 95.813(b)(2). The Interactive Television Association (ITA) 
requests that the Commission initiate a rule making proceeding to 
eliminate this ownership restriction and permit one licensee to own 
both licenses in a market. Petitioner ITA maintains that, in view of 
several telephone and cable companies' interest in interactive 
television, these rules are no longer needed to promote competition. 
The Commission declines to grant this petition for rule making at this 
time. The Commission observes that the interactive television 
marketplace is in a relatively early state of competition. Moreover, 
allowing a single entity to acquire both licenses in a service area 
would limit the opportunity for other potential competitors to emerge. 
Such a result is inconsistent with Congress' mandate to facilitate the 
dissemination of licenses among a wide variety of applicants. 47 U.S.C. 
309(j)(3)(B).
    41. On its own motion, the Commission also clarifies that, where 
unintended common attributable ownership interests exist between two 
license winners in an IVDS service area, an applicant will be permitted 
to divest itself of the prohibited common ownership within 90 days 
after license grant. Assuming that the applicant is otherwise 
qualified, the Commission will conditionally grant the license if the 
winning applicant has submitted a signed statement with its long-form 
applications stating its intent to divest. The licensee must then 
certify its compliance when timely achieved. In addition, in the event 
that a licensee seeks to bid on another license in its market at a 
future auction, it may request a waiver of the common ownership 
prohibition to bid on the other license. If the licensee then wins the 
second license, the licensee must divest itself of its existing license 
within 90 days of the grant of the second and is responsible for all 
penalty or other amounts that result from these transactions. Any 
licensee desiring such a waiver should submit its statement and request 
as an attachment to its short-form application.

II. Procedural Matters

    42. Pursuant to the Regulatory Flexibility Act of 1980, 5 U.S.C. 
Sec. 604, the Commission's final analysis for the Sixth Memorandum 
Opinion and Order is as follows:
    43. Need for and purpose of this action. As a result of new 
statutory authority, the Commission may utilize competitive bidding 
mechanisms in the granting of certain initial licenses. The Commission 
published an Initial Regulatory Flexibility Analysis, see generally 5 
U.S.C. Sec. 603, within the Notice of Proposed Rule Making in this 
proceeding (at 8 FCC Rcd 7635, Appendix at 7666 (1993)), and published 
Final Regulatory Flexibility Analyses within the Second Report and 
Order and the Fourth Report and Order. As noted in these previous final 
analyses, this proceeding will establish a system of competitive 
bidding for choosing among certain applications for initial licenses, 
and will carry out statutory mandates that certain designated entities, 
including small entities, be afforded an opportunity to participate in 
the competitive bidding process and in the provision of spectrum-based 
services.
    44. Summary of the issues raised by the public comments in response 
to the Initial Regulatory Flexibility Analysis. As this is an Order on 
Reconsideration, there is no initial regulatory flexibility analysis to 
which petitioners are responding. There were no petitions which 
discussed the final regulatory flexibility analysis in the underlying 
order.
    45. Significant alternatives considered. Although no comments were 
received pertaining to IVDS, the Second Report and Order and Fourth 
Report and Order addressed at length the general policy considerations 
raised as a result of the Commission's new auction authority.
    46. With respect to the Memorandum Opinion and Order reconsidering 
the rules, a Final Regulatory Flexibility Analysis (FRFA), in 
compliance with 5 U.S.C. Section 801, is provided as follows.
    47. This action reconsiders rules previously adopted by the 
Commission and is authorized under Section 405 of the Communications 
Act, 47 U.S.C. Sec. 405. Because the action is not generated by a 
Notice of Proposed Rule Making, there is no applicable Initial 
Regulatory Flexibility Act analysis to which it responds. However, the 
Commission's Final Regulatory Flexibility Analysis (FRFA) in this Order 
conforms to the RFA, as amended by the Contract with America 
Advancement Act of 1996 (CWAAA), Public Law No. 104-131, 110 Stat. 847 
(1996).

A. Need for and Objective of the Rules

    48. This Order adopts rule changes regarding the Commission's 
auction of Interactive Video and Data Service (IVDS) licenses. The rule 
changes are appropriate because laws have changed since the rules were 
originally adopted which invalidate some of the provisions, because the 
Supreme Court decision in Adarand Constructors, Inc. v. Pena, 115 S.Ct. 
2097 (1995), has affected the Commission's decisions regarding the 
level of legal scrutiny that must be met by some of its designated 
entity provisions, and because petitions for reconsideration of earlier 
orders have caused us to review the rules in a new light. The objective 
of the Order is to bring the benefit of the Commission's experience 
since the first IVDS auction to subsequent IVDS auctions and to make 
opportunities available to small businesses to operate in the service. 
The most significant changes being made are: to allow IVDS licenses to 
be auctioned using a simultaneous multiple round auction methodology; 
to eliminate the tax certificate program for licensees; and to extend 
bidding credits to both licenses in each IVDS market.

B. Summary of Issues Raised by Public Comment on the Initial Regulatory 
Flexibility Analysis

    49. As this is an Order on Reconsideration, there is no initial 
regulatory flexibility analysis to which petitioners are responding. 
There were no petitions which discussed the final regulatory 
flexibility analysis in the underlying order.

C. Projected Reporting, Recordkeeping and Other Compliance Requirements 
of the Rules

Authorizing Use of Simultaneous Multiple Round Auctions
    50. The Commission, on its own motion, is adopting a rule which 
will permit IVDS licenses to be auctioned using a simultaneous multiple 
round auction in addition to oral outcry auctions. The Commission is 
recommending the use of an oral outcry auction for the RSA and re-
auctioned licenses, but it is trying to add flexibility in the event 
that a simultaneous multiple round auction would be more appropriate at 
some later point. A simultaneous multiple round auction will allow 
remote access to bidding software, auction information, bid submission 
and results. This will make it easier for small business operators to 
participate in an auction without leaving their places of business. 
Also, it will make information concerning the status of the auction 
easier to access, which will reduce the administrative burden on 
participants in the auction. There are no other reporting, 
recordkeeping or compliance changes which would result from this rule 
change.

[[Page 49073]]

Elimination of the Tax Certificate Program
    51. The Commission had authority under Title 26 of the United 
States Code, 26 U.S.C. Sec. 1071, to issue tax certificates to benefit 
women and/or minority owned businesses. In 1995, the Congress repealed 
section 1071. This rule is being eliminated to comply with the tax 
code.
Bidding Credits Extended to Both Licenses in Each MSA
    52. The Commission originally wrote its rules to permit a bidding 
credit to be awarded to only one auction winner in each MSA. 
Originally, a minority- or woman-owned business designated entity 
auction winner who did not receive a bidding credit was free to 
transfer its license and gain the benefits of a tax certificate. The 
auction winner who received a bidding credit was subject to unjust 
enrichment penalties if it transferred the license. The tax certificate 
acted as the equivalent of a bidding credit, helping an auction winner 
attract capital. If the auction winner's license was transferred to a 
designated entity, or the winner is a designated entity, the tax 
certificate would provide a financial incentive for transacting 
business with the designated entity. In the absence of a tax 
certificate program, small businesses with gross revenues under the 
requisite levels will be eligible for a bidding credit on both licenses 
in the MSA. The companies eligible for these bidding credits will have 
to provide information to the Commission which establishes that they 
meet the qualifications to receive the bidding credit. This reporting 
requirement is necessary to avoid fraud on the public.
Long Form Application Changed to Form 600
    53. Applicants were required to submit financial information 
regarding their qualification to hold a license on an FCC Form 574. The 
Commission has secured approval by the Office of Management and Budget 
for the use of the FCC Form 600. This form collects more accurate and 
complete financial information regarding applicants. As a result, it 
helps the Commission ensure that the applicants for licenses are fully 
qualified to hold licenses, reducing the amount of time that radio 
spectrum would sit unused, if it were subject to legal dispute.
Winning Bidders May Receive Upfront Payment Refund
    54. One petitioner, ITV, requested that when upfront money on 
deposit exceeded the amount necessary for a winning bidder to make its 
down payment the excess funds be refunded to the bidder. The Commission 
granted the request to change its rules to alleviate one source of 
financial constraints on small businesses. This will not result in any 
changed reporting or recordkeeping. It could reduce the need to secure 
additional interim financing.
    55. All of these changes were made to encourage the participation 
of designated entities in the auctions of IVDS licenses, as Section 
309(j) of the Communications Act requires.

D. Description and Estimate of Small Entities Subject to the Rules

    56. The proposed changes in the regulations would affect a number 
of entities both large and small. The Commission was directed by the 
Communications Act, 47 U.S.C. 309(j) to make provisions to ensure that 
smaller businesses, and other designated entities, have an opportunity 
to participate in the auction process. To fulfill this statutory 
mandate, these proposed rules are designed to attract participation by 
the small entities. The small businesses who will be subject to the 
rules would be those which choose to operate interactive video and data 
services, a class of wireless communications services with a wide 
variety of uses. The services will generally be offered to consumers 
who wish to subscribe to those services.
    57. IVDS is a communications based service subject to regulation as 
a wireless provider of pay television services under Standard 
Industrial Classification 4841 (SIC 4841), which covers subscription 
television services. The Small Business Administration (SBA) defines 
small businesses in SIC 4841 as businesses with annual gross revenues 
of $11 million or less. 13 CFR Sec. 121.201. In this, the Commission 
proposes to extend special provisions to small businesses with annual 
gross revenues of $15 million or less and additional benefits to very 
small businesses with annual gross revenues of $3 million or less. The 
Commission observes that this proposal is consistent with its approach 
in other wireless services, see e.g., the 900 MHz specialized mobile 
radio service, and is narrowly tailored to address the capital 
requirements for IVDS. The Commission is soliciting SBA approval for 
the small business definitions for this and other auctionable services.
    58. The Commission estimate of the number of small business 
entities subject to the rules begins with the Bureau of Census report 
on businesses listed under SIC 4841, subscription television services. 
The total number of entities under this category is 1,788. There are 
1,463 companies in the 1992 Census Bureau report which are categorized 
as small businesses providing cable and pay TV services. The Commission 
knows that many of these businesses are cable and television service 
businesses, rather than IVDS licensees. Therefore, the number of small 
entities currently in this business which will be subject to the rules 
will be less than 1,463.
    59. The first IVDS auction resulted in 170 entities winning 
licenses for 594 MSA licenses. Of the 594 licenses, 557 were won by 
entities qualifying as a small business. For that auction, the 
Commission defined a small business as an entity, together with its 
affiliates, that has no more than a $6 million net worth and, after 
federal income taxes (excluding any carry over losses), has no more 
than $2 million in annual profits each year for the previous two years. 
In the upcoming IVDS reauction of approximately 100 licenses in 
metropolitan service area (MSA) markets and auction of 856 licenses in 
rural service area (RSA) markets (two licenses per market), bidding 
credits and installment payments are available to encourage 
participation by small and very small businesses. The Commission cannot 
estimate, however, the number of licenses that will be won by entities 
qualifying as small or very small businesses under the proposed rules. 
Given the success of small businesses in past IVDS auctions, and that 
small businesses make up over 80 percent of firms in the subscription 
television services industry, the Commission assumes for purposes of 
this FRFA that all of the licenses may be awarded to small businesses, 
which would be affected by the rules amendments. The Commission 
estimates that some companies will win more than one license, as 
happened in the earlier IVDS auction.
    60. Applicants seeking to participate in the auction also will be 
subject to these rule amendments. It is impossible to accurately 
predict how many small businesses will apply to participate in the 
auction. In the last IVDS auction, there were 289 qualified applicants. 
The Commission does not anticipate that there will be significantly 
more participants in the subsequent IVDS auction.

E. Steps Taken to Minimize the Burdens on Small Entities

    61. The changes made in Sixth Memorandum Opinion and Order are 
designed to minimize burdens on small businesses. The extension of an

[[Page 49074]]

additional bidding credit to the second license in each market will 
assist businesses owned by women and minorities. Most of the businesses 
owned by women and minorities which have participated in the FCC's 
auctions are small businesses which will benefit from this rule. This 
rule change will benefit small businesses owned by women and minorities 
by doubling the number of bidding credits available to them.
    62. Refunds of excess upfront payments on deposit will benefit 
small businesses. Smaller businesses often have more difficulty in 
raising capital. The rules permitted the retention of any excess 
upfront payments on deposit with the FCC to apply to down payments or 
to bid withdrawal payments. 47 CFR Sec. 1.2106. While an upfront 
payment is an important part of ensuring that only serious bidders 
participate in the Commission's auction process, it is also important 
that small businesses have an opportunity to put their more limited 
funds to the best possible use. By assuring the return of excess funds 
after the first down payment and any withdrawal penalties are paid, 
small businesses will have those funds to use as they wish.
    63. By adding an auction methodology, the Commission adds 
flexibility to its auction process. One advantage of simultaneous 
multiple round auctions is that they can make it possible for bidders 
to participate from their own places of business. That is an advantage 
under some auction circumstances. The Commission has chosen to use an 
oral outcry auction for the RSA license auction, and for the first MSA 
licenses which will be re-auctioned, because an oral outcry auction 
will be most efficient.

F. Significant Alternatives Considered and Rejected

Authorizing Use of Simultaneous Multiple Round Auctions
    64. The Commission does not currently have plans to use a 
simultaneous multiple round auction for this service. The rule is being 
added should it become necessary at a later time to re-auction licenses 
which have developed a higher degree of interdependence. Because this 
rule adds administrative expediency, which will speed the issuance of 
licenses, the Commission have chosen to add the option of an additional 
auction methodology for this service. The Commission is acting to 
minimize delays in the close of an auction by adding flexibility to its 
stopping and activity rules. It determined that the alternative of 
leaving the rules unchanged could delay the auction process at some 
time in the future.
Elimination of the Tax Certificate Program
    65. All small businesses which were owned by members of minority 
groups or women who choose to participate in the auction for IVDS 
licenses will be subject to this rule change. Due to the repeal of the 
tax code provision, the Commission has no choice but to eliminate this 
provision which benefitted these small businesses.
Bidding Credits Extended on Both Licenses in Each MSA
    66. This rule will apply to any small businesses owned by women or 
minorities that eligible for bidding credits which participate in the 
re-auction of MSA licenses. The Commission considered leaving the rules 
unchanged, but in the absence of the tax certificate program, the rules 
may have unfairly disadvantaged some minority or women owned small 
businesses while offering greater advantages to some of their 
competitors. Therefore, in eliminating the tax certificate program, the 
Commission felt it necessary to extend the bidding credit to both 
licenses in each market. The Commission considered the extension of 
bidding credits to rural telephone companies. The Commission is not 
required to make all benefits available to all designated entities. 
Consequently, in weighing the competing public policy concerns with 
respect to bidding credits, the Commission chose not to extend bidding 
credits to rural telephone companies.
Long-Form Application Changed to Form 600
    67. This rule will enable the Commission to more effectively 
evaluate applications filed for IVDS licenses. The Commission did not 
consider alternatives because in adapting its processes to auctions, 
the Commission has concentrated on reducing the number of different 
forms and steps that auction participants will have to master to 
participate in the process. Because all other auctionable services have 
shifted to the Form 600, IVDS auction participants will be able to use 
information they may have filed for other auctionable services in any 
future IVDS auctions as well.
Winning Bidders May Receive Upfront Payment Refund
    68. The rules previously did not make clear that an auction winner 
could receive a refund of any excess monies on deposit with the FCC, 
after payment of the first down payment and any penalties due. This 
rule change was made to ensure that businesses which win IVDS licenses 
have as much capital available to build systems and serve the public as 
possible. Because the rule change results in returning money to 
businesses, the Commission did not consider alternatives in making this 
change.

G. Commission's Outreach Efforts to Learn of and Respond to the Views 
of Small Entities Pursuant to 5 U.S.C. Sec. 609

    69. The Commission did not seek specific comments regarding small 
entities' views of the rules being changed because the petitions and 
comments were filed in this proceeding prior to the enactment of the 
1996 Regulatory Flexibility Act Amendments. However, the Commission, in 
making changes to the rules, has sought to alleviate burdens on small 
businesses. When Congress authorized the FCC to use auctions, it 
instructed the FCC to make provisions for designated entities, 
including small businesses, when it designed competitive bidding 
mechanisms.

H. Report to Congress

    70. The Commission shall send a copy of this Final Regulatory 
Flexibility Analysis, along with this Memorandum Opinion and Order, in 
a report to Congress pursuant to the Small Business Regulatory 
Enforcement Fairness Act of 1996, 4 U.S.C. Sec. 801(a)(1)(A). A copy of 
this FRFA will also be published in the Federal Register.
    71. Authority for issuance of this Sixth Memorandum Opinion and 
Order is contained in Sections 4(i), 303(r), and 309(j) of the 
Communications Act of 1934, as amended, 47 U.S.C. Secs. 154(i), 303(r) 
and 309(j).
    72. Accordingly, IT IS ORDERED that, pursuant to the authority of 
Sections 4(i), 303(r), and 309(j) of the Communications Act of 1934, as 
amended, 47 U.S.C. Secs. 154(i), 303(r), and 309(j), this Sixth 
Memorandum Opinion and Order is adopted, and Parts 1 and 95 of the 
Commission's Rules are AMENDED as set forth below.
    73. It is further ordered that the rule changes made herein will 
become effective November 18, 1996. It is further ordered that, as 
described above, the petition for reconsideration filed by ITV is 
granted in part to the extent described above and is denied in all 
other respects, the petitions for reconsideration filed by Phase One, 
RCA, and USIN are denied, and the

[[Page 49075]]

petition for rule making filed by ITA is denied.

List of Subjects

47 CFR Part 1

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

47 CFR Part 95

    Communications equipment, Radio.

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

Rule Changes

    Parts 1 and 95 of title 47 of the Code of Federal Regulations are 
amended as follows:

PART 1--PRACTICE AND PROCEDURE

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

    Authority: 47 U.S.C. 151, 154, 303, and 309(j) unless otherwise 
noted.

    2. Section 1.2107 is amended by revising paragraph (c) to read as 
follows:


Sec. 1.2107  Submission of down payment and filing of long-form 
applications.

* * * * *
    (c) A high bidder that meets its down payment obligations in a 
timely manner must, within ten (10) business days after being notified 
that it is a high bidder, submit an additional application (the ``long-
form application'') pursuant to the rules governing the service in 
which the applicant is the high bidder (unless it has already submitted 
such an application, as contemplated by Sec. 1.2105(a)(1)(b). For 
example, if the applicant is high bidder for a license in the 
Interactive Video Data Service (see 47 CFR part 95, subpart F), the 
long-form application will be submitted on FCC Form 600 in accordance 
with Sec. 95.815 of this chapter. Notwithstanding any other provision 
in title 47 of the Code of Federal Regulations to the contrary, high 
bidders need not submit an additional application filing fee with their 
long-form applications. Notwithstanding any other provision in title 47 
of the Code of Federal Regulations to the contrary, the high bidder's 
long-form application must be mailed or otherwise delivered to: Office 
of the Secretary, Federal Communications Commission, Attention: Auction 
Application Processing Section, 1919 M Street, NW., Room 222, 
Washington, DC 20554. An applicant that fails to submit the required 
long-form application as required under this subsection, and fails to 
establish good cause for any late-filed submission, shall be deemed to 
have defaulted and will be subject to the penalties set forth in 
Sec. 1.2104.
* * * * *

PART 95--PERSONAL RADIO SERVICES

    1. The Authority Citation for part 95 continues to read as follows.

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

    2. Section 95.815 is amended by revising paragraphs (b), (d)(2), 
and (f)(3) to read as follows:


Sec. 95. 815  License application.

* * * * *
    (b) Each application for an IVDS system license must be made on a 
separate FCC Form 600, and must be submitted to the Federal 
Communications Commission, Interactive Video and Data Service, P.O. Box 
358365, Pittsburgh, PA 15251-5365. Each application for a CTS license 
where the CTS antenna exceeds 6.1m (20 feet) (see Sec. 95.811(b)) must 
be made on a separate FCC Form 574, and must be submitted to the 
address set forth in Sec. 1.1102 of this chapter.
* * * * *
    (d) * * *
    (2) A completed application (FCC Form 600).
* * * * *
    (f) * * *
    (3) A separate application (FCC Form 600) for each CTS that is 
being added or modified.
* * * * *
    3. Section 95.816 is amended by revising paragraphs (c)(1), (c)(2), 
(c)(4), (c)(6), and (d)(1); removing paragraph (d)(2); and 
redesignating paragraph (d)(3) as (d)(2) and revising it; and adding 
new paragraph (d)(3) to read as follows:


Sec. 95.816  Competitive bidding proceedings.

* * * * *
    (c) * * *
    (1) Competitive bidding design options and mechanisms. The Wireless 
Telecommunications Bureau will select competitive bidding design(s) and 
mechanisms in accordance with Secs. 1.2103 and 1.2104 of this chapter. 
If simultaneous multiple round bidding is used, the Wireless 
Telecommunications Bureau has the discretion to vary the duration of 
the bidding rounds or the interval at which bids are accepted at any 
time before or during the course of the auction.
    (2) Forms.
    (i) Applicants must submit short-form applications (FCC Form 175) 
as specified in Commission Public Notices. Minor deficiencies may be 
corrected prior to the auction. Major modifications such as changes in 
ownership, failure to sign an application or failure to submit required 
certifications will result in the dismissal of the application. See 
1.2105(a) and (b) of this chapter.
    (ii) Applicants must submit a long-form application (FCC Form 600) 
within ten (10) business days after being notified that it is the 
winning bidder for a license. See 1.2107(c) and (d) of this chapter.
* * * * *
    (4) Down payments. See Sec. 1.2107(b) of this chapter.
* * * * *
    (6) Withdrawal, default or disqualification. See Secs. 1.2104(g) 
and 1.2109 of this chapter.
* * * * *
    (d) * * *
    (1) Bidding credits. A winning bidder that qualifies as a business 
owned by women and/or minorities may use a bidding credit of twenty 
five (25) percent to lower the cost of its winning bid.
    (2) Installment payments. Each licensee that qualifies as a small 
business may pay the remaining 80 percent of the net auction price in 
quarterly installment payments pursuant to Sec. 1.2110(e) of this 
chapter. Licensees who qualify for installment payments are entitled to 
pay their winning bid amount in installments over the term of the 
license, with interest charges to be fixed at the time of licensing at 
a rate equal to the rate for five-year U.S. Treasury obligations. 
Payments shall include interest only for the first two years and 
payments of interest and principal amortized over the remaining three 
years of the license term. A license issued to an eligible small 
business that elects installment payments shall be conditioned on the 
full and timely performance of the license holder's quarterly payments.
    (3) Audits.
    (i) Applicants and licensees claiming eligibility under this 
section shall be subject to audits by the Commission, using in-house 
and contract resources. Selection for audit may be random, on 
information, or on the basis of other factors.
    (ii) Consent to such audits is part of the certification included 
in the short-form application (Form 175). Such consent shall include 
consent to the audit of the applicant's or licensee's books, documents, 
and other material (including accounting procedures and practices) 
regardless of form or type,

[[Page 49076]]

sufficient to confirm that such applicant's or licensee's 
representations are, and remain, accurate. Such consent shall include 
inspection at all reasonable times of the facilities, or parts thereof, 
engaged in providing and transacting business, or keeping records 
regarding licensed IVDS and shall also include consent to the interview 
of principals, employees, customers and suppliers of the applicant or 
licensee.
* * * * *
[FR Doc. 96-23939 Filed 9-17-96; 8:45 am]
BILLING CODE 6712-01-P