[Federal Register Volume 63, Number 67 (Wednesday, April 8, 1998)]
[Rules and Regulations]
[Pages 17111-17123]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 98-9352]


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FEDERAL COMMUNICATIONS COMMISSION

47 CFR Parts 1 and 24

[WT Docket No. 97-82; FCC 98-46]


Installment Payment Financing for Personal Communications 
Services (PCS) Licensees

AGENCY: Federal Communications Commission.

ACTION: Final rule.

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SUMMARY: In this Order on Reconsideration of the Second Report and 
Order, the Commission generally affirms the framework established in 
the Second Report and Order but allows elections among the four payment 
options--disaggregation, amnesty, prepayment, and resumption of 
payments--to be made on a Major Trading Area (MTA) basis and makes 
certain other modifications to the options in order to provide C block 
licensees greater flexibility in making their elections. The changes 
will allow more of the existing licensees to adjust their business 
plans and remain in the wireless market to compete against other 
providers, while also providing for the return of spectrum to the 
Commission so that other entrepreneurs will have opportunities to 
obtain broadband PCS licenses in a reauction.

EFFECTIVE DATE: June 8, 1998.


[[Page 17112]]


FOR FURTHER INFORMATION CONTACT: Rachel Kazan or Julie Buchanan at 
(202) 418-0660.

SUPPLEMENTARY INFORMATION: This Order on Reconsideration of the Second 
Report and Order in WT Docket No. 97-82, adopted on March 23, 1998, and 
released on March 24, 1998, 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. 20554. The complete text may be 
purchased from the Commission's copy contractor, International 
Transcription Service, Inc., 1231 20th Street, N.W., Washington, D.C. 
20036 (202) 857-3800. The complete Order on Reconsideration of the 
Second Report and Order also is available on the Commission's Internet 
home page (http://www.fcc.gov).

Summary of Action

I. Background

    1. On September 25, 1997, the Commission adopted a Second Report 
and Order and Further Notice of Proposed Rule Making (Second Report and 
Order) and (Further Notice), 62 FR 55348 (October 24, 1997), 
establishing March 31, 1998, as the deadline for broadband Personal 
Communications Services (PCS) C and F block licensees to resume 
installment payments. In addition, the Commission offered C block 
licensees a choice of three alternative payment options in lieu of 
resuming payments under the terms of the original payment plan. The 
three options were intended to provide limited relief to C block 
licensees experiencing financial difficulties, while preserving the 
fairness and integrity of the auction process.
    2. In response to the rulings in the Second Report and Order, the 
Commission received 37 petitions for reconsideration, 17 oppositions to 
the petitions, 16 replies to the oppositions, and 38 ex parte filings. 
After considering the arguments raised in those filings, the Commission 
generally affirmed the framework established in the Second Report and 
Order but made certain modifications designed to provide C block 
licensees greater flexibility in making their elections. These changes 
improve upon the Second Report and Order by allowing more of the 
existing licensees to adjust their business plans and remain in the 
wireless market to compete against other providers, while also 
providing for the return of spectrum to the Commission so that other 
entrepreneurs will have opportunities to obtain broadband PCS licenses 
in a reauction. In a forthcoming Order, the Commission will address 
comments filed in response to the Further Notice, which covers rules 
for the reauction of returned C block licenses.
    3. Consistent with Congress' mandate in section 309(j)(4)(D) of the 
Communications Act of 1934, as amended, 47 U.S.C. Sec. 309(j)(4)(D), to 
promote the participation of small businesses and other designated 
entities in the provision of spectrum-based services, the Commission 
limited eligibility in the initial C block auctions to entrepreneurs 
and small businesses. The C block auction concluded on May 6, 1996, and 
the subsequent reauction of defaulted licenses concluded on July 16, 
1996, with a total of 90 bidders winning 493 licenses. The winning 
bidders were permitted to pay 90 percent of their net bid price over a 
period of ten years, paying only interest for the first six years and 
paying both interest and principal for the remaining four years. See 47 
CFR 24.711(b)(3). The net bid price is equal to the winning bid less 
any bidding credits for which the licensee was eligible. See 47 CFR 
24.712.
    4. On March 31, 1997, the Wireless Telecommunications Bureau (the 
Bureau) suspended the deadline for payment of installment payments for 
all C block licensees. The suspension was implemented in response to a 
joint request from several C block licensees seeking modification of 
their installment payment obligations and because of other debt 
collection issues. 62 FR 55348, 55349. On April 28, 1997, the Bureau 
extended the suspension to F block licensees. Id. On September 25, 
1997, the Commission ended this suspension and established March 31, 
1998, as the deadline for C and F block licensees to resume their 
installment payments. Id.
    5. The Commission decided in the Second Report and Order to allow 
each C block licensee to elect one of three options for all of its 
licenses in lieu of continuing payments under the licensee's original 
installment payment plan. 62 FR 55348. Each of the three options--
disaggregation, amnesty, and prepayment--was intended to provide 
limited relief to financially troubled licensees without harming the 
integrity of the auction process. Id.
    6. The Commission required C block licensees to file a written 
election notice on or before January 15, 1998, specifying whether they 
would resume payments under the terms of the original installment 
payment plan or would proceed under one of the alternative options. Id. 
at 55353. On January 7, 1998, the Commission postponed the election 
date until February 26, 1998, in order to resolve issues raised on 
reconsideration before licensees submitted their elections. 63 FR 2170. 
In addition, the Commission announced that the reauction of spectrum 
surrendered by C block licensees pursuant to their elections would 
begin on September 29, 1998. Id. On February 24, 1998, the Commission 
revised both the February 26, 1998, election date and the March 31, 
1998, payment resumption date. 63 FR 10153. It changed the election 
date to 60 days from publication of this Order in the Federal Register 
and the payment resumption date to at least 30 days after the new 
election date. Id.

II. Overview

    7. In this Order on Reconsideration of the Second Report and Order 
(Reconsideration Order), the Commission continues to believe that the 
relief provided C block licensees in the Second Report and Order will 
speed deployment of service to the public by easing lenders' and 
investors' concerns regarding regulatory uncertainty and by potentially 
making more capital available for investment and growth. Although the 
decision adopted in the Second Report and Order largely should be 
maintained, certain aspects of the adopted approach might constrain 
many C block licensees from making use of the relief measures offered. 
A few adjustments to the adopted approach will better allow the 
Commission to effectuate its intent to provide C block licensees a 
limited measure of relief under the unique but varied circumstances 
presented. The Commission therefore leaves the basic framework intact 
while altering it slightly to allow licensees to be more flexible in 
making their elections for licenses in different geographic areas, to 
use more of the down payments already on deposit, and to be more 
flexible in the use of those down payments.
    8. The Commission eliminates the requirement that a licensee must 
make the same election for all its licenses. Instead, it allows a 
licensee to make different elections for the different MTAs in which it 
holds licenses. The election made for an MTA will apply to every Basic 
Trading Area (BTA) license held by the licensee in that MTA. As under 
the Second Report and Order, the possible elections will include 
resumption of payments, amnesty, prepayment, or disaggregation. As part 
of the modifications to the adopted approach, the Commission will also 
permit a combination of disaggregation and prepayment. Resumption of 
payments and prepayment of 30 MHz licenses remain essentially the same 
as

[[Page 17113]]

in the Second Report and Order. The amnesty and disaggregation options, 
however, are modified, as detailed below.
    9. In addition, the Commission adopts the following limited 
modifications: (1) It extends to 90 days the 60-day non-delinquency 
period for payments not made on the payment resumption date, and it 
imposes a 5 percent late payment fee for payments made within this 90-
day non-delinquency period; (2) it instructs the Bureau to modify the 
payment schedules of all C and F block licensees so that all payments 
will be due on the same date; (3) it eliminates as moot the build-out 
exception to the amnesty option; and (4) it clarifies that the 
affordability exception in context of the prepayment option means that 
a licensee electing prepayment that does not have sufficient funds to 
prepay all of its BTA licenses within an MTA is required to prepay only 
the BTA licenses within the MTA that it is able to prepay using only 
the amount of credit available to the licensee for prepayment.

III. MTA-by-MTA Elections

    10. Licensees will be better able to take advantage of the options 
if they are allowed to make different elections for the different areas 
in which they hold licenses. Therefore, the Commission eliminates the 
requirement that a licensee must make the same election for all its 
licenses. Instead, it establishes the rule that each a licensee is 
permitted to make only one election for each MTA in which it holds 
licenses. In other words, the same election must be applied to each BTA 
license held in a given MTA, but different elections may be selected 
for different MTAs.
    11. By allowing elections to be made on an MTA-by-MTA basis, the 
Commission enables licensees to make election decisions that are based 
not solely on the elements of each option, but rather on licensees' own 
business plans and financial situation. The Commission believes that 
MTA-by-MTA elections will promote rapid deployment of service to the 
public. See Communications Act Sec. 309(j)(3)(A), 47 U.S.C. 
Sec. 309(j)(3)(A). Licensees will have more opportunity to localize 
their business plans by surrendering licenses in markets where success 
now seems unlikely due to financial difficulties. As a result, they 
will be able to focus on providing service in those markets where they 
have retained their licenses. In addition, the surrendered licenses 
presumably will be reauctioned to entities better positioned to provide 
service in those license areas. The Commission anticipates that MTA-by-
MTA elections will produce a more robust and competitive reauction. It 
expects more licenses to be returned for reauction because a licensee 
choosing disaggregation or resumption will now be free to surrender 
licenses it was reluctant to keep, but was forced to do so under the 
previous terms of those elections. Allowing those licenses to be 
reauctioned to entities that are more committed, or better able, to 
serve those markets will stimulate competition and benefit consumers. 
Furthermore, permitting elections on an MTA-by-MTA basis will not 
undermine the integrity of the auction process because licensees still 
must pay the full amount of their licenses.

IV. Resumption of Payments

    12. The Commission denies requests for a longer deferral of the 
payment deadline and agrees with parties that urge it to reject any 
attempts to extend further the suspension of payments. By the time they 
must resume making payments, C and F block licensees will have enjoyed 
a respite from their payment obligations substantially longer than one 
year. A more extensive deferral would be unfair to unsuccessful bidders 
that might not have withdrawn from the auction had they known of 
deferral opportunities. As the Commission stated in the Second Report 
and Order, a further deferral would be a temporary solution that might 
only postpone licensees' financial difficulties and further prolong 
uncertainty.
    13. Although the Commission will not grant the lengthy postponement 
requested by some parties, it will extend to 90 days the automatic 60-
day non-delinquency period applicable to payments due on the payment 
resumption date. The Commission's rules allow a 90-day non-delinquency 
period for all other installment payments. 47 CFR 1.2110(f)(4)(i). 
Although the Commission stated in the Second Report and Order that a 
shorter non-delinquency period was justified in light of the one-year 
payment suspension, it now believes it preferable to make the length of 
the non-delinquency period consistent with its rule for all other 
payments. See 62 FR 55348, 55349. The Commission provides this 30-day 
extension to assist licensees that are experiencing last-minute delays 
in raising capital. By offering this additional time, the Commission 
believes that it will help these licensees complete their fund-raising 
efforts.
    14. Consistent with its rule recently adopted for all other 
payments, payments made within this 90-day non-delinquency period will 
be assessed a 5 percent late payment fee. See 63 FR 2315, 2327; 47 CFR 
1.2110(f)(4)(i). However, in light of the more than one-year suspension 
and this expanded non-delinquency period, there will be no subsequent 
automatic grace period for licensees that fail to make payment within 
the 90-day non-delinquency period. See 63 FR 2315, 2327; 47 CFR 
1.2110(f)(4)(ii). Subsequent payments, due after the initial resumption 
payment, will be subject to the rules adopted in the Third Report and 
Order in the Commission's Competitive Bidding Proceeding. See 63 FR 
2315.
    15. Under this plan, the Suspension Period, which the Commission 
defined in the Second Report and Order as the period beginning with the 
date on which each license was conditionally granted through and 
including March 31, 1998, will still end on March 31, 1998. See 62 FR 
55348, 55349. All interest accrued from the date of license grant 
through March 31, 1998, (i.e., Suspension Interest) will continue to be 
payable over eight equal payments. Interest accrued from April 1, 1998, 
through the payment resumption date will be due on the payment 
resumption date, in addition to one-eighth of the Suspension Interest. 
The Commission believes that this plan will require licensees 
continuing under an installment payment plan, either through resumption 
or disaggregation, to demonstrate their financial viability by making a 
reasonable payment on the payment resumption date. This payment will 
provide evidence of the ability of licensees to gain access to the 
capital necessary both to service their government debt obligations and 
to provide service to the public. In addition, the Commission instructs 
the Bureau to modify the payment schedule so that all C and F block 
installment payments will be due on a quarterly basis, beginning on the 
payment resumption date.
    16. The Commission rejects a suggestion that Suspension Interest be 
forgiven, as well as alternative proposals that Suspension Interest be 
paid either in a balloon at the end of the ten-year installment payment 
period or over six years in conjunction with other interest payments. 
Because the Commission already has provided sufficient relief by 
granting the one-year suspension, it will neither forgive nor defer 
payment of the Suspension Interest. The Commission has accommodated 
licensees sufficiently by allowing payment of the Suspension Interest 
over eight equal payments.
    17. The Commission also rejects requests from parties seeking a 
deviation from the payment schedule

[[Page 17114]]

and from amounts established by the licensees' Notes. The Commission is 
providing all C block licensees with an array of alternative payment 
options, designed to accommodate licensees' various needs. These 
options were developed and are now being modified in an effort to 
balance complex and competing interests, with the recognition that it 
is impossible to devise alternatives that satisfy every entity with an 
interest in this proceeding. The record before the Commission does not 
provide a sufficient basis for creating additional payment choices; 
indeed, there is opposition to the Commission's doing so. Retroactively 
changing the payment terms would be unfair to other applicants that 
might have bid differently under more relaxed payment terms. Moreover, 
the Commission has purposefully adopted an approach that does not 
significantly alter the amounts paid for individual licenses.
    18. Finally, the Commission will not adopt the proposal made by one 
party that the Commission compensate in some way those licensees that 
timely made the March 31, 1997, payment and, as a consequence, did not 
benefit from a suspension of that payment obligation. Compensating 
licensees for complying with Commission rules would establish a 
precedent the Commission considers inadvisable. Furthermore, if a 
licensee opts to return all its licenses, the Commission will refund 
any installment payments previously submitted for those licenses. If a 
licensee returns some licenses and retains others, the licensee will be 
allowed to apply previously submitted installment payments toward the 
prepayment of retained licenses or toward the Suspension Interest for 
retained licenses which the licensee does not prepay. For example, if a 
licensee elects resumption of payments for an MTA, any installment 
payments previously submitted for a BTA license within that MTA will be 
applied toward the Suspension Interest owed for that license. The 
treatment of installment payments with respect to the disaggregation 
and prepayment options is specified below. Therefore, because 
installment payments will either be refunded or credited, the 
Commission believes that additional compensation is unnecessary.

V. Surrender of Licenses for Reauction (Amnesty)

    19. In the Second Report and Order, the Commission adopted an 
amnesty option under which a C block licensee would be permitted to 
surrender all of its licenses in exchange for relief from its 
outstanding debt. 62 FR 55348, 55351. The Commission would waive any 
applicable default payments, subject to coordination with the 
Department of Justice pursuant to applicable federal claims collections 
standards. Id.; see also 4 CFR parts 101-105. Licensees electing this 
option would not have their down payments returned; however, neither 
would they be deemed in default or delinquent in meeting government 
debt obligations. 62 FR 55348, 55351. In addition, they would be 
eligible to bid for any and all licenses in the reauction and would not 
be restricted in making post-auction acquisitions. See id.
    20. Subject to one exception, licensees availing themselves of the 
amnesty option would be required to surrender all of their licenses to 
the Commission. Id. The sole exception to this ``all-or-nothing'' rule 
allowed licensees that met or exceeded the five-year build-out 
requirement on September 25, 1997, the date of adoption of the Second 
Report and Order, to keep licenses for built-out markets. Id. 
Specifically, a licensee utilizing this exception would be allowed to 
retain any built-out BTA, on the condition that it also keep any 
additional BTAs in the MTA where the built-out BTA is located and that 
it pay for all of those retained licenses under the terms of their 
original notes. 62 FR 55348, 55351-52.
    21. The Commission directed the Bureau to refund any installment 
payments licensees had already made (whether due on or before March 31, 
1997) on any license surrendered under the amnesty option and announced 
that it would forgive payment of any due, but unpaid, installment 
payments for any surrendered license. 62 FR 55348, 55352. Licensees 
retaining licenses under the build-out exception were to pay over eight 
equal payments (beginning with the payment due on March 31, 1998) all 
Suspension Interest applicable to the retained licenses. All 
installment payments previously made by the licensee on any of its 
licenses would be applied to reduce the Suspension Interest applicable 
to the retained licenses, and any amounts remaining would be refunded. 
Id.
    22. In keeping with the Commission's decision on reconsideration to 
allow licensees to make elections on an MTA-by-MTA basis, the 
Commission modifies the amnesty option to permit licensees to select 
that option for as many of their MTAs as they choose. Because amnesty 
no longer requires an ``all-or-nothing'' choice, the Commission 
eliminates as moot the build-out exception.
    23. The Commission originally adopted the ``all-or-nothing'' 
requirement for the amnesty option in order to prevent licensees from 
``cherry-picking'' only the most desirable MTAs. 62 FR 55348, 55351. 
The Commission believed that facilitating a ``cherry-picking'' scheme 
would limit the potential for licenses to be aggregated, which would 
decrease their value to bidders in the reauction. Id. On 
reconsideration, the Commission finds persuasive the contention of one 
party that requiring licensees to keep or surrender entire MTAs, rather 
than BTAs, will sufficiently limit ``cherry-picking.'' The Commission 
also agrees with that party that applying the amnesty option on an MTA-
by-MTA basis does not carry a risk of ``cherry-picking'' significantly 
different from that connected with the original disaggregation option.
    24. Several parties object to the fact that a licensee does not 
receive any refund of its down payment under the amnesty option. As the 
Commission explained in the Second Report and Order, its intent in 
retaining the down payment was to ensure that licensees electing the 
amnesty option and participating in the reauction of their surrendered 
licenses do so without the undue advantage of having all of their 
original funds available to repurchase the same spectrum they 
surrendered. See id. The Commission further explained that licensees 
selecting amnesty would benefit substantially by avoiding being 
declared in default and thereby being freed from assessments of 
delinquencies and other collection costs associated with default 
payments. Id.; see also 47 CFR 1.2110(f)(4)(iii), (iv). This rationale 
continues to be valid. If the Commission were to allow C block 
licensees to return their licenses, receive a refund of their down 
payments, and participate in the reauction, it would undermine the 
integrity of the auction process by placing amnesty licensees in 
virtually the same position they would have occupied had the initial C 
block auction never taken place.
    25. Nevertheless, the Commission recognizes that because all 
elections now are being applied on an MTA-by-MTA basis, licensees are 
permitted to return licenses in certain MTAs and retain licenses in 
other MTAs, as with the prepayment option under the Second Report and 
Order. Thus, licensees electing the amnesty option have the following 
choice. For licenses in each MTA returned under the amnesty option, the 
licensee may choose either to: (1) receive no credit for its down 
payment(s) but remain eligible to bid in the reauction on all its 
licenses in the returned MTA (pure amnesty), or (2) obtain credit for 
70 percent of its down payment and forgo for a period of

[[Page 17115]]

two years from the start date of the reauction eligibility to reacquire 
the licenses it surrendered pursuant to this option through either 
reauction or any other secondary market transaction (amnesty/
prepayment).
    26. For purposes of this two-year eligibility restriction, a 
licensee includes qualifying members of the licensee's control group 
and their affiliates. If a licensee opts to return all its licenses, 
the Commission will refund any installment payments previously 
submitted for those licenses. The 70 percent credit must be applied 
toward prepayment of the entire principal owed for a retained MTA with 
30 MHz licenses and/or toward prepayment of the entire principal owed 
for the retained 15 MHz licenses of an MTA that has been disaggregated. 
Providing an additional choice within the amnesty option substantially 
increases the level of flexibility available to licensees and enables 
them to formulate new business plans that may be more attractive to 
lenders and investors.

VI. Prepayment

    27. In the Second Report and Order, the Commission offered C block 
licensees the option to prepay the outstanding principal debt 
obligations for any licenses, on an MTA basis, that they elected to 
retain, subject to the restriction described below. The remaining 
licenses were required to be surrendered to the Commission for 
reauction. 62 FR 55348, 55352. In exchange, the Commission would 
forgive the debt on the surrendered licenses, and any associated 
payments owed. Id. A licensee electing this option would make its 
prepayment by using 70 percent of the total of all down payments made 
on the licenses it surrendered to the Commission, plus 100 percent of 
any installment payments previously paid for all licenses 
(collectively, ``Available Down Payments''), plus any ``new money'' it 
was able to raise. Id. The remaining portion of the down payment 
applicable to the surrendered licenses would not be refunded or 
credited but simply would be retained by the Commission. Id. Licensees 
would be prohibited from bidding on their returned spectrum in the 
reauction or from reacquiring it in the secondary market for two years 
from the start of the reauction. 62 FR 55348, 55353. Licensees could, 
however, bid on spectrum or licenses surrendered by other licensees, 
provided such licensees were not affiliates.
    28. The requirement that a licensee had to prepay all its BTA 
licenses within those MTAs that it selected for prepayment prevented 
``cherry-picking'' because licensees could not prepay only the most 
desirable BTA licenses within a given MTA and then surrender the rest. 
Id. The one exception to this rule was that any licensee lacking 
sufficient funds to prepay every BTA license within a chosen MTA would 
be permitted to prepay only those BTA licenses within that MTA that it 
could afford. Id. The licenses for the remaining BTAs within that MTA 
which the licensee could not afford to prepay would be surrendered to 
the Commission.
    29. In the Reconsideration Order, the Commission clarifies that the 
term ``Available Down Payments,'' as used in the Second Report and 
Order, was intended to include both 70 percent of the down payment made 
on surrendered licenses and any installment payments previously 
submitted for those licenses. See 62 FR 55348, 55352. The Commission 
also explains that under its modified approach, the prepayment option 
remains essentially the same as set forth in the Second Report and 
Order. For any 30 MHz licenses that are returned to the Commission, the 
licensee may continue to apply 70 percent of the down payment made on 
those licenses toward the prepayment of the entire outstanding 
principal owed in retained MTAs. The licensee may pool any down payment 
amounts that have been designated for prepayment, plus installment 
payments previously paid on any returned licenses. As described below, 
down payment amounts may also come from disaggregated licenses if the 
licensee uses the credit for prepayment. The Commission will refer to 
this pool of credit as a licensee's ``Prepayment Credit.'' The term 
``Prepayment Credit'' is essentially a substitution for the term 
``Available Down Payments,'' updated to account for the additional 
flexibility provided under the Commission's modified approach. 
Prepayment Credit may be used to prepay any retained MTAs with 30 MHz 
licenses. As discussed below, it also may be used to prepay the 
retained 15 MHz licenses of any MTAs that have been disaggregated.
    30. As under the Second Report and Order, any ``new money'' that is 
used to make prepayment must be submitted on or before the election 
date. Unlike under the Second Report and Order, affiliated licensees 
will be allowed to combine their Prepayment Credits. See id. However, 
any affiliated licensees that choose to pool their Prepayment Credits 
will be considered one licensee for purposes of making elections. 
Accordingly, the elections made by those affiliates must be made in 
concert and must be made on an MTA-by-MTA basis, as is required of 
individual licensees. Therefore, if affiliated licensees decide to pool 
their credits, then all BTA licenses held by any of those affiliates 
must be surrendered for credit in any MTA where one of their BTA 
licenses is surrendered for credit. Similarly, those affiliated 
licensees must collectively select MTAs for prepayment, and all BTA 
licenses held by any of those affiliates in those selected MTAs must be 
prepaid, subject to the affordability exception. Likewise, if those 
affiliated licensees choose to disaggregate an MTA, then all BTA 
licenses held by any of those affiliates in that MTA must be 
disaggregated, and so on.
    31. Credit pooling does not require the participation of all of a 
licensee's affiliates. Any affiliate that chooses not to pool its 
credit along with its other affiliates will be considered an individual 
licensee for purposes of making elections. Allowing this flexibility is 
consistent with the fact that, for purposes of the reauction, the 
Commission considers a licensee and its affiliates to be the same 
entity. This rule will also prevent licensees from being precluded from 
electing prepayment by virtue of the fact that they transferred BTA 
licenses to affiliates.
    32. On reconsideration, the Commission clarifies that, for purposes 
of its requirement that a licensee prepay all of those BTA licenses 
within an MTA ``that it can afford,'' a licensee can ``afford'' to 
prepay all of its BTA licenses within that MTA if it can prepay all BTA 
licenses using only its Prepayment Credit. See 62 FR 55348, 55352-53. 
If this amount is not enough to prepay all its BTA licenses within an 
MTA, the licensee must prepay as many BTA licenses in the MTA as this 
amount will allow and must surrender for reauction the remaining BTA 
licenses that it cannot afford to prepay. Only under these 
circumstances may a licensee choose, within the given MTA, which BTA 
licenses to prepay and which to surrender. Once a licensee adds any 
``new money'' at all to make prepayment, the affordability exception 
does not apply, and the licensee must add sufficient ``new money'' 
that, when added to its Prepayment Credit, is adequate to prepay all 
its BTA licenses within its chosen MTAs. A licensee claiming the 
affordability exception may choose only one MTA in which it will apply, 
and the licensee must prepay all of its BTA licenses within all other 
MTAs that it has selected for prepayment. The Commission will not 
refund any unspent portion of the Prepayment Credit.

[[Page 17116]]

    33. Not receiving a refund of any unspent portion of the Prepayment 
Credit is a reasonable price for being relieved of the requirement that 
all BTA licenses in all MTAs be prepaid. The affordability exception 
also will apply to disaggregated MTAs that the licensee wishes to 
prepay. This clarification provides an objective means for licensees to 
implement the affordability exception. It eliminates any doubt or 
confusion regarding the scope of the term ``afford,'' and it is an 
easy, bright-line test to administer. In addition, the restrictions the 
Commission imposes on the affordability exception minimize a licensee's 
ability to ``cherry-pick'' among BTAs.
    34. In the Reconsideration Order, the Commission maintains its rule 
that licensees electing the prepayment option will receive no refund or 
credit for 30 percent of the down payment made on 30 MHz licenses they 
surrender to the Commission. The Commission believes that retention of 
this portion of the down payment is necessary to preserve the integrity 
of the auction process. See Communications Act Sec. 309(j), 47 U.S.C. 
Sec. 309(j). Furthermore, to return the entire down payment would 
undermine the purpose of the down payment--to help ensure performance 
on a licensee's debt obligation. See Communications Act 
Sec. 309(j)(4)(B), 47 U.S.C. Sec. 309(j)(4)(B); In the Matter of BDPCS, 
Inc., Order, 12 FCC Rcd 6606 (WTB 1997), application for review 
pending. The Commission disagrees with parties that characterize 
retention of a portion of the down payment as punitive, a penalty, or a 
forfeiture. Thirty percent of the down payment is the fair and 
reasonable price for receiving the benefits of this option. Moreover, 
the prepayment option provides licensees with more flexibility in using 
their down payments than is permitted under current rules.
    35. The Commission disagrees with the claims of some parties that 
it should account for the net present value of forgoing installment 
payments or that it should otherwise discount the principal amount due 
under the installment payment plan. The Commission properly rejected 
this argument in the Second Report and Order. In the Second Report and 
Order, the Commission stated that a licensee should be required to pay 
the face value of its auction bid. 62 FR 55348, 55352. Accounting for 
the net present value of forgoing installment payments would rewrite 
the auction results because it would have the effect of changing the 
amounts bid for licenses. Therefore, to do so would be unfair to those 
bidders that withdrew from the auction under the assumption that the 
winning bid amounts represented the prices that would be paid for the 
licenses. Moreover, if the Commission were to discount the debt at a 
licensee's cost of capital it would be impossible to determine 
accurately a cost of capital for all licensees. The cost of capital 
varies for each licensee because it is based on a licensee's individual 
cost of debt and equity and on the ratio of debt to equity. Therefore, 
no single discount rate would be appropriate for every licensee.
    36. Because the Commission continues to support the policy that 
auction bids should be paid at their face value, it will not discount 
the principal due. Although the Commission provides favorable terms for 
financing the bid price, the cost of an installment payment plan is the 
interest that accrues over time. The benefit to a licensee for early 
pay-off of its financial obligations is the savings in the amount of 
interest that otherwise would be owed. This trade-off provides a 
further reason for not discounting the principal.
    37. The Commission declines to allow licensees choosing the 
prepayment option to use the five-year build-out exception provided 
under the amnesty option in the Second Report and Order. A build-out 
exception is not needed because, under the Reconsideration Order, 
licensees are permitted to retain any MTAs they wish, whether built-out 
or not. Moreover, even under the approach adopted in the Second Report 
and Order, a build-out exception was unnecessary because licensees had 
the discretion to choose which MTAs to prepay and which to surrender, 
as opposed to the ``all-or-nothing'' approach under the original 
amnesty option. 62 FR 55348, 55353. In addition, the Commission 
declines to allow licensees that hold both C and F block licenses to 
use their C block down payment to purchase for cash their F block 
licenses. Such flexibility is not warranted because the reduction of 
debt associated with prepayment will help those licensees address their 
capital needs in servicing their F block debt. Finally, the Commission 
rejects an argument that the requirement that prepaying licensees must 
purchase all BTA licenses held within an MTA is unfair to licensees 
that have licenses in only one MTA. The requirement is essential to 
prevent ``cherry-picking,'' and a licensee that cannot avail itself of 
the prepayment option can either choose another option or limit its 
purchases under the affordability exception, if applicable.

VII. Disaggregation of Spectrum for Reauction

    38. In the Second Report and Order, the Commission offered C block 
licensees the option to disaggregate a portion of their spectrum and 
return it to the Commission for reauction. 62 FR 55348, 55350O51. 
Licensees electing the disaggregation option would return one-half 
(i.e., 15 MHz of 30 MHz) of their spectrum from each of their BTA 
licenses within the MTAs in which they chose to disaggregate spectrum. 
Id. In other words, licensees would not be required to disaggregate 
spectrum for all of the licenses they hold, but they would have to 
disaggregate spectrum for all of the licenses they hold in a given MTA 
if they disaggregated spectrum for one license in that MTA. The 
returned spectrum would have to be at 1895-1902.5 MHz paired with 1975-
1982.5 MHz, which is spectrum contiguous to the F block. 62 FR 55348, 
55350.
    39. In exchange, the Commission would reduce by 50 percent the 
amount of debt that was owed on a 30 MHz license before it was 
disaggregated. Id. Fifty percent of the down payment made on the 30 MHz 
license would be considered the down payment for the retained 15 MHz of 
spectrum, but the Commission would not provide a refund or credit for 
the remaining 50 percent of the down payment. Id. Licensees were 
required to repay over eight equal payments (beginning with the payment 
due on March 31, 1998) all Suspension Interest, adjusted to reflect the 
reduction in debt obligation. Id. Any installment payments that were 
paid prior to the suspension would be credited in full against those 
amounts. Id. Licensees were prohibited from bidding on their returned 
spectrum in the reauction or from reacquiring it in the secondary 
market for two years from the start of the reauction. 62 FR 55348, 
55350-51 Licensees could, however, bid on spectrum or licenses 
surrendered by other licensees, provided such licensees were not 
affiliates. Id.
    40. As provided under the Second Report and Order, when a licensee 
disaggregates an MTA, it will receive full credit for the portion of 
the down payment applicable to the spectrum retained from a license 
(i.e., 50 percent of the down payment made on the original 30 MHz 
license). However, on reconsideration, the Commission modifies its 
decision that licensees electing the disaggregation option receive no 
refund or credit for the portion of the down payment applicable to the 
returned spectrum. For each disaggregated license for which the 
licensee elects to resume installment

[[Page 17117]]

payments, rather than prepay, the Commission will provide a credit of 
40 percent of the down payment applicable to the 15 MHz of spectrum 
that is returned to the Commission. The 40 percent credit may only be 
used to reduce the amount owed on the 15 MHz of spectrum retained from 
the same BTA license that generated the credit. The credit, at the 
licensee's option, may be applied either to Suspension Interest and/or 
to reduce the principal outstanding. Any installment payments 
previously submitted for a disaggregated license for which the licensee 
elects to resume installment payments will be credited as described in 
the Second Report and Order (i.e., toward Suspension Interest). See 62 
FR 55348, 55350.
    41. The Commission derived the 40 percent credit because when that 
credit is combined with the 100 percent credit associated with the 
retained spectrum, the licensee will receive a credit of 70 percent of 
the total down payment for the original 30 MHz license. The Commission 
has decided to allow this additional credit because it is persuaded by 
the argument of several parties that the credit permitted under the 
disaggregation option should be consistent with the 70 percent credit 
permitted under the prepayment option. The Commission believes that the 
disparity that existed under the Second Report and Order was unfair to 
licensees that were precluded from electing prepayment. Furthermore, 
allowing this additional credit will advance the purposes of the 
disaggregation option. Disaggregation benefits both licensees and 
consumers because it provides a means for licensees to remain in a 
market area at a significantly reduced cost. By having their 
outstanding debt decreased by 50 percent, licensees improve their 
ability to finance their retained spectrum and build out their 
networks. In addition, disaggregation is pro-competitive because it 
provides a means for other competitors to enter a market area. It also 
gives unsuccessful bidders an opportunity to rebid on spectrum in 
market areas in which they were initially outbid. The Commission 
believes that the additional 40 percent credit will promote these 
benefits of disaggregation and will help licensees that have expressed 
an interest in disaggregation to take advantage of this option and 
continue their plans to provide service in their license areas.
    42. The Commission believes that a 40 percent credit is warranted 
when a licensee resumes installment payments on a disaggregated MTA 
because the licensee remains in the MTA and continues building out its 
network in order to serve those consumers. Accordingly, it will not 
provide such a 40 percent credit to licensees that resume installment 
payments on a license in a different MTA. In contrast to a licensee 
that uses the 40 percent credit to resume installments on the retained 
portion of the disaggregated license, a licensee that seeks to apply a 
40 percent credit from down payments made on licenses returned under an 
amnesty election would have, under those circumstances, abandoned 
service to the entire licensed area affected by that election. The 
Commission believes that licensees that surrender licenses should not 
receive a credit for abandoning those markets unless they use the 
credit to prepay retained licenses. As discussed above, a licensee that 
selects the amnesty option and chooses to bid on its returned licenses 
in the reauction will not receive credit for any of its down payment 
made on its returned licenses. In such case, a licensee's opportunity 
to bid on its returned licenses is equitable compensation for not 
receiving any down payment credit.
    43. The Commission also revises the approach adopted in the Second 
Report and Order to provide for a combination of disaggregation and 
prepayment. As discussed, there are many advantages to both prepayment 
and disaggregation. The Commission believes that a combination of the 
two should be encouraged because it offers the benefits of both 
options. For example, the licensee continues to build out its network 
in the market area; the Commission is relieved from its position of 
lender; and competing entities have the opportunity to bid on the 
returned spectrum. Therefore, if a licensee disaggregates an MTA and 
prepays the outstanding principal owed on the retained portion of the 
MTA, the Commission will provide the licensee with a higher percentage 
of credit as an incentive to choose both disaggregation and prepayment. 
Instead of receiving a 40 percent credit, a licensee that elects both 
disaggregation and prepayment will receive credit for 70 percent of the 
down payment applicable to the returned spectrum. (The portion of the 
down payment applicable to the returned spectrum is the equivalent of 
50 percent of the down payment made on the original 30 MHz license.) 
This 70 percent credit will be added to the licensee's Prepayment 
Credit which, as explained above, may be used to prepay any retained 
MTAs with 30 MHz licenses and/or the retained portions of any MTAs that 
have been disaggregated. Allowing this 70 percent credit is consistent 
with the Commission's policy of providing a 70 percent credit for 30 
MHz licenses that are returned to the Commission. In both cases, the 
credit is 70 percent of the down payment associated with the amount of 
spectrum that is returned. In addition, any installment payments 
previously submitted for the licenses in an MTA that is both 
disaggregated and prepaid will be added to the licensee's Prepayment 
Credit.
    44. If a licensee elects both disaggregation and prepayment for an 
MTA, the licensee must prepay the principal owed on the 15 MHz of 
spectrum retained from each BTA license in the MTA. However, if a 
licensee's Prepayment Credit is insufficient to make full prepayment on 
the entire MTA, then the affordability exception will apply. Thus, the 
licensee will be required to prepay only what it can afford and must 
return the rest of the spectrum to the Commission for reauction. As 
with prepayment of full 30 MHz licenses, the exception will not apply 
if any ``new money'' is added to make prepayment, and the exception may 
be applied to only one MTA.
    45. The Commission denies requests by several parties to allow 
licensees to receive credit for their entire down payment under the 
disaggregation option. The Commission believes that providing full 
credit would undermine the integrity of the auction process. See 
Communications Act Sec. 309(j), 47 U.S.C. Sec. 309(j). As the 
Commission concluded in the Second Report and Order, allowing licensees 
to use their entire down payment would be unfair to those C block 
licensees electing to continue under the existing installment payment 
plan and to bidders that were unsuccessful in the auction. See 62 FR 
66348, 55352.
    46. Because numerous benefits are conferred under the 
disaggregation option, the Commission disagrees with the claims of some 
parties that not providing a refund or credit for all of the down 
payment constitutes a penalty or forfeiture. Under disaggregation, the 
Commission forgives up to half of a licensee's outstanding debt, an 
action that will facilitate investment and growth by making more funds 
available to licensees for build-out. In addition, the Commission 
provides low-cost, long-term financing for the retained spectrum. 
Furthermore, the Commission renders a valuable service by providing an 
efficient and cost-effective mechanism for transferring spectrum that 
licensees otherwise might have been forced to resell in the secondary 
market at great risk. In exchange, the

[[Page 17118]]

Commission receives the disaggregated spectrum and retains a portion of 
the down payment applicable to that spectrum. Therefore, retention of 
part of the down payment is not a penalty; rather, it is the fair and 
reasonable price for receiving the benefits of disaggregation.
    47. The Commission declines to adopt a suggestion to allow C block 
licensees to retain the 15 MHz of spectrum adjacent to the F block if 
they also hold the F block license for the same BTA. Allowing certain C 
block licensees to disaggregate a different portion of spectrum would 
create a patchwork pattern of spectrum blocks in the reauction and 
would limit the opportunity for F block licensees to aggregate larger 
spectrum blocks by bidding on contiguous spectrum in the reauction. To 
promote consistency and simplicity in the reauction, the Commission 
also rejects a request that to allow licensees the choice to 
disaggregate 10, 15, or 20 MHz of spectrum. Allowing licensees to 
disaggregate different pieces of spectrum would create inefficiency in 
the market and would limit the potential for aggregation, thereby 
decreasing the value of spectrum in the reauction and delaying service 
to the public. Finally, the Commission disagrees with the arguments of 
two parties that disaggregation should be permitted on a BTA-by-BTA 
basis, rather than on an MTA-by-MTA basis. Disaggregation on an MTA-by-
MTA basis will promote participation in the reauction because licensees 
are prohibited from selectively retaining 30 MHz of spectrum in only 
the most desirable BTAs.
    48. The Commission also declines to extend the build-out exception 
to licensees selecting the disaggregation option. Under the modified 
approach, a build-out exception is unnecessary because licensees have 
the flexibility to determine which MTAs to retain and which to 
surrender. Moreover, as stated in the Second Report and Order, a build-
out exception was never needed under the disaggregation option because, 
unlike the original amnesty option, the disaggregation option was never 
an ``all-or-nothing'' proposition. 62 FR 55348, 55350. Under the 
original amnesty option, a licensee was required to surrender all 
licenses except for those in MTAs in which it satisfied the build-out 
requirement. By comparison, disaggregation was permitted on an MTA-by-
MTA basis. Licensees were never compelled to disaggregate spectrum in 
all their MTAs.
    49. The Commission affirms the statement in the Second Report and 
Order that upon acceptance of the election notice, the disaggregated 
spectrum will be deemed returned to the Commission. 62 FR 55348, 55353. 
Further, after disaggregation, notwithstanding the fact that a 
disaggregating licensee will continue to hold in its possession a 30 
MHz license, that license will no longer authorize use of the 15 MHz of 
spectrum that is surrendered to the Commission. The license will 
continue to be valid with respect to the 15 MHz of spectrum that is 
retained.

VIII. Election Procedures

    50. In the Second Report and Order, the Commission established 
January 15, 1998, as the deadline for C block licensees to elect to 
continue under the existing installment payment plan or to elect one of 
the three alternative options. Id. The Commission also required, inter 
alia, C block licensees whose elections would necessitate ongoing 
payments to execute any necessary financing documents pursuant to 
appropriate requirements and time frames established by the Bureau. The 
Commission specified procedures to be followed by licensees electing to 
continue under their existing notes or electing disaggregation, 
amnesty, or prepayment.
    51. On January 7, 1998, the Commission changed the election date to 
February 26, 1998, in order to allow licensees to submit their 
elections after final disposition of arguments raised on 
reconsideration. 63 FR 2170. On February 24, 1998, the Commission 
issued an order changing the election date to 60 days after publication 
of the Reconsideration Order in the Federal Register. 63 FR 10153.
    52. Moving the election date was an appropriate action given the 
large number of petitions for reconsideration filed in this proceeding. 
The revised deadline has provided sufficient time for the Commission to 
respond to arguments raised on reconsideration so that licensees can be 
assured of regulatory certainty before making their elections. The 
postponement satisfies the requests of several parties that the date be 
delayed. The Commission denies other requests for a still longer 
postponement. Licensees already have had several months in which to 
consider the options under the Second Report and Order, and the 
Commission believes that the additional 60 days they will have after 
publication in the Federal Register will provide sufficient time for 
any reevaluation that may be necessary in light of the modifications 
the Commission makes in the Reconsideration Order.
    53. In the Second Report and Order, the Commission inadvertently 
omitted reference to the requirement that F block licensees execute 
fully and deliver timely all necessary financing documents. 
Consequently, it clarifies in the Reconsideration Order that F block 
licensees, as well as C block licensees, must execute and deliver all 
necessary financing documents pursuant to appropriate requirements and 
time frames as will be established by the Bureau in a forthcoming 
public notice on procedures. The Commission modifies the Second Report 
and Order to require both C and F block licensees that fail to execute 
fully and deliver timely to the Commission any required financing 
documents to pay on the payment resumption date all unpaid simple 
interest accruing from the date of license grant through the payment 
resumption date. See 62 FR 55348, 55353. The Bureau's forthcoming 
public notice also will set forth updated election procedures for C 
block licensees, reflecting the Commission's modifications to the 
Second Report and Order.

IX. Reauction

    54. Timing. On January 7, 1998, the Commission announced that the C 
block reauction would begin on September 29, 1998. 63 FR 2170. In light 
of the postponement of both the election date and the payment 
resumption date, as discussed above, it will be necessary to establish 
a new reauction date. The Commission delegates to the Bureau the 
authority to establish the reauction date and instructs the Bureau to 
issue a public notice announcing the new date at least three months in 
advance of the start of the reauction.
    55. Eligibility. The Second Report and Order specified that all 
entrepreneurs, all entities that had been eligible for and had 
participated in the original C block auction, and all current C block 
licensees would be eligible to bid in the reauction. 62 FR 55348, 
55349; see also 62 FR 55375. The Commission, however, created an 
exception for incumbent licensees: for a period of two years from the 
start date of the reauction, C block licensees (defined as qualifying 
members of the licensee's control group, and their affiliates) that 
opted for the disaggregation or prepayment options would be prohibited 
from reacquiring, either through the reauction or through any secondary 
market transaction, any spectrum or licenses that they surrendered to 
the Commission under those options. 62 FR 55348, 55350, 55353. Such 
licensees, however, would be permitted to bid on spectrum or

[[Page 17119]]

licenses surrendered by other licensees, provided that such licensees 
were not affiliates. 62 FR 55348, 55350; see 62 FR 55348, 55353. 
Licensees electing the amnesty option would be eligible to bid for any 
and all licenses at the reauction, with no restrictions on post-auction 
acquisitions. 62 FR 55348, 55351.
    56. The only reauction eligibility issues set forth in the Second 
Report and Order ripe for reconsideration in this phase of the 
proceeding are those related directly to whether and how a licensee's 
election of a particular payment option should affect its eligibility 
to participate in the reauction of, or reacquire an ownership interest 
in, surrendered spectrum. The Commission defers to other phases of WT 
Docket No. 97-82 additional eligibility issues, including the 
qualifications of entities that have defaulted on payments to 
participate in the reauction and the use of a ``controlling interest'' 
approach rather than ``control group'' structures to determine 
financial size in the C block, as well as in all auctionable services. 
See 47 CFR 24.709(b)(3)(i), (b)(5)(i)(C); 62 FR 2315. The Commission 
notes that, in its comments filed in response to the Further Notice, 
one party challenges the Commission's ruling in the Second Report and 
Order that participation in the C block reauction is limited to 
qualified entrepreneurs. In their petitions for reconsideration, other 
parties respond to this argument and urge the Commission not to 
reconsider its decision. The Commission addresses this issue here, 
notwithstanding the fact that the initial challenge was not filed as a 
petition for reconsideration of the Second Report and Order. The 
Commission concludes that no party has provided a convincing rationale 
for deviating from the public interest goals articulated by the 
Commission in the Second Report and Order. See 62 FR 55348, 55349. 
Consequently, the Commission affirms its ruling in the Second Report 
and Order to limit eligibility for participation in the reauction to 
applicants meeting the current definition of ``entrepreneur.'' Id.
    57. On reconsideration, the Commission makes a change to the 
eligibility requirements, which already has been discussed above, and 
also a clarification. As stated, a licensee that elects the amnesty 
option for an MTA and opts to receive partial credit for down payments 
on its returned licenses in that MTA will not be eligible to reacquire 
those licenses through either reauction or any secondary market 
transaction for a period of two years from the start date of the 
reauction. This restriction also applies to the licensee's affiliates. 
Likewise, if a licensee disaggregates an MTA, neither it nor its 
affiliates may bid on the returned spectrum in the reauction or 
reacquire it through a secondary market transaction for two years after 
the start date of the reauction. Licensees that return licenses under 
the amnesty option or spectrum under the disaggregation option are not 
precluded from bidding in the reauction on licenses or spectrum 
returned by other non-affiliated licensees (or from later reacquiring 
those licenses or spectrum in post-auction transactions). The 
Commission clarifies that the term ``affiliate'' is defined by the 
competitive bidding rules in the Part 1 Third Report and Order. 47 CFR 
1.2110(b)(4); 63 FR 2315, 2318.
    58. Several parties believe that the Commission should revise the 
bidding eligibility requirements. One party, for example, agrees with 
the Commission's decision to exclude C block licensees that choose 
disaggregation or prepayment from bidding on their surrendered spectrum 
at reauction, but contends that the Commission undermines the integrity 
of the auction process by not similarly limiting the ability of 
licensees that select the amnesty option. This party contends that the 
lack of such a restriction will unjustly enrich licensees that select 
the amnesty option and then bid for the same spectrum at a likely 
discount. Other parties, on the other hand, claim that it is 
unreasonably discriminatory to preclude entities choosing 
disaggregation or prepayment from reacquiring their surrendered 
spectrum for two years while allowing entities choosing the amnesty 
option to reacquire their spectrum immediately either by reauction or 
through secondary markets.
    59. The Commission's modified approach addresses both of these 
arguments. Licensees electing disaggregation and/or prepayment for one 
MTA now can choose to return licenses in other MTAs and bid on those 
licenses in the reauction. However, licensees electing amnesty for an 
MTA must forgo their entire down payment if they wish to bid on their 
returned licenses for that MTA. The Commission believes that this cost 
sufficiently mitigates any concern of unjust enrichment.

X. Miscellaneous Matters

    60. Cross Defaults. The Second Report and Order provided that if a 
licensee defaulted on a C block license, the Commission would not 
pursue cross default remedies with regard to the licensee's other 
licenses in the C or F blocks. 62 FR 55348, 55353-54. In other words, 
if a licensee defaulted on a given C block license but was meeting its 
payment obligations on its other C or F block licenses, the Commission 
would not declare the licensee to be in default with respect to those 
other C or F block licenses. Id. The Commission does not believe that 
its decision encourages auction participants to bid speculatively and 
then ``cherry-pick'' among the licenses they ultimately decide to keep 
by simply defaulting on the ones they no longer desire. The Commission 
has implemented numerous procedures, described earlier, to safeguard 
against ``cherry-picking.'' Moreover, the Commission believes that by 
not imposing cross default remedies, it encourages regional financing. 
Even if a licensee's holdings in one region have proven unattractive to 
the financial market, the same licensee's holdings in other markets may 
be financially sound. Therefore, the Commission will not depart from 
the decision in the Second Report and Order. The Commission notes that 
licensees that ultimately default will continue to be subject to debt 
collection procedures. 47 CFR 1.2110(f)(4)(iv).
    61. No Extension of C Block Relief to Other Licensees. The 
Commission rejects various requests to grant F block licensees the same 
relief provided to C block licensees, because C and F block licensees 
do not have the same need for financial relief. After careful review, 
the Commission determined in the Second Report and Order that the 
nature and extent of any financing difficulties faced by the C block 
licensees appeared to be different from any such problems facing 
entrepreneurs in the F block. C block prices were higher, on average, 
than F block prices. The Commission disagrees with several parties that 
argue that the Commission's explanation in the Second Report and Order 
fails to justify disparate treatment. The difficulties in financing the 
unexpectedly high prices bid in the C block auctions is a sufficiently 
distinguishing basis for limiting relief to C block licensees. The 
Commission agrees with the analysis of one party that the C block 
situation was the result of a unique set of mostly unpredictable 
events, including litigation and resulting licensing delays and the 
lack of a simultaneous non-entrepreneur auction that could have been 
used to ease price pressures.
    62. The need for C block relief was due to exceptional and urgent 
circumstances, and because it is essential to maintain the integrity of 
the auction process, only the most exigent situation would cause the 
Commission to offer such relief. Even in addressing

[[Page 17120]]

the C block financing situation, the Commission provided options that 
offered only limited relief so as to be fair to bidders that withdrew 
from the auction. The Commission therefore is not persuaded by one 
party's claim that F block licensees should be granted relief because 
A, B, and C block licensees have a competitive advantage given their 
earlier licensing date and their larger amounts of spectrum. The 
Commission also rejects another party's argument that C block options 
should be available to entrepreneurs with D, E, and F block licenses 
because C block relief will change the relative values of those 
licenses. These arguments do not present sufficiently compelling 
reasons to apply the extraordinary procedures we adopted for C block 
licensees to D, E, and F block licensees. One party argues that 
narrowband PCS entities should receive relief comparable to that 
afforded C block licensees because they compete in the same consumer 
and financial markets and face similar circumstances. The record in 
this reconsideration proceeding is insufficient to adopt global changes 
affecting narrowband PCS entities, but the Commission notes that 
payment matters for these entities are currently being examined in 
another proceeding before the Commission. 62 FR 27563.
    63. Issues Addressed in Other Proceedings or Requiring Action by 
Congress. A number of parties make requests involving issues either 
that will be, or have been, addressed in other proceedings or that 
require action by Congress. For example, several petitioners urge the 
Commission to reduce the interest rate for C block installment 
payments. The Bureau will address this issue in a forthcoming order. 
With respect to a request that the Commission allow commercial lenders 
to acquire a security interest in licenses, the Commission notes that 
it previously resolved the issue in another proceeding. 62 FR 13540, 
13542.
    64. Other parties encourage the Commission to seek Congressional 
authority to award tax certificates to entities that provide investment 
capital to C block licensees. Section 309(j)(4)(D) of the 
Communications Act mandates that, in seeking to ensure that designated 
entities are ``given the opportunity to participate in the provision of 
spectrum-based services,'' the Commission shall ``consider the use of 
tax certificates.'' 47 U.S.C. Sec. 309(j)(4)(D). By allowing a tax 
deferral of the gain realized on an investment, tax certificates 
provide a significant means of enhancing the value of an investment in 
an enterprise, and the Commission believes that a tax certificate 
program for spectrum-based services would be as beneficial to the 
wireless industry as the Commission's tax certificate programs were for 
the broadcast and cable industries. However, in view of Congress' 
repeal in 1995 of Section 1071 of the IRS Code, which granted the 
Commission authority to use tax certificates to promote Commission 
policies, the Commission believes that legislative action would be 
necessary before the Commission could provide such tax relief. See Pub. 
L. 104-7, Sec. 2, 109 Stat. 93, 93-94 (1995). Accordingly, the 
Commission urges Congress to review the positive impact of the 
Commission's previous tax certificate programs and to grant the 
Commission the authority to establish a similar program for wireless 
enterprises, which the Commission believes would promote competition in 
the telecommunications industry by encouraging investment in new 
services.

XII. Supplemental Final Regulatory Flexibility Analysis

    65. As required by the Regulatory Flexibility Act (RFA), 5 U.S.C. 
Sec. 604, an Initial Regulatory Flexibility Analysis (IRFA) was 
incorporated into the Order, Memorandum Opinion and Order and Notice of 
Proposed Rulemaking (Notice) in WT Docket No. 97-82. Amendment of Part 
1 of the Commission's Rules--Competitive Bidding Proceeding, WT Docket 
No. 97-82, Order, Memorandum Opinion and Order and Notice of Proposed 
Rulemaking, FCC 97-60 (released February 28, 1997). The Commission 
sought written public comment on the proposals in the Notice, including 
comment on the IRFA. A Final Regulatory Flexibility Analysis (FRFA) was 
incorporated into the Second Report and Order. The Commission received 
37 petitions for reconsideration in response to the Second Report and 
Order. This FRFA analyzes the modifications adopted in response to 
those petitions for reconsideration.
A. Need for, and Objectives of, this Reconsideration Order
    66. This Reconsideration Order is designed to assist C block 
broadband PCS licensees to meet their financial obligations to the 
Commission while at the same time helping the Commission meet its goal 
of ensuring rapid provision of PCS service to the public. The 
Reconsideration Order provides a variety of relief mechanisms to assist 
C block licensees that are experiencing difficulties in meeting the 
financial obligations under the installment payment plan. The relief 
provided to C block licensees will speed deployment of service to the 
public by easing lenders' concerns regarding regulatory uncertainty and 
by potentially making more capital available for investment and growth. 
By facilitating the provision of service to consumers, the Commission 
advances Congress' objective to promote ``the development and rapid 
deployment of new technologies, products, and services for the benefit 
of the public.'' Communications Act Sec. 309(j)(3)(A), 47 U.S.C. 
Sec. 309(j)(3)(A).
B. Summary of Significant Issues Raised by Public Comments in Response 
to the IRFA
    67. There were no comments filed in response to the IRFA; however, 
in this proceeding the Commission has considered the economic impact on 
small businesses of the modifications the Commission has adopted. See 
Section E of this Supplemental FRFA, infra.
C. Description and Estimate of the Number of Small Entities to Which 
Rules Will Apply
    68. The RFA directs agencies to provide a description of and, where 
feasible, an estimate of the number of small entities that will be 
affected by our rules. 5 U.S.C. Secs. 603(b)(3), 604(a)(3). The RFA 
generally defines the term ``small entity'' as having the same meaning 
as the terms ``small business,'' ``small organization,'' and ``small 
governmental jurisdiction.'' 5 U.S.C. Sec. 601(6). In addition, the 
term ``small business'' has the same meaning as the term ``small 
business concern'' under Section 3 of the Small Business Act. 5 U.S.C. 
Sec. 601(3) (incorporating by reference the definition of ``small 
business concern'' in 15 U.S.C. Sec. 632). Under the Small Business 
Act, a ``small business concern'' is one which: (1) is independently 
owned and operated; (2) is not dominant in its field of operation; and 
(3) meets any additional criteria established by the Small Business 
Administration (SBA). 15 U.S.C. Sec. 632.
    69. This Reconsideration Order applies to broadband PCS C and F 
block licensees. The Commission, with respect to broadband PCS, defines 
small entities to mean those having gross revenues of not more than $40 
million in each of the preceding three calendar years. See 47 CFR 
24.720(b)(1). This definition has been approved by the SBA. See 
Implementation of Section 309(j) of the Communications Act--Competitive 
Bidding, Third Memorandum Opinion and Order and Further Notice of 
Proposed Rulemaking, 59 FR 44058 (1994); Implementation of Section 
309(j) of the Communications

[[Page 17121]]

Act--Competitive Bidding, Fifth Report and Order, 59 FR 37566 (1994); 
47 CFR 24.320(b), 24.720(b). On May 6, 1996, the Commission concluded 
the broadband PCS C block auction. The broadband PCS D, E, and F block 
auction closed on January 14, 1997. Ninety bidders (including the C 
block reauction winners, prior to any defaults by winning bidders) won 
493 C block licenses and 88 bidders won 491 F block licenses. Small 
businesses placing high bids in the C and F block auctions were 
eligible for bidding credits and installment payment plans. For 
purposes of the evaluations and conclusion in this FRFA, the Commission 
assumes that all of the 90 C block broadband PCS licensees and 88 F 
block broadband PCS licensees, a total of 178 licensees potentially 
affected by this Reconsideration Order, are small entities.
D. Description of the Projected Reporting, Recordkeeping, and Other 
Compliance Requirements
    70. C block licensees must file notice of their elections with the 
Wireless Telecommunications Bureau no later than the election date. The 
election date will be 60 days after publication of the Reconsideration 
Order in the Federal Register. The Reconsideration Order increases the 
reporting requirements of the Second Report and Order to the extent 
that elections now may be made for each MTA. See Second Report and 
Order, supra. Formerly, licensees were required to make the same 
election for all their licenses.
E. Steps Taken to Minimize the Significant Economic Impact on Small 
Entities, and Significant Alternatives Considered
    71. As noted in the FRFA of the Second Report and Order, the 
Commission analyzed the significant economic impact on small entities 
and considered significant alternatives. Id. The modifications adopted 
on reconsideration will further reduce the burden on C block licensees, 
which are small businesses. These modifications include:
    (1) Elections on an MTA-by-MTA basis. Licensees now will have the 
flexibility to make elections on an MTA-by-MTA basis, and so are not 
compelled to make the same election for all their licenses. This 
modification will afford C block licensees greater flexibility in 
fashioning a restructuring plan.
    (2) Additional flexibility for licensees. The Commission added 
flexibility to the amnesty option by offering licensees the choice 
between receiving a credit for their returned licenses or having the 
opportunity to bid on their return licenses in the reauction. The 
Commission also provided additional flexibility by allowing licensees 
to combine disaggregation with prepayment.
    (3) Higher percentage of down payment credit. By crediting a higher 
percentage of the down payment under disaggregation, the Commission 
better enables these small businesses to remain in the wireless market. 
The Commission provides even more credit to licensees choosing a 
combination of disaggregation and prepayment in order to encourage 
licensees to take advantage of the benefits of both these options.
    (4) Thirty-day extension of the non-delinquency period for payments 
not made on the resumption date. The Commission's 30-day extension is 
intended to help licensees that are experiencing last-minute delays in 
raising capital by providing them additional time to complete their 
fund-raising efforts.
    (5) Clarification of the Affordability Exception. The Commission's 
clarification of the affordability exception provides an objective 
means for licensees to implement the exception. It eliminates any doubt 
or confusion regarding the scope of the term ``afford,'' and it is an 
easy, bright-line test to administer.
    72. The Commission believes that it is in the public interest to 
adopt the above modifications in order to facilitate rapid introduction 
of service to the public without further regulatory or marketplace 
delay. The Commission's decision minimizes the potential significant 
economic impact on small entities by permitting C block licensees to 
choose among a variety of alternative solutions to reduce their debt to 
the Commission. The intent of this Reconsideration Order is to 
alleviate to some extent the financial difficulties faced by these 
small entities by providing options that: (1) achieve a degree of 
fairness to all parties, including losing bidders in the C block 
auction; (2) continue to promote competition and participation by 
smaller businesses in providing broadband PCS service; and (3) avoid 
solutions that merely prolong uncertainty.
    73. The Commission rejected proposals for a further deferral of the 
payment resumption deadline because licensees already have had a 
sufficient deferral period. In addition, the Commission does not wish 
to adopt temporary solutions that might only postpone the difficulties 
faced by the C block licensees and further prolong uncertainty. There 
is no guarantee that an extended deferral period would improve the long 
term financial outlook facing many licensees. The Commission also 
rejected arguments that licensees should receive full credit for down 
payments made on licenses or spectrum returned to the Commission for 
reauction. The Commission already provides substantial use of a 
licensee's down payment. Moreover, providing full credit would be 
unfair to unsuccessful bidders that withdrew from the C block auction.
F. Report to Congress
    74. The Commission shall send a copy of the Reconsideration Order, 
including this Supplemental FRFA, in a report to Congress pursuant to 
the Small Business Regulatory Enforcement Fairness Act of 1996. See 5 
U.S.C. Sec. 801(a)(1)(A). A copy of the Reconsideration Order and this 
FRFA (or summary thereof) will be published in the Federal Register. 
See 5 U.S.C. Sec. 604(b). A copy of the Reconsideration Order and this 
FRFA will also be sent to the Chief Counsel for Advocacy of the Small 
Business Administration.

XIII. Ordering Clauses

    75. Accordingly, it is ordered that, pursuant to the authority 
granted 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), the 
petitions for reconsideration filed in response to the Second Report 
and Order are granted in part and denied in part, as provided herein.
    76. It is further ordered that, pursuant to the authority granted 
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), the 
modifications to the Commission's rules, as described herein and in 
Appendix B, are hereby adopted. These modifications shall become 
effective 60 days after publication of this Order on Reconsideration of 
the Second Report and Order in the Federal Register.
    77. It is further ordered that, pursuant to 47 U.S.C. Sec. 155(c) 
and 47 CFR 0.331, the Chief of the Wireless Telecommunications Bureau 
is granted delegated authority to prescribe and set forth procedures 
for the implementation of the provisions adopted herein.
    78. It is further ordered that the Commission's Office of Public 
Affairs, Reference Operations Division, shall send a copy of this Order 
on Reconsideration of the Second Report and Order, including the 
Supplemental Final Regulatory Flexibility Analysis, to

[[Page 17122]]

the Chief Counsel for Advocacy of the Small Business Administration.

Paperwork Reduction Act

Notice of Public Information Collections Submitted to the Office of 
Management and Budget for Emergency Review and Approval

Summary

    The Federal Communications, as part of its continuing effort to 
reduce paperwork burden invites the general public and other Federal 
agencies to take this opportunity to comment on the following proposed 
and/or continuing information collections, as required by the Paperwork 
Reduction Act of 1995, Public Law 104-13. An agency may not conduct or 
sponsor a collection of information unless it displays a currently 
valid control number. No person shall be subject to any penalty for 
failing to comply with a collection of information subject to the 
Paperwork Reduction Act (PRA) that does not display a valid control 
number. Comments are requested concerning (a) whether the proposed 
collection of information is necessary for the proper performance of 
the functions of the Commission, including whether the information 
shall have practical utility; (b) the accuracy of the Commission's 
burden estimates; (c) ways to enhance the quality, utility, and clarity 
of the information collected; and (d) ways to minimize the burden of 
the collection of information on the respondents, including the use of 
automated collection techniques or other forms of information 
technology. Please Note: The Commission is seeking emergency approval 
for these information collections by April 30, 1998, under the 
provisions of 5 CFR 1320.13.
    Dates: Written comments should be submitted on or before April 27, 
1998. If you anticipate that you will be submitting comments, but find 
it difficult to do so within the period of time allowed by this notice, 
you should advise the contact listed below as soon as possible.
    Addresses: Direct all comments to Judy Boley, Federal 
Communications Commission, Room 234, 1919 M St., N.W., Washington, DC 
20554 or via internet to [email protected] and Timothy Fain, OMB Desk 
Officer, 10236 NEOB 725 17th Street, N.W., Washington, DC 20503 or 
[email protected].
    For Further Information Contact: For additional information or 
copies of the information collections, contact Judy Boley at 202-418-
0214 or via internet at [email protected].
    Supplementary Information:
    OMB Control Number: 3060-0801.
    Title: Amendment of the Commission's Rules Regarding Installment 
Payment Financing for Personal Communications Services (PCS) Licensees.
    Type of Review: Emergency Revision.
    Respondents: Businesses or other for-profit entities.
    Number of Respondents: 345.
    Estimated Time for Response: 0.5-4.89 hours.
    Total Annual Burden: 1,687.50 hours.
    Total Cost to Respondents: $69,592.
    Needs and Uses: This information collection allows the Federal 
Communications Commission to offer C block PCS licensees various 
options regarding their existing installment payment obligations. The 
information is necessary in order to enable the licensees to meet their 
financial obligations and to ensure rapid provision of PCS to the 
public.

List of Subjects

47 CFR Part 1

    Practice and Procedure.

47 CFR Part 24

    Personal Communications Services.

Federal Communications Commission.
Magalie Roman Salas,
Secretary.

Rule Changes

    Parts 1 and 24 of Chapter I 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: 15 U.S.C. 79 et seq.; 47 U.S.C. 151, 154(i), 154(j), 
155, 225, and 303(r), unless otherwise noted.

    2. Section 1.2110 is amended by revising paragraphs (f)(4)(ii), 
(iii), (iv) to read as follows:


Sec. 1.2110  Designated entities.

* * * * *
    (f) * * * 
    (4) * * *
    (ii) If any licensee fails to make the required payment at the 
close of the 90-day period set forth in paragraph (i) of this section, 
the licensee will automatically be provided with a subsequent 90-day 
grace period, except that no subsequent automatic grace period will be 
provided for payments from C or F block licensees that are not made 
within 90 days of the payment resumption date for those licensees, as 
explained in Amendment of the Commission's Rules Regarding Installment 
Payment Financing for Personal Communications Services (PCS) Licensees, 
Order on Reconsideration of the Second Report and Order, WT Docket No. 
97-82, FCC 98-46 (rel. Mar. 24, 1998). Any licensee making a required 
payment during this subsequent period will be assessed a late payment 
fee equal to ten percent (10%) of the amount of the past due payment. 
Licensees shall not be required to submit any form of request in order 
to take advantage of the initial 90-day non-delinquency period and 
subsequent automatic 90-day grace period. All licensees that avail 
themselves of the automatic grace period must pay the required late 
fee(s), all interest accrued during the non-delinquency and grace 
periods, and the appropriate scheduled payment with the first payment 
made following the conclusion of the grace period.
    (iii) If an eligible entity making installment payments is more 
than one hundred and eighty (180) days delinquent in any payment, it 
shall be in default, except that C and F block licensees shall be in 
default if their payment due on the payment resumption date, referenced 
in paragraph (f)(4)(ii) of this section, is more than ninety (90) days 
delinquent.
    (iv) Any eligible entity that submits an installment payment after 
the due date but fails to pay any late fee, interest or principal at 
the close of the 90-day non-delinquency period and subsequent automatic 
grace period, if such a grace period is available, will be declared in 
default, its license will automatically cancel, and will be subject to 
debt collection procedures.
* * * * *

PART 24--PERSONAL COMMUNICATIONS SERVICES

    3. The authority citation for part 24 continues to read as follows:

    Authority: 47 U.S.C. 154, 301, 302, 303, 309 and 332, unless 
otherwise noted.

    4. Section 24.709 is amended by revising paragraph (b)(9) to read 
as follows:


Sec. 24.709  Eligibility for licenses for frequency Blocks C and F.

* * * * *
    (b) * * *
    (9) Special rule for licensees disaggregating or returning certain 
spectrum in frequency block C. (i) In addition to entities qualifying 
under this section, any entity that was eligible for and participated 
in the auctions for frequency block C, which began on December 18, 
1995, and July 3, 1996, will be eligible to bid in a reauction of

[[Page 17123]]

block C spectrum surrendered pursuant to Amendment of the Commission's 
Rules Regarding Installment Payment Financing for Personal 
Communications Services (PCS) Licensees, Second Report and Order and 
Further Notice of Proposed Rule Making, WT Docket No. 97-82, 12 FCC Rcd 
16,436 (1997), as modified by the Order on Reconsideration of the 
Second Report and Order, WT Docket No. 97-82, FCC 98-46 (rel. Mar. 24, 
1998).
    (ii) The following restrictions will apply for any reauction of 
frequency block C spectrum conducted after March 24, 1998:
    (A) Applicants that elected to disaggregate and surrender to the 
Commission 15 MHz of spectrum from any or all of their frequency block 
C licenses, as provided in Amendment of the Commission's Rules 
Regarding Installment Payment Financing for Personal Communications 
Services (PCS) Licensees, Second Report and Order and Further Notice of 
Proposed Rule Making, WT Docket No. 97-82, 12 FCC Rcd 16,436 (1997), as 
modified by the Order on Reconsideration of the Second Report and 
Order, WT Docket No. 97-82, FCC 98-46 (rel. Mar. 24, 1998), will not be 
eligible to apply for such disaggregated spectrum until 2 years from 
the start of the reauction of that spectrum.
    (B) Applicants that surrendered to the Commission any of their 
frequency block C licenses, as provided in Amendment of the 
Commission's Rules Regarding Installment Payment Financing for Personal 
Communications Services (PCS) Licensees, Second Report and Order and 
Further Notice of Proposed Rule Making, WT Docket No. 97-82, 12 FCC Rcd 
16,436 (1997), as modified by the Order on Reconsideration of the 
Second Report and Order, WT Docket No. 97-82, FCC 98-46 (rel. Mar. 24, 
1998), will not be eligible to apply for the licenses that they 
surrendered to the Commission until 2 years from the start of the 
reauction of those licenses if they elected to apply a credit of 70% of 
the down payment they made on those licenses toward the prepayment of 
licenses they did not surrender.
* * * * *
[FR Doc. 98-9352 Filed 4-7-98; 8:45 am]
BILLING CODE 6712-01-P