[Federal Register Volume 64, Number 95 (Tuesday, May 18, 1999)]
[Rules and Regulations]
[Pages 26887-26890]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 99-12455]


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FEDERAL COMMUNICATIONS COMMISSION

47 CFR Part 24

[WT Docket No. 97-82; FCC 99-66]


Installment Payment Financing for Personal Communications 
Services (PCS) Licenses

AGENCY: Federal Communications Commission.

ACTION: Final rule.

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SUMMARY: In this document, the Commission denies petitions for 
reconsideration of the Order on Reconsideration of the Second Report 
and Order and amends the Commission's rules to apply construction 
requirements for 10 MHz licensees to licensees of 15 MHz blocks 
resulting from the disaggregation restructuring option available to 
certain C block Personal Communications Services (``PCS'') licensees. 
The Commission also considers and denies requests for clarification 
and/or waiver of the cross default provisions in F block notes.

EFFECTIVE DATE: July 19, 1999.

FOR FURTHER INFORMATION CONTACT: Jill Pender of the Wireless 
Telecommunications Bureau, Auctions and Industry Analysis Division, 
Legal Branch, at (202) 418-1546 or email [email protected].

SUPPLEMENTARY INFORMATION: This document is a summary of the 
Commission's Second Order on Reconsideration of the Second Report and 
Order, WT Docket No. 97-82, FCC 99-66, adopted March 31, 1999, and 
released, April 5, 1999. The full text of this Second Order on 
Reconsideration of the Second Report and Order is available for 
inspection and copying during normal business hours in the FCC 
Reference Information Center, Room CY-A257, 445 Twelfth St., S.W., 
Washington, D.C. 20554. The complete text may be purchased from the 
Commission's copy contractor, International Transcription Services, 
1231 20th Street, N.W., Washington,

[[Page 26888]]

D.C. 20036, telephone (202) 857-3800, facsimile (202) 857-3805. The 
complete Second Order on Reconsideration of the Second Report and Order 
is also available on the Internet at the Commission's web site: http://
www.fcc.gov/wtb.

Summary of Action

I. Background

    1. On March 23, 1998, the Commission adopted an Order on 
Reconsideration of the Second Report and Order, 63 FR 17111, April 8, 
1998 (``First Reconsideration Order'') generally affirming the 
installment payment restructuring options for C block PCS licensees 
established in the Second Report and Order and Further Notice of 
Proposed Rule Making, 62 FR 55348, October 24, 1997 (``C Block Second 
Report and Order'') (collectively ``C Block Restructuring Orders''). In 
the C Block Second Report and Order, the Commission allowed elections 
among four options--disaggregation, amnesty, prepayment, and resumption 
of payments. In the First Reconsideration Order, the Commission 
modified the C Block Second Report and Order to: (1) eliminate the 
requirement that a licensee must make the same election for all of its 
licenses, instead allowing different elections for the different MTAs 
in which a licensee holds licenses; (2) apply elections made for an MTA 
to every Basic Trading Area (BTA) license held by the licensee in that 
MTA; (3) permit a combination of disaggregation and prepayment; and (4) 
permit payment credits for each disaggregated license for which the 
licensee elected to resume installment payments rather than prepay.
    2. By an Order adopted and released on February 24, 1998, 63 FR 
10153, March 2, 1998, the Commission notified licensees that elections 
for resumption of payments would be due 60 days after publication of 
the Commission's First Reconsideration Order in the Federal Register. 
The Wireless Telecommunications Bureau (``Bureau'') announced by public 
notice on April 17, 1998 an election date of June 8, 1998 and a payment 
resumption date of July 31, 1998. See ``Wireless Telecommunications 
Bureau Announces June 8, 1998 Election Date for Broadband PCS C Block 
Licensees,'' Public Notice, DA 98-741 (rel. April 17, 1998).
    3. During the period in which the Commission was considering the 
election options, two licensees filed for bankruptcy, DCR PCS, Inc., 
the subsidiary of Pocket Communications, Inc. (``Pocket'') and GWI PCS, 
Inc (``GWI''). Two weeks before the submission date for petitions for 
reconsideration in this matter, the U.S. Bankruptcy Court for the 
Northern District of Texas (``bankruptcy court'') issued a bench ruling 
in GWI PCS 1, Inc. v. FCC, Adv. Pro. 397-3492 (Bankr. N.D. Tex. April 
24, 1998), appeal pending, United States v. GWI PCS 1, Inc., et al., 
No. 3:98cv1704-L (N.D. Tex.) (``GWI Decision''), allowing the GWI 
licensees to retain 14 C block licenses for which GWI PCS was the high 
bidder at the C block auction, but voiding 84.34 percent of the debt 
owed to the Commission for these licenses. Three other C block 
licensees have since filed for bankruptcy. See In Re NextWave Personal 
Communications, Inc., 98-B21529 (ASH), Chapter 11, Adv. Pro. 98-5178A 
(Bankr. SDNY); In re Urban Comm-North Carolina, Inc., No. 98-B10086 
(Bankr. SDNY); In re Magnacomm Wireless, LLC, No. 98-39048T (Bankr. WD 
Wash). In response to the First Reconsideration Order, the Commission 
received eleven petitions for reconsideration, one set of supplemental 
comments, and no oppositions or replies. A number of these petitions 
asked that the Commission apply the GWI Decision to C block licensees 
in general. Subsequently, more than 90 percent of C block licensees 
filed proper elections in compliance with the First Reconsideration 
Order.
    4. The Commission also received requests for rulings on the impact 
of its cross default policy on certain pre-existing PCS F block notes. 
The Commission previously concluded that it would not pursue a policy 
of cross default (either within or across services) where licensees 
default on an installment payment. See Amendment of Part 1 of the 
Commission's Rules--Competitive Bidding Procedures, Allocation of 
Spectrum Below 5 GHz Transferred from Federal Government Use, 4660-4685 
MHz, WT Docket No. 97-82, ET Docket No. 94-32, Third Report and Order 
and Second Further Notice of Proposed Rule Making, 63 FR 2315, January 
15, 1998 (``Part 1 Third Report and Order''). The Commission found in 
the Part 1 Third Report and Order and in the First Reconsideration 
Order that its policy against cross defaults on installment payments 
would promote the goals discussed in Section 309(j) of the 
Communications Act by not terminating a license simply because an 
affiliate failed to make a payment with respect to another license. 
These decisions did not address the subject of cross defaults that 
might occur in the installment payment program as a result of an event 
of default other than a failure to make installment payment. One party 
requests that the Commission not exercise remedies based on the cross-
bankruptcy default provisions in notes that had been issued for 
installment payment financing of PCS F block licenses (``F block 
notes''), while another requests a waiver of the cross default 
provisions contained in the F block notes. A third party argues that 
certain F block note provisions are inconsistent with the Commission's 
cross default ruling in the Part 1 Third Report and Order, the C Block 
Second Report and Order, and the First Reconsideration Order, and 
further maintains that the Part 1 Third Report and Order requires 
invalidation of the provisions of any notes that the Commission may 
already have executed where the insolvency of a note maker or its 
affiliate is defined as an event of default.

II. Overview

    5. In this Second Order on Reconsideration of the Second Report and 
Order, WT Docket No. 97-82, FCC 99-66 (``Second Reconsideration 
Order''), the Commission reaffirms its earlier conclusion that the 
relief provided C block licensees in previous C Block Restructuring 
Orders 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. 
The adjustments to the C Block Second Report and Order contained in the 
First Reconsideration Order provided additional flexibility to 
licensees without undermining the integrity of the auctions process. 
The petitioners have presented no arguments sufficient to require 
modifications to the C Block Restructuring Orders. Accordingly, the 
Commission affirms its First Reconsideration Order, but makes one minor 
amendment to the construction rules to effectuate the disaggregation 
option. Section 24.203(b) is amended to recognize the existence of 15 
MHz blocks resulting from the C Block Restructuring Orders, and apply 
the current construction requirements for 10 MHz blocks to the 15 MHz 
blocks. The Commission also considers and rejects requests for 
clarification or waiver of cross default provisions contained in F 
block notes.

III. Issues Related to Bankruptcy Filings and Decisions

    6. The Commission released previous C Block Restructuring Orders 
prior to the issuance of the GWI Decision. Some petitioners rely on the 
GWI Decision as

[[Page 26889]]

a basis for requesting a stay of the June 8, 1998 election and July 31, 
1998 resumption of payment dates. The Commission notes that this issue 
is mooted by the proper filing of election notices and the resumption 
of payments by more than 90 percent of the C block licensees, and finds 
that no good cause exists for delaying elections based on actual and 
projected bankruptcy activity. The Commission also rejects the GWI 
Decision as a valid precedent in this matter and refuses to apply the 
bankruptcy court's findings to other C block licensees.

IV. First Reconsideration Order Issues Raised

    7. Some petitioners claim that single license holders fail to 
realize the benefits afforded larger-scale licensees. They sought 
future auction credits for single-license holders using the amnesty 
option, so that such licensees would not lose the benefit of their down 
payments. The Commission rejects special options that would enhance the 
financial benefits afforded single license holders and affirms the 
options as articulated in the First Reconsideration Order. The Second 
Reconsideration Order provides the following reasons for refusing to 
grant the petitioners' request: (1) the Commission already has provided 
a variety of restructuring options so that licensees may choose the 
option that best suits their situation; (2) multiple licensees 
receiving a credit for returned licenses, unlike holders of single 
licenses using the amnesty option, are prohibited from rebidding on 
surrendered licenses; (3) holders of single licenses may use the 
disaggregation option and thereby receive the same proportional 
benefits as large-scale holders.
    8. Two petitioners raise arguments concerning the validity and use 
of the MTA-by-MTA elections contained in the First Reconsideration 
Order. The Commission rejects any alteration to disaggregation 
generally and refuses to discard or change the MTA-by-MTA elections 
permitted in the First Reconsideration Order. The Commission believes 
that the MTA is the appropriate unit for making an election and it will 
not permit BTA-by-BTA elections because it would threaten the 
interdependency of licenses and limit the potential for aggregation of 
licenses within an MTA.

V. Amendment of Section 24.203(b)

    9. The Commission notes that while the C Block Restructuring Orders 
provided a disaggregation option which will result in 15 MHz C block 
licenses, the current construction rules address only 10 MHz and 30 MHz 
blocks. See 47 CFR 24.203(b). The Second Reconsideration Order amends 
Section 24.203(b) to apply to licensees of 15 MHz blocks resulting from 
the disaggregation option under the C Block Restructuring Orders the 
construction requirements for 10 MHz blocks.

VI. Requests for Ruling on Impact of Cross Default Policy on 
Certain Pre-Existing PCS F Block Notes

    10. The Commission finds that the Part 1 Third Report and Order is 
not inconsistent with, and therefore does not invalidate, the cross 
default provisions contained in the F block notes. The Commission notes 
that the Part I Third Report and Order and the F block notes set forth 
the Commission's policy toward licensees that default under different 
circumstances. The Second Reconsideration Order affirms the policy of 
the Part 1 Third Report and Order, which states that the Commission 
will not pursue a policy of cross default in cases where licensees 
default on installment payments. The Commission cautions that this 
finding does not preclude the application of cross default in the very 
different circumstance of an affiliate's insolvency or bankruptcy. 
Accordingly, the Commission holds that the F block note default 
provisions continue to have full force and effect as to all events 
enumerated therein. In light of this clarification that the cross 
default provisions in the F block note continue to have full force and 
effect, the Commission will not grant requests for clarification to the 
contrary, nor will it permit a waiver of the cross default provisions 
in the F block notes.

VII. Second Supplemental Final Regulatory Flexibility Analysis

    11. As required by the Regulatory Flexibility Act (``RFA''), 5 
U.S.C. 604, an Initial Regulatory Flexibility Analysis (``IRFA'') was 
incorporated in the Order, Memorandum Opinion and Order and Notice of 
Proposed Rulemaking (``Notice'') in WT Docket No. 97-82. 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 in the C Block Second Report and Order. A Supplemental 
FRFA appeared in the First Reconsideration Order. The Commission 
received 11 Petitions for Reconsideration in response to the First 
Reconsideration Order. This Second Supplemental FRFA addresses 
modification of the construction requirements for broadband PCS 
licenses necessitated by the adoption of the C Block Restructuring 
Orders.

A. Need for, and Objectives of, New Rule

    12. The C Block Restructuring Orders were designed to assist C 
block broadband personal communications services (``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. One of the financial restructuring 
options provided for in the C Block Restructuring Orders permitted 
disaggregation of a licensee's spectrum, resulting in the availability 
of 15 MHz C block licenses where only 10 MHz and 30 MHz blocks were 
available previously. The amendment of section 24.203(b) in this Second 
Reconsideration Order sets necessary construction standards for 
licensees of 15 MHz blocks created through the disaggregation option 
available under the C Block Restructuring Orders. This amendment 
applies to licensees of 15 MHz blocks the same construction 
requirements as apply to 10 MHz blocks. In doing so, this rule 
facilitates a process designed to increase effective use of the 
spectrum and ultimately provide licensees with the flexibility to 
introduce a wide variety of new and innovative telecommunications 
services to the public.

B. Summary of Significant Issues Raised by Public Comments in Response 
to the IRFA

    13. There were no comments filed in response to the IRFA in the C 
Block Second Report and Order; however, in this proceeding we have 
considered the economic impact on small businesses of the modification 
adopted in this Second Reconsideration Order. See Section E of this 
Second Supplemental FRFA, infra.

C. Description and Estimate of the Number of Small Entities to Which 
Rules Will Apply

    14. 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. The RFA generally defines the term ``small 
entity'' as having the same meaning as the terms ``small business,'' 
``small organization,'' and ``small governmental jurisdiction.'' In 
addition, the term ``small business'' has the same meaning as the term 
``small business concern'' under Section 3 of the Small Business Act. 
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

[[Page 26890]]

of operation; and (3) meets any additional criteria established by the 
Small Business Administration (``SBA'').
    15. The Second 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. This 
definition has been approved by the SBA. On May 6, 1996, the Commission 
concluded the broadband PCS block auction. A Second PCS C block auction 
closed on July 16, 1996. The broadband PCS D, E, and F block auction 
closed on Jan. 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 our evaluations and conclusion in this FRFA, we assume 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 
Second Reconsideration Order, are small entities. The disaggregation 
option applies only to C Block licensees, so therefore the rules 
changes will affect no more than 90 entities prior to any auction of 
returned spectrum.

D. Description of the Projected Reporting, Record-Keeping, and Other 
Compliance Requirements

    16. The modifications adopted by the C Block Restructuring Orders 
include reporting and record-keeping requirements for licensees of 
newly created 15 MHz blocks to establish compliance with the 
construction requirement adopted for those blocks. These licensees must 
file maps and other supporting documents at the five and ten-year 
construction benchmarks.

E. Steps Taken To Minimize the Significant Economic Impact on Small 
Entities, and Significant Alternatives Considered

    17. As noted in the FRFA of the C Block Second Report and Order, 
the Commission analyzed the significant economic impact on small 
entities and considered significant alternatives. The modifications 
adopted on reconsideration further reduced the burden on C block 
licensees, which are small businesses. These steps were detailed at 
length in the Supplemental FRFA. The amendment adopted in the Second 
Reconsideration Order similarly minimizes economic impact in that it 
applies the 10 MHz construction requirements to licensees of the newly 
created 15 MHz blocks. Thus, it applies the less onerous of the 
existing construction requirements.

F. Report to Congress

    18. The Commission shall send a copy of the Second Reconsideration 
Order, including this Second Supplemental FRFA, in a report to Congress 
pursuant to the Small Business Regulatory Enforcement Fairness Act of 
1996. See 5 USC 801(a)(1)(A). A copy of the Second Reconsideration 
Order and this FRFA will also be sent to the Chief Counsel for Advocacy 
of the Small Business Administration.

Paperwork Reduction Act

    19. This Second Reconsideration Order contains neither a modified 
nor a new information collection.

List of Subjects in 47 CFR Part 24

    Personal communications services.

Federal Communications Commission.
Magalie Roman Salas,
Secretary.

Rule Changes

    Accordingly, Part 24 of Title 47 of the Code of Federal Regulations 
is amended as follows:

PART 24--PERSONAL COMMUNICATIONS SERVICES

    1. 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.

    2. Section 24.203(b) is amended by revising the first sentence to 
read as follows:


Sec. 24.203  Construction requirements.

* * * * *
    (b) Licensees of 10 MHz blocks and 15 MHz blocks resulting from the 
disaggregation option as provided in 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 97-82, 12 FCC Rcd 16,436 (1997), as modified by 
Order on Reconsideration of the Second Report and Order, WT Docket 97-
82, 13 FCC Rcd 8345 (1998), must serve with a signal level sufficient 
to one-quarter of the population in their licensed area within five 
years of being licensed, or make a showing of substantial service in 
their licensed area within five years of being licensed. * * *
* * * * *
[FR Doc. 99-12455 Filed 5-17-99; 8:45 am]
BILLING CODE 6712-01-U