[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