[Federal Register Volume 64, Number 249 (Wednesday, December 29, 1999)]
[Rules and Regulations]
[Pages 72956-72959]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 99-33768]


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FEDERAL COMMUNICATIONS COMMISSION

47 CFR Part 95

[WT Docket No. 98-169; FCC 99-372]


Rules to Provide Regulatory Flexibility in the 218-219 MHz 
Service

AGENCY: Federal Communications Commission.

ACTION: Final rule.

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SUMMARY: The Commission modifies the restructuring plan adopted in the 
218-219 MHz final rule document. The purpose of the modification is to 
remove a provision whereby an eligible licensee participating in the 
restructuring plan can obtain a seventy-percent credit on its down 
payment and forego, for a period of two years, eligibility to acquire 
the surrendered licenses. It was not the Commission's intent to adopt 
the seventy-percent credit and the intended effect is to correct the 
prior error.

DATES: Effective December 29, 1999.

FOR FURTHER INFORMATION CONTACT: Andrea Kelly, Wireless 
Telecommunications Bureau, Auctions and Industry Analysis Division 
(202) 418-0660.

SUPPLEMENTARY INFORMATION: 1. This Order on Reconsideration in WT 
Docket 98-169 was adopted November 24, 1999 and released November 30, 
1999. The document is available, in its entirety, for inspection and 
copying during normal business hours in the FCC Reference Center, (Room 
CY-A257), 445 12th Street, SW, Washington, DC 20554. It may also be 
purchased from the Commission's copy contractor, International 
Transcription Services, Inc. (ITS, Inc.), 1231 20th Street, NW, 
Washington, DC 20036, (202) 857-3800. In addition, it is available on 
the Commission's website at http://www.fcc.gov/Bureaus/Wireless/Orders.

Synopsis

I. Background

    2. In the 218-219 MHz Report and Order 64 FR 59656 (November 3, 
1999), the Commission adopted a restructuring plan for existing 218-219 
MHz licensees. These licensees were current in installment payments 
(i.e. less than ninety days delinquent) as of March 16, 1998, or those 
licensees that had properly filed grace period requests

[[Page 72957]]

under the former installment payment rule. (``Eligible Licensees''). 
The restructuring plan offered three options to provide specific relief 
for licensees that wish to retain their license but are experiencing 
financial hardship or that wish to return their licenses due to an 
inability to assume their financial responsibilities. The three options 
are: (a) Reamortization and Resumption of Payments; (b) Amnesty, and 
(c) Prepayment, whereby an Eligible Licensee may prepay the principal 
of any license it wishes to retain with cash and prepayment credits 
generated from down payments on spectrum returned to the Commission and 
any installment payments previously made. The Commission's order 
allowed an Eligible Licensee electing the Amnesty option to choose 
either to receive no credit for its down payment, but remain eligible 
to bid on the surrendered licenses when they are subsequently offered 
in auction, with no restriction on after-market acquisitions; or obtain 
a credit for seventy percent of its down payment and forego for a 
period of two years, from the start date of the next auction of the 
218-219 MHz Service, eligibility to reacquire the surrendered licenses 
through either auction or any secondary market transaction.

II. Discussion

    3. It was not the Commission's original intent to adopt the seventy 
percent credit proposed in the 218-219 MHz Flex NPRM, 63 FR 52215 
(September 30, 1998) therefore, on its own motion, for the following 
reasons, the Commission corrects the prior error. On review, it is 
apparent that, under the Amnesty option, allowing an Eligible Licensee 
to obtain credit for its down payment and forego reacquiring 
surrendered licenses for a period of two years is inconsistent with our 
responsibility to protect the integrity of the auction program and 
promote new and innovative uses of spectrum. Giving a seventy percent 
credit on down payments associated with returned spectrum, without an 
adequate counterbalancing public interest benefit, would undermine the 
integrity of the auction process by relieving participants of even the 
most basic obligation of their participation.
    4. However, the Commission recognizes that it allows for a credit 
on down payments in other portions of the 218-219 MHz Report and Order. 
Specifically, an Eligible Licensee who elects the Prepayment option is 
eligible for an eighty-five percent credit on its down payment. It is 
important to note that an Eligible Licensee who elects the prepayment 
option is providing a public benefit through early payment of its 
financial obligations. Nevertheless, under the Prepayment option, the 
Commission retains an amount equal to the three-percent default 
payment. (Fifteen percent of the twenty-percent down payment equals 
three percent of the purchase price.) Thus, as an Eligible Licensee 
electing the Amnesty option is not providing the same public benefit, 
it would not be in the public interest to allow it a seventy-percent 
credit on its down payment. Amendment of the Commission's Rules 
Regarding Installment Payment Financing For Personal Communications 
Services, (PCS), Order on Reconsideration of the Second Report and 
Order, 63 FR 17111 (April 8, 1998) (``C Block Reconsideration Order'').
    5. The 218-219 MHz Report and Order increased the flexibility of 
the 218-219 MHz service and extended the license term in order to 
encourage new and innovative uses in the marketplace and expedite 
service to the public. In the 218-219 MHz Report and Order, the only 
restriction on reacquisition applied to those Eligible Licensees opting 
for the seventy percent credit. Thus, as the seventy percent credit is 
no longer available, Eligible Licensees electing Amnesty will not be 
precluded from reacquiring licenses at auction or in the secondary 
market. This result is appropriate as Eligible Licensees electing 
amnesty may still have viable business plans to implement based on 
spectrum they may acquire in future auctions or in the secondary 
market. A two-year restriction on the acquisition of certain spectrum 
may negatively impact an otherwise viable business plan. The 
Commission's action in this Order on Reconsideration moots the comments 
of EON Corporation seeking to broaden the disqualification period to 
exclude the future acquisition of any 218-219 MHz Service licenses to 
be auctioned in the ensuing two-year period. As the Commission stated 
in the 218-219 MHz Report and Order, limiting the reacquisition of 
spectrum or acquisition of additional spectrum by Eligible Licensees 
would not be in the public interest.
    6. The Commission modifies the 218-219 MHz Report and Order. 
Therefore, while the Commission will not give Eligible Licensees 
electing amnesty a credit for down payments associated with spectrum 
returned to the Commission, neither will it limit the reacquisition of 
spectrum or the acquisition of additional spectrum.

III. Ordering Clauses

    7. Accordingly, it is ordered that, pursuant to Sec. 1.108 of the 
Commission's rules, 47 CFR 1.108, the Commission reconsiders on its own 
motion the decision in Amendment of part 95 of the Commission's Rules 
to Provide Regulatory Flexibility in the 218-219 MHz Service, Report 
and Order and Memorandum Opinion and Order, WT Docket No. 98-169, FCC 
99-239 regarding amnesty and resumption of payment in the 218-219 MHz 
service, as detailed herein.

IV. Supplemental Final Regulatory Flexibility Analysis

    8. As required by the Regulatory Flexibility Act (``RFA''),\1\ an 
Initial Regulatory Flexibility Analysis (``IRFA'') was incorporated in 
the Amendment of part 95 of the Commission's Rules to Provide 
Regulatory Flexibility in the 218-219 MHz Service and Amendment of part 
95 of the Commission's Rules to Allow Interactive Video and Data 
Service Licensees to Provide Mobile Services, 218-219 MHz Flex NPRM. 
The Commission sought written public comment on the proposals in the 
218-219 MHz Flex NPRM, including comment on the IRFA. A Final 
Regulatory Flexibility Analysis (``FRFA'') was included in the 
Amendment of part 95 of the Commission's Rules to Provide Regulatory 
Flexibility in the 218-219 MHz Service, 218-219 MHz Report and Order. 
In this Order on Reconsideration, we issue this supplemental Final 
Regulatory Flexibility Analysis (``supplemental FRFA'') which conforms 
to the RFA.
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    \1\ See 5 U.S.C. 603. The RFA, see 5 U.S.C. 601 et. seq., has 
been amended by the Contract With America Advancement Act of 1996, 
Public Law 104-121, 110 Stat. 847 (1996) (``CWAAA''). Title II of 
the CWAAA is the Small Business Regulatory Enforcement Fairness Act 
of 1996 (``SBREFA'').
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V. Need for, and Objecties of, The Order on Reconsideration

    9. In the 218-219 MHz Report and Order, among other things, we 
adopted a restructuring plan for existing 218-219 MHz licensees that 
were current in installment payments (i.e. less than ninety days 
delinquent) as of March 16, 1998, or those licensees that had properly 
filed grace period requests under the former installment payment rule. 
(``Eligible Licensees''). The restructuring plan offered three options 
to provide specific relief for licenses that wish to retain their 
license, but are experiencing financial hardship, or that wish to 
return their licenses due to an inability to assume their financial 
responsibilities. Under one of these options, Amnesty, an Eligible 
Licensee could choose either to receive no credit

[[Page 72958]]

for its down payment, but remain eligible to bid on the surrendered 
licenses when they are subsequently offered in auction, with no 
restriction on after-market acquisitions; or obtain a credit for 
seventy percent of its down payment and forego for a period of two 
years, from the start date of the next auction of the 218-219 MHz 
Service, eligibility to reacquire the surrendered licenses through 
either auction or any secondary market transaction.
    10. On review, it is apparent that, under the Amnesty option, 
allowing an Eligible Licensee to obtain credit for its down payment and 
forego reacquiring surrendered licenses for a period of two years is 
inconsistent with our responsibility to protect the integrity of the 
auction program and promote new and innovative uses of spectrum. Giving 
a seventy percent credit of the down payments associated with returned 
spectrum would undermine the integrity of the auction process by 
relieving participants of even the most basic obligation of their 
participation. Further, a two-year restriction on the reacquisition of 
the surrendered license unduly restricts the number of potential 
licenses, and is inconsistent with a fair and equitable auction 
process.

VI. Summary of Significant Issues Raised by Public Comments in Response 
to the Initial Regulatory Flexibility Analysis

    11. Previously, no petitions were filed in direct response to the 
IRFA or the FRFA in this proceeding. Thus, on our own motion, we have 
issued this 218-219 MHz Reconsideration Order.

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

    12. Previously, in the FRFA, pursuant to the RFA, we provided a 
detailed description and estimate of the number of small entities that 
may be affected by the proposed rules, if adopted. We noted that the 
218-219 MHz Report and Order affects a number of small entities who are 
either licensees, or who may choose to become applicants for licenses, 
in the 218-219 MHz Service. Such entities fall into two categories. The 
first category consists of those using the 218-219 MHz Service for 
providing interactivity capabilities in conjunction with broadcast 
services. In the FRFA, with respect to the first category, we estimated 
that the number of small business entities operating in the 218-219 MHz 
band for interactivity capabilities with television viewers in the 218-
219 MHz Service which will be subject to the rules will be less than 
612. The second category consists of those using the 218-219 MHz 
Service to operate other types of wireless communications services with 
a wide variety of uses, such as commercial data applications and two-
way telemetry services. In the FRFA, with respect to the second 
category, we estimated that the number of small entities that would 
provide wireless communications services other than that described 
herein would be 247 or less.
    13. On January 6, 1998, the SBA approved of the small business size 
standards established in the Competitive Bidding Tenth Report and 
Order.\2\ As we described in the FRFA, the first auction of 218-219 MHz 
spectrum resulted in 170 entities winning licenses for 594 Metropolitan 
Statistical Area (``MSA'') licenses. Of the 594 licenses, 557 were won 
by entities qualifying as a small business.
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    \2\ See Letter to Daniel B. Phythyon, Chief, WTB, from Aida 
Alverez, Administrator, SBA, Dated Jan. 6, 1998.
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VIII. Description of Projected Reporting, Recordkeeping, and Other 
Compliance Requirements

    14. Previously, in the FRFA to the 218-219 MHz Report and Order, we 
adopted rules altering the reporting and recordkeeping requirements for 
a number of small business entities. The rules changed the obligations 
of 218-219 MHz Service licensees with respect to license renewal, 
construction reports, and acquisitions by partitioning or 
disaggregation. As we noted in the FRFA, the 218-219 MHz Report and 
Order contained three options relevant to some small businesses that 
will alter their reporting and recordkeeping requirements. Our 
reconsideration order is relevant only to the second option. 
Specifically, non-defaulting 218-219 MHz Service licensees currently 
participating in the installment payment plan may elect one of three 
restructuring plans concerning their outstanding payments. However, our 
reconsideration order does not alter any reporting, recordkeeping, or 
other compliance requirements contained in the 218-219 MHz Report and 
Order.

IX. Steps Taken to Minimize Significant Economic Impact on Small 
Entities, and Significant Alternatives Considered

    15. As we described in detail in the FRFA to the 218-219 MHz Report 
and Order, we adopted final rules designed to maximize opportunities 
for participation by, and growth of, small businesses in providing 
wireless services. We noted that we expected that the extension of 
license terms from five to ten years and allowing partitioning and 
disaggregation of licenses will specifically assist small businesses. 
We also noted that the 218-219 MHz Report and Order contained 
provisions, such as liberalization of construction requirements and 
technical restrictions, and elimination of the cross-ownership 
restriction, that will assist all licenses, including small business 
licensees.
    16. In this Order on Reconsideration, we change the options 
available to those small businesses electing the Amnesty option in the 
restructuring plan. The 218-219 MHz Report and Order allowed an 
Eligible Licensee electing the Amnesty option to choose either to 
receive no credit for its down payment, but remain eligible to bid on 
the surrendered licenses when they are subsequently offered in auction, 
with no restriction on after-market acquisitions; or obtain a credit 
for seventy percent of its down payment and forego for a period of two 
years, from the start date of the next auction of the 218-219 MHz 
Service, eligibility to reacquire the surrendered licenses through 
either auction or any secondary market transaction. We recognize that 
some commentators proposed a more liberal amnesty option. However, we 
believe that eliminating all adverse financial consequences of a 
licensee's decision to participate in the auction would be contrary to 
a fair and equitable auction process. Further, it might encourage 
future licensees to participate in an auction under the assumption that 
the Commission will relieve it of the most basic obligations of 
participation in an auction, if, in the future, its business plans do 
not prove profitable. Thus, we will not provide the licensees with a 
seventy percent down payment credit. However, to the extent that a 
licensee believes that it can create a valuable business with the same 
license, if its debt burden were smaller, it will not be precluded from 
acquiring the license at auction, or in any secondary market 
transaction. For these reasons, we did not consider any significant 
alternatives to our proposals to minimize significant economic impact 
on small entities.
    17. Report to Congress: The Commission will send a copy of the 
Order on Reconsideration, including this FRFA, in a report to be sent 
to Congress pursuant to the Small Business Regulatory Enforcement 
Fairness Act of 1996, see 5 U.S.C. 801(a)(1)(A). In addition, the 
Commission will send a copy of the Order on Reconsideration, including 
FRFA, to the Chief Counsel for Advocacy of the Small Business 
Administration.

[[Page 72959]]

List of Subjects in 47 CFR Part 95

    Communications equipment, Penalties, Radio, Reporting and 
recordkeeping requirements.

Federal Communications Commission.
William F. Caton,
Deputy Secretary.
[FR Doc. 99-33768 Filed 12-28-99; 8:45 am]
BILLING CODE 6712-01-P