[Federal Register Volume 65, Number 52 (Thursday, March 16, 2000)]
[Rules and Regulations]
[Pages 14213-14215]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 00-6637]


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FEDERAL COMMUNICATIONS COMMISSION

47 CFR Part 24

[WT Docket No. 97-82; FCC 00-54]


Installment Payment Financing for Personal Communications 
Services (PCS) Licenses

AGENCY: Federal Communications Commission.

ACTION: Final rule; petition for reconsideration.

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SUMMARY: In this document, the Commission dismisses or denies petitions 
for reconsideration of its Fourth Report and Order in which it modified 
the rules governing auctions of licenses for C block broadband Personal 
Communications Services (``PCS'') spectrum. Some of the issues raised 
by petitioners are specific to Auction No. 22 and have been rendered 
moot by the occurrence of that auction. Other issues will be decided in 
separate proceedings. By this document the Commission declines to 
extend the two year ``grandfather'' exception to the entrepreneur 
eligibility requirement for C block auctions and also declines to 
``grandfather'' in future C and F block auctions the bidding credit 
eligibility of participants in earlier C block auctions.

FOR FURTHER INFORMATION CONTACT: Audrey Bashkin, Auctions & Industry 
Analysis Division, Wireless Telecommunications Bureau, at 418-0660.

SUPPLEMENTARY INFORMATION: This is a summary of an Order on 
Reconsideration of the Fourth Report & Order (Order on Reconsideration) 
adopted February 15, 2000 and released February 29, 2000. The complete 
text of the Order on Reconsideration, including the attachment, is 
available for inspection and copying during normal business hours in 
the FCC Reference Center (Room CY-A257), 445 12th Street, SW, 
Washington, DC. It may also be purchased from the Commission's copy 
contractor, International Transcription Services, Inc. (ITS, Inc.), 
1231 20th Street, NW, Washington, DC 20035, (202) 857-3800. It is also 
available on the Commission's web site at http://www.fcc.gov/wtb/auctions.

I. Introduction and Background

    1. In this Order on Reconsideration, we address petitions for 
reconsideration of our Fourth Report and Order, released August 19, 
1998 (``C Block Fourth Report and Order''), 63 FR 50791 (September 23, 
1998), in which we modified the rules governing auctions of C block 
broadband Personal Communications Services (``PCS'') spectrum. To date, 
there have been three auctions of licenses for C block spectrum. 
Auctions No. 5 and 10, which ended on May 6, 1996, and July 16, 1996, 
respectively, preceded the C Block Fourth Report and Order. Auction No. 
22, which followed the C Block Fourth Report and Order, concluded on 
April 15, 1999, and also included licenses for E and F block spectrum. 
An earlier auction of licenses for D, E, and F block spectrum, Auction 
No. 11, concluded on January 14, 1997. One or more additional auctions 
of C and F block spectrum are expected.
    2. In response to the C Block Fourth Report and Order, we received 
five petitions for reconsideration, one opposition, and one set of 
comments. Within the time frame for filing oppositions, we also 
received related correspondence. Some of the issues raised by 
petitioners are specific to Auction No. 22 and have been rendered moot 
by the occurrence of that auction. Other issues will be decided in 
separate proceedings. The remaining issues concern entrepreneur and 
bidding credit eligibility. In this order, we decline to extend the two 
year ``grandfather'' exception to the entrepreneur eligibility 
requirement for C block auctions and also decline to ``grandfather'' in 
future C and F block auctions the bidding credit eligibility of 
participants in earlier C block auctions.

II. Auction Inventory

    3. Background. In the C Block Fourth Report and Order, we decided 
not to delay the next C block auction pending resolution of bankruptcy 
proceedings affecting the availability for auction of certain C block 
spectrum.
    4. Discussion. Both Conestoga and DiGiPH ask that we reconsider 
this decision. Because Auction No. 22 has already been held, these 
requests have become moot. As we stated in the C Block Fourth Report 
and Order, spectrum made available for licensing as a result of any 
bankruptcy proceeding will be included in the next appropriate auction 
of C block spectrum.

III. Entrepreneur Eligibility

    5. Background. Consistent with Congress' mandate to promote the

[[Page 14214]]

participation of small businesses and other ``designated entities'' in 
the provision of spectrum-based services, the Commission limited 
eligibility for C and F block broadband PCS licenses in Auctions No. 5, 
10, and 11 to ``entrepreneurs.'' The Commission considers 
entrepreneurs, with regard to the C and F blocks, to be those entities 
that can meet the auction and licensing eligibility requirements of 
Sec. 24.709 of the Commission's rules. The principal requirement is as 
follows:

No application is acceptable for filing and no license shall be 
granted for frequency block C or frequency block F, unless the 
applicant, together with its affiliates and persons or entities that 
hold interests in the applicant and their affiliates, have gross 
revenues of less than $125 million in each of the last two years and 
total assets of less than $500 million at the time the applicant's 
short-form application (Form 175) is filed. 47 CFR 24.709(a)(1); see 
id. 24.720; Competitive Bidding Fifth Report and Order, 65 FR 37566 
(July 22, 1994), Fifth Memorandum Opinion and Order, 59 FR 63210 
(December 7, 1994) and Sixth Report and Order, 60 FR 37786 (July 21, 
1995).

    6. In the C Block Fourth Report and Order, we decided that entities 
that had been eligible for and had participated in Auction No. 5 or 10 
would also be eligible to bid on C block spectrum in Auction No. 22 and 
in any C block auction beginning within two years of the start date of 
Auction No. 22, even if such entities had become too large to qualify 
as entrepreneurs.
    7. Discussion. In its petition, Omnipoint argues that, because a 
``number of C [b]lock licenses [are] currently tied up in bankruptcy 
and not slated for the upcoming C [b]lock reauction [Auction No. 22], 
entrepreneurs will again see a shift in the market result of all prior 
C block auctions during all upcoming reauctions.'' Omnipoint maintains 
that, pursuant to ``notions of fairness and auction integrity,'' the 
Commission should allow all ``original C block applicants'' to compete 
in any subsequent auction of C block licenses, regardless of when such 
auction occurs.
    8. We disagree. The two-year ``grandfather'' exception to the 
entrepreneur eligibility requirement was part of a package of financial 
restructuring options offered by the Commission to C block licensees 
experiencing financial difficulties in the wake of the first two C 
block auctions. See C Block Reconsideration Order, 63 FR 17111 (April 
8, 1998), C Block Second Report and Order, 62 FR 55375 (October 24, 
1997) and Second C Block Reconsideration Order, 64 FR 26887 (May 18, 
1999). When making these options available, the Commission explained 
that they were intended to provide ``limited relief,'' limited in both 
scope and time. We recognized that not all licenses involved in 
bankruptcy proceedings would likely be available for inclusion in the 
Auction No. 22 license inventory; nevertheless, we decided to permit 
the grandfather exception for only two years. We believe, as we 
explained in the C Block Fourth Report and Order, that fairness to 
other future bidders prevents our providing the eligibility exception 
indefinitely. Therefore, as to the issue of entrepreneur eligibility, 
we will deny Omnipoint's petition.

IV. Bidding Credit Eligibility

    9. Background. Bidding credits are available to C block auction 
winners that qualify as small or very small businesses or consortia 
thereof. Under current C (and F) blocks rules, which were in effect for 
Auction No. 22, small businesses and small business consortia receive a 
15 percent bidding credit and very small businesses and very small 
business consortia receive a 25 percent bidding credit. In the C Block 
Fourth Report and Order, we expressly declined to ``grandfather'' 
eligibility for bidding credits, deciding that bidding credit 
eligibility in upcoming C block auctions would be determined according 
to an applicant's size at the deadline for filing short-form 
applications and not the applicant's size when it applied to 
participate in Auction No. 5 or 10. We concluded that it would not be 
in the best interests of the public and, in particular, of competing 
small business bidders and licensees to provide a discount to 
applicants that no longer meets the small business size standards.
    10. Discussion. Omnipoint urges us to reconsider this decision, 
contending that our refusal to ``grandfather'' bidding credit 
eligibility is unfair to those existing entrepreneur licensees that 
have generated PCS revenues since the initial C block auction. We 
disagree. Bidding credits function as a discount on a winning bidder's 
high bid, thereby substantially reducing the licensee's payment 
obligation to the Federal government. The purpose of such credits is to 
allow small entities with limited access to capital to compete 
effectively against larger businesses in auctions. Were we to allow 
large businesses to qualify for bidding credits, by virtue of their 
past participation as small businesses in earlier C block auctions, we 
would undermine the effectiveness of such credits in aiding entities 
that currently qualify as small businesses. We cannot justify such a 
result, nor can we envision a convincing public policy rationale for 
providing larger businesses with a 15 or 25 percent discount off their 
Federal obligation. Accordingly, we deny Omnipoint's petition as to the 
issue of bidding credits.

V. Controlling Interest Rule

    11. Background. In the C Block Reconsideration Order, we deferred 
to other phases of WT Docket No. 97-82 the decision whether to use a 
``controlling interest'' approach to determine financial attribution 
for future C block auctions rather than to continue using ``control 
group'' structures.
    12. Discussion. In its petition, Leap asks that we apply the 
controlling interest concept to the C and F blocks. Cook opposes this 
request. Leap's petition and Cook's opposition are moot insofar as they 
concern Auction No. 22, for which control group structures applied.

VI. Minimum Opening Bids

    13. Background. In the C Block Fourth Report and Order, we 
established that the minimum opening bid for each market in Auction No. 
22 would be ten percent of the corresponding net high bid for the 
market in the first C block auction; however, we stated that the 
Wireless Telecommunications Bureau (``Bureau'') could exercise its 
discretion to set smaller minimum opening bids if the Bureau believed 
they were warranted.
    14. Discussion. While disagreeing on specifics, Conestoga and 
Omnipoint both suggest that we reduce the minimum opening bids. Because 
Auction No. 22, has already taken place, these requests are moot. We 
note that the Bureau, after considering comments, including one filed 
by Omnipoint, reduced the Auction No. 22 minimum opening bids for C 
block licenses to five percent (for 30 MHz C block licenses) and 2.5 
percent (for 15 MHz C block licenses) of the most recent net high bid 
for C block licenses in the same market. For each future C block 
auction, the Bureau will continue its current practice under the 
Balanced Budget Act of 1997 to establish minimum opening bids and/or 
reserve prices after notice and comment. See Part 1 Third Report and 
Order 63 FR 770 (January 7, 1998).

VII. Bid Increment Methodology

    15. In a December 10, 1998 meeting with Bureau and Division staff, 
Omnipoint outlined a proposal for a bid increment methodology to be 
employed in Auction No. 22. The fact that Auction No. 22 has already 
occurred renders

[[Page 14215]]

Omnipoint's suggestion moot; however, we note that, in advance of 
Auction No. 22, the Bureau considered and rejected essentially the same 
proposal by Omnipoint. For each future C block auction, the Bureau 
will, after notice and comment, establish an appropriate bid increment 
methodology.

VIII. Default Payment Rules

    16. Mountain Solutions argues that our decision to eliminate 
installment payment financing in Auction No. 22 and to exclude from the 
auction spectrum involved in bankruptcy proceedings, along with other 
factors, will decrease auction prices and thereby increase the payment 
owed by Mountain Solutions for defaults on second down payments for C 
block licenses Mountain Solutions had previously won. Mountain 
Solutions argues further that it would be inequitable for the 
Commission strictly to apply its default payment rule against Mountain 
Solutions. Because Auction No. 22 has already occurred, Mountain 
Solutions' petition, insofar as it seeks modification of our rules for 
that auction, is moot. The remaining issue--the extent to which 
Mountain Solutions will be held liable for its default payment 
obligations--is before us in a separate proceeding and will be 
considered there.

IX. Other Filing

    17. In a letter related to this proceeding, McBride asks that we 
assist Representative W. J. ``Billy'' Tauzin, Chairman of the U.S. 
House of Representatives Subcommittee on Telecommunications, Trade, and 
Consumer Protection, in Chairman Tauzin's efforts with regard to the C 
block auction. Specifically, McBride requests that we help promote 
competition and encourage the participation of designated entities in 
the wireless telecommunications industry and that we make sure that all 
C block licensees are treated in a fair and equitable manner. We 
believe that, with the C Block Fourth Report and Order and Auction No. 
22, we have furthered the goals articulated in McBride's letter; 
however, because the letter does not request specific reconsideration 
of the C Block Fourth Report and Order, we neither grant nor deny it.

X. Ordering Clauses

    18. Accordingly, it is ordered that, pursuant to sections 4(i), 
5(b), 5(c)(1), 303(r), and 309(j) of the Communications Act of 1934, as 
amended, 47 U.S.C. sections 154(i), 155(b), 156(c)(1), 303(r), and 
309(j), the petition for reconsideration filed in response to the C 
Block Fourth Report and Order by Omnipoint Corporation is denied. The 
petition for reconsideration filed in response to the C Block Fourth 
Report and Order by Mountain Solutions, Ltd., Inc., is dismissed in 
part as moot and denied in all other respects. The remaining petitions 
for reconsideration filed in response to the C Block Fourth Report and 
Order are dismissed as moot. This Order on Reconsideration is hereby 
adopted.

List of Subjects in 47 CFR Part 24

    Personal communications services.

Federal Communications Commission.
William F. Caton,
Deputy Secretary.
[FR Doc. 00-6637 Filed 3-15-00; 8:45 am]
BILLING CODE 6712-01-U