[Federal Register Volume 66, Number 209 (Monday, October 29, 2001)]
[Rules and Regulations]
[Pages 54447-54452]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 01-27103]


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FEDERAL COMMUNICATIONS COMMISSION

47 CFR Part 1

[WT Docket No. 97-82; FCC 01-270]


Competitive Bidding Procedures

AGENCY: Federal Communications Commission.

ACTION: Final rule.

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SUMMARY: In this document the Commission adopts modifications to its 
competitive bidding ``anti-collusion'' rule. These modifications codify 
Commission practices with respect to application of the anti-collusion 
rule and require applicants to report to the Commission prohibited 
communications.

DATES: Effective November 28, 2001.

FOR FURTHER INFORMATION CONTACT: David Hu of the Auctions and Industry 
Analysis Division at (202) 418-0660.

SUPPLEMENTARY INFORMATION: This is a summary of a Seventh Report and 
Order (7th R&O) in WT Docket No. 97-82, adopted on September 19, 2001 
and released on September 27, 2001. The full text of this document is 
available for public inspection and copying during regular business 
hours at the FCC Reference Information Center, Portals II, 445 12th 
Street, SW., Room CY-A257, Washington, DC, 20554. This document may 
also be purchased from the Commission's duplicating contractor, Qualex 
International, Portals II, 445 12th Street, SW., Room CY-B402, 
Washington, DC, 20554, telephone 202-863-2893, facsimile 202-863-2898, 
or via e-mail [email protected].

I. Introduction

    1. In the 7th R&O, the Commission adopts modifications to 
Sec. 1.2105(c) of the Commission's rules, the competitive bidding 
``anti-collusion rule.'' Specifically, the Commission amends the rule 
so that its language clearly reflects the Commission's practice of 
prohibiting communications regarding bids or bidding strategies only 
between auction applicants that have applied to bid on licenses in any 
of the same geographic areas. In addition, the Commission amends the 
rule to (i) clarify that it prohibits an auction applicant from 
discussing a competing applicant's bids or bidding strategies even if 
the first applicant does not discuss its own bids or bidding 
strategies, and (ii) require auction applicants that make or receive a 
prohibited communication of bids or bidding strategies to report the 
communication immediately to the Commission in writing.

II. Background

    2. The Commission adopted Sec. 1.2105(c)(1) to deter 
anticompetitive conduct during auctions of spectrum licenses and to 
ensure the competitiveness of post-auction markets. The Commission's 
anti-collusion rule seeks to foster a level competitive playing field 
during auctions and to ``ensure that the government receives a fair 
market price for the use of the spectrum.'' In promulgating the rule, 
the Commission was particularly concerned that some firms might engage 
in behavior that would unfairly disadvantage other bidders. 
Communications that violate Sec. 1.2105(c)(1) have the potential to 
undermine the competitiveness of our auction process and public 
confidence in the integrity of that process.
    3. In the Third Further Notice of Proposed Rule Making (FNPRM), 65 
FR 6113 (February 8, 2000) the Commission proposed to amend 
Sec. 1.2105(c)(1) to prohibit an auction applicant from discussing 
another applicant's bids or bidding strategies even if the first 
applicant does not discuss or disclose its own bids or bidding 
strategies. The Commission also proposed to amend Sec. 1.2105(c) to 
require any auction applicant that makes or receives a communication of 
bids or bidding strategies prohibited under Sec. 1.2105(c)(1) to report 
such a communication to the Commission promptly. In addition, the 
Commission sought comment on whether other changes to Sec. 1.2105(c)(1) 
may be warranted at this time in light of Congress's mandate that the 
Commission ensure competitive auctions. The Commission received one 
comment on the amendments proposed in the FNPRM.

III. Discussion

A. Amendments to Sec. 1.2105(c)(1)

    4. Background. Subject to certain exceptions, Sec. 1.2105(c)(1) 
prohibits auction applicants that have applied to bid on any common 
license area from communicating their bids or bidding strategies with 
each other from the short-form application filing deadline to the post-
auction down payment deadline, unless such applicants are members of a 
bidding consortium or other joint bidding agreement reported on their 
short-form applications. In other words, if two auction applicants 
(that have not entered into an agreement and identified each other on 
the FCC Form 175) are each eligible to bid on numerous license areas 
but there is only one license area for which they are both eligible to 
bid, they may not discuss or disclose to each other their bids or 
bidding strategies relating to any license area that either of them is 
eligible to bid on.
    5. Discussion. Applicants subject to Sec. 1.2105(c)(1). Section 
1.2105(c)(1) of the Commission's rules states that ``all applicants'' 
are prohibited from discussing or disclosing their bids or bidding 
strategy from the short-form application filing deadline until after 
the down payment deadline. Notwithstanding the term ``all applicants,'' 
the Commission has applied the prohibitions of the rule only to auction 
applicants that have applied to bid for licenses in any of the same 
geographic license areas, and thus are competing applicants. Thus, as 
noted, even if two auction applicants that have not identified each 
other as parties to an agreement on the FCC Form 175 are each eligible 
to bid on only one license area in common, they may not discuss or 
disclose to each other their bids or bidding strategies relating to any 
license area that either of them is eligible to bid

[[Page 54448]]

on. For example, two applicants not listed on each other's short-form 
applications for an auction of broadband PCS licenses may not discuss 
bids or bidding strategies with each other if they are bidding for 
licenses in any of the same MTAs or BTAs, even if they are not bidding 
for the same frequency blocks. On the other hand, auction applicants 
that have not applied to bid on licenses in any of the same geographic 
areas, and thus are not competing applicants, are not subject to the 
prohibitions of Sec. 1.2105(c)(1).
    6. The Commission finds that it would be helpful to auction 
applicants to amend Sec. 1.2105(c)(1) so that it accurately reflects 
the Commission's application of the rule. Thus, the Commission amends 
Sec. 1.2105(c)(1) to make clear that only auction applicants that have 
applied for licenses in any of the same geographic license areas are 
prohibited from discussing with or disclosing to each other their bids 
or bidding strategy. The Commission also cautions auction applicants 
that apply to bid for licenses in any of the same geographic license 
areas (and that are not listed on each other's FCC Form 175) against 
indirectly communicating their bids or bidding strategies to each other 
through third-party discussions or disclosures to other auction 
applicants that have not applied to bid on licenses in any of the same 
geographic license areas.
    7. Communications regarding other applicants' bids or bidding 
strategies. In the Western PCS Order, 14 FCC Record 21571 (1999), the 
Commission provided auction applicants with official notice that 
Sec. 1.2105(c)(1) prohibits an auction applicant from cooperating or 
collaborating with respect to, or discussing or disclosing, another 
applicant's bids or bidding strategies. Thus, an auction applicant may 
violate Sec. 1.2105(c)(1) even if it does not discuss its own bids or 
bidding strategies. Nevertheless, the Commission stated in the FNPRM 
that it believes that auction applicants would benefit if the text of 
the rule plainly stated that it prohibits an auction applicant from 
discussing another applicant's bids or bidding strategies even if it 
does not discuss or disclose its own bids or bidding strategies.
    8. The Commission amends Sec. 1.2105(c)(1) to clarify the 
prohibition against an auction applicant cooperating or collaborating 
with respect to, discussing with, or disclosing to a competing 
applicant the substance of the bids or bidding strategies of any 
competing applicant. The Commission believes that the rule's 
prohibition against discussing, or disclosing, bids or bidding strategy 
would have minimal deterrent force if an applicant to whom a competing 
applicant's bidding information is disclosed could discuss such 
information with either that or another competing applicant without 
violating the rule. For instance, absent such a prohibition, it would 
be easy to circumvent the rule's prohibitions as Bidder A could pass on 
to competing Bidder C bidding strategy information of Bidder B with 
whom Bidder A has a bidding agreement. The Commission believes that an 
applicant's discussion with a competing applicant of any other 
competing applicant's bids or bidding strategy could have a deleterious 
effect on the integrity and competitiveness of our auctions and that it 
is therefore essential to explicitly prohibit such discussions.

B. Required Disclosure of Communications Regarding Bids or Bidding 
Strategies

    9. Background. Whenever the information furnished in a pending 
application is no longer substantially accurate and complete in all 
significant respects, Sec. 1.65(a) of the Commission's rules requires 
the applicant to amend the application so as to furnish additional or 
corrected information ``as promptly as possible and in any event within 
30 days * * *.'' Pursuant to Sec. 1.65(a), auction applicants are 
required to maintain the accuracy and completeness of their pending 
short-form applications. Because the short-form application contains a 
certification under penalty of perjury that the applicant has not 
entered and will not enter into any agreements other than those 
identified in its application, auction applicants that engage in 
communications of bids or bidding strategies that result in a bidding 
agreement, arrangement or understanding not already identified on their 
short-form applications are required to promptly disclose any such 
agreement, arrangement or understanding to the Commission by amending 
their pending applications. Thus, even though competing applicants are 
prohibited by Sec. 1.2105(c)(1) from communicating their bids or 
bidding strategies to each other after the short-form application 
filing deadline, applicants that engage in such prohibited discussions 
are nonetheless required by Sec. 1.65(a) to promptly disclose any 
resulting agreements or understandings by amending their pending 
applications. Failure to make the notification required by Sec. 1.65(a) 
would constitute a separate violation of our rules in addition to the 
underlying violation of Sec. 1.2105(c)(1).
    10. In the FNPRM, the Commission sought comment on whether the 
integrity and competitiveness of its auction process would be enhanced 
if it required auction applicants that make or receive communications 
prohibited under Sec. 1.2105(c)(1) to report promptly such 
communications to the Commission even if the communications do not 
result in an agreement, arrangement or understanding that must be 
reported to the Commission under Sec. 1.65(a). The Commission invited 
comment on whether would-be disseminators of prohibited bidding or 
bidding strategy information, knowing that recipients of such 
prohibited information would have an affirmative duty to disclose 
promptly such communications to the Commission, would be deterred from 
making such communications. The Commission also solicited comment on 
any potential burden that may be associated with such a reporting 
requirement, and the appropriate deadline for making such a report.
    11. Discussion. The Commission amends Sec. 1.2105(c) to require 
auction applicants that make or receive a communication of bids or 
bidding strategies prohibited under Sec. 1.2105(c)(1) to report such a 
communication to the Commission immediately, even if the communication 
does not result in an agreement, arrangement or understanding that must 
be reported under Sec. 1.65(a). As it noted in the FNPRM, the 
Commission has found that even when a prohibited communication of bids 
or bidding strategies is limited to one applicant's bids or bidding 
strategies, it may unfairly disadvantage the other bidders in the 
market by creating an impermissible asymmetry of information. Thus, 
when one bidder is privy to a competing bidder's strategic bidding 
information without reporting this fact, it may use such information to 
manipulate the auctions process and gain an unfair competitive 
advantage over other bidders in the market who are unable to access, 
analyze, and act upon this strategic information in making bidding 
decisions. Section 1.2105(c)(1) of the Commission's rules attempts to 
address this concern by prohibiting all auction applicants that have 
applied to bid on any of the same geographic areas from cooperating or 
collaborating with respect to, discussing or disclosing to each other 
in any manner the substance of their bids or bidding strategies. The 
Commission has encountered instances of violations of Sec. 1.2105. In 
some instances, there has been concern expressed about a bidder's

[[Page 54449]]

obligation to report information received from another bidder that 
potentially violates the Commission's rule, and it has previously 
counseled applicants that the safest course of action for a recipient 
of a prohibited communication during the period in which Sec. 1.2105(c) 
prohibitions are in effect would be to terminate the discussion and 
promptly report the communication to the Commission. Therefore, the 
Commission further clarifies the anti-collusion rule by including a 
reporting requirement, as a deterrent to would-be disseminators of 
prohibited information regarding bids or bidding strategies. This will, 
the Commission believes, make clear the responsibility to report such 
behavior and will thereby enhance the competitiveness and fairness of 
our spectrum auctions.
    12. Thus, an applicant's duty under Sec. 1.2105(c) is two-fold. 
Applicants may not engage in prohibited communications with competing 
applicants, and they are obligated to report to the Commission all 
communications prohibited under Sec. 1.2105(c)(1). Thus, an applicant's 
failure to report a prohibited communication pursuant to 
Sec. 1.2105(c)(6) may constitute a rule violation distinct from any act 
of collusion that violates Sec. 1.2105(c)(1). Moreover, the 
Sec. 1.2105(c)(6) reporting requirement the Commission adopts today 
applies even if the communication of bids or bidding strategies does 
not result in a bidding arrangement, agreement or understanding that 
must be reported to the Commission under Sec. 1.65(a). As explained 
previously, applicants have always had, under Sec. 1.65(a), an 
affirmative duty to report any communications of bids or bidding 
strategies that result in a bidding arrangement, agreement or 
understanding after the filing of a short-form application. By 
requiring applicants to update pending applications to reflect such 
prohibited collusive agreements and communications, the Commission has 
sought to ensure the integrity and transparency of its auction 
processes. By now amending its rules to include an affirmative 
reporting requirement that applies even if a communication does not 
rise to the level of that which must be reported under Sec. 1.65(a), 
the Commission can ensure that all bidders remain on a level playing 
field throughout the course of an auction. The reporting requirement 
the Commission adopts today does not relieve any applicant from its 
duty pursuant to Sec. 1.65(a) to update its pending application any 
time a communication of bids or bidding strategies results in an 
arrangement, agreement, or understanding. Of course, the fact that a 
party complies with the reporting requirements of Sec. 1.65(a) and 
Sec. 1.2105(c)(6) will not insulate it from any sanctions that may be 
appropriate in connection with a violation of the Sec. 1.2105(c)(1) 
prohibition against collusive communications.
    13. The Commission disagrees with one commenter's suggestion that 
recipients of bidding information should be exempt from the requirement 
to report such communications to the Commission. Section 1.2105(c) does 
not distinguish between initiators and recipients in terms of their 
duty to avoid a collusive communication. Rather, the anti-collusion 
rule focuses on the content of the communication (i.e., the discussion 
or disclosure must involve direct or indirect information that affects, 
or could affect, bids or bidding strategy, or the negotiation of 
settlement agreements) that occurs between auction applicants for any 
of the same geographic license areas after the short-form filing 
deadline. Thus, all auction applicants that have applied for a license 
in the same geographic area, and have not reported in their short-form 
applications that they have an agreement with each other, must 
affirmatively avoid all communications with each other that disclose 
their or a competing applicant's bids or bidding strategy. In light of 
the fact that the Commission's current rules do not focus on whether a 
party is initiating or receiving a communication, the Commission does 
not believe that it should limit the reporting requirement it adopts 
today to initiators of prohibited communications. Moreover, because 
initiators of collusive communications are less likely to report such 
communications, the Commission considers recipients of prohibited oral 
or written communications regarding bids or bidding strategies to be an 
important deterrent against collusive behavior. The Commission also 
believes that recipients should be held to the same reporting standard 
as initiators because, even if a recipient does not reach an agreement 
or understanding with the initiator, a recipient nevertheless derives 
substantial benefit from obtaining details of a competitor's bids or 
bidding strategy prior to or during an auction. If the Commission were 
to allow recipients to possess strategic bidding information that other 
applicants are not privy to, it would unfairly disadvantage other 
bidders in the market by sanctioning an asymmetry of information that 
could be used to manipulate the auction process. Therefore, the mere 
occurrence of a communication by or among auction applicants for the 
same geographic license area about their own or a competing applicant's 
bids or bidding strategy triggers the reporting requirement.
    14. The Commission does not believe that there is any merit to one 
commenter's assertion that compliance with this reporting requirement 
will expose recipients of communications to substantial legal 
liability. In the past the Commission has indicated that auction 
applicants, rather than the Commission, are in the best position to 
determine in the first instance when communications may constitute 
potential violations of the rule. The Commission continues to believe 
that this is the case and that, rather than requiring it to take on the 
impossible task of screening all applicant communications, it should 
place the responsibility for identifying potentially unauthorized 
communications on auction applicants. Applicants, during the course of 
their day-to-day operations, are better equipped to identify and report 
such communications. Nonetheless, the Commission emphasizes that 
applicants are not responsible for deciding whether a violation of the 
anti-collusion rule has occurred. Thus, the purpose of the reporting 
requirement the Commission adopts today is to obligate parties to 
notify the Commission of communications that appear to violate the 
anti-collusion rule and to allow the Commission to determine whether a 
violation has occurred. The determination of whether a violation of the 
rule has occurred rests with the Commission, not with bidders. Thus, 
while the reporting requirement places an affirmative duty on all 
auction applicants to report what they perceive to be prohibited 
communications, auction applicants are required only to act in good 
faith and to report truthfully the facts and circumstances of what they 
perceive to be a communication covered by Sec. 1.2105(c). The 
Commission will then investigate these reports and reach a judgment as 
to whether a violation has occurred. By simply reporting the facts, 
auction applicants can insulate themselves from liability.
    15. The Commission also finds that any burden associated with the 
reporting requirement it establishes today will be slight, particularly 
in comparison with the potential benefits to the auction process and 
bidders. Applicants will be required only to submit a letter to the 
Commission

[[Page 54450]]

describing the facts of a communication that appears to be prohibited.
    16. In sum, the Commission amends Sec. 1.2105(c) to require all 
auction applicants to report prohibited discussions or disclosures 
regarding bids or bidding strategy to the Commission in writing 
immediately, but in no case later than five business days after the 
communication occurs. Thus, an auction applicant must report a 
prohibited communication within five business days even if the 
communication does not result in an agreement or understanding 
regarding bids or bidding strategy. Although the Commission believes 
that applicants generally should need less than five business days to 
make such reports, it will not impose a shorter deadline because it 
finds that there may be circumstances in which applicants, particularly 
small businesses, may need five business days to file a report. An 
auction applicant that receives a communication prohibited under 
Sec. 1.2105(c)(1) orally should respond immediately and unequivocally 
that it is unwilling to participate in any violation of 
Sec. 1.2105(c)(1). If a prohibited communication is received other than 
orally, an auction applicant should respond immediately in writing that 
it is unwilling to participate in any violation of Sec. 1.2105(c)(1). 
In either case, the auction applicant must report the improper 
communication to the Commission in writing within five business days 
after the communication occurs.

IV. Conclusion

    17. In the 7th R&O, the Commission amends Sec. 1.2105(c)(1) of the 
Commission's rules to clarify that the rule prohibits only auction 
applicants that have applied to bid for licenses in any of the same 
geographic license areas from cooperating or collaborating with respect 
to, or discussing or disclosing to each other bids or bidding 
strategies. The Commission also amends the rule to clarify that it 
prohibits such auction applicants from cooperating or collaborating 
with respect to, or discussing or disclosing to each other any 
competing applicant's bids or bidding strategies. Thus, the rule may be 
violated even if an applicant does not discuss or disclose its own bids 
or bidding strategies. Finally, the Commission amends Sec. 1.2105(c) to 
require any auction applicant that makes or receives a communication of 
bids or bidding strategies prohibited under Sec. 1.2105(c)(1) of our 
rules to report such communication to the Commission in writing 
immediately, but in no case later than five business days after the 
communication occurs.

V. Procedural Matters

A. Regulatory Flexibility Act

    18. The Commission has prepared a Final Regulatory Flexibility 
Analysis (``FRFA'') of the possible significant economic impact on 
small entities of the rule amendments adopted herein. The Commission's 
Reference Information Center, Consumer Information Bureau, will send a 
copy of the 7th R&O, including the FRFA, to the Chief Counsel for 
Advocacy of the Small Business Administration.

B. Final Paperwork Reduction Act of 1995 Analysis

    19. The 7th R&O contains a new information collection, which was 
proposed in the FNPRM. As required by the Paperwork Reduction Act of 
1995, the Commission sought comment from the public and from the Office 
of Management and Budget (OMB) on this proposed change to the 
Commission's information collection requirements. This new information 
collection was submitted to OMB for approval, as prescribed by the 
Paperwork Reduction Act. On October 17, 2001, the Commission received 
emergency approval from OMB for the information collection contained in 
the rules (OMB No. 3060-0995).

C. Ordering Clauses

    20. Authority for issuance of the 7th R&O is contained in sections 
4(i), 4(j), 303(r), 309(j) and 403 of the Communications Act of 1934, 
as amended, 47 U.S.C. 154(i), 154(j), 303(r), 309(j) and 403.
    21. Accordingly, it is ordered that part 1 of the Commission's 
rules is amended as specified herein and shall become effective 
November 28, 2001.
    22. It is further ordered that the Commission's Reference 
Information Center, Consumer Information Bureau, shall send a copy of 
the 7th R&O, including the Final Regulatory Flexibility Analysis, to 
the Chief Counsel for Advocacy of the Small Business Administration.

VI. Final Regulatory Flexibility Analysis

    23. As required by the Regulatory Flexibility Act (``RFA''), an 
Initial Regulatory Flexibility Analysis (``IRFA'') was incorporated in 
the FNPRM in this proceeding. The Commission sought written public 
comment on the proposals in the FNPRM, including comment on the IRFA. 
This present Final Regulatory Flexibility Analysis (``FRFA'') conforms 
to the RFA.
    24. An RFA certification, rather than an analysis, is appropriate 
where ``the rule will not, if promulgated, have a significant economic 
impact on a substantial number of small entities.'' The Commission 
believes that the rule amendments it has adopted will not have a 
significant economic impact on a substantial number of small entities. 
The Commission nonetheless voluntarily performs this FRFA in order to 
thoroughly explain this conclusion and to address concerns raised in 
comments submitted by the Small Business Administration (``SBA''). The 
Commission discusses our conclusion further in section B, infra.

A. Need for and Objectives of the Report and Order

    25. The amendments to 47 CFR 1.2105(c) adopted in the 7th R&O are 
intended to enhance the competitiveness and integrity of the 
Commission's auctions. First, the Commission amends Sec. 1.2105(c)(1) 
so that its language clearly reflects the Commission's application of 
the rule to prohibit communications regarding bids or bidding 
strategies only between applicants that have applied to bid on licenses 
in any of the same geographic areas. Second, the Commission clarifies 
Sec. 1.2105(c)(1) to explicitly prohibit auction applicants that have 
applied to bid on licenses in any of the same geographic areas from 
discussing with or disclosing to each other any competing applicant's 
bids or bidding strategies. Although the Commission has previously 
interpreted the rule to prohibit an applicant's discussion of a 
competing applicant's bids or bidding strategies, it believes that all 
auction applicants would benefit from this amendment, which ensures 
that the text of the rule is unambiguous. Third, the Commission amends 
Sec. 1.2105(c) to require any auction applicant that makes or receives 
a communication of bids or bidding strategies prohibited by 47 CFR 
1.2105(c)(1) to report such communication to the Commission. The 
Commission believes that this reporting requirement will act as a 
deterrent to would-be disseminators of prohibited information and will 
thereby enhance the competitiveness and fairness of our auctions.

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

    26. The SBA filed comments in response to the IRFA. The SBA asserts 
that the Commission failed to describe the impact its proposed rules 
would

[[Page 54451]]

have on small businesses as required by the RFA. Further, the SBA 
states that the Commission's proposals would expand the obligations 
that applicants must meet when they participate in an auction. The SBA 
states that the amended anti-collusion rule would impose reporting 
requirements on applicants, cover a broader range of communications, 
and increase the risk of punitive action, including monetary 
forfeitures. The SBA asserts that small businesses have far fewer 
financial resources than their larger counterparts and they are 
therefore less able to absorb the costs of forfeitures. According to 
the SBA, the Commission did not discuss the potential burden posed by 
the risk of punishment as it should have. The SBA also states that the 
Commission failed to propose any alternatives designed to minimize the 
impact of its proposed rules on small business, as the RFA requires.
    27. The Commission acknowledges that the amendment to 
Sec. 1.2105(c) that it proposed in the FNPRM, and that it adopts today, 
imposes a reporting requirement on all auction participants, including 
small businesses. However, the Commission has previously urged parties 
to report communications prohibited under Sec. 1.2105(c)(1) to the 
Commission, and parties have done so in the past. Thus, the Commission 
views the adoption of this requirement as consistent with conduct that 
the Commission has urged on applicants in the past. Further, the 
amendment to Sec. 1.2105(c)(1) that the Commission adopts today to 
prohibit auction applicants from discussing the bids or bidding 
strategies of competing applicants merely clarifies the text of the 
rule to make it consistent with the interpretation it announced in the 
Western PCS Order. Nonetheless, the Commission recognizes that these 
amendments to our anti-collusion rule impose increased duties and 
present the possibility of sanctions against auction applicants, 
including small entities, that do not comply with the revised rules.
    28. Based on past experience, however, the Commission does not 
believe the impact of these amendments on small businesses will be 
significant. In all of its auctions held to date except for the 
auctions for broadcast licenses, 1,513 out of a total of 1,881 
qualified bidders have been small businesses as that term has been 
defined under rules adopted by the Commission for specific services, 
but only two forfeitures have been assessed in all, i.e., against 
businesses of all sizes. Thus, despite the large number of small 
businesses that have participated in the auctions program since its 
inception, an extremely small percentage of auction participants have 
made or received communications that have violated the anti-collusion 
rule. The Commission believes that the vast majority of applicants 
comply with the its rules and do not engage in prohibited behavior, and 
that this will continue to be the case. Therefore, the Commission 
expects these amendments to have little impact on small businesses 
generally. The amended rules will deter the few that would try to gain 
an advantage unfairly by creating an asymmetry of information that is 
detrimental to other participants.
    29. Moreover, while the Commission acknowledges that the reporting 
requirement it adopts today constitutes a potential burden, it expects 
the actual burden to be slight. In addition to the fact that the 
Commission expects there to be few instances of prohibited 
communications to be reported, it notes that the new filing requirement 
will place a de minimis reporting burden upon auction participants 
because it merely requires those who make or receive a communication of 
bids or bidding strategies prohibited by Sec. 1.2105(c)(1) to send a 
letter to the Secretary. Furthermore, section 223 of the SBREFA allows 
agencies to reduce or eliminate fines or other enforcement actions 
taken against small entities. Indeed, section 223 requires agencies to 
provide for the reduction, and under appropriate circumstances for the 
waiver, of civil penalties for violations of a statutory or regulatory 
requirement by a small entity. Under appropriate circumstances, an 
agency may consider ability to pay in determining penalty assessments 
on small entities. In amending Sec. 1.80 of its rules in 1997 to 
incorporate guidelines for assessing forfeitures, the Commission also 
made clear that its forfeiture policies are consistent with this 
approach. The Commission cannot in good conscience alter the uniform 
standards of behavior required of all auction participants, even if to 
do so might assist small businesses. Public confidence in the fairness 
of our auction process could be undermined if all entities were not 
subject to the same standards of behavior. However, in light of the 
provisions of the SBREFA and for the other reasons discussed, the 
Commission concludes that the amendments it adopts today are not likely 
to have a significant economic impact on a substantial number of small 
entities.
    30. The Commission also believes generally that any burden 
associated with these rule amendments is outweighed by the advantages 
presented by a fair auction process that does not allow some bidders to 
gain an advantage over others through collusive behavior. Thus, the 
Commission finds that the rule amendments that it adopts today will 
benefit all bidders, including small businesses. First, the Commission 
believes that the amendments will enhance the competitiveness and 
fairness of its auction process to the benefit of small auction 
applicants. Second, under the amendments, general confidence in the 
integrity of our auctions should increase. In short, the Commission 
concludes that the public policy benefits of the amendments 
substantially outweigh the minimal impact the reporting requirement 
imposes on small entities.

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

    31. The RFA directs agencies to provide a description of and, where 
feasible, an estimate of the number of small entities that may be 
affected by the proposed rules, if adopted. The RFA generally defines 
the term ``small entity'' as having the same meaning as the terms 
``small organization,'' ``small business,'' and ``small governmental 
jurisdiction.'' The term ``small business'' has the same meaning as the 
term ``small business concern'' 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) satisfies any 
additional criteria established by the SBA. A small organization is 
generally ``any not-for-profit enterprise which is independently owned 
and operated and is not dominant in its field.'' Nationwide, as of 
1992, there were approximately 275,801 small organizations. ``Small 
governmental jurisdiction'' generally means ``governments of cities, 
counties, towns, townships, villages, school districts, or special 
districts, with a population of less than 50,000.'' As of 1992, there 
were approximately 85,006 such jurisdictions in the United States. This 
number includes 38,978 counties, cities, and towns; of these, 37,566, 
or 96 percent, have populations of fewer than 50,000. The Census Bureau 
estimates that this ratio is approximately accurate for all 
governmental entities. Thus, of the 85,006 governmental entities, the 
Commission estimates that 81,600 (91 percent) are small entities. 
According to SBA reporting data, there were 4.44 million small business 
firms nationwide in 1992.
    32. The amendments to Sec. 1.2105(c) adopted in the 7th R&O will 
apply to all entities that apply to participate in Commission auctions, 
including small

[[Page 54452]]

entities. The number of entities that may apply to participate in 
future Commission auctions is unknown. The number of small businesses 
that have participated in prior auctions has varied. As stated 
previously, small businesses, as defined under the Commission's rules, 
have accounted for 1,513 out of a total of 1,881 qualified bidders in 
all prior auctions, not including broadcast auctions. Given these 
statistics, the Commission expects a large percentage of participants 
in its auctions program generally to be small businesses in the future, 
although this may not be the case in each individual auction.

D. Description of Reporting, Recordkeeping and Other Compliance 
Requirements

    33. As a result of the actions taken in the 7th R&O, disseminators 
and recipients of communications prohibited by Sec. 1.2105(c)(1) will 
be required to report such communications to the Commission, in 
writing, within five business days after the communication occurs.

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

    34. The RFA requires an agency to describe any significant 
alternatives that it has considered in reaching its proposed approach, 
which may include the following four alternatives, among others: (1) 
The establishment of differing compliance or reporting requirements or 
timetables that take into account the resources available to small 
entities; (2) the clarification, consolidation, or simplification of 
compliance or reporting requirements under the rule for small entities; 
(3) the use of performance rather than design standards; and (4) an 
exemption from coverage of the rule, or any part thereof, for small 
entities. In the 7th R&O, the Commission amends Sec. 1.2105(c) to 
require auction applicants that make or receive a communication of bids 
or bidding strategies prohibited by Sec. 1.2105(c)(1) of its rules to 
report such a communication in writing to the Commission immediately, 
but in no case later than five business days after the communication 
occurs. The Commission considered, but decided against, imposing a 
shorter deadline for such reports. The Commission believes that five 
business days will lessen the burden of the reporting requirement, 
particularly for small businesses. The Commission also considered not 
applying the requirement to recipients of prohibited communications. 
However, the Commission believes that recipients of prohibited 
communications are more likely to report such communications and thus 
serve as an important deterrent against collusive behavior. Moreover, 
the Commission believes that recipients of prohibited communications 
must be held to the same enforcement standard as initiators, because a 
recipient may derive substantial unfair benefit from obtaining details 
of a competitor's bids or bidding strategy.

F. Report to Congress

    35. The Commission will send a copy of the 7th R&O, including this 
FRFA, in a report to be sent to Congress pursuant to the Congressional 
Review Act, see 5 U.S.C. 801(a)(1)(A). In addition, the Commission will 
send a copy of the 7th R&O, including FRFA, to the Chief Counsel for 
Advocacy of the Small Business Administration.

Federal Communications Commission.
Magalie Roman Salas,
Secretary.

Rule Changes

    For the reasons discussed in the preamble, the Federal 
Communications Commission amends 47 CFR part 1 as follows:

PART 1--PRACTICE AND PROCEDURE

    1. The authority citation for part 1 continues to read as follows:

    Authority: Sections 4, 303, and 332, 48 Stat. 1066, 1082, as 
amended: 47 U.S.C. 154, 303, and 332, unless otherwise noted.

    2. Section 1.2105 is amended by revising paragraph (c)(1), 
redesignating paragraph (c)(6) as (c)(7) and adding new paragraph 
(c)(6) to read as follows:


Sec. 1.2105  Bidding application and certification procedures; 
prohibition of collusion.

* * * * *
    (c) Prohibition of collusion. (1) Except as provided in paragraphs 
(c)(2), (c)(3), and (c)(4) of this section, after the short-form 
application filing deadline, all applicants for licenses in any of the 
same geographic license areas are prohibited from cooperating or 
collaborating with respect to, discussing with each other, or 
disclosing to each other in any manner the substance of their own, or 
each other's, or any other competing applicants' bids or bidding 
strategies, or discussing or negotiating settlement agreements, until 
after the down payment deadline, unless such applicants are members of 
a bidding consortium or other joint bidding arrangement identified on 
the bidder's short-form application pursuant to 
Sec. 1.2105(a)(2)(viii).
* * * * *
    (6) Any applicant that makes or receives a communication of bids or 
bidding strategies prohibited under paragraph (c)(1) of this section 
shall report such communication in writing to the Commission 
immediately, and in no case later than five business days after the 
communication occurs. Such reports shall be filed with the Office of 
the Secretary, and a copy shall be sent to the Chief of the Auctions 
and Industry Analysis Division, Wireless Telecommunications Bureau.
* * * * *

[FR Doc. 01-27103 Filed 10-26-01; 8:45 am]
BILLING CODE 6712-01-P