[Federal Register Volume 67, Number 194 (Monday, October 7, 2002)]
[Notices]
[Pages 62470-62472]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 02-25348]


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FEDERAL COMMUNICATIONS COMMISSION

[WT Docket No. 02-276; FCC 02-248]


Commission Seeks Comment on Disposition of Down Payments and 
Pending Applications for Licenses Won During Auction No. 35

AGENCY: Federal Communications Commission.

ACTION: Notice.

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SUMMARY: This document seeks comment on whether the Commission should 
take further action with regard to the pending applications for 
licenses won during Auction No. 35, which would consist of one of two 
scenarios described in the document. Under these scenarios, the 
Commission would refund certain amounts on deposit with the Commission 
for licenses subject to pending litigation or regulatory proceedings, 
and allow individual applicants to request voluntary dismissal of their 
license applications, with prejudice, for some or all of the licenses 
subject to pending litigation or regulatory proceedings.

DATES: Comments are due on or before October 11, 2002, and reply 
comments are due on or before October 21, 2002.

ADDRESSES: Office of the Secretary, Federal Communications Commission, 
445 12th Street, SW., TW-A325, Washington, DC 20554 or hand carry 
comments to 236 Massachusetts Avenue, NE., Suite 110, Washington, DC 
20002. The filing hours at this location are 8 a.m. to 7 p.m.

FOR FURTHER INFORMATION CONTACT: Scott Delacourt at (202) 418-0639.

SUPPLEMENTARY INFORMATION: This is a summary of the Auction No. 35 
Pending License Applications Public Notice released September 12, 2002. 
The complete text of the Auction No. 35 Pending License Applications 
Public Notice, including the statement, 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. The Auction No. 35 Pending License 
Applications Public Notice 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].

Background

    1. On March 26, 2002, the Commission granted partial refunds of the 
down payments made by certain winning bidders in Auction No. 35 Partial 
Refund Order, 17 FCC Rcd 6283 (not published in the Federal Register). 
These winning bidders had made down payments and filed long-form 
applications for spectrum associated with licenses that had previously 
been issued to NextWave Personal Communications Inc., NextWave Power 
Partners Inc. (collectively ``NextWave'') and Urban Comm-North 
Carolina, Inc. (``Urban Comm''). This spectrum, as well as Auction No. 
35, continues to be the subject of extensive litigation and pending 
regulatory proceedings. Key issues over the effectiveness of the 
Commission's automatic cancellation rules with respect to NextWave's 
licenses are scheduled for oral argument before the Supreme Court on 
October 8, 2002.
    2. Pursuant to the Partial Refund Order, the Commission has already 
refunded approximately $2.8 billion to the Auction No. 35 winning 
bidders who have not yet received their licenses, but it retained an 
amount equal to three percent of the net winning bids for these 
licenses and maintained the pending status of the applications for 
these licenses. The total amount still on deposit with the Commission 
is $489,548,061. The total amount of these Auction No. 35 winners' 
obligations, including the refunded down payments, to the government 
for the former NextWave and Urban Comm licenses won at the auction is 
$16,318,268,700. The Commission has already received $504,419,150 in 
final payments for other licenses won and granted based on Auction No. 
35.
    3. As noted in the Partial Refund Order, the Commission was 
sympathetic to the needs of the auction winners, many of whom are small 
businesses, to have access to their funds to continue to operate their 
businesses. At the same time, the Commission held that it must protect 
the integrity of Auction No. 35 in the event the Commission is 
ultimately successful in its litigation. It therefore struck a balance 
between the hardship that would be imposed by continuing to retain the 
entirety of the down payments and the need to protect the integrity of 
the auction. Accordingly, it refunded to the payors of record a 
substantial portion of the monies on deposit.

[[Page 62471]]

    4. However, the Commission's Partial Refund Order also found, inter 
alia, that the continued litigation associated with particular licenses 
did not relieve the winning bidders of the obligation to pay their full 
bid amounts for licenses won in Auction No. 35. In this regard, the 
Commission disposed of matters raised by Verizon in a letter to the 
Commission's Deputy General Counsel in which Verizon argued that it no 
longer had an obligation to pay the amount it bid in Auction No. 35 
based on the theory that spectrum auctions create contractual 
relationships between the Commission and winning bidders, and that the 
Commission's failure to make timely delivery of the licenses rendered 
the contract void. No other Auction No. 35 applicant advanced this 
contract theory. In response to Verizon's letter, the Partial Refund 
Order stated that auctions are a regulatory mechanism for distributing 
licenses and that the relationship between the Commission and winning 
bidders of spectrum licenses is governed by the Communications Act, the 
Commission's competitive bidding regulations, and Public Notices 
setting forth specific conditions on particular auctions. Those 
conditions, the Commission stated, included the auction's contingency 
on the ``final'' outcome of the Next Wave litigation. Therefore, the 
Commission held that the fact that spectrum associated with the former 
NextWave licenses was not yet available for use by the Auction No. 35 
winning bidders did not require the Commission to relieve Verizon of 
its bid obligations.
    5. Verizon challenged the Commission's Partial Refund Order in two 
courts. In the D.C. Circuit, in case No. 02-1110, Verizon seeks a 
ruling that the delay in licensing caused by the NextWave litigation 
entitles Verizon to declare its auction obligations void. In the Court 
of Federal Claims, in case No. 02-280c, Verizon seeks a declaration 
nullifying Auction No. 35 as well as consequential damages. We stand by 
our legal conclusions in the Partial Refund Order, and do not through 
the Auction No. 35 Pending License Applications Public Notice suggest 
any support for Verizon's legal argument.

Discussion

    6. Since the Commission issued its Partial Refund Order several 
months ago, the state of the capital markets for entities, including 
the applicants, engaged in the provision of wireless telecommunications 
services, as well as other telecommunications services, has continued 
to decline rapidly. Specifically, since March, the Commission has 
received submissions asserting that unique and troubling financial 
circumstances have led to difficulties in accessing capital and other 
problems for companies of all sizes, which in turn has affected the 
customers they serve. For instance, these commenters suggest that the 
impact of continuing contingent liabilities on credit ratings in the 
midst of a severe downturn in capital markets could potentially 
frustrate other policy objectives as well as quality of service. 
Moreover, as we have seen in the past, market downturns affect the 
value of spectrum licenses won at auction and licensees' (or 
applicants') ability to meet auction payment obligations. At the same 
time, the Commission remains concerned about protecting the integrity 
of its spectrum auction program. Concerns about the state of the 
capital markets must be balanced against this important public interest 
consideration.
    7. Taking official notice of the status of the capital markets and 
other economic events, the Commission, on its own motion, seeks comment 
on these observations and whether it should take further action with 
regard to the pending applications for licenses won during Auction No. 
35 for spectrum formerly licensed to NextWave and Urban Comm.
    8. Specifically, the Commission seeks comment on whether it should 
consider further, inter alia, the following scenarios:
    (i) Full Refund and Option to Dismiss All Pending Applications. 
Upon request, the Commission would refund to the payor of record the 
full amount of monies on deposit with the Commission for the licenses 
subject to the NextWave litigation and Urban Comm proceedings. The 
Commission would also provide a period of time for individual 
applicants to request voluntary dismissal of all of their applications, 
with prejudice.
    Under this scenario, applicants obtaining a full refund and 
choosing to dismiss their applications would lose all claims to the 
affected Auction No. 35 licenses. Should the Commission prevail in the 
litigation, new initial licenses for the spectrum would be assigned by 
auction at a future date. In addition, the Commission would waive, in 
whole or part, its default rules for these licenses and, subject to 
coordination with the Department of Justice pursuant to applicable 
federal claims collection standards, forgive the debt incurred on them 
at Auction No. 35. The Commission seeks comment on whether it would be 
advisable to waive the default rules, or to extend debt forgiveness, in 
whole or in part, to a bidder opting for dismissal of its 
application(s). In addition, we seek comment on whether a bidder 
receiving a waiver or debt forgiveness should be barred from 
participating in the reauction of the licenses or otherwise obtaining 
such licenses for a period of time. Finally, the Commission seeks 
comment on whether applicants that would like to keep their 
applications pending should reaffirm their commitment to their Auction 
No. 35 obligations or just remain silent.
    (ii) Selective Opt-Out for Pending Applications. The Commission 
would grant individual applicant requests for voluntary dismissal of 
their applications, with prejudice, for certain licenses and not 
others.
    Under this scenario, the Commission would provide applicants the 
opportunity to pick and choose licenses for which to keep the 
applications pending and which to dismiss. The Commission seeks comment 
on whether all of the down payments should be refunded or only down 
payments associated with the dismissed licenses. As with the first 
scenario, applicants choosing to dismiss their applications would lose 
all claims to the affected licenses. Should the Commission prevail in 
the litigation, new initial licenses for the spectrum would be assigned 
by auction at a future date. In addition, the Commission would, in 
whole or part, waive its default rules for dismissed license 
applications and, subject to coordination with the Department of 
Justice pursuant to applicable federal claims collection standards, 
forgive the debt on them incurred at Auction No. 35. Again, the 
Commission seeks comment on whether a bidder opting for dismissal of 
its application(s) and receiving a full or partial waiver of the 
default payment rules should be barred from participating in the 
reauction of the licenses or otherwise obtaining such licenses for a 
period of time.
    9. Although the oral argument in the Supreme Court case is fast 
approaching and the Commission has the utmost confidence in the merits 
of its case, the Commission and winning bidders in Auction No. 35 still 
face the possibility of prolonged litigation over such licenses during 
uncertain and trying economic conditions. The Commission also 
recognizes that should the Supreme Court rule in the government's 
favor, there may nevertheless be unresolved issues over the licenses, 
that would prolong the litigation. Depending on the length of the 
delay, capital market conditions may continue to change, increasing the 
possibility that winning bidders in Auction 35 will be in a 
significantly different position that at the time of the auction. 
Accordingly, the

[[Page 62472]]

Commission seeks comment on the scenarios discussed based on the 
changed circumstances since issuance of its Partial Refund Order. The 
Commission also seeks comment on whether granting relief under any of 
the options discussed herein would promote or disserve the public 
interest objectives outlined in section 309(j) of the Communications 
Act, including ``promoting economic opportunity and competition'' and 
ensuring ``efficient and intensive use of the electromagnetic 
spectrum.''

Procedural Matters

    10. Pursuant to 47 CFR 1.1200(a), the Commission may adopt modified 
ex parte procedures in particular proceedings if the public interest so 
requires. Accordingly, issues related to the Auction No. 35 Pending 
License Applications Public Notice will be governed by ``permit-but-
disclose'' ex parte procedures that are applicable to non-restricted 
proceedings under 47 CFR 1.1206. Designating this matter as ``permit 
but disclose'' will provide an opportunity for all interested parties 
to comment on the policy questions concerning the treatment of the 
funds on deposit. All other matters concerning Auction No. 35 
applications that are the subject of NextWave's Petition to Defer and 
other petitions to deny remain restricted, pending further action by 
Public Notice.
    11. Pursuant to Sec. Sec.  1.415 and 1.419 of the Commission's 
rules, 47 CFR 1.415, 1.419, interested parties may file comments on or 
before October 11, 2002, and reply comments on or before October 21, 
2002. Comments may be filed using the Commission's Electronic Comment 
Filing System (ECFS) or by filing paper copies. See Electronic Filing 
of Documents in Rulemaking Proceedings, 63 FR 24121 (May 1, 1998).
    12. Comments filed through the ECFS can be sent as an electronic 
file via the Internet to <http://www.fcc.gov/e-file/ecfs.html. Generally, only one copy of an electronic 
submission must be filed. In completing the transmittal screen, 
commenters should include their full name, U.S. Postal Service mailing 
address, and the applicable docket or rulemaking number. Parties may 
also submit an electronic comment by Internet e-mail. To get filing 
instructions for e-mail comments, commenters should send an e-mail to 
[email protected], and should include the following words in the body of the 
message, ``get form .'' A sample form 
and directions will be sent in reply. Parties who choose to file by 
paper must file an original and four copies of each filing. Filings can 
be sent by hand or messenger delivery, by commercial overnight courier, 
or by first-class or overnight U.S. Postal Service mail (although we 
continue to experience delays in receiving U.S. Postal Service mail). 
The Commission's contractor, Vistronix, Inc., will receive hand-
delivered or messenger-delivered paper filings for the Commission's 
Secretary at 236 Massachusetts Avenue, NE., Suite 110, Washington, DC 
20002. The filing hours at this location are 8 a.m. to 7 p.m. All hand 
deliveries must be held together with rubber bands or fasteners. Any 
envelopes must be disposed of before entering the building. Commercial 
overnight mail (other than U.S. Postal Service Express Mail and 
Priority Mail) must be sent to 9300 East Hampton Drive, Capitol 
Heights, MD 20743. U.S. Postal Service first-class mail, Express Mail, 
and Priority Mail should be addressed to 445 12th Street, SW., 
Washington, DC 20554. All filings must be addressed to the Marlene H. 
Dortch, Secretary, Office of the Secretary, Federal Communications 
Commission.

Federal Communications Commission.
Marlene H. Dortch,
Secretary.
[FR Doc. 02-25348 Filed 10-4-02; 8:45 am]
BILLING CODE 6712-01-P