[Federal Register Volume 70, Number 143 (Wednesday, July 27, 2005)]
[Proposed Rules]
[Pages 43372-43386]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 05-14840]


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FEDERAL COMMUNICATIONS COMMISSION

47 CFR Parts 1, 73, and 74

[WT Docket No. 05-211; FCC 05-123]


Implementation of the Commercial Spectrum Enhancement Act; 
Modernization of Competitive Bidding Rules

AGENCY: Federal Communications Commission.

ACTION: Proposed rule.

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SUMMARY: In this the Commission begins a proceeding to implement rules 
and procedures needed to comply with the recently enacted Commercial 
Spectrum Enhancement Act (CSEA). The Commission also proposes a number 
of changes to its competitive bidding rules that are necessary, apart 
from CSEA, to bring them in line with the current requirements of the 
Commission's auctions program.

DATES: Comment Date, August 26, 2005; Reply Comment Date, September 12, 
2005. Written comments on the Paperwork Reduction Act proposed 
information collection requirements must be submitted by the public, 
Office of Management and Budget (OMB), and other interested parties on 
or before September 26, 2005.

ADDRESSES: You may submit comments, identified by WT Docket No. 05-211; 
FCC 05-123 by any of the following methods:
     Federal eRulemaking Portal: http://www.regulations.gov. 
Follow the instructions for submitting comments.
     Federal Communications Commission's Web Site: http://www.fcc.gov/cgb/ecfs/. Follow the instruction for submitting comments.
     People with Disabilities: Contact the FCC to request 
reasonable accommodations (accessible format documents, sign language 
interpreters, CART, etc.) by e-mail: [email protected] or phone: 202-418-
0530 or TTY: 202-418-0432.
    In addition to filing comments with the Secretary, a copy of any 
comments on the Paperwork Reduction Act information collection 
requirements contained herein should be submitted to Judith B. Herman, 
Federal Communications Commission, Room 1-C804, 445 12th Street, SW., 
Washington, DC 20554, or via the Internet to [email protected], 
and to Kristy L. LaLonde, OMB Desk Officer, Room 10234 NEOB, 725 17th 
Street, NW., Washington, DC 20503, via the Internet to [email protected], or via fax at 202-395-5167.
    For detailed instructions for submitting comments and additional 
information on the rule making process, see the SUPPLEMENTARY 
INFORMATION section of this document.

FOR FURTHER INFORMATION CONTACT: Audrey Bashkin or Gary Michaels, 
Auctions and Spectrum Access Division, Wireless Telecommunications 
Bureau, (202) 418-0660. For additional information concerning the 
Paperwork Reduction Act information collection requirements contained 
in this document, contact Judith B. Herman at

[[Page 43373]]

202-418-0214, or via the Internet at [email protected].

SUPPLEMENTARY INFORMATION: 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 and reply comments on or before the dates indicated on 
the first page of this document. Comments may be filed using: (1) the 
Commission's Electronics Comment Filing System (ECFS), (2) the Federal 
Government's eRulemaking Portal, or (3) by filing paper copies. See 
Electronic Filing of Documents in Rulemaking Proceedings, 63 FR 24121 
(1998).
     Electronic Filers: Comments may be filed electronically 
using the Internet by accessing the ECFS: http://www.fcc.gov/cgb/ecfs/ 
or the Federal eRulemaking Portal: http://www.regulations.gov. Filers 
should follow the instructions provided on the website for submitting 
comments.
     For ECFS filers, if multiple docket or rule making numbers 
appear in the caption of this proceeding, filers must transmit one 
electronic copy of the comments for each docket or rule making number 
referenced in the caption. In completing the transmittal screen, filers 
should include their full name, U.S. Postal Service mailing address, 
and the applicable docket or rule making number. Parties may also 
submit an electronic comment by Internet e-mail. To get filing 
instructions, filers should send an e-mail to [email protected], and include 
the following words in the body of the message, ``get form.'' A sample 
form and directions will be sent in response.
     Paper Filers: Parties who choose to file by paper must 
file an original and four copies of each filing. If more than one 
docket or rule making number appears in the caption of this proceeding, 
filers must submit two additional copies for each additional docket or 
rule making number. 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 the Commission continues to experience 
delays in receiving U.S. Postal Service mail). All filings must be 
addressed to the Commission's Secretary, Office of the Secretary, 
Federal Communications Commission.
     The Commission's contractor 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, Express, and Priority 
mail should be addressed to 445 12th Street, SW., Washington DC 20554.
     People with Disabilities: Contact the FCC to request 
materials in accessible formats (Braille, large print, electronics 
files, audio format, etc.) by e-mail at [email protected] or call the 
Consumer & Governmental Affairs Bureau at 202-418-0531 (voice), 202-
418-7365 (TTY).

Initial Paperwork Reduction Act of 1995 Analysis

    This document contains proposed new information collection 
requirements. The Commission, as part of its continuing effort to 
reduce paperwork burdens, invites the general public and the Office of 
Management and Budget (OMB) to comment on the information collection 
requirements contained in this document, as required by the Paperwork 
Reduction Act of 1995, Public Law 104-13. Public and agency comments 
are due 60 days after the date of publication in the Federal Register. 
Comments should address: (a) Whether the proposed collection of 
information is necessary for the proper performance of the functions of 
the Commission, including whether the information shall have practical 
utility; (b) the accuracy of the Commission's burden estimates; (c) 
ways to enhance the quality, utility, and clarity of the information 
collected; and (d) ways to minimize the burden of the collection of 
information on the respondents, including the use of automated 
collection techniques or other forms of information technology. In 
addition, pursuant to the Small Business Paperwork Relief Act of 2002, 
Public Law 107-198, see 44 U.S.C. 3506(c)(4), the Commission seeks 
specific comment on how it might further reduce the information 
collection burden for small business concerns with fewer than 25 
employees.
    OMB Control Number: 3060-XXXX.
    Title: Implementation of the Commercial Spectrum Enhancement Act 
and Modernization of the Commission's Competitive Bidding Rules and 
Procedures
    Form Numbers: N/A.
    Type of Review: Supplemental collection for which comment is being 
sought in a notice of proposed rule making.
    Respondents: Business or other for-profit, not-for-profit 
institutions and State, Local or Tribal Government.
    Number of Respondents: 75.
    Estimated Time per Response: 10 minutes, entirely by in-house 
staff.
    Frequency of Response: Reporting; on occasion.
    Total Annual Burden: 12.5 hours.
    Total Annual Costs: none.
    Privacy Impact Assessment: No.
    Needs and Uses: Respondents would be required to specify on their 
short-form applications the licenses, if any, for which they intend to 
seek a tribal land bidding credit, should they win. This information 
would enable the Commission to determine at the close of bidding in a 
spectrum auction with a reserve price or prices whether the price or 
prices had been met, taking into account all possible tribal land 
bidding credits that might be awarded in the auction.

I. Introduction and Executive Summary

    1. With this Notice of Proposed Rule Making (``NPRM''), WT Docket 
No. 05-211, FCC-123 released on June 14, 2005, the Commission begins a 
proceeding to implement rules and procedures needed to comply with the 
recently enacted Commercial Spectrum Enhancement Act (CSEA). The 
Commission also proposes a number of changes to its competitive bidding 
rules that are necessary, apart from CSEA, to bring them in line with 
the current requirements of the Commission's auctions program.
    2. CSEA establishes a mechanism to use spectrum auction proceeds to 
reimburse federal agencies operating on the 216-220 MHz, 1432-1435 MHz, 
1710-1755 MHz, and 2385-2390 MHz bands, and certain other frequency 
bands that may be reallocated from federal to non-federal use, for the 
cost of relocating operations. In a related Declaratory Ruling, the 
Commission interpreted the meaning of the term ``total cash proceeds'' 
as used in CSEA to be winning bids net of any applicable bidding credit 
discounts. In the NPRM, the Commission seeks comment on changes to the 
Commission's competitive bidding rules necessary to implement CSEA. 
Specifically, the Commission proposes to:
     Change the Commission reserve price rule as mandated by 
CSEA; and
     Change the Commission tribal land bidding credit rules in 
auctions subject to CSEA or to a reserve price requirement unrelated to 
CSEA in order to determine whether auction results

[[Page 43374]]

satisfy any revenue requirement at or near the completion of bidding.
    3. The Commission also considers in the NPRM a number of other 
measures to update the Commission's competitive bidding rules and 
procedures, including steps to (a) ensure that the Commission's general 
auction rules are consistent with the use of combinatorial (or package) 
bidding methodologies, (b) conform the payment rules and procedures for 
broadcast construction permits won at auction to the Commission's part 
1 general competitive bidding rules and recent procedures, and (c) 
determine whether certain existing competitive bidding provisions 
should be modified in order to achieve their intended purposes. 
Specifically, the Commission proposes to:
     Change the Commission's default payment rule to clarify 
its application in certain situations;
     Change the Commission's interim withdrawal and additional 
default payment rules to replace the current interim withdrawal and 
additional default payments of 3 percent of the relevant bid with an 
amount up to 20 percent of the relevant bid, with the precise amount 
for each auction established in advance of the auction;
     Adopt new Commission rules to establish procedures in 
advance of each auction for apportioning bid amounts in the auction 
among licenses in a package or among components of a license to 
determine the amount of an individual bid or a portion of a bid when 
needed for calculations pursuant to Commission rules or procedures;
     Change Commission payment rules and procedures for 
broadcast construction permits won at auction to conform to the payment 
rules and procedures for non-broadcast licenses won at auction; and
     Change Commission rules and procedures for consortia of 
designated entities and entrepreneurs to improve the licensing process 
for such entities.
    4. The Commission notes that several additional issues involved 
with implementing reserve prices for auctions subject to CSEA may 
arise. One such issue is whether the total cash proceeds attributable 
to eligible frequencies can be assessed on a license-by-license basis, 
so that the auction might be deemed to meet the CSEA revenue threshold 
for one license but not another. Another unresolved issue is whether, 
where an auction involves both CSEA-eligible frequencies and other 
spectrum, the full amount or only a portion of winning bids should be 
considered when measuring whether auction results satisfy the CSEA 
revenue requirement. Whether such issues will actually arise in an 
auction, and what the best possible resolutions may be, may depend upon 
the characteristics of the specific spectrum licenses to be auctioned 
and the circumstances under which the auction is conducted. 
Accordingly, the Commission will leave consideration of such issues to 
later actions, including possible auction- or service-specific rule 
making proceedings, subsequent declaratory rulings regarding questions 
of statutory interpretation, or adoption of specific auction procedures 
by the Commission.

II. Notice of Proposed Rule Making

A. Implementing CSEA

i. Complying With CSEA's Reserve Price Requirement
    5. From the inception of the Commission's auctions program in 1994, 
Commission rules have allowed for the use of reserve (or 
``reservation'') prices. The Balanced Budget Act of 1997 added 
paragraph 309(j)(4)(F) to the Communications Act, requiring the 
Commission to prescribe methods to require a reasonable reserve price 
or establish a minimum bid for licenses made available in spectrum 
auctions. The Commission's current reserve price rule for all 
auctionable services, Sec.  1.2104(c) of the Commission's rules, states 
that the Commission may establish a reservation price, disclosed or 
undisclosed, below which a license subject to auction will not be 
awarded.
    6. CSEA requires the total cash proceeds from any auction of 
eligible frequencies to equal at least 110 percent of the total 
estimated relocation costs provided to the Commission by NTIA. To 
implement this requirement, CSEA directs the Commission to revise its 
reserve price regulations adopted pursuant to section 309(j)(4)(F) of 
the Communications Act. Thus, in contrast to the Commission's current 
reserve price rule, the reserve price rule the Commission must adopt 
for auctions subject to CSEA cannot be discretionary. The Commission 
proposes, therefore, to modify Sec.  1.2104(c) of its rules to add a 
requirement that, for any auction of eligible frequencies under CSEA, 
the Commission will establish a reserve price (or prices) that ensures 
that the total cash proceeds (as defined in the related Declaratory 
Ruling) attributable to such spectrum will equal at least 110 percent 
of the total estimated relocation costs provided to the Commission by 
NTIA. The Commission seeks comment on this proposal.
ii. Modifying Tribal Land Bidding Credit Rules
    7. In an effort to encourage carriers to provide telecommunications 
services to tribal lands with historically low telephone service 
penetration rates, the Commission makes tribal land bidding credits 
available to auction winners that serve qualifying tribal lands. The 
amount of a bidding credit is determined according to a formula set 
forth in the Commission's rules and is subject to a cap based on a 
sliding scale according to the amount of the high bid. To apply for a 
tribal land bidding credit, an auction winner must indicate on its 
long-form application (FCC Form 601) that it intends to serve a 
qualifying tribal land within a particular market. The applicant must 
then amend its long-form application by attaching a certification from 
the tribal government authorizing the applicant to provide service on 
its tribal land, certifying that the area to be served by the winning 
bidder is indeed qualifying tribal land, and assuring that it has not 
and will not enter into an exclusive contract with the applicant and 
will not unreasonably discriminate among wireless carriers seeking to 
provide service on the qualifying tribal land. The applicant must also 
attach its own certification that it will comply with construction 
requirements for tribal land and consult with the tribal government 
regarding the siting of facilities and service deployment.
    8. The deadline for submitting these certifications is not until 
180 days after the filing deadline for long-form applications. 
Accordingly, in auctions that include spectrum covering qualifying 
tribal lands, the Commission may not know for at least 180 days after 
the long-form deadline how much of a discount on the auction's winning 
bids it will have to allow for tribal land bidding credits. In auctions 
subject to CSEA, this situation could lead to a potentially substantial 
post-auction delay in calculating whether ``total cash proceeds'' meet 
the 110 percent revenue requirement. Thus, the Commission's current 
tribal land bidding credit procedures could prevent the Commission from 
concluding the auction expeditiously after the cessation of bidding and 
might even (should award of the credits reduce the auction's net 
winning bids to below the 110 percent revenue requirement) lead to 
cancellation of the auction long after the bidding has ended.
    9. The Commission, therefore, seeks comment on different possible 
methods of ensuring that the Commission will be able to promptly 
calculate ``total cash

[[Page 43375]]

proceeds'' while at the same time preserving the availability of tribal 
land bidding credits in auctions subject to CSEA. One possibility in 
such auctions is to award tribal land bidding credits on a pro rata 
basis out of the funds exceeding the reserve price. Under this option, 
the amounts that could be discounted by tribal land bidding credits in 
an auction subject to CSEA would be limited to net bids in excess of 
the reserve price or 110 percent of the total estimated relocation 
costs. If this amount were insufficient to pay all of the tribal land 
bidding credits for which auction winners were eligible, then each 
eligible tribal land bidding credit recipient would receive a pro rata 
credit in proportion to the amount the applicant would have received 
had the auction not been subject to a reserve price.
    10. A second option on which the Commission seeks comment is to 
award tribal land bidding credits on a first-come, first-served basis 
in auctions subject to CSEA. Under this alternative, winning bidders 
would still have to file the certifications for a tribal land bidding 
credit no later than 180 days after the filing deadline for long-form 
applications. However, bidding credits up to the full amount determined 
by the existing formula would be awarded to eligible applicants in the 
order in which they had filed the certifications for such credits, but 
only to the extent that funds were available. As with the first 
alternative, the money available for tribal land bidding credits would 
be limited to the net winning bids exceeding 110 percent of the total 
estimated relocation costs (or another specified reserve price). This 
alternative offers the appeal of encouraging the early filing of tribal 
land bidding credit certifications but might exclude applicants that 
encountered delays through no fault of their own in obtaining the 
required certifications.
    11. The Commission also seeks comment on a third option pursuant to 
which it would require applicants to specify on their short-form 
applications the licenses, if any, for which they intend to seek a 
tribal land bidding credit, should they win. Under this option, the 
Commission would determine whether the CSEA reserve price had been met, 
insofar as tribal land bidding credits are concerned, by deducting the 
maximum amount of tribal land bidding credits for which winning bidders 
that had indicated on their short-form applications an interest in 
receiving such credits could be eligible. While this alternative would 
facilitate prompt determination of whether, taking tribal land bidding 
credits into account, the CSEA-required reserve price had been met, it 
could create an additional burden for short-form applicants. It could 
also overstate the potential impact of tribal land bidding credits on 
auction revenues in the event that license winners that had indicated 
an interest in receiving tribal land bidding credits ultimately did not 
receive such credits for any reason.
    12. The Commission also invites commenters to propose other methods 
to enable the Commission to determine promptly total cash proceeds 
while preserving the availability of tribal land bidding credits. The 
Commission encourages those offering proposals or commenting on the 
proposals presented here to consider the practical implications of each 
approach, and the Commission requests that commenters discuss, in 
particular, how a given approach might best promote the dual purposes 
of facilitating CSEA compliance and encouraging service on tribal lands 
through the award of tribal land bidding credits. The Commission also 
seeks comment on whether it should adopt the same or similar approach 
for any non-CSEA auctions for which the Commission, pursuant to section 
309(j)(4)(F) of the Communications Act, establishes a reserve price 
based on winning bids net of all discounts.

B. Updating Competitive Bidding Rules and Procedures

i. Clarifying the Default Rule
    13. Section 1.2104(g) of the Commission's rules provides that a 
bidder that withdraws a high bid during the course of an auction is 
subject to a withdrawal payment equal to the difference between the 
amount of the withdrawn bid and the amount of the winning bid in the 
same or subsequent auction. In the event that a bidding credit applies 
to any of the bids, the bid withdrawal payment equals the difference 
between either the net withdrawn bid and the subsequent net winning bid 
or the gross withdrawn bid and the subsequent gross winning bid, 
whichever difference is less. However, no withdrawal payment is 
assessed for a withdrawn bid if either the subsequent winning bid or 
any intervening subsequent withdrawn bid equals or exceeds the original 
withdrawn bid. (Net bids for purposes of this calculation would not 
include any discounts resulting from tribal land bidding credits.) An 
intervening subsequent withdrawn bid less than the original withdrawn 
bid may limit the amount of the withdrawal payment; however, it is only 
possible to determine the final amount of a withdrawal payment once 
there is a higher intervening subsequent withdrawn bid or a subsequent 
winning bid.
    14. Under Sec.  1.2104(g) of the Commission's rules, a high bidder 
that defaults or is disqualified after the close of an auction is 
subject to the payment just described for withdrawn bids (the 
``deficiency payment'' or ``deficiency portion'') plus an additional 
payment equal to 3 percent (or, in the case of defaults or 
disqualifications after the close of a package bidding auction, 25 
percent) of the defaulting bidder's bid or the subsequent winning bid, 
whichever is less. (The deficiency payment for a default or 
disqualification following a package bidding auction is, in most 
instances, calculated differently from the way in which the deficiency 
payment is calculated for a default or disqualification following a 
non-package bidding auction.) The 3 (or 25) percent payment must be 
calculated using the same bid amounts and basis (i.e., net or gross 
bids) as used in calculating the deficiency payment.
    15. The rule does not, however, anticipate the anomaly that might 
result from calculating the additional 3 or 25 percent payment for a 
bidder that defaults or is disqualified after the close of an auction, 
when, in a subsequent auction, there is a higher withdrawn bid, but no 
winning bid, for a license corresponding to the defaulted license. A 
literal reading of Sec.  1.2104(g) of the Commission's rules might seem 
to dictate that, while the defaulter's deficiency obligation would be 
calculated as the difference between the defaulter's bid and the higher 
withdrawn bid in the subsequent auction (thus resulting in no 
deficiency payment), the defaulter's additional 3 or 25 percent payment 
obligation, which is based upon the lesser of the defaulter's bid or 
the subsequent winning bid, could not be calculated until the 
corresponding license had been won in a still later auction. Yet such a 
reading conflicts with the explicit assumption in the Commission's 
default payment rule that the deficiency payment and the additional 
payment are calculated using the same bids. Moreover, reading the rule 
this way would prolong the period before the final amount of the 
default payment obligation could be assessed and payment could be 
collected.
    16. To remove any ambiguity associated with this possible 
occurrence, the Commission believes that a clarification of the rule is 
needed. Therefore, the Commission proposes that when, in a subsequent 
auction, there is a higher withdrawn bid but no

[[Page 43376]]

winning bid for a license that corresponds to a defaulted license, the 
additional default payment be determined as 3 percent (or 25 percent) 
of the defaulting bidder's bid. The additional payment would, as 
always, be calculated using the same basis, i.e., net or gross bids, as 
used in the calculation of the deficiency payment. The Commission 
believes that adopting this proposal would simplify and accelerate the 
calculation of final default payments in applicable situations by 
allowing use of the same subsequent bid in calculating both the 
deficiency payment portion and the additional payment portion of the 
final default payment and by allowing an earlier determination of the 
additional payment amount.
    17. Further, the Commission believes that clarification of the 
additional payment portion of the default payment rule is needed for 
certain situations in which no deficiency payment is owed. As noted, 
normally the additional payment is a percentage of either the 
defaulting bidder's bid or the subsequent applicable bid, whichever is 
less, using the same basis--net or gross bids--as used in calculating 
the deficiency payment. However, when the defaulted bid was subject to 
a bidding credit and the subsequent applicable bid equals or exceeds 
the defaulted bid, regardless of which basis--net or gross bids--is 
used, it is not clear whether the additional payment should be based on 
the net defaulted bid or on the gross defaulted bid. The Commission 
proposes that, in such a situation, the additional payment be 3 (or 25) 
percent of the net defaulted bid amount, thus basing the default 
payment on what the defaulter was obligated to pay at the close of 
bidding. The Commission further proposes to extend this proposed 
clarification to determinations of the amount of default payments in 
situations where the initial bid, the subsequent winning bid, or any 
intervening withdrawn bid is for a license that is part of a package, 
contingent upon the Commission's prior or concurrent adoption of a rule 
change that would allow use of the conventional default rule in such 
situations. The Commission seeks comment on these proposals.
ii. Raising the Limit on Withdrawal and Default Payments
a. Background
    18. Withdrawals. The Commission's rules provide that a bidder that 
withdraws a high bid during an auction is subject to a withdrawal 
payment equal to the difference between the amount of the withdrawn bid 
and the amount of the winning bid in the same or subsequent auction(s). 
In the event that a license for which there has been a withdrawn high 
bid is not subject to a subsequent higher bid or won in the same 
auction, the final withdrawal payment cannot be calculated until a 
corresponding license is subject to a higher bid or won in a subsequent 
auction. In such a case, the bidder responsible for the withdrawn high 
bid is assessed an interim bid withdrawal payment equal to 3 percent of 
the amount of its withdrawn bid, and this interim payment is applied 
toward any final bid withdrawal payment that is ultimately assessed.
    19. The Commission adopted the withdrawal payment rules in 1994 to 
discourage insincere bidding, which, whether done for frivolous or 
strategic purposes, distorts price information generated by the auction 
process and may reduce the efficiency of the auction. The Commission 
anticipated that strategic withdrawals--such as when a bidder attempts 
to deter a rival from acquiring a license by bidding up the price of 
the license and then withdrawing--would be particularly damaging to 
competitive bidding. The Commission added the 3 percent interim bid 
withdrawal payment to the rules to help ensure that the withdrawal 
payment could be collected if one ultimately were assessed.
    20. Defaults and Disqualifications. The Commission's rules also 
provide that if, after the close of an auction, a high bidder defaults 
on a down payment or final payment obligation or is disqualified, the 
bidder is liable for a default payment. This payment consists of a 
deficiency portion, equal to the difference between the amount of the 
bidder's bid and the amount of the winning bid the next time a license 
covering the same spectrum is won in an auction, plus an additional 
payment equal to 3 percent (or, in the case of defaults or 
disqualifications after the close of a package bidding auction, 25 
percent) of the defaulter's bid or of the subsequent winning bid, 
whichever is less. The Commission adopted the default payment rule in 
1994. In 1997, the Commission extended to all auctionable services a 
policy, earlier adopted for broadband personal communications services 
(``PCS''), of assessing initial default deposits. Pursuant to this 
policy, the Commission, in instances in which the amount of a default 
payment cannot yet be determined, assesses an initial default deposit 
of between 3 percent and 20 percent of the defaulted bid amount.
    21. Requiring an additional payment in the case of post-auction 
defaults is intended to provide an incentive to bidders wishing to 
withdraw their bids to do so prior to the close of an auction, because 
a default or disqualification after an auction is generally more 
harmful to the auction process than a withdrawal during the auction. 
The Commission set the additional payment at 3 percent, estimating that 
amount as the transaction cost of selling a license in the after-
market. The Commission posited that if it were to establish a 
significantly higher additional default payment, most bidders would, 
rather than default, sell unwanted licenses individually in the 
secondary market. The Commission determined that such a result would 
not only be unfair to entities subject to resale restrictions but also 
would be a less efficient mechanism for assigning defaulted licenses 
than would Commission auctions of such licenses.
b. Discussion
    22. The Commission has observed a disproportionate number of 
withdrawals late in its auctions, indicating that some bidders have 
been placing and then withdrawing bids primarily to discourage 
potential or existing market competitors from seeking to acquire 
licenses. Moreover, bidders continue to default on their payment 
obligations. Withdrawals and defaults weaken the integrity of the 
auctions process and impede the deployment of service to the public and 
could prove particularly troublesome in auctions with a specific cash 
proceeds or reserve price requirement, such as auctions subject to 
CSEA.
    23. Based on its experience in administering auctions, the 
Commission believes that changes to its existing withdrawal and default 
payment rules may be necessary in order to more effectively minimize 
the occurrence of withdrawals, defaults, and disqualifications. 
Accordingly, the Commission proposes to increase the current limits on 
the interim withdrawal payment and the additional default payment. In 
the case of defaults on unwanted licenses, the Commission's rationale 
for limiting the additional payment to 3 percent no longer holds the 
same validity that it did eleven years ago when the payment was 
established. Resale restrictions have since been reduced, and secondary 
market tools for the redistribution of access to spectrum have been 
rapidly developing, due, in part, to Commission innovation and 
encouragement. In cases where defaults result from the failure of 
bidders realistically to assess in advance their

[[Page 43377]]

ability to pay for their bids, a larger payment requirement may provide 
added incentive for bidders to conduct the necessary analysis and 
refrain from placing bids they cannot afford or at least for them to 
withdraw such bids rather than defaulting on them.
    24. Accordingly, the Commission proposes to modify Sec.  1.2104(g) 
of its rules to raise the current 3 percent limits on the interim 
withdrawal payment and the additional default payment to 20 percent 
each. The Commission would, as part of its determination of competitive 
bidding procedures in advance of each auction, establish the 
appropriate level, from 3 percent up to a maximum of 20 percent, at 
which to set each of the two payments. This 3 to 20 percent range 
mirrors the parameters long used for determining initial default 
deposit amounts. In light of the potentially greater harm resulting 
from defaults in combinatorial bidding auctions, the Commission does 
not propose to change the size of the 25 percent additional payment for 
defaults or disqualifications following combinatorial bidding auctions. 
The Commission seeks comment on these proposals.
iii. Apportioning Bid Amounts
a. Apportionment Among the Licenses in a Package
    25. The Commission's competitive bidding rules and procedures 
assume that the amount of each bid on an individual license is always 
known. This assumption makes sense only when licenses are won 
individually. However, in combinatorial (or ``package'') bidding, 
bidders place single all-or-nothing bids on groups (or packages) of 
licenses. Thus, there may be no identifiable bid amounts on the 
individual licenses comprising packages of more than one license.
    26. The Commission employed package bidding for the first time in 
Auction No. 51, an auction of regional narrowband PCS licenses that was 
held on September 24 and 25, 2003. The Commission announced in 2000 
that a combinatorial bidding system would be used for Auction No. 31, 
the planned auction of licenses in the Upper 700 MHz bands. In 
addition, the Commission recently announced its launch of a new auction 
bidding software system--the Integrated Spectrum Auction System or 
``ISAS''--which, among other things, will facilitate package bidding. 
The Commission believes that the use of combinatorial bidding 
methodology makes it necessary for it to modify its rules to allow the 
apportionment of package bids among the individual licenses comprising 
a package whenever an individual bid amount is needed to administer a 
Commission rule or procedure. There are several situations in which the 
need for an individual bid amount could arise.
    27. Small Business and New Entrant Bidding Credits. Under the 
Commission's rules, small business and new entrant bidding credits are 
awarded as percentage discounts on winning bid amounts for specific 
licenses. In the event that an entity entitled to such a bidding credit 
places a bid on a package of licenses in an auction with combinatorial 
bidding, it may be necessary to apportion the bid among the licenses 
comprising the package. For example, if the entity bids on a package of 
licenses not all of which entitle the winner to a bidding credit or to 
the same percentage bidding credit, it will be necessary to apportion 
the bid among the individual licenses comprising the package in order 
to calculate the amount of the bidding credits. Moreover, in the case 
of small business bidding credits, even if the small business is 
entitled to a uniform bidding credit on all licenses in a package, it 
may be necessary to apportion the package bid among individual licenses 
in order to determine the amount of an unjust enrichment payment 
obligation.
    28. Unjust Enrichment Payment Obligations. Under the Commission's 
existing rules, an unjust enrichment payment is due when a licensee 
that received a small business bidding credit for a license transfers 
control of, or fully or partially assigns, the license within the first 
five years of the license term to an entity not qualifying for a 
bidding credit, or for as favorable a bidding credit as the licensee's. 
The amount of an unjust enrichment payment, determined according to a 
declining schedule, is a percentage of either the bidding credit or the 
difference between the bidding credit the licensee received and the 
bidding credit for which the transferee or assignee would qualify, up 
to 100 percent, plus interest. Unjust enrichment payment obligations 
for partitioned license areas are calculated based upon the ratio of 
the population of the partitioned area to the overall population of the 
original license area. Correspondingly, unjust enrichment payment 
obligations for disaggregated spectrum are calculated based upon the 
ratio of the amount of spectrum disaggregated to the total amount of 
spectrum of the original license. In the case of combined partitioning 
and disaggregation, unjust enrichment payment obligations are 
calculated based upon the ratio of ``MHz-pops'' in the partial license 
to the total ``MHz-pops'' in the original license, where ``MHz-pops'' 
is defined as the number of megahertz of spectrum multiplied by the 
population of the covered area. This MHz-pops ratio is a generalization 
of the ratios used for simple partitions and disaggregations, taking 
into account both the license area and the bandwidth being assigned. If 
a bidder wins a package of licenses in an auction with combinatorial 
bidding and subsequently seeks to transfer or fully or partially assign 
an individual license that comprises part of the package, calculating 
any required unjust enrichment payment will require a determination of 
the price and applicable bidding credit for the individual license.
    29. Tribal Land Bidding Credits. The size of a tribal land bidding 
credit is subject to a limit which is set using the amount of the high 
bid on the license in question. Accordingly, in order to calculate a 
tribal land bidding credit for a license won as part of a package, it 
will be necessary to determine how much of the winning bid amount for 
the package to allocate to that license.
    30. Default and Withdrawal Payments. Calculating the amount of a 
default or withdrawal payment involves a comparison between the 
withdrawing or defaulting bidder's bid and a subsequent bid. The 
Commission already has in place a rule for calculating default payment 
obligations in connection with combinatorial bidding auctions. 
Initially adopted as part of the service-specific part 27 competitive 
bidding rules in anticipation of package bidding in auctions of the 
Upper 700 MHz band, the rule later was incorporated into the part 1 
rules as Sec.  1.2104(g)(3), applicable to all defaults on licenses won 
in a combinatorial bidding auction. In addition to specifying the 
method of calculating the deficiency portion of default payments after 
package bidding auctions, this rule increases the additional payment 
required of package bidding defaulters from 3 percent to 25 percent. In 
raising the amount of the additional default payment, the Commission 
reasoned that defaults following a combinatorial bidding auction have 
the potential to cause greater disruption to the auction and licensing 
process than do defaults following other types of auctions. Section 
1.2104(g)(3) of the Commission's rules accommodates situations in which 
all relevant licenses won in one or more subsequent auctions correspond 
to licenses originally made available in the same initial auction. 
However, it does not allow for situations

[[Page 43378]]

in which the corresponding licenses are made available in one or more 
subsequent auctions that include licenses that were not won in the same 
initial auction. Consequently, rather than use Sec.  1.2104(g)(3) of 
the Commission's rules to calculate a default payment obligation when 
one or both of the involved licenses is part of a package, the 
Commission believes that it would be preferable to use a method to 
apportion the package bid amount among the individual licenses 
comprising the package.
    31. The procedures for the two package bidding auctions announced 
to date have not permitted withdrawals, and, accordingly, the 
Commission has never adapted its withdrawal payment rule to package 
bidding situations. Nevertheless, it may happen that, after a 
withdrawal in a non-package bidding auction, the license on which the 
bid was withdrawn is not won in the same auction but, instead, a 
corresponding license is won in a subsequent auction as part of a 
package. Moreover, new package bidding designs may at some point make 
it practicable for the Commission to allow withdrawals in package 
bidding auctions. For these reasons, the Commission believes it 
necessary to amend Sec.  1.2104(g) of the Commission's rules to provide 
for calculating withdrawal payments in all possible situations 
involving combinatorial bidding.
    32. Proposal for Apportioning Package Bids. The Commission proposes 
to specify in advance of each auction that uses a combinatorial bidding 
design or includes spectrum previously subject to a combinatorial 
auction a method for apportioning the bid on a package among the 
individual licenses comprising the package. The Commission proposes 
further that the portion of the total bid attributed to an individual 
license pursuant to the selected method--to be known as the 
``apportioned package bid'' or ``APB''--serve as a stand-in for the bid 
on that license whenever the individual bid amount is needed for one of 
its regulatory calculations, such as calculating the size of a bidding 
credit, a small business bidding credit unjust enrichment payment 
obligation, a tribal land bidding credit limit, or a withdrawal or 
default payment obligation.
    33. There are at least two available methods by which the 
Commission could apportion package bids to the individual licenses 
comprising a package. One possible method is to use a MHz-pops ratio, 
just as is currently done for unjust enrichment calculations involving 
partitioning or disaggregation. For Auction No. 51, the Commission 
decided that MHz-pops would be used should it be necessary to calculate 
the upper limit on a tribal land bidding credit for a license won as 
part of a package. Another possible method is to use current price 
estimates (``CPEs''), which are estimates of the prices of individual 
licenses comprising a package in a combinatorial bidding auction. The 
Commission developed a methodology for determining CPEs as part of the 
combinatorial bidding procedures established for Auctions No. 31 and 
51. CPEs were calculated after every round of Auction No. 51 as part of 
the mathematical optimization process used to determine the winning 
bids and were also used in determining the minimum acceptable bid 
amounts for each subsequent round. The same use of CPEs was announced 
for Auction No. 31.
    34. CPEs determined for the final round of an auction (``final 
price estimates'' or ``FPEs'') can serve as a valid proxies for the 
market values of individual licenses won as parts of a package, because 
they take into account the minimum opening bids for the licenses as 
well as all the bids placed in the auction and, therefore, reflect all 
available information about the relative demand for the licenses. In 
addition, because the sum of all of the FPEs for the component licenses 
of a package is mathematically constrained to equal the winning bid for 
the package, the ratios of these estimates to the package bid amount 
have a natural role as indicators of the relative weights of the 
different licenses in the market value of the package.
    35. While the Commission considers the use of either MHz-pops 
ratios or FPEs to be acceptable for determining APBs, the Commission 
does not wish now to be limited to any given method, including these 
two. Instead, the Commission believes that it is in the best interest 
of the auction program and bidders for the Commission to have the 
flexibility to select the method best suited to a particular auction, 
including being able to take advantage of any developments in auction 
design that might provide other ways to apportion package bids among 
the individual component licenses of a package.
    36. Adoption of the Commission's proposal that APBs be determined 
for each combinatorial bidding auction would allow calculation of how 
much of a total bidding credit to attribute to a license won as part of 
a package and determination, according to the Commission's existing 
rules, of the amount of an unjust enrichment payment obligation, the 
upper limit on a tribal land bidding credit for a license won as part 
of a package, or a withdrawal payment obligation. Further, substituting 
an APB for the unknown amount of a winning bid on an individual license 
won as part of a package would allow use of the ``conventional'' 
default rule (i.e., the default rule used where neither the initial nor 
the subsequent winning bid is for a license won as part of a package) 
for combinatorial bidding situations, including situations not covered 
by the existing part 1 combinatorial bidding default rule. Indeed, 
using an APB as a substitute for the amount of a bid on a license won 
as part of a package would allow the Commission to fairly perform any 
of its calculations requiring the amount of the individual bid. 
Consequently, the Commission seeks comment on these proposals.
b. Apportionment Among the Components of a License
    37. Implicit in the Commission's rules for determining the amount 
of a withdrawal or default payment--determinations that involve a 
comparison between the withdrawing or defaulting bidder's bid and a 
subsequent bid--is the assumption that the subsequent bid will be for a 
license with the same geographic and spectral components as the 
original license. However, when there have been intervening rule 
changes involving the relevant spectrum, the second license may not be 
identical in geography and spectrum to the first. For example, such 
rule changes occurred last year when, in order to provide greater 
flexibility and a more functional band plan for licensees, the 
Commission restructured the rules governing the Multipoint Distribution 
Service and the Instructional Television Fixed Service in the 2495-2690 
MHz band. As radio technology continues to evolve and services become 
more sophisticated, there likely will be other instances where the 
Commission's band plans are updated. Therefore, for purposes of 
calculating a withdrawal or default payment--or for any comparison of a 
bid for one license with a bid for another license in a subsequent 
auction when the second license is similar to but not exactly the same 
as the first in terms of geography or spectrum--the Commission needs a 
procedure for apportioning the bid placed on the reconfigured license 
in the second auction.
    38. The Commission accordingly proposes that, prior to auctions 
involving reconfigured licenses, the Commission specify, as necessary, 
a method for apportioning the bid on a

[[Page 43379]]

reconfigured license among the license's component parts. Using a MHz-
pops ratio would be suitable for such an apportionment, as the 
Commission has successfully employed the ratio to apportion small 
business bidding credit amounts in order to calculate unjust enrichment 
payments. However, the Commission proposes to retain the flexibility to 
select another method of apportionment should it identify a method that 
it believes would better suit the particular licenses involved. 
Further, the Commission proposes to use methods for package bid 
apportionment and individual license bid apportionment in concert when 
circumstances warrant. The Commission seeks comment on these proposals.
iv. Conforming Broadcast Construction Permit Payment Procedures With 
Part 1 Rules
    39. The Commission's part 1 rules currently provide that, unless 
otherwise specified by public notice, auction winners are required to 
pay the balance of their winning bids in a lump sum within ten (10) 
business days following the release of a public notice establishing the 
payment deadline. In recent wireless spectrum auctions, the Commission 
has required each winning bidder to submit the balance of the net 
amount of its winning bid(s) within ten (10) business days after the 
deadline for submitting down payments. This procedural change was 
necessary to guard against payment defaults that may then lead to 
bankruptcy filings and litigation that tie up the availability of the 
defaulted licenses. Specific part 73 and 74 rules, however, provide 
that winning bidders in broadcast service auctions must render their 
final payment for construction permits won through competitive bidding 
after their long-form applications have been processed, any petitions 
to deny have been dismissed or denied, and the public notice announcing 
that broadcast construction permits are ready to be granted has been 
released. Recognizing the discrepancy between these auction payment 
procedures, the Commission, in the Auction No. 37 Procedures Public 
Notice, 69 FR 42729, July 16, 2004, noted that it would consider future 
changes to the broadcast rules to conform the broadcast final payment 
procedures to the analogous part 1 rules.
    40. One of the primary objectives of the Commission's auction rules 
is to ensure that only serious, financially qualified applicants 
receive licenses and construction permits so that the provision of 
service to the public is expedited. The Commission has determined that 
the timely payment of auction obligations is one of the means by which 
it can be assured of the financial qualifications, and thus the 
seriousness, of a winning bidder. Moreover, the Commission has 
consistently stated that those entities that plan to participate in an 
auction must have the appropriate financing in place before the start 
of the auction. Recent judicial clarifications of the relationship 
between the Commission's authority under section 309(j) of the 
Communications Act and creditor protections under the Bankruptcy Code 
have shifted significant risk to the government in the event an auction 
payment defaulter attempts to tie up the unpaid licenses won at auction 
in bankruptcy litigation. Accordingly, when establishing the payment 
schedule for licenses won at auction, the Commission protects the 
integrity of the auction program and the availability of licenses by 
ensuring timely full payment and minimizing the opportunity to ``game'' 
the auction and license assignment processes. By harmonizing the 
broadcast auction payment procedures with the Commission's part 1 
rules, the Commission seeks to apply its rules consistently in 
furtherance of the public interest.
    41. While the part 73 and part 74 broadcast auction rules reference 
the part 1 final payment rule, the more specific payment provisions in 
the broadcast rules preclude application of the part 1 final payment 
procedures. To conform the part 73 and part 74 broadcast rules and make 
them consistent with the existing competitive bidding and payment 
procedures contained in part 1 of its rules, the Commission proposes to 
adopt for broadcast auctions the final payment procedures in its part 1 
rules. Specifically, the Commission proposes to incorporate into its 
part 73 and part 74 broadcast auction rules the part 1 rule requiring 
that, unless otherwise specified by public notice, winning bidders in a 
broadcast auction are required to pay the balance of their winning bids 
in a lump sum within ten (10) business days following the release of a 
public notice establishing the payment deadline. The Commission seeks 
comment on this proposal. Under its current practice, the Commission 
informs prospective bidders of final payment procedures in a public 
notice announcing the procedures for the auction. The Commission 
believes that amending the final payment deadline for broadcast 
auctions to conform to the Commission's existing procedures for 
wireless auctions will provide consistency throughout its competitive 
bidding rules and help to achieve the Commission's objective that only 
sincere, financially qualified applicants participate in competitive 
bidding. The Commission further believes that providing greater 
certainty to all winning bidders regarding when final payment will be 
due will also benefit them as they compete with other sincere bidders 
that have also secured the financing necessary to participate in an 
auction and pay for their licenses. In wireless spectrum auctions, 
winning bidders, including small businesses, have been able to comply 
with the Commission's new final payment procedure without difficulty. 
The Commission therefore believes that winning bidders in broadcast 
auctions should be able to comply with this change with similar ease. 
The Commission seeks comment on this proposal.
v. Improving Procedures for Using the Consortium Exception to the 
Designated Entity and Entrepreneur Aggregation Rule
    42. For purposes of determining whether an applicant or licensee is 
eligible for small business or broadband PCS entrepreneur status, the 
Commission attributes to the applicant the gross revenues (and, when 
determining broadband PCS entrepreneur eligibility, the total assets) 
of the applicant's affiliates, its controlling interests, and the 
affiliates of its controlling interests, and aggregates these amounts 
with the applicant's own gross revenues (and total assets). Calculated 
in this manner, the applicant's gross revenues (and total assets) must 
not exceed the caps established by the Commission for particular 
services. However, under an exception to this aggregation rule, where 
an applicant or licensee is a consortium comprised exclusively of 
members eligible for small business bidding credits or broadband PCS 
entrepreneur status, or both, the gross revenues (and total assets) of 
the consortium members are not aggregated. In other words, so long as 
each member of a consortium individually meets the financial caps for 
small business bidding credits (or broadband PCS entrepreneur status), 
the consortium will be eligible for such credits (or for entrepreneur-
only broadband PCS licenses), regardless of whether the gross revenues 
(or total assets) of all consortium members would, if aggregated, 
exceed the caps. The consortium exception, originally adopted on a 
service-by-service basis where capital costs of auction

[[Page 43380]]

participation were high, is intended to enable small businesses or 
entrepreneurs to pool their resources to help them overcome this 
challenge to capital formation.
    43. The Commission has provided some direction as to how the 
consortium exception should be implemented by parties wishing to 
establish such consortia, but the Commission is concerned that there 
remains uncertainty about the operation of the exception in certain 
situations. For example, the Commission has said that before or during 
the auction individual members of a bidding consortium may withdraw 
from the consortium with regard to some licenses selected on the 
consortium's short-form application, while remaining a part of the 
consortium for purposes of bidding on all other licenses specified. If 
consortium members agree that any of their members may withdraw in this 
fashion, such an agreement must be disclosed on an original or amended 
short-form application. Should the consortium win licenses, its members 
must file, in conjunction with their long-form application, requests to 
transfer or assign licenses as necessary to comply with the consortium 
arrangement.
    44. Apart from this guidance, the Commission has not explained how 
consortia should proceed once they have won licenses, nor has it 
considered the problems that allowing consortia to become licensees may 
cause. The consortium exception has been seldom used, and the 
Commission suspects that one reason for this infrequent use has been 
the absence of clear direction from the Commission as to how consortium 
members should be formally organized or how (and when) members should 
allocate and own the licenses they win. For example, contractual 
disputes may arise between members of consortia, with a resulting delay 
in buildout and the provision of service. Similarly, problems may occur 
should one or more members of a licensed consortium file for bankruptcy 
protection. And if consortium members agree after the auction to divide 
their license holdings among themselves without first applying for 
Commission approval, they may be held accountable for unauthorized 
assignments or transfers of control. Not only would such difficulties 
impede service to the public and consume Commission resources, they 
would prove expensive and time consuming for the small businesses 
involved.
    45. In order to provide additional guidance to those interested in 
taking advantage of the consortium exception and to reduce the 
likelihood of complications resulting from the exception's use, the 
Commission seeks comment on possible policy options for improving the 
pre- and post-auction procedures governing the consortium exception to 
facilitate its use among small businesses facing capital formation 
constraints. For example, the Commission seeks comment on whether it 
should adopt a new requirement that each member of the consortium file 
an individual long-form application for its respective, mutually 
agreed-upon license(s), following an auction in which a consortium has 
won one or more licenses. To comply with this requirement, consortium 
members would, prior to filing their short-form application, have 
reached an agreement as to how they would allocate among themselves any 
licenses (or disaggregated or partitioned portions of licenses) they 
might win, and they would have disclosed this agreement on their short-
form application as required by the Commission's disclosure rules. The 
Commission further seeks comment on whether, in order for two or more 
consortium members to be licensed together for the same license(s) (or 
disaggregated or partitioned portions thereof), they should be required 
to form a legal business entity, such as a corporation, partnership, or 
limited liability company, after having disclosed this intention on 
their short-form and long-form applications. In particular, the 
Commission seeks comment on whether such new entities would have to 
meet its small business or entrepreneur financial limits and whether 
allowing these entities to exceed the limits would be consistent with 
its existing designated entity and broadband PCS entrepreneur rules, as 
well as its obligations under the Communications Act. As commenters 
address these issues and any other options proposed by interested 
parties, the Commission is particularly interested in their views about 
how these approaches might work in the context of package bidding and 
to what extent adopting these proposals might encourage wider use of 
the consortium exception.

III. Conclusion

    46. For the reasons stated, the Commission seeks comment on the 
foregoing proposed changes in its competitive bidding rules set forth 
in the Notice of Proposed Rule Making.

IV. Procedural Matters and Ordering Clauses

A. Ex Parte Rules--Permit-But-Disclose Proceeding

    47. For purposes of this permit-but-disclose notice and comment 
proceeding, members of the public are advised that ex parte 
presentations are permitted, except during the sunshine Agenda period, 
provided that the presentations are disclosed pursuant to the 
Commission's rules.

B. Initial Regulatory Flexibility Analysis

    48. As required by the Regulatory Flexibility Act, see 5 U.S.C. 
603, the Commission has prepared an Initial Regulatory Flexibility 
Analysis (IRFA) of the possible significant economic impact on small 
entities of the proposals suggested in the Notice. Written public 
comments are requested on the IRFA. These comments must be filed in 
accordance with the same filing deadlines as comments filed in response 
to the Notice, and must have a separate and distinct heading 
designating them as responses to the IRFA and must be filed by the 
deadlines for comments provided in paragraph 55. The Commission will 
send a copy of this Notice, including the IRFA, to the Chief Counsel 
for Advocacy of the Small Business Administration (SBA). In addition, 
the Notice and the IRFA (or summaries thereof) will be published in the 
Federal Register.
i. Need for, and Objectives of, the Proposed Rules
    58. This Notice proposes modifications to existing Commission rules 
for the purposes of implementing the recently enacted Commercial 
Spectrum Enhancement Act (CSEA). CSEA establishes a mechanism to use 
spectrum auction proceeds to reimburse federal agencies operating on 
certain frequencies that have been reallocated from federal to non-
federal use for the cost of relocating their operations. The Notice 
also proposes a number of changes to the Commission's competitive 
bidding rules that are necessary, apart from CSEA, to bring the rules 
in line with the current requirements of the Commission's auctions 
program.
    59. Reserve price rule. CSEA requires the total cash proceeds from 
any auction of eligible frequencies to equal at least 110 percent of 
the total estimated relocation costs provided to the Commission by 
National Telecommunications and Information Administration (NTIA). To 
implement this requirement, CSEA directs the Commission to revise its 
reserve price

[[Page 43381]]

regulations adopted pursuant to section 309(j)(4)(F) of the 
Communications Act. The Commission proposes, therefore, to modify its 
existing reserve price rule (Sec.  1.2104(c)) to add a requirement 
that, for any auction of eligible frequencies under CSEA, the 
Commission will establish a reserve price (or prices) that ensures that 
the ``total cash proceeds'' attributable to such spectrum will equal at 
least 110 percent of the total estimated relocation costs provided to 
the Commission by NTIA.
    60. Tribal land bidding credit rule. In an effort to encourage 
carriers to provide telecommunications services to tribal lands with 
historically low telephone service penetration rates, the Commission 
makes tribal land bidding credits available to auction winners that 
serve qualifying tribal lands. Under the Commission's current rules, in 
auctions that include spectrum covering qualifying tribal lands, the 
Commission may not know for at least 180 days after the long-form 
application deadline how much of a discount on the auction's winning 
bids it will have to allow for tribal land bidding credits. In auctions 
subject to CSEA, this timing could lead to substantial post-auction 
delay in calculating whether total cash proceeds meet the 110 percent 
revenue requirement. Accordingly the Commission seeks comment on 
possible methods of ensuring that the Commission will be able to 
promptly calculate total cash proceeds while at the same time 
preserving the availability of tribal land bidding credits in auctions 
subject to CSEA. Specifically, in the Notice, the Commission seeks 
comment on (a) awarding tribal land bidding credits on a pro rata basis 
out of the funds exceeding 110 percent of the total estimated 
relocation costs, (b) awarding tribal land bidding credits on a first-
come, first-served basis out of the funds exceeding 110 percent of the 
total estimated relocation costs, and (c) requiring applicants to 
specify on their short-form applications any licenses for which they 
intend to seek a tribal land bidding credit, should they win, so that 
the Commission can calculate the amount necessary to satisfy CSEA's 
reserve price requirement if winning bidders receive the maximum tribal 
land bidding credits for which they indicate an interest on their 
short-form applications. The Notice also invites commenters to propose 
other methods and seeks comment on adopting the same method as that 
used for auctions subject to CSEA, or a similar approach, for other, 
non-CSEA auctions for which the Commission establishes a reserve price 
based on winning bids net of all bidding credits.
    61. Default payment rule clarification. Under Sec.  1.2104(g) of 
the Commission's rules, a high bidder that defaults or is disqualified 
after the close of an auction is subject to a default payment 
consisting of two parts--a ``deficiency payment'' and an ``additional 
payment.'' The deficiency payment is equal to the payment required for 
a withdrawn high bid, i.e., the difference between the amount of the 
defaulted (or withdrawn) bid and the amount of a lower winning bid in 
the same or a subsequent auction. In the event that a bidding credit 
applies to any of the bids, the deficiency payment equals the 
difference between either the net defaulted bid and the subsequent net 
winning bid or the gross defaulted bid and the subsequent gross winning 
bid, whichever difference is less. The additional payment is equal to 3 
percent (or, in the case of defaults or disqualifications after the 
close of a package bidding auction, 25 percent) of the defaulting 
bidder's bid or the subsequent winning bid, whichever is less.
    62. No deficiency payment is assessed when either the subsequent 
winning bid or any intervening subsequent withdrawn bid equals or 
exceeds the original defaulted bid. It is unclear from the existing 
rule whether, in such a situation, the additional payment should be a 
percentage of the higher intervening subsequent withdrawn bid or of the 
subsequent winning bid. To clarify the rule, the Commission proposes 
that when, in a subsequent auction, there is a higher withdrawn bid but 
no winning bid for a license that corresponds to a defaulted license, 
the additional default payment will be determined as 3 percent (or 25 
percent) of the defaulting bidder's bid. The Commission also proposes a 
further clarification of the additional payment rule for certain 
situations in which no deficiency payment is owed, because, under the 
current rule, it is unclear under the current rule whether the 
additional payment should be based on the net defaulted bid or on the 
gross defaulted bid. Pursuant to the Commission's proposal, the 
additional payment in such a situation would be 3 (or 25) percent of 
the net defaulted bid amount.
    63. Interim withdrawal and additional default payment rules. When a 
license for which there has been a withdrawn high bid is neither 
subject to a subsequent higher bid nor won in the same auction, the 
final withdrawal payment cannot be calculated until a corresponding 
license is either subject to a higher bid or won in a subsequent 
auction. In such a case, under the Commission's existing rule, the 
bidder responsible for the withdrawn high bid is assessed an interim 
bid withdrawal payment equal to 3 percent of the amount of its 
withdrawn bid, and this interim payment is applied toward any final bid 
withdrawal payment that is ultimately assessed. As noted in the 
previous paragraph, a high bidder that defaults or is disqualified 
after the close of an auction is subject to a default payment 
consisting of a deficiency payment and an additional payment. 
Currently, the additional payment is calculated as 3 percent (or, in 
the case of defaults or disqualifications after the close of a package 
bidding auction, 25 percent) of the defaulting bidder's bid or the 
subsequent winning bid, whichever is less, except that no deficiency 
payment is assessed when either the subsequent winning bid or any 
intervening subsequent withdrawn bid equals or exceeds the original 
defaulted bid. In an effort to discourage withdrawals and defaults, 
both of which pose an ongoing threat to the integrity of the auctions 
process, the Commission proposes to increase the current limits on the 
interim withdrawal payment and the additional default payment from 3 
percent to 20 percent each, with the specific percentage to be set by 
the Commission in advance of each auction.
    64. Package bid and license apportionment. In combinatorial 
(package) bidding, bidders place single all-or-nothing bids on groups 
(or packages) of licenses. Thus, there are no identifiable bid amounts 
on the individual licenses composing packages of more than one license. 
Similarly, when the Commission reconfigures licenses, with respect to 
either geographic or spectral dimensions, following an initial auction, 
there may not be identifiable bid amounts on licenses comparable to 
those offered in the initial auction. However, there are several 
situations in which an individual bid amount is needed for one of the 
Commission's regulatory calculations, such as calculating a small 
business bidding credit, an unjust enrichment payment obligation 
related to such a credit, a tribal land bidding credit limit, or a 
withdrawal or default payment obligation. Accordingly, the Commission 
proposes to specify a method for apportioning bids either among the 
individual licenses composing a package and/or among a license's 
component parts in advance of each auction that (a) uses a 
combinatorial bidding design, (b) includes spectrum previously subject 
to a combinatorial auction, or (c) includes

[[Page 43382]]

licenses that have been reconfigured following an initial auction.
    65. Broadcast construction permit rules. The Commission's part 1 
competitive bidding rules provide that, unless otherwise specified by 
public notice, auction winners are required to pay the balance of their 
winning bids in a lump sum within ten business days following the 
release of a public notice establishing the payment deadline. In recent 
wireless spectrum auctions, winning bidders have been required to 
submit the balance of the net amount of their winning bids within ten 
business days after the deadline for submitting down payments. This 
procedure is necessary to guard against payment defaults that may then 
lead to bankruptcy filings and litigation that tie up the availability 
of the defaulted licenses. Specific part 73 and 74 rules, however, 
provide that winning bidders in broadcast service auctions must render 
their final payment for construction permits won through competitive 
bidding only after their long-form applications have been processed, 
any petitions to deny have been dismissed or denied, and the public 
notice announcing that broadcast construction permits are ready to be 
granted has been released. In order to provide consistency throughout 
the Commission's competitive bidding rules and help to ensure that only 
sincere, financially qualified applicants participate in competitive 
bidding, the Commission proposes to adopt for broadcast auctions the 
final payment procedures in its part 1 competitive bidding rules.
    66. Consortium exception to the designated entity and entrepreneur 
aggregation rule. For purposes of determining whether an applicant or 
licensee is eligible for small business or broadband personal 
communications services (PCS) entrepreneur status, the Commission 
attributes to the applicant the gross revenues (and, when determining 
entrepreneur eligibility, the total assets) of the applicant's 
affiliates, its controlling interests, and the affiliates of its 
controlling interests, and aggregates these amounts with the 
applicant's own gross revenues (and total assets). However, under an 
exception to this aggregation rule, when an applicant or licensee is a 
consortium comprised exclusively of members eligible for small business 
bidding credits or broadband PCS entrepreneur status, or both, the 
gross revenues (and total assets) of the consortium members are not 
aggregated. The consortium exception has been seldom used, perhaps 
because of the absence of clear direction from the Commission as to how 
consortium members should be formally organized and how (and when) 
members should allocate and own the licenses they win. In order to 
provide additional guidance to those interested in taking advantage of 
the consortium exception and to reduce the likelihood of complications 
resulting from the exception's use, the Commission seeks comment on 
possible policy options for improving the pre- and post-auction 
procedures governing the exception. These options include requiring 
each member of a consortium to file an individual long-form application 
for its respective, mutually agreed-upon license(s) and requiring two 
or more consortium members seeking to be licensed together to form a 
legal business entity, such as a corporation, partnership, or limited 
liability company.
ii. Legal Basis
    67. The proposed actions are authorized under sections 4(i), 
303(r), and 309(j) of the Communications Act of 1934, as amended, 47 
U.S.C. 154(i), 303(r), and 309(j).
iii. Description and Estimate of the Number of Small Entities to Which 
the Proposed Rules Will Apply
    68. 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: (a) Is independently owned and operated; 
(b) is not dominant in its field of operation; and (c) satisfies any 
additional criteria established by the SBA.
    69. 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 2002, there were 
approximately 1.6 million small organizations. The term ``small 
governmental jurisdiction'' is defined as ``governments of cities, 
towns, townships, villages, school districts, or special districts, 
with a population of less than fifty thousand.'' As of 1997, there were 
approximately 87,453 governmental jurisdictions in the United States. 
This number includes 39,044 county governments, municipalities, and 
townships, of which 37,546 (approximately 96.2%) have populations of 
fewer than 50,000, and of which 1,498 have populations of 50,000 or 
more. Thus, the Commission estimates the number of small governmental 
jurisdictions overall to be 84,098 or fewer. Nationwide, there are a 
total of approximately 22.4 million small businesses, according to SBA 
data.
    70. The changes and additions to the Commission's part 1 rules 
proposed in this Notice would be of general applicability to all 
services, applying to all entities of any size that apply to 
participate in Commission auctions. The changes proposed to parts 73 
and 74 of the Commission's rules would apply to all entities of any 
size that win broadcast construction permits in future competitive 
bidding. Accordingly, this IRFA provides a general analysis of the 
impact of the proposals on small businesses rather than a service by 
service analysis. 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. In all 
of our auctions held to date, 1927 out of a total of 2498 qualified 
bidders either have claimed eligibility for small business bidding 
credits or have self-reported their status as small businesses as that 
term has been defined under rules adopted by the Commission for 
specific services. These figures do not generally include applicants 
for auctions of broadcast construction permits where sized-based 
bidding preferences have not been available.
iv. Description of Projected Reporting, Recordkeeping, and Other 
Compliance Requirements
    71. Pursuant to one of the options set forth to change the tribal 
land bidding credit rule, the Commission would award tribal land 
bidding credits on a first-come, first-served basis in auctions subject 
to a CSEA or other reserve price. This option, if adopted, would not 
alter the burdens on auction winners of licenses covering qualifying 
tribal land with regard to reporting or recordkeeping; however, it 
might encourage them to submit the required certifications sooner than 
they otherwise would have. Pursuant to another option to change the 
tribal land bidding credit rule, auction applicants of all sizes would 
be required to indicate on their short-forms any intention to seek 
tribal land bidding credits should they win qualifying licenses. While 
this requirement would increase the reporting burden on applicants 
planning to seek such

[[Page 43383]]

credits, the burden would likely be as minimal as checking off a box.
    72. The proposal to increase the current limits on the interim 
withdrawal payment and the additional default payment from 3 percent to 
20 percent each would, to the extent that the respective payment had 
been set at more than 3 percent, increase the financial burden on 
entities of any size that withdrew a high bid or defaulted on a payment 
obligation. However, by refraining from withdrawing high bids and 
defaulting on payment obligations, entities could avoid any such 
increased financial burden.
    73. Adopting for broadcast auctions the final payment procedures of 
the Commission's part 1 competitive bidding rules might require future 
winners of broadcast construction permits, both large and small, to 
submit their final payments for such permits sooner than would have 
been required in the absence of the proposed rule changes.
    74. Requiring each member of a consortium to file an individual 
long-form application for its respective, mutually agreed-upon 
license(s) or requiring two or more consortium members seeking to be 
licensed together to form a legal business entity might increase the 
reporting requirements and/or regulatory compliance burdens on auction 
applicants using the consortium exception, all of which would be small 
businesses or broadband PCS entrepreneurs. However, adopting these 
requirements might also increase use of the consortium exception, thus 
increasing the availability of small business bidding credits and 
entrepreneur eligibility.
    75. None of the other proposals in the Notice would alter 
reporting, recordkeeping, or other compliance requirements.
v. Steps Taken To Minimize Significant Economic Impact on Small 
Entities, and Significant Alternatives Considered
    76. 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): (a) 
The establishment of differing compliance or reporting requirements or 
timetables that take into account the resources available to small 
entities; (b) the clarification, consolidation, or simplification of 
compliance or reporting requirements under the rule for small entities; 
(c) the use of performance, rather than design, standards; and (d) an 
exemption from coverage of the rule or any part thereof for small 
entities. The Commission has considered the economic impact on small 
entities of the following rule changes and additions proposed in the 
Notice and has taken steps to minimize the burdens on small entities.
    77. The Commission has sought comment on several options for 
modifying its tribal land bidding credit rule in order to determine 
which of the options best ensures that the Commission will be able to 
comply with CSEA's reserve price requirement while at the same time 
preserving the availability of tribal land bidding credits in auctions 
subject to CSEA.
    78. Adoption of the proposed increases to the current limits on the 
interim withdrawal payments and additional default payments would 
benefit small entities more than it would burden them. For example, the 
proposal to provide the Commission with the option of increasing the 
size of the interim withdrawal payment is intended to discourage 
strategic withdrawals. Such bid withdrawals could have a significant 
adverse effect on the competitiveness of small entities in the auctions 
process. Moreover, to the extent that the proposed increase in the 
additional default payment encourages bidders to realistically assess 
in advance their ability to pay for their bids, a larger payment 
requirement may prevent bidders from placing bids they cannot afford.
    79. With regard to its proposal to modify its payment rules for 
broadcast construction permits, the Commission believes that amending 
the final payment deadline for broadcast auctions to conform to its 
existing procedures for wireless auctions would provide consistency 
throughout its competitive bidding rules and help to achieve its 
objective that only sincere, financially qualified applicants 
participate in competitive bidding. The Commission further believes 
that providing greater certainty to all winning bidders regarding when 
final payment will be due will also benefit them as they compete with 
other sincere bidders that have also secured the financing necessary to 
participate in an auction and pay for their licenses. The Commission 
notes that in wireless spectrum auctions, winning bidders, including 
small businesses, have been able to comply with the Commission's new 
final payment procedure without difficulty, and it therefore surmises 
that winning bidders of all sizes in broadcast auctions should be able 
to comply with this change with similar ease.
    80. The Commission's goal in requesting comment on possible 
modifications to the consortium exception to the small business and 
entrepreneur aggregation rule is to promote wider use of the exception 
and thus to increase the competitive bidding opportunities available to 
small entities facing capital formation constraints. To that end, the 
Commission has specifically requested that commenters address whether 
adopting the rule changes discussed might encourage wider use of the 
consortium exception.
vi. Federal Rules That May Duplicate, Overlap, or Conflict With the 
Proposed Rule
    81. None.

C. Ordering Clauses

    84. Accordingly, it is ordered that, pursuant to sections 4(i), 
303(r), and 309(j) of the Communications Act of 1934, as amended, 47 
U.S.C. 154(i), 303(r), and 309(j), this Notice of Proposed Rule Making 
is hereby adopted.
    85. It is further ordered that the Commission's Consumer and 
Governmental Affairs Bureau, Reference Information Center, shall send a 
copy of this Notice of Proposed Rule Making, including the Initial 
Regulatory Flexibility Certification, to the Chief Counsel for Advocacy 
of the Small Business Administration.

List of Subjects

47 CFR Part 1

    Administrative practice and procedure, Civil rights, Claims, 
Communications common carriers, Cuba, Drug abuse, Environmental impact 
statements, Equal access to justice, Equal employment opportunity, 
Federal buildings and facilities, Government employees, Income taxes, 
Indemnity payments, Individuals with disabilities, Investigations, 
Lawyers, Metric system, Penalties, Radio, Reporting and recordkeeping 
requirements, Satellites, Telecommunications, Television, Wages.

47 CFR Part 73

    Civil defense, Communications equipment, Defense communications, 
Education, Equal employment opportunity, Foreign relations, Mexico, 
Political candidates, Radio, Reporting and recordkeeping requirements, 
Television.

47 CFR Part 74

    Communications equipment, Education, Radio, Reporting and 
recordkeeping requirements, Research, Television.


[[Page 43384]]


Federal Communications Commission.
Marlene H. Dortch,
Secretary.

Proposed Rules

    For the reasons discussed in the preamble, the Federal 
Communications Commission amends 47 CFR parts 1, 73, and 74 as follows:

PART 1--PRACTICE AND PROCEDURE

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

    Authority: 15 U.S.C. 79 et seq.; 47 U.S.C. 151, 154(i), 154(j), 
155, 157, 225, and 303(r).

    2. Amend Sec.  1.2103 by adding paragraphs (b)(1) and (b)(2) to 
read as follows:


Sec.  1.2103  Competitive bidding design options.

* * * * *
    (b) * * *
    (1) Apportioned package bid. The apportioned package bid on a 
license is an estimate of the price of an individual license included 
in a package of licenses in an auction with combinatorial (package) 
bidding. Apportioned package bids shall be determined by the Commission 
according to a methodology it establishes in advance of each auction 
with combinatorial bidding.
    (2) Substitute for bid amount. The apportioned package bid on a 
license included in a package shall be used in place of the amount of 
an individual bid on that license when the bid amount is needed to 
determine the size of a designated entity bidding credit (see Sec.  
1.2110(f)(1) through 1.2110(f)(2)), a new entrant bidding credit (see 
Sec.  73.5007 of this chapter), a bid withdrawal or default payment 
obligation (see Sec.  1.2104(g)), a tribal land bidding credit limit 
(see Sec.  1.2110(f)(3)(iv)), or a size-based bidding credit unjust 
enrichment payment obligation (see Sec.  1.2111(d),(e)(2) through 
(e)(3)), or for any other determination required by the Commission's 
rules or procedures.
* * * * *
    3. Amend Sec.  1.2104 by revising paragraphs (c), (g)(1), and 
(g)(2); removing paragraph (g)(3); and adding paragraph (j) to read as 
follows:


Sec.  1.2104  Competitive bidding mechanisms.

* * * * *
    (c) Reserve Price. The Commission may establish a reserve price or 
prices, either disclosed or undisclosed, below which a license or 
licenses subject to auction will not be awarded. For any auction of 
eligible frequencies described in section 113(g)(2) of the National 
Telecommunications and Information Administration Organization Act (47 
U.S.C. 923(g)(2)), the Commission will establish a reserve price or 
prices pursuant to which the total cash proceeds from any auction of 
eligible frequencies shall equal at least 110 percent of the total 
estimated relocation costs provided to the Commission by the National 
Telecommunications and Information Administration pursuant to section 
113(g)(4) of such Act (47 U.S.C. 923(g)(4)).
* * * * *
    (g) * * *
    (1) Bid withdrawal prior to close of auction. A bidder that 
withdraws a high bid during the course of an auction is subject to a 
withdrawal payment equal to the difference between the amount of the 
withdrawn bid and the amount of the winning bid in the same or 
subsequent auction(s). In the event that a bidding credit applies to 
any of the bids, the bid withdrawal payment is either the difference 
between the net withdrawn bid and the subsequent net winning bid, or 
the difference between the gross withdrawn bid and the subsequent gross 
winning bid, whichever is less. No withdrawal payment will be assessed 
for a withdrawn bid if either the subsequent winning bid or any of the 
intervening subsequent withdrawn bids equals or exceeds that withdrawn 
bid. The withdrawal payment amount is deducted from any upfront 
payments or down payments that the withdrawing bidder has deposited 
with the Commission. In the case of multiple bid withdrawals on a 
single license, the payment for each bid withdrawal will be calculated 
based on the sequence of bid withdrawals and the amounts withdrawn in 
the same or subsequent auction(s). In the event that a license for 
which there have been withdrawn bids is not won in the same auction, 
those bidders for which a final withdrawal payment cannot be calculated 
will be assessed an interim bid withdrawal payment of between 3 and 20 
percent of their withdrawn bids, according to a percentage (or 
percentages) established by the Commission in advance of the auction. 
The interim bid withdrawal payment will be applied toward any final bid 
withdrawal payment that will be assessed at the close of a subsequent 
auction of the corresponding license.

    Example 1 to paragraph (g)(1). Bidder A withdraws a bid of $100. 
Subsequently, Bidder B places a bid of $90 and withdraws. In that 
same auction, Bidder C wins the license at a bid of $95. Withdrawal 
payments are assessed as follows: Bidder A owes $5 ($100-$95). 
Bidder B owes nothing.
    Example 2 to paragraph (g)(1). Bidder A withdraws a bid of $100. 
Subsequently, Bidder B places a bid of $95 and withdraws. In that 
same auction, Bidder C wins the license at a bid of $90. Withdrawal 
payments are assessed as follows: Bidder A owes $5 ($100-$95). 
Bidder B owes $5 ($95-$90).
    Example 3 to paragraph (g)(1). Bidder A withdraws a bid of $100. 
Subsequently, in that same auction, Bidder B places a bid of $90 and 
withdraws. In a subsequent auction, Bidder C places a bid of $95 and 
withdraws. Bidder D wins the license in that auction at a bid of 
$80. Assuming that the Commission established an interim bid 
withdrawal payment of 3 percent in advance of the auction, 
withdrawal payments are assessed as follows: At the end of the first 
auction, Bidder A and Bidder B are each assessed an interim 
withdrawal payment equal to 3 percent of their withdrawn bids 
pending Commission assessment of a final withdrawal payment (Bidder 
A would owe 3% of $100, or $3, and Bidder B would owe 3% of $90, or 
$2.70). At the end of the second auction, Bidder A would owe $5 
($100-$95) less the $3 interim withdrawal payment for a total of $2. 
Because Bidder C placed a subsequent bid that was higher than Bidder 
B's $90 bid, Bidder B would owe nothing. Bidder C would owe $15 
($95-$80).

    (2) Default or disqualification after close of auction. A bidder 
assumes a binding obligation to pay its full bid amount upon acceptance 
of the high bid at the close of an auction. If a high bidder defaults 
or is disqualified after the close of such an auction, the defaulting 
bidder will be subject to a default payment consisting of a deficiency 
payment, described in Sec.  1.2104(g)(2)(i), and an additional payment, 
described in Sec.  1.2104(g)(2)(ii) through 1.2104(g)(2)(iii). The 
default payment will be deducted from any upfront payments or down 
payments that the defaulting bidder has deposited with the Commission.
    (i) Deficiency payment. The deficiency payment will equal the 
difference between the amount of the defaulted bid and the amount of 
the winning bid in a subsequent auction, so long as there have been no 
intervening withdrawn bids that equal or exceed the defaulted bid or 
the subsequent winning bid. If the subsequent winning bid or any 
intervening subsequent withdrawn bid equals or exceeds the defaulted 
bid, no deficiency payment will be assessed. If there have been 
intervening subsequent withdrawn bids that are lower than the defaulted 
bid and higher than the subsequent winning bid, but no intervening 
withdrawn bids that equal or exceed the defaulted bud, the deficiency 
payment will equal the difference between the amount of the defaulted 
bid and the amount of the highest intervening subsequent withdrawn bid. 
In the event that a

[[Page 43385]]

bidding credit applies to any of the applicable bids, the deficiency 
payment will be based solely on net bids or solely on gross bids, 
whichever results in a lower payment.
    (ii) Additional payment--applicable percentage. When the default or 
disqualification follows an auction without combinatorial bidding, the 
additional payment will equal between 3 and 20 percent of the 
applicable bid, according to a percentage (or percentages) established 
by the Commission in advance of the auction. When the default or 
disqualification follows an auction with combinatorial bidding, the 
additional payment will equal 25 percent of the applicable bid.
    (iii) Additional payment--applicable bid. When no deficiency 
payment is assessed, the applicable bid will be the net amount of the 
defaulted bid. When a deficiency payment is assessed, the applicable 
bid will be the subsequent winning bid, using the same basis--i.e., net 
or gross--as was used in calculating the deficiency payment.
* * * * *
    (j) Bid apportionment. Prior to each auction of reconfigured 
licenses (i.e., licenses having similar, but not identical, geographic 
and spectral components as licenses made available in one or more prior 
auctions), the Commission will specify, as necessary, a method for 
apportioning a bid on a reconfigured license among the license's 
component parts. The Commission may use such an apportionment for 
purposes of comparing a bid on the original license with a bid on a 
reconfigured license.

PART 73--RADIO BROADCAST SERVICES

    4. The authority citation for part 73 continues to read as follows:

    Authority: 47 U.S.C. 154, 303, 334, 336 and 339.

    5. Amend Sec.  73.3571 by revising paragraph (h)(4)(ii) to read as 
follows:


Sec.  73.3571  Processing AM broadcast station applications.

* * * * *
    (h) * * *
    (4) * * *
    (ii) Winning bidders are required to pay the balance of their 
winning bids in a lump sum prior to the deadline established by the 
Commission pursuant to Sec.  1.2109(a) of this chapter. Long-form 
construction permit applications will be processed and the FCC will 
periodically release a public notice listing such applications that 
have been accepted for filing and announcing a date by which petitions 
to deny must be filed in accordance with the provisions of Sec. Sec.  
73.5006 and 73.3584. Construction permits will be granted by the 
Commission only after full and timely payment of winning bids and any 
applicable late fees, and if the applicant is duly qualified, and upon 
examination, the FCC finds that the public interest, convenience and 
necessity will be served.
* * * * *
    6. Amend Sec.  73.3573 by revising paragraph (f)(5)(ii) to read as 
follows:


Sec.  73.3573  Processing FM broadcast station applications.

* * * * *
    (f) * * *
    (5) * * *
    (ii) Winning bidders are required to pay the balance of their 
winning bids in a lump sum prior to the deadline established by the 
Commission pursuant to Sec.  1.2109(a) of this chapter. Long-form 
construction permit applications will be processed and the FCC will 
periodically release a Public Notice listing such applications that 
have been accepted for filing and announcing a date by which petitions 
to deny must be filed in accordance with the provisions of Sec. Sec.  
73.5006 and 73.3584. Construction permits will be granted by the 
Commission only after full and timely payment of winning bids and any 
applicable late fees, and if the applicant is duly qualified, and upon 
examination, the FCC finds that the public interest, convenience and 
necessity will be served.
* * * * *
    7. Section 73.5003 is revised to read as follows:


Sec.  73.5003  Submission of full payments.

    Winning bidders are required to pay the balance of their winning 
bids in a lump sum prior to the deadline established by the Commission 
pursuant to Sec.  1.2109(a) of this chapter. If a winning bidder fails 
to pay the balance of its winning bid in a lump sum by the applicable 
deadline as specified by the Commission, it will be allowed to make 
payment within ten (10) business days after the payment deadline, 
provided that it also pays a late fee equal to five (5) percent of the 
amount due in accordance with Sec.  1.2109(a) of this chapter. 
Broadcast construction permits will be granted by the Commission only 
after full and timely payment of winning bids and any applicable late 
fees and in accordance with the provisions of this subsection.
    8. Amend Sec.  73.5006 by revising paragraph (d) to read as 
follows:


Sec.  73.5006  Filing of petitions against long-form applications.

* * * * *
    (d) Broadcast construction permits will be granted by the 
Commission only if the Commission denies or dismisses all petitions to 
deny, if any are filed, and is otherwise satisfied that an applicant is 
qualified, and after full and timely payment of winning bids and any 
applicable late fees. See 47 CFR 73.5003. Construction of broadcast 
stations shall not commence until the grant of such permit or license 
to the winning bidder and only after full and timely payment of winning 
bids and any applicable late fees.

PART 74--RADIO BROADCAST SERVICES

    9. The authority citation for part 74 continues to read as follows:

    Authority: 47 U.S.C. 154, 303, 307, 336(f), 336(h) and 554.

    10. Amend Sec.  74.1233 by revising paragraph (d)(5)(ii) to read as 
follows:


Sec.  74.1233  Processing FM translator and booster station 
applications.

* * * * *
    (d) * * *
    (5) * * *
    (ii) Winning bidders are required to pay the balance of their 
winning bids in a lump sum prior to the deadline established by the 
Commission pursuant to Sec.  1.2109(a) of this chapter. Long-form 
construction permit applications will be processed and the FCC will 
periodically release a Public Notice listing such applications that 
have been accepted for filing and announcing a date by which petitions 
to deny must be filed in accordance with the provisions of Sec. Sec.  
73.5006 and 73.3584. Construction permits will be granted by the 
Commission only after full and timely payment of winning bids and any 
applicable late fees, and if the applicant is duly qualified, and upon 
examination, the FCC finds that the public interest, convenience and 
necessity will be served. If a winning bidder fails to pay the balance 
of its winning bid in a lump sum by the applicable deadline as 
specified by the Commission, it will be allowed to make payment within 
ten (10) business days after the payment deadline, provided that it 
also pays a late fee equal to five (5) percent of the amount due in 
accordance with Sec.  1.2109(a) of this chapter. Construction of the FM 
translator station shall not commence until the grant of such permit to 
the winning bidder and only after full and

[[Page 43386]]

timely payment of winning bids and any applicable late fees.
* * * * *
[FR Doc. 05-14840 Filed 7-26-05; 8:45 am]
BILLING CODE 6712-01-P