Fees for Products and Services in Connection With Competitive Bidding Procedures

FEDERAL COMMUNICATIONS COMMISSION

47 CFR Part 1

[WT Docket No. 95-69, FCC 95-308]

Fees for Products and Services in Connection With Competitive

Bidding Procedures

AGENCY: Federal Communications Commission.

ACTION: Final rule.

-----------------------------------------------------------------------

SUMMARY: The Commission has adopted a Report and Order which

establishes a schedule of fees that participants in the competitive

bidding process will be assessed for certain on-line computer services,

bidding software, and bidder information packages. In establishing the

fees, the Report and Order implements the Independent Offices

Appropriations Act. The Commission's action in assessing the fees is to

recoup the Federal Government's costs for providing such services and

products.

EFFECTIVE DATE: July 26, 1995.

FOR FURTHER INFORMATION CONTACT:

Bert Weintraub, Wireless Telecommunications Bureau, Tel. No. (202) 418-

1316.

SUPPLEMENTARY INFORMATION: This is the complete text of the Report and

Order which was adopted on July 21, 1995, and released on July 21,

1995.

I. Introduction

1. In this Report and Order, we amend Part 1 of the Commission's

Rules to establish a schedule of fees that participants in the

competitive bidding process will be assessed for certain on-line

computer services, bidding software, and for bidder information

packages, We conclude that assessment of these charges is reasonable

and necessary to recoup the Commission's costs for providing such

services and products. Specifically, we will assess the following fees

to bidders and other interested parties:

$2.30 per minute for access via a 900 number telephone

service to the Commission's Wise Area Network (FCC WAN) system that

will enable users to bid electronically from remote locations and

access licensing databases.

$175.00 for remote bidding software package.

No charge for the first bidder information package

requested, and a $16.00 fee for each additional package that is

subsequently requested by the same party.

II. Background

2. The Omnibus Budget Reconciliation Act of 1993, Public Law No.

103-66, Title VI, section 6002(b), 107 Stat. 312, authorized the

Commission to award licenses by competitive bidding where mutually

exclusive applications for initial licensing are received for

subscriber-based services for compensation. Under this authority, the

Commission, to date, has conducted three auctions for Personal

Communications Service (PCS) licenses.\1\ In previous Commission

auctions, remote electronic bidding was provided by Business

Information network (BIN). Bidders electing to bid electronically from

remote locations (i.e., not at the FCC auctions site) paid

[[Page 38277]]

BIN a fee for the remote bidding software and an on-line computer

access charge. The fee covered BIN's costs to develop and provide

remote bidding access.

\1\ The three PCS auction conducted thus far are: (1) The

Nationwide Narrowband PCS auction, held from July 25 through July

29, 1994; (2) the Regional PCS Narrowband auction held October 26

through November 8, 1994; and (3) the broadband PCS A and B block

auction, held December 5, 1994, through March 13, 1995. All three of

these auctions were conducted as simultaneous multiple round

auctions. In a simultaneous multiple round auction, auction

participants submit bids on specific licenses in each round of the

auction. The auction closes when there are no new bids during a

bidding round on any of the offered licenses. See Second Report and

Order, PP Docket No. 93-253, 9 FCC Rcd 2348 (1994), 59 FR 22,980

(1994).

---------------------------------------------------------------------------

3. Due to the experience gained from these three auctions, the

Commission has developed its own remote electronic access system that

utilizes Wide Area Network or WAN technology. This system (FCC Wan)

would allow bidders and other interested parties to file applications

electronically, bid electronically, access auction round results, and

query FCC licensing databases from their personal computers from remote

locations The Commission has also developed a number of proprietary

software applications to support the remote electronic access system.

Bidders and other interested parties would utilize a 900 number

telephone service to access the FCC Wan system. The Commission has

incurred significant costs in developing this remote electronic access

system. Such costs include: infrastructure design and implementation;

software development and testing; and other administrative/personnel

costs.

4. On May 16, 1995, we adopted a Notice of Proposed Rulemaking

(Notice) \2\ seeking comment on a proposed schedule of fees to be

assessed in future auctions for access to certain on-line computer

services, and for obtaining proprietary bidding software as well as

multiple bidder information packages. In order to recoup our costs, we

proposed to charge a fee to bidders and other interested parties for

access to the FCC WAN system and for obtaining the proprietary bidding

software needed to make use of the system's electronic bidding

functions. We also proposed recouping some of the printing and

production costs associated with providing bidder information packages

to prospective auction participants. Specifically, we indicated that

parties would continue to receive one complimentary bidder information

package, but suggested charging a fee for additional packages that are

requested.

\2\ WT Docket No. 95-69, 10 FCC Rcd 7066 (1995), 60 FR 26,860

(1995).

---------------------------------------------------------------------------

5. We also observed that under government regulations any funds

received from the sale of materials, software, or services must go

directly to the U.S. Treasury. See 31 U.S.C. 3302(b); 69 Comp. 260,

262(1990). We noted that the Independent Offices Appropriation Act of

1952, as amended (IOAA), 31 U.S.C. 9701, permits the government to

impose fees and charges for services and things of value. The IOAA

authorizes agencies to prescribe regulations establishing charges for

products and services provided by an agency. The charges must be fair

and must be based on the costs to the government, the value of the

service or product to the recipient, the public policy or interest

served, and other relevant facts. See 31 U.S.C. 9701(b). In addition,

we indicated that the Office of Management and Budget (OMB) has issued

policy guidelines on use of fees in Circular A-25 (OMB Circular),\3\

which was recently revised. We noted that the revised OMB Circular,

encourages the assessment of fees for government-provided products and

services, and provides that agencies must establish fees based on

either a ``full-cost'' or ``market price'' analysis.

\3\ See FPC v. New England Power Co., 415 U.S. 345, 349-51

(1974) (citing the OMB Circular).

---------------------------------------------------------------------------

6. More specifically, we proposed in the Notice to calculate our

fees on the basis of ``market price'' \4\ rather than utilizing a

``full cost'' pricing analysis.\5\ In particular, we proposed to

utilize prevailing price methodology to determine the fees for the FCC

WAN system use, the proprietary bidding software, and the additional

bidder information packages. We proposed the following fees: (1) $4.00

per minute for access via a 900 number to the FCC WAN system; (2)

$200.00 for each remote bidding software package; and (3) $16.00 for

each additional bidder information package (including postage)

requested beyond the one complimentary copy that is made available. We

sought comments on these charges, and on comparable market prices for

similar products and services that are offered to the public.

\4\ ``Market price'' means the price for a good, resource, or

service that is based on competition in open markets, and creates

neither a shortage nor a surplus of the good, resource, or service.

See OMB Circular at 58 Fed. Reg. 38,145.

\5\ ``Full cost'' includes all direct and indirect costs to any

part of the Federal Government of providing a good, resource, or

service. See OMB Circular at 58 FR 38,145.

---------------------------------------------------------------------------

7. BellSouth Corporation (BellSouth), Rural Telecommunications

Coalition (RTC) and AirTouch Paging (AirTouch) filed formal comments

and National Paging & Personal Communications Association (NPPCA) and

Kennedy-Wilson International (KWI) filed informal comments by letter in

response to the Notice.

III. Discussion

8. BellSouth questions whether the Commission can assess fees for

its auction-related services under IOAA, when Section 309(j)(8)(B) of

the Communications Act already authorizes the Commission to recover the

cost of conducting auctions from auction revenues. We conclude that

assessing fees for use of the Commission's FCC WAN system as described

above is fully consistent with our competitive bidding obligations

under the Communications Act and with other laws and regulations that

govern fees. See 47 U.S.C. 309(j)(8)(B); 31 U.S.C. 9701(a). Assessing a

fee to bidders using certain on-line computer services and bidding

software is a reasonable and efficient means of recovering the costs

associated with developing, maintaining, enhancing, and upgrading this

important system and its companion software. Indeed, our proposal

supports a congressional goal set forth in the IOAA, which is that

``each service or thing of value provided by an agency * * * to a

person * * * be self-sustaining to the extent possible.'' See 31 U.S.C.

9701(a). Moreover, contrary to BellSouth's suggestion, nothing in

Section 309(j)(8)(B) prohibits the Commission from imposing fees on

auction participants under the IOAA.

A. On-Line Computer Access Charges

9. Comments. BellSouth, RTC, and AirTouch oppose the Commission's

proposal to establish on-line access charges by comparing the FCC WAN

system with the costs associated with access to Westlaw and Lexis-Nexis

services, claiming the comparison is invalid. RTC contends that the fee

for 900 service should be based upon ``full cost'' and not ``market

price.'' In addition, BellSouth and NPPCA assert that there is no

alternative to remote electronic bidding procedures. Additionally,

NPPCA claims there is already a fee to file applications

electronically.

10. Decision. After considering the record, we will charge $2.30

per minute for access to the FCC WAN system for purposes of bidding

electronically, reviewing other applications (e.g., FCC Form 175 or FCC

Form 600 applications), and obtaining available licensing database

information. We emphasize, however, that we will not charge a user a

fee for accessing this system for the purpose of filing a short- or

long-form application electronically. There will be a clear delineation

between services for which on-line access fees will be charged and

services for which no on-line access fees will be charged. Users who

download from the FCC's electronic bulletin board or from the Internet

software specific to a service for which we intend to charge on-line

access fees will receive clear notification that execution of this

software will result in on-line access fees. In addition, when a caller

executes software specific to a service for which

[[Page 38278]]

we intend to charge on-line access fees, there will be a grace period,

free of charge to the caller. During the grace period, the caller will

be advised of the associated pricing, basic program content, sponsor

information, and provided the option to disconnect without being

charged. Charges to the caller will not begin until the grace period

has ended. Instructions on downloading and executing software specific

to a particular service will be made available by Public Notice prior

to the availability of that service.

11. In arriving at this $2.30 fee, we considered that the FCC WAN

system will provide services that are similar to both the electronic

bidding capabilities previously offered by BIN and to database services

provided by Westlaw or Lexis-Nexis. For previous auctions, the cost for

on-line electronic bidding through BIN was $23.00 per hour, which

equals $.38 per minute (rounded). The average cost associated with

access to on-line database services such as Westlaw or Lexis-Nexis is

$4.23 per minute.

12. While our new remote electronic bidding system is similar to

BIN, which charged $23.00 per hour, FCC WAN system access to the

Commission's licensing databases is more like the services provided by

Westlaw or Lexis-Nexis. Both Westlaw and Lexis-Nexis provide on-line

database access for research purposes to legal and other research

professionals. We have therefore averaged the costs of these two types

of services to arrive at a fee of $2.30 per minute for on-line access

to the FCC WAN system. BellSouth and AirTouch argue that the Commission

should use other information service providers such as CompuServe,

Prodigy, Internet and America On-line as comparisons in determining a

price per minute for access to the FCC WAN system. According to the

commenters, these particular services range in price from $10.00 to

$30.00 per month for limited access and $3.00 to $10.00 per hour for

special services. These providers market their products and services to

the general public, however, and their fees obviously reflect the high

volume of users that are serviced by them. By comparison, the

Commission's auction and licensing databases are of interest to a

relatively small number of potential users. Westlaw or Lexis-Nexis,

however, do service a small number of users with information that is

akin to the licensing database information we plan to offer.

Consequently, their pricing provides a more relevant comparison for

establishing our fees here.

13. We note that OMB guidelines provide that the price of the

government-provided service must be adjusted to reflect the ``level of

service and quality of the good or service'' when compared to a similar

commercial service. OMB Circular at 58 FR 38145. In this regard, we

believe it is reasonable to charge a higher per-minute fee for our

remote bidding system than was charged by BIN because of the enhanced

bidding functionality of the FCC WAN system. Specifically, electronic

bidding via the FCC WAN system is expected to be faster and more

efficient \6\ than BIN. Bidders will have the option of uploading bids

from a file that they have created off-line, which will reduce the time

required to submit and verify bid submissions. Also, bidders will be

able to develop round results files based on their individual needs. In

addition to remote bidding and round results, the system also will

provide for access to the Commission's licensing databases (i.e., to

locate and review other applications). Moreover, the FCC WAN system

permits applications to be filed electronically (e.g., the FCC Form 175

and the FCC Form 600).

\6\ Our FCC WAN system is demonstrably faster than the BIN

system used in previous auctions, according to our test results. For

example, using BIN, the average amount of on-line time for the

Regional Narrowband auction was 16 minutes, 37 seconds per bidding

round whereas the average amount of time using the new system in a

mock Regional Narrowband auction was 12 minutes, 26 seconds per

bidding round (i.e., using a comparison of 30 licenses).

14. In addition, we reject RTC's argument that charging for 900

number service should be based on ``full cost'' instead of ``market

price.'' First, OMB has given us the discretion to choose either

methodology. Second, based on our examination of the two methodologies,

we conclude that application of a ``market price'' approach is more

practical and efficient for our purposes here. In this regard, we note

that the Commission will incur costs of approximately $700,000 for one

year of service for the expanded telephone cabling required to

implement the Commission's on-line bidding system.\7\ This figure

alone, however, does not reflect all of the cost components to be

included within OMB's definition of ``full cost.'' Attempting to

apportion ``full cost'' to individual auctions, which will each vary in

duration, number of bidders and number of licenses, is administratively

unworkable. Thus, we conclude that the ``full cost'' methodology is

inappropriate in this context. This analysis answers BellSouth's

concerns that we have not provided any estimate of Commission costs. We

reiterate that market price remains the only viable methodology in

establishing a fee for 900 service. Likewise, AirTouch's assertion that

a $.15 to $.20 per minute charge for 900 service. Likewise, AirTouch's

assertion that a $.15 to $.20 per minute charge for 900 service would

recoup the Commission's costs is an attempt at the ``full cost''

recovery methodology, which we have declined to use.

\7\ The Notice pointed out that the General Services

Administration (``GSA'') was in the process of making arrangements

to add 900 service to the Federal Telecommunications System

(``FTS'') 2000 contract, which is the government-wide telephone

system. The Notice should have additionally mentioned that point-to-

point telephone cabling upgrades were also added to the FTS

contract. Since release of the Notice, installation of the expanded

telephone cabling has been ordered but addition of the 900 service

is pending and will not be added until this Report and Order has

been adopted and released.

---------------------------------------------------------------------------

15. Finally, we are not persuaded by BellSouth's or NPPCA's

argument that there is no alternative to remote electronic bidding

procedures and therefore no fee should be charged for this service. We

note that bidders may continue to place bids through a 800 telephone

number service free of charge.\8\ In addition, contrary to NPPCA's

belief, we have not established a fee for electronic filing of the FCC

Form 175. In order to encourage auction participants to file their

short-form applications electronically, as noted above, we do not plan

to charge for this particular use.

\8\ As in previous auctions, bidders still will have the option

of placing their bids from remote locations via an 800 telephone

number service at no charge. Round results information also will be

available to bidders over the Internet and on a FCC electronic

bulletin board at no charge.

---------------------------------------------------------------------------

B. Auction Bidding Software

16. Comments. BellSouth, RTC, and AirTouch generally argue that

there are a number of comparable software packages on the market that

are substantially cheaper than the $200.00 fee proposed by the

Commission for fee proposed by the Commission for its bidding software

package. They provided names of various computer companies, computer

programs and protocols, as well as various dollar amounts in support of

their arguments.

17. Decision. After reviewing the comments and alternative prices

suggested, we have decided to assess a fee of $175.00 for the remote

bidding software package made available to each user on the FCC WAN

system. We will not, however, charge for software that is necessary for

users to file applications electronically on the FCC WAN system. Also,

we will not charge for software

[[Page 38279]]

that is needed for users to access the Commission's licensing databases

(although as discussed supra, FCC WAN users will be charged $2.30 per

minute for actually accessing the Commission's licensing database). We

base our $175.00 price on the BIN bidding software which was made

available to bidders in previous Commission auctions for a $200.00

charge. We will reduce this fee by $25.00, however, because our system

does not include a communications component that was provided as part

of the BIN software package. Specifically, the $25.00 reduction

represents the cost of certain technical protocols that are necessary

for remote electronic bidders and other interested parties to access

the Commission's remote electronic system.\9\

\9\ Such technical protocols are available ``off the shelf'' and

can be purchased for approximately $25.00. Examples of these

protocols are Trumpet, NetManage Chameleon and Wollongong Pathway

Access.

---------------------------------------------------------------------------

18. AirTouch argues that computer software programs such as

Procomm, Telix, Crosstalk and SLIP PPP are appropriate comparisons to

the FCC remote bidding software and should be used in determining the

market price of our bidding software. For two reasons, we do not

believe these software packages are ``price comparable'' to the bidding

software we plan to offer. First, the programs cited by AirTouch are

produced for large numbers of users whereas our software is targeted to

a small group of users. Second, these programs are more limited in

scope and function than the FCC's software. Specifically, the cited

programs are communications and technical protocols only whereas the

FCC's software package is a more sophisticated logic-based program that

will enable users to submit and withdraw bids electronically.

C. Bidder's Information Package

19. Comments. None of the commenting parties challenge the

methodology used to calculate the $16.00 cost for each additional

bidder information package. AirTouch nevertheless opposes a charge for

additional bidder information packages, and claims it will be difficult

to enforce the policy. KWI, on the other hand, states the Commission

should charge $50.00 to $100.00 for bidder information packages to

ensure they are distributed to persons with a serious interest in the

auction process.

20. Decision. We conclude that it is both fair and reasonable to

provide one complimentary bidder information package to each person or

entity, and to charge $16.00 for each additional package (including

postage) requested by the same person or entity. The $16.00 charge is

based on the average direct costs incurred by the Commission to

duplicate, bind and mail such packages.

21. We observe that nothing prevents a recipient of a complimentary

bidder information package from making additional copies at his or her

own expense. We are unpersuaded that charging for additional bidder

information packages violates the public interest or will be unduly

burdensome to enforce, as AirTouch suggests. We also reject KWI's

suggestion that we charge $50.00 to $100.00 for bidder information

packages since we think such charges would not be consistent with OMB

guidelines.

D. Payment of Fees Methodology

22. Comments. None of the commenting parties object to the proposed

inclusion of the FCC WAN on-line access charges on the user's long

distance telephone bill. Moreover, none of the commenters express any

opposition to having the fees for the bidding software and the bidder

information packages collected by credit card or cashier checks. KWI

suggests expanding the payment method to include personal and corporate

checks.

23. Decision. Charges for on-line access to the FCC WAN system will

be included in the form of 900 number service charges on each user's

long distance telephone bill. Each user will pay its long distance

telephone company directly for these charges. As for bidding software

and additional bidder information packages, we will permit payment by

credit card and cashier's check. Further, we agree that personal or

corporate checks should be permitted and will permit payment in this

manner as long as such checks sufficiently identify the payor. All

checks should be made payable to the ``Federal Communications

Commission'' or ``FCC.'' The Commission contracts with an auctioneer

for each auction, and it is the auction contractor that will be

responsible for administering payments of the bidding software and

additional bidder information packages. Bidders may obtain the FCC's

bidding software and bidder information packages from the FCC's auction

contractor. Specific instructions for purchasing the software and

bidder information packages will be made available by Public Notice

prior to the start of each auction.

IV. Procedural Matters

24. Pursuant to the Regulatory Flexibility Act (Pub. L. 96-354,

Stat. 1165, 5 U.S.C. 601, et seq. (1981), the Commission attached an

Initial Regulatory Flexibility Analysis (IRFA) as Appendix A to the

Notice in WT Docket No. 95-69. Written comments on the IRFA were

requested. The Commission's Final Regulatory Flexibility Analysis is as

follows:

A. Need and Purpose of the Action. This rulemaking proceeding is

taken to implement the Commission's establishment and collection of

fees for the Commission's proprietary remote software packages, on-line

communications service charges, and bidder's information packages in

connection with auctionable services. The rules specifically set forth

the amounts that are to be paid in connection with bidding for

auctionable services. The objective of this proceeding is to collect

the necessary amounts through the fees being adopted, with the funds

going to the U.S. Treasury.

B. Issues Raised in Response to the Initial Regulatory Flexibility

Analysis. There were no comments submitted in response to the Initial

Regulatory Flexibility Analysis.

C. Significant Alternatives Considered and Rejected. All

significant alternatives have been addressed in this Report and Order.

D. Description, Potential Impact, and Number of Small Entities

Involved. Because the Commission will provide proprietary remote

software packages, on-line communications services, and bidder's

information packages directly, the fees assessed and collected will

recover the Government's costs. While the number of small entities

impacted by these fees is unknown, any such impact is likely to be

insubstantial. Moreover, the Commission has provided alternative remote

access options free of charge.

25. For further information on the assessment and collection of the

charges established by the rules adopted herein, contact Bert

Weintraub, Wireless Telecommunications Bureau, Auctions Division, at

(202) 418-1316.

V. Ordering Clause

26. Accordingly, it is ordered That pursuant to the authority of

Sections 4(i) and (j), 303(r), and 309(j) of the Communications Act of

1934, as amended, 47 U.S.C. 154 (i) and (j), 303(r), and 309(j), as

well as the Independent Offices Appropriation Act of 1952, as amended,

31 U.S.C. 9701, Part 1 of the Commission's Rules, 47 C.F.R. Part 1, is

amended to assess and collect fees in connection with auctionable

services as set forth below, effective upon publication in the Federal

Register. Pursuant to 5 U.S.C.

[[Page 38280]]

553(d)(3), we conclude that ``good cause'' exists to have the rule

amendments set forth in this Report and Order take effect immediately

upon publication in the Federal Register. The Commission's next auction

is presently scheduled to commence on August 29, 1995, and short-form

applications for that auction are due on July 28, 1995.\10\ In order to

provide for a smooth transition to the new computer system and software

discussed in this Report and Order, it is necessary to institute our

fee schedule prior to the start of this upcoming auction.

\10\ See Public Notice, DA 95-1420, released June 23, 1995.

List of Subjects in 47 CFR Part 1

Administrative practice and procedure.

Federal Communications Commission.

William F. Caton,

Acting Secretary.

Rule Changes

Part 1 of Title 47 of the Code of Federal Regulations is amended as

follows:

PART 1--PRACTICE AND PROCEDURE

1. The authority citation continues to read as follows:

Authority: 47 U.S.C. 151, 154, 303, and 309(j) unless otherwise

noted.

2. Sections 1.1181 and 1.1182 are added to Subpart G to read as

follows:

Sec. 1.1181 Authority to prescribe and collect fees for competitive

bidding-related services and products.

Authority to prescribe, impose, and collect fees for expenses

incurred by the government is governed by the Independent Offices

Appropriation Act of 1952, as amended , 31 U.S.C. 9701, which

authorizes agencies to prescribe regulations that establish charges for

the provision of government services and products. Under this

authority, the Federal Communications Commission may prescribe and

collect fees for competitive bidding-related services and products as

specified in Sec. 1.1182.

Sec. 1.1182 Schedule of fees for products and services provided by the

Commission in connection with competitive bidding procedures.

------------------------------------------------------------------------

Product or service Fee amount Payment procedure

------------------------------------------------------------------------

On-line remote access 2.30 per minute........ Charges included on

900 Number Telephone customer's long

Service). distance telephone

bill.

Remote Bidding Software $175.00 per package.... Payment to auction

contractor by credit

card or check.

(Public Notice will

specify exact payment

procedures.)

Bidder Information First package free; Payment to auction

Package. $16.00 per additional contractor by credit

package (including card or check.

postage) to same (Public Notice will

person or entity. specify exact payment

procedures.)

------------------------------------------------------------------------

[FR Doc. 95-18451 Filed 7-25-95; 8:45 am]

BILLING CODE 6712-01-M