Direct Broadcast Satellite Service

FEDERAL COMMUNICATIONS COMMISSION

47 CFR Part 100

[IB Docket No. 95-168; PP Docket No. 93-253; FCC 95-507]

Direct Broadcast Satellite Service

AGENCY: Federal Communications Commission.

ACTION: Final rule.

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SUMMARY: On December 14, 1995, the Federal Communications Commission

adopted a Report and Order in which it adopted a number of new rules

and policies for the Direct Broadcast Satellite (``DBS'') service,

including the use of competitive bidding to resolve mutually exclusive

applications for DBS resources. As part of its decision in Advanced

Communications Corporation, FCC 95-428 (released October 18, 1995), the

Commission reclaimed for the public 51 channels of DBS spectrum at two

orbital locations (27 channels at 110 deg. W.L. and 24 channels at

148 deg. W.L.) that had previously been assigned to Advanced

Communications Corporation (``ACC''). The Commission adopts rules and

policies in the DBS service in order to update the current ``interim''

rules and to reassign, through a competitive bidding process, channels

at orbital locations previously assigned to ACC.

EFFECTIVE DATE: January 19, 1996.

FOR FURTHER INFORMATION CONTACT: Suzanne Hutchings or Bill Wiltshire,

International Bureau, (202) 418-0420; or Diane Conley, Wireless

Telecommunications Bureau, (202) 418-0660.

SUPPLEMENTARY INFORMATION: This summarizes the Commission's Report and

Order in IB Docket No. 95-168; PP Docket No. 93-253; FCC 95-507,

adopted on December 14, 1995, and released on December 15, 1995. The

complete text of this Report and Order (``Order'') is available for

inspection and copying during normal business hours in the FCC

Reference Center (Room 239), 1919 M Street NW., Washington, D.C., and

also may be purchased from the Commission's copy contractor,

International Transcription Service, (202) 857-3800, 2100 M Street NW.,

Suite 140, Washington, D.C. 20037. This Order contains new or modified

information collections subject to the Paperwork Reduction Act of 1995

(``PRA''), Pub. L. 104-13, which were proposed in the NPRM and

submitted to the Office of Management and Budget (``OMB'') for

approval. The Commission received no comments on the proposed

information collections, and therefore adopts them as originally

proposed. The effective date of the new and modified rules being

adopted falls after the deadline for OMB action under the PRA.

Synopsis of the Report and Order

I. Introduction

1. Over six years ago, in Continental Satellite Corporation, 4 FCC

Rcd 6292 (1989), the Commission stated that existing DBS permittees

would have first right to additional channel assignments upon surrender

or cancellation of a DBS construction permit. The Notice of Proposed

Rulemaking (``NPRM'') in this proceeding, 60 FR 55822 (Nov. 3, 1995),

tentatively concluded that this reassignment policy no longer serves

the public interest, and accordingly proposed to use competitive

bidding when the Commission has received mutually exclusive

applications for reassignment of such DBS resources. Specifically, the

NPRM proposed to auction two large blocks of channels that are

currently available at two orbital locations. In addition, the NPRM

proposed new service rules that would: (1) impose performance criteria

intended to ensure that DBS resources are utilized in a timely manner;

(2) guard against potential anticompetitive conduct by DBS providers;

and (3) ensure timely DBS service to Alaska and Hawaii. The NPRM also

requested comment on our existing policy governing the extent to which

DBS resources may be put to alternative uses.

2. The Commission concludes that the public interest is no longer

served by the pro rata methodology established in Continental for

reassigning reclaimed DBS channels. Accordingly, the Commission adopts

new rules for reassigning DBS resources. In the Order, the Commission

finds that it has the statutory authority to auction DBS construction

permits if the Commission receives mutually exclusive applications, and

that the objectives of Section 309(j) of the Communications Act, 47

U.S.C. 309(j), would be served by doing so. Specifically, under the

Order the Commission will auction two DBS construction permits: one for

all 28 channels now available at the 110 deg. W.L. orbital location (27

channels from ACC plus 1 channel that was never assigned), and another

for all 24 channels now available at the 148 deg. W.L. orbital

location. The NPRM proposed to employ an oral outcry auction to award

construction permits for these channel blocks. The Commission has

instead determined that these two permits should be awarded through a

sequential multiple round electronic auction. Other auction designs may

be used for future DBS auctions.

[[Page 65588]]

3. The Commission also adopts three new service rules and revises

an existing policy. First, a person receiving a new or additional DBS

construction permit will be required to complete construction of its

first satellite within four years of receiving its permit, and to

complete all satellites in its DBS system within six years. Second, new

permittees will be required to provide DBS service to Alaska and Hawaii

from any orbital location where such service is technically feasible,

and existing permittees will be required to provide such service from

either or both of their assigned orbital locations in order to retain

their channel assignments at western orbital locations. Third, the term

for non-broadcast DBS licenses will be lengthened from five years to

ten years, to encourage investment and innovation in the service and to

better match the useful life of DBS satellites. In addition, the

existing policy restricting non-DBS use of DBS resources will be

restated in terms of capacity rather than time in order to allow DBS

licensees to configure their systems more efficiently. The Commission

believes that these rules are well designed to spur swift development

of DBS spectrum resources to the benefit of the American public.

II. Proposed Service Rules

A. Performance Objectives

4. The Commission finds that combining existing due diligence

requirements with additional milestones for construction and operation

of DBS systems by new permittees will prevent unnecessary delays in the

commencement of service. Accordingly, the Commission adopts, as

proposed in the NPRM, two additional performance criteria for those

receiving DBS construction permits after the effective date of the

proposed rule: (1) completion of construction of the first satellite in

a DBS system within four years of authorization; and (2) launch and

operation of all satellites in a DBS system within six years of

authorization.

B. Use of DBS Capacity

5. At present, Commission policy requires each DBS licensee to

begin DBS operations before the end of its first five-year license

term, but allows otherwise unrestricted use during that term. After

expiration of the first term, a DBS operator may continue to provide

non-DBS service only on those transponders on which it also provides

DBS service, and only up to half of the use of each transponder each

day. The Commission finds that capacity-based restrictions would allow

DBS permittees and licensees more flexibility in how they configure

their satellites as a matter of technical efficiency in complying with

the limitations we have imposed. Accordingly, the Order restates

existing restrictions on the use of DBS resources as a function of

capacity rather than time, but otherwise retains the existing use

policy. Thus, the new policy will be that a DBS licensee must begin DBS

operations within five years of receipt of its license, but may

otherwise make unrestricted use of the spectrum during that time. After

that five-year period, such a licensee may continue to provide non-DBS

service so long as at least half of its total capacity at a given

orbital location is used for DBS service.

6. The NPRM noted the possibility that, as a result of a separate

proceeding, operators using DBS channels and orbital locations may be

permitted to provide both domestic and international service. See

Amendment to the Commission's Regulatory Policies Governing Domestic

Fixed Satellites and Separate International Satellite Systems, Notice

of Proposed Rulemaking, FCC 95-146, para. 38 (released April 25,

1995)(``Transborder/Separate Systems''), 60 FR 24817 (May 10, 1995).

The Commission notes that the construction permits available at auction

currently authorize only DBS service to the United States, and finds

that the potential for international DBS service is no basis for

delaying the auction pending resolution of international satellite

service issues in the Transborder/Separate Systems proceeding.

C. Rules and Policies Designed to Promote Competition

1. Spectrum Aggregation Limitations. 7. The NPRM proposed certain

rules intended to prevent strategic use of DBS resources for

anticompetitive purposes and also requested comment on whether

additional steps were necessary to achieve the desired goal of

fostering competition among multichannel video programming distributors

(``MVPDs''), such as DBS and cable systems. Two of the rules proposed

were structural, in that they placed limits on the number of full-CONUS

DBS channels a person could hold or use. The NPRM also proposed rules

aimed at preventing specific types of potentially anticompetitive

conduct, and requested comment on the degree to which existing rules

might address those same concerns.

8. The Commission rejects both of the spectrum caps proposed in the

NPRM, and instead adopts a one-time spectrum limitation applicable to

the upcoming auction. Under this one-time auction rule, a party

currently holding an attributable interest in full-CONUS channels at

one location may bid at auction for channels currently available at the

110 deg. location, but if successful must divest its existing full-

CONUS channels at any other location within twelve months. The

Commission finds that the rule is necessary given the scarcity of full-

CONUS DBS spectrum and the impact that concentration of this spectrum

into the hands of any single provider might have on the overall MVPD

market. The resulting intra-DBS competition will best serve the public

interest by ensuring a level of rivalry between and among DBS firms and

other MVPDs that should constrain any potential there might be for

strategic anticompetitive conduct. The Commission also finds that

twelve months should be sufficient to allow an orderly divestiture, if

necessary, and strikes a proper balance between the time necessary for

negotiation and the desire to ensure that spectrum not remain idle.

9. For purposes of implementing the spectrum aggregation limitation

adopted in the Order, the Commission will only consider three orbital

locations--101 deg., 110 deg., and 119 deg.--to be capable of full-

CONUS service. A fourth orbital location, at 61.5o W.L, should not be

deemed to be capable of delivering full-CONUS service at this time

since an operator serving customers in the western United States from

that location would face interference from tall objects that an

operator from the other three locations would not face due to their

better look angles, and therefore would be at a qualitative

disadvantage in attracting customers.

10. In applying the auction spectrum rule adopted in the Order,

interests will be attributed to their holders and deemed cognizable

under criteria similar to those used in the context of the broadcast,

newspaper and cable television cross ownership rules. The rules adopted

in the Order attribute the following interests: (1) any voting interest

of five percent or more; (2) any general partnership interest and

direct ownership interest; (3) any limited partnership interest, unless

the limited partnership agreement provides for insulation of the

limited partner's interest and the limited partner in fact is insulated

from and has no material involvement, either directly or indirectly, in

the management or operation of the DBS activities of the partnership;

and (4) officers and directors. As with the broadcast rules, the

attribution threshold for institutional investors is ten percent, and a

multiplier will be used to

[[Page 65589]]

calculate interests held through successive and multiple layers of

ownership.

2. Conduct Rules. 11. In addition to the structural solutions

designed to promote competition by preventing the potential for undue

concentration of DBS and MVPD resources, the NPRM also proposed conduct

limitations on the use of DBS resources in order to address a number of

specific forms of potential anticompetitive behavior. In the Order, the

Commission finds that the one-time auction rule described above will

significantly promote rivalry among DBS systems and encourage the

development of competition in markets for the delivery of video

programming. The Order states that there is little direct evidence of

anticompetitive behavior specific to the DBS context. Accordingly, the

Commission has decided to rely upon the competitive effect of its one-

time spectrum rule to prevent the range of anticompetitive conduct

discussed in the NPRM, and thus refrains from adopting conduct rules at

this stage in the development of the DBS industry.

12. In view of the market structure set in motion by the Order's

one-time spectrum rule, the Commission does not find it necessary to

adopt rules prohibiting DBS services from being offered as

``ancillary'' to cable services. Thus, there is no reason to extend to

all non-DBS MVPDs the restrictions imposed in the DBS construction

permit issued to Tempo Satellite, Inc., or to maintain those

restrictions with respect to Tempo. Similarly, the Commission finds no

compelling need at this time for adopting rules designed to ensure that

a cable-affiliated DBS operator will compete against other DBS

providers for subscribers in cabled areas, or for determining that all

joint marketing arrangements between DBS operators and other MVPDs will

a fortiori reduce competition. Further, the Commission declines to

amend the existing program access and carriage rules to address

specific conduct by DBS operators. The Order states that there is no

evidence in this record that exclusive agreements currently pose any

anticompetitive concern or will do so in the future.

13. The NPRM identified as another area of concern program access

issues related to the development of systems such as TCI's proposed

``Headend in the Sky'' (``HITS'') service for satellite delivery of

programming to terrestrial MVPD systems. It appears that a HITS-like

service that provides most of the available programming, and provides

it in a digital format that could be passed through to subscribers,

could offer substantial efficiencies for many MVPDs. The benefits of

this service cannot materialize if competing DBS operators are unable

to provide such service because, for example, programmers refuse to

authorize MVPDs to receive programming services from the competing

operator's DBS satellite. However, the Commission has no evidence

before it of firms presently supplying HITS-like service, and the

actual characteristics of such a service remain unclear. Moreover,

resolution of the issues surrounding such a service is not necessary to

the proceeding at hand. Accordingly, the Commission has decided that it

would be imprudent to consider rules governing HITS service absent a

better understanding of the nature of the service.

Other Concerns

14. The NPRM observed that in the Advanced Communications

Corporation proceeding, commenters raised a number of other concerns

about potential strategic conduct that could arise from cable-

affiliated ownership of full-CONUS DBS spectrum. Those commenters

argued that cable-affiliated ownership of full-CONUS DBS spectrum

should be prohibited, or in the alternative, that several remedial

conditions should be imposed. The NPRM sought comment on the extent to

which those and related concerns are implicated by the proposed auction

of DBS construction permits, and if so, whether additional DBS service

rules might be appropriate to address those concerns. For the time

being, the Commission has decided to rely upon the one-time auction

spectrum limitation, the rivalry that rule should promote throughout

the MVPD market, and the Commission's ongoing ability to monitor

developments in the DBS and MVPD markets through its Title III

authority, as adequate restraints on anticompetitive conduct. The

Commission remains committed to fostering a vibrant DBS service and

recognizes that periodic reviews will be necessary to ensure that the

benefits of rivalry are available to the public. It intends to keep a

watchful eye on developments in the service to ensure that DBS systems

have an opportunity to develop into truly competitive MVPDs.

East/West Paired Assignments

15. The NPRM tentatively concluded that progress in the DBS service

has rendered unnecessary the Continental policy of assigning DBS

channels only in east/west pairs. The commenters supported this

conclusion, and accordingly the Commission will no longer require DBS

permittees and licensees to retain their assigned channels in east/west

pairs.

D. Service to Alaska and Hawaii

16. The Commission adopts the rules proposed in the NPRM to: (1)

require that all new permittees must provide service to Alaska and

Hawaii if such service is technically feasible from their orbital

locations; and (2) condition the retention of channels assigned to

current permittees at western orbital locations on provision of such

service, from either or both of their assigned orbital locations. These

rules should help achieve the important goal of bringing service to

underserved regions of the United States. The Commission declined the

proposal of some commenters that the first rule be applied to existing

as well as new permittees. The Commission notes that service to Alaska

and Hawaii has already been shown to be feasible from all but the

101 deg.W.L. and 61.5 deg.W.L. orbital locations, and that any party

acquiring channels at those two locations that desires not to provide

service to Alaska or Hawaii will bear the burden of showing that such

service is not feasible as a technical matter, or that while

technically feasible such service would require so many compromises in

satellite design and operation as to make it economically unreasonable.

E. License Term

17. The Commission adopts the NPRM's proposal to increase the term

of a non-broadcast DBS license from 5 years to 10 years, the maximum

allowed under the Communications Act, which better reflects the useful

life of a DBS satellite, is consistent with the current proposal for

extending the term of satellite licenses in other services, and should

encourage investment and innovation in the DBS service.

III. Adoption of a New Methodology for Reassigning DBS Resources

18. Over six years ago, in the Continental decision, the Commission

stated that existing DBS permittees would have first right to

additional channel assignments upon surrender or cancellation of a DBS

construction permit. The NPRM tentatively concluded that this

reassignment policy, adopted in an era before Congress explicitly

authorized the Commission's use of auctions and well before any DBS

system actually went into operation, no longer serves the public

interest, and therefore should be abandoned.

19. After reviewing the comments received in response to the NPRM,

the Commission remains convinced that the pro rata distribution of

reclaimed

[[Page 65590]]

channels to existing permittees no longer serves the public interest.

The historic policy of assigning a relatively small number of channels

to each permittee was based upon a conception of DBS service that has

not been put into practice. Instead, the service has experienced a move

toward channel consolidation, an understandable trend given that DBS

systems must compete in the MVPD market with cable systems that are

promising a 500-channel service in the future. Under Continental, the

channels available for reassignment would be divided pro rata to assign

five pairs of channels at two orbital locations to each of six

permittees. The result would be a piecemeal assignment of valuable

spectrum, requiring the permittees to negotiate either joint operations

or channel swaps. The process necessary in either case is often a time

consuming one that is not always successful, which is further

complicated by the time required for Commission consideration and

approval of the resulting transactions. There is also no guarantee that

the permittees eligible for this distribution value the channels most

highly and can put them to use most efficiently.

20. By contrast, competitive bidding procedures are specifically

designed and intended to assign scarce resources to those who value

them most highly and can make the most efficient use of them. By

offering the available channels in two large blocks, the Commission

obviates the need for reaggregation and allows the auction winners to

proceed directly to acquisition or construction of satellites and

system operation of their systems. Since the Commission intends to hold

an auction in January 1996, it concludes that an auction method is

better suited to achieving expedited service from the channels

available than is the existing policy under Continental. In addition,

the Commission concludes that since it has determined that the public

interest supports a change in its regulatory approach, it has full

authority to modify existing DBS permits through notice and comment

rulemaking, even if doing so frustrates the expectations of existing

permittees.

21. All potential auction participants should be aware that the

decision cancelling ACC's construction permit is currently on appeal,

and that others may seek judicial review of this Order as well. In the

unlikely event that a court either overturns the Advanced order and

ACC's permit with its associated orbital/channel authorizations is

ultimately reinstated, or overturns this rulemaking and the Continental

reassignment methodology is ultimately maintained, the Commission would

rescind any permit awarded through the auction process and move with

all deliberate speed to refund money paid up to that point.

Participants in the auction are hereby put on notice of this

possibility, and should be willing to facilitate that process if it

becomes necessary.

IV. Adoption of Rules for Auctioning DBS Permits

A. Authority to Conduct Auctions

The Commission has authority under Section 309(j) of the

Communications Act, 47 U.S.C. 309(j), to employ auctions to choose

among mutually exclusive applications for initial licenses or

construction permits where the principal use of the spectrum is likely

to involve the licensee receiving compensation from subscribers. Having

reviewed the comments received in response to the NPRM in this

proceeding, the Commission concludes that it has the authority under

Section 309(j) to award DBS construction permits for the spectrum

reclaimed from ACC, as well as other available spectrum, by means of

competitive bidding.

Given that both DBS licensees now providing service to the public

operate on a subscription basis, and all other permittees planning to

initiate service in the near future also plan to offer subscription-

based service, the Commission believes that it is a reasonable

assumption that a majority of the use of DBS spectrum is likely to

involve the licensee receiving compensation from subscribers, and the

``principal use'' requirement of the statute is therefore satisfied. In

light of current licensees' subscription-based operations, and all

other permittees' plans for such operations, the Commission disagrees

with the claim made by one commenter that competitive bidding will

force DBS operators to offer all-subscription service.

The Commission also disagrees with the argument made by another

commenter that construction permits awarded for the channels reclaimed

from ACC are not initial. When channels are reclaimed from existing

permittees, the construction permits for them are cancelled and cannot

be modified. Thus, any construction permits awarded for reclaimed

channels will be ``initial'' under Section 309(j) because they will be

new permits for the channels in question.

With respect to the requirement of mutual exclusivity, the

Commission does not accept the claim that it could have avoided mutual

exclusivity by applying the spectrum reassignment policy in

Continental. The Commission has determined that this policy would delay

the development of DBS service and would squander valuable spectrum,

and thus would not be in the public interest. The Commission also notes

that where it has scheduled an auction and it turns out that only one

application is filed for a particular construction permit, the auction

will be cancelled and the application will be processed. In addition,

the Commission will consider mutual exclusivity to exist only when the

number of DBS channels sought at a given orbital location exceeds the

number available there.

The Commission further concludes that the use of competitive

bidding to assign DBS spectrum will promote the statutory objectives of

the rapid deployment of service and the efficient use of spectrum more

effectively than any other spectrum assignment method. An auction is

likely to promote the rapid deployment of service because those parties

that are in the best position to deploy technologies and services are

also likely to be the highest bidders. In addition, abandonment of the

Commission's Continental policy opens the DBS industry to a wide range

of potential new entrants and thus is consistent with the statutory

objective of disseminating licenses among a wide variety of licensees.

The possibility that auction costs will be passed on to consumers does

not mean, as certain commenters assert, that auctions will not serve

the statutory objective of recovering a portion of the value of DBS

spectrum for the public. DBS operators may also pass on other costs to

consumers. Moreover, auction winners will be constrained from charging

rates higher than those of competitors who have not paid for spectrum.

Finally, the auctioning of DBS channels will ensure that the ultimate

holder of the channels has paid market value to the U.S. Treasury and

thus will serve the statutory goal of avoiding unjust enrichment. The

Commission will therefore award construction permits for the channels

available at 110 deg. and 148 deg., as well as DBS construction permits

that become available in the future, by means of competitive bidding.

B. Competitive Bidding Design

The Commission will auction one construction permit for the block

of 28 channels at 110 deg. and one construction permit for the block of

24 channels at 148 deg.. The Commission believes that designating two

permits for these channels will best serve the public interest and the

objectives of Section 309(j)(4)(B), 47 U.S.C. 309(j)(4)(B),

[[Page 65591]]

especially the promotion of investment in and rapid deployment of the

DBS service. The construction permits available for auction include

authority to transmit pursuant to allocations in accordance with the

ITU feeder link plan allocating frequencies for establishing uplinks

and downlinks. The Commission recognizes that there may be legitimate

reasons for auctioning spectrum in smaller blocks; therefore, in the

future, the Commission may auction DBS spectrum either channel by

channel or in small blocks.

The Commission proposed in the NPRM to award the construction

permits for the channels available at 110 deg. and 148 deg. by means of

an oral outcry auction. However, the Commission is persuaded by the

comments submitted that the auction for these channels should have more

structure. The Commission concludes that a sequential multiple round

electronic auction would be the best way of providing such structure.

The primary benefit of additional structure is the reduced risk of

bidders making errors in submitting bids, and bid submission errors are

far less likely with electronic bidding than in a traditional oral

auction. Multiple round electronic bidding also provides bidders more

time to analyze previous bids, confer with decision makers, and refine

their bidding strategy than a continuous oral auction. Multiple round

electronic bidding with the activity rule adopted by the Commission

also provides bidders with more information about other bidders'

valuations. Finally, given the Commission's experience with electronic

auctions, such an auction is likely to be easier for the Commission to

implement.

In anticipation of a rapid auction pace, the Commission will

provide for electronic bidding at an FCC auction site. The Commission

does not anticipate allowing telephone bids and remote electronic

bidding, but the Wireless Telecommunications Bureau will announce by

Public Notice whether such bidding will be permitted. In the event that

telephone bids and remote electronic bidding are not allowed, all

bidders will be required to have an authorized bidding representative

at the auction site. The channels at 110 deg. and 148 deg. will be

auctioned separately since no commenter has made the case that there is

significant interdependence between the channels available at these two

orbital locations. The Commission may auction one channel block

immediately after the other, but also reserves the discretion to hold

two separate auctions for the two blocks.

Although the Commission will not use simultaneous multiple round

bidding, oral outcry bidding, sealed bidding, or a combined sealed bid-

oral outcry auction to award construction permits for the spectrum

available at 110 deg. and 148 deg., such auction designs could be

suitable for DBS under certain circumstances. The Commission therefore

adopts rules providing for these auction designs, and reserves the

discretion to employ such auction designs for DBS in the future. The

Commission also delegates to the Wireless Telecommunications Bureau the

authority to implement and modify auction procedures--including the

general design and timing of an auction, the number of authorizations

to be offered in any one auction, the manner of submitting bids, and

procedures such as minimum opening bids and bid increments, activity

and stopping rules, and application and payment requirements--and to

announce such procedures by Public Notice.

C. Bidding Procedures

Sequencing. The 28 channels available at 110 deg. will be auctioned

first. The sequence of future DBS auctions will be determined in

keeping with the Commission's general finding that the highest value

licenses should be auctioned first because the greater the value of the

licenses, the greater the cost to the public of delaying licensing. See

Second Report and Order, PP Docket No. 93-253, 59 FR 22980 (May 4,

1994). In the event that the Commission needs to assign separate blocks

of channels that it believes to be interdependent, it may choose to

utilize a simultaneous multiple round auction.

Bid Increments and Tie Bids. The Commission reserves the discretion

to establish, raise and lower minimum bid increments in the course of

DBS auctions. The Commission anticipates using larger percentage

minimum bid increments early in the auction and reducing the minimum

increment percentage as bidding activity falls. The Commission also

reserves the discretion to establish and change maximum bid increments

in the course of DBS auctions. Where a tie bid occurs, the high bidder

will be determined by the order in which the bids were received by the

Commission.

Minimum Opening Bid. The Commission believes that it would be

useful to have a minimum opening bid for the channels at 110 deg. to

help move the auction along and to increase the likelihood that the

public receives fair market value for the spectrum. A minimum opening

bid therefore will be established for the channels available at

110 deg., the amount of which will be announced by Public Notice. The

amount of this minimum opening bid will be determined using all

available information and taking into consideration the uncertainty as

to the value of the spectrum. No commenter has suggested a minimum

opening bid for the channels available at 148 deg., and it appears that

the value of these channels is substantially lower than the value of

the channels at 110 deg.. The Commission therefore will not set a

minimum opening bid for the channels at 148 deg.. The Commission also

reserves discretion to decide whether to set minimum opening bids for

individual auctions in the future as circumstances warrant.

Activity Rules. A bidder must be active in each round of the

auction or use an activity rule waiver. To be active in the current

round, a bidder must submit an acceptable bid in the current round or

have the high bid from the previous round. Bidders will be provided

with five activity rule waivers that may be used in any round during

the course of the auction. A bidder who is not active in a round and

has no remaining activity rule waivers will no longer be eligible to

bid on the construction permit being auctioned.

If a bidder is not active in a round, a waiver will be applied

automatically. An automatic waiver applied in a round in which there

are no new valid bids will not keep the auction open. A proactive

activity rule waiver is a waiver invoked by a bidder during the bid

submission period. If a bidder submits a proactive waiver in a round in

which no other bidding activity occurs, the auction will remain open.

The Commission retains the discretion to issue additional waivers

during the course of an auction for circumstances beyond a bidder's

control or in the event of a bid withdrawal, as discussed below. The

Commission also retains the flexibility to adjust by Public Notice

prior to an auction the number of waivers permitted.

Stopping Rules. A stopping rule specifies when an auction is over.

The auction will close after one round passes in which no new valid

bids or proactive activity rule waivers are submitted. The Commission

retains the discretion, however, to keep the auction open even if no

new valid bids and no proactive waivers are submitted. In the event

that the Commission exercises this discretion, the effect will be the

same as if a bidder had submitted a proactive waiver.

[[Page 65592]]

D. Procedural and Payment Issues

Application Procedures, Permittee Qualifications, and Payment for

Construction Permits Awarded by Competitive Bidding. The Commission's

general procedural and payment rules for auctions will be applied to

the DBS service, along with certain modifications. Applicants for DBS

auctions will be required to file a short-form application, FCC Form

175, prior to the auction in which they wish to participate. Filing

deadlines will be announced by Public Notice. If administratively

feasible, electronic filing of FCC Form 175 for the auction of spectrum

available at 110 deg. and 148 deg. will be allowed; filing procedures

will be announced by Public Notice. For subsequent DBS auctions, the

Commission will also announce by Public Notice how such forms should be

filed.

As discussed below, every DBS auction participant will be required

to submit to the Commission an upfront payment prior to commencement of

the auction. In addition, every auction winner will be required to

submit an amount sufficient to bring its total deposit up to 20 percent

of its winning bid within 10 business days of the announcement of

winning bidders. Winning bidders will be required to file information

in conformance with Part 100 of the Commission's Rules within 30 days

of the announcement of winning bidders. Winning bidders must submit, as

part of this post-auction application process, a signed statement

describing their efforts to date and future plans to come into

compliance with any applicable spectrum limitations, if they are not

already in compliance.

After reviewing a winning bidder's information supplied in

conformance with Part 100 and determining that the bidder is qualified

to be a permittee, and after verifying receipt of the bidder's 20

percent down payment, the Commission will announce the application's

acceptance for filing, thus triggering the filing window for petitions

to deny. If the Commission dismisses or denies any and all petitions to

deny, the Commission will issue an announcement to this effect, and the

winning bidder will then have five (5) business days to submit the

balance of its winning bid. If the bidder does so, the permit will be

granted subject to a condition, if necessary, that the permittee come

into compliance with any applicable spectrum limitations within twelve

(12) months of the final grant. The permittee may come into compliance

with applicable spectrum caps by either surrendering to the Commission

its excess channels or filing an application that would result in

divestiture of the excess channels. If the bidder fails to submit the

balance of the winning bid or the permit is otherwise denied, the

Commission will assess a default payment as set forth below and re-

auction the permit.

Upfront Payment. The Commission's approach to upfront payments

varies from auction to auction depending on a balancing of the goal of

encouraging bidders to submit serious bids with the desire to simplify

the bidding process and minimize implementation costs imposed on

bidders. In the Second Report and Order in the Competitive Bidding

proceeding, the Commission outlined a rationale for setting upfront

payments at roughly five percent of the estimated value of a winning

bid. Second Report and Order, PP Docket No. 93-253, 59 FR 22980 (May 4,

1994). A year ago, Tempo would have paid ACC $45 million for its

channels at 110 deg. and 148 deg.. In view of the fact that MCI has

stated it would bid $175 million for the channels at 110 deg., and in

the absence of any specific expression of interest in bidding on the

channels at 148 deg., it seems clear that the channels at 110 deg. are

more valuable than those at 148 deg.. Moreover, the Commission strongly

believes that the value of the channels has increased over the past

year. These considerations lead the Commission to set an upfront

payment of $10 million for the channels at 110 deg. and $2 million for

the channels at 148 deg.. The figure of $10 million is well above five

percent of $45 million (it is actually 22.2 percent). This reflects a

balancing of the assumed increase in value of the spectrum with the

fact that the channels at 110 deg. and 148 deg. were included in the

Tempo-ACC arrangement.

The magnitude of the upfront payment also reflects the Commission's

concern that, if the upfront payment is too low, there is a risk of

encouraging insincere bidding. Moreover, a $10 million payment should

not be an excessive burden for bidders because it will not be held for

a significant amount of time. In addition, $10 million is the lowest of

the specific upfront payment suggestions in the comments. With respect

to procedures for collecting upfront payments, the Commission will

accept only wire transfers for the auction of the channels available at

110 deg. and 148 deg..

Bid Withdrawal, Default and Disqualification. Any bidder who

withdraws a high bid during an auction before the Commission declares

bidding closed will be required to reimburse the Commission in the

amount of the difference between its high bid and the amount of the

winning bid the next time the construction permit is offered by the

Commission, if this subsequent winning bid is lower than the withdrawn

bid. No withdrawal payment will be assessed if the subsequent winning

bid exceeds the withdrawn bid. To prevent multiple withdrawals by the

same party, the Commission will bar a bidder who withdraws a bid from

continued participation in the auction of the withdrawn construction

permit.

In the event of a bid withdrawal, the Commission will reoffer the

construction permit in the next round. The offer price will be the

highest price at or above which bids were made in previous rounds by

three or more bidders. The Commission may at its discretion reduce this

price in subsequent rounds if it receives no bids at this price. Prior

to restarting the auction, the Commission will also restore the

eligibility of all bidders who have not withdrawn. After a withdrawal

the Commission will also issue each eligible bidder one activity rule

waiver in addition to any remaining waivers to provide additional time

for bid preparation and to avoid accidental disqualification.

A default payment will be assessed if a winning bidder fails to pay

the full amount of its 20 percent down payment or the balance of its

winning bid in a timely manner, or is disqualified after the close of

an auction. The amount of this default payment will be equal to the

difference between the defaulting auction winner's ``winning'' bid and

the amount of the winning bid the next time the construction permit is

offered for auction by the Commission, if the latter bid is lower. In

addition, the defaulting auction winner will be required to submit a

payment of three (3) percent of the subsequent winning bid or three (3)

percent of its own ``winning'' bid, whichever is less. If withdrawal,

default or disqualification involves gross misconduct,

misrepresentation or bad faith by an applicant, the Commission retains

the option to declare the applicant and its principals ineligible to

bid in future auctions, or take any other action the Commission deems

necessary, including institution of proceedings to revoke any existing

licenses held by the applicant.

E. Regulatory Safeguards

Transfer Disclosure Provisions. In order to accumulate data to

evaluate whether DBS authorizations are being issued for bids that fall

short of market value, the Commission will require any entity that

acquires a DBS license through competitive bidding and seeks

[[Page 65593]]

to transfer that license within six years of the initial license grant,

to file, together with its application for FCC consent to the transfer,

the associated contracts for sale, option agreements, management

agreements, or other documents disclosing the total consideration

received in return for the transfer of its license. Thus, the

information submitted should include not only a monetary purchase

price, but also any future, contingent, in-kind, or other

consideration. Any competitive concerns raised by the possible

disclosure of sensitive information can be addressed by the provisions

in Sections 0.457 and 0.459 of the Commission's rules, 47 CFR

Secs. 0.457, 0.459, providing for the nondisclosure of information.

Performance Requirements. In implementing auction procedures, the

Commission is required under Section 309(j) to include performance

requirements ``to ensure prompt delivery of service to rural areas, to

prevent stockpiling or warehousing of spectrum by licensees or

permittees, and to promote investment in and rapid deployment of new

technologies and services.'' 47 U.S.C. Sec. 309(j)(4)(B). The

Commission concludes that the performance requirements adopted as part

of the DBS service rules are sufficient to achieve these goals, and it

is unnecessary to adopt any further performance rules in connection

with auction procedures.

Rules Prohibiting Collusion. The Commission adopts the anti-

collusion rules proposed in the NPRM with one modification, as

explained below. Under these rules, bidders must identify on their

short-form applications any parties with whom they have entered into

any consortium arrangements, joint ventures, partnerships or other

agreements or understandings which relate in any way to the competitive

bidding process. Bidders are also required to certify on their short-

form applications that they have not entered into any explicit or

implicit agreements, arrangements or understandings of any kind with

any parties, other than those identified, regarding the amount of their

bid, bidding strategies or the particular properties on which they will

or will not bid. In the NPRM, the Commission proposed that after short-

form applications are filed, and prior to the time the winning bidder

has submitted the balance of its bid, all applicants should be

prohibited from cooperating, collaborating, discussing or disclosing in

any manner the substance of their bids or bidding strategies with other

applicants for construction permits serving the same or overlapping

geographic areas, unless such bidders are members of a bidding

consortium or other joint bidding arrangement identified on the

bidder's short-form application. The Commission adopts this

prohibition, but extends it only until the winning bidder has submitted

its 20 percent down payment, and not until the winning bidder has

submitted the balance of its bid. Even when an applicant has withdrawn

its application after the short-form filing deadline, the applicant may

not enter into a bidding agreement with another applicant bidding on

the same or overlapping geographic areas from which the first applicant

withdrew. In addition, once the short-form application has been filed,

a party with an attributable interest in one bidder may not acquire a

controlling interest in another bidder bidding for construction permits

in any of the same or overlapping geographic areas.

DBS applicants may (1) modify their short-form applications to

reflect formation of consortia or changes in ownership at any time

before or during an auction, provided that such changes do not result

in a change in control of the applicant, and provided that the parties

forming consortia or entering into ownership agreements have not

applied for construction permits for channels that may be used to cover

the same or overlapping geographic areas; and (2) make agreements to

bid jointly for construction permits after the filing of short-form

applications, provided that the parties to the agreement have not

applied for construction permits that may be used to serve the same or

overlapping geographic areas. In addition, the holder of a non-

controlling attributable interest in an entity submitting a short-form

application may acquire an ownership interest in, form a consortium

with, or enter into a joint bidding arrangement with other applicants

for construction permits that may be used to serve the same or

overlapping geographic areas after the filing of short-form

applications, provided that (1) the attributable interest holder

certifies to the Commission that it has not communicated and will not

communicate with any party concerning the bids or bidding strategies of

more than one of the applicants in which it holds an attributable

interest, or with which it has a consortium or joint bidding

arrangement, and which have applied for construction permits that may

be used to serve the same or overlapping geographic areas, and (2) the

arrangements do not result in any change in control of an applicant.

Winning bidders are required to submit a detailed explanation of

the terms and conditions and parties involved in any bidding consortia,

joint venture, partnership or other agreement or arrangement they have

entered into relating to the competitive bidding process prior to the

close of bidding. Such arrangements must have been entered into prior

to the filing of short-form applications as provided in the Order.

In adopting these rules, the Commission reminds potential bidders

for DBS construction permits that allegations of collusion in a

petition to deny may be investigated by the Commission or referred to

the U.S. Department of Justice for investigation. Bidders who are found

to have violated the antitrust laws or the Commission's rules while

participating in an auction may be subject to forfeiture of their down

payment or their full bid amount, as well as revocation of their

license, and may be prohibited from participating in future auctions.

F. Designated Entities

Because of the extremely high implementation costs associated with

satellite-based services, the Commission tentatively concluded in the

NPRM that no special provisions should be made for designated

entities--i.e., small businesses, rural telephone companies, and

businesses owned by members of minority groups and women--for the

channels currently available at 110 deg. and 148 deg.. The Commission

noted, however, that the expeditious implementation of DBS service at

the two orbital locations in question might indirectly benefit

designated entities by providing new opportunities for them to supply

programming and equipment. Having reviewed the comments submitted in

this proceeding, the Commission concludes that competition in the

delivery of DBS service requires auction rules that will allow

expedient assignment of the channels at 110 deg. and 148 deg.. Given

the fact that these channels offer enough capacity to provide full DBS

service in competition with current video providers, auction rules that

put these two construction permits in the hands of entities that can

quickly provide competition are in the public interest. No commenters

assert that small businesses could attract the capital necessary to

provide service on all the channels available at either 110 deg. or

148 deg..

Accordingly, the Commission will not adopt special provisions for

designated entities in the DBS auction for the channels at 110 deg. and

148 deg., and will not set aside spectrum in this auction for

[[Page 65594]]

``independents,'' as suggested by one commenter. Another commenter's

statement that small and minority businesses are developing services

for the DBS industry confirms the Commission's belief that a wide

variety of businesses will be involved in the DBS industry; however,

the Commission does not have a record before it sufficient to support

adoption of this commenter's suggestion that the Commission provide

incentives to encourage companies to team up with small and minority-

owned businesses. However, designated entity provisions for future DBS

auctions may be appropriate, particularly if spectrum is auctioned in

small blocks.

Paperwork Reduction Act

22. The Order contains new or modified information collections

subject to the Paperwork Reduction Act of 1995 (``PRA''), Pub. L. No.

104-13, which were proposed in the NPRM and were submitted to the

Office of Management and Budget (``OMB'') for approval. The Commission,

as part of its continuing effort to reduce paperwork burdens, also

invited the general public to comment on the information collections

proposed. The Commission received no comments on the proposed

collections, and adopts them as originally proposed. The effective date

of the new and modified rules that have been adopted falls after the

deadline for OMB action under the PRA.

47 CFR Part 100

OMB Approval Number: None.

Title: Direct Broadcast Satellite Service.

Form No.: None.

Type of Review: Approval of existing collection.

Respondents: Businesses or other for profit.

Number of Respondents: 8.

Estimated Time Per Response: 400 hours.

Total Annual Burden: 3200 hours.

Needs and Uses: In accordance with the Communications Act, the

information collected will be used by the Commission in granting DBS

authorizations, and in determining the technical and legal

qualifications of a satellite applicant, permittee or licensee.

Existing information collection requirements are set forth in Part 100

of the Commission's Rules and in Commission orders. See e.g., Inquiry

Into the Development of Regulatory Policy in Regard to Direct Broadcast

Satellites for the Period Following the 1983 Regional Administrative

Radio Conference, 90 FCC 2d 676 (1982), recon. denied, 53 RR 2d 1637

(1983); CBS, Inc., 98 FCC 2d 1056 (1983); Tempo Enterprises, Inc., 1

FCC Rcd 20, 21 (1986); and United States Satellite Broadcasting Co., 3

FCC Rcd 6858, 6861-62 (1988). Under the existing information collection

requirements in the Commission's Rules, an entity awarded a DBS

authorization would be required to submit the information required

pursuant to 47 CFR 100.13, 100.19, 100.21, 100.51. The Commission

proposed to require that DBS auction winners submit: (1) Ownership

information to determine compliance with Parts 1 and 100 of the

Commission's Rules; (2) a statement describing their efforts to comply

with the proposed spectrum aggregation limitations; (3) an explanation

of the terms and conditions and parties involved in any bidding

consortia, joint venture, partnership, or other agreement or

arrangement they enter into relating to the competitive bidding process

prior to the close of bidding; and (4) any agreements or contracts

pertaining to the transfer of the DBS authorization acquired through

auction during the six years following grant of the authorization.

Final Regulatory Flexibility Analysis

Pursuant to Section 603 of the Regulatory Flexibility Act, 5 U.S.C.

Sec. 603, an initial Regulatory Flexibility Analysis was incorporated

in the Notice of Proposed Rulemaking in IB Docket No. 95-168/PP Docket

No. 93-253. Written comments on the proposals in the Notice, including

the Regulatory Flexibility Analysis, were requested.

A. Need and Purpose of Rules

This rulemaking proceeding modifies the licensing and service rules

for the DBS service. It also adopts rules for competitive bidding in

the DBS service based on Section 309(j) of the Communications Act, 47

U.S.C. Sec. 309(j), which authorizes the Commission to use auctions to

select among mutually exclusive applications for authorizations under

certain circumstances. Our objectives have been to promote efficiency

and innovation in the licensing and use of the electromagnetic

spectrum, to develop competitive and innovative communications systems,

and to promote effective and adaptive regulations.

B. Issues Raised by the Public in Response to the Initial Analysis

No comments were received specifically in response to the Initial

Regulatory Flexibility Analysis. We have, however, taken into account

all issues raised by the public in response to the proposed rules. In

certain instances, we have eliminated or modified rules in response to

those comments.

C. Significant Alternatives Considered

We have attempted to balance all the commenters' concerns with our

public interest mandate under the Communications Act in order to update

the existing ``interim'' rules in the DBS service. We will continue to

examine these rules in an effort to eliminate unnecessary regulations

and to minimize significant economic impact on small businesses.

Ordering Clauses

Accordingly, IT IS ORDERED that Part 100 of the Commission's Rules

is amended as specified below.

24. It is Further Ordered that the one-time auction spectrum

limitation discussed above Will be Implemented in connection with the

auction of the construction permits for the use of 28 DBS channels at

the 110 deg. orbital location and 24 channels at the 148 deg. orbital

location.

25. It is Further Ordered that the amendments to Part 100 adopted

herein and the one-time auction spectrum limitation discussed above

Will Become Effective January 19, 1996. This action is taken pursuant

to Sections 1, 4(i), 4(j), 7, and 309(j) of the Communications Act of

1934, as amended, 47 U.S.C. Secs. 151, 154(i), 154(j), 157, and 309(j).

26. It is Further Ordered that, pursuant to 47 U.S.C. Sec. 155(c),

the Chief, Wireless Telecommunications Bureau, is granted Delegated

Authority to implement and modify auction procedures in the DBS

service, including the general design and timing of an auction, the

number of authorizations to be offered in an auction, the manner of

submitting bids, minimum opening bids and bid increments, activity and

stopping rules, and application and payment requirements, and to

announce such procedures by Public Notice.

27. It is Further Ordered that condition (a) placed on the

construction permit of Tempo Satellite, Inc. in Tempo Satellite, Inc.,

7 FCC Rcd 2728, 2732 (1992), which imposed certain marketing

restrictions, is Rescinded.

28. It is Further Ordered that the proceeding in IB Docket No. 95-

168 is hereby terminated.

List of Subjects in 47 CFR Part 100

Radio, Satellites.

[[Page 65595]]

Federal Communications Commission.

William F. Caton,

Acting Secretary.

Rule Changes

Part 100 of Chapter I of Title 47 of the Code of Federal

Regulations is amended as follows:

PART 100--DIRECT BROADCAST SATELLITE SERVICE

1. The authority citation for Part 100 is revised to read as

follows:

Authority: 47 U.S.C. 154, 303, 309, and 554, unless otherwise

noted.

2. Section 100.17 is revised to read as follows:

Sec. 100.17 License term.

(a) Licenses for non-broadcast facilities governed by this part

will be issued for a period of ten (10) years. Licenses for broadcast

facilities governed by this part will be issued for a period of five

(5) years.

3. Section 100.19 is revised to read as follows:

Sec. 100.19 Due diligence requirements.

(a) All persons granted DBS authorizations shall proceed with

diligence in constructing DBS systems. Permittees shall be required to

complete contracting for construction of the satellite station(s)

within one year of the grant of the construction permit. The satellite

stations shall also be required to be in operation within six years of

the construction permit grant.

(b) In addition to the requirements stated in paragraph (a) of this

section, all persons who receive new or additional DBS construction

permits after January 19, 1996 shall complete construction of the first

satellite in their respective DBS systems within four years of the

grant of the construction permit. All satellite stations in such a DBS

system shall be in operation within six years of the grant of the

construction permit.

(c) DBS permittees and licensees shall be required to proceed

consistent with all applicable due diligence obligations, unless

otherwise determined by the Commission upon proper showing in any

particular case. Transfer of control of the construction permit shall

not be considered to justify extension of these deadlines.

4. A new Section 100.53 is added to Subpart D to read as follows:

Sec. 100.53 Geographic service requirements.

(a) Those holding DBS permits or licenses as of January 19, 1996

must either:

(1) Provide DBS service to Alaska and Hawaii from one or more

orbital locations before the expiration of their current

authorizations; or

(2) Relinquish their western DBS orbital/channel assignments at the

following orbital locations: 148 deg. W.L., 157 deg.W.L., 166 deg.

W.L., and 175 deg. W.L.

(b) Those acquiring DBS authorizations after January 19, 1996 must

provide DBS service to Alaska and Hawaii where such service is

technically feasible from the acquired orbital location.

A new subpart E consisting of Secs. 100.71 through 100.80 is added

to Part 100 to read as follows:

Subpart E--Competitive Bidding Procedures for DBS

Sec.

100.71 DBS subject to competitive bidding.

100.72 Competitive bidding design for DBS construction permits.

100.73 Competitive bidding mechanisms.

100.74 Withdrawal, default and disqualification payments.

100.75 Bidding application (FCC Form 175 and 175-S Short-form).

100.76 Submission of upfront payments and down payments.

100.77 Long-form applications.

100.78 Permit grant, denial, default, and disqualification.

100.79 Prohibition of collusion.

100.80 Transfer disclosure.

Sec. 100.71 DBS subject to competitive bidding.

Mutually exclusive initial applications to provide DBS service are

subject to competitive bidding procedures. The general competitive

bidding procedures found in Part 1, Subpart Q of this chapter, will

apply unless otherwise provided in this part.

Sec. 100.72 Competitive bidding design for DBS construction permits.

(a) The Commission will employ the following competitive bidding

designs when choosing from among mutually exclusive initial

applications to provide DBS service:

(1) Single round sealed bid auctions (either sequential or

simultaneous);

(2) Sequential oral auctions;

(3) Combined sealed bid-oral auctions;

(4) Sequential multiple round electronic auctions; or

(5) Simultaneous multiple round auctions.

(b) The Wireless Telecommunications Bureau may design and test

alternative procedures. The Wireless Telecommunications Bureau will

announce by Public Notice before each auction the competitive bidding

design to be employed in a particular auction.

(c) The Wireless Telecommunications Bureau may use combinatorial

bidding, which would allow bidders to submit all or nothing bids on

combinations of construction permits, in addition to bids on individual

construction permits. The Commission may require that to be declared

the high bid, a combinatorial bid must exceed the sum of the individual

bids by a specified amount. Combinatorial bidding may be used with any

type of auction design.

(d) The Wireless Telecommunications Bureau may use single combined

auctions, which combine bidding for two or more substitutable

construction permits and award construction permits to the highest

bidders until the available construction permits are exhausted. This

technique may be used in conjunction with any type of auction.

Sec. 100.73 Competitive bidding mechanisms.

(a) Sequencing. In sequential auctions, the Wireless

Telecommunications Bureau will generally auction DBS construction

permits in order of their estimated value, with the highest value

construction permit being auctioned first. The Wireless

Telecommunications Bureau may vary the sequence in which DBS

construction permits will be auctioned.

(b) Grouping. All DBS channels available for a particular orbital

location will be auctioned as a block, unless the Wireless

Telecommunications Bureau announces, by Public Notice prior to the

auction, an alternative auction scheme. In the event the Wireless

Telecommunications Bureau uses either a simultaneous multiple round

competitive bidding design or combinatorial bidding, the Wireless

Telecommunications Bureau will determine which construction permits

will be auctioned simultaneously or in combination.

(c) Bid Increments and Tie Bids. The Wireless Telecommunications

Bureau may, by announcement before or during an auction, establish,

raise or lower minimum bid increments in dollar or percentage terms.

The Wireless Telecommunications Bureau may establish and change maximum

bid increments during an auction. The Wireless Telecommunications

Bureau may also establish by Public Notice a suggested opening bid or a

minimum opening bid on each construction permit. Where a tie bid

occurs, the high bidder will be determined by the order in which the

bids were received by the Commission.

(d) Stopping Rules. The Wireless Telecommunications Bureau may

establish stopping rules before or during multiple round auctions in

order to terminate an auction within a reasonable time.

[[Page 65596]]

(e) Activity Rules. The Wireless Telecommunications Bureau may

establish activity rules which require a minimum amount of bidding

activity. In the event that the Wireless Telecommunications Bureau

establishes an activity rule in connection with a simultaneous multiple

round auction or sequential multiple round electronic auction, each

bidder will be automatically granted a certain number of waivers of

such rule during the auction.

Sec. 100.74 Withdrawal, default and disqualification payments.

(a) When the Commission conducts a sequential multiple round

electronic auction or simultaneous multiple round auction pursuant to

Sec. 100.72, the Wireless Telecommunications Bureau will impose

payments on a bidder who withdraws a high bid during the course of the

auction, who defaults on payments due, or who is disqualified.

(b) A bidder who withdraws a high bid during the course of such an

auction will be assessed a payment equal to the difference between the

amount bid and the amount of the winning bid the next time the

construction permit is offered for auction by the Commission. No

withdrawal payment will be assessed if the subsequent winning bid

exceeds the withdrawn bid. This payment amount will be deducted from

any upfront payments or down payments that the withdrawing bidder has

deposited with the Commission.

(c) If a high bidder defaults or is disqualified after the close of

such an auction, the defaulting bidder will be subject to the payment

in paragraph (b) of this section plus an additional payment equal to

three (3) percent of the subsequent winning bid. If the subsequent

winning bid exceeds the defaulting bidder's bid amount, the 3 percent

payment will be calculated based on the defaulting bidder's bid amount.

These amounts will be deducted from any upfront payments or down

payments that the defaulting or disqualified bidder has deposited with

the Commission.

(d) When the Commission conducts a sequential multiple round

electronic auction, the Wireless Telecommunications Bureau will bar a

bidder who withdraws a bid from continued participation in the auction

of the withdrawn construction permit. When the Commission conducts any

other type of auction, the Wireless Telecommunications Bureau may bar a

bidder who withdraws a bid from continued participation in the bidding

for the same construction permit or other construction permits offered

in the same auction.

(e) When the Commission conducts any type of auction other than

those provided for in paragraphs (a), (b), (c), and (d) of this

section, the Wireless Telecommunications Bureau may modify the payments

to be paid in the event of bid withdrawal, default or disqualification;

provided, however, that such payments shall not exceed the payments

specified above.

Sec. 100.75 Bidding application (FCC Form 175 and 175-S Short-form).

All applicants to participate in competitive bidding for DBS

construction permits must submit applications on FCC Form 175 pursuant

to the provisions of Sec. 1.2105 of this chapter. The Wireless

Telecommunications Bureau will issue a Public Notice announcing the

availability of DBS construction permits and the date of the auction

for those construction permits. This Public Notice also will specify

the date on or before which applicants intending to participate in a

DBS auction must file their applications in order to be eligible for

that auction, and it will contain information necessary for completion

of the application as well as other important information such as any

upfront payment that must be submitted, and the location where the

application must be filed.

Sec. 100.76 Submission of upfront payments and down payments.

(a) Bidders in DBS auctions will be required to submit an upfront

payment in accordance with Sec. 1.2106 of this chapter, the amount of

which will be announced by Public Notice prior to each auction.

(b) Winning bidders in a DBS auction must submit a down payment to

the Commission in an amount sufficient to bring their total deposits up

to 20 percent of their winning bids within ten (10) business days of

the announcement of winning bidders.

Sec. 100.77 Long-form applications.

Each winning bidder will be required to submit the information

described in Secs. 100.13, 100.21, and 100.51 within thirty (30) days

after being notified by Public Notice that it is the winning bidder.

Each winner also will be required to file, by the same deadline, a

signed statement describing its efforts to date and future plans to

come into compliance with any applicable spectrum limitations, if it is

not already in compliance. Such information shall be submitted pursuant

to the procedures set forth in Sec. 100.13 and any associated Public

Notices. Only auction winners will be eligible to file applications for

DBS construction permits in the event of mutual exclusivity between

applicants filing a short-form application.

Sec. 100.78 Permit grant, denial, default, and disqualification.

(a) Each winning bidder will be required to pay the balance of its

winning bid in a lump sum payment within five (5) business days

following Public Notice that the construction permit is ready for

grant.

(b) A bidder who withdraws its bid during the course of an auction,

defaults on a payment due, or is disqualified, will be subject to the

payments specified in Sec. 100.74.

Sec. 100.79 Prohibition of collusion.

(a) Bidders are required to identify on their short-form

applications any parties with whom they have entered into any

consortium arrangements, joint ventures, partnerships or other

agreements or understandings which relate in any way to the competitive

bidding process. Bidders are also required to certify on their short-

form applications that they have not entered into any explicit or

implicit agreements, arrangements or understandings of any kind with

any parties, other than those identified, regarding the amount of their

bid, bidding strategies or the particular properties on which they will

or will not bid.

(b)(1) Except as provided in paragraphs (b)(2), (b)(3) and (b)(4)

of this section, after the filing of short-form applications, all

applicants are prohibited from cooperating, collaborating, discussing

or disclosing in any manner the substance of their bids or bidding

strategies, or discussing or negotiating settlement agreements, with

other applicants until after the high bidder submits its downpayment,

unless such applicants are members of a bidding consortium or other

joint bidding arrangement identified on the bidder's short-form

application.

(2) Applicants may modify their short-form applications to reflect

formation of consortia or changes in ownership at any time before or

during an auction, provided that such changes do not result in a change

in control of the applicant, and provided that the parties forming

consortia or entering into ownership agreements have not applied for

construction permits that may be used to serve the same or overlapping

geographic areas. Such changes will not be considered major

modifications of the application.

[[Page 65597]]

(3) After the filing of short-form applications, applicants may

make agreements to bid jointly for construction permits, provided that

the parties to the agreement have not applied for construction permits

that may be used to serve the same or overlapping geographic areas.

(4) After the filing of short-form applications, a holder of a non-

controlling attributable interest in an entity submitting a short-form

application may acquire an ownership interest in, form a consortium

with, or enter into a joint bidding arrangement with, other applicants

for construction permits that may be used to serve the same or

overlapping geographic areas, provided that:

(i) The attributable interest holder certifies to the Commission

that it has not communicated and will not communicate with any party

concerning the bids or bidding strategies of more than one of the

applicants in which it holds an attributable interest, or with which it

has a consortium or joint bidding arrangement, and which have applied

for construction permits that may be used to serve the same or

overlapping geographic areas; and

(ii) The arrangements do not result in any change in control of an

applicant.

(5) Applicants must modify their short-form applications to reflect

any changes in ownership or in the membership of consortia or joint

bidding arrangements.

(c) Winning bidders are required to submit a detailed explanation

of the terms and conditions and parties involved in any bidding

consortia, joint venture, partnership or other agreement or arrangement

they have entered into relating to the competitive bidding process

prior to the close of bidding. Such arrangements must have been entered

into prior to the filing of short-form applications pursuant to

paragraphs (a) and (b) of this section.

Sec. 100.80 Transfer disclosure.

Any entity that acquires a DBS license through competitive bidding,

and seeks to transfer that license within six years of the initial

license grant, must file, together with its application for FCC consent

to the transfer, the associated contracts for sale, option agreements,

management agreements, or other documents disclosing the total

consideration received in return for the transfer of its license. The

information submitted must include not only a monetary purchase price,

but also any future, contingent, in-kind, or other consideration.

[FR Doc. 95-30938 Filed 12-19-95; 8:45 am]

BILLING CODE 6712-01-P