Auction of Local Multipoint Distribution Service; Auction Notice and Filing Requirements for 986 Basic Trading Area (``BTA'') Licenses in the 28 GHz and 31 GHz Bands, Scheduled for December 10, 1997

FEDERAL COMMUNICATIONS COMMISSION

Auction of Local Multipoint Distribution Service; Auction Notice

and Filing Requirements for 986 Basic Trading Area (``BTA'') Licenses

in the 28 GHz and 31 GHz Bands, Scheduled for December 10, 1997

[DA 97-2081]

Released September 25, 1997

I. Introduction

Local Multipoint Distribution Service (``LMDS'') Licenses to Be

Auctioned: The Federal Communications Commission (``FCC'' or

``Commission'') will hold an auction for 986 licenses to provide LMDS

in the 28 GHz and 31 GHz bands. Two licenses will be offered in each of

493 BTAs and BTA-like areas in the United States. One license, in

frequency block A, will authorize service on 1,150 megahertz of

spectrum in both the 28 GHz and 31 GHz bands. The second license,

frequency block B, will authorize service on 150 megahertz of spectrum

in the 31 GHz band. Each frequency block encompasses the following

spectrum:

Block A (1,150 megahertz): 28 GHz band: 27,500-28,350 MHz and 29,100-

29,250 MHz and 31 GHz band: 31,075-31,225 MHz

Block B (150 megahertz): 31 GHz band: 31,000-31,075 MHz and 31,225-

31,300 MHz

Note: Operations to take place in the 29,100--29,250 MHz band

are governed by 47 CFR 101.103(g) and (h), 101.113(c), 101.133(d),

and 101.147(t), which are new provisions designed to facilitate the

sharing of this spectrum by LMDS, GSO/FSS gateways, and MSS feeder

link licensees. These provisions allow only hub-to-subscribers

transmissions by LMDS licensees in this band.

Auction Date: The auction will commence on December 10, 1997. The

initial schedule for bidding will be announced by public notice at

least one week before the start of the auction. Unless otherwise

announced, bidding will be conducted on each business day until bidding

has stopped on all licenses.

Auction Title: LMDS--Auction No. 17.

Bidding Methodology: Simultaneous multiple round bidding. Bidding

will be permitted only from remote locations, either electronically (by

computer) or telephonically.

Pre-Auction Deadlines:

Auction Seminar--October 30, 1997

Short-Form Application (FCC Form 175) November 17, 1997, 5:30

p.m. ET (Applications are not due on November 10 as previously

announced on July 30, 1997)

Upfront Payments (via wire transfer)--December 1, 1997, 6:00

p.m. ET (Payments are not due on November 24 as previously announced on

July 30, 1997)

Orders for Remote Bidding Software--December 1, 1997, 5:30

p.m. ET

Mock Auction--December 8, 1997

Telephone Contacts:

FCC National Call Center--888-CALL-FCC (888-225-5322) (For

Bidder Information Packages, General Auction Information, and Seminar

Registration, press option #2 at the prompt)

FCC Technical Support Hotline--202-414-1250

Participation: Those wishing to participate in the auction must:

Submit a short-form application (FCC Form 175) by the above-

listed deadline.

Submit an upfront payment and an FCC Remittance Advice Form

(FCC Form 159) by the above-listed deadline.

Comply with all provisions outlined in this Public Notice.

Prohibition of Collusion: To ensure the competitiveness of the

auction process, the Commission's rules prohibit applicants for the

same BTA from communicating with each other during the auction about

bids, bidding strategies, or settlements. This prohibition begins with

the filing of short-form applications, and ends when winning bidders

submit their first down payments. The only exception is where

applicants enter into a bidding agreement before filing their short-

form applications, and disclose the existence of the agreement in their

short-form applications. See 47 CFR 1.2105(c).

Bidder Information Package: More complete details about this

auction are contained in a Bidder Information Package. The Commission

will provide one copy to each company free of charge. Additional copies

may be ordered at a cost of $16.00 each, including postage, payable by

Visa or Master Card, or by check payable to ``Federal Communications

Commission'' or ``FCC.'' To place an order, contact the FCC National

Call Center at 888-CALL-FCC (888-225-5322, press option #2 at the

prompt). Prospective bidders who have already contacted the FCC

expressing an interest in this auction will receive a Bidder

Information Package in two to three weeks, and need not call again

unless they wish to order additional copies.

Relevant Authority: Prospective bidders must familiarize themselves

thoroughly with the Commission's rules relating to LMDS, contained in

title 47, part 101 of the Code of Federal Regulations, and those

relating to application and auction procedures, contained in title 47,

part 1 of the Code of Federal Regulations.

Prospective bidders must also be thoroughly familiar with the

procedures, terms and conditions (collectively, ``Terms'') contained in

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

4, 1994); the Second Memorandum Opinion and Order in PP Docket No. 93-

253, 59 FR 44272 (August 26, 1994); the Erratum to the Second

Memorandum Opinion and Order in PP Docket No. 93-253 (released October

19, 1994); the First Report and Order, 61 FR 44177 (August 28, 1996),

and Fourth Notice of Proposed Rule Making in CC Docket No. 97-297, 61

FR 39425 (July 29, 1996); the Second Report and Order, 62 FR 23148

(April 29, 1997), Order on Reconsideration, 62 FR 28373 (May 23, 1997),

and Fifth Notice of Proposed Rule Making in CC Docket No. 96-297, 62 FR

16514 (April 7, 1997) (``LMDS Second R&O''); and the Second Order on

Reconsideration in CC Docket No. 97-297, 62 FR 48787 (September 17,

1997) (collectively referred to as the ``Relevant Orders'').

The Terms contained in the Commission's rules, Relevant Orders,

Public Notices and Bidder Information Package are not negotiable.

Prospective bidders should review these auction documents thoroughly

prior to the auction to make certain that they understand all of the

provisions and are willing to be bound by all of the Terms before

participating in the auction.

Potential bidders should also be aware that petitions for

reconsideration of the Commission's actions in the LMDS Second R&O have

been filed; that several, but not all, matters raised in petitions for

reconsideration have been

[[Page 53630]]

addressed in the Second Order on Reconsideration; and that the Terms

adopted therein are therefore subject to change upon reconsideration or

appeal. There are also petitions for reconsideration filed against the

Commission's actions in the First Report and Order, these petitions are

pending an order on reconsideration.

The Commission may amend or supplement the information contained in

our Public Notices or the Bidder Information Package at any time, and

will issue public notices to convey any new or supplemental information

to bidders. It is the responsibility of all prospective bidders to

remain current with all Commission rules and with all public notices

pertaining to this auction. Copies of most Commission documents,

including public notices, can be retrieved from the FCC Internet node

via anonymous [email protected] or the FCC World Wide Web site at http://

www.fcc.gov. Additionally, documents may be obtained for a fee by

calling the Commission's copy contractor, International Transcription

Service, Inc., at 202-857-3800.

Incumbent Licensees: Although LMDS operations are permitted in the

31,000--31,075 MHz and 31,225--31,300 MHz bands, incumbent city

licensees and private business users operating in these two segments

are entitled to protection against harmful interference from any LMDS

operation in these blocks. LMDS service providers will be entitled to

interference protection from any other presently-authorized primary

users in the 31,075--31,225 MHz bands.

Block A of the New York BTA is encumbered by a pre-existing

licensee in the New York Primary Metropolitan Statistical Area. The

incumbent licensee, CellularVision of New York, is entitled to

interference protection.

Reminder to potential Non-geostationary Mobile Satellite Service

applicants/licensees: Section 101.103(h) of the Commission's rules

requires that no more than 15 days after the release of this Public

Notice, NGSO-MSS feeder link earth station complex applicants/licensees

planning to operate in the 29,100--29,250 MHz band pursuant to

Sec. 25.257 of the Commission's rules, file with the Commission a set

of geographical coordinates consistent with section 101.103(h)(2) of

the Commission's rules. This information should be directed to the

attention of: Robert James, Federal Communications Commission, Wireless

Telecommunications Bureau 1919 M Street, NW, Room 8102, Washington,

D.C. 20554.

Other Proceedings: Currently pending in the U.S. Court of Appeals

for the D.C. Circuit is a consolidated petition for review of the LMDS

Second R&O and Order on Reconsideration. See James L. Melcher v.

Federal Communications Commission and United States of America, Case

No. 93-110 (and consolidated cases) dealing with two issues:

eligibility restrictions for incumbent local exchange carriers

(``ILECs'') to own LMDS licenses ``in-region,'' and the denial of

petitions for reconsideration of the 971 waiver applications for

service in the 28 GHz band which were previously dismissed. Also

pending before the Commission are several petitions for reconsideration

of the LMDS Second R&O and Order on Reconsideration dealing with the

issues of: the eligibility restriction on ILECs; the allocation of the

31 GHz band to LMDS; the reinstatement of dismissed applications in the

31 GHz band; the application of a new frequency tolerance to the 31 GHz

band; and further reconsideration of the 971 waiver applications for

service in the 28 GHz band which were previously dismissed; as well as

petitions for clarification of certain technical and service rules. A

memorandum opinion and order on reconsideration responding to these

petitions will be released in the near future.

Bidder Alerts: All applicants must certify on their FCC Form 175

applications under penalty of perjury that they are legally,

technically, financially and otherwise qualified to hold a license, and

not in default on any payment for Commission licenses (including down

payments) or delinquent on any non-tax debt owed to any Federal agency.

Prospective bidders are reminded that submission of a false

certification to the Commission is a serious matter that may result in

severe penalties, including monetary forfeitures, license revocations,

exclusion from participation in future auctions, and/or criminal

prosecution.

The FCC makes no representations or warranties about the use of

this spectrum for particular services. Applicants should be aware that

an FCC auction represents an opportunity to become an FCC licensee in

this service, subject to certain conditions and regulations. An FCC

auction does not constitute an endorsement by the FCC of any particular

services, technologies or products, nor does an FCC license constitute

a guarantee of business success. Applicants should perform their

individual due diligence before proceeding as they would with any new

business venture.

As is the case with many business investment opportunities, some

unscrupulous entrepreneurs may attempt to use the LMDS auction to

deceive and defraud unsuspecting investors. Common warning signals of

fraud include the following:

The first contact is a ``cold call'' from a telemarketer,

or is made in response to an inquiry prompted by a radio or television

infomercial.

The offering materials used to invest in the venture

appear to be targeted at IRA funds, for example by including all

documents and papers needed for the transfer of funds maintained in IRA

accounts.

The amount of the minimum investment is less than $25,000.

The sales representative makes verbal representations

that: (a) the Internal Revenue Service (``IRS''), Federal Trade

Commission (``FTC''), Securities and Exchange Commission (``SEC''),

FCC, or other government agency has approved the investment; (b) the

investment is not subject to state or federal securities laws; or (c)

the investment will yield unrealistically high short-term profits. In

addition, the offering materials often include copies of actual FCC

releases, or quotes from FCC personnel, giving the appearance of FCC

knowledge or approval of the solicitation.

Information about deceptive telemarketing investment schemes is

available from the FTC at 202-326-2222 and from the SEC at 202-942-

7040. Complaints about specific deceptive telemarketing investment

schemes should be directed to the FTC, the SEC, or the National Fraud

Information Center at 800-876-7060. Consumers who have concerns about

specific LMDS proposals may also call the FCC National Call Center at

888-CALL-FCC (888-225-5322).

II. Bidder Eligibility and Small Business Provisions

A. General Eligibility Criteria

As described above, this auction offers two licenses: one license

for 1,150 megahertz of spectrum in the 28 GHz and 31 GHz bands; and one

license for 150 megahertz of spectrum in the 31 GHz band; in each of

493 BTA and BTA-like areas, for a total of 986 licenses. General

eligibility to provide LMDS service, subject to certain restrictions

outlined below, is afforded to entities which are not precluded under

47 CFR 101.7, 101.1001, and 101.1003.

(1) Eligibility Restrictions

(a) 1,150 megahertz licenses.

ILECs and cable television companies are subject to certain

restrictions on their eligibility to own an attributable interest in

the 1,150 megahertz LMDS

[[Page 53631]]

license in their authorized or franchised service areas (``in-

region''). An incumbent is defined as ``in-region'' if its authorized

service area represents 10 percent or more of the population of the

BTA. A 20 percent or greater ownership level constitutes an

attributable interest in a license. ILECs and cable companies are

permitted to participate fully in the auction of the 1,150 megahertz

LMDS licenses, but are required to divest any overlapping interests

within 90 days if they win a license at the auction. The eligibility

restrictions terminate on the third anniversary of the effective date

of the LMDS rules. These restrictions may be extended beyond the three-

year period, if, upon a review at the end of this period, the

Commission determines that sufficient competition has not developed.

The Commission may waive the restriction in individual cases upon a

showing of good cause.

(b) 150 megahertz licenses.

All entities that meet the Commission's general eligibility

criteria, including ILECs and cable television companies, are eligible

to own attributable interests in the 150 megahertz license in any BTA.

(2) Determination of Revenues

For purposes of determining which entities qualify as very small

businesses, small businesses, and entrepreneurs, the Commission will

attribute to the applicant the gross revenues of all of its controlling

principals and affiliates. For purpose of this auction, the Commission

will not impose specific equity requirements on controlling principals.

However, in order to qualify as a very small business, small business,

or entrepreneur an applicant's qualifying principals must maintain

control of the applicant. The term ``control'' includes both de facto

and de jure control of the applicant. Typically, de jure control is

evidenced by ownership of at least 50.1 percent of an entity's voting

stock. De facto control is determined on a case-by-case basis. The

following are some common indicia of control:

The entity constitutes or appoints more than 50 percent of

the board of directors or management committee;

The entity has authority to appoint, promote, demote, and

fire senior executives that control the day-to-day activities of the

licensee; or

The entity plays an integral role in management decisions.

(3) Application Showing

Applicants should note that they will be required to file

supporting documentation to establish that they satisfy the eligibility

requirements for this auction. See 47 CFR 1.2105 and 101.1109.

B. Bidding Credits

Qualifying LMDS applicants are eligible for bidding credits. The

size of an LMDS bidding credit depends on the annual gross revenues of

the bidder and its controlling principles and affiliates, as averaged

over the preceding three years:

A bidder with gross annual revenues of not more than $15

million receives a 45 percent discount on its winning bids for LMDS

licenses;

A bidder with gross annual revenues of more than $15

million but not more than $40 million receives a 35 percent discount on

its winning bids for LMDS licenses; and

A bidder with gross annual revenues of more than $40

million but not more than $75 million receives a 25 percent discount on

its winning bids for LMDS licenses.

Bidding credits are not cumulative: applicants that qualify receive

either the 25 percent, the 35 percent, or the 45 percent bidding

credit, but not all. The definitions of very small business, small

business, and entrepreneur (including calculation of gross annual

revenue) are set forth in 47 CFR 101.1112.

LMDS bidders should note that unjust enrichment provisions apply to

winning bidders that use bidding credits and subsequently assign or

transfer control of their BTA licenses to an entity not qualifying for

the same levels of bidding credits. See 47 CFR 101.1107(e).

III. Pre-Auction Procedures

A. Short-Form Application (FCC Form 175)--Due November 17, 1997

In order to be eligible to bid in this auction, applicants must

first submit an FCC Form 175 application. This application must be

received at the Commission by 5:30 p.m. ET on November 17, 1997. Late

applications will not be accepted.

There is no application fee required when filing an FCC Form 175.

However, to be eligible to bid, an applicant must submit an upfront

payment. See Part 3.C, infra.

(1) Filing Options

Auction applicants are strongly encouraged to file their

applications electronically in order to take full advantage of the

greater efficiencies and convenience of electronic filing, bidding and

access to bidding data. For example, electronic filing enables the

applicant to: (a) receive interactive feedback while completing the

application; and (b) receive immediate acknowledgement that the FCC

Form 175 has been submitted for filing. In addition, only those

applicants who file electronically will have the option of bidding

electronically. However, manual filing (via hard copy) is also

permitted. Please note that manual filers will not be permitted to bid

electronically and must bid telephonically, unless the FCC Form 175 is

amended electronically prior to the resubmission date for incomplete or

deficient applications. Applicants who file electronically may make

amendments to their applications until the filing deadline. The

following is a brief description of each filing method.

(a) Electronic Filing.

Applicants wishing to file electronically may generally do so on a

24-hour basis beginning October 27, 1997. All the information required

to file the FCC Form 175 electronically (i.e., software and help files)

will be available over both the Internet and the FCC's Bulletin Board

System (``BBS'').

(b) Manual Filing.

Auction applicants will be permitted to file their FCC Form 175

applications in hard copy. When any manually filed FCC Form 175 and

175-S exceeds five pages in length, the FCC additionally requires that

all attachments be submitted on a 3.5-inch diskette, or the entire

application be filed in a microfiche version. Manual filers must use

the September 1997 version of FCC Form 175 and the October 1995 edition

of the 175-S (if applicable). Earlier versions of the FCC Form 175 will

not be accepted for filing. Copies of FCC Forms 175 and 175-S can be

obtained by calling 202-418-FORM.

Manual applications may be submitted by hand delivery (including

private ``overnight'' courier), or by U.S. mail (certified mail with

return receipt recommended), addressed to: FCC Form 175 Filing, Auction

No. 17, Federal Communications Commission, Auctions & Industry Analysis

Division, 1270 Fairfield Road, Gettysburg, PA 17325-7245.

Note: Manual applications delivered to any other locations will

not be accepted.

(2) Completion of the FCC Form 175

Applicants should carefully review 47 CFR 1.2105 and 101.1104, and

must complete all items on the FCC Form 175 (and 175-S, if applicable).

Failure to sign a manually filed FCC Form 175 or failure to submit

the required ownership information (for both electronic and manual

filers) will result in dismissal of the application and loss of the

ability to participate in the auction. Only original signatures

[[Page 53632]]

will be accepted for manually filed applications.

(3) Electronic Review of FCC Form 175

The FCC Form 175 review software may be used to review and print

applicants' FCC Form 175 applications. In other words, applicants who

file electronically may review their own completed FCC Forms 175.

Applicants also have access to view other applicants' completed FCC

Forms 175, after the filing deadline has passed and the FCC has issued

a public notice explaining the status of the applications. There is a

fee of $2.30 per minute for accessing this system.

B. Application Processing and Minor Corrections

After the deadline for filing the FCC Form 175 applications has

passed, the FCC will process all timely applications to determine which

are acceptable for filing, and subsequently will issue a public notice

identifying: (1) Those applications accepted for filing (including FCC

account numbers and the licenses for which they applied); (2) those

applications rejected; and (3) those applications that have minor

defects that may be corrected, and the deadline for filing such

corrected applications.

As described more fully in the Commission's rules, after the

November 17, 1997, short-form filing deadline, applicants may make only

minor corrections to their FCC Form 175 applications. Applicants will

not be permitted to make major modifications to their applications

(e.g., change their license selections, change the certifying official

or change control of the applicant). See 47 CFR 1.2105.

C. Upfront Payments--Due December 1, 1997

In order to be eligible to bid in the auction, applicants must

submit an upfront payment accompanied by an FCC Remittance Advice (FCC

Form 159). Manual filers must use the July 1997 version of FCC Form

159. Earlier versions of this form will not be accepted. All upfront

payments must be received at Mellon Bank in Pittsburgh, Pennsylvania,

by 6:00 p.m. ET on December 1, 1997.

Please note that:

All payments must be made in U.S. dollars.

All payments must be made by wire transfer. No other form

of payment will be accepted.

Upfront payments for Auction No. 17 go to a lockbox number

different from the ones used in previous FCC auctions, and different

from the lockbox number to be used for post-auction payments.

Failure to deliver the upfront payment by the December 1,

1997 deadline will result in dismissal of the application and

disqualification from participation in the auction.

(1) Wire Transfers

For this auction, the FCC requires applicants to make their upfront

payments by wire transfer, which experience has shown provides the

greatest reliability and efficiency. Wire transfer payments must be

received by 6:00 p.m. ET on December 1, 1997. To avoid untimely

payments, applicants should discuss arrangements (including bank

closing schedules) with their banker several days before they plan to

make the wire transfer, and allow sufficient time for the transfer to

be initiated and completed before the deadline. Applicants will need

the following information:

ABA Routing Number: 043000261

Receiving Bank: Mellon Pittsburgh

BNF: FCC/AC--9100180

OBI Field: (Skip one space between each information item)

``AUCTIONPAY''

TAXPAYER IDENTIFICATION NO. (same as FCC Form 175, block 7)

PAYMENT TYPE CODE (enter ``AWLU'')

FCC CODE (same as FCC Form 159, Block 23A: ``17'')

PAYER NAME (same as FCC Form 175, Block 1)

LOCKBOX NO. 358420

Note: The BNF and Lockbox number are specific to the upfront

payments for this auction; do not use BNF or Lockbox numbers from

previous auctions.

Applicants must fax a completed FCC Form 159 to Mellon Bank at 412-

236-5702 at least one hour before placing the order for the wire

transfer (but on the same business day). On the cover sheet of the fax,

write ``Wire Transfer--Auction Payment for Auction Event No. 17.''

(2) FCC Form 159

Each upfront payment must be accompanied by a completed FCC

Remittance Advice (FCC Form 159). Proper completion of FCC Form 159 is

critical to ensuring correct credit of upfront payments. Detailed

instructions for completion of FCC Form 159 will be included in the

Bidder Information Package.

(3) Amount of Upfront Payment

The amount of the upfront payment required to bid on a particular

license(s) in Auction No. 17 has been calculated in three tiers, based

on the population (``pop'') figures for the BTA(s), and adjusted to

take into account the spectrum bandwidth that is being licensed in

frequency block A and in frequency block B.

The formula utilized to calculate upfront payments is as follows:

Frequency Block A

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

Per pop Frequency

BTA population x multiple* x block B*

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

Over 1,000,000............................................ x $0.90 x 10%

100,000-1,000,000......................................... x $0.60 x 10%

Under 100,000............................................. x $0.30 x 10%

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

* All upfront payments are rounded up to the nearest dollar. A minimum upfront payment amount has been set at

$2,500 per license.

Please note that upfront payments are not attributed to specific

licenses, but instead will be translated to bidding units to define the

bidder's maximum bidding eligibility. Thus, an applicant does not have

to make an upfront payment to cover all licenses for which the

applicant has applied. Rather, the total upfront payment defines the

maximum amount of bidding units on which the applicant will be

permitted to bid (including standing high bids) in any single round of

bidding. In order to be able to place a bid on a license, in addition

to having specified that license on FCC Form 175, a bidder must have an

eligibility level that meets or exceeds the number of bidding units

assigned to that license. At a minimum, an applicant's total upfront

payment must be enough to establish eligibility to bid on at least one

of the licenses applied for on FCC Form 175, or else the

[[Page 53633]]

applicant will not be eligible to participate in the auction.

In calculating the upfront payment amount, an applicant should

determine the maximum number of bidding units it may wish to bid on in

any single round, and submit an upfront payment covering that number of

bidding units.

Note: An applicant may, on its FCC Form 175, apply for every

license being offered, but its actual bidding in any round will be

limited by the bidding units reflected in its upfront payment. As

explained in Parts 4.A(2) and 4.A(4), infra, bidders will be

required to remain active in each round of the auction on a

specified percentage of the bidding units reflected in their upfront

payments in order to retain their current eligibility.

(4) Applicant's Wire Transfer Information for Purposes of Refunds

Because experience with prior auctions has shown that in most cases

wire transfers provide quicker and more efficient refunds than paper

checks, the Commission plans to use wire transfers for all Auction No.

17 refunds. To avoid delays in processing refunds, applicants should

include wire transfer instructions with any refund request they file;

they may also provide this information in advance by faxing it to the

FCC Billings and Collections Branch, ATTN: Regina Dorsey or Linwood

Jenkins, at 202-418-2843. (Applicants should also note that

implementation of the Debt Collection Improvement Act of 1996 requires

the FCC to obtain a Taxpayer Identification Number (TIN) before it can

disburse refunds.) Eligibility for refunds is discussed in Part 5.D,

infra.

D. Auction Registration

Approximately five business days before the auction, the FCC will

issue a public notice announcing all qualified bidders for the auction.

Qualified bidders are those applicants whose FCC Form 175 applications

have been accepted for filing and who have timely submitted upfront

payments sufficient to make them eligible to bid on at least one of the

licenses for which they applied.

All qualified bidders are automatically registered for the auction.

Registration materials will be distributed prior to the auction by two

separate overnight mailings, each containing part of the confidential

identification codes required to place bids. These mailings will be

sent only to the contact person at the applicant address listed in the

FCC Form 175.

Applicants who do not receive both registration mailings will not

be able to submit bids. Therefore, any qualified applicant who has not

received both mailings by noon on Monday, December 8, 1997 should

contact the FCC National Call Center at 888-CALL-FCC (888-225-5322,

press option #2 at the prompt). Receipt of both registration mailings

is critical to participating in the auction and each applicant is

responsible for ensuring it has received all of the registration

material.

Qualified bidders should note that lost login codes, passwords or

bidder identification numbers can be replaced only by appearing in

person at the FCC Auction Headquarters located at 2 Massachusetts

Avenue, N.E., Washington, D.C. 20002. Only an authorized representative

or certifying official, as designated on an applicant's FCC Form 175,

may appear in person with two forms of identification (one of which

must be a photo identification) in order to receive replacement codes.

E. Remote Electronic Bidding Software

Qualified bidders who file or amend the FCC Form 175 electronically

are allowed to bid electronically, but must purchase remote electronic

bidding software for $175.00, including shipping and handling, by

December 1, 1997. (Auction software is tailored to a specific auction,

so software from prior auctions will not work for Auction No. 17.)

Bidders who order remote bidding software by the ordering deadline will

receive it with the registration mailings. A software order form will

appear in a subsequent public notice.

F. Auction Seminar

On October 30, 1997 the FCC will sponsor a seminar for the LMDS

auction. This seminar will be held at the Renaissance Hotel, 999 9th

Street, N.W., Washington, D.C. The seminar will provide attendees with

information about pre-auction procedures, conduct of the auction, FCC

remote bidding software, and the LMDS service and auction rules.

Additionally, there will be an opportunity for interested parties to

display equipment at this event. If interested, please contact the FCC

at 888-CALL-FCC (888-225-5322, press option #2 at the prompt).

Please note that a maximum of two representatives from each company

may attend, first-come first-served, on a reservation basis until room

capacity is filled. To register, complete the registration form

included in the Bidder Information Package.

G. Mock Auction

All applicants whose FCC Forms 175 have been accepted for filing

will be eligible to participate in a mock auction beginning December 8,

1997. The mock auction will enable applicants to become familiar with

the electronic software prior to the auction. Free demonstration

software will be available for use in the mock auction. Due to

different bidding procedures in the LMDS auction from previous

Commission auctions, participation by all bidders is strongly

recommended. Details will be announced by public notice.

IV. Auction Event

The first round of the auction will begin on December 10, 1997.

A. Auction Structure

(1) Simultaneous Multiple Round Auction

The 986 LMDS BTAs will be awarded through a single, simultaneous

multiple round auction. Unless otherwise announced, bids will be

accepted on all licenses in each round of the auction.

(2) Maximum Eligibility and Activity Rules

As explained in Part 3.C(3), supra, the amount of the upfront

payment submitted by a bidder determines the initial maximum

eligibility (in bidding units) for each bidder. In order to ensure that

the auction closes within a reasonable period of time, an activity rule

requires bidders to bid actively throughout the auction, rather than

wait until the end before participating. Bidders are required to be

active on a percentage of their maximum eligibility during each round

of the auction. Details of the specific percentages for each stage are

set forth under Auction Stages in Part 4.A(4), infra. A bidder that

does not satisfy the activity rule will either lose bidding eligibility

or use an activity rule waiver, as explained by Activity Rule Waivers

and Reducing Eligibility in Part 4.A(3), infra.

A bidder is considered active on a license in the current round if

it is either the high bidder at the end of the previous bidding period

and does not withdraw the high bid in the current round, or if it

submits an acceptable bid in the current round (see Minimum Acceptable

Bids in Part 4.B(2), infra). A bidder's activity level in a round is

the sum of the bidding units associated with licenses on which the

bidder is active. The minimum required activity level is expressed as a

percentage of the bidder's maximum bidding eligibility, and increases

as the auction progresses, as set forth under Auction Stages in Parts

4.A(4) and 4.A(5), infra.

(3) Activity Rule Waivers and Reducing Eligibility

Each bidder will be provided five activity rule waivers that may be

used

[[Page 53634]]

in any round during the course of the auction. Use of an activity rule

waiver preserves the bidder's current bidding eligibility despite the

bidder's activity in the current round being below the required minimum

level. An activity rule waiver applies to an entire round of bidding

and not to a particular license.

The FCC auction system assumes that bidders with insufficient

activity would prefer to use an activity rule waiver (if available)

rather than lose bidding eligibility. Therefore, the system will

automatically apply a waiver (known as an ``automatic waiver'') at the

end of any bidding period where a bidder's activity level is below the

minimum required unless: (1) there are no activity rule waivers

available; or (2) the bidder overrides the automatic application of a

waiver by reducing eligibility, thereby meeting the minimum

requirements.

A bidder with insufficient activity who wants to reduce its bidding

eligibility rather than use an activity rule waiver must affirmatively

override the automatic waiver mechanism during the bidding period by

using the reduce eligibility function in the software. In this case,

the bidder's eligibility is permanently reduced to bring the bidder

into compliance with the activity rules as described in Auction Stages,

Part 4.A(4), infra. Once eligibility has been reduced, a bidder will

not be permitted to regain its lost bidding eligibility.

Finally, a bidder may proactively use an activity rule waiver as a

means to keep the auction open without placing a bid. If a bidder

submits a proactive waiver (using the proactive waiver function in the

bidding software) during a bidding period in which no bids are

submitted, the auction will remain open and the bidder's eligibility

will be preserved. An automatic waiver invoked in a round in which

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

(4) Auction Stages

The auction is composed of three stages, which are each defined by

an increasing activity rule. Below are the proposed activity levels for

each stage of the auction. The FCC reserves the discretion to alter the

activity percentages before and during the auction.

Stage One: In each round of the first stage of the auction, a

bidder desiring to maintain its current eligibility is required to be

active on licenses encompassing at least 60 percent of its current

bidding eligibility. Failure to maintain the requisite activity level

will result in a reduction in the bidder's bidding eligibility in the

next round of bidding (unless an activity rule waiver is used). During

Stage One, reduced eligibility for the next round will be calculated by

multiplying the current round activity by five-thirds (5/3).

Stage Two: In each round of the second stage, a bidder desiring to

maintain its current eligibility is required to be active on 80 percent

of its current bidding eligibility. During Stage Two, reduced

eligibility for the next round will be calculated by multiplying the

current round activity by five-fourths (5/4).

Stage Three: In each round of the third stage, a bidder desiring to

maintain its current eligibility is required to be active on 98 percent

of its current bidding eligibility. In this final stage, reduced

eligibility for the next round will be calculated by multiplying the

current round activity by fifty-fortyninths (50/49).

Caution: Since activity requirements increase in each auction

stage, bidders must carefully check their current activity during the

bidding period of the first round following a stage transition. This is

especially critical for bidders who have standing high bids and do not

plan to submit new bids. In past auctions, some bidders inadvertently

lost bidding eligibility or used an activity rule waiver because they

did not reverify their activity status at stage transitions. Bidders

may check their activity against the required minimum activity level by

using the bidding software's bidding module.

(5) Stage Transitions

The auction will start in Stage One. Under the FCC's general

guidelines it will advance to the next stage (i.e., from Stage One to

Stage Two, and from Stage Two to Stage Three) when in each of three

consecutive rounds of bidding, the high bid has increased on 10 percent

or less of the licenses being auctioned (as measured in bidding units).

However, the FCC retains the discretion to accelerate the auction by

announcement. This determination will be based on a variety of measures

of bidder activity including, but not limited to, the auction activity

level, the percentages of licenses (measured in terms of bidding units)

on which there are new bids, the number of new bids, and the percentage

increase in revenue.

(6) Auction Stopping Rules

Barring extraordinary circumstances, bidding will remain open on

all licenses until bidding stops on every license. Thus, the auction

will close for all licenses when one round passes during which no

bidder submits a new acceptable bid on any license, applies a proactive

waiver, or withdraws a previous high bid.

The FCC retains the discretion, however, to keep an auction open

even if no new acceptable bids or proactive waivers are submitted, and

no previous high bids are withdrawn. In this event, the effect will be

the same as if a bidder had submitted a proactive waiver. Thus, the

activity rule will apply as usual, and a bidder with insufficient

activity will either lose bidding eligibility or use an activity rule

waiver (if it has any left).

Further, in its discretion, the FCC reserves the right to declare

that the auction will end after a specified number of additional rounds

(``special stopping rule''). If the FCC invokes this special stopping

rule, it will accept bids in the final round(s) only for licenses on

which the high bid increased in at least one of the preceding specified

number of rounds. The FCC intends to exercise this option only in

extreme circumstances, such as where the auction is proceeding very

slowly, where there is minimal overall bidding activity, or where it

appears likely that the auction will not close within a reasonable

period of time. Before exercising this option, the FCC is likely to

attempt to increase the pace of the auction by, for example, moving the

auction into the next stage (where bidders would be required to

maintain a higher level of bidding activity), increasing the number of

bidding rounds per day, and/or increasing the amount of the minimum bid

increments for the limited number of licenses where there is still a

high level of bidding activity.

(7) Auction Delay, Suspension, or Cancellation

By public notice or by announcement during the auction, the FCC may

delay, suspend or cancel the auction in the event of natural disaster,

technical obstacle, evidence of an auction security breach, unlawful

bidding activity, administrative or weather necessity, or for any other

reason that affects the fair and competitive conduct of competitive

bidding. In such cases, the FCC, in its sole discretion, may elect to:

resume the auction starting from the beginning of the current round;

resume the auction starting from some previous round; or cancel the

auction in its entirety. Network interruption may cause the FCC to

delay or suspend the auction.

B. Bidding Procedures

(1) Round Structure

The initial bidding schedule will be announced by public notice at

least one week before the start of the auction, and

[[Page 53635]]

will be included in the registration mailings. The round structure for

each bidding round contains a single bidding period followed by the

release of the round results.

The FCC has discretion to change the bidding schedule in order to

foster an auction pace that reasonably balances speed with the bidders'

need to study round results and adjust their bidding strategies. The

FCC may increase or decrease the amount of time for the performance and

review periods, or the number of rounds per day, depending upon the

bidding activity level and other factors.

(2) Minimum Opening Bid/Reserve Prices

When FCC licenses are subject to auction (i.e., because they are

mutually exclusive) the recently enacted Balanced Budget Act of 1997

calls upon the Commission to prescribe methods by which a reasonable

reserve price is required or minimum opening bid established, unless it

determines that such an assessment is not in the public interest.

Balanced Budget Act of 1997, Public Law 105-33, 111 Stat. 251 (1997);

47 U.S.C. Sec. 309(j)(4)(F). In light of the Balanced Budget Act, the

Commission will release a subsequent Public Notice which will seek

comment on a proposal that a reserve price and/or minimum opening bid

be established for the LMDS auction.

(3) Minimum Acceptable Bids

Once there is a standing high bid on a license, a bid increment

will be applied to that license to establish a minimum acceptable bid

for the following round. The Commission will use its exponential

smoothing methodology to calculate minimum bid increments. The

exponential smoothing formula calculates the bid increment based on a

weighted average of the activity received on each license in the

current and all previous rounds. This methodology will tailor the bid

increment for each license based on activity, rather than setting a

global increment for all licenses. A detailed description of the

exponential smoothing bid increment will be included in the forthcoming

Bidder Information Package.

(4) High Bids

Each bid will be date-and time-stamped when it is entered into the

computer system. In the event of tie bids, the Commission will identify

the high bidder on the basis of the order in which bids are received by

the Commission, starting with the earliest bid. The bidding software

allows bidders to make multiple submissions in a round. Each bid is

date-and time-stamped according to when it was submitted. Thus, bids

submitted by a bidder earlier in a round will have an earlier date-and

time-stamp than bids submitted later in a round.

(5) Bidding

During a bidding period, a bidder may submit bids for as many

licenses as it is eligible, as well as withdraw high bids from previous

bidding periods, remove bids placed in the same bidding period, or

permanently reduce eligibility. Bidders also have the option of making

multiple submissions and withdrawals in each bidding period, and will

not have a separate period to withdraw bids. If a bidder enters

multiple bids for a single license in the same round, the system takes

the last bid entered as that bidder's bid for the round, and the date

and time stamp of that bid reflect the latest time the bid was entered.

A bidder's maximum eligibility in the first round of the auction is

determined by: (a) the licenses applied for on FCC Form 175; and (b)

the upfront payment amount deposited. The bid submission screens will

be tailored for each bidder to include only those licenses for which

the bidder applied on its FCC Form 175. A bidder also has the option to

further tailor its bid submission screens to call up specified groups

of licenses.

The bidding software requires each bidder to login to the FCC

Auction System during the bidding period using the FCC Account Number,

Bidder Identification Number, and confidential security codes provided

in the registration materials. Bidders are encouraged to download and

print bid confirmations after they submit their bids.

In Auction No. 17, the screen will display a ``Click on Check Box

to Bid'' column that provides a check box for each Minimum Bid Accepted

amount in place of the bid entry field. To place a bid at the minimum

acceptable bid amount for a license, a bidder must click the

appropriate box to put a check mark in it and then press submit to

enter the bid into the auction system. Bidders may not type in a bid

for any license.

Once the click box is checked, the Bid Submission screen updates

the Group Total (total dollars bid), Bid-Units, and Activity amounts,

as if a bid amount had been typed. However, by using the check boxes,

there is no risk of mistyping bids. Other auction screens are

unchanged, as are the reports.

(6) Bid Withdrawal and Bid Removal

(a) Procedures.

Before the close of a bidding period, a bidder has the option of

removing any bids placed in that round. By using the remove bid

function in the software, a bidder may effectively `unsubmit' any bid

placed within that round. A bidder removing a bid placed in the same

round is not subject to withdrawal payments. Note that removing a bid

will affect a bidder's activity for the round in which it is removed.

Once a round closes, a bidder may no longer remove a bid. However,

in the next round, a bidder may withdraw standing high bids from

previous rounds using the withdraw bid function. A high bidder that

withdraws its standing high bid from a previous round is subject to the

bid withdrawal payments specified in 47 CFR 101.1103(f), 1.2104(g), and

1.2109. The procedure for withdrawing a bid and receiving a withdrawal

confirmation is essentially the same as the bidding procedure described

in Bidding, Part 4.B(4), supra.

The FCC will limit the number of rounds in which bidders may place

withdrawals to two rounds. These rounds will be at the bidder's

discretion and there will be no limit on the number of bids that may be

withdrawn in either of these rounds. Withdrawals will still be subject

to the bid withdrawal payments specified in 47 CFR 101.1103(f),

1.2104(g), and 1.2109. Bidders should note that abuse of the

Commission's bid withdrawal procedures could result in the denial of

the ability to bid on a market.

If a high bid is withdrawn, the license will be offered in the next

round at the second highest bid price, which may be less than, or equal

to, in the case of tie bids, the amount of the withdrawn bid, without

any bid increment. The FCC will serve as a ``place holder'' on the

license until a new acceptable bid is submitted on that license.

(b) Calculation.

Generally, a bidder who withdraws a standing high bid during the

course of an auction will be subject to a payment equal to the lower

of: (1) the difference between the net withdrawn bid and the subsequent

net winning bid; or (2) the difference between the gross withdrawn bid

and the subsequent gross winning bid for that license. See 47 CFR

101.1103(f), 1.2104(g), and 1.2109. No withdrawal payment will be

assessed if the subsequent winning bid exceeds the withdrawn bid.

(7) Round Results.

The bids placed during a bidding period are not published until the

conclusion of that bidding period. After a bidding period closes, the

FCC will

[[Page 53636]]

compile reports of all bids placed, bids withdrawn, current high bids,

new minimum accepted bids, and bidder eligibility status (bidding

eligibility and activity rule waivers), and post the reports for public

access.

Reports reflecting bidders' identities and bidder identification

numbers for Auction No. 17 will be available before and during the

auction. Thus, bidders will know in advance of this auction the

identities of the bidders against which they are bidding.

(8) Auction Announcements

The FCC will use auction announcements to announce items such as

schedule changes and stage transitions. All FCC auction announcements

will be available on the FCC remote electronic bidding system, as well

as the Internet and the FCC Bulletin Board System.

(9) Other Matters

As noted in Part 3.B, supra, after the short-form filing deadline,

applicants may make only minor changes to their FCC Form 175

applications. For example, permissible minor changes include deletion

and addition of authorized bidders (to a maximum of three) and revision

of exhibits. Filers should make these changes on-line, and submit a

letter to Kathleen O'Brien Ham, Chief, Auctions and Industry Analysis

Division, Wireless Telecommunications Bureau, Federal Communications

Commission, 2025 M Street, N.W., Room 5202, Washington, D.C. 20554 (and

mail a separate copy to Matthew Moses, Auctions and Industry Analysis

Division), briefly summarizing the changes. Questions about other

changes should be directed to the FCC Auctions and Industry Analysis

Division at 202-418-0660.

V. Post-Auction Procedures

A. Down Payments and Withdrawn Bid Payments

After bidding has ended, the Commission will issue a public notice

declaring the auction closed, identifying the winning bids and bidders

for each license, and listing withdrawn bid payments due.

Within five business days after release of this auction closing

notice, each winning bidder must submit sufficient funds (in addition

to its upfront payment) to bring its total amount of money on deposit

with the Government to 20 percent of its net winning bids (actual bids

less any applicable bidding credits). See 47 CFR 101.1102(b). In

addition, by the same deadline all bidders must pay any withdrawn bid

amounts due under 47 CFR 1.2104(g), as discussed in Part 4.B(5), supra.

(Upfront payments are applied first to satisfy any withdrawn bid

liability, before being applied toward down payments.)

B. Long-Form Application

Within ten business days after release of the auction closing

notice, winning bidders must submit a properly completed long-form

application and required exhibits for each LMDS license won through the

auction. Winning very small businesses, small businesses, and

entrepreneurs must include an exhibit demonstrating their eligibility

for bidding credits. See 47 CFR 101.1109(b). Further filing

instructions will be provided to auction winners at the close of the

auction.

C. Default and Disqualification

Any high bidder that defaults or is disqualified after the close of

the auction (i.e., fails to remit the required down payment within the

prescribed period of time, fails to submit a timely long-form

application, fails to make full payment, or is otherwise disqualified)

will be subject to the payments described in 47 CFR 1.2104(g)(2). In

such event the Commission may re-auction the license to existing or new

applicants or offer it to the next highest bidders (in descending

order) at their final bids. See 47 CFR 1.2109(b) and (c). In addition,

if a default or disqualification involves gross misconduct,

misrepresentation, or bad faith by an applicant, the Commission may

declare the applicant and its principals ineligible to bid in future

auctions, and may take any other action that it deems necessary,

including institution of proceedings to revoke any existing licenses

held by the applicant. See 47 CFR 1.2109(d).

D. Refund of Remaining Upfront Payment Balance

All applicants who submitted upfront payments but were not winning

bidders for any LMDS license may be entitled to a refund of their

remaining upfront payment balance after the conclusion of the auction.

No refund will be made unless there are excess funds on deposit from

that applicant after any applicable bid withdrawal payments have been

paid.

Bidders who drop out of the auction completely may be eligible for

a refund of their upfront payments before the close of the auction.

However, bidders who reduce their eligibility and remain in the auction

are not eligible for partial refunds of upfront payments until the

close of the auction. Qualified bidders who have exhausted all their

activity rule waivers, have no remaining bidding eligibility, and have

not withdrawn a high bid during the auction must submit a written

refund request which includes wire transfer instructions, a Taxpayer

Identification Number (``TIN''), and a copy of their bidding

eligibility screen print, to: Federal Communications Commission,

Billings and Collections Branch, Attn: Regina Dorsey or Linwood

Jenkins, 1919 M Street, N.W., Room 452, Washington, D.C. 20554.

Bidders can also fax their request to the Billings and Collections

Branch at (202) 418-2843. Once the request has been approved, a refund

will be sent to the address provided on the FCC Form 159.

Note: Refund processing generally takes up to two weeks to

complete. Bidders with questions about refunds should contact Regina

Dorsey or Linwood Jenkins at 202-418-1995.

Media Contact: Audrey Spivack at (202) 418-0654.

Public Safety and Private Wireless Division: Susan Magnotti or Bob

James at (202) 418-0680; Auctions and Industry Analysis Division: Mark

Bollinger, Matthew Moses, or Louis Sigalos at (202) 418-0660.

Federal Communications Commission.

William F. Caton,

Acting Secretary.

[FR Doc. 97-27232 Filed 10-14-97; 8:45 am]

BILLING CODE 6712-01-P