Installment Payment Financing for Personal Communications Services (PCS) Licensees

FEDERAL COMMUNICATIONS COMMISSION

47 CFR Parts 1 and 24

[WT Docket No. 97-82; FCC 98-176]

Installment Payment Financing for Personal Communications

Services (PCS) Licensees

AGENCY: Federal Communications Commission.

ACTION: Final rule.

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SUMMARY: This Order amends the Commission's Rules Regarding Installment

Payment Financing for Personal Communications Services (PCS) Licenses.

In this C Block Fourth Report and Order, the Commission resolves its

proposals in its C Block Further Notice of Proposed Rule Making. In so

doing, the Commission sets forth the rules that will govern reauctions

of C block spectrum surrendered to the Commission pursuant to the C

Block Second Report and Order and the C Block Order on Reconsideration

of the Second Report and Order, as well as any other C block spectrum

available for reauction.

EFFECTIVE DATE: November 23, 1998.

FOR FURTHER INFORMATION CONTACT: Audrey Bashkin at (202) 418-0660.

SUPPLEMENTARY INFORMATION: This Fourth Report and Order, in WT Docket

No. 97-82, adopted July 27, 1998 and released August 19, 1998, is

available for inspection and copying during

[[Page 50792]]

normal business hours in the FCC Dockets Branch, Room 230, 1919 M

Street, N.W., Washington, D.C. The complete text may be purchased from

the Commission's copy contractor, International Transcription Service,

Inc., 1231 20th Street, N.W., Washington, D.C. 20036, (202) 857-3800.

Synopsis of Fourth Report and Order

I. Background

A. C. Block Proceedings

1. Consistent with Congress' mandate to promote the participation

of small business and other ``designated entities'' in the provision of

spectrum-based services, the Commission limited eligibility in the

initial C block auctions to entrepreneurs and small businesses. The C

block auction concluded on May 6, 1996, and the subsequent reauction of

defaulted licenses concluded on July 16, 1996, with a total of 90

bidders winning 493 licenses. The winning bidders were permitted to pay

90 percent of their net bid price over the ten-year license term.

2. The Commission decided in the C Block Second Report and Order,

62 FR 55348 (October 24, 1997) (as modified by the C Block Order on

Reconsideration of the Second Report and Order (``C Block

Reconsideration Order''), 63 FR 17111 (April 8, 1998)) to allow each C

block licensee to elect one of four options for each of its licenses:

resumption of payments under the licensee's original installment

payment plan, disaggregation, amnesty, or prepayment. The array of

choices was intended to provide limited relief to financially troubled

licensees without harming the integrity of the auction process. The

Commission required C block licensees to file a written election

notice, specifying whether they would resume payments under the terms

of the original installment payment plan or would proceed under one of

the alternative options. Included with the C Block Second Report and

Order was the C Block Further Notice of Proposed Rule Making (``C Block

Further Notice''), 62 FR 55375 (October 24, 1997), in which the

Commission sought comment on proposed changes to the C block rules to

govern the reauction of surrendered spectrum in the C block. The

Wireless Telecommunications Bureau (the ``Bureau'') announced by public

notice on April 17, 1998 an election date of June 8, 1998 and a payment

resumption date for C block licensees of July 31, 1998.

B. Part 1 Proceedings

3. On December 31, 1997, the Commission released a Third Report and

Order and Second Further Notice of Proposed Rule Making, 63 FR 2315

(January 15, 1998), (Part 1 Third Report and Order), which adopts

general competitive bidding rules to supplant, wherever practicable,

auction rules that were specific to each auctionable service or class

of service. The Commission's purpose was to streamline competitive

bidding regulations, eliminate unnecessary rules, and increase the

overall efficiency and consistency of the auction process. In the

process, the Commission resolves many of the issues that had been

raised in the C Block Further Notice. Accordingly, future C block

reauctions will adhere to Part 1 rules, as amended, to the extent

applicable. Where the Commission's rules in Part 1 are not

determinative, bidders will continue to look to Part 24 rules, as

amended in this C Block Fourth Report and Order.

II. Licenses to be Reauctioned

A. Background

4. In the C Block Further Notice, the Commission proposed that it

reauction: (1) all licenses representing C block spectrum returned

pursuant to the disaggregation, prepayment, or amnesty options; and (2)

all C block licenses held as a result of defaults. The Commission

believed that including all available licenses in a reauction would

allow it fairly and efficiently to facilitate the rapid provision of

service to the public and also would allow for the most efficient

aggregation of licenses.

B. Discussion

5. The Commission adopts its proposal in the C Block Further Notice

to reauction all available C block licenses held by the Commission.

Several commenters agree, and no commenter disagrees, with this

proposal. The Commission's recent modifications to the C block payment

options in the C Block Reconsideration Order provide no reason to

deviate from this basic approach. Any C block license that becomes

available for reauction after the next C block reauction will be

reauctioned in a subsequent reauction as soon as practicable.

6. Some Commenters argue that the next reauction should include

licenses owned by entities that have filed for bankruptcy protection.

One commenter maintains that if licenses held by C block bankruptcy

petitioners are excluded from the next reauction, the uncertainty

surrounding the fate of those licenses will make business planning

difficult for other C block entities. Another commenter urges the

Commission to amend its rules in order to be able to revoke

automatically the licenses of licensees that have declared bankruptcy.

7. In the Part 1 Third Report and Order, the Commission addressed

the issue of whether it can immediately reclaim and reauction licenses

held by a licensee that declares bankruptcy. As the Commission stated

there, it is confident of its position that the Commission can reclaim

licenses quickly since the Commission conditions licenses upon payment

and requires automatic cancellation in the event of nonpayment.

Nevertheless, until controlling precedent is established by the courts,

or legislation addressing conflicting rights is enacted, a delay in the

reauction of licenses in bankruptcy litigation may occur. The pendency

of bankruptcy proceedings involving certain C block licenses makes it

impossible for the Commission to resolve at this time whether those

licenses will be available in the next C block reauction. The

Commission does not intend, however, to delay a reauction of other

available C block licenses because of such litigation. Such a delay

easily could become the first in an interminable series of delays,

undermining the Commission's primary goal of getting licenses into the

hands of parties that will provide service to the public and

competition in the market. For this reason, the Commission believes

that the public will realize a greater benefit if the Commission

auctions all available C block spectrum as soon as practicable than the

public will realize if the Commission postpones a reauction until it

has resolved all issues connected with every bankruptcy proceeding.

Licenses made available in any bankruptcy proceeding will be included

in the next appropriate reauction.

III. Eligibility for Participation

A. Background

8. In the C Block Second Report and Order, the Commission decided

that the public interest considerations mandated by Section 309(j) of

the Communications Act, 47 U.S.C. 309(j), would be furthered by

applying to a C block reauction the same eligibility rules that had

been used for the original C block auction. The Commission, therefore,

deemed eligible to participate in a C block reauction: (1) all

applicants qualifying, as of the start of the reauction, as

entrepreneurs under the Commission's rules; and (2) all entities that

had filed a short-form application (FCC Form 175) to participate in,

and had been eligible to participate in, the original C block auction.

Accordingly,

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the Commission decided that all entities that had participated in the

original C block auction would be eligible to participate in the next

reauction; however, the Commission prohibited C block licensees that

return spectrum pursuant to the disaggregation or prepayment options

from reacquiring their returned spectrum for a period of two years from

the start date of the next C block reauction. This prohibition extended

to qualifying members of the licensee's control group, and their

affiliates.

9. In the C Block Further Notice, the Commission sought comment on

whether it should restrict participation in the C block reauction to

entities that have not defaulted on any payments owed the Commission.

The Commission asked for comment on possible alternatives to excluding

defaulters from participation in a reauction. One possibility was for

the Commission to have an expedited hearing on a winning defaulter's

financial qualifications, allowing the defaulter to attempt to rebut a

presumption that it is not financially qualified. Another idea was for

the Commission to require defaulters to submit either more detailed

financial information at the application stage or a larger upfront

payment. The Commission observed that C block licensees would not be in

default simply by virtue of having elected the alternative payment

options established in the C Block Second Report and Order.

10. In the C Block Reconsideration Order, the Commission modified

the alternative payment options to, inter alia, divide the amnesty

option into two categories: ``pure amnesty'' and ``amnesty/

prepayment.'' The Commission decided that, while licensees returning

spectrum pursuant to the ``pure amnesty'' option would not be

prohibited from reacquiring their returned spectrum, licensees

returning spectrum pursuant to the ``amnesty/prepayment'' option would

have to forgo, for a period of two years from the start date of next C

block reauction, eligibility to reacquire their spectrum. This

prohibition extends to qualifying members of a licensee's control

group, and their affiliates. In addition, the Commission retained the

two-year prohibition on the reacquisition of spectrum returned pursuant

to the disaggregation or prepayment options established in the C Block

Second Report and Order. The Commission also responded to petitions for

reconsideration of the C Block Second Report and Order which disagreed

with a comment filed in response to the C Block Further Notice, asking

that the Commission open eligibility for a reauction to ``all qualified

bidders.'' The Commission disagreed with that proposal, affirming its

ruling in the C Block Second Report and Order to limit eligibility for

participation in C block reauctions to applicants meeting the

Commission's definition of entrepreneur.

B. Discussion

11. The Commission retains the C block eligibility parameters

established in the C Block Second Report and Order. The following

entities will be eligible for C block reauctions: (1) entities that

filed an FCC Form 175 short-form application for, and were eligible

for, the original C block auction and (2) entities qualifying as

entrepreneurs under Section 24.709 of the Commission's rules, as of the

deadline for the filing of short-form applications for the reauction.

While, under these rules, entities that participated in the original C

block reauction will be eligible for C block reauctions, the Commission

retains the eligibility restriction established in the C Block Second

Report and Order, as modified in the C Block Reconsideration Order, for

licensees that surrender licenses pursuant to the disaggregation,

prepayment, and/or ``amnesty/prepayment'' options. Such licensees will

be ineligible to reacquire their surrendered licenses through reauction

or by any other means for a period of two years from the start date of

the next C block reauction.

12. The Commission's decision in the C Block Second Report and

Order to impose a two-year bar on the eligibility of licensees to

reacquire licenses they return pursuant to the disaggregation and

prepayment options sparked comment. A commenter wants all licensees to

be permitted to participate in a reauction, regardless of their

election of an alternative payment option. Another commenter, on the

other hand, urges the Commission to bar licensees electing the amnesty

option from bidding on their surrendered spectrum in a reauction. The

Commission dealt with both of these requests in the C Block

Reconsideration Order. As the Commission stated there, it believes that

the modified approach the Commission adopted in that order addresses

the concerns of both of these parties. Therefore, the Commission

affirms the decision it made in that order. Another commenter asks that

the qualifications of licensees electing any of the alternative payment

options be subjected to a higher level of scrutiny regarding their

financial qualification to deal with the requirements of additional

licenses. The Commission believes that a higher level of scrutiny is

not warranted. As noted above, C block licensees that have elected

alternative payment options are not defaulters. Moreover, all

applicants for C block reauctions will be required to pay a substantial

upfront payment, which should help ensure that only serious, qualified

bidders participate.

13. Because the Commission is not planning to include C block

licenses that remain involved in bankruptcy proceedings in the next C

block reauction, there likely will be more than one reauction for C

block. Accordingly, the Commission must evaluate whether to allow

applicants for and participants in the original C block auction to

remain eligible to participate in all future C block reauctions,

regardless of whether they still qualify as entrepreneurs under the

Commission's rules at the deadline for filing a short-form application.

While the Commission believes that flexibility in this regard is

appropriate, it also believes that fairness to other future bidders

prevents its providing an open eligibility standard indefinitely.

Consequently, in order to be eligible for any C block reauction that

begins more than two years from the start date of the next C block

reauction, an applicant must qualify as an entrepreneur under the

Commission's rules at the time of filing its short-form application.

14. Several parties commented on the eligibility rules established

in C Block Second Report and Order, with most commenters supporting the

Commission's decision. As mentioned, however, one commenter urges the

Commission not to limit a reauction just to entrepreneurs but rather to

allow ``all qualified bidders'' to participate. That commenter argues

that a restricted auction skews the marketplace and that the increasing

level of competition in the wireless arena makes it less likely that

small business entrepreneurs can survive. According to the commenter,

the Commission could enable small businesses to bid competitively by

providing them bidding credits and permitting them to partition and

disaggregate 30 MHz licenses after the auction. No other commenter

supports these views, and several parties oppose them. As stated, the

Commission recently denied this request in the C Block Reconsideration

Order, and the record in this proceeding provides the Commission with

no basis to alter its decision.

15. The Commission's FCC Form 175 short-form application for all

auctions requires applicants to certify that they are not in default on

any Commission licenses and that they are not

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delinquent on any non-tax debt owed to any Federal agency. The

Commission believes that, in order to preserve the integrity of C block

reauctions and to support its ongoing effort to streamline the

licensing process, it is necessary to limit participation in C block

reauctions to entities that can make the certification. Consequently,

to be eligible to participate in any future C block reauction, an

applicant must certify on its short-form application that it is not in

default on any Commission licenses and not delinquent on any non-tax

debt owed to any Federal agency. At the same time, the Commission

believes that past business misfortunes do not inevitably preclude an

entity from being able to meet its present and future responsibilities

as a Commission licensee. Therefore, the Commission will allow ``former

defaulters,'' i.e., applicants that have defaulted or been delinquent

in the past, but have since paid all of their outstanding non-Internal

Revenue Service Federal debts and all associated charges or penalties,

to be eligible to participate in C block reauctions, provided that they

are otherwise qualified.

IV. Application of General Auction Rules to C Block

A. Background

16. The Commission tentatively concluded in the C Block Further

Notice that the next reauction will be conducted in conformity with the

general competitive bidding rules in Part 1, Subpart Q, of the

Commission's rules, as revised, consistent with other auctions for

wireless services. The Commission also proposed to use Part 24 rules to

the extent they do not conflict with the Commission's Part 1 rules or

with rules specifically adopted or proposed in the C Block Second

Report and Order and C Block Further Notice. The Commission sought

comment on the application of Part 1 rules to the following aspects of

the C block reauction: competitive bidding mechanisms; bidding

application and certification procedures and prohibition of collusion;

submission of upfront payment, down payment and filing of long-form

applications; procedures for filing long-form applications; and

procedures regarding license grant, denial, and default.

17. Subsequently, in the Part 1 Third Report and Order, the

Commission adopted general competitive bidding rules that apply to each

auctionable service or class of service, including the C block of

broadband personal communications services. In that order, the

Commission addressed, and in some cases completely or partly resolved,

the issues raised in the C Block Further Notice, except for the two

issues discussed above in this C Block Fourth Report and Order, i.e.,

licenses to be reauctioned and eligibility for participation in C block

reauctions. The Commission also clarified that specific auction

procedures not established by its rules will be established by the

Bureau in advance of each auction, pursuant to public notice and

comment. However, the Commission received sufficient comment in

response to the C Block Further Notice to make further comment

unnecessary for many of the C block reauction procedures. Consequently,

in the remainder of this C Block Fourth Report and Order, the

Commission reviews the issues raised in the C Block Further Notice and

addressed in the Part 1 Third Report and Order. Where necessary, the

Commission clarifies the effect of the Part 1 Third Report and Order on

the rules for future C block reauctions. In cases where C block auction

rules are the same as or parallel to F block auction rules, the

Commission also clarifies the effect of the Part 1 Third Report and

Order on the rules for F block reauctions.

B. Discussion

1. Competitive Bidding Design

18. The Commission tentatively concluded in the C Block Further

Notice that it would award all licenses and spectrum in the C block

reauction by means of a simultaneous multiple-round electronic auction.

This type of auction would facilitate any aggregation strategies of

bidders and provide the most information about license values during

the auction. The Commission further tentatively concluded that

telephonic bidding (instead of electronic bidding) should be permitted

only in exceptional circumstances, and that those circumstances would

be determined by the Bureau in each instance. This tentative conclusion

was prompted by the Commission's desire to conduct the reauction

quickly, as well as by recent improvements in its electronic bidding

software. In the Part 1 Third Report and Order, the Commission

clarified that the Bureau, consistent with its existing delegated

authority, would seek comment in advance of each auction on auction-

specific issues, including the competitive bidding design of the

auction. The Commission notes, as previously mentioned, that there

likely will be more than one C block reauction.

19. Even though the Bureau normally would determine the bidding

design of an auction, because no commenter opposed the proposal for a

simultaneous multiple-round auction, the Commission believes that the

simultaneous multiple-round design is appropriate for the next C block

reauction. If, however, in preparing for a C block reauction, the

Bureau determines that another design might be warranted, it remains

within the Bureau's authority to seek comment on, and to modify, the

competitive bidding design of the reauction. The Commission received

two comments addressing the subject of telephonic bidding, with one

party supporting the proposal that telephonic bidding be permitted only

in exceptional circumstances and the other party asking that telephonic

bidding remain an option. The Commission has decided, on further

consideration, to permit the use of telephonic bidding as an

alternative to electronic bidding in the next C block reauction. In the

recent local multipoint distribution service (LMDS) auction (Auction

No. 17), telephonic bidding was a viable option; and telephonic bidding

is being made available to bidders in the upcoming Phase II 220 MHz

service auction (Auction No. 18). The Commission believes that allowing

parties to use either electronic or telephonic bidding, as their

circumstances dictate, will promote auction participation by as many

qualified applicants as possible and is not inconsistent with the

Commission decision to require that, beginning January 1, 1999, all

short and long-form applications for auctionable services be filed

electronically.

2. Activity Rules

20. In the C Block Further Notice, the Commission tentatively

concluded that a reauction should be conducted in three stages, as the

Commission has done in other simultaneous multiple-round auctions. The

Commission proposed to use high activity requirements in C block

reauctions, with bidders required to be more active in each subsequent

stage than they had been in the last. These activity levels would be

similar to those used in other auctions, such as requiring bidders to

be active on eighty percent of their eligible licenses in Stage I,

ninety percent in Stage II, and ninety-eight percent in Stage III. The

Commission also proposed requiring the Bureau to use its delegated

authority to schedule bidding rounds aggressively, to move quickly into

the next stage of the auction when bidding activity falls, and to use

higher minimum bid increments for very active licenses. In the Part 1

Third Report and Order, the Commission directed the

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Bureau to seek comment prior to the start of each auction on activity

requirements for each stage of the auction and activity rule waivers.

21. The Commission believes that the proposal to conduct reauctions

in three stages is reasonable for the next C block reauction,

particularly in the absence of opposing comment and in light of the

general interest in beginning the reauction as soon as possible. The

Bureau normally would determine this structure, however; and it remains

within the Bureau's discretion to deviate from the proposed three-stage

structure if, after appropriate notice and comment, it determines that

a different structure would better serve the public interest. Given

that the C Block Further Notice mentioned the eighty, ninety, and

ninety-eight percent activity levels as an example, the Commission

continues to delegate to the Bureau determination of the specific

activity levels to employ for each C block reauction. As proposed, the

Bureau will use its delegated authority to schedule bidding rounds

aggressively, move quickly into the next stage of the auction when

bidding activity falls, and use higher minimum bid increments for very

active licenses.

3. Reserve Price, Minimum Opening Bid, and Minimum Bid Increments

22. The Balanced Budget Act of 1997 requires the Commission to

prescribe methods by which a reasonable reserve price will be required

or a minimum opening bid established, unless the Commission determines

that neither is in the public interest. In the C Block Further Notice,

the Commission stated that, in the C block reauction, employing a

minimum opening bid would help make certain that the public is fairly

compensated, the auction is expedited, and the Commission is able to

make adjustments based on the competitiveness of the auction. The

Commission sought comment on its proposal to use a minimum opening bid

for a reauction, as well as on which methodology to employ and factors

to consider in establishing minimum opening bids. The Commission

proposed minimum opening bids for each market equal to ten percent of

the corresponding net high bid for the market in the original C block

auction. The Commission asked commenters to explain whether this

proposal would be reasonable or would result in a substantial number of

unsold licenses. The Commission asked further whether the amount of the

minimum opening bid should be capped and whether the Commission should

establish a different amount.

23. After requesting comment on minimum opening bids in the C Block

Further Notice, the Commission clarified in the Part 1 Third Report and

Order that the Bureau has the authority to seek comment on minimum

opening bids and reserve prices and to establish such mechanisms for

each auction, consistent with the Bureau's role in managing the auction

process and setting valuations for other purposes. The Commission

instructed the Bureau to consider such factors as the amount of

spectrum being auctioned, levels of incumbency, the availability of

technology to provide service, the size of the geographic service

areas, issues of interference with other spectrum bands, and any other

relevant factors that could reasonably affect valuation of the spectrum

being auctioned.

24. For the next C block reauction, the Commission believes that

the proposal of a minimum opening bid for each market equal to ten

percent of the corresponding net high bid for the market in the

original C block auction is appropriate. Because the Commission has

already sought and received comment on this issue, and because there is

a strong public interest in beginning the next C block reauction as

soon as possible, the Bureau will not seek further comment on a

specific amount for a minimum opening bid for the next reauction.

Instead, the specific amount of the minimum opening bid for each market

will be listed in a public notice to be released by the Bureau in

advance of the next C block reauction. The Bureau may exercise its

discretion to set forth a minimum opening bid smaller than ten percent

if, based upon further evaluation, the Bureau believes that a smaller

amount is warranted.

4. Electronic Filing

25. In the C Block Further Notice, the Commission sought comment on

its tentative conclusion to require electronic filing of all short-form

applications in a reauction. The Commission believed that electronic

filing of applications would serve the best interests of auction

participants and members of the public monitoring a reauction.

Commission policies have consistently encouraged electronic filing. In

the Part 1 Third Report and Order, the Commission pointed out that

electronic filing helps ensure the accuracy and completeness of

applications prior to submission, and the Commission required

electronic filing of all short-form and long-form applications by

January 1, 1999, unless operationally infeasible. More recently, the

Commission proposed mandatory electronic filing of applications for all

wireless services, whether auctionable or non-auctionable. Accordingly,

the Commission will require electronic filing of both short-form and

long-form applications for C block reauctions.

5. Upfront Payment

26. In accordance with Sec. 1.2106 of the Commission's rules, 47

CFR 1.2106, which requires submission of an upfront payment as a

prerequisite to participation in spectrum auctions, the Commission

proposed in the C Block Further Notice to set an upfront payment for

the next C block reauction at $.06 per MHz per pop. The Commission

determined that this amount was appropriate to further its goal of

allowing only serious, qualified applicants to participate in a

reauction. The Commission noted that it had adopted the same upfront

payment for its most recent broadband PCS auction, the D, E, and F

block auction. The Commission explained that, in the Competitive

Bidding Second Report and Order, 59 FR 22980 (May 4, 1994), it had

indicated that the upfront payment should be set using a formula based

upon the amount of spectrum and population (``pops'') covered by the

license(s) for which the parties intend to bid. It had also concluded

that the best approach would be to determine the amount of the upfront

payment on an auction-by-auction basis. In the C Block Further Notice,

the Commission sought comment on its $.06 per MHz per pop proposal, as

well as on alternative methods of establishing an upfront payment and,

in particular, on how the Commission may estimate the present market

value of the spectrum to be auctioned. Subsequently, in the Part 1

Third Report and Order, the Commission affirmed its reasoning in the

Competitive Bidding Second Report and Order, stating the Commission's

belief that it should maintain the current competitive bidding rules,

which allow the amount of the upfront payment and the terms under which

it is assessed to be determined on an auction-by-auction basis.

27. Deciding the amount and terms of the upfront payment amount on

an auction-by-auction basis pursuant to the Part 1 rule is consistent

with past auction procedure. The Bureau normally establishes the

upfront payment after public notice and comment. The Commission,

therefore, finds that specific provisions contained in Part 24 of the

its rules addressing the upfront payment amount for C block (and F

block) auctions are unnecessary. Accordingly, and consistent with its

ongoing streamlining effort, the Commission removes those Part 24

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provisions as of the effective date of this order.

28. There is support among the commenters for setting the upfront

payment amount at the proposed $.06 per MHz per pop, and the Commission

believes that in the next C block reauction the upfront payment should

be no higher than this amount. The Bureau may establish a lower upfront

payment if it deems a lower amount to be reasonable. Because the

Commission has already sought and received comment on this issue, and

because there is a strong public interest in beginning the next C block

reauction as soon as possible, there is no need for the Bureau to seek

further comment on the upfront payment amount for the next reauction.

Instead, the specific upfront payment amount for each market will be

listed in a public notice to be released by the Bureau in advance of

the next C block reauction.

29. While the Commission has decided not to prohibit ``former

defaulters'' from participating in C block reauctions, it believes that

the integrity of the auctions program and the licensing process

dictates requiring a more stringent financial showing from applicants

with a poor Federal financial track record. Consequently, the

Commission amends its rules to require that the upfront payment amount

for ``former defaulters'' be fifty percent more than the normal amount

set by the Bureau for any given license in a C block reauction. So that

the Bureau may implement this rule, the Commission will require

applicants to make an additional certification on their short-form

applications revealing whether they have ever been in default on any

Commission licenses or have ever been delinquent on any non-tax debt

owed to any Federal agency. The Commission's policy here is analogous

to the Congressional policy reflected in the Debt Collection

Improvement Act, which bars delinquent Federal debtors from obtaining

Federal loans, loan insurance, or guarantees.

6. Down Payment and Full Payment

30. The Commission tentatively concluded in the C Block Further

Notice that each winning bidder should be required to tender a down

payment sufficient to bring its total amount on deposit with the

Commission up to twenty percent of its winning bid within ten business

days after issuance of a public notice announcing the winning bidder

for the license. The Commission also proposed to require a winning

bidder to file an FCC Form 600 long-form application (since renumbered

FCC Form 601) with a timely down payment, pursuant to Section 1.2107 of

the Commission's rules, 47 CFR 1.2107. Upon review of the long-form

applications and receipt of the down payments, the Commission would

announce the applications that were accepted for filing, triggering the

filing window for petitions to deny. If any or all petitions to deny

were dismissed or denied, a public notice announcing that the

Commission was prepared to grant the license conditioned upon final and

full payment would be issued. The winning bidder would then have ten

days following release of that public notice to submit the balance of

its winning bid in order to be awarded its license(s). The C Block

Further Notice proposed having a period of fifteen days, following the

issuance of the public notice announcing that an application had been

accepted for filing, in which to file petitions to deny.

31. The Part 1 Third Report and Order adopted a standard down

payment of twenty percent of an applicant's high bids, which is similar

to the proposal in the C Block Further Notice. It also amended Sections

1.2109(a) of the Commission's rules, 47 CFR 1.2109(a), to permit

auction winners to make their final payments within ten business days

after the designated deadline, provided that they also pay a late fee

equal to five percent of the amount due. In accordance with the 1997

Balanced Budget Act, the Part 1 Third Report and Order amended

Secs. 1.2108(b) and (c), 47 CFR 1.2108(b), (c), to prohibit the

Commission from granting a license earlier than seven days following

issuance of the public notice announcing the application is accepted

for filing. Additionally, the Part 1 Third Report and Order established

that the filing periods for petitions to deny, oppositions, and replies

are to be no shorter than five days.

32. The conclusions the Commission reached in the Part 1 Third

Report and Order do not conflict with its proposals in the C Block

Further Notice. Accordingly, the Commission will apply the Part 1

rules, as amended. The Bureau will announce by public notice the

deadline for petitions to deny. As discussed in the Part 1 Third Report

and Order, in order to preserve the integrity of the auction process,

it is important to use an indicator of potential licensees' financial

capability to attract capital to build out and operate systems. The

Commission believes that the use of one substantial down payment is a

necessary tool to gauge an applicant's financial viability, its

seriousness in building its system, and the likelihood of default. For

these reasons, the Commission repeals the Part 24 C block rules on down

payment and full payment. Pursuant to the same rationale, the

Commission also repeals the Part 24 F block rules on down payment and

full payment.

7. Amendments and Modifications of Applications

33. In the C Block Further Notice, the Commission proposed to allow

applicants to amend or modify their short-form applications at any time

before or during the auction, pursuant to Section 1.2105 of the

Commission's rules, 47 CFR 1.2105. In the Part 1 Third Report and

Order, the Commission created a uniform definition of minor and major

amendments to an applicant's short-form application (FCC Form 175). The

Commission also amended Section 1.2105 of the Commission's rules so

that it would mirror the Part 24 rule, Sec. 24.822, 47 CFR 24.822, and

allow applicants, after the short-form filing deadline, to make minor

amendments to their short-form applications both prior to and during

the auction. The amendment to Sec. 1.2105 of the Commission's rules has

rendered Sec. 24.822 unnecessary. Accordingly, the Commission repeals

Sec. 24.822 of the rules.

34. The Commission also proposed in the C Block Further Notice to

create an exception to the general rule prohibiting major amendments

and permit short-form amendments to reflect the departure of a

consortium member. In the Part 1 Third Report and Order, the Commission

determined that, under Part 1 of its rules, major amendments to the

short-form include changes in license areas, ownership changes

constituting a change in control, and the addition of members to a

bidding consortium. Minor amendments include, inter alia, any amendment

not identified as major. The Commission did not identify the deletion

of members to a bidding consortium as a major amendment. Consequently,

such a change would be a minor amendment under the Part 1 rules, as

amended, and permitted after the short-form filing deadline.

Accordingly, the Commission's proposal in the C Block Further Notice to

allow short-form amendments reflecting the departure of a consortium

member is no longer necessary.

8. Bid Withdrawal, Default, and Disqualification

35. The Commission tentatively concluded in the C Block Further

Notice that the withdrawal, default, and disqualification rules for a

reauction should be based upon the procedures established in the

Commission's general

[[Page 50797]]

competitive bidding rules. In the Part 1 Third Report and Order, the

Commission recognized that bidders sometimes improperly withdraw bids

(e.g., to delay the close of an auction for strategic purposes), and

the Commission suggested that the Bureau exercise its discretion to

prevent such abuses of the auction process. The Commission is

considering limiting the number of rounds in which bids may be

withdrawn, thereby preventing any entities that violate the

Commission's withdrawal procedures from continuing to bid on that

particular market. The Bureau has announced that, in the upcoming Phase

II 220 MHz service auction (Auction No. 18), it will limit the number

of rounds in which bids may be withdrawn, and it has proposed such a

limitation for the upcoming 156-162 MHz VHF public coast station

spectrum auction. Similarly, the Bureau will seek comment in advance of

the next C block reauction on limiting the number of rounds in that

reauction in which bids may be withdrawn.

36. For bids submitted in error, the Commission proposed in the C

Block Further Notice to follow the guidelines it had developed to

provide relief from the bid withdrawal payment requirements under

certain circumstances. In the Part 1 Third Report and Order, the

Commission decided that when a winning bidder or licensee defaults, and

its license has yet to be reauctioned, the Commission will assess an

initial default payment of at least three percent, but not exceeding

twenty percent, of the defaulted bid amount. Once the license has been

reauctioned, when the total default payment can be determined, the

Commission will either assess the balance of the remaining default

payment or refund any amounts due. As a result of ``click box bidding''

and other mechanisms employed to reduce erroneous bids, the Commission

concluded that a decreased bid withdrawal payment rule, meant to

provide some bidders relief from full application of bid withdrawal

payments, is not necessary. The Commission directs the Bureau to follow

the Part 1 rule on bid withdrawal, default, and disqualification,

Sec. 1.2104(g), 47 CFR 1.2104(g), to the extent applicable.

9. Anti-Collusion Rules

37. The Commission proposed in the C Block Further Notice to apply

the anti-collusion rules enumerated in the Competitive Bidding Second

Report and Order. In the Part 1 Third Report and Order, the Commission

created an exception to its general anti-collusion rules. Under this

exception, a non-controlling attributable interest holder in an

applicant may obtain an ownership interest in, or enter into a

consortium arrangement with, another applicant for a license in the

same geographic area, provided that the original applicant has

withdrawn from the auction, is no longer placing bids, and has no

further eligibility. The exception provides flexibility for non-

controlling investors to invest in other auction applicants if their

original applicant fails to complete the auction.

38. Although one commenter to the C Block Further Notice raised the

issue of creating a ``safe harbor'' for discussions of non-auction

related business matters between applicants in the same license area,

the Commission determined in the Part 1 Third Report and Order that

there was no need to create a ``safe harbor.'' Section 1.2105(c) of the

Commission's rules, 47 CFR 1.2105(c), places significant limitations on

applicants seeking business opportunities in geographic license areas

where they plan to bid. The Commission concluded that interpretations

of the anti-collusion rules provided by the Bureau instruct the public

as to permissible non-auction discussions, obviating the need for a

``safe harbor'' in the auction process.

39. As the Commission noted in the Third Report and Order, however,

auction applicants should be aware that communications concerning, but

not limited to, issues such as management, resale, roaming,

interconnection, partitioning and disaggregation may all raise

impermissible subject matter for discussion because they may convey

pricing information and bidding strategy. Because auction applicants

should avoid all communication with each other that will likely affect

bids or bidding strategies, the Commission believes that individual

applicants, and not the Commission, are in the best position to

determine in the first instance which communications are permissible

and which are not. Bidders should familiarize themselves with

Commission rules and rule interpretations regarding unauthorized

communications in auction proceedings, and they should report any such

communications to the Bureau. As always, the Commission retains the

right to investigate possible instances of collusion or to refer any

allegations of collusion to the United States Department of Justice for

investigation.

10. Bidding Credits

40. The original C block auction offered winning bidders qualifying

as a small business or a consortium of small businesses a bidding

credit of twenty-five percent of winning bids. The Commission's rules

defined a small business as ``an entity that, together with its

affiliates and persons or entities that hold interest in such entity

and their affiliates, has average annual gross revenues that are not

more than forty million dollars for the preceding three years.''

Subsequent to that auction, the Commission amended its rules to define

also a very small business in the C or F blocks as ``an entity that,

together with its affiliates and persons or entities that hold interest

in such entity and their affiliates, has average annual gross revenues

that are not more than fifteen million dollars for the preceding three

years.'' The Commission proposed in the C Block Further Notice to have

two tiers of bidding credits for the next C block reauction, a twenty-

five percent bidding credit for small businesses and a thirty-five

percent bidding credit for very small businesses.

41. In order to provide continuity and certainty for auction

participants, the Commission adopted a schedule of bidding credits in

the Part 1 Third Report and Order to be used in future auctions for all

services. The schedule sets the bidding credit percentage according to

the average annual gross revenues of the designated entity. Applying

the Part 1 schedule to the gross revenue thresholds for small and very

small businesses under its rules for C and F block auctions, the

Commission concludes that a small business will receive a fifteen

percent bidding credit, and a very small business will receive a

bidding credit of twenty-five percent. The Commission recognizes that

the amount of bidding credits differs from its proposal in the C Block

Further Notice; however, use of the Part 1 schedule benefits potential

bidders by providing them with certainty about the size of available

bidding credits well in advance of C block reauctions. The Commission

will amend Secs. 24.712 and 24.717 of its rules, 47 CFR 24.712, 24.717,

to reflect its application of the Part 1 bidding credits schedule to C

and F block reauctions.

42. Eligibility for bidding credits will be determined at the

deadline for filing short-form applications. Thus, if an entity no

longer qualifies as a small business as of the deadline for filing

short-form applications, but is eligible to participate in the next C

block reauction because it was eligible to participate in the original

C block auction, it will not be eligible for bidding credits. Because

of the complex issues involved in the original C block auction, the

Commission is willing to allow former C block auction participants and

eligible applicants to

[[Page 50798]]

participate in the next reauction (and in reauctions for the ensuing

two years). However, the Commission does not feel that it is in the

best interests of the public and, in particular, of competing small

business bidders and licensees to provide a discount to applicants that

no longer meet the small business size standards.

43. The Commission reminds applicants that, under Sec. 1.2111(d) of

its rules, as amended, 47 CFR 1.2111(d), C block licensees that utilize

a bidding credit, and during their initial license term seek to make a

change in the ownership or control of a license that would result in

the license's being owned or controlled by an entity that does not meet

the eligibility criteria for a bidding credit, or that is eligible for

a lower bidding credit, will have to reimburse the U.S. Government for

a percentage of the amount of the bidding credit. This percentage, in

some circumstances, will be as high as the full amount of the bidding

credit plus interest.

11. Installment Payment Program

44. The Commission tentatively concluded in the C Block Further

Notice that it would not provide an installment payment program in the

next reauction. Subsequently, in the Part 1 Third Report and Order, the

Commission suspended the installment payment program for the immediate

future.

45. The Commission will apply its decision in the Part 1 Third

Report and Order and not offer installment payments in the next

reauction. It is the Commission's responsibility to balance the

competing goals in Section 309(j) that require, inter alia, that it

promote the development and rapid deployment of new spectrum-based

services, while ensuring that designated entities are given an

opportunity to participate in the provision of such services. The

Commission recognizes that conditioning receipt of a license upon

payment requires greater financial resources. However, many C block

licensees have requested relief from their installment payment

obligations and three have sought bankruptcy protection. The objective

of Section 309(j) to speed service to the public cannot be achieved

when licenses are held in abeyance in bankruptcy court. Other financing

alternatives, such as the provision of bidding credits, will help to

ensure meaningful small business participation.

VI. Procedural Matters and Ordering Clauses

A. Final Regulatory Flexibility Analysis

46. The Final Regulatory Flexibility analysis, pursuant to the

Regulatory Flexibility Act, see 5 U.S.C. 604, is attached.

B. Paperwork Reduction Act Analysis

47. This Order contains a modified information collection that was

submitted to the Office of Management and Budget requesting clearance

under the Paperwork Reduction Act of 1995.

C. Ordering Clauses

48. Accordingly, it is ordered that, pursuant to Sections 4(i),

5(b), 5(c)(1), 303(r), and 309(j) of the Communications Act of 1934, as

amended, 47 U.S.C. 154(i), 155(b), 156(c)(1), 303(r), and 309(j), this

Fourth Report and Order is hereby adopted, and Secs. 1.2105, 24.703,

24.704, 24.705, 24.706, 24.707, 24.709, 24.711, 24.712, 24.716, 24.717,

24.822 of the Commission's rules, 47 CFR 1.2105, 24.703, 24.704,

24.705, 24.706, 24.707, 24.709, 24.711, 24.712, 24.716, 24.717, 24.822,

are amended as set forth in the rule changes, effective November 23,

1998.

49. It is further ordered that the Commission's Office of Public

Affairs, Reference Operations Division, shall send a copy of this

Fourth Report and Order, including the Final Regulatory Flexibility

Analysis, to the Chief Counsel for Advocacy of the Small Business

Administration.

50. It is further ordered that, pursuant to 47 U.S.C. 155(c) and 47

CFR 0.331, the Chief of the Wireless Telecommunications Bureau is

granted delegated authority to prescribe and set forth procedures for

the implementation of the provisions adopted herein.

Paperwork Reduction Act

Notice of Public Information Collections Submitted to the Office of

Management and Budget for Emergency Review and Approval

SUMMARY: The Federal Communications Commission, as part of its

continuing effort to reduce paperwork burden invites the general public

and other Federal agencies to take this opportunity to comment on the

following proposed and/or continuing information collections, as

required by the Paperwork Reduction Act of 1995, Public Law 104-13. An

agency may not conduct or sponsor a collection of information unless it

displays a currently valid control number. No person shall be subject

to any penalty for failing to comply with a collection of information

subject to the Paperwork Reduction Act (PRA) that does not display a

valid control number. Comments are requested concerning (a) whether the

proposed collection of information is necessary for the proper

performance of the functions of the Commission, including whether the

information shall have practical utility; (b) the accuracy of the

Commission's burden estimates; (c) ways to enhance the quality,

utility, and clarity of the information collected; and (d) ways to

minimize the burden of the collection of information on the

respondents, including the use of automated collection techniques or

other forms of information technology.

Please Note: The Commission is seeking emergency approval for

these information collections by October 9, 1998, under the

provisions of 5 CFR 1320.13.

DATES: Written comments should be submitted on or before October 7,

1998. If you anticipate that you will be submitting comments, but find

it difficult to do so within the period of time allowed by this notice,

you should advise the contact listed below as soon as possible.

ADDRESSES: Direct all comments to Judy Boley, Federal Communications

Commission, Room 234, 1919 M St., N.W., Washington, DC 20554, or via

internet to [email protected], and Timothy Fain, OMB Desk Officer, 10236

NEOB 725 17th Street, N.W., Washington, DC 20503 or [email protected].

FOR FURTHER INFORMATION CONTACT: For additional information or copies

of the information collections, contact Judy Boley at 202-418-0214 or

via internet at [email protected].

SUPPLEMENTARY INFORMATION:

OMB Control Number: 3060-0801.

Title: Amendment of the Commission's Rules Regarding Installment

Payment Financing for Personal Communications Services (PCS) Licensees.

Type of Review: Emergency Revision.

Respondents: Businesses or other for-profit entities.

Number of Respondents: 750.

Estimated Time for Response: 0.25 hours.

Total Annual Burden: 187.5 hours.

Total Cost to Respondents: $0.

Needs and Uses: The C Block Fourth Report and Order requires each

applicant for C block spectrum to attach to its short-form application

a statement made under penalty of perjury indicating whether or not the

applicant has ever been in default on any Commission licenses or has

ever been delinquent on any non-tax debt owed to

[[Page 50799]]

any Federal agency. This information collection allows the Federal

Communications Commission to ascertain whether or not applicants for C

block PCS spectrum have ever been in default on any Commission licenses

or have ever been delinquent on any non-tax debt owed to any Federal

agency. The information will allow the Commission to determine the

amount of the upfront payment to be paid by each applicant and will

help ensure that C block reauctions are conducted fairly and

efficiently, thereby speeding the flow of payments to the U.S. Treasury

and accelerating the provision of PCS to the public.

List of Subjects

47 CFR Part 1

Practice and procedure, Competitive bidding proceedings,

Telecommunications.

47 CFR Part 24

Personal communications services, Competitive bidding procedures

for broadband PCS, Telecommunications.

Federal Communications Commission.

Magalie Roman Salas,

Secretary.

Rule Changes

Parts 1 and 24 of Title 47 of the Code of Federal Regulations are

amended as follows:

PART 1--PRACTICE AND PROCEDURE

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

Authority: 15 U.S.C. 79 et seq.; 47 U.S.C. 151, 154(i), 154(j),

155, 225, and 303(r), unless otherwise noted.

2. Section 1.2105 is amended by adding (a)(2)(xi) to read as

follows:

Sec. 1.2105 Bidding application and certification procedures;

prohibition of collusion

(a) * * *

(2) * * *

(xi) For C block applicants, an attached statement made under

penalty of perjury indicating whether or not the applicant has ever

been in default on any Commission licenses or has ever been delinquent

on any non-tax debt owed to any Federal agency.

* * * * *

PART 24--PERSONAL COMMUNICATIONS SERVICES

3. The authority citation for part 24 continues to read as follows:

Authority: 47 U.S.C. 154, 301, 302, 303, 309, and 332, unless

otherwise noted.

Sec. 24.703 [Removed]

4. Section 24.703 is removed.

5. Section 24.704 is revised to read as follows:

Sec. 24.704 Withdrawal, default and disqualification penalties.

See Sec. 1.2104 of this chapter.

Sec. 24.705 [Removed]

6. Section 24.705 is removed.

7. Section 24.706 is amended by revising paragraph (a) to read as

follows:

Sec. 24.706 Submission of upfront payments and down payments.

(a) All auction participants are required to submit an upfront

payment in accordance with Sec. 1.2106 of this chapter. Any C block

applicant that has previously been in default on any Commission

licenses or has previously been delinquent on any non-tax debt owed to

any Federal agency must submit an upfront payment equal to 50 percent

more than that set for each particular license.

* * * * *

Sec. 24.707 [Removed]

8. Section 24.707 is removed.

9. Section 24.709 is amended by adding paragraphs (a)(4) and (a)(5)

and revising paragraphs (b)(9)(i) and (e) to read as follows:

Sec. 24.709 Eligibility for licenses for frequency Blocks C and F.

(a) * * *

(4) In order to be eligible for participation in a C block auction,

an applicant must certify that it is not in default on any Commission

licenses and that it is not delinquent on any non-tax debt owed to any

Federal agency. See Sec. 24.706 of this part.

(5) An applicant for participation in a C block auction must state

under penalty of perjury whether or not it has ever been in default on

any Commission licenses or has ever been delinquent on any non-tax debt

owed to any Federal agency. See Sec. 24.706 of this part.

(b) * * *

(9) * * *

(i) In addition to entities qualifying under this section, any

entity that was eligible for and participated in the auction for

frequency block C, which began on December 18, 1995, or the reauction

for frequency block C, which began on July 3, 1996, will be eligible to

bid in any reauction of block C spectrum that begins within two years

of the start date of the first reauction of C block spectrum following

the effective date of this rule.

* * * * *

(e) Definitions. The terms affiliate, business owned by members of

minority groups and/or women, and gross revenues used in this section

are defined in Sec. 1.2110 of this chapter. The terms consortium of

small businesses, control group, existing investor, institutional

investor, nonattributable equity, preexisting entity, publicly traded

corporation with widely dispersed voting power, qualifying investor,

small business, and total assets used in this section are defined in

Sec. 24.720 of this chapter.

10. Section 24.711 is amended by revising paragraphs (a)(1) and

(a)(2) to read as follows:

Sec. 24.711 Upfront payments, down payments and installment payments

for licenses for frequency Block C.

(a) * * *

(1) Each eligible bidder for licenses subject to auction on

frequency Block C shall pay an upfront payment as set forth in a Public

Notice pursuant to the procedures in Sec. 1.2106 of this chapter.

(2) Each winning bidder shall make a down payment and pay the

balance of its winning bids pursuant to Sec. 1.2107 and Sec. 1.2109 of

this chapter.

* * * * *

11. Section 24.712 is revised to read as follows:

Sec. 24.712 Bidding credits for licenses for frequency Block C.

(a) A winning bidder that qualifies as a small business or a

consortium of small businesses as defined in Sec. 24.720(b)(1) or

Sec. 24.720(b)(4) of this part may use a bidding credit of fifteen

percent, as specified in Sec. 1.2110(e)(2)(iii) of this chapter, to

lower the cost of its winning bid.

(b) A winning bidder that qualifies as a very small business or a

consortium of very small businesses as defined in Sec. 24.720(b)(2) or

Sec. 24.720(b)(5) of this part may use a bidding credit of twenty-five

percent as specified in Sec. 1.2110(e)(2)(ii) of this chapter, to lower

the cost of its winning bid.

(c) Unjust enrichment. See Sec. 1.2111 of this chapter.

12. Section 24.716 is amended by revising paragraphs (a)(1) and

(a)(2) to read as follows:

Sec. 24.716 Upfront payments, down payments and installment payments

for licenses for frequency Block F.

(a) * * *

(1) Each eligible bidder for licenses subject to auction on

frequency Block F shall pay an upfront payment as set forth in a Public

Notice pursuant to the procedures in Sec. 1.2106 of this chapter.

(2) Each winning bidder shall make a down payment and pay the

balance of

[[Page 50800]]

its winning bids pursuant to Sec. 1.2107 and Sec. 1.2109 of this

chapter.

* * * * *

13. Section 24.717 is revised to read as follows:

Sec. 24.717 Bidding credits for licenses for frequency Block F.

(a) A winning bidder that qualifies as a small business or a

consortium of small businesses as defined in Sec. 24.720(b)(1) or

Sec. 24.720(b)(4) of this part may use a bidding credit of fifteen

percent, as specified in Sec. 1.2110(e)(2)(iii) of this chapter, to

lower the cost of its winning bid.

(b) A winning bidder that qualifies as a very small business or a

consortium of very small businesses as defined in Sec. 24.720(b)(2) or

Sec. 24.720(b)(5) of this part may use a bidding credit of twenty-five

percent, as specified in Sec. 1.2110(e)(2)(ii) of this chapter, to

lower the cost of its winning bid.

(c) Unjust enrichment. See Sec. 1.2111 of this chapter.

Sec. 24.822 [Removed]

14. Section 24.822 is removed.

Note: This attachment will not appear in the Code of Federal

Regulations.

Attachment--Final Regulatory Flexibility Analysis

As required by the Regulatory Flexibility Act (RFA), an Initial

Regulatory Flexibility Analysis (IRFA) was incorporated into the C

Block Further Notice of Proposed Rule Making in WT Docket No. 97-82

(``C Block Further Notice''). The Commission sought written public

comment on the proposals in the C Block Further Notice, including

comment on the IRFA. This present Final Regulatory Flexibility

Analysis (FRFA) conforms to the RFA.

A. Need for, and Objectives of, the C Block Fourth Report and Order

in WT Docket No. 97-82

This C Block Fourth Report and Order sets forth the rules that

will govern reauctions of C block spectrum surrendered to the

Commission pursuant to the C Block Second Report and Order and the C

Block Order on Reconsideration of the Second Report and Order (``C

Block Reconsideration Order''), as well as any other C block

spectrum available for reauction. The C Block Fourth Report and

Order also reflects the Commission's ongoing effort to streamline

auction procedures by eliminating overlapping or redundant rules and

simplifying procedures for auction participants.

B. Summary of Significant Issues Raised by Public Comments in

Response to the IRFA

There were no comments filed directly in response to the IRFA.

The Commission, however, has considered the economic impact on small

businesses of the rules adopted herein. See section E, infra.

C. Description and Estimate of the Number of Small Entities to

Which the Rules Will Apply

The RFA directs agencies to provide a description of and, where

feasible, an estimate of the number of small entities that will be

affected by our rules. The RFA generally defines the term ``small

entity'' as having the same meaning as the terms ``small business,''

``small organization,'' and ``small governmental jurisdiction.'' In

addition, the term ``small business'' has the same meaning as the

term ``small business concern'' under the Small Business Act. Under

the Small Business Act, a ``small business concern'' is one which:

(1) is independently owned and operated; (2) is not dominant in its

field of operation; and (3) meets any additional criteria

established by the Small Business Administration (``SBA'').

The rule changes effected by this C Block Fourth Report and

Order affect all small businesses that participate in future

reauctions of C block and F block spectrum, including small

businesses currently holding C block and F block broadband personal

communications services (PCS) licenses that choose to participate

and other small businesses that may acquire licenses through

reauction. The Commission grants C block and F block licenses only

to applicants that, together with their affiliates and persons or

entities that hold interests in the applicants and their affiliates,

have gross revenues of less than $125 million in each of the last

two years and total assets of less than $500 million. The

Commission, with respect to broadband PCS, defines small businesses

as entities that, together with their affiliates and persons or

entities that hold interest in such entities and their affiliates,

have average annual gross revenues that are not more than forty

million dollars for the preceding three years. This definition has

been approved by the SBA.

On May 6, 1996, the Commission concluded the broadband PCS C

block auction. The broadband PCS D, E, and F block auction closed on

January 14, 1997. Ninety bidders (including the C block reauction

winners, prior to any defaults by winning bidders) won 493 C block

licenses and 88 bidders won 491 F block licenses. Small businesses

placing high bids in the C and F block auctions were eligible for

bidding credits and installment payment plans. For purposes of its

evaluations and conclusions in this RFA, the Commission assumes that

all of the 90 C block broadband PCS licensees and 88 F block

broadband PCS licensees, a total of 178 licensees potentially

affected by this C Block Fourth Report and Order, are small

entities. In addition to the 178 current small business licensees

that may participate at the reauction of C block licenses, a number

of additional small business entities may seek to acquire licenses

through reauction and would thus be affected by these rules.

In addition, the Commission will provide small business bidders

and very small business bidders in C block and F block reauctions

with bidding credits, with a greater discount given to very small

businesses. Under Commission rules, very small businesses in the C

block and F block are entities that, together with their affiliates

and persons or entities that hold interest in such entities and

their affiliates, have average annual gross revenues of not more

than fifteen million for the preceding three years. As discussed

below, small businesses will receive a fifteen percent bidding

credit, and very small businesses will receive a bidding credit of

twenty-five percent.

D. Description of Reporting, Recordkeeping, and Other Compliance

Requirements

As a result of the C Block Fourth Report and Order, each

applicant for a C block reauction will be required to attach to its

short-form application a statement indicating whether or not the

applicant has ever been in default on any Commission licenses or has

ever been delinquent on any non-tax debt owed to any Federal agency.

E. Steps Taken To Minimize Significant Economic Impact on Small

Entities, and Significant Alternatives Considered

The Commission will include in the next C block reauction all

licenses representing C block spectrum returned to the Commission

under the disaggregation, prepayment, or amnesty options established

in the C Block Second Report and Order, as modified in the C Block

Reconsideration Order, as well as all C block licenses held by the

Commission as a result of defaults. While some commenters argue that

the next reauction should include licenses that have filed for

bankruptcy protection, the Commission believes that the public and C

block reauction applicants will realize a greater benefit if the

Commission auctions all available C block spectrum as soon as

practicable than they will if the Commission postpones a reauction

until it has resolved all issues connected with ongoing bankruptcy

proceedings.

The following two types of entities will be eligible to

participate in C block reauctions: (1) Entities that filed an FCC

Form 175 short-form application for, and were eligible for, the

original C block auction, and (2) entities qualifying under Section

24.709 of the Commission's rules, 47 CFR 24.709, as of the deadline

for the filing of short-form applications for the reauction. All but

two of the entities that applied for and were eligible to

participate in the original C block auction qualified as small

businesses under Section 24.720 of the Commissions rules, 47 CFR

24.720. In order to ensure the integrity of C block reauctions, the

Commission retains the eligibility restriction established in the C

Block Second Report and Order, as modified in the C Block

Reconsideration Order, for licensees that surrender licenses

pursuant to the disaggregation, prepayment, and/or ``amnesty/

prepayment'' options. Such licensees will be ineligible to reacquire

their surrendered licenses through reauction or by any other means

for a period of two years from the start date of the next C block

reauction.

To further ensure auction integrity for the benefit of

applicants as well as the general public, the Commission will

restrict C block reauctions to entities not in default on any

Commission debt and not delinquent on any non-tax debt owed to any

Federal agency.

[[Page 50801]]

However, the Commission believes that past business misfortunes do

not inevitably preclude an entity from being able to meet its

present and future responsibilities as a Commission licensee.

Therefore, the Commission will allow ``former defaulters,'' i.e.,

applicants that have defaulted or been delinquent in the past, but

have since paid all of their outstanding non-Internal Revenue

Service Federal debts and all associated charges or penalties, to be

eligible to participate in C block reauctions, provided that they

are otherwise qualified.

In the Part 1 Third Report and Order, the Commission adopted

general competitive bidding rules to supplant, wherever practicable,

specific auction rules for each auctionable service or class of

service. Accordingly, future C block reauctions will adhere to Part

1 rules, insofar as applicable. Part 1 rules are determinative for

the following aspects of C block reauctions: competitive bidding

design; activity rules; reserve price, minimum opening bid, and

minimum bid increments; electronic filing; upfront payment; down

payment and full payment; amendments and modifications of

applications; bid withdrawal, default, and disqualification; anti-

collusion, and installment payment financing. Based upon the record

in this proceeding, the Commission sets a ceiling for minimum

opening bids that is no more than ten percent of the amount of the

net high bid for the corresponding market in the original C block

auction. The Commission also sets the upfront payment amount for the

next C block reauction at no higher than $.06 per MHz per pop. The

Commission will require that the upfront payment for ``former

defaulters'' be 50 percent more than that required from applicants

that do not have a history of default. This increased upfront

payment formula reflects the increased risk associated with these

parties.

In the Part 1 Third Report and Order, the Commission adopted a

schedule of bidding credits to be used in future auctions for all

services. Applying the Part 1 schedule to the gross revenue

thresholds under the Part 24 rules for small and very small C block

and F block businesses, gives small business applicants in C block

reauctions a fifteen percent bidding credit and very small business

applicants a twenty-five percent bidding credit. Eligibility for

bidding credits will be determined by the size of the applicant as

of the deadline for filing short-form applications.

Section 309(j) of the Communications Act of 1934, 47 U.S.C.

309(j), as amended, directs the Commission to disseminate licenses

among a wide variety of applicants, including small businesses and

other designated entities. Section 309(j) also requires that the

Commission ensure the development and rapid deployment of new

technologies, products, and services for the benefit of the public,

and recover for the public a portion of the value of the public

spectrum resource made available for commercial use. The Commission

believes that the C Block Fourth Report and Order promotes these

goals while maintaining the fair and efficient execution of the

auctions program.

F. Report to Congress

The Commission will send a copy of the C Block Fourth Report and

Order, including this FRFA, in a report to Congress pursuant to the

Small Business Regulatory Enforcement Fairness Act of 1996. See 5

U.S.C. 801(a)(1)(A). A copy of the C Block Fourth Report and Order

and this FRFA (or summary thereof) will be published in the Federal

Register. See 5 U.S.C. 604(b). A copy of the C Block Fourth Report

and Order and this FRFA will also be sent to the Chief Counsel for

Advocacy of the Small Business Administration.

[FR Doc. 98-25344 Filed 9-22-98; 8:45 am]

BILLING CODE 6712-01-P