Rules to Provide Regulatory Flexibility in the 218-219 MHz Service

FEDERAL COMMUNICATIONS COMMISSION

47 CFR Part 95

[WT Docket No. 98-169; FCC 99-372]

Rules to Provide Regulatory Flexibility in the 218-219 MHz

Service

AGENCY: Federal Communications Commission.

ACTION: Final rule.

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SUMMARY: The Commission modifies the restructuring plan adopted in the

218-219 MHz final rule document. The purpose of the modification is to

remove a provision whereby an eligible licensee participating in the

restructuring plan can obtain a seventy-percent credit on its down

payment and forego, for a period of two years, eligibility to acquire

the surrendered licenses. It was not the Commission's intent to adopt

the seventy-percent credit and the intended effect is to correct the

prior error.

DATES: Effective December 29, 1999.

FOR FURTHER INFORMATION CONTACT: Andrea Kelly, Wireless

Telecommunications Bureau, Auctions and Industry Analysis Division

(202) 418-0660.

SUPPLEMENTARY INFORMATION: 1. This Order on Reconsideration in WT

Docket 98-169 was adopted November 24, 1999 and released November 30,

1999. The document is available, in its entirety, for inspection and

copying during normal business hours in the FCC Reference Center, (Room

CY-A257), 445 12th Street, SW, Washington, DC 20554. It may also be

purchased from the Commission's copy contractor, International

Transcription Services, Inc. (ITS, Inc.), 1231 20th Street, NW,

Washington, DC 20036, (202) 857-3800. In addition, it is available on

the Commission's website at http://www.fcc.gov/Bureaus/Wireless/Orders.

Synopsis

I. Background

2. In the 218-219 MHz Report and Order 64 FR 59656 (November 3,

1999), the Commission adopted a restructuring plan for existing 218-219

MHz licensees. These licensees were current in installment payments

(i.e. less than ninety days delinquent) as of March 16, 1998, or those

licensees that had properly filed grace period requests

[[Page 72957]]

under the former installment payment rule. (``Eligible Licensees'').

The restructuring plan offered three options to provide specific relief

for licensees that wish to retain their license but are experiencing

financial hardship or that wish to return their licenses due to an

inability to assume their financial responsibilities. The three options

are: (a) Reamortization and Resumption of Payments; (b) Amnesty, and

(c) Prepayment, whereby an Eligible Licensee may prepay the principal

of any license it wishes to retain with cash and prepayment credits

generated from down payments on spectrum returned to the Commission and

any installment payments previously made. The Commission's order

allowed an Eligible Licensee electing the Amnesty option to choose

either to receive no credit for its down payment, but remain eligible

to bid on the surrendered licenses when they are subsequently offered

in auction, with no restriction on after-market acquisitions; or obtain

a credit for seventy percent of its down payment and forego for a

period of two years, from the start date of the next auction of the

218-219 MHz Service, eligibility to reacquire the surrendered licenses

through either auction or any secondary market transaction.

II. Discussion

3. It was not the Commission's original intent to adopt the seventy

percent credit proposed in the 218-219 MHz Flex NPRM, 63 FR 52215

(September 30, 1998) therefore, on its own motion, for the following

reasons, the Commission corrects the prior error. On review, it is

apparent that, under the Amnesty option, allowing an Eligible Licensee

to obtain credit for its down payment and forego reacquiring

surrendered licenses for a period of two years is inconsistent with our

responsibility to protect the integrity of the auction program and

promote new and innovative uses of spectrum. Giving a seventy percent

credit on down payments associated with returned spectrum, without an

adequate counterbalancing public interest benefit, would undermine the

integrity of the auction process by relieving participants of even the

most basic obligation of their participation.

4. However, the Commission recognizes that it allows for a credit

on down payments in other portions of the 218-219 MHz Report and Order.

Specifically, an Eligible Licensee who elects the Prepayment option is

eligible for an eighty-five percent credit on its down payment. It is

important to note that an Eligible Licensee who elects the prepayment

option is providing a public benefit through early payment of its

financial obligations. Nevertheless, under the Prepayment option, the

Commission retains an amount equal to the three-percent default

payment. (Fifteen percent of the twenty-percent down payment equals

three percent of the purchase price.) Thus, as an Eligible Licensee

electing the Amnesty option is not providing the same public benefit,

it would not be in the public interest to allow it a seventy-percent

credit on its down payment. Amendment of the Commission's Rules

Regarding Installment Payment Financing For Personal Communications

Services, (PCS), Order on Reconsideration of the Second Report and

Order, 63 FR 17111 (April 8, 1998) (``C Block Reconsideration Order'').

5. The 218-219 MHz Report and Order increased the flexibility of

the 218-219 MHz service and extended the license term in order to

encourage new and innovative uses in the marketplace and expedite

service to the public. In the 218-219 MHz Report and Order, the only

restriction on reacquisition applied to those Eligible Licensees opting

for the seventy percent credit. Thus, as the seventy percent credit is

no longer available, Eligible Licensees electing Amnesty will not be

precluded from reacquiring licenses at auction or in the secondary

market. This result is appropriate as Eligible Licensees electing

amnesty may still have viable business plans to implement based on

spectrum they may acquire in future auctions or in the secondary

market. A two-year restriction on the acquisition of certain spectrum

may negatively impact an otherwise viable business plan. The

Commission's action in this Order on Reconsideration moots the comments

of EON Corporation seeking to broaden the disqualification period to

exclude the future acquisition of any 218-219 MHz Service licenses to

be auctioned in the ensuing two-year period. As the Commission stated

in the 218-219 MHz Report and Order, limiting the reacquisition of

spectrum or acquisition of additional spectrum by Eligible Licensees

would not be in the public interest.

6. The Commission modifies the 218-219 MHz Report and Order.

Therefore, while the Commission will not give Eligible Licensees

electing amnesty a credit for down payments associated with spectrum

returned to the Commission, neither will it limit the reacquisition of

spectrum or the acquisition of additional spectrum.

III. Ordering Clauses

7. Accordingly, it is ordered that, pursuant to Sec. 1.108 of the

Commission's rules, 47 CFR 1.108, the Commission reconsiders on its own

motion the decision in Amendment of part 95 of the Commission's Rules

to Provide Regulatory Flexibility in the 218-219 MHz Service, Report

and Order and Memorandum Opinion and Order, WT Docket No. 98-169, FCC

99-239 regarding amnesty and resumption of payment in the 218-219 MHz

service, as detailed herein.

IV. Supplemental Final Regulatory Flexibility Analysis

8. As required by the Regulatory Flexibility Act (``RFA''),\1\ an

Initial Regulatory Flexibility Analysis (``IRFA'') was incorporated in

the Amendment of part 95 of the Commission's Rules to Provide

Regulatory Flexibility in the 218-219 MHz Service and Amendment of part

95 of the Commission's Rules to Allow Interactive Video and Data

Service Licensees to Provide Mobile Services, 218-219 MHz Flex NPRM.

The Commission sought written public comment on the proposals in the

218-219 MHz Flex NPRM, including comment on the IRFA. A Final

Regulatory Flexibility Analysis (``FRFA'') was included in the

Amendment of part 95 of the Commission's Rules to Provide Regulatory

Flexibility in the 218-219 MHz Service, 218-219 MHz Report and Order.

In this Order on Reconsideration, we issue this supplemental Final

Regulatory Flexibility Analysis (``supplemental FRFA'') which conforms

to the RFA.

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\1\ See 5 U.S.C. 603. The RFA, see 5 U.S.C. 601 et. seq., has

been amended by the Contract With America Advancement Act of 1996,

Public Law 104-121, 110 Stat. 847 (1996) (``CWAAA''). Title II of

the CWAAA is the Small Business Regulatory Enforcement Fairness Act

of 1996 (``SBREFA'').

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V. Need for, and Objecties of, The Order on Reconsideration

9. In the 218-219 MHz Report and Order, among other things, we

adopted a restructuring plan for existing 218-219 MHz licensees that

were current in installment payments (i.e. less than ninety days

delinquent) as of March 16, 1998, or those licensees that had properly

filed grace period requests under the former installment payment rule.

(``Eligible Licensees''). The restructuring plan offered three options

to provide specific relief for licenses that wish to retain their

license, but are experiencing financial hardship, or that wish to

return their licenses due to an inability to assume their financial

responsibilities. Under one of these options, Amnesty, an Eligible

Licensee could choose either to receive no credit

[[Page 72958]]

for its down payment, but remain eligible to bid on the surrendered

licenses when they are subsequently offered in auction, with no

restriction on after-market acquisitions; or obtain a credit for

seventy percent of its down payment and forego for a period of two

years, from the start date of the next auction of the 218-219 MHz

Service, eligibility to reacquire the surrendered licenses through

either auction or any secondary market transaction.

10. On review, it is apparent that, under the Amnesty option,

allowing an Eligible Licensee to obtain credit for its down payment and

forego reacquiring surrendered licenses for a period of two years is

inconsistent with our responsibility to protect the integrity of the

auction program and promote new and innovative uses of spectrum. Giving

a seventy percent credit of the down payments associated with returned

spectrum would undermine the integrity of the auction process by

relieving participants of even the most basic obligation of their

participation. Further, a two-year restriction on the reacquisition of

the surrendered license unduly restricts the number of potential

licenses, and is inconsistent with a fair and equitable auction

process.

VI. Summary of Significant Issues Raised by Public Comments in Response

to the Initial Regulatory Flexibility Analysis

11. Previously, no petitions were filed in direct response to the

IRFA or the FRFA in this proceeding. Thus, on our own motion, we have

issued this 218-219 MHz Reconsideration Order.

VII. Description and Estimate of the Number of Small Entities to Which

the Rules Apply

12. Previously, in the FRFA, pursuant to the RFA, we provided a

detailed description and estimate of the number of small entities that

may be affected by the proposed rules, if adopted. We noted that the

218-219 MHz Report and Order affects a number of small entities who are

either licensees, or who may choose to become applicants for licenses,

in the 218-219 MHz Service. Such entities fall into two categories. The

first category consists of those using the 218-219 MHz Service for

providing interactivity capabilities in conjunction with broadcast

services. In the FRFA, with respect to the first category, we estimated

that the number of small business entities operating in the 218-219 MHz

band for interactivity capabilities with television viewers in the 218-

219 MHz Service which will be subject to the rules will be less than

612. The second category consists of those using the 218-219 MHz

Service to operate other types of wireless communications services with

a wide variety of uses, such as commercial data applications and two-

way telemetry services. In the FRFA, with respect to the second

category, we estimated that the number of small entities that would

provide wireless communications services other than that described

herein would be 247 or less.

13. On January 6, 1998, the SBA approved of the small business size

standards established in the Competitive Bidding Tenth Report and

Order.\2\ As we described in the FRFA, the first auction of 218-219 MHz

spectrum resulted in 170 entities winning licenses for 594 Metropolitan

Statistical Area (``MSA'') licenses. Of the 594 licenses, 557 were won

by entities qualifying as a small business.

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\2\ See Letter to Daniel B. Phythyon, Chief, WTB, from Aida

Alverez, Administrator, SBA, Dated Jan. 6, 1998.

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VIII. Description of Projected Reporting, Recordkeeping, and Other

Compliance Requirements

14. Previously, in the FRFA to the 218-219 MHz Report and Order, we

adopted rules altering the reporting and recordkeeping requirements for

a number of small business entities. The rules changed the obligations

of 218-219 MHz Service licensees with respect to license renewal,

construction reports, and acquisitions by partitioning or

disaggregation. As we noted in the FRFA, the 218-219 MHz Report and

Order contained three options relevant to some small businesses that

will alter their reporting and recordkeeping requirements. Our

reconsideration order is relevant only to the second option.

Specifically, non-defaulting 218-219 MHz Service licensees currently

participating in the installment payment plan may elect one of three

restructuring plans concerning their outstanding payments. However, our

reconsideration order does not alter any reporting, recordkeeping, or

other compliance requirements contained in the 218-219 MHz Report and

Order.

IX. Steps Taken to Minimize Significant Economic Impact on Small

Entities, and Significant Alternatives Considered

15. As we described in detail in the FRFA to the 218-219 MHz Report

and Order, we adopted final rules designed to maximize opportunities

for participation by, and growth of, small businesses in providing

wireless services. We noted that we expected that the extension of

license terms from five to ten years and allowing partitioning and

disaggregation of licenses will specifically assist small businesses.

We also noted that the 218-219 MHz Report and Order contained

provisions, such as liberalization of construction requirements and

technical restrictions, and elimination of the cross-ownership

restriction, that will assist all licenses, including small business

licensees.

16. In this Order on Reconsideration, we change the options

available to those small businesses electing the Amnesty option in the

restructuring plan. The 218-219 MHz Report and Order allowed an

Eligible Licensee electing the Amnesty option to choose either to

receive no credit for its down payment, but remain eligible to bid on

the surrendered licenses when they are subsequently offered in auction,

with no restriction on after-market acquisitions; or obtain a credit

for seventy percent of its down payment and forego for a period of two

years, from the start date of the next auction of the 218-219 MHz

Service, eligibility to reacquire the surrendered licenses through

either auction or any secondary market transaction. We recognize that

some commentators proposed a more liberal amnesty option. However, we

believe that eliminating all adverse financial consequences of a

licensee's decision to participate in the auction would be contrary to

a fair and equitable auction process. Further, it might encourage

future licensees to participate in an auction under the assumption that

the Commission will relieve it of the most basic obligations of

participation in an auction, if, in the future, its business plans do

not prove profitable. Thus, we will not provide the licensees with a

seventy percent down payment credit. However, to the extent that a

licensee believes that it can create a valuable business with the same

license, if its debt burden were smaller, it will not be precluded from

acquiring the license at auction, or in any secondary market

transaction. For these reasons, we did not consider any significant

alternatives to our proposals to minimize significant economic impact

on small entities.

17. Report to Congress: The Commission will send a copy of the

Order on Reconsideration, including this FRFA, in a report to be sent

to Congress pursuant to the Small Business Regulatory Enforcement

Fairness Act of 1996, see 5 U.S.C. 801(a)(1)(A). In addition, the

Commission will send a copy of the Order on Reconsideration, including

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

Administration.

[[Page 72959]]

List of Subjects in 47 CFR Part 95

Communications equipment, Penalties, Radio, Reporting and

recordkeeping requirements.

Federal Communications Commission.

William F. Caton,

Deputy Secretary.

[FR Doc. 99-33768 Filed 12-28-99; 8:45 am]

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