# FCC-05-123: Implementation of the Commercial Spectrum Enhancement Act and Modernization of the Commission's Competitive Bidding Rules and Procedure (06/14/05): Implementation of the Commercial Spectrum Enhancement Act and Modernization of the Commission's Competitive Bidding Rules and Procedure

> Federal · Rulings · In force

URL: https://www.frixlaw.com/law-library/statutes/FCC_FCC_05_123

## Section

- **Citation:** FCC-05-123: Implementation of the Commercial Spectrum Enhancement Act and Modernization of the Commission's Competitive Bidding Rules and Procedure (06/14/05)
- **Heading:** Implementation of the Commercial Spectrum Enhancement Act and Modernization of the Commission's Competitive Bidding Rules and Procedure
- **Jurisdiction:** Federal
- **Kind:** Rulings
- **Status:** In force
- **Text as of:** August 14, 2026
- **Source:** Compiled text
- **Location:** FCC Declaratory Rulings / Implementation of the Commercial Spectrum Enhancement Act and Modernization of the Commission's Competitive Bidding Rules and Procedure

## Text

Federal Communications Commission
FCC 05-123
Before the
Federal Communications Commission
Washington, D.C. 20554
In the Matter of
)
)
Implementation of the Commercial Spectrum )
Enhancement Act and Modernization of the )
WT Docket No. 05-211
Commission's Competitive Bidding Rules and )
Procedures
)
)
)
)
DECLARATORY RULING AND NOTICE OF PROPOSED RULE MAKING
Adopted: June 9,2005
Released: June 14,2005
By the Commission:
Comment Date: 30 days after publication in the Federal Register
Reply Comment Date: 45 days after publication in the Federal Register
TABLE OF CONTENTS
Heading
Paragraph #
I. INTRODUCTION AND EXECUTIVE SUMMARY
1
n. DECLARATORY RULING
5
m. NOTICE OF PROPOSED RULE MAKING
14
A. Implementing CSEA
14
1. Complying with CSEA's Reserve Price Requirement
14
2. Modifying Tribal Land Bidding Credit Rules
16
B. Updating Competitive Bidding Rules and Procedures
22
1. Clarifying the Default Rule
22
2. Raising the Limit on Withdrawal and Default Payments
27
a. Background
27
b. Discussion
31
3. Apportioning Bid Amoimts
34
a. Apportionment Among the Licenses in a Package
34
b. Apportionment Among the Components of a License
46
4. Conforming Broadcast Construction Permit Payment Procedures with Part 1 Rules
48
5. Improving Procedures for Using the Consortium Exception to the Designated Entity
and Entrepreneur Aggregation Rule
51
IV. CONCLUSION
55
V. PROCEDURAL MATTERS AND ORDERING CLAUSES
56
A. Ex Parte Rules -
Permit-But-Disclose Proceeding
56
11268
ackage
34
b. Apportionment Among the Components of a License
46
4. Conforming Broadcast Construction Permit Payment Procedures with Part 1 Rules
48
5. Improving Procedures for Using the Consortium Exception to the Designated Entity
and Entrepreneur Aggregation Rule
51
IV. CONCLUSION
55
V. PROCEDURAL MATTERS AND ORDERING CLAUSES
56
A. Ex Parte Rules -
Permit-But-Disclose Proceeding
56
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FCC 05-123
B. Paperwork Reduction Act
57
C. Initial Regulatory Flexibility Analysis
58
D. Comment Filing Procedures
58
E. Accessible Formats
62
F. Further Information
63
G. Ordering Clauses
64
APPENDICES:
Appendix A -
Proposed Rules
Appendix B -
Initial Regulatory Flexibility Analysis
I. INTRODUCnON AND EXECUTIVE SUMMARY
1. With this Declaratory Ruling and Notice of Proposed Rule Making {^''Declaratory Rulin^^
and "Notice"'), we begin a proceeding to implement rules and procediu-es needed to comply with the
recently enacted Commercial Spectrum Enhwcement Act ("CSEA").' We also propose a number of
changes to our conqietitive bidding rules that are necessary, apart fiom CSEA, to bring them in line with
the current requirements of our auctions program.
2. CSEA establishes a mechanism to use spectrum auction proceeds to reimburse federal
agencies operating on the 216-220 MHz, 1432-1435 MHz, 1710-1755 MHz, and 2385-2390 MHz bands,
and certain other fiequency bands that may be reallocated from federal to non-federal use, for the cost of
relocating operations. In the Declaratory Ruling, we interpret the meaning of the term "total cash
proceeds" as used in CSEA, because we fmd that an interpretation is necessary for us to be able to
inq)lement the statute. We determine that "total cash proce^" for purposes of CSEA means witming
bids net of any applicable bidding credit discoimts. Should we determine that additional provisions of
CSEA must be interpreted in order to comply with the statute, we will make those interpretations in
subsequent actions.
3
CSEA, because we fmd that an interpretation is necessary for us to be able to
inq)lement the statute. We determine that "total cash proce^" for purposes of CSEA means witming
bids net of any applicable bidding credit discoimts. Should we determine that additional provisions of
CSEA must be interpreted in order to comply with the statute, we will make those interpretations in
subsequent actions.
3. In the Notice, we seek comment on changes to our conq>etitive bidding rules necessary to
inclement CSEA. Specifically, we propose to:
•
Change the Conunission reserve price rule as mandated by CSEA; and
•
Change the Commission tribal land bidding credit rules in auctions subject to CSEA or to a
reserve price requirement unrelated to CSEA in order to determine whether auction results satisfy
any revenue requirement at or near the completion of bidding;
4. We also consider in the Notice a number of other measures to update our competitive bidding
rules and procedures, including steps to (1) ensure that our general auction rules are consistent with the
use of combinatorial (or package) bidding mediodologies, (2) conform the payment rules and procedures
for broadcast construction permits won at auction to our Part 1 general competitive bidding rules and
recent procedures, and (3) determine whether certain existing conqjetitive bidding provisions should be
modified in order to achieve their intended purposes. Spiecifically, we propose to:
'
Commercial Spectrum Enhancement Act, Pub. L. No. 108-494,118 Stat. 3986, Title II (2004) (codified
in scattered sections of Title 47 of the United States Code)
("CSEA").
11269
al competitive bidding rules and
recent procedures, and (3) determine whether certain existing conqjetitive bidding provisions should be
modified in order to achieve their intended purposes. Spiecifically, we propose to:
'
Commercial Spectrum Enhancement Act, Pub. L. No. 108-494,118 Stat. 3986, Title II (2004) (codified
in scattered sections of Title 47 of the United States Code)
("CSEA").
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•
Change the Commission's default payment rule to clarify its application in certain situations;
•
Change the Commission's interim withdrawal and additional default payment rules to replace the
current interim withdrawal and additional default payments of 3 percent of the relevant bid with
an amount up to 20 percent of the relevant bid, with the precise amount for each auction
established in advance of the auction;
• Adopt new Commission rules to establish procedures in advance of each auction for apportioning
bid amounts in the auction among licenses in a package or among components of a license to
determine the amount of an individual bid or a portion of a bid when needed for calculations
pursuant to Commission mles or procedures;
•
Change Commission payment rules and procedures for broadcast constmction permits won at
auction to conform to the payment rules and procedures for non-broadcast licenses won at
auction; and
• Change Commission rules and procedures for consortia of designated entities and entrepreneurs
to in^jrove the licensing process for such entities.
II. DECLARATORY RULING
5. CSEA, signed into law on December 23, 2004, establishes a Spectrum Relocation Fund
("SRF') to reimburse federal agencies operating on certain frequencies that have been reallocated from
federal to non-federal use for the cost of relocating their operations.^ The SRF will be funded from cash
proceeds attributable to "eligible frequencies" in an auction involving such frequencies
CLARATORY RULING
5. CSEA, signed into law on December 23, 2004, establishes a Spectrum Relocation Fund
("SRF') to reimburse federal agencies operating on certain frequencies that have been reallocated from
federal to non-federal use for the cost of relocating their operations.^ The SRF will be funded from cash
proceeds attributable to "eligible frequencies" in an auction involving such frequencies. The statute
identifies four bands (the 216-220 MHz, 1432-1435 MHz, 1710-1755 MHz and 2385-2390 MHz bands)
as eligible frequencies in which SRF fimds will be used to relocate federal entities.' In addition, the
statute designates as "eligible frequencies" any other band of frequencies reallocated from federal use to
non-federal use after January 1, 2003, and assigned by the Commission through competitive bidding.^
6. Pursuant to CSEA, the National Telecommunications and Information Administration
("NTIA") must notify the Commission of estimated relocation costs and timelines for relocation fh>m
eligible frequencies by eligible federal entities at least six months in advance of a scheduled auction of
eligible frequencies.' CSEA further requires that the "total cash proceeds" from any auction of eligible
frequencies must equal at least 110 percent of estimated relocation costs of eligible federal entities.^
CSEA prohibits the Commission from concluding any auction of eligible frequencies that falls short of
this revenue requirement:
'
CSEA §§ 201-209.
'
Id. § 202 (codified at 47 U.S.C. § 923(g)(2)(A)).
^ Id. § 202 (codified at 47 U.S.C. § 923(g)(2)(B)). Bands of frequencies previously identified by the
National Telecommunications and Information Administration in the Spectrum Reallocation Final Report, NTIA
Special Publication 95-32 (1995), are excluded. Id. § 202 (codified at 47 U.S.C. § 923(g)(2)(B)).
'
Id. § 202 (codified at 47 U.S.C. § 923(g)(4)).
'Id.
§ 309a)(16)).
'
Id. § 203(b) (codified incorrectly at 47 U.S.C. § 309(j)(15); should have been codified at 47 U.S.C.
11270
dentified by the
National Telecommunications and Information Administration in the Spectrum Reallocation Final Report, NTIA
Special Publication 95-32 (1995), are excluded. Id. § 202 (codified at 47 U.S.C. § 923(g)(2)(B)).
'
Id. § 202 (codified at 47 U.S.C. § 923(g)(4)).
'Id.
§ 309a)(16)).
'
Id. § 203(b) (codified incorrectly at 47 U.S.C. § 309(j)(15); should have been codified at 47 U.S.C.
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The Commission shall not conclude any auction of eligible frequencies ... if the total
cash proceeds attributable to such spectrum are less than 110 percent of the total
estimated relocation costs provided to the Commission .... If the Commission is unable
to conclude an auction for the foregoing reason, the Commission shall cancel the auction,
return within 45 days after the auction cancellation date emy deposits from participating
bidders held in escrow, and absolve such bidders from any obligation to the United States
to bid in any subsequent reauction of such spectrum.^
7. As a threshold matter, in order to implement this requirement, we must determine the
meaning of the term "total cash proceeds" as used in the statute. Under our conpetitive bidding rules,
winning bids in an auction do not necessarily translate into amoxmts actually owed by bidders. The
discrepancy between gross and net winning bid amounts arises finm the award of bidding credits.
Pursuant to our statutory authority for designing competitive bidding systems, we have established rules
granting bidding credits -
i.e., discotmts on gross winning bids -
to eligible designated entities and new
entrants into the marketplace.^ We also have established rules providing bidding credits to winning
bidders that undertake to serve previously underserved tribal lands. In this context, the plain language of
the statute appears to refer to an auction's net winning bids rather than gross winning bids
bidding credits -
i.e., discotmts on gross winning bids -
to eligible designated entities and new
entrants into the marketplace.^ We also have established rules providing bidding credits to winning
bidders that undertake to serve previously underserved tribal lands. In this context, the plain language of
the statute appears to refer to an auction's net winning bids rather than gross winning bids. The word
"cash" is defined as "money or its equivalent;"'" or "ready money"" and "proceeds" is defined as "the
money obtained fix)m a commercial or fund-raising venture: yield."*^
8. In addition to the language of the statute, the purpose underlying the revenue requirement of
CSEA supports a determination that "total cash proceeds" is based on winning bids net of bidding credits.
Given that Congress's purpose in establishing the SRF was to provide a mechanism for making sufficient
funds available to relocating federal agencies," it is reasonable to assume that Congress did not intend the
Commission, in determining whether the "total cash proceeds" requirement has been met, to count those
portions of winning bids for which the bidder would receive credit and not have to pay. Accordingly, we
do not read CSEA to equate the amount of the gross winning bids with the total cash proceeds of the
auction.
9. While the statute appears quite clear with respect to gross winning bids, we acknowledge that
there is some degree of ambiguity as to whether an auction would meet the 110 percent requirement once
the net winning bids exceed this percentage of NTIA's estimated relocation costs, in light of the fact that
defaults and disqualifications may also reduce auction revenues, at least in the short-term. In other words.
'
Id. § 203(b) (codified at 47 U.S.C. § 309(j)(15)(B)).
'
See A1 C.F.R. § 1.2110(f)(l)-(2) (designated entities); id. § 73.5007 (new entrants). New entrant
bidding credits are available only in auctions of broadcast constmction permits.
^ See id. § 1.2110(f)(3).
Black's Law Dictionary 208 (7th ed.l999)
isqualifications may also reduce auction revenues, at least in the short-term. In other words.
'
Id. § 203(b) (codified at 47 U.S.C. § 309(j)(15)(B)).
'
See A1 C.F.R. § 1.2110(f)(l)-(2) (designated entities); id. § 73.5007 (new entrants). New entrant
bidding credits are available only in auctions of broadcast constmction permits.
^ See id. § 1.2110(f)(3).
Black's Law Dictionary 208 (7th ed.l999).
"
Webster's 11 New College Dictionary 172 (1999).
W.
at 881.
"
See CSEA § 202 (codified at 47 U.S.C. § 923(g)(1)):
Any Federal entity that operates a Federal Government station assigned to a band of fi^quencies
specified in paragraph (2) and that incurs relocation costs because of the reallocation of
fiaquencies from Federal use to non-Federal use shall receive payment for such costs from the
Spectrum Relocation Fund, in accordance with section 118 of this Act.
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it is possible that the government may not be able to collect the entire net amormt of the winning bids by
the time final payment is due, and that the insolvency of a disqualified or defaulting bidder may prevent
the government fi'om ever collecting this entire amount. Despite these possibilities, however, there are
several reasons to conclude that, under the most reasonable reading of the statute, the Commission is
permitted to equate the net winning bids of an auction with that auction's total cash proceeds.
10. First, to a large extent, the Commission's rules ensure that the public ultimately will be
compensated for at least the net amount of any bids subject to a post-auction default or disqualification.
As we discuss in detail later, section 1.2104(g) of the Commission's mles requires a high bidder that
defaults or is disqualified after the close of an auction to make a default payment equaling the difference
between the amount of the defaulter's bid and the amoimt of the winning bid the next time a license
covering the same spectrum is won in an auction
post-auction default or disqualification.
As we discuss in detail later, section 1.2104(g) of the Commission's mles requires a high bidder that
defaults or is disqualified after the close of an auction to make a default payment equaling the difference
between the amount of the defaulter's bid and the amoimt of the winning bid the next time a license
covering the same spectrum is won in an auction. The defaulter also must make an additional payment
equal to 3 percent (or, in the case of defaults or disqualifications after the close of a package bidding
auction, 25 percent) of the defaulter's bid or of the subsequent winning bid, whichever is less.*^
11. Second, too strict a reading of the phrase "total cash proceeds" would create an uiu-easonable
burden on the administration of the auction in that the Commission would be forced to wait imtil cash
proceeds were received before "concluding" the auction piu-suant to CSEA. Such an approach would
create risk for winning bidders, whose licenses might be cancelled or never granted due to another
winning bidder's default. This lack of certainty could interfere with financing and service roll-out
and would conflict with the Commission's statutory objective of licensing spectrum without
administrative delay piuauant to the public interest.'^ We do not believe that Congress intended such a
result. Consequently, we believe that it is appropriate to calculate net winning bids once bidding has
ended, before payment is required of wiruiing bidders.
12. CSEA requires the Commission to revise its reserve price regulations to prescribe methods by
which CSEA's auction revenue requirement will be met.'® Accordingly, in the Notice below, we propose
a change to our rules to con^ly with this mandate. In addition, in light of our interpretation of "total cash
proceeds," we believe that we need to revise our tribal land bidding credit rules
g bidders.
12. CSEA requires the Commission to revise its reserve price regulations to prescribe methods by
which CSEA's auction revenue requirement will be met.'® Accordingly, in the Notice below, we propose
a change to our rules to con^ly with this mandate. In addition, in light of our interpretation of "total cash
proceeds," we believe that we need to revise our tribal land bidding credit rules. These rules provide for a
discount to be applied to winning bids when the winning bidder makes the required showing that it will
undertake to serve previously underserved tribal lands." However, pursuant to our rules, the process for
determining whether a winning bidder is eligible to receive a tribal land bidding credit may take more
than 180 days after the end of bidding.'® Thus, at the end of bidding, we may not be able to calculate the
potential discount attributable to tribal land bidding credits with any reliability. To prevent the lengthy
process of determining tribal land bidding credits from delaying the determination of whether a reserve
price or prices mandated by CSEA or any other revenue requirement have been met, we propose, in the
Notice below, modifications to our tribal land bidding credit rules.
13. We note that several additional issues involved with implementing reserve prices for auctions
subject to CSEA may arise. One such issue is whether the total cash proceeds attributable to eligible
frequencies can be assessed on a license-by-license basis, so that the auction might be deemed to meet the
CSEA revenue threshold for one license but not another. Another unresolved issue is whether, where an
'Ud. § 1.2104(g)(2)-(3).
"
See 47 U.S.C. § 309(jX3)(A).
'® CSEA § 203(b) (codified at 47 U.S.C. § 3090)(15)(A)).
'M7C.F.R.§ 1.2110(f)(3).
"id. § 1.2110(f)(3Kii).
11272
tributable to eligible
frequencies can be assessed on a license-by-license basis, so that the auction might be deemed to meet the
CSEA revenue threshold for one license but not another. Another unresolved issue is whether, where an
'Ud. § 1.2104(g)(2)-(3).
"
See 47 U.S.C. § 309(jX3)(A).
'® CSEA § 203(b) (codified at 47 U.S.C. § 3090)(15)(A)).
'M7C.F.R.§ 1.2110(f)(3).
"id. § 1.2110(f)(3Kii).
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auction involves both CSEA-eligible frequencies and other spectrum, the full amount or only a portion of
wiiming bids should be considered when measuring whether auction results satisfy the CSEA revenue
requirement. Whether such issues will actually arise in an auction, and what the best possible resolutions
may be, may depend upon the characteristics of the specific spectrum licenses to be auctioned and the
circumstances under which the auction is conducted. Accordingly, we will leave consideration of such
issues to later actions, including possible auction- or service-specific rule making proceedings, subsequent
declaratory rulings regarding questions of statutory interpretation, or adoption of specific auction
procedures by the Commission.
ra.
NOTICE OF PROPOSED RULE MAKING
A. Implementing CSEA
1. Complying with CSEA's Reserve Price Requirement
14. From the inception of the Commission's auctions program in 1994, Commission rules have
allowed for the use of reserve (or "reservation") prices." The Balanced Budget Act of 1997 added
paragraph 309(jX4)(F) to the Communications Act, requiring the Commission to "prescribe methods by
which a reasonable reserve price will be required, or a minimum bid will be established, to obtain any
license or permit being assigned pursuant to the con:q)etitive bidding, imless the Commission determines
that such a reserve price or minimum bid is not in the public interest."^" Our current reserve price rule for
all auctionable services, section 1.2104(c), states t^t we "may establish a reservation price, either
disclosed or undisclosed, below
r a minimum bid will be established, to obtain any
license or permit being assigned pursuant to the con:q)etitive bidding, imless the Commission determines
that such a reserve price or minimum bid is not in the public interest."^" Our current reserve price rule for
all auctionable services, section 1.2104(c), states t^t we "may establish a reservation price, either
disclosed or undisclosed, below which a license subject to auction will not be awarded."^'
15. As noted above, CSEA requires the total cash proceeds from any auction of eligible
fi^uencies to equal at least 110 percent of the total estimated relocation costs provided to the
Commission by NTIA. To implement this requirement, CSEA directs the Conunission to revise its
reserve price regulations adopted pursuant to Section 309(jX4)(F) of the Communications Act. Thus, in
contrast to our current reserve price rule, the reserve price rule we must adopt for auctions subject to
CSEA cannot be discretionary. We propose, therefore, to modify section 1.2104(c) to add a requirement
that, for any auction of eligible fi^uencies under CSEA, we will establish a reserve price (or prices) that
ensures that the total cash proceeds (as defined in the Declaratory Ruling above) attributable to such
spectrum will equal at least 110 percent of the total estimated relocation costs provided to the
Commission by NTIA. We seek comment on this proposal.
2. Modifying Tribal Land Bidding Credit Rules
16. In an effort to encourage carriers to provide telecommunications services to tribal lands with
historically low telephone service penetration rates, the Commission makes tribal land bidding credits
available to auction winners that serve qualifying tribal lands.^^ The amoimt of a bidding credit is
"
Iiiq}lementation of Section 309(j) of the Conunimications Act - Conqwtitive Bidding, PP Docket No.
93-253, Second Report and Order, 9 FCC Red 2348,2384 fll 206-07,2387 H 224 (1994) {"Competitive Bidding
Second Report and Ordef"); 47 C.F.R. § 1.2104(c) (1994-present)
s tribal land bidding credits
available to auction winners that serve qualifying tribal lands.^^ The amoimt of a bidding credit is
"
Iiiq}lementation of Section 309(j) of the Conunimications Act - Conqwtitive Bidding, PP Docket No.
93-253, Second Report and Order, 9 FCC Red 2348,2384 fll 206-07,2387 H 224 (1994) {"Competitive Bidding
Second Report and Ordef"); 47 C.F.R. § 1.2104(c) (1994-present).
^
Balanced Budget Act of 1997, Pub. L. No. 105-33,88 Stat. 259, § 3002 (codified at 47 U.S.C.
§ 3090)(4)(F)) ("Balanced Budget Act").
47 C.F.R. § 1.2104(c). This provision has been unchanged since its adoption in 1994. See Competitive
Bidding Second Report and Order, 9 FCC Red at 2407; 59 Fed. Reg. 49,938 (Sept. 30, 1994).
47 C.F.R. § 1.2110(f)(3). See Extending Wireless Telecommunications Services to Tribal Lands, WT
Docket No. 99-266, Report ar^ Oi^er and Further Notice of Proposed Rule Making, 15 FCC Red 11,794 (2000).
(continued....)
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determined according to a formula set forth in our rules and is subject to a cap based on a sliding scale
according to the amount of the high bid.^^ To apply for a tribal land bidding credit, an auction winner
must indicate on its long-form application (FCC Form 601) that it intends to serve a qualifying tribal land
within a particular market." TTie applicant must then amend its long-form application by attaching a
certification fix)m the tribal government authorizing the applicant to provide service on its tribal land,
certifying that the area to be served by the winning bidder is indeed qualifying tribal land, and assuring
that it has not and will not enter into an exclusive contract with the applicant and will not unreasonably
discriminate among wireless carriers seeking to provide service on Ae qualifying tribal land.^' The
applicant must also attach its own certification that it will comply with construction requirements for
tribal land and consult with the tribal government regarding the siting of facilities and service
deploy
and will not enter into an exclusive contract with the applicant and will not unreasonably
discriminate among wireless carriers seeking to provide service on Ae qualifying tribal land.^' The
applicant must also attach its own certification that it will comply with construction requirements for
tribal land and consult with the tribal government regarding the siting of facilities and service
deployment."
17. The deadline for submitting these certifications is not imtil 180 days after the filing deadline
for long-form applications.^^ Accordingly, in auctions that include spectrum covering qualif^ng tribal
lands, the Commission may not know for at least 180 days after the long-form deadline how much of a
discoimt on the auction's winning bids it will have to allow for tribal land bidding credits. In auctions
subject to CSEA, this situation could lead to a potentially substantial post-auction delay in calculating
whether "total cash proceeds" meet the 110 percent revenue requirement. Thus, our current tribal land
bidding credit procedtires could prevent the Commission from concluding the auction expeditiously after
the cessation of bidding and might even (should award of the credits reduce the auction's net winning
bids to below the 110 percent revenue requirement) lead to cancellation of the auction long after the
bidding has ended.
18. We, therefore, seek comment on different possible methods of ensuring that the Commission
will be able to promptly calculate "total cash proceeds" while at the same time preserving the availability
of tribal land bidding credits in auctions subject to CSEA. One ix>ssibility in such auctions is to award
tribal land bidding credits on a pro rata basis out of the funds exceeding the reserve price. Under this
option, the amounts that could be discounted by tribal land bidding credits in an auction subject to CSEA
would be limited to net bids in excess of the reserve price or 110 percent of the total estimated relocation
costs
in auctions subject to CSEA. One ix>ssibility in such auctions is to award
tribal land bidding credits on a pro rata basis out of the funds exceeding the reserve price. Under this
option, the amounts that could be discounted by tribal land bidding credits in an auction subject to CSEA
would be limited to net bids in excess of the reserve price or 110 percent of the total estimated relocation
costs. If this amount were insufficient to pay all of the tribal land bidding credits for which auction
winners were eligible, then each eligible tribal land bidding credit recipient would receive a pro rata credit
(...continued from previous page)
"Qualifying tribal land" is "any federally recognized Indian tribe's reservation. Pueblo, or Colony, including
former reservations in Oklahoma, Alaslm Native regions established pursuant to the Alaska Native Claims
Settlement Act... and Indian allotments, that has a wireline telephone subscription rate equal to or less than
eighty-five (85) percent based on the most recently available U.S. Census Data." 47 C.F.R. § 1.2110(fX3)(i). Not
all Commission auctions include licenses covering qualifying tribal lands. See, e.g., "Auction of Lower 700 MHz
Band Licenses Scheduled for July 20,2005," Public Notice, DA 05-737, at 13 (rel. Mar. 22, 2005).
2347C.F.R. § 1.2110(f)(3)(iii)-(iv).
"
Id. § 1.2107(e). The Commission requires that winning bidders intending to apply for tribal land
bidding credits do so by the filing deadline for long-form applications and does not permit applicants to amend
their applications after the filing deadline to indicate their intention to seek a credit. See, e.g., "Broadband PCS
Spectrum Auction Closes; Winning Bidders Announced for Auction No. 58," Public Notice, 20 FCC Red 3703,
3736-37 (2005).
"
47 C.F.R. § 1.2110(f)(3)(ii)(A).
Id. § 1.2110(f)(3)(ii)(B).
"W. § 1.21I0(f)(3)(ii)(A)-(B).
11274
long-form applications and does not permit applicants to amend
their applications after the filing deadline to indicate their intention to seek a credit. See, e.g., "Broadband PCS
Spectrum Auction Closes; Winning Bidders Announced for Auction No. 58," Public Notice, 20 FCC Red 3703,
3736-37 (2005).
"
47 C.F.R. § 1.2110(f)(3)(ii)(A).
Id. § 1.2110(f)(3)(ii)(B).
"W. § 1.21I0(f)(3)(ii)(A)-(B).
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in proportion to the amount the applicant would have received had the auction not been subject to a
reserve price.
19. A second option on which we seek comment is to award tribal lemd bidding credits on a first-
come, first-served basis in auctions subject to CSEA. Under this alternative, winning bidders would still
have to file the certifications for a tribal land bidding credit no later than 180 days after the filing deadline
for long-form applications. However, bidding credits up to the ftill amount determined by the existing
formula would be awarded to eligible applicants in the order in which they had filed the certifications for
such credits, but only to the extent that funds were available. As with the first alternative, the money
available for tribal land bidding credits would be limited to the net winning bids exceeding 110 percent of
the total estimated relocation costs (or another specified reserve price). This alternative offers the appeal
of encouraging the early filing of tribal land bidding credit certifications but might exclude applicants that
encoimtered delays through no fault of their own in obtaining the required certifications.
20. We also seek comment on a third option pursuant to which we would require applicants to
specify on their short-form applications the licenses, if any, for which they intend to seek a tribal land
bidding credit, should they win
of tribal land bidding credit certifications but might exclude applicants that
encoimtered delays through no fault of their own in obtaining the required certifications.
20. We also seek comment on a third option pursuant to which we would require applicants to
specify on their short-form applications the licenses, if any, for which they intend to seek a tribal land
bidding credit, should they win. Under this option, the Commission would determine whether the CSEA
reserve price had been met, insofar as tribal land bidding credits are concerned, by deducting the
maximum amount of tribal land bidding credits for which winning bidders that had indicated on their
short-form applications an interest in receiving such credits could be eligible. While this alternative
would facilitate prompt determination of whether, taking tribal land bidding credits into account, the
CSEA-required reserve price had been met, it could create an additional burden for short-form applicants.
It could also overstate the potential inqiact of tribal land bidding credits on auction revenues in the event
-that license winners that had indicated an interest in receiving tribal land bidding credits ultimately did
not receive such credits for any reason.^®
21. We also invite commenters to propose other methods to enable the Commission to determine
pronqitly total cash proceeds while preserving the availability of tribal land bidding credits. We
encourage those offering proposals or commenting on the proposals presented here to consider the
practical inqilications of each approach, and we request that commenters discuss, in particular, how a
given approach might best promote the dual purposes of facilitating CSEA compliance and encotiraging
service on tribal lands through the award of tribal land bidding credits
l land bidding credits. We
encourage those offering proposals or commenting on the proposals presented here to consider the
practical inqilications of each approach, and we request that commenters discuss, in particular, how a
given approach might best promote the dual purposes of facilitating CSEA compliance and encotiraging
service on tribal lands through the award of tribal land bidding credits. We also seek comment on
whether we should adopt the same or similar approach for any non-CSEA auctions for which the
Commission, pursuant to section 309(jX4XF) of the Conununications Act, establishes a reserve price
based on winning bids net of all discounts.^
B. Updating Competitive Bidding Rules and Procedures
1. Clarifying the Default Rule
22. Section 1.2104(g) of our mles provides that a bidder that withdraws a high bid during the
course of an auction is subject to a withdrawal payment equal to the difference between the amount of the
withdrawn bid and the amoimt of the winning bid in the same or subsequent auction. In the event that a
1.2110(f)(3).
We note that, in auctions where reserve prices are based on gross winning bid amnnnts, rather than on
winning bids net of discounts, it will not be necessary to follow the procedures for which we seek comment in this
section. See "Auction of Licenses in the 747-762 and 777-792 MHz Bands Scheduled for June 19,2002; Further
Modification of Package Bidding Procedures and Other Procedures for Auction No. 31," Public Notice, 17 FCC
Red 5140,5175-78 (2002) {"Auction No. 31 Procedures Public Notice"), modified by erratum, 17 FCC Red 7049
will not be necessary to follow the procedures for which we seek comment in this
section. See "Auction of Licenses in the 747-762 and 777-792 MHz Bands Scheduled for June 19,2002; Further
Modification of Package Bidding Procedures and Other Procedures for Auction No. 31," Public Notice, 17 FCC
Red 5140,5175-78 (2002) {"Auction No. 31 Procedures Public Notice"), modified by erratum, 17 FCC Red 7049
(2002).
11275

Federal Communications Cominission
FCC 05-123
bidding credit applies to any of the bids, the bid withdrawal payment equals the difference between either
the net withdrawn bid and the subsequent net winning bid or the gross withdrawn bid and the subsequent
gross winning bid, whichever difference is less.^" However, no withdrawal payment is assessed for a
withdrawn bid if either the subsequent wiiming bid or any intervening subsequent withdrawn bid equals
or exceeds the original withdrawn bid.''
23. Under section 1.2104(g), a high bidder that defaults or is disqualified after the close of an
auction is subject to the payment just described for withdrawn bids (foe "deficiency payment" or
"deficiency portion") plus an additional payment equal to 3 percent (or, in the case of defaults or
disqualifications after the close of a package bidding auction, 25 percent) of foe defaulting bidder's bid or
the subsequent winning bid, whichever is less.'^ The 3 (or 25) percent payment must be calculated using
the same bid amounts and basis (i.e., net or gross bids) as used in calculating the deficiency payment."
24
plus an additional payment equal to 3 percent (or, in the case of defaults or
disqualifications after the close of a package bidding auction, 25 percent) of foe defaulting bidder's bid or
the subsequent winning bid, whichever is less.'^ The 3 (or 25) percent payment must be calculated using
the same bid amounts and basis (i.e., net or gross bids) as used in calculating the deficiency payment."
24. The rule does not, however, anticipate the anomaly that might result fix)m calculating the
additional 3 or 25 percent payment for a bidder that defaults or is disqualified after foe close of an
auction, when, in a subsequent auction, there is a higher withdrawn bid, but no winning bid, for a license
corresponding to foe defaulted license." A literal reading of section 1.2104(g) might seem to dictate that,
while the defaulter's deficiency obligation would be calculated as foe difference between the defaulter's
bid and foe higher withdrawn bid in the subsequent auction (thus resulting in no deficiency payment), the
defaulter's additional 3 or 25 percent payment obligation, which is based upon the lesser of ^
defaulter's
bid or the subsequent winning bid, could not be calculated until foe corresponding license had been won
in a still later auction. Yet such a reading conflicts with the explicit assumption in our default payment
rule that the deficiency payment and the additional payment are calculated using the same bids: "If either
bid amount is subject to a bidding credit, foe 3 percent [payment] will be calculated using the same bid
amoimts and basis (net or gross bids) as in foe calculation of foe [withdrawal] payment. . .
Moreover,
"
We note that for purposes of calculating the withdrawal payment amount, net bids would not include
any discounts resulting from tribal land bidding credits.
"
An intervening subsequent withdrawn bid less than the original withdrawn bid may limit the amount of
the withdrawal payment. See 47 C.F.R
imts and basis (net or gross bids) as in foe calculation of foe [withdrawal] payment. . .
Moreover,
"
We note that for purposes of calculating the withdrawal payment amount, net bids would not include
any discounts resulting from tribal land bidding credits.
"
An intervening subsequent withdrawn bid less than the original withdrawn bid may limit the amount of
the withdrawal payment. See 47 C.F.R. § 1.2104(g)(1) ("In the case of multiple bid withdrawals on a single
license, the payment for each bid withdrawal will be calculated based on the sequence of bid withdrawals and the
amounts withdrawn in the same or subsequent auction(s)."), particularly, examples 2 and 3. However, it is only
possible to determine the final amount of a withdrawal payment once there is a higher intervening subsequent
withdrawn bid or a subsequent winning bid.
In this Notice and in our rules, bidders that are disqualified after the close of an auction are referred to
as "defaulting bidders," just as are bidders that default after an auction's close. Similarly, the payment owed by a
disqualified bidder is referred to as a "default payment." See id. §§ 1.2104(g)(2)-(3); 1.2109. Currently, the
deficiency payment for a default or disqualification following a package bidding auction is, in most instances,
calculated differently from the way in which the deficiency payment is calculated for a default or disqualification
following a non-package bidding auction. See id. § 1.2104(g)(3).
"/d. § 1.2104(g)(2).
"
By "corresponding license," we mean a license with the same, or similar, geographic and spectral
components as the defaulted license.
"
47 C.F.R. § 1.2104(g)(2). See also id. § 1.2104(g)(3)(ii) (calculating the additional 25 percent payment
for defaults and disqualifications after the close of a combinatorial bidding auction)
ackage bidding auction. See id. § 1.2104(g)(3).
"/d. § 1.2104(g)(2).
"
By "corresponding license," we mean a license with the same, or similar, geographic and spectral
components as the defaulted license.
"
47 C.F.R. § 1.2104(g)(2). See also id. § 1.2104(g)(3)(ii) (calculating the additional 25 percent payment
for defaults and disqualifications after the close of a combinatorial bidding auction). We note that the quoted
sentence of section 1.2104(g)(2) actually reads: "If either bid amount is subject to a bidding credit, the 3 percent
credit will be calculated using the same bid amounts and basis (net or gross bids) as in the calculation of the
payment in paragraph (g)(1) of this section." (emphasis added) The use of the word "credit" in this sentence was
in error. Our pressed clarifications of section 1.2104 would eliminate the error.
11276

Federal Communications Commission
FCC 05-123
reading the rule this way would prolong the period before the final amount of the default payment
obligation could be assessed and payment could be collected.
25. To remove any ambiguity associated with this possible occurrence, we believe that a
clarification of the rule is needed. Therefore, we propose that when, in a subsequent auction, there is a
higher withdrawn bid but no winning bid for a license that corresponds to a defaulted license, the
additional default payment be determined as 3 percent (or 25 percent) of the defaulting bidder's bid.^^
The additional payment would, as always, be calculated using the same basis, i.e., net or gross bids, as
used in the calctilation of the deficiency payment.^^ We believe that adopting this proposal would
simplify and accelerate the calculation of final default payments in applicable situations by allowing use
of the same subsequent bid in calculating both the deficiency payment portion and the additional payment
portion of the final default payment and by allowing an earlier determination of the additional payment
amount.
26
of the deficiency payment.^^ We believe that adopting this proposal would
simplify and accelerate the calculation of final default payments in applicable situations by allowing use
of the same subsequent bid in calculating both the deficiency payment portion and the additional payment
portion of the final default payment and by allowing an earlier determination of the additional payment
amount.
26. Further, we believe that clarification of the additional payment portion of the default payment
rule is needed for certain situations in which no deficiency payment is owed. As noted, normally the
additional payment is a percentage of either the defaulting bidder's bid or the subsequent applicable bid,
whichever is less, using the same basis -
net or gross bids -
as used in calculating the deficiency payment.
However, when the defaulted bid was subject to a bidding credit and the subsequent applicable bid equals
or exceeds the de£iulted bid, regardless of which basis -
net or gross bids -
is used, it is not clear whether
the additional payment should be based on the net defaulted bid or on the gross defaulted bid. We
propose that, in such a situation, the additional payment be 3 (or 25) percent of the net defaulted bid
amount, thus basing the default payment on what the defaulter was obligated to pay at the close of
bidding. We seek comment on these proposals.^^
2. Raising the Limit on Withdrawal and Default Payments
a. Background
27. Withdrawals. As we have discussed, our rules provide that a bidder that withdraws a high bid
during an auction is subject to a withdrawal payment equal to the difference between the amoimt of the
^
In the event that there are no intervening subsequent withdrawn bids that are higher than the defaulted
bid but there are intervening subsequent withdrawn bids that are higher than the subsequent winning bid, the
highest such intervening subsequent withdrawn bid will be used to calculate both portions of the final default
payment
hdrawal payment equal to the difference between the amoimt of the
^
In the event that there are no intervening subsequent withdrawn bids that are higher than the defaulted
bid but there are intervening subsequent withdrawn bids that are higher than the subsequent winning bid, the
highest such intervening subsequent withdrawn bid will be used to calculate both portions of the final default
payment. For example, if the defaulted bid were for $100 and the subsequent winning bid were for $80 but there
were an intervening subsequent withdrawn bid for $90, the default payment (both the deficiency portion and the
additional payment) would be calculated using the $100 defaulted bid and the $90 intervening subsequent
withdrawn bid.
As in the calculation of withdrawal payments, net bids for purposes of calculating default deficiency
and additional payments would not include discounts resulting from tribal land bidding credits.
As previously noted, in most instances, we use a different calculation to determine the amount of the
deficiency portion of a default payment in the context of combinatorial bidding. See 47 C.F.R. § 1.2104(g)(3).
However, in a subsequent section of this Notice, we propose changes to our rules that would instead require use of
the "conventional" default rule (i.e., the default rule used where neither the initial nor the subsequent winning bid
is for a license won as part of a package) for combinatorial bidding situations. Accordingly, we further propose to
extend the clarification discussed here to determinations of the amount of default payments in situations where the
initial bid, the subsequent winning bid, or any intervening withdrawn bid is for a license that is part of a package.
Adoption of this further proposal, however, would be contingent upon our concurrent or prior adoption of a rule
change that would allow use of the "conventional" default rale in such situations.
11277
here to determinations of the amount of default payments in situations where the
initial bid, the subsequent winning bid, or any intervening withdrawn bid is for a license that is part of a package.
Adoption of this further proposal, however, would be contingent upon our concurrent or prior adoption of a rule
change that would allow use of the "conventional" default rale in such situations.
11277

Federal Communications Commission
wiAdrawn bid
the amount of the winning bid in the same or subsequent auction(s).'' In the event that
a license for which th^ has been a withdrawn high bid is not subject to a subsequent higher bid or won
withdrawal payment cannot be calculated until a corresponding license is
h
subsequent auction. In such a case, the bidder responsible for the
with^wn
bid IS assessed an interim bid withdrawal payment equal to 3 percent of the amount of its
m 3 percent up to a maximum of 20 percent, at which to set
each of the two payments. This 3 to 20 percent range mirrors the parameters long used for determining
initial default deposit amounts. In light of the potentially greater harm resulting fix)m defaults in
combinatorial bidding auctions, we do not propose to change the size of the 25 percent additional
payment for defaults or disqualifications following combinatorial bidding auctions. We seek comment on
these proposals.
See, e.g., round results for Auctions No. 33 (700 MHz Guard Bands) and No. 37 (FM Broadcast)
ult deposit amounts. In light of the potentially greater harm resulting fix)m defaults in
combinatorial bidding auctions, we do not propose to change the size of the 25 percent additional
payment for defaults or disqualifications following combinatorial bidding auctions. We seek comment on
these proposals.
See, e.g., round results for Auctions No. 33 (700 MHz Guard Bands) and No. 37 (FM Broadcast).
Links to these round results may be fotmd on the Commission's Web site at, respectively,
httD://wireless.fcc.gov/auctions/33/ and httD://wireless.fcc.gov/auctions/37/. Software to assist with viewing round
results may be downloaded from httD://wirele8S.fcc.gov/auctions/data/trackingtools.html.
For example, three bidders defaulted on a total of 13 licenses following Auction No. 40 (Lower and
Upper Paging Bands); three bidders defaulted on a total of 6 licenses following Auction No. 37 (FM Broadcast);
two bidders defaulted on a total of five licenses following Auction. No. 35 (C and F Block Broadband PCS); and a
single bidder defaulted on 10 licenses following Auction No. 34 (800 MHz Specialized Mobile Radio Service).
"
See 47 U.S.C. § 309(j)(4)(F), (15)(B).
See Amendment of the Commission's Rules Regarding Installment Payment Financing for Personal
Communications Services (PCS) Licensees, WT Docket No. 97-82, Sixth Report and Order and Order on
Reconsideration, 15 FCC Red 16,266,16,289-91 1146-51 (2000); 47 C.F.R. § 24.839(aX6).
"
See, e.g.. Promoting Efficient Use of Spectram Through Elimination of Barriers to the Development of
Secondary Maricets, WT Eiocket No. 00-230, Second Report and Order, Order on Reconsideration, and Second
Further Notice of Proposed Rulemaking, 19 FCC Red 17,503 (2004); id. Report and Order and Further Notice of
Proposed Rulemaking, 18 FCC Red 20,604 (2003).
11280
000); 47 C.F.R. § 24.839(aX6).
"
See, e.g.. Promoting Efficient Use of Spectram Through Elimination of Barriers to the Development of
Secondary Maricets, WT Eiocket No. 00-230, Second Report and Order, Order on Reconsideration, and Second
Further Notice of Proposed Rulemaking, 19 FCC Red 17,503 (2004); id. Report and Order and Further Notice of
Proposed Rulemaking, 18 FCC Red 20,604 (2003).
11280

Federal Coimnunications Commission
FCC 05-123
3. Apportioning Bid Amounts
a. Apportionment Among the Licenses in a Package
34. Our competitive bidding rules and procedures assume that the amount of each bid on an
individual license is always known. This assun:q>tion makes sense only when licenses are won
individually. However, in combinatorial (or "package") bidding, bidders place single all-or-nothing bids
on groups (or packages) of licenses. Thus, there may be no identifiable bid amounts on the individual
licenses comprising packages of more than one license.
35. The Commission employed package bidding for the first time in Auction No. 51, an auction
of regional narrowband PCS licenses that was held on September 24 and 25, 2003.'^ The Commission
announced in 2000 that a combinatorial bidding system would be used for Auction No. 31, the planned
auction of licenses in the Upper 700 MHz bands.'^ In addition, the Commission recently annoimced its
launch of a new auction bidding software sjretem -
the Integrated Spectrum Auction System or "ISAS" -
which, among other things, will facilitate package bidding.^' We believe that the use of combinatorial
bidding methodology makes it necessary for us modify our rules to allow the apportioiunent of package
bids among the individual licenses con:q)rising a package whenever an individual bid amoimt is needed to
administer a Commission rule or procedure. As we discuss below, there are several situations in which
the need for an individual bid amount could arise.
36. Small Business and New Entrant Bidding Credits
thodology makes it necessary for us modify our rules to allow the apportioiunent of package
bids among the individual licenses con:q)rising a package whenever an individual bid amoimt is needed to
administer a Commission rule or procedure. As we discuss below, there are several situations in which
the need for an individual bid amount could arise.
36. Small Business and New Entrant Bidding Credits. Under our rules, small business and new
entrant bidding credits are awarded as percentage discounts on winning bid amoimts for specific
licenses.^ In the event that an entity entitled to such a bidding credit places a bid on a package of
licenses in an auction with combinatorial bidding, it may be necessary to apportion the bid among the
licenses conq)rising the package. For example, if the entity bids on a package of licenses not all of which
entitle the wiimer to a bidding credit or to the same percentage bidding credit, it will be necessary to
apportion the bid among the individual licenses con^rising the package in order to calculate the amount
of the bidding credits. Moreover, as discussed below, in the case of small business bidding credits, even
if the small business is entitled to a rmiform bidding credit on all licenses in a package, it may be
necessary to apportion the package bid among individual licenses in order to determine the amoimt of an
unjust enrichment payment obligation.
37. Unjust Enrichment Payment Obligations. Under our existing rules, an unjust enrichment
See "Regional Narrtowband PCS Spectrum Auction Closes; Winning Bidder Announced," Public
Notice, 18 FCC Red 19,689 (2003); "Auction of Regional Narrowband PCS Licenses Scheduled for September
24,2003; Notice of Filing Requirements, Minimum Opening Bids, Upfiont Payments, Package Bidding and Other
Auction Procedures," Public Notice, 18 FCC Red 11,974 (2003) ("Auction No. 51 Procedures Public Notice")
e "Regional Narrtowband PCS Spectrum Auction Closes; Winning Bidder Announced," Public
Notice, 18 FCC Red 19,689 (2003); "Auction of Regional Narrowband PCS Licenses Scheduled for September
24,2003; Notice of Filing Requirements, Minimum Opening Bids, Upfiont Payments, Package Bidding and Other
Auction Procedures," Public Notice, 18 FCC Red 11,974 (2003) ("Auction No. 51 Procedures Public Notice").
"
"Auction of Licenses in the 747-762 and 777-792 MHz Bands Scheduled for September 6, 2000;
Procedures Inqjlementing Package Bidding for Auction No. 31; Bidder Semiiuu- Scheduled for July 24,2000,"
Public Notice, 15 FCC Red 8809, 8813 (2000). Auction No. 31 has been posqmned from its original planned start
date, and a new start date has not yet been annoimced. "Auction of Licenses in the 747-762 and 777-792 MHz
Bands (Auction No. 31) is Rescheduled," Public Notice, 17 FCC Red 14,546 (2002).
™ See 'TCC Aimounces New Integrated Spectrum Auction System," Public Notice, DA 05-454 (rel. Feb.
18,2005). In addition to providing bidding functionality for multiple types of auctions, the new system also
conqirises an FCC Form 175 electrotiic filing system, combining auction application, bidding, and administration
processes into a single software system.
See 47 C.F.R. § 1.2110(0(1 )-(2) (designated entities); id. § 73.5007 (new entrants). New entrant
bidding credits are available only in auctions of broadcast constmction permits. Id.
11281
ality for multiple types of auctions, the new system also
conqirises an FCC Form 175 electrotiic filing system, combining auction application, bidding, and administration
processes into a single software system.
See 47 C.F.R. § 1.2110(0(1 )-(2) (designated entities); id. § 73.5007 (new entrants). New entrant
bidding credits are available only in auctions of broadcast constmction permits. Id.
11281

CommunicationsComnussion
FCC 05-123
foliv
T
^
control
n »rft? f
^
y®^ of the license term to an entity not
quailing for a bidding credit, or for as favorable a bidding credit as the licensee's.*' The amount of an
unjmt ennchment pa)ment, determmed according to a declining schedule, is a percentage of either the
whfch^thlf °f
betwera the bidding credit the licensee received and the bidding credit for
which the transferee or assignee would qualify, up to 100 percent, plus interest." Unjust Lichment
paymen obligations for partitioned license areas are calculated based upon the ratio of tl^e poSS^f
the p^itioned area to the overall population of the original license La." ConS^n^y
ennchment payment obligations for disaggregated spectrum are calculated based upon the ratio of the
disaggregated to the total amount of spectrum of the original license.** In the case of
uZn thfZ^ZS
enrichment payment obligations are calculated based
SLS
r
"MHz-pops" in the original license, whero
MH^ps IS defin^ M the number of megahertz of spectrum multiplied by the population of the
covered arw. This MHz-pops ratio is a generalization of the ratios used for simple partitions and
disaggregations, tatang mto account both the license area and the bandwidth being assigned. If a bidder
fiZ
of licenses m an auction with combinatorial bidding and subsequently seeks to transfer or
folly or partially assign an mdiyidual license that comprises part of the package, calculating any required
fodhddZh^Zi payment will require a determination of the price and applicable bidding credit for the
Land Bidding Credits
account both the license area and the bandwidth being assigned. If a bidder
fiZ
of licenses m an auction with combinatorial bidding and subsequently seeks to transfer or
folly or partially assign an mdiyidual license that comprises part of the package, calculating any required
fodhddZh^Zi payment will require a determination of the price and applicable bidding credit for the
Land Bidding Credits. As discussed above, the size of a tribal land bidding credit is
subj^t to a lum which is srt using the amount of the high bid on the license in question.** Accordingly
to
^ tnbal land bidding credit for a license won as part of a package, it will be necessar^
to determine how much of the winmng bid amount for the package to allocate to that license.
H f H
Withdrawal Payments. As we have also discussed, calculating the amount of a
default or withdrawal ^ayr^t involves a comparison between the withdrawing or defaulting bidder's bid
and a subsequent bid. The Commission already has in place a rule for calculating default payment
obh^tiom in connection with combinatorial bidding auctions. Initially adopted as pL of the s^ce-
mh'
biddmg rules m anticipation of package bidding in auctions of the Upper 700
MHz band, the rule later was mcoiporated into the Part 1 rules as section 1.2104(g)(3), applicable to all
*' Id. § 1.2111(d)(1);
47 U.S.C. § 309aX3)(C), (4)(E). In this Notice, we refer only to unjust
emchment payment obligations involving small business bidding credits; however, unjust enrichment payment
obligations can result from other circumstances, as well. See 47 C.F.R. § 1.2111(b), (c), and (e)
*M7 C.F.R.§ 1.2111(d).
*'«. § 1.2111(e)(3).
^
Id.
T •
Geo^phic Partitioning and Spectrum Disaggregation by Commercial Mobile Radio Services
msT?! S
and Further Notice of Proposed Rulemaking, 11 FCC Red
66
67
47 C.F.R.§ 1.2110(f)(3)(iv).
Id. § 1.2104(g).
D 1
«rr
746-764 and 776-794 MHz Bands, and Revisions to Part 27 of the Commission's
c°'
Opinion and Order, 15 FCC Red 21,070, 21,074-79^1111-17
C.F.R.§ 1.2111(d).
*'«. § 1.2111(e)(3).
^
Id.
T •
Geo^phic Partitioning and Spectrum Disaggregation by Commercial Mobile Radio Services
msT?! S
and Further Notice of Proposed Rulemaking, 11 FCC Red
66
67
47 C.F.R.§ 1.2110(f)(3)(iv).
Id. § 1.2104(g).
D 1
«rr
746-764 and 776-794 MHz Bands, and Revisions to Part 27 of the Commission's
c°'
Opinion and Order, 15 FCC Red 21,070, 21,074-79^1111-17
(2000) (
700 MHz Second Memorandum Opinion and OrdeP').
11282

Federal Communications Commission
FCC 05-123
defaults on licenses won in a combinatorial bidding auction.^ In addition to sp>ecifying the method of
^
Part I Order on Reconsideration ofthe Fifth Report and Order, ISFCCRcdat 10,198-204
25-31;
47 C.F.R. § 1.2104(g)(3). Under the nile, when a winning bidder defaults on paying for a license won in a
combinatorial bidding auction and/or won in a subsequent combinatorial bidding auction, its default payment
obligations are calculated as follows:
(1) Where a defaulting bidder held winning bids on individual licenses (i.e.,. not as part of a package), and
in a subsequent auction the licenses are also won individually, the deficiency portion will be calculated by
subtracting the subsequent winning bid from the defaulted bid. The deficiency portion for such bids will be
calculated on a license-by-license basis (i.e., in the event of defaults on multiple bids, the differences
between the amounts originally bid and the amounts subsequently bid will not be aggregated to determine a
net amount owed). If the subsequent winning bid(s) exceed the defaulted bid(s), no deficiency portion will
be assessed. Even in the absence of a deficiency portion, however, an additional 25% payment will be due.
y-license basis (i.e., in the event of defaults on multiple bids, the differences
between the amounts originally bid and the amounts subsequently bid will not be aggregated to determine a
net amount owed). If the subsequent winning bid(s) exceed the defaulted bid(s), no deficiency portion will
be assessed. Even in the absence of a deficiency portion, however, an additional 25% payment will be due.
(2) Where a defaulting bidder won licenses in package(s), and in a subsequent auction the licenses are won
either (a) in the same package(s), or (b) in smaller packages or as individual licenses that correlate to the
defaulted package(s), the deficiency portion will be determined on a package-by-package basis. In the
event a defrulting bidder defaults on more than one such bid, the differences between the amount originally
bid and the amounts(s) subsequently bid will not be aggregated to determine a net amount owed. Thus, in
this situation, the deficiency portion will be calculated in a manner analogous to where the licenses are sold
individually. However, with regard to each individual package, udiere the licenses are subsequently sold
individually or as part of smaller packages, the amounts received in the subsequent auction will be
aggregated in order to determine any deficiertcy.
(3) Where a defrulting bidder or bidders won licenses either individually or as part of packages, and in a
subsequent auction the licenses are won as larger packages or different packages (not itKluding the
situation described in preceding paragraph), the deficiency portion will be calculated by subtracting the
aggregate amount originally bid for the licenses from the aggregate amount bid in the subsequent auction
for the licenses. Thus, in this situation, the deficiency portion will not be calculated on a bid-by-bid basis.
licenses are won as larger packages or different packages (not itKluding the
situation described in preceding paragraph), the deficiency portion will be calculated by subtracting the
aggregate amount originally bid for the licenses from the aggregate amount bid in the subsequent auction
for the licenses. Thus, in this situation, the deficiency portion will not be calculated on a bid-by-bid basis.
(4) If, in a situation requiring that bids be aggregated in order to determine the deficiency portion of the
default payments for bi^, there are multiple defaulting bidders, the default payment (both Ae deficiency
portion and the additional 25% payment portion) will be allocated to the defaulting bidders in proportion to
their share of the aggregated default bids.
(5) In the event that a bidding credit applies to any applicable bids(s), the deficiency portion of the default
payment will be assessed using the lesser of the difference between gross bids and the difference between
net bids. (In the event that a bidder does not have a bidding credit, the bidder's gross bid and net bid are
the same.) In other words, (i) the sum of the gross defaulted bid(s) minus the gross subsequent winning
bid(s) will be compared to (ii) the sum of the net defaulted bid(s) minus the net subsequent witming bid(s).
The lesser of (i) and (ii) will be used to calculate the deficiency portion of the default payment.
(6) The default payment consists of the deficiency portion and an additional 25% payment. The additional
payment will be 25% of the lesser of the subsequent winning bids(s) and the defaulted bid(s). The
Commission will use the same gross or net bid(s) diat were used to calculate the deficiency portion when
assessing the additional 25% payment. That is, the Commission will conqiare the defaulted and subsequent
bid(s) according to the methods described above for calculation of the deficiency portion of the default
payment udien determining whether the defaulted bid(s) or the subsequent winning bid(s) is the lesser
amount
same gross or net bid(s) diat were used to calculate the deficiency portion when
assessing the additional 25% payment. That is, the Commission will conqiare the defaulted and subsequent
bid(s) according to the methods described above for calculation of the deficiency portion of the default
payment udien determining whether the defaulted bid(s) or the subsequent winning bid(s) is the lesser
amount. Should there be no difference between the gross or net bid(s) for purposes of assessing the
deficiency portion, the Commission will assess the additional 25% payment using the lesser of the gross or
net bid(s).
(7) In the case of combinatorial bidding defaults, the Commission will assess a 25% interim default
payment pending assessment of the final default payment after a subsequent auction. This procedure is
appropriate because even under the most favorable set of circumstances for the defaulting bidder, i.e.,
where the bid price for the package at the subsequent auction exceeds defaulted bid, the final default
(continued....)
11283

Federal Communications Commission
FCC 05-123
deficiracy porton of default payments after package bidding auctions, this rule increases
the additional paymOTtrequir^ of package bidding defaulters from 3 percent to 25 percent. In raising the
amount of the additional default payment, the Commission reasoned that defaults following a
H

^tcntial to cause greatw disruption to the auction and licensing
process than do defaults following other types of auctions.™ Section 1.2104(g)(3) accommodates
s.tuat.om ,n wUch all
Uc«,«s won in ona or mom snbsoquen. auctiona^^,^Sr^
onginally made available m the same initial auction. However, it does not allow for situations in which
the corresponding licenses are made available m one or more subsequent auctions that include licenses
that were not won m the same imtial auction
aults following other types of auctions.™ Section 1.2104(g)(3) accommodates
s.tuat.om ,n wUch all
Uc«,«s won in ona or mom snbsoquen. auctiona^^,^Sr^
onginally made available m the same initial auction. However, it does not allow for situations in which
the corresponding licenses are made available m one or more subsequent auctions that include licenses
that were not won m the same imtial auction. Consequently, rather than use section 1.2104(g)(3) to
ca culate a default payment obligation when one or both of the involved licenses is part of a pacSge we
believe ttet it would be preferable to use a method to apportion the package bid amount among'the
individual licenses conqinsmg the package.
Procedu^ for the two package bidding auctions announced to date have not permitted
withdrawals, and, ac^rdmgly, the Commission has never adapted its withdrawal payment rule to
pac^ge biddmg situations. Nevertheless, it may happen that, after a withdrawal in a non-package
biddmg auction, the lic^e on which the bid was withdrawn is not won in the same auction but, instead, a
co^spondmg license is won in a subsequent auction as part of a package. Moreover, new package
biddmg desi^s may at some point make it practicable for the Commission to allow withdrawals in
package bidding aiwtions. For these reasons, we believe it necessary to amend section 1.2104(g) to
provide for calculating withdrawal payments in all possible situations involving combinatorial biddirig.
4L Proposal for Apportioning Package Bids. We propose that the Commission specify in
advance of each auction that uses a combinatorial bidding design or includes spectrum previously subject
to a combirMonal auction a method for apportioning the bid on a package among the individual licerises
compnsmg the paclrage
ting withdrawal payments in all possible situations involving combinatorial biddirig.
4L Proposal for Apportioning Package Bids. We propose that the Commission specify in
advance of each auction that uses a combinatorial bidding design or includes spectrum previously subject
to a combirMonal auction a method for apportioning the bid on a package among the individual licerises
compnsmg the paclrage. We propose further that the portion of the total bid attributed to an individual
license pursuant to the selected method - to be known as the "apportioned package bid" or "APB" -
serve
as a stand-in for the bid on that license whenever the individual bid amount is needed for one of our
re^latory calculations, such as calculating the size of a bidding credit, a small business bidding credit
unjust enrichment payment obligation, a tribal land bidding credit limit, or a withdrawal or default
payment obligation.
available methods by which the Commission could apportion package
bids to the individual licenses comprising a package. One possible method is to use a "MHz-pops" ratio
just as IS currently done for unjust enrichment calculations involving partitioning or disaggregation. For
(...continued from previous page)
payment would be 25% of the defaulted bid.
70 700 MHz Second Memorandum Opinion and Order, 15 FCC Red at 21,078-79 17:
effects of a default in a package bidding auction require a strong deterrent against
insincere bidding and strategic default. In an auction without pacl^e bidding, a default on a
license mostly affects only the bidders for that license; if the defaulting bidder had not bid, the
other licenses in the auction likely still would have been won by the same bidders. In an auction
with package bidding, however, a default may reasonably be expected to affect multiple licenses
(and perhaps every license in the auction)... if the defaulting bidder had not bid, the licenses may
well have been sold in different packages
ers for that license; if the defaulting bidder had not bid, the
other licenses in the auction likely still would have been won by the same bidders. In an auction
with package bidding, however, a default may reasonably be expected to affect multiple licenses
(and perhaps every license in the auction)... if the defaulting bidder had not bid, the licenses may
well have been sold in different packages.
Notice, 18 FCC Red at 12,007; Auction of Licenses in the 747-
762 and 777-792 MHz Bands Scheduled for June 19,2002; Auction No. 31 Procedures Public Notice 17 FCC
Red at 5185-86. Auction No. 31 has not yet occurred.
11284

Federal Communications Commission
FCC 05-123
Auction No. 51, the Commission decided that MHz-pops would be used should it be necessary to
calculate the iqiper limit on a tribal land bidding credit for a license won as part of a package.^ Another
possible methc^ is to use current price estimates ("CPEs"), which are estimates of the prices of individual
licenses comprising a package in a combinatorial bidding auction.^^ The Commission developed a
methodology for determining CPEs as part of the combinatorial bidding procedures establish^ for
Auctions No. 31 and-5T. onent licenses of a package.^^
45. Adoption of otir proposal that APBs be determined for each combinatorial bidding auction
would allow calculation of how much of a total bidding credit to attribute to a license won as part of a
package and determination, according to our existing rules, of foe amount of an unjust enrichment
payment obligation, foe upper limit on a tribal land bidding credit for a license won as part of a package,
or a withdrawal payment obligation
s be determined for each combinatorial bidding auction
would allow calculation of how much of a total bidding credit to attribute to a license won as part of a
package and determination, according to our existing rules, of foe amount of an unjust enrichment
payment obligation, foe upper limit on a tribal land bidding credit for a license won as part of a package,
or a withdrawal payment obligation. Further, substituting an APB for foe unknown amount of a winning
bid on an individual license won as part of a package would allow use of foe "conventional" default rule
(i.e., the default rule used where neither foe initial nor the subsequent winning bid is for a license won as
part of a package) for combinatorial bidding situations, including situations not covered by the existing
^
"Regional Narrowband PCS Spectrum Auction; 2 Qualified Bidders," Public Notice, 18 FCC Red
18,570, 18,577 (2003).
"
The mathematical derivation of current price estimates is described in detail in the Auction No. SI
Procedures Public Notice, 18 FCC Red at 12,003-04, 12,029-34, and in the Auction No. 31 Procedures Public
Notice, 17 FCC Red at 5178-81, 5193-99.
See Auction No. 51 Procedures Public Notice, 18FCCRcdat 12,003-04,12,029-34.
Auction No. 31 Procedures Public Notice, 17 FCC Red at 5178-81, 5193-99.
Auction No. 51 Procedures Public Notice, 18 FCC Red at 12,003; Auction No. 31 Procedures Public
Notice, 17 FCC Red at 5198.
"
Pursuant to our proposal, the method for apportioning bids in combinatorial bid auctions would be
included in the Commission's pre-auction notice and comment process.
11285
CRcdat 12,003-04,12,029-34.
Auction No. 31 Procedures Public Notice, 17 FCC Red at 5178-81, 5193-99.
Auction No. 51 Procedures Public Notice, 18 FCC Red at 12,003; Auction No. 31 Procedures Public
Notice, 17 FCC Red at 5198.
"
Pursuant to our proposal, the method for apportioning bids in combinatorial bid auctions would be
included in the Commission's pre-auction notice and comment process.
11285

Federal Communications Commission
FCC 05-123
Part 1 combinatorial bidding default rule/* Indeed, using an APB as a substitute for the amount of a bid
on a license won as part of a package would allow us to fairly perform any Commission calculation
requiring the amoimt of the individual bid. Consequently, we seek comment oil these proposals.
b. Apportionment Among the Components of a License
46. Implicit in our rules for determining the amount of a withdrawal or default payment -
determinations that involve a comparison between the withdrawing or defaulting bidder's bid and a
subsequent bid -
is the assumption that the subsequent bid will be for a license with the same geographic
and spectral components as the original license. However, when there have been intervening rule changes
involving the relevant spectrum, the second license may not be identical in geography and spectrum to the
first. For example, such rule changes occurred last year when, in order to provide greater flexibility and a
more functional band plan for licensees, the Commission restmctured the rules governing the Multipoint
Distribution Service and the Instructional Television Fixed Service in the 2495 -
2690 MHz band.'' We
can expect that, as radio technology continues to evolve and services become more sr^histicated, there
will be other instances where our baftd plans are updated
provide greater flexibility and a
more functional band plan for licensees, the Commission restmctured the rules governing the Multipoint
Distribution Service and the Instructional Television Fixed Service in the 2495 -
2690 MHz band.'' We
can expect that, as radio technology continues to evolve and services become more sr^histicated, there
will be other instances where our baftd plans are updated. Therefore, for purposes of calculating a
withdrawal or default payment -
or for any comparison of a bid for one license with a bid for another
license in a subsequent auction when the second license is similar to but not exactly the same as the first
in terms of geography or spectrum - we need a procedure for apportioning the bid placed on the
reconfigured license in the second auction.
47. We accordingly propose that, prior to auctions involving reconfigured licenses, the
Commission specify, as necessary, a method for apportioning the bid on a reconfigured license among the
license's component parts. Using a MHz-pops ratio would be suitable for such an apportionment, as the
Commission has successfully employed the ratio to apportion small business bidding credit amounts in
order to calculate unjust enrichment payments. However, we propose to retain the flexibility to select
another method of apportionment should we identify a method that we believe would better suit the
particular licenses involved. Further, we propose to use methods for package bid apportionment and
individual license bid apportionment in concert when circumstances Warrant. We seek comment on these
proposals.
4. Confomiing Broadcast Construction Permit Payment Procedures with Part 1 Rules
48
select
another method of apportionment should we identify a method that we believe would better suit the
particular licenses involved. Further, we propose to use methods for package bid apportionment and
individual license bid apportionment in concert when circumstances Warrant. We seek comment on these
proposals.
4. Confomiing Broadcast Construction Permit Payment Procedures with Part 1 Rules
48. Our Part I rules currently provide that, unless otherwise specified by public notice, auction
winners are required to pay the balance of their winning bids in a lun^ sum within ten (10) business days
following the release of a public notice establishing the payment deadline.*® In recent wireless spectrum
'* In returning to our "conventional" default rale, we propose to retain the higher (25 percent) aHHiHnnal
payment amount for combinatorial bidding defaults adopted as part of the existing combinatorial bidding default
payment rale, because the rationale for having the higher payment amount remains valid. See 700 MHz Second
Memorandum Opinion and Order, 15 FCC Red at 21,078-79117. In addition, in the case of combinatorial
bidding defaults, we propose to continue our practice of assessing a 25 percent interim default deposit pending
assessment of the final default payment after a subsequent auction. See Part I Order on Reconsideration of the
Fifth Report and Order, 18 FCC Red at 10,204 ^ 31.
"
Amendment of Parts 1,21,73,74 and 101 of the Commission's Rules to Facilitate the Provision of
Fixed and Mobile Broadband Access, Educational and Other Advanced Services in the 2150-2162 and 2500-2690
MHz Bands, WT Docket No. 03-66, RM-10586, Report and Order and Further Notice of Proposed Rulemaking, 19
FCC Red 14,165 (2004).
^
47 C.F.R. § 1.2109(a). The Commission adopted this procedure for establishing final payment
deadlines in the Part 1 Third Report and Order. See Part I Third Report and Order, 13 FCC Red at 428-30 Tfll 92-
(continued....)
11286
ed Services in the 2150-2162 and 2500-2690
MHz Bands, WT Docket No. 03-66, RM-10586, Report and Order and Further Notice of Proposed Rulemaking, 19
FCC Red 14,165 (2004).
^
47 C.F.R. § 1.2109(a). The Commission adopted this procedure for establishing final payment
deadlines in the Part 1 Third Report and Order. See Part I Third Report and Order, 13 FCC Red at 428-30 Tfll 92-
(continued....)
11286

Federal Communications Commission
FCC 05-123
auctions, the Commission has required each winning bidder to submit the balance of the net amount of its
winning bid(s) within ten (10) business days after the deadline for submitting down payments.*' This
procedural change was necessary to guard against payment defaults that may then lead to bankruptcy
filings and litigation that tie up the availability of the defaulted licenses.*^ Specific Part 73 and 74 rules,
however, provide that winning bidders in broadcast service auctions must render their final payment for
construction permits won through competitive bidding after their long-form applications have heen
processed, any petitions to deny have been dismissed or denied, and the public notice aimouncing that
broadcast construction permits are ready to be granted has been released.*^ Recognizing the discrqjancy
between these auction payment procedures, the Commission, in the Auction No. 37 Procedures Public
Notice, noted that it would consider future changes to the broadcast rules to conform the broadcast final
payment procedures to the analogous Part 1 rules.*^
49
and the public notice aimouncing that
broadcast construction permits are ready to be granted has been released.*^ Recognizing the discrqjancy
between these auction payment procedures, the Commission, in the Auction No. 37 Procedures Public
Notice, noted that it would consider future changes to the broadcast rules to conform the broadcast final
payment procedures to the analogous Part 1 rules.*^
49. One of the primary objectives of our auction rules is to ensure that only serious, financially
qualified applicants receive licenses and construction permits so that the provision of service to the public
is expedited.*' The Commission has determined that the timely payment of auction obligations is one of
the means by which it can be assured of the financial qualifications, and thus the seriousness, of a winning
bidder.** Moreover, the Commission has consistently stated that those entities that plan to participate in
(...continued from previous page)
96. Prior to that rule change, auction winners were required to pay the balance of their winning bids in a lunq)
sum within five business days following the award of &e license. 47 C.F.R. § 1.2109(a) (1996).
*' See, e.g., "Auction of Licenses in the Multichannel Video Distribution and Data Service Rescheduled
for January 14,2004; Notice and Filing Requirements, Minimum Opening Bids, Upfiront Payments and Other
Auction Procedures," Public Notice, 18 FCC Red 17,553,17,588 (2003). The Commission has also provided for
this payment procedure in Auctions No. 52, No. 55, No. 56, No. 57, No. 58 and No. 59.
*^ See FCC v. Nextwave Personal Communications, Inc., 537 U.S. 293 (2003) {"Nextwave") (holding that
Section 525 of the Banknq>tcy Code, 11 U.S.C. § 525, prohibits the cancellation of a Commission-issued license
held by a licensee in bankruptcy proceedings where the cancellation is based upon the licensee's failure to make
full and timely payment on the license).
*' See, e.g., 47 C.F.R. §§ 73.357l(h)(4)(ii); 73.3573(f)(5)(ii); 73.5006(d); 74.1233(dX5)(ii)
.S. 293 (2003) {"Nextwave") (holding that
Section 525 of the Banknq>tcy Code, 11 U.S.C. § 525, prohibits the cancellation of a Commission-issued license
held by a licensee in bankruptcy proceedings where the cancellation is based upon the licensee's failure to make
full and timely payment on the license).
*' See, e.g., 47 C.F.R. §§ 73.357l(h)(4)(ii); 73.3573(f)(5)(ii); 73.5006(d); 74.1233(dX5)(ii). Broadcast
service auctions include FM radio, AM radio, television, low power television (LPTV), and FM and television
translator stations.
*^ See "Auction of FM Broadcast Construction Permits Scheduled for November 3,2004; Notice and
Filing Requirements, Minimum Opening Bids, Upfrx)nt Payments and Other Auction Procedures," Public Notice,
19 FCC Red 10,570,10,605 (2004) ("Auction No. 37 Procedures Public Notice").
*' Inqilementation of Section 309(j) of the Communications Act - Competitive Bidding, Second Report
and Order, 9 FCC Red 2348,2375 (1994) ("Part I Second Report and Order'")-, Mountain Solutions LTD, Inc., 12
FCC Red 5904, 5907-08 (1997), aff"d, 13 FCC Red 21,983 (1997), review denied in part and dismissed in part.
Mountain Solutions LTD, Inc. v. F.C.C., 197 F.3d 512 (D.C. Cir. 1999) ("Mountain Solutions'").
** See Delta Radio, Inc., 18 FCC Red 16,889 (2003), affd, 387 F.3d 897 (D.C. Cir. 2004) (fmancial
qualifications of winning bidders established by timely auction payments). See also BDPCS, Inc., 15 FCC Red
17,590 (2000) (default payment rules provide strong incentives to ensure the fmancial qualifications of potential
bidders), affd, 351 F. 3d 1177 (D.C. Cir. 2003) (affirming the Commission's imposition of default payments to
winning bidders wdio fail to make required payments post-auction). As the Commission has stated, awarding
licenses to those who value them the most encourages growth while maintaining safeguards against
anticonq)etitive behavior. Competitive Bidding Second Report and Order, 9 FCC Red at 2349-50 H 5. See also
Mountain Solutions, 197 F.3d 512.
11287
the Commission's imposition of default payments to
winning bidders wdio fail to make required payments post-auction). As the Commission has stated, awarding
licenses to those who value them the most encourages growth while maintaining safeguards against
anticonq)etitive behavior. Competitive Bidding Second Report and Order, 9 FCC Red at 2349-50 H 5. See also
Mountain Solutions, 197 F.3d 512.
11287

Federal Communications Commission
FCC 05-123
an auction must have the appropriate financing in place before the start of the auction." Recent judicial
clarifications of the relationship between the Commission's authority under Section 309(j) of the
Communications Act and creditor protections imder the Bankruptcy Code have shifted significant risk to
the government in the event an auction payment defaulter attenqjts to tie up the impaid licenses won at
auction in bankruptcy litigation.*® Accordingly, when establishing the payment schedule for licenses won
at auction, the Commission protects the integrity of the auction program and the availability of licenses by
ensuring timely full payment and minimizing the opportunity to "game" the auction and license
assignment processes.® By harmonizing the broadcast auction payment procedures with our Part 1 rules,
we seek to apply our rules consistently in furtherance of the public interest.®®
50. While the Part 73 and Part 74 broadcast auction mles reference the Part 1 final payment rule,
the more specific parent provisions in the broadcast rules preclude application of the Part 1 final
payment procedures.® To conform the Part 73 and Part 74 broadcast mles and make them consistent with
the existing competitive bidding and payment procedures contained in Part 1 of our mles, we propose to
adopt for broadcast auctions the final payment procedures in our Part 1 mles
final payment rule,
the more specific parent provisions in the broadcast rules preclude application of the Part 1 final
payment procedures.® To conform the Part 73 and Part 74 broadcast mles and make them consistent with
the existing competitive bidding and payment procedures contained in Part 1 of our mles, we propose to
adopt for broadcast auctions the final payment procedures in our Part 1 mles. Specifically, we propose to
incorporate into our Part 73 and Part 74 broadcast auction mles the Part 1 rule requiring ttot, unless
otherwise specified by public notice, winning bidders in a broadcast auction are requir^ to pay the
balance of their winning bids in a lunq) sum within ten (10) business days following the release of a
public notice establishing the payment deadline.®^ We seek comment on this proposal. Under our current
practice, the Commission informs prospective bidders of final payment procedures in a public notice
armouncing the procedures for the auction. As noted above, we believe that amending the final payment
deadline for broadcast auctions to conform to our existing procedures for wireless auctions will provide
consistency throughout our competitive bidding mles and help to achieve our objective that only sincere,
financially qualified applicants participate in competitive bidding. We further believe that providing
greater certainty to all wiruiing bidders regarding when final payment will be due will also benefit them as
they con^)ete with other sincere bidders that have also secured the financing necessary to participate in an
auction and pay for their licenses. In wireless spectrum auctions, winning bidders, including small
businesses, have been able to comply with the Commission's new final payment procedure without
difficulty. We therefore believe that winning bidders in broadcast auctions should be able to conqjly with
this change with similar ease. We seek comment on this proposal.
"
See 47 C.F.R. § 1.2105(a)(2)(v)
uction and pay for their licenses. In wireless spectrum auctions, winning bidders, including small
businesses, have been able to comply with the Commission's new final payment procedure without
difficulty. We therefore believe that winning bidders in broadcast auctions should be able to conqjly with
this change with similar ease. We seek comment on this proposal.
"
See 47 C.F.R. § 1.2105(a)(2)(v). See also Requests for Extension of the Commission's Initial Non-
Delinquency Period for C and F Block Installment Payments, Order, 13 FCC Red 22,071,22,072 (1998).
®* See NextWave, 537 U.S. 293.
®' See Competitive Bidding Second Report and Order, 9 FCC Red at 2381-82 TI192.
®® However, should the Commission determine that such post-processing payment procedures are in the
best interests of the potential bidders, it retains the discretion to employ the current payment schedule for
broadcast licenses.
®' See, e.g., 47 C.F.R. §§ 73.3571; 73.3573; 73.5006; 74.1233.
®^ See id. § 1.2109(a). We note that in 2002 the Commission directed Media Bureau staff to issue public
notices announcing that constmction permits are ready for grant promptly after dismissing or denying petitions to
deny. Application of Abundant Life, Inc., Memorandum Opinion and Order, 17 FCC Red 4006,4007 n.5 (2002).
To Ae extent that in future auctions wiiming bidders are required to make their final payments prior to initial
resolution of petitions to deny, a ready-to-grant public notice would not be necessary.
11288
constmction permits are ready for grant promptly after dismissing or denying petitions to
deny. Application of Abundant Life, Inc., Memorandum Opinion and Order, 17 FCC Red 4006,4007 n.5 (2002).
To Ae extent that in future auctions wiiming bidders are required to make their final payments prior to initial
resolution of petitions to deny, a ready-to-grant public notice would not be necessary.
11288

Federal Communications Commission
FCC 05-123
5. Improving Procedures for Using the Consortium Exception to the Designated Entity
and Entrepreneur Aggregation Rule
51. For purposes of determining whether an applicant or licensee is eligible for small business or
broadband PCS entrepreneur status, the Commission attributes to the applicant the gross revenues (and,
when determining broadband PCS entrepreneur eligibility, the total assets^^) of the applicant's affiliates,
its controlling interests, and the affiliates of its controlling interests, and aggregates these amounts with
the applicant's own gross revenues (and total assets)."^ Calculated in this manner, the applicant's gross
revenues (and total assets) must not exceed the caps established by the Commission for particular
services. However, under an exception to this aggregation rule, where an applicant or licensee is a
consortium conqirised exclusively of members eligible for small business bidding credits or broadband
PCS entrepreneur status, or both, the gross revenues (and total assets) of the consortium members are not
aggregated.^^ In other words, so long as each member of a consortium individually meets the financial
caps for small business bidding credits (or broadband PCS entrqireneur status), the consortium will be
eligible for such credits (or for entrq)reneur-only broadband PCS licenses), regardless of whether the
gross revenues (or total assets) of all consortium members would, if aggregated, exceed the caps
egated.^^ In other words, so long as each member of a consortium individually meets the financial
caps for small business bidding credits (or broadband PCS entrqireneur status), the consortium will be
eligible for such credits (or for entrq)reneur-only broadband PCS licenses), regardless of whether the
gross revenues (or total assets) of all consortium members would, if aggregated, exceed the caps. The
consortium exception, originally adopted on a service-by-service basis where capital costs of auction
participation were high, is intended to enable small businesses or entrepreneurs to pool their resources to
help them overcome this challenge to capital formation.^
52. The Commission has provided some direction as to how the consortium exception should be
implemented by parties wishing to establish such consortia, but we are concerned that there remains
uncertainty about the operation of the exception in certain situations. For example, the Commission has
said that, before or during the auction individual members of a bidding consortium may withdraw from
the consortium with regard to some licenses selected on the consortium's short-form application, while
remaining a part of the consortium for .purposes of bidding on all other licenses specified. If consortium
members agree that any of their members may withdraw in this fashion, such an agreement must be
disclosed on an original or amended short-form application. Should the consortium win licenses, its
members must file, in conjunction with their long-form application, requests to transfer or assign licenses
"
In the context of this Notice, "entrepreneur" refers to an entity eligible to hold certain broadband PCS C
and F block licenses won in closed bidding. See 47 C.F.R. §§ 1.2110 and 24.709
be
disclosed on an original or amended short-form application. Should the consortium win licenses, its
members must file, in conjunction with their long-form application, requests to transfer or assign licenses
"
In the context of this Notice, "entrepreneur" refers to an entity eligible to hold certain broadband PCS C
and F block licenses won in closed bidding. See 47 C.F.R. §§ 1.2110 and 24.709. Generally speaking, an
^iplicant or licensee qualifies as an entrepreneur if it, together with its affiliates, persons or entities that hold
interests in the applicant or licensee, and their affiliates, has combined total assets of less than $500 million and
has had combing gross revenues of less than $125 million in each of the last two years. Id. § 24.709(a)(1).
^Id. § 1.2110(b)(1).
^
Id. § 1.2110(b)(3)(i).
"
See, e.g.. Implementation of Section 309(j) of the Communications Act -
Competitive Bidding, PP
Docket No. 93-253, Second Memorandum Opinion and Order, 9 FCC Red 7245, 7276-78 THI81-85 (1994);
lnq)lementation of Section 309(j) of the Communications Act -
Conq)etitive Bidding, PP D^ket 93-253, Fifth
Report and Order, 9 FCC Red 5532, 5591 J 133, 5601 % 158, 5610 H 179 (1994).
^ Amendment of Parts 2 and 90 of the Commission's Rules to Provide for the Use of 200 Channels
Outside the Designated Filing Areas in the 896-901 MHz and the 935-940 MHz Bands Allotted to the Specialized
Mobile Radio Pool, PR Docket No. 89-553, Second Order on Reconsideration and Seventh Report and Order, 11
FCC Red 2639,2679 H 105 (1995); lnq)lementation of Section 309(j) of the Communications Act -
Conq>etitive
Bidding, PP Docket No. 93-253, Ninth Report and Order, 11 FCC Red. 14,769, 14,789-90 H 42 (1996).
11289
ing Areas in the 896-901 MHz and the 935-940 MHz Bands Allotted to the Specialized
Mobile Radio Pool, PR Docket No. 89-553, Second Order on Reconsideration and Seventh Report and Order, 11
FCC Red 2639,2679 H 105 (1995); lnq)lementation of Section 309(j) of the Communications Act -
Conq>etitive
Bidding, PP Docket No. 93-253, Ninth Report and Order, 11 FCC Red. 14,769, 14,789-90 H 42 (1996).
11289

Federal Communications Commission
FCC 05-123
as necessary to comply with the consortium arrangement
98
53. Apart from this guidance, the Cormnission has not explained how consortia should proceed
once they have won licenses, nor has it considered the problems that allowing consortia to become
licensees may cause. The consortium exception has been seldom used, and we suspect that one reason for
this infrequent use has been the absence of clear direction from the Commission as to how consortium
members should be formally organized or how (and when) members should allocate and own the licenses
they win. For example, contractual disputes may arise between members of consortia, with a resulting
delay in buildout and the provision of service. Similarly, problems may occur should one or more
members of a licensed consortium file for bankruptcy protection. And if consortium members agree after
the auction to divide their license holdings among themselves without first applying for Commission
approval, they may be held accountable for unauthorized assignments or transfers of control. Not only
would such difficulties impede service to the public and consume Commission resources, they would
prove expensive and time consuming for the small businesses involved.
54
sortium members agree after
the auction to divide their license holdings among themselves without first applying for Commission
approval, they may be held accountable for unauthorized assignments or transfers of control. Not only
would such difficulties impede service to the public and consume Commission resources, they would
prove expensive and time consuming for the small businesses involved.
54. In order to provide additional guidance to those interested in taking advantage of the
consortium exception and to reduce the likelihood of complications resulting from the exception's use, we
seek comment on possible policy options for in^roving the pre- and post-auction procedures governing
the consortiiun exception to facilitate its use among small businesses facing capital formation constraints.
For example, we seek comment on whether we should adopt a new requirement that each member of the
consortium file an individual long-form application for its respective, mutually agreed-upon license(s),
following an auction in which a consortium has won one or more licenses. To comply with this
requirement, consortium members would, prior to filing their short-form application, have reached an
agreement as to how they would allocate among themselves any licenses (or disaggregated or partitioned
portions of licenses) they might win, and they would have disclosed this agreement on their short-form
application as required by our disclosure rules." We further seek comment on whether, in order for two
or more consortium members to be licensed together for the same license(s) (or disaggregated or
partitioned portions thereof), they should be required to form a legal business entity, such as a
corporation, partnership, or limited liability company, after having disclosed this intention on their short-
form and long-form applications
ure rules." We further seek comment on whether, in order for two
or more consortium members to be licensed together for the same license(s) (or disaggregated or
partitioned portions thereof), they should be required to form a legal business entity, such as a
corporation, partnership, or limited liability company, after having disclosed this intention on their short-
form and long-form applications. In particular, we seek comment on whether such new entities would
have to meet our small biisiness or entrepreneur financial limits and whether allowing these entities to
exceed the limits would be consistent with our existing designated entity and broadband PCS
entrepreneur rules, as well as our obligations under the Communications Act. As commenters address
these issues and any other options proposed by interested parties, we are particularly interested in then-
views about how these approaches might woik in the context of package bidding and to what extent
adopting these proposals might encourage wider use of the consortium exception.
rv. CONCLUSION
55. For the reasons stated, we adopt the interpretation of "total cash proceeds" set forth in the
Declaratory Ruling above and seek comment on the foregoing proposed changes in our competitive
bidding rules set forth in the Notice ofProposed Rule Making.
"
Amendment of Parts 2 and 90 of the Commission's Rules to Provide for the Use of 200 Channels
Outside the Designated Filing Areas in the 896-901 MHz and the 935-940 MHz Bands Allotted to the Specialized
Mobile Radio Pool, PR Docket No. 89-553, Second Order on Reconsideration and Seventh Report and Order, 11
FCC Red 2639,26791105 (1995); Implementation of Section 309(j) of the Communications Act -
Competitive
Bidding, PP Docket No. 93-253, Ninth Report and Order, 11 FCC Red. 14,769, 14,789-90 ^ 42 (1996).
"5ee47C.F.R. § 1.2105(aX2Xviii).
11290
and the 935-940 MHz Bands Allotted to the Specialized
Mobile Radio Pool, PR Docket No. 89-553, Second Order on Reconsideration and Seventh Report and Order, 11
FCC Red 2639,26791105 (1995); Implementation of Section 309(j) of the Communications Act -
Competitive
Bidding, PP Docket No. 93-253, Ninth Report and Order, 11 FCC Red. 14,769, 14,789-90 ^ 42 (1996).
"5ee47C.F.R. § 1.2105(aX2Xviii).
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FCC 05-123
V. PROCEDURAL MATTERS AND ORDERING CLAUSES
A. Ex Parte Rules -
Permit-But-Disclose Proceeding
56. For purposes of this permit-but-disclose notice and comment proceeding, members of the
public are advised that ex parte presentations are permitted, except during the sunshine Agenda period,
provided that the presentations are disclosed pru^uant to the Commission's rules.""'
B. Paperwork Reduction Act
57. This document contains proposed new information collection requirements. The
Commission, ^
part of its continuing effort to reduce paperwork burdens, invites the general public and
the Office of Management and Budget ("0MB") to comment on the information collection requirements
contained in this document, as required by the Paperwork Reduction Act of 1995, Public Law 104-13.
Public and agency comments are due 60 days after the date of publication in the Federal Register.
Comments should address: (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. In addition, pursuant to the Small Business Paperwork Relief Act of 2002,
Public Law 107-198, see 44 U.S.C
ssion'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. In addition, pursuant to the Small Business Paperwork Relief Act of 2002,
Public Law 107-198, see 44 U.S.C. 3506(cX4), we seek specific comment on how we might "further
reduce the information collection burden for small business concerns with fewer than 25 employees."
C. Initial Regulatory Flexibility Analysis
58. As required by the Regulatory Flexibility Act, see 5 U.S.C. § 603, the Commission has
prepared an Initial Regulatory Flexibility Analysis ("IRFA") of the possible significeuit economic impact
on small entities of the proposals suggested in the Notice. The IRFA is set forth in Appendix B. Written
public comments are requested on the IRFA. These comments must be filed in accordance with the same
filing deadlines as comments filed in response to the Notice, and must have a separate and distinct
heading designating them as responses to the IRFA.
D. Comment Filing Procedures
59. Pursuant to sections 1.415 and 1.419 of the Commission's rules, 47 C.F.R §§ 1.415, 1.419,
interested parties may file comments on or before 30 days after publication in the Federal Register and
may file reply comments on or before 45 days after publication in the Federal Register. All tilings
related to this Declaratory Ruling and Notice of Proposed Rule Making should refer to WT Docket
No. 05-211. Comments may be filed using: (1) the Commission's Electronic Comment Filing System
(ECFS), (2) the Federal Government's eRulemaking Portal, or (3) by filing paper copies. See Electronic
Filing of Documents in Rulemaking Proceedings, 63 FR 24121 (1998).
60. Electronic Filers: Comments may be filed electronically using the Internet by accessing the
ECFS: http://www.fcc.gov/cgb/ecfs/ or the Federal eRulemaking Portal: httD://www.regulations.gov
on's Electronic Comment Filing System
(ECFS), (2) the Federal Government's eRulemaking Portal, or (3) by filing paper copies. See Electronic
Filing of Documents in Rulemaking Proceedings, 63 FR 24121 (1998).
60. Electronic Filers: Comments may be filed electronically using the Internet by accessing the
ECFS: http://www.fcc.gov/cgb/ecfs/ or the Federal eRulemaking Portal: httD://www.regulations.gov.
Filers should follow the instructions provided on the website for submitting comments. For ECFS filers,
if multiple docket or rulemaking numbers appear in the caption of this proceeding, filers must transmit
one electronic copy of the comments for each docket or rulemaking number referenced in the caption. In
completing the transmittal screen, filers should include their full name, U.S. Postal Service mailing
See generally id. §§ 1.1202,1.1203, 1.1206(a).
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Federal Communications Commission
FCC 05-123
address, and the applicable docket or rulemaking number. Parties may also submit an electronic comment
by Intemet e-mail. To get filing instmctions, filers should send an e-mail to ecfs@fcc.gov. and include
the following words in the body of the message, "get form." A sample form and directions will be sent in
response.
61. Paper Filers: Parties who choose to file by paper must file an original and four copies of each
filing. Filings can be sent by hand or messenger delivery, by commercial overnight courier, or by first-
class or overnight U.S. Postal Service mail (although we continue to experience delays in receiving U.S.
Postal Service mail). All filings must be addressed to the Commission's Secretary, Office of the
Secretary, Federal Communications Commission.
•
The Commission's contractor will receive hand-delivered or messenger-deliva^
paper filings for the Commission's Secretary at 236 Massachusetts Avenue, NE.,
Suite 110, Washington, DC 20002. The filing hours at this location are 8:00 a.m. to
7:00 p.m. All hand deliveries must be held together with rubber bands or fasteners
n's Secretary, Office of the
Secretary, Federal Communications Commission.
•
The Commission's contractor will receive hand-delivered or messenger-deliva^
paper filings for the Commission's Secretary at 236 Massachusetts Avenue, NE.,
Suite 110, Washington, DC 20002. The filing hours at this location are 8:00 a.m. to
7:00 p.m. All hand deliveries must be held together with rubber bands or fasteners.
Any envelopes must be disposed of before entering the building
• Commercial overnight mail (other than U.S. Postal Service Express Mail and Priority
Mail) must be sent to 9300 East Hanqjton Drive, Capitol Heights, MD 20743.
•

U.S. Postal Service first-class. Express, and Priority mail should be addressed to 445
12* Street, SW, Washington DC 20554.
E. Accessible Formats
62. To request copies of this Declaratory Ruling and Notice of Proposed Rule Making in
accessible formats (Braille, large print, electronic files, audio format) for people with disabilities, send an
e-mail to fcc504@fcc.gov or call the Consumer and Governmental Affairs Bureau at (202) 418-0531 or
(202) 418-7365 (TTY).
F. Further Information
63. For further information concerning this Declaratory Ruling and Notice of Proposed Rule
Making, contact Audrey Bashkin, Auctions and Spectrum Access Division, (202) 418-0660, Wireless
Telecommunications Bureau, Federal Communications Commission, Washington, E>C 20554.
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Federal Communications Commission
FCC 05-123
G. Ordering Clauses
64. Accordingly, IT IS ORDERED THAT, pursuant to Sections 4(i), 303(r), and 309(j) of the
Communications Act of 1934, as amended, 47 U.S.C. Sections 154(i), 303(r), and 309(j), this Declaratory
Ruling and Notice of Proposed Rule Making is hereby ADOPTED.
65. IT IS FURTHER ORDERED that the Commission's Consumer and Governmental Affairs
Btireau, Reference Information Center, SHALL SEND a copy of this Notice of Proposed Rule Making,
including the Initial Regulatory Flexibility Certification, to the Chief Coiuisel for Advocacy of the Small
Business Administration
and 309(j), this Declaratory
Ruling and Notice of Proposed Rule Making is hereby ADOPTED.
65. IT IS FURTHER ORDERED that the Commission's Consumer and Governmental Affairs
Btireau, Reference Information Center, SHALL SEND a copy of this Notice of Proposed Rule Making,
including the Initial Regulatory Flexibility Certification, to the Chief Coiuisel for Advocacy of the Small
Business Administration.
FEDERAL COMMUNICATIONS COMMISSION
Marlene H. Dortch
Secretary
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Federal Communications Commission
FCC 05-123
APPENDIX A
Proposed Rules
PART 1 -
PRACTICE AND PROCEDURE
Part 1 of Title 47 of the Code of Federal Regulations is revised to read as follows:
1.
The authority citation for Part 1 continues to read as follows:
Authority: 47 U.S.C. 151, 154(i), 1540), 155, 225, 303(r), 309 and 325(e).
2.
Amend § 1.2103 to add new paragraphs (b)(1) and (b)(2) to read as follows:
6 1.2103 Competitive bidding design options.
* « * * *
(Jo)***
(1) Apportioned package bid. The apportioned package bid on a license is an estimate of the price of an
individual license included in a package of licenses in an auction with combinatorial (package) bidding.
Apportioned package bids shall be determined by the Commission according to a methodology it
establishes in advance of each auction with combinatorial bidding.
(2) Substitute for bid amount. The apportioned package bid on a license included in a package shall be
used in place of the amoimt of an individual bid on that license when the bid amount is needed to
determine the size of a designated entity bidding credit (see § 1.2110(f)(l)-(2)), a new entrant bidding
credit (see § 73.5007), a bid withdrawal or default payment obligation (see § 1.2104(g)), a tribal land
bidding credit limit (see § 1.2110(f)(3Xiv)), or a size-based bidding credit unjust enrichment payment
obligation (see § 1.211 l(d),(e)(2)-(3)), or for any other determination required by the Commission's rules
or procedures.
11294
y bidding credit (see § 1.2110(f)(l)-(2)), a new entrant bidding
credit (see § 73.5007), a bid withdrawal or default payment obligation (see § 1.2104(g)), a tribal land
bidding credit limit (see § 1.2110(f)(3Xiv)), or a size-based bidding credit unjust enrichment payment
obligation (see § 1.211 l(d),(e)(2)-(3)), or for any other determination required by the Commission's rules
or procedures.
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Federal Communications Commission
FCC 05-123
3.
Amend § 1.2104 by revising paragraphs (c), (g)(1), and (g)(2); removing paragraph (g)(3); and
adding paragraph (j) to read as follows:
S 1.2104 Competitive bidding mechanisms.
* *
* *
(g) * * *
(1) Bid withdrawal prior to close of auction. A bidder that withdraws a high bid during the course of an
auction is subject to a withdrawal payment equal to the difference between the amount of the withdrawn
bid and the amount of the winning bid in the same or subsequent auction(s). In the event that a bidding
credit applies to any of the bids, the bid withdrawal payment is either the difference between the net
withdrawn bid and the subsequent net winning bid, or the difference between the gross withdrawn bid and
the subsequent gross winning bid, whichever is less
e between the amount of the withdrawn
bid and the amount of the winning bid in the same or subsequent auction(s). In the event that a bidding
credit applies to any of the bids, the bid withdrawal payment is either the difference between the net
withdrawn bid and the subsequent net winning bid, or the difference between the gross withdrawn bid and
the subsequent gross winning bid, whichever is less. No withdrawal payment will be assessed for a
withdrawn bid if either the subsequent winning bid or any of the intervening subsequent withdrawn bids
equals or exceeds that withdrawn bid. The withdrawal payment amount is deducted from any upfront
payments or down payments that the withdrawing bidder has deposited with the Commission. In the case
of multiple bid withdrawals on a single license, the payment for each bid withdrawal will be calculated
based on the sequence of bid withdrawals and the amoimts withdrawn in the same or subsequent
11295

Federal Communications Commission
FCC 05-123
auction(s). In the event that a license for which there have been withdrawn bids is not won in the same
auction, those bidders for which a final withdrawal payment cannot be calculated will be assessed an
interim bid withdrawal payment of between 3 and 20 percent of their withdrawn bids, according to a
percentage (or percentages) established by the Commission in advance of the auction. The interim bid
withdrawal payment will be applied toward any final bid withdrawal payment that will be assessed at the
close of a subsequent auction of the corresponding license.
Example 1 to paragraph (g)(1). Bidder A withdraws a bid of $100. Subsequently, Bidder B places a bid
of $90 and withdraws. In that same auction. Bidder C wins the license at a bid of $95. Withdrawal
payments are assessed as follows: Bidder A owes $5 ($100-$9S). Bidder B owes nothing
Example 2 to paragraph (g)(1). Bidder A withdraws a bid of $100. Subsequently, Bidder B places a bid
of $95 and withdraws. In that same auction. Bidder C wins the license at a bid of $90
quently, Bidder B places a bid
of $90 and withdraws. In that same auction. Bidder C wins the license at a bid of $95. Withdrawal
payments are assessed as follows: Bidder A owes $5 ($100-$9S). Bidder B owes nothing
Example 2 to paragraph (g)(1). Bidder A withdraws a bid of $100. Subsequently, Bidder B places a bid
of $95 and withdraws. In that same auction. Bidder C wins the license at a bid of $90. Withdrawal
payments are assessed as follows: Bidder A owes $5 ($100-$95). Bidder B owes $5 ($95-$90).
Example 3 to paragraph (g)(1). Bidder A withdraws a bid of $100. Subsequently, in that same auction.
Bidder B places a bid of $90 and withdraws. In a subsequent auction, Bidder C places a bid of $95 and
withdraws. Bidder D wins the license in that auction at a bid of $80. Assuming that the Commission
established an interim bid withdrawal payment of 3 percent in advance of the auction, withdrawal
payments are assessed as follows: At the end of the first auction. Bidder A and Bidder B are each assessed
an interim withdrawal payment equal to 3 percent of their withdrawn bids pending Commission
assessment of a final withdrawal payment (Bidder A would owe 3% of $100, or $3, and Bidder B would
owe 3% of $90, or $2.70). At the end of the second auction. Bidder A would owe $5 ($100-$95) less the
$3 interim withdrawal payment for a total of $2. Because Bidder C placed a subsequent bid that was
higher than Bidder B's $90 bid. Bidder B would owe nothing. Bidder C would owe $15 ($95-$80).
ission
assessment of a final withdrawal payment (Bidder A would owe 3% of $100, or $3, and Bidder B would
owe 3% of $90, or $2.70). At the end of the second auction. Bidder A would owe $5 ($100-$95) less the
$3 interim withdrawal payment for a total of $2. Because Bidder C placed a subsequent bid that was
higher than Bidder B's $90 bid. Bidder B would owe nothing. Bidder C would owe $15 ($95-$80).
(2) Default or disqualification after close of auction. A bidder assumes a binding obligation to pay its full
bid amount upon acceptance of the high bid at the close of an auction. If a high bidder defaults or is
disqualified after the close of such an auction, the defaulting bidder will be subject to a default payment
consisting'of a deficiency payment, described in § 1.2104(g)(2)(i), and an additional payment, described
11296

Federal Communications Coitimission
FCC 05-123
in § 1.2104(gX2)(ii)-(iii). The default payment will be deducted from any upfrx)nt payments or down
payments that the defaulting bidder has deix)sited with the Commission.
(i) Deficiency payment. The deficiency payment will equal the difference between the amount of the
defaulted bid and the amount of the winning bid in a subsequent auction, so long as there have been no
intervening withdrawn bids that equal or exceed the defaulted bid or the subsequent winning bid. If the
subsequent winning bid or any intervening subsequent withdrawn bid equals or exceeds the defaulted bid,
no deficiency payment will be assessed. If there have been intervening subsequent withdrawn bids that
are lower than the defaulted bid and higher than the subsequent winning bid, but no intervening
withdrawn bids that equal or exceed the defaulted bud, the deficiency payment will equal the difference
between the amount of the defaulted bid and the amount of the highest intervening subsequent withdrawn
bid
iency payment will be assessed. If there have been intervening subsequent withdrawn bids that
are lower than the defaulted bid and higher than the subsequent winning bid, but no intervening
withdrawn bids that equal or exceed the defaulted bud, the deficiency payment will equal the difference
between the amount of the defaulted bid and the amount of the highest intervening subsequent withdrawn
bid. In the event that a bidding credit applies to any of the rqyplicable bids, the deficiency payment will be
based solely on net bids or solely on gross bids, whichever results in a lower payment.
(ii) Additional payment -
applicable percentage. When the default or disqualification follows an auction
without combinatorial bidding, the additional payment will equal between 3 and 20 percent of the
applicable bid, according to a percentage (or percentages) estabUshed by the Commission in advance of
the auction. When the default or disqualification follows an auction with combinatorial bidding, the
additional payment will equal 25 percent of the applicable bid.
(iii) Additional payment -
applicable bid. When no deficiency payment is assessed, the applicable bid
will be the net amount of the defaulted bid. When a deficiency payment is assessed, the applicable bid
will be the subsequent winning bid, using the same basis — i.e., net or gross - as was used in calculating
the deficiency payment.
*
* * * *
(j) Bid apportionment. Prior to each auction of reconfigured licenses (i.e., licenses having similar, but
not identical, geographic and spectral components as licenses made available in one or more prior
auctions), the Commission will specify, as necessary, a method for apportioning a bid on a reconfigured
license among the license's component parts. The Commission may use such an apportionment for
11297
apportionment. Prior to each auction of reconfigured licenses (i.e., licenses having similar, but
not identical, geographic and spectral components as licenses made available in one or more prior
auctions), the Commission will specify, as necessary, a method for apportioning a bid on a reconfigured
license among the license's component parts. The Commission may use such an apportionment for
11297

Federal Cotnmnnications Commission
FCC 05-123
purposes of comparing a bid on the original license with a bid on a reconfigured license.
PART 73 -
RADIO BROADCAST SERVICES
Part 73 of Title 47 of the Code of Federal Regulations is revised to read as follows:
4.
The authority citation for Part 73 continues to read as follows:
Authority: 47 U.S.C. 154, 303, 334 and 336.
5.
Amend § 73.3571 by revising paragraph (h)(4)(ii) to read as follows:
S 73 J571 Processing AM broadcast station aPDlications
« * *
* *
(h)(4) * * *
* * * 4>
(ii) Winning bidders are required to pay the balance of their wiiming bids in a lump sum prior to the
deadline established by the Commission pursuant to §1.2109(a).
Long-form construction permit
applications will be processed and the FCC will periodically release a Public Notice listing such applications
that have been accepted for filing and annoimcing a date by which petitions to deny must be filed in
accordance with the provisions of §§73.5006 and 73.3584. Construction permits will be granted by the
Commission only after full and timely payment of winning bids and any applicable late fees, and if the
applicant is duly qualified, and upon examination, the FCC finds that the public interest, convenience and
necessity will be served.
6.
Amend § 73.3573 by revising paragraph (fX5)(ii) to read as follows:
S 73
J573 Processing FM broadcast station applications.
* *
4* 4>
(d) Broadcast construction permits will be granted by the Commission only if the Commission denies or
dismisses all petitions to deny, if any are filed, and is otherwise satisfied that an applicant is qualified, and
after full and timely payment of winning bids and any applicable late fees. See 47 CFR 73.5003.
Construction of broadcast stations shall not commence until the grant of such permit or license to the
winning bidder and only after full and timely payment of winning bids and any applicab

[Text truncated at 120,000 characters. The full text is on the page linked above.]

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Source: Frix Law Library, https://www.frixlaw.com/law-library/statutes/FCC_FCC_05_123. Check the current official text before relying on it. Not legal advice.