September 14, 2004

> DA 04-2975

Mr. Richard Hodson

Hodson Broadcasting

520 Monticello Drive

Las Vegas, NV 89107-3616

Re: Hodson Broadcasting -- Request for Waiver of Section 1.2106(a)
Former Defaulter Upfront Payment Requirement For Participation in FM
Broadcast Auction No. 37

Dear Mr. Hodson:

The Commission has received your application (FCC Form 175) to
participate in the upcoming FM Broadcast Auction ("Auction No. 37"). In
this letter we address your request for waiver of the requirement that
an applicant that has previously been in default on any Commission
license or has been delinquent on any non-tax debt owed to any Federal
agency must submit an upfront payment equal to 50 percent more than that
set for each particular license.[^1] For the reasons discussed below, we
deny the waiver request.

In your waiver request, you state that in 1985 you obtained a \$2,240
Stafford Student Loan, guaranteed by the Higher Education Assistance
Foundation, to attend broadcasting school. You further state that, due
to unemployment and other financial setbacks, the loan went into default
and was eventually referred to the Internal Revenue Service. In January
1992, you were able to repay the loan in full, including accrued
interest, but state that due to an oversight a letter of satisfaction
was not issued by the U.S. Department of Education until March of 2003.

You argue that because your loan default was cured over 12 years ago,
you should be relieved of the requirement to make an upfront payment
that is 50 percent higher that that set for each license, as set forth
in Section 1.2106(a). You also contend that waiver may be granted under
Section 1.2110(h) of the Commission's rules, which provides that the
Commission may establish different upfront payment requirements for
categories of designated entities, and that grant of the requested
waiver will comport with various federal mandates giving relief to small
businesses such as Hodson Broadcasting.[^2]

To obtain a waiver of the Commission's competitive bidding rules,[^3]
you must show: (i) that the underlying purpose of the rule would not be
served, or would be frustrated, by its application in this particular
case, and that grant of the requested waiver would be in the public
interest; or (ii) that the unique facts and circumstances of the
particular case render application of the rule inequitable, unduly
burdensome or otherwise contrary to the public interest, or that the
applicant has no reasonable alternative.[^4]

Based on the record before us, you have not satisfied the Commission's
criteria for granting a waiver of Section 1.2106(a). You contend that
your full payment of the former debt should justify waiver of the more
stringent upfront payment requirement. We disagree. The "former
defaulter" policies were incorporated into the Commission's Part 1
general competitive bidding rules in 2000.[^5] The Commission reasoned
that "the integrity of the auctions program and the licensing process
dictates requiring a more stringent financial showing from applicants
with a poor Federal financial track record."[^6] Thus, while cure of an
outstanding federal default or delinquency enables the former defaulter
or delinquent to participate in an auction,[^7] former defaulters and
delinquents are required to make a larger upfront payment. You have not
shown that enforcing the requirement in this case would frustrate this
purpose or would not serve it. Furthermore, you have not demonstrated
how satisfaction of your delinquent debt constitutes "unique facts and
circumstances" sufficient to justify the requested waiver.

We also reject your contention that 47 C.F.R. § 1.2110(h) of the
Commission's rules and Section 257 of the Telecommunications Act of 1996
provide authority for the waiver you seek. Section 1.2110(h) allows the
Commission to "establish different upfront payment requirements for
*categories* of designated entities ...."[^8] Section 257 requires the
Commission to identify and eliminate, *by regulations*, market entry
barriers for entrepreneurs and other small businesses in the provision
and ownership of telecommunications services and information services,
or in the provision of parts or services to providers of
telecommunications services and information services . . . ."[^9]
Neither Section 257 of the Telecommunications Act of 1996 nor Section
1.2110(h) of the Commission's rules compel us to grant a waiver that
would establish a different upfront payment requirement in response to
the request of an individual applicant. Moreover, the Regulatory
Flexibility Act, 5 U.S.C. § 603(c) does not support your request for a
waiver of 1.2106(a). Section 603(c) of the Regulatory Flexibility Act
requires Federal agencies to prepare an analysis of the impact of
proposed rules on small entities, including a discussion of significant
alternatives to the proposed rule.[^10] Thus, Section 603 applies only
in the context of the Commission's rulemaking proceedings, and not to
individual requests to waive a final rule.

We disagree with your argument that denial of the waiver request would
frustrate Congress' directives to ensure that the auction process
provides ample opportunity to small businesses. The Commission has
consistently rejected arguments that Sections 309(j)(3)(B) and
309(j)(4)(C), which are the statutory bases pursuant to which the
Commission has adopted bidding credits and other provisions to provide
greater opportunities to small businesses to participate in the
provision of spectrum-based service, also obligate the Commission to
afford such entities special treatment under its general competitive
bidding rules.[^11] The Commission fulfills competitive bidding
statutory mandates and policy goals with appropriate rule provisions,
not by forbearing from enforcing its competitive bidding rules.

Waiver of the upfront payment requirement in this instance would lead to
an inconsistent application of our rules and would not serve the public
interest. The Commission's rules and the integrity of the competitive
bidding process are best served by applying the upfront payment
requirement in a fair and consistent manner. Your waiver request is
therefore DENIED.

 

Hodson Broadcasting's short-form application has been accepted. Based on
the disclosure regarding a prior default, and our denial of your waiver
request, the Commission\'s rules require that you submit an upfront
payment equal to 50 percent more than that set for the construction
permits on which you wish to be eligible to bid.[^12] Accordingly, your
eligibility will be calculated by applying any payments received prior
to the upfront payment deadline based on upfront payments that are 150
percent of the amounts required for other applicants.

Sincerely,

Gary D. Michaels, Deputy Chief

Auctions and Spectrum Access Division

Wireless Telecommunications Bureau

[^1]: 47 C.F.R. § 1.2106(a).

[^2]: Specifically, in support of your waiver request, you cite Section
    257 of the Telecommunications Act of 1996, which requires the
    Commission to remove entry barriers for entrepreneurs and other
    small businesses, and the Regulatory Flexibility Act, 5 U.S.C. §
    603(c), which "requires an agency to describe any significant
    alternatives that it has considered in reaching its proposed
    procedures and/or regulations," including, *inter alia*, "an
    exemption for coverage of the rule, or any part thereof, for such
    small entities." Hodson Broadcasting, FCC Form 175 Application,
    Waiver Justification at 2 (emphasis in original).

[^3]: 47 C.F.R. § 1.2105(b)(2).

[^4]: 47 C.F.R. § 1.925.

[^5]: Amendment of Part 1 of the Commission's Rules -- Competitive
    Bidding Procedures*, Order on Reconsideration of the Third Report
    and Order, Fifth Report and Order, and Fourth Further Notice of
    Proposed Rule Making*, 15 FCC Rcd 15293, 15316-17 (2000).

[^6]: *Id*. at 15317.

[^7]: *Id*. at 15316.

[^8]: 47 C.F.R. § 1.2110(h) (emphasis added).

[^9]: 47 U.S.C. § 257(a) (emphasis added).

[^10]: Section 603(c) lists "an exemption from coverage of the rule, or
    any part thereof, for such small entities" as an example of the
    significant alternatives to be discussed in an initial regulatory
    flexibility analysis. 5 U.S.C. § 603(c).

[^11]: *See, e.g.,* *TPS Utilicom*, 18 FCC Rcd 2516, 2522-23 and n. 39
    (WTB 2003) and cases cited therein. *Cf.* Reallocation and Service
    Rules for the 698-746 Spectrum MHz Band (Television Channels 52-59),
    *Report and Order*, GN Docket 01-74, 17 FCC Rcd 1022, 1089-90 (2002)
    (rejecting arguments that Sections 309(j)(3)(B) and 309(j)(4)(C)
    amount to a "congressional mandate" to establish a special bidding
    credit for rural telephone companies).

[^12]: 47 C.F.R. § 1.2106(a).