**Before the**

**FEDERAL COMMUNICATIONS COMMISSION**

**Washington, DC 20554**

In the Matter of )

)

Amendment of Part 95 of the ) WT Docket No. 98-169

Commission\'s Rules to Provide )

Regulatory Flexibility in the )

218-219 MHz Service )

)

)

**ORDER ON RECONSIDERATION**

**Adopted: November 24, 1999 Released: November 30, 1999**

By the Commission:

1\. In this *Order on Reconsideration*, on our own motion, we alter the
restructuring plan adopted in the *218--219* *MHz Report and Order* in
the above-captioned proceeding, FCC 99-239, which was released on
September 10, 1999.[^1]

**I. BACKGROUND**

2\. In the *218--219 MHz* *Report and Order*, among other things, we
adopted a restructuring plan for existing 218-219 MHz licensees that
were current in installment payments (*i.e*. less than ninety days
delinquent) as of March 16, 1998, or those licensees that had properly
filed grace period requests under the former installment payment rule.
("Eligible Licensees"). The restructuring plan offered three options to
provide specific relief for licensees that wish to retain their license
but are experiencing financial hardship or that wish to return their
licenses due to an inability to assume their financial responsibilities.
The three options are:

\(1\) Reamortization and Resumption of Payments; (2) Amnesty, and (3)
Prepayment, whereby an Eligible Licensee may prepay the principal of any
license it wishes to retain with cash and prepayment credits generated
from down payments on spectrum returned to the Commission and any
installment payments previously made.[^2] Our order allowed an Eligible
Licensee electing the Amnesty option to choose either to receive no
credit for its down payment, but remain eligible to bid on the
surrendered licenses when they are subsequently offered in auction, with
no restriction on after-market acquisitions; or obtain a credit for
seventy percent of its down payment and forego for a period of two
years, from the start date of the next auction of the 218-219 MHz
Service, eligibility to reacquire the surrendered licenses through
either auction or any secondary market transaction.[^3]

**II. DISCUSSION**

3\. It was not our original intent to adopt the seventy percent credit
contained in the *218-219 MHz Flex NPRM*,[^4] therefore, on our own
motion, for the following reasons, we correct the prior error. On
review, it is apparent that, under the Amnesty option, allowing an
Eligible Licensee to obtain credit for its down payment and forego
reacquiring surrendered licenses for a period of two years is
inconsistent with our responsibility to protect the integrity of the
auction program and promote new and innovative uses of spectrum. Giving
a seventy percent credit on down payments associated with returned
spectrum, without an adequate counterbalancing public interest benefit,
would undermine the integrity of the auction process by relieving
participants of even the most basic obligation of their participation.

4\. However, we recognize that we allow for a credit on down payments in
other portions of the *218-219 MHz Report and Order*. Specifically, an
Eligible Licensee who elects the Prepayment option is eligible for an
eighty-five percent credit on its down payment.[^5] It is important to
note that an Eligible Licensee who elects the prepayment option is
providing a public benefit through early payment of its financial
obligations. Nevertheless, under the Prepayment option, the Commission
retains an amount equal to the three percent default payment.[^6] Thus,
as an Eligible Licensee electing the Amnesty option is not providing the
same public benefit, it would not be in the public interest to allow it
a seventy percent credit on its down payment.[^7]

5\. The *218-219 MHz Report and Order* increased the flexibility of the
218-219 MHz service and extended the license term in order to encourage
new and innovative uses in the marketplace and expedite service to the
public. In the *218-219 MHz Report and Order*, the only restriction on
reacquisition applied to those Eligible Licensees opting for the seventy
percent credit. Thus, as the seventy percent credit is no longer
available, Eligible Licensees electing Amnesty will not be precluded
from reacquiring licenses at auction or in the secondary market. This
result is appropriate as Eligible Licensees electing amnesty may still
have viable business plans to implement based on spectrum they may
acquire in future auctions or in the secondary market. A two-year
restriction on the acquisition of certain spectrum may negatively impact
an otherwise viable business plan. Our action in this *Order on
Reconsideration* moots the comments of EON Corporation seeking to
broaden the disqualification period to exclude the future acquisition of
any 218-219 MHz Service licenses to be auctioned in the ensuing two-year
period. As we stated in the *218-219 MHz Report and Order*, limiting the
reacquisition of spectrum or acquisition of additional spectrum by
Eligible Licensees would not be in the public interest.[^8]

6\. For the above reasons, we modify the *218-219 MHz Report and Order*.
Therefore, while we will not give Eligible Licensees electing amnesty a
credit for down payments associated with spectrum returned to the
Commission, neither will we limit the reacquisition of spectrum or the
acquisition of additional spectrum.

## III. ORDERING CLAUSES

7\. Accordingly, IT IS ORDERED that, pursuant to Section 1.108 of the
Commission\'s rules, 47 C.F.R. Section 1.108, we reconsider on our own
motion our decision in Amendment of Part 95 of the Commission\'s Rules
to Provide Regulatory Flexibility in the 218-219 MHz Service, *Report
and Order and Memorandum Opinion and Order*, WT Docket No. 98-169, FCC
99-239 (released Sept. 10, 1999), regarding amnesty and resumption of
payment in the 218-219 MHz service, as detailed herein.

FEDERAL COMMUNICATIONS COMMISSION

Magalie Roman Salas

Secretary

APPENDIX A

**SUPPLEMENTAL FINAL REGULATORY FLEXIBILITY ANALYSIS**

*Order on Reconsideration*

As required by the Regulatory Flexibility Act ("RFA"),[^9] an Initial
Regulatory Flexibility Analysis ("IRFA") was incorporated in the
Amendment of Part 95 of the Commission\'s Rules to Provide Regulatory
Flexibility in the 218-219 MHz Service and Amendment of Part 95 of the
Commission\'s Rules to Allow Interactive Video and Data Service
Licensees to Provide Mobile Services, *Order, Memorandum Opinion and
Order, and Notice of Proposed Rulemaking.*[^10] The Commission sought
written public comment on the proposals in the *218-219 MHz Flex NPRM*,
including comment on the IRFA. A Final Regulatory Flexibility Analysis
("FRFA") was included in the Amendment of Part 95 of the Commission\'s
Rules to Provide Regulatory Flexibility in the 218-219 MHz Service,
*Report and Order and Memorandum Opinion and Order*.[^11] In this *Order
on Reconsideration*, we issue this supplemental Final Regulatory
Flexibility Analysis ("supplemental FRFA") which conforms to the
RFA.[^12]

**I. Need for, and Objectives of, the Order on Reconsideration:**

In the *218--219 MHz* *Report and Order*, among other things, we adopted
a restructuring plan for existing 218-219 MHz licensees that were
current in installment payments (*i.e*. less than ninety days
delinquent) as of March 16, 1998, or those licensees that had properly
filed grace period requests under the former installment payment rule.
("Eligible Licensees"). The restructuring plan offered three options to
provide specific relief for licenses that wish to retain their license,
but are experiencing financial hardship, or that wish to return their
licenses due to an inability to assume their financial responsibilities.
Under one of these options, Amnesty, an Eligible Licensee could choose
either to receive no credit for its down payment, but remain eligible to
bid on the surrendered licenses when they are subsequently offered in
auction, with no restriction on after-market acquisitions; or obtain a
credit for seventy percent of its down payment and forego for a period
of two years, from the start date of the next auction of the 218-219 MHz
Service, eligibility to reacquire the surrendered licenses through
either auction or any secondary market transaction.[^13]

On review, it is apparent that, under the Amnesty option, allowing an
Eligible Licensee to obtain credit for its down payment and forego
reacquiring surrendered licenses for a period of two years is
inconsistent with our responsibility to protect the integrity of the
auction program and promote new and innovative uses of spectrum. Giving
a seventy percent credit of the down payments associated with returned
spectrum would undermine the integrity of the auction process by
relieving participants of even the most basic obligation of their
participation. Further, a two-year restriction on the reacquisition of
the surrendered license unduly restricts the number of potential
licenses, and is inconsistent with a fair and equitable auction process.

**II. Summary of Significant Issues Raised by Public Comments in
Response to the Initial Regulatory Flexibility Analysis:**

Previously, no petitions were filed in direct response to the IRFA or
the FRFA in this proceeding. Thus, on our own motion, we have issued
this *218-219 MHz Reconsideration Order.*

**III. Description and Estimate of the Number of Small Entities to which
the Rules Apply:**

Previously, in the FRFA, pursuant to the RFA, we provided a detailed
description and estimate of the number of small entities that may be
affected by the proposed rules, if adopted.[^14] We noted that the
*218-219 MHz Report and Order* affects a number of small entities who
are either licensees, or who may choose to become applicants for
licenses, in the 218‑219 MHz Service. Such entities fall into two
categories. The first category consists of those using the 218-219 MHz
Service for providing interactivity capabilities in conjunction with
broadcast services. In the FRFA, with respect to the first category, we
estimated that the number of small business entities operating in the
218-219 MHz band for interactivity capabilities with television viewers
in the 218-219 MHz Service which will be subject to the rules will be
less than 612.[^15] The second category consists of those using the
218‑219 MHz Service to operate other types of wireless communications
services with a wide variety of uses, such as commercial data
applications and two-way telemetry services. In the FRFA, with respect
to the second category, we estimated that the number of small entities
that would provide wireless communications services other than that
described above would be 247 or less.[^16]

On January 6, 1998, the SBA approved of the small business size
standards established in the *Competitive Bidding Tenth Report and
Order*.[^17] As we described in the FRFA, the first auction of 218-219
MHz spectrum resulted in 170 entities winning licenses for 594
Metropolitan Statistical Area ("MSA") licenses. Of the 594 licenses, 557
were won by entities qualifying as a small business.[^18]

**IV. Description of Projected Reporting, Recordkeeping, and Other
Compliance Requirements:**

Previously, in the FRFA to the *218-219 MHz Report and Order,* we
adopted rules altering the reporting and recordkeeping requirements for
a number of small business entities. The rules changed the obligations
of 218-219 MHz Service licensees with respect to license renewal,
construction reports, and acquisitions by partitioning or
disaggregation. As we noted in the FRFA, the *218-219 MHz Report and
Order* contained three options relevant to some small businesses that
will alter their reporting and recordkeeping requirements. Our
reconsideration order is relevant only to the second option.
Specifically, non-defaulting 218-219 MHz Service licensees currently
participating in the installment payment plan may elect one of three
restructuring plans concerning their outstanding payments. However, our
reconsideration order does not alter any reporting, recordkeeping, or
other compliance requirements contained in the *218-219 MHz Report and
Order*.

> V. Steps Taken to Minimize Significant Economic Impact on Small
> Entities, and Significant Alternatives Considered:

As we described in detail in the FRFA to the *218-219 MHz Report and
Order*, we adopted final rules designed to maximize opportunities for
participation by, and growth of, small businesses in providing wireless
services. We noted that we expected that the extension of license terms
from five to ten years and allowing partitioning and disaggregation of
licenses will specifically assist small businesses. We also noted that
the *218-219 MHz Report and Order* contained provisions, such as
liberalization of construction requirements and technical restrictions,
and elimination of the cross-ownership restriction, that will assist all
licenses, including small business licensees.[^19]

In this *Order on Reconsideration*, we change the options available to
those small businesses electing the Amnesty option in the restructuring
plan. *The 218-219 MHz Report and Order* allowed an Eligible Licensee
electing the Amnesty option to choose either to receive no credit for
its down payment, but remain eligible to bid on the surrendered licenses
when they are subsequently offered in auction, with no restriction on
after-market acquisitions; or obtain a credit for seventy percent of its
down payment and forego for a period of two years, from the start date
of the next auction of the 218-219 MHz Service, eligibility to reacquire
the surrendered licenses through either auction or any secondary market
transaction.[^20] We recognize that some commentators proposed a more
liberal amnesty option.[^21] However, we believe that eliminating all
adverse financial consequences of a licensee's decision to participate
in the auction would be contrary to a fair and equitable auction
process. Further, it might encourage future licensees to participate in
an auction under the assumption that the Commission will relieve it of
the most basic obligations of participation in an auction, if, in the
future, its business plans do not prove profitable. Thus, we will not
provide the licensees with a seventy percent down payment credit.
However, to the extent that a licensee believes that it can create a
valuable business with the same license, if its debt burden were
smaller, it will not be precluded from acquiring the license at auction,
or in any secondary market transaction. For these reasons, we did not
consider any significant alternatives to our proposals to minimize
significant economic impact on small entities.

**[Report to Congress]{.underline}**: The Commission will send a copy of
the *Order on Reconsideration,* including this FRFA, in a report to be
sent to Congress pursuant to the Small Business Regulatory Enforcement
Fairness Act of 1996, *see* 5 U.S.C. § 801(a)(1)(A). In addition, the
Commission will send a copy of the *Order on Reconsideration*, including
FRFA, to the Chief Counsel for Advocacy of the Small Business
Administration. A copy of the *Order on Reconsideration* and
supplemental FRFA (or summaries thereof) will also be published in the
Federal Register. *See* 5 U.S.C. § 604(b).

[^1]: Amendment of Part 95 of the Commission\'s Rules to Provide
    Regulatory Flexibility in the 218-219 MHz Service, *Report and Order
    and Memorandum Opinion and Order*, WT Docket No. 98-169, FCC 99-239
    (released Sept. 10, 1999) ("*218--219 MHz Report and Order*").

[^2]: *218-219 MHz Report and Order*, at ¶¶ 32, 40-53.

[^3]: *Id*., at ¶ 46-48.

[^4]: Amendment of Part 95 of the Commission\'s Rules to Provide
    Regulatory Flexibility in the 218-219 MHz Service and Amendment of
    Part 95 of the Commission\'s Rules to Allow Interactive Video and
    Data Service Licensees to Provide Mobile Services (proceeding
    terminated*), Order, Memorandum Opinion and Order, and Notice of
    Proposed Rulemaking*, 13 FCC Rcd 19064, 19086 (1998) ("*218-219 MHz
    Flex NPRM*").

[^5]: *218-219 MHz Report and Order*, at ¶ 53.

[^6]: Fifteen percent of the twenty percent down payment equals three
    percent of the purchase price. *See* 47 C.F.R. § 1.2104(g)(2).

[^7]: We also distinguish for the same reasons the circumstances under
    which we provided a credit on down payments for returned C block
    licenses where the licensees elected to prepay retained or
    disaggregated licenses. Similarly, we distinguish that aspect of the
    disaggregation option in C block whereby a licensee could apply a
    portion of the half of the down payment associated with the returned
    part of the license to reduce the debt on the retained part. In such
    case, the licensee is not abandoning its efforts to serve the public
    with at least part of the spectrum that it had committed itself to
    develop. Amendment of the Commission's Rules Regarding Installment
    Payment Financing For Personal Communications Services, (PCS),
    *Order on Reconsideration of the Second Report and Order*, FCC No.
    98-46, 13 FCC Rcd. 8345, at ¶¶ 37, 51-52 (rel. March 24, 1998) ("*C
    Block Reconsideration Order*").

[^8]: *218-219 MHz Report and Order,* at ¶ 48.

[^9]: *See* 5 U.S.C. § 603. The RFA, [see]{.underline} 5 U.S.C. § 601
    *et. seq.*, has been amended by the Contract With America
    Advancement Act of 1996, Pub. L. No. 104-121, 110 Stat. 847 (1996)
    ("CWAAA"). Title II of the CWAAA is the Small Business Regulatory
    Enforcement Fairness Act of 1996 ("SBREFA").

[^10]: Amendment of Part 95 of the Commission\'s Rules to Provide
    Regulatory Flexibility in the 218-219 MHz Service and Amendment of
    Part 95 of the Commission\'s Rules to Allow Interactive Video and
    Data Service Licensees to Provide Mobile Services (proceeding
    terminated), *Order, Memorandum Opinion and Order, and Notice of
    Proposed Rulemaking*, 13 FCC Rcd 19064, 19101 (1998) ("*218-219 MHz
    Flex NPRM"*).

[^11]: Amendment of Part 95 of the Commission\'s Rules to Provide
    Regulatory Flexibility in the 218-219 MHz Service, *Report and Order
    and Memorandum Opinion and Order*, WT Docket No. 98-169, FCC 99-239
    (rel. Sept. 10, 1999) ("*218--219 MHz Report and Order.")*.

[^12]: *See* 5 U.S.C. § 604.

[^13]: *Id*. ¶ 46-48.

[^14]: *218-219 MHz Report and Order*, at 85-86 (Appendix C).

[^15]: Id., at 86.

[^16]: *Id*.

[^17]: *See* Letter to Daniel B. Phythyon, Chief, WTB, from Aida
    Alverez, Administrator, SBA, Dated Jan. 6, 1998.

[^18]: *218-219 MHz Report and Order*, at 86 (Appendix C).

[^19]: *Id.,* at 88.

[^20]: *Id*. ¶ 46-48.

[^21]: *See* Comments Corrected reply Comments of IVDS Coalition at 14.