DA 04-3884

Janet Fitzpatrick Moran, Esq.

Patton Boggs LLP

2550 M Street, NW

Washington, DC 20037-1350

Re: [Request to Modify Post-Auction Payment Procedures for Auction No.
58]{.underline}

Dear Ms. Moran:

This letter responds to your request dated November 19, 2004, on behalf
of Wirefree Partners, Inc. ("Wirefree"), seeking an extension of the
Federal Communications Commission's ("Commission") final payment
deadline for licenses that may be won in Auction No. 58.[^1]
Specifically, you request that the Commission revise the final payment
deadline to allow winning bidders to submit their final payments after
the Commission announces that it is ready to grant the licenses won at
auction.[^2] Alternatively, you ask for a decision that, in the event
that a winning bidder defaults, the Commission will "not retain more
than 20% of an applicant's total bid as an interim default penalty until
a final decision penalty can be computed under Section
1.2104(g)(2)."[^3] For the reasons set forth below, we deny these
requests.

Section 1.2109(a) of the Commission's rules states that auction winners
are required to pay the balance of their winning bids in a lump sum
within ten (10) business days following the release of a public notice
establishing the payment deadline.[^4] Pursuant to its delegated
authority,[^5] the Wireless Telecommunications Bureau ("Bureau")
released the *Auction No. 58 Procedures Public Notice* in September of
2004 and clearly stated that winning bidders would be required to make
down payments on their winning bids (i.e., bring their amounts on
deposit with the Commission to 20 percent of the net amount of their
winning bids) within ten business days of the release of a public notice
announcing the close of Auction No. 58.[^6] The *Auction No. 58
Procedures Public Notice* also established that winning bidders would be
required to make their final payments (i.e., the remaining 80 percent
balance of their net winning bids) within 10 business days after the
deadline for submitting down payments.[^7]

Now, practically on the eve of the Auction No. 58 short-form filing
deadline, Wirefree asks the Bureau to change its announced procedures by
requiring payment of the final 80 percent balance after the Commission
is ready to grant the licenses.[^8] Wirefree contends that the payment
deadline should be changed "because the requirement to pay 100% of the
bid has a disproportionately negative impact on small businesses."[^9]
In support of its request, Wirefree cites the *Part 1 Third Report and
Order*[^10] and to the decision in the recent FM broadcast auction
requiring full payment after the broadcast licenses are ready to be
granted.[^11]

One of the primary objectives of the Commission's auction rules is to
ensure that only serious, financially qualified applicants be awarded
licenses so as to expedite provision of service to the public.[^12] The
Commission has determined that 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.[^13] The
Commission has also stated that those entities that plan to participate
in an auction must have the appropriate financing in place before the
start of the auction.[^14] Moreover, when establishing the payment
schedule for licenses won at auction, the Bureau seeks to further the
public interest by ensuring full payment and minimizing the opportunity
to "game" the processes.[^15]

Given these considerations, we find that Wirefree has failed to justify
a change to the current Auction No. 58 post-auction payment schedule or
that such a change is called for by Section 309(j) or Commission
precedent.[^16] In a series of rulemaking decisions, the Commission
addressed the hurdles that small businesses may face in accessing
capital by setting aside certain broadband PCS spectrum licenses and
establishing bidding credits as a means of providing opportunities for
small businesses to participate in the spectrum auction program, thus
meeting its statutory mandate.[^17] Moreover, we disagree with the
assertion made in the Wirefree Request that the Commission, in the *Part
1 Third Report and Order*, intended to formally tie the final winning
bid payment to the grant of a license.[^18] The partial statement from
the *Part 1 Third Report and Order* cited in the Wirefree Request was
made in the context of the Commission's shortening the petition to deny
period. This action was taken to reduce the time between the end of the
auction and the granting of licenses for unchallenged applications.
Thus, if anything, such action supports linking the final payment to the
close of the auction by generally decreasing the time before a license
can be granted.

We also do not find the post-auction payment schedule established in the
recent FM broadcast auction to be relevant or applicable to the
procedures established for Auction No. 58. In that case, specific Part
73 rules provided that final payment would be due after the release of a
public notice announcing that the broadcast construction permits were
ready to be granted.[^19] However, the *Auction No. 37 Procedures Public
Notice* also noted that the Bureau and the Media Bureau were considering
changes to the broadcast rules to conform the Part 73 final payment
deadline with the analogous payment process consistent with Part 1
rules.[^20] Regardless, for Auction No. 58 purposes, neither Part 1 nor
Part 24 of the Commission's rules ties the payment deadline to license
grant. In fact, at least five of the most recently announced auctions
for non-broadcast licenses required that the balance of the winning bid
be paid within ten business days after the deadline for submitting down
payments.[^21] In each of these wireless auctions, the Bureau
implemented this procedure without any noted problems from small
businesses in complying with a post-auction payment schedule similar to
the one established for Auction No. 58.

Additionally, we believe that any change to the payment schedule for
Auction No. 58 at such a late date would be contrary to the public
interest and detrimental to the integrity of the auction process. As
noted above, the Bureau announced the Auction No. 58 procedures on
September 16, 2004.[^22] Wirefree made its request on November 19, 2004,
after the short-form filing window had opened for Auction No. 58 and
only a few business days before the filing deadline.[^23] Revising the
auction payment schedule either during or after the short-form filing
window, as requested by Wirefree, may deny potential bidders sufficient
time to make changes to business plans developed based on deadlines
established more than two months before the Wirefree Request was filed.
Moreover, we find that the Wirefree Request does not provide compelling
reasons to warrant such a change.[^24]

Similarly, we find that Wirefree has failed to provide a basis for a
change in the Commission's policy regarding the retention of a bidder's
monies on deposit in the event of a post-auction default. Where a
winning bidder or licensee defaults and the defaulted license has yet to
be reauctioned, the Commission generally assesses an initial default
payment of between three percent (3%) and twenty percent (20%) of the
defaulted bid amount.[^25] In exercising our discretion to refund
amounts above that range, we will continue to review the particular
circumstances underlying a bidder's default.[^26]

This action is taken pursuant to authority delegated pursuant to Section
0.331 of the Commission's rules.[^27]

Sincerely,

John B. Muleta

Chief

Wireless Telecommunications Bureau

[^1]: Letter from Janet Fitzpatrick Moran, Counsel for Wirefree
    Partners, Inc., to John Muleta, Chief, Wireless Telecommunications
    Bureau, dated November 19, 2004 ("Wirefree Request").

[^2]: *Id*. at 1.

[^3]: *Id*. at 1, 3.

[^4]: 47 C.F.R. § 1.2109.

[^5]: *See* 47 C.F.R. § 0.131; *see also* Amendment of Part 1 of the
    Commission's Rules --- Competitive Bidding Proceeding, WT Docket No.
    97-82, *Order, Memorandum Opinion and Order, and Notice of Proposed
    Rule Making*, 12 FCC Rcd 5686, 5697-98 (1997) ("We also clarify that
    pursuant to Section 0.131 of our rules, the Chief, Wireless
    Telecommunications Bureau, has delegated authority to implement all
    of the Commission's rules pertaining to auctions procedures.").

[^6]: "Broadband PCS Spectrum Auction Scheduled for January 12, 2005;
    Notice and Filing Requirements, Minimum Opening Bids, Upfront
    Payments and Other Procedures for Auction No. 58," *Public Notice*,
    19 FCC Rcd 18190, 18226 (WTB 2004) ("*Auction No. 58 Procedures
    Public Notice*").

[^7]: *Id*.

[^8]: Wirefree Request at 1, 3.

[^9]: *Id*. at 2.

[^10]: *Id*. at 2, citing Amendment of Part 1 of the Commission's Rules
    -- Competitive Bidding Procedures, WT Docket No. 97-82, *Third
    Report and Order and Second Further Notice of Proposed Rule Making*,
    13 FCC Rcd. 374, 432 (1997) (*Part 1 Third Report and Order*)
    ("concerns regarding delayed payment are outweighed by the risk and
    uncertainty that would be imposed on an applicant if it were
    required to make its full payment while a petition against its
    application was still pending....").

[^11]: Wirefree Request at 2.

[^12]: *See* Implementation of Section 309(j) of the Communications Act
    -- Competitive Bidding, PP Docket No. 93-253, *Second Report and
    Order*, 9 FCC Rcd 2348, 2375 (1994) (*Competitive Bidding Second
    Report and Order*); Mountain Solutions LTD, Inc., 12 FCC Rcd 5904,
    5907-08 (WTB 1997), *aff'd*, 13 FCC Rcd 21983 (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). See also Request of GLH
    Communications, Inc. for Temporary Waiver of Installment Payment
    Deadlines (47 C.F.R. § 1.2110(g)(4) and Debt Collection Rules ( 47
    C.F.R. §1901 et seq.), *Order*, 18 FCC Rcd 14695, 14698-99 (WTB-AIAD
    2003).

[^13]: *See* BDPCS, Inc., *Memorandum Opinion and Order*, 12 FCC Rcd
    3230, 3235 (1997) (*BDPCS MO&O*) ("\[I\]n order to maintain the
    integrity of the auction process, and to ensure the efficient
    provision of services to the public, auction participants are held
    to certain obligations, such as meeting relevant financial
    deadlines."), *recon. denied in part and granted in part*, 12 FCC
    Rcd 15341 (1997). As the Commission has stated, awarding licenses to
    those who value them the most encourages growth while maintaining
    safeguards against anticompetitive behavior. *Competitive Bidding
    Second Report and Order*, 9 FCC Rcd at 2349-50.

[^14]: *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 Rcd 22071, 22072
    (1998).

[^15]: *See Competitive Bidding Second Report and Order*, 9 FCC Rcd at
    2381-82.

[^16]: 47 U.S.C. § 309(j).

[^17]: *See* Implementation of Section 309(j) of the Communications
    Act -- Competitive Bidding, PP Docket 93-253, *Fifth Report and
    Order*, 9 FCC Rcd 5532, 5581-82 (1994). *See also* Implementation of
    Section 309(j) of the Communications Act -- Competitive Bidding, PP
    Docket 93-253, *Fifth Memorandum Opinion and Order*, 10 FCC Rcd 403,
    420-21 (1994); Amendment of the Commission's Rules Regarding
    Installment Payment Financing for Personal Communication Services
    (PCS) Licensees, WT Docket No. 97-82, *Sixth Report and Order and
    Order on Reconsideration*, 15 FCC Rcd 16266 (2000).

[^18]: Wirefree Request at 2.

[^19]: *See* 47 C.F.R. §§ 73.3573(f)(5)(ii); 73.5006(d).

[^20]: *See* Auction of FM Broadcast Construction Permits Scheduled for
    November 3, 2004; Notice and Filing Requirements, Minimum Opening
    Bids, Upfront Payments and Other Auction Procedures, Public Notice,
    19 FCC Rcd 10570, 10605 (WTB/MB 2004).

[^21]: *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, Upfront
    Payments and Other Auction Procedures, *Public Notice*, 18 FCC Rcd
    17553, 17588 (WTB 2003). The Bureau has also exercised this
    discretion in Auction Nos. 52, 55, 56 and 57.

[^22]: *See*, *generally*, *Auction No. 58 Procedures Public Notice*.

[^23]: The Wirefree Request was filed November 19, 2004, leaving only 5
    business days before the close of the short-form filing deadline of
    November 30, 2004.

[^24]: In addition, we note that the Wirefree Request is essentially
    seeking reconsideration of the Bureau's action in the *Auction No.
    58 Procedures Public Notice* establishing the final payment
    deadline. Because the filing was submitted over two months after the
    release of the *Auction No. 58 Procedures Public Notice*, the
    Wirefree Request should also be dismissed as an untimely petition
    for reconsideration. *See* 47 C.F.R. § 1.106(f) (petitions for
    reconsideration must be filed within 30 days); *see also* 47 U.S.C.
    § 405 (limiting the Commission\'s power to consider petitions for
    reconsideration to those filed within 30 days from public notice of
    the order, decision, report or action complained of).

[^25]: *See Part 1 Third Report and Order*, 13 FCC Rcd at 434; *see
    also* 47 C.F.R. § 1.2106(e) (In the event a payment "is assessed
    pursuant to §1.2104 for bid withdrawal or default, upfront payments
    or down payments on deposit with the Commission will be used to
    satisfy the bid withdrawal or default payment . . ."); *see also* 47
    C.F.R. § 1.2104, 1.2109, 1.2107

[^26]: *See* Letter from Margaret W. Wiener, Chief, Auctions and
    Industry Analysis Division, to Raymond Quianzon, counsel to TPS
    Utilicom, Inc, 18 FCC Rcd 21332 (WTB 2003).

[^27]: 47 C.F.R. § 0.331.