DA 04-3685

Cheryl A. Tritt, Esq.

Morrison & Foerster, LLP

2000 Pennsylvania Avenue, NW

Washington, DC 20006-1888

Re: Expedited Clarification of Sections 1.2105(a) and 1.2106(a) of the
Commission's Rules

Dear Ms. Tritt:

This letter responds in part to your November 12, 2004, request
("Request") that the Federal Communications Commission clarify that the
term "debt" or "non-tax debt," as referenced in Sections 1.2105(a) and
1.2106(a) and Section 1.1910 of the Commission's rules, 47 C.F.R. §§
1.2105(a), 1.2106(a), and 1.1910, does not include regulatory or
application fees owed to the Commission or any other federal agencies.
In light of the need for parties to comply with Sections 1.2105(a) and
1.2106(a) in connection with applications to participate in Auction No.
58 that must be filed no later than November 30, 2004, we have expedited
this response with respect to Sections 1.2105(a) and 1.2106(a).[^1]

In brief, the terms "debt" and "non-tax debt" as used in Sections
1.2105(a) and 1.2106(a), include regulatory or application fees owed to
the Commission. Such debts are considered delinquent for purposes of
Sections 1.2105(a) and 1.2106(a) only after the expiration of a final
payment deadline.[^2] Our clarification in this regard applies only to
these auction-related rules, and not to Section 1.1910 and related rules
implementing the Debt Collection Improvement Act.

It is generally accepted that the term "non-tax debt" refers to debts
other than those arising under the Internal Revenue Code of 1986. *See*
31 U.S.C. § 3701(a)(8). Application and regulatory fees arise under
Sections 8 and 9 of the Communications Act of 1934, as amended, 47
U.S.C. §§ 158 and 159, not the Internal Revenue Code. You contend that
the definition of "debt" in Section 1.1901(e) of the Commission's rules,
47 C.F.R. § 1.1901(e), does not include regulatory or application fees.
In fact, Section 1.1901(e) specifically includes "amounts due to the
United States from fees."[^3] In addition, you contend that the
Commission's separate provisions for the handling of application and
regulatory fees indicate an intention to exclude those obligations from
the meaning of "debt" or "non-tax debt" in Sections 1.2105(a) and
1.2106(a). We do not believe that the Commission's having separate rules
governing application and regulatory fees, on one hand, and competitive
bidding, on the other, requires the conclusion that the terms "debt" or
"non-tax debt" do not include regulatory or application fees owed to the
Commission for purposes of Sections 1.2105(a) or 1.2106(a).

Sections 1.2105(a) and 1.2106(a) apply only when a relevant party is or
has been delinquent on a non-tax debt. When particular debts become
delinquent for purposes of those rules depends on the circumstances of
the debt.  For purposes of determining when a debt becomes delinquent
under Sections 1.2105(a) and 1.2106(a), we look to the other Commission
competitive bidding rules governing delinquencies. For example, the
Commission expressly provides that parties paying for licenses won in
competitive bidding in installments that pay late but otherwise in
accordance with Commission rules regarding late periods for installment
payments are not "delinquent" on their installment debt.[^4] By rule,
the Commission provides that if late installment payments, together with
associated late fees, are not paid within two quarters of the original
payment deadline, the licensee shall be in default and subject to debt
collection procedures.[^5] Section 1.2105(a) or, in the event the
default/delinquency is later resolved, Section 1.2106(a), only will
apply at this point. The Commission adopted this approach to provide
licensees "adequate financial incentives to make installment payments on
time, while at the same time creating increased certainty that will help
licensees pursue private market solutions to their financing
difficulties."[^6] It would be contrary to the Commission's purpose of
"help\[ing\] licensees pursue private market solutions to their
financing difficulties" to treat licensees as "delinquent" for purposes
of Sections 1.2105(a) and 1.2106(a).

In order to maintain consistency with the Commission's express treatment
of installment payment debt under the competitive bidding rules, we
believe that to the extent that Commission rules permit late payment of
regulatory or application fees accompanied by late fees, such debts will
become delinquent for purposes of Sections 1.2105(a) and 1.2106(a) only
after the expiration of a final payment deadline.[^7] Therefore, we
conclude that with respect to regulatory or application fees, the
sanctions Sections 1.2105(a) and 1.2106(a) impose with respect to
competitive bidding should be limited to circumstances in which the
relevant party has not complied with a final Commission payment
deadline.

This action is taken pursuant to authority delegated pursuant to Section
0.331 of the Commission's rules.[^8]

Sincerely,

Margaret Wiener

Chief, Auctions and Spectrum Access Division

Wireless Telecommunications Bureau

[^1]: The circumstances described in the Request do not present any need
    for clarification of Section 1.1910. With respect to the Request's
    inquiry regarding regulatory or application fees owed to other
    federal agencies, we will not attempt to address the application of
    the Commission's rules to such obligations absent more specific
    information, *e.g.*, the nature of the particular obligations or the
    policies of the relevant agency.

[^2]: With respect to installment payment debt on Commission licenses,
    the final deadline for purposes of Sections 1.2105(a) and 1.2106(a)
    is the final payment deadline provided by the Commission's rules,
    regardless of any pending requests for waiver of such rules or other
    requests for administrative relief. *See* Letter to Audrey P.
    Rasmussen, Counsel to Tracy Broadcasting Corp., from Gary D.
    Michaels, Deputy Chief, Auctions and Spectrum Access Div., Wireless
    Telecommunications Bur., DA 04-3065 (Sept. 24, 2004).

[^3]: While the definitions of Section 1.1901 specifically apply only to
    47 C.F.R. Part 1, Subpart O, we believe the definitions may be
    useful when interpreting Sections 1.2105(a) and 1.2106(a), which are
    contained in Part 1, Subpart Q.

[^4]: 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 Notice of Proposed
    Rule Making,* 15 FCC Rcd 15,293, 15,310 ¶28 (2000) ("\[W\]e will
    provide such licensees with two quarters (two 3-month periods) in
    which to submit their late installment payments and required late
    fees without being considered delinquent.")

[^5]: 47 C.F.R. §1.2110(g)(4)(iv).

[^6]: Amendment of Part 1 of the Commission's Rules -- Competitive
    Bidding Procedures, *Third Report and Order and Second Further
    Notice of Proposed Rulemaking*, 13 FCC Rcd 374, 439, ¶110 (1997).

[^7]: Even where Commission rules expressly enable late payment, subject
    to payment of an additional late fee, and do not impose a final
    payment deadline, the Commission may in some cases issue a demand
    for payment by a date certain. *See* 47 C.F.R. § 1.1164(a). Failure
    to comply with the terms of a particular demand letter in the time
    provided may render the subject debt delinquent, notwithstanding
    rules generally permitting late payment.

[^8]: 47 C.F.R. § 0.331.