> DA 01-1319
>
> June 1, 2001

Russell H. Fox, Esq.

Russ Taylor, Esq.

Gardner, Carton & Douglas

1301 K Street, N.W.

Suite 900, East Tower

Washington, D.C. 20005-3317

> Re: Request for Temporary Waiver of Installment
>
> Payment Due Date

Dear Messrs. Fox and Taylor:

This letter responds to the Petition filed on behalf of Capital Two-Way
Communications, Inc. ("petitioner") requesting that the Auctions and
Industry Analysis Division waive the Commission's installment payment
rules.[^1] In the alternative, the Petition requests a grace period
pursuant to the installment payment rules that were in effect at the
time the two licenses were awarded to Capital Two-Way Communications,
Inc. and Everest Communications, Inc. ("Capital/Everest").[^2] For the
reasons set forth below, we deny the Petition.

On April 16, 1996, the Commission granted Capital/Everest two 900 MHz
Specialized Mobile Radio ("SMR") licenses from Auction No. 7.[^3] As a
small business, Capital/Everest was eligible to participate in the
Commission's installment payment plan for 900 MHz SMR licenses.[^4]
After grant of the licenses, only seven installment payments were made
on each license. On December 1, 1998, the last such payment was made
when the Commission received the May 31, 1998 installment payment for
each license. After that date, the no additional payments were made on
either of the licenses.

The Commission's installment payment rules in effect after March 16,
1998 provided that if a licensee did not make full and timely payment of
an installment, a 90-day non-delinquency period was automatically
granted.[^5] This was immediately followed by an automatic 90-day grace
period if full payment was not made during the non-delinquency
period.[^6] Licenses automatically cancelled once this 180-day period
had elapsed.[^7] Thus, under the installment payment rules in effect,
the licenses cancelled automatically for failure to make full and timely
payment.

Nine months after the last payment was made on the licenses, and after
the licenses had automatically cancelled, the instant Petition was
filed.[^8] Petitioner argues that a waiver should be granted because
service to the public would be delayed by a future auction of licenses
for the same spectrum,[^9] and because an assignment application is
pending that would assign the licenses to an entity with the financial
means to make the installment payments.[^10] For a waiver of the
Commission's rules to be granted, one of two tests must be met. The
entity requesting the waiver must demonstrate either that: (1) the
underlying purpose of the rules would not be served or would be
frustrated by application to the instant case, and that a grant of the
requested waiver would be in the public interest or, (2) in view of
unique or unusual factual circumstances of the instant case, application
of the rule(s) would be inequitable, unduly burdensome or contrary to
the public interest, or the applicant has no reasonable
alternative.[^11] As we explain below, the instant Petition failed to
establish grounds for a waiver.

The Petition fails to establish that the underlying purpose of the
Commission's rules would not be served by their application in this
instance. The argument that grant of this waiver would speed service to
the public ignores the fact that grant of such a waiver would undermine
the auction and licensing process. The licenses were conditioned upon
the full and timely performance of the payment obligations,[^12] which
the licensee failed to fulfill. The Commission has repeatedly emphasized
the importance of full and timely payment.[^13] Strict enforcement of
payment rules enhances the integrity of the auction and licensing
process by ensuring that applicants have the necessary financial
capacity and that spectrum is awarded to those qualified bidders who
value the spectrum most. Moreover, the Commission has held that the
ability to make installment payments is evidence of a licensee's ability
to access the capital necessary to both pay for the license and provide
service to the public.[^14] Insisting that licensees demonstrate their
ability to pay as a condition to holding licenses is essential to a fair
and efficient licensing process, is fair to all participants in our
auctions, including those who won licenses in the auctions and those who
did not, and fosters the promotion of economic opportunity and
competition in the marketplace.[^15]

Turning to the second part of the waiver standard, there is nothing
unique or unusual presented by the Petition.[^16] The representation
that a pending license assignment would put the licenses in the hands of
a third party with the means to make payments is unremarkable. The
Commission's rules require that the licensee make timely and full
payment on its licenses.[^17] The existence of a potential assignee does
not negate the licensee's failure to comply with the Commission's rules.
Thus, the Petition does not provide a basis for a grant of a waiver of
the Commission's installment payment rules.

As an alternative argument, the petitioner contends that it should not
be subject to the Commission's installment payment rules in effect when
its licenses cancelled.[^18] Rather, the petitioner maintains that the
Commission should apply the former Part 1 rules that were in effect when
the licenses were granted. The Commission's former Part 1 rules provided
that any licensee whose installment payment was more than ninety days
past due was in default, unless the licensee properly filed a grace
period request.[^19] In the *Part 1 Third Report and Order*, the
Commission modified the installment payment grace period provisions as
applied to all licensees participating in an installment payment plan at
that time.[^20] The petitioner argues that application of the modified
rules ("new Part 1 rules") would constitute impermissible retroactive
rulemaking.[^21] The Commission rejected this argument in the *Order on
Reconsideration of the Part 1 Third Report and Order*[^22] and concluded
that the new Part 1 rules do not violate the prohibitions on
retroactivity under the Administrative Procedure Act ("APA").[^23] The
Petition does not provide a basis to depart from Commission precedent on
this issue. Further, even under the old Part 1 rules, the waiver
request, filed nine months after its last payment, was clearly untimely.

Finally, the petitioner erroneously contends that its situation is
analogous to that of TE-MCG.[^24] In *TE-MCG*, the Wireless
Telecommunications Bureau recognized a constructive waiver of the
Commission's rules where installment payments were accepted after the
installment payment deadlines had passed.[^25] However, in this
instance, the licensee ceased making payments and did not file a request
for a waiver of the Commission's rules until nine months after its last
installment payment.[^26] Thus, the factual circumstances presented here
are clearly distinguishable from *TE-MCG*.

For the reasons detailed above, the instant Petition requesting a waiver
of the Commission's installment payment rules, or in the alternative,
requesting a grace period is DENIED.

This action is taken pursuant to sections 1, 4(i), 4(j), 303(r), and
309(j) of the Communications Act of 1934, as amended, 47 U.S.C. §§ 151,
154(i), 154(j), 303(r), 309(j) and the authority delegated pursuant to
section 0.331 of the Commission's Rules, 47 C.F.R. § 0.331.

Sincerely,

Margaret Wiener

Chief, Auctions and Industry Analysis Division

Wireless Telecommunications Bureau

[^1]: Petition for Waiver, Or, In The Alternative, Request For "Grace
    Period," filed by Capital Two-Way Communications, Inc. on Aug. 31,
    1999 ("Petition").

[^2]: Petition at 1-2.

[^3]: "FCC Prepared to Award 900 MHz MTA Licenses; Additional payment
    due by July 8, 1996," *Public Notice*, DA 96-1057, 11 FCC Rcd 7701
    (1996). Capital/Everest won a G block license in the Dallas, Texas
    market, YSM007G, call sign KNNY226 ("Dallas license") with a net bid
    of \$843,000 and won a T block license in the San Antonio, Texas
    market, YSM033T, call sign KNNY227 ("San Antonio license") with a
    net bid of \$468,363.

[^4]: ^?^ 47 C.F.R. §§ 90.812 and 1.2110(f) (1996). A promissory note
    and a security agreement was executed for each of the two 900 MHz
    SMR licenses. Each promissory note included a schedule of 40
    quarterly installment payments commencing November 1996 and
    concluding August 2006. Security Agreement (Specialized Mobile
    Radio: Auction Event No. 7), License No. YSM007G, (August 21, 1996)
    ("Dallas Security Agreement"); Installment Payment Plan Note
    (Specialized Mobile Radio: Auction Event No. 7 -- Installment Plan
    B), License No. YSM007G, (August 21, 1996) ("Dallas Installment
    Payment Note"); Security Agreement (Specialized Mobile Radio:
    Auction Event No. 7), License No. YSM033T, (August 21, 1996) ("San
    Antonio Security Agreement"); Installment Payment Plan Note
    (Specialized Mobile Radio: Auction Event No. 7 -- Installment Plan
    B), License No. YSM033T, (August 21, 1996) ("San Antonio Installment
    Payment Note").

[^5]: 47 C.F.R. § 1.2110(e)(4)(i) (1996). The Part 1 rules referenced in
    this letter have been amended to reflect the use of quarters for
    implementation of the Commission's payment deadlines and attendant
    grace period rules. Amendment of Part 1 of the Commission's
    Rules-Competitive Bidding Procedures, WT Docket 97-82, *Order on
    Reconsideration of the Third Report and Order, Fifth Report and
    Order, and the Fourth Further Notice of Proposed Rulemaking*, 15 FCC
    Rcd 15293, 15 FCC Rcd 21520 (2000) ("*Part 1 Third Report and Order
    Recon*"). These changes have no effect on our evaluation of the
    Petition.

[^6]: 47 C.F.R. § 1.2110(e)(4)(ii) (1996).

[^7]: 47 C.F.R. § 1.2110(e)(4)(iv) (1996).

[^8]: Petition.

[^9]: Petition at 3.

[^10]: ^?^ Petition at 2-3.

[^11]: 47 C.F.R. §1.925.

[^12]: 47 C.F.R. § 90.812(a) (1996) ("An MTA license issued to an
    eligible small business that elects installment payments will be
    conditioned on the full and timely performance of the license
    holder\'s quarterly payments*.*"); *see also* Dallas Security
    Agreement at ¶ 2 ("The debtor recognizes that its continued
    retention of the License, and rights to operate as a Commission
    licensee thereunder, is conditioned upon compliance with all orders
    and regulations applicable to the Licensee and the Communications
    Act of 1934, as amended "); San Antonio Security Agreement at ¶ 2
    (contains the same language as in the Dallas Security Agreement).

[^13]: *See, e.g.,* In the Matter of Southern Communications Systems,
    Inc., Request for Limited Rule Waiver to Comply with PCS Installment
    Payment for C Block Licenses in the Cleveland, TN BTA, *Memorandum
    Opinion & Order*, FCC 00-433 at ¶ 15 (rel. Dec. 21, 2000)
    ("*Southern MO&O")*; In the Matter of Licenses of 21^st^ Century
    Telesis, Inc. For Facilities in the Broadband Personal
    Communications Services, *Memorandum Opinion & Order*, FCC 00-434 at
    ¶ 10 (rel. Dec. 21, 2000) ("*21^st^ Century MO&O")*; In the Matter
    of Public Notice DA 00-49 Auction of C and F Block Broadband PCS
    Licenses NextWave Personal Communications, Inc. and NextWave Power
    Partners, Inc., Petition for Reconsideration, In re Settlement
    Request Pursuant to DA 99-745 For Various Broadband PCS C Block
    Licenses, *Order on Reconsideration*, 15 FCC Rcd 17500 (2000)
    ("*NextWave Order on Reconsideration*"); "Wireless
    Telecommunications Bureau Will Strictly Enforce Default Payment
    Rules; Bureau to Re-Auction Licenses Quickly*," Public Notice*, DA
    96-481, 11 FCC Rcd 10853 (1996) (WTB).

[^14]: Amendment of the Commission's Rules Regarding Installment Payment
    Financing of Personal Communications (PCS) Licensees, WT Docket No.
    97-82, *Order on Reconsideration of the Second Report and Order*, 13
    FCC Rcd 8345, 8348 ¶8 (1998).

[^15]: *See* *NextWave Order on Reconsideration*, 15 FCC Rcd 17500.

[^16]: *See* In the Matter of Requests for Extension of the Commission's
    Initial Non-Delinquency Period for C and F Block Installment
    Payments, *Order*, 13 FCC Rcd 22071, 22072, ¶ 4 (1998) ("The
    challenge of raising capital to finance ... licenses exists in
    varying degrees for all licensees and does not constitute 'unique
    facts and circumstances.' "), *petition for recon. denied*, 14 FCC
    Rcd 6080 (1999*), aff'd*., *SouthEast Telephone v. FCC*, No.
    99-1164, 1999 WL 1215855 (D.C. Cir. Nov. 24, 1999).

[^17]: ^?^ 47 C.F.R. § 1.21110(f)(4) (1996).

[^18]: Petition at 4.

[^19]: 47 C.F.R. § 1.2110(e)(4)(ii) and (iii) (1996).

[^20]: In the Matter of 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 372, 434-42 ¶¶
    103-113 (1998).

[^21]: ^?^ Petition at 4-5*.*

[^22]: ^?^ *Part 1 Third Report and Order Recon*, 15 FCC Rcd at
    15304-396 ¶¶ 18, 20-22*.*

[^23]: ^?^ 5 U.S.C. § 701 *et. seq*.

[^24]: Petition at 5-6.

[^25]: Letter from Thomas J. Sugrue, Chief, Wireless Telecommunications
    Bureau, to Lloyd W. Coward, Esq., Counsel for TE‑MCG Consortium, DA
    99‑258, 14 FCC Rcd 2173 (1999) ("*TE-MCG")*.

[^26]: ^?^ Petition.