**Before the**

**Federal Communications Commission**

**Washington, D.C. 20554**

In the Matter of )

)

Amendment of the Commission\'s ) WT Docket No. 97-82

Rules Regarding Installment Payment )

Financing For Personal Communications )

Services (PCS) Licensees )

**ORDER ON RECONSIDERATION**

**OF THE SECOND REPORT AND ORDER**

**Adopted:** **March 23, 1998 Released:** **March 24, 1998**

By the Commission: Commissioners Ness and Powell concurring in part,
dissenting in part, and issuing separate statements; Commissioner
Tristani issuing a statement.

**TABLE OF CONTENTS**

[Paragraph No.]{.underline}

I. Introduction 1

II\. Background 3

III\. Overview 7

IV\. MTA-by-MTA Elections 16

V. Resumption of Payments 21

VI\. Surrender of Licenses for Reauction (Amnesty) 31

VII\. Prepayment 38

VIII\. Disaggregation of Spectrum for Reauction 49

IX\. Election Procedures 61

X. Reauction 66

XI\. Miscellaneous Matters 73

A. Cross Defaults 73

B. No Extension of C Block Relief to Other Licensees 74

C. Issues Addressed in Other Proceedings or Requiring Action by Congress
77

XII\. Procedural Matters and Ordering Clauses 79

Appendix A: List of Pleadings

Appendix B: Revised Rules

Appendix C: Supplemental Final Regulatory Flexibility Analysis

**I. INTRODUCTION**

On September 25, 1997, the Commission adopted a *Second Report and Order
and Further Notice of Proposed Rule Making* (\"*Second Report and
Order*\" and \"*Further Notice*\") establishing March 31, 1998, as the
deadline for broadband Personal Communications Services (\"PCS\") C and
F block licensees to resume installment payments.[^1] In addition, the
Commission offered C block licensees a choice of three alternative
payment options in lieu of resuming payments under the terms of the
original payment plan. The three options were intended to provide
limited relief to C block licensees experiencing financial difficulties,
while preserving the fairness and integrity of the auction process.

In response to the rulings in the *Second Report and Order*, we received
37 petitions for reconsideration, 17 oppositions to the petitions, 16
replies to the oppositions, and 38 *ex parte* filings.[^2] After
considering the arguments raised in those filings, we generally affirm
the framework established in the *Second Report and Order*, but we make
a few modifications designed to provide C block licensees greater
flexibility in making their elections. We believe that these changes
improve upon the *Second Report and Order* by allowing more existing
licensees to adjust their business plans and remain in the wireless
market to compete against other providers, while also providing for the
return of spectrum to the Commission so that other entrepreneurs will
have opportunities to obtain broadband PCS licenses in a reauction. In a
forthcoming Order, we will address comments filed in response to the
*Further Notice*, which covers rules for the reauction of returned C
block licenses.

**II. BACKGROUND**

Consistent with Congress\' mandate to promote the participation of small
businesses and other \"designated entities\" in the provision of
spectrum-based services,[^3] the Commission limited eligibility in the
initial C block auctions to entrepreneurs and small businesses. The C
block auction concluded on May 6, 1996, and the subsequent reauction of
defaulted licenses concluded on July 16, 1996, with a total of 90
bidders winning 493 licenses. The winning bidders were permitted to pay
90 percent of their net bid price over a period of ten years, paying
only interest for the first six years and paying both interest and
principal for the remaining four years.[^4]

On March 31, 1997, the Wireless Telecommunications Bureau (the
\"Bureau\") suspended the deadline for payment of installment payments
for all C block licensees.[^5] The suspension was implemented in
response to a joint request from several C block licensees seeking
modification of their installment payment obligations and to allow more
time for discussions with other federal agencies concerning \"the
transfer of responsibilities for certain debt functions related to \[the
installment payment\] program.\"[^6] On April 28, 1997, the Bureau
extended the suspension to F block licensees.[^7] As mentioned above, on
September 25, 1997, the Commission ended this suspension and established
March 31, 1998, as the deadline for C and F block licensees to resume
their installment payments.[^8]

After reviewing various proposals for relief, the Commission decided in
the *Second Report and Order* to allow each C block licensee to elect
one of three options for all of its licenses in lieu of continuing
payments under the licensee\'s original installment payment plan.[^9]
Each of the three options \-- disaggregation, amnesty, and prepayment
\-- was intended to provide limited relief to financially troubled
licensees without harming the integrity of the auction process.[^10] The
Commission determined that further relief for F block licensees was
unnecessary.[^11]

In the *Second Report and Order*, the Commission required C block
licensees to file a written election notice on or before January 15,
1998, specifying whether they would resume payments under the terms of
the original installment payment plan or would proceed under one of the
alternative options.[^12] On January 7, 1998, we postponed the election
date until February 26, 1998, in order to resolve issues raised on
reconsideration before licensees submitted their elections.[^13] In
addition, we announced that the reauction of spectrum surrendered by C
block licensees pursuant to their elections would begin on September 29,
1998.[^14] On February 24, 1998, we revised both the February 26, 1998,
election date and the March 31, 1998, payment resumption date.[^15] We
changed the election date to 60 days from publication of this Order in
the *Federal Register* and the payment resumption date to at least 30
days after the new election date.[^16]

**III. OVERVIEW**

The Commission determined in the *Second Report and Order* that it would
serve the public interest to provide a variety of relief mechanisms to
assist C block licensees that were experiencing difficulties in meeting
the financial obligations under the installment payment plan. The
Commission believed the \"extraordinary procedures\" it adopted to offer
relief to C block licensees appropriately balanced a number of important
policy goals.[^17] In formulating a resolution to the complex issues
involved, one of the Commission\'s foremost objectives was to preserve
the integrity of the auction process and to maintain public confidence
in the stability of the Commission\'s auction rules.[^18] The Commission
also believed it was essential to ensure fair and impartial treatment
for all auction participants, including winning bidders, unsuccessful
bidders, and licensees in competing services.[^19] At the same time, the
Commission was cognizant of its statutory mandate to promote economic
opportunity and to encourage broad participation in the provision of
spectrum-based services.[^20] In addition, the Commission attempted to
implement a workable solution in a timely manner that would facilitate
rapid introduction of service to the public without further regulatory
or marketplace delay.[^21]

We believe the approach adopted in the *Second Report and Order* largely
accomplishes these objectives. The relief provided C block licensees
will speed deployment of service to the public by easing lenders\' and
investors\' concerns regarding regulatory uncertainty and by potentially
making more capital available for investment and growth. By facilitating
the provision of service to consumers, the Commission advanced
Congress\' objective to promote \"the development and rapid deployment
of new technologies, products, and services for the benefit of the
public.\"[^22] In addition, the mechanisms the Commission created to
help these small businesses remain viable competitors in the marketplace
furthered its statutory mandate to \"promot\[e\] economic opportunity
and competition and ensur\[e\] that new and innovative technologies are
readily accessible to the American people by avoiding excessive
concentration of licenses and by disseminating licenses among a wide
variety of applicants, including small businesses . . . .\"[^23]
However, out of fairness to bidders that withdrew from the auction and
to maintain the integrity of the auction process, the Commission
rejected proposals that would have significantly altered the amounts
paid for individual licenses. Mindful of the effect its decision would
have on future auctions, the Commission opted for a more modest
approach.

Although we believe the decision adopted in the *Second Report and
Order* largely should be maintained, we believe that certain aspects of
the adopted approach were overly restrictive. A number of petitioners
claim that the options presented by the Commission do not provide
economically viable alternatives for financially troubled
licensees.[^24] Indeed, a frequent complaint expressed throughout the
numerous petitions is that the available options fall short of providing
meaningful relief. We also received several letters from members of
Congress asking that we take additional measures to assist C block
licensees.[^25]

After reviewing the extensive record on reconsideration, we believe that
a radical departure from the *Second Report and Order* is not
warranted.[^26] The *Second Report and Order* created an innovative
solution to requests from C block licensees needing financial relief.
Certain requirements, however, may constrain many C block licensees from
making use of the relief measures offered. We believe that, with a few
adjustments to the adopted approach, we can better effectuate the
Commission\'s intent to provide C block licensees a limited measure of
relief under the unique but varied circumstances presented. We therefore
will leave the basic framework intact, but we will alter it slightly to
allow licensees to be more flexible in making their elections for
licenses in different geographic areas, to use more of the down payments
already on deposit, and to be more flexible in the use of those down
payments. We believe that this approach improves upon the *Second Report
and Order* by better enabling C block licensees to remain participants
in the wireless market, which will promote competition and the delivery
of new services to the public.

First, we will eliminate the requirement that a licensee must make the
same election for all its licenses. Instead, a licensee may make
different elections for the different Major Trading Areas (\"MTAs\") in
which it holds licenses. The election made for an MTA will apply to
every Basic Trading Area (\"BTA\") license held by the licensee in that
MTA. As under the *Second Report and Order*, the possible elections
include resumption of payments, amnesty, prepayment, or disaggregation.
As part of the modifications to the adopted approach, we will also
permit a combination of disaggregation and prepayment. Resumption of
payments and prepayment of 30 MHz licenses will remain essentially the
same as in the *Second Report and Order*. We will, however, modify the
amnesty and disaggregation options, as follows.

Under the revised amnesty option, a licensee may return to the
Commission licenses in any MTA it wishes so long as it returns all its
BTA licenses within the MTA. The entire outstanding debt on the returned
licenses will be forgiven. For each MTA that is returned, the licensee
will have two choices, and its decision will apply to all its BTA
licenses within the MTA. If the licensee wishes to bid on those licenses
it returns in the reauction, none of the down payment associated with
such licenses will be available, consistent with the *Second Report and
Order*. Alternatively, the licensee may opt to forgo the opportunity to
bid on its returned licenses in exchange for a credit of 70 percent of
the down payment made on the licenses. This credit may be used to prepay
the entire principal owed for a retained MTA with 30 MHz licenses. This,
essentially, is the prepayment option as adopted in the *Second Report
and Order*. Alternatively, we permit a combination of prepayment and
disaggregation, so that the licensee may prepay the entire principal
owed for the retained 15 MHz licenses of an MTA that has been
disaggregated.

As under the *Second Report and Order*, a licensee that disaggregates an
MTA may continue making installment payments on the retained spectrum.
However, for each disaggregated license, the licensee will now receive
credit for 40 percent of the down payment applicable to the returned 15
MHz of spectrum. This 40 percent credit may be applied only to the 15
MHz of spectrum retained from the same license. It may be used to reduce
the principal outstanding and/or to pay \"Suspension Interest\" (i.e.,
all unpaid simple interest accruing from the date of license grant
through March 31, 1998). Because the down payment applicable to the
retained spectrum will be considered the down payment for that spectrum
and the licensee thus retains 100 percent of that portion of the down
payment, the licensee in effect receives a blended credit of 70 percent
of the total down payment made on the full 30 MHz license.

Alternatively, under our modified approach, a licensee will be allowed
to prepay a disaggregated MTA. In that case, the licensee will receive
credit for 70 percent of the down payment applicable to the returned
spectrum. Because the licensee retains 100 percent of the portion of the
down payment associated with the retained portion of the license, the
licensee in effect receives a blended credit of 85 percent of the total
down payment. The 70 percent credit may be applied toward the prepayment
of a retained MTA with 30 MHz licenses (so long as the retained 15 MHz
license is prepaid) and/or toward the prepayment of the retained 15 MHz
licenses of an MTA that has been disaggregated.

In addition, we adopt the following limited modifications: (1) we extend
to 90 days the 60-day non-delinquency period for payments not made on
the payment resumption date, and we impose a 5 percent late payment fee
for payments made within this 90-day non-delinquency period; (2) we
instruct the Bureau to modify the payment schedules of all C and F block
licensees so that all payments will be due on the same date; (3) we
eliminate the build-out exception to the amnesty option because it is
rendered moot by our modified approach; and (4) for purposes of the rule
that a licensee electing prepayment that does not have sufficient funds
to prepay all its BTA licenses within an MTA may prepay only the BTA
licenses within the MTA that it can afford, we clarify that a licensee
can \"afford\" as many BTA licenses within an MTA that it can prepay
using only the amount of credit available to the licensee for
prepayment.

**IV. MTA-BY-MTA ELECTIONS**

**A. Background**

Under the *Second Report and Order*, a licensee was not permitted to
make more than one election. Therefore, whatever election was chosen
would apply to all licenses held by the licensee. For practical
purposes, there was a limited mixing of options to the extent that
payments would have to be resumed under the terms of the original
installment plan with respect to any licenses not halved under the
disaggregation option and any licenses retained under the build-out
exception to the amnesty option. Licensees were precluded, however, from
forming any other combinations among the options. For example, a
licensee could not prepay some licenses and disaggregate others.

**B. Discussion**

By offering a menu of options, the Commission attempted to accommodate
the fact that different licensees face different circumstances. However,
the requirement that a licensee make the same election for all its
licenses failed to account for the situation where a licensee faces
different circumstances in its different license areas. We believe that
licensees will be able to take better advantage of the varied benefits
of the options if they are allowed to make different elections for the
different areas in which they hold licenses. Therefore, we eliminate the
requirement that a licensee must make the same election for all its
licenses. We agree with NextWave and other parties that instead we
should allow a licensee to make one election for each MTA in which it
holds licenses.[^27] In other words, the same election must be applied
to each BTA license held in a given MTA, but different elections may be
selected for different MTAs. For this purpose, the available elections
that may be applied to an MTA are the resumption of payments under the
existing installment payment plan, amnesty, prepayment, disaggregation,
and a combination of disaggregation and prepayment. These elections are
discussed in detail below.

We believe the MTA is the appropriate unit for making an election for
similar reasons that the Commission previously determined it was an
appropriate cut-off point.[^28] We do not believe licensees should be
permitted to make elections on a BTA-by-BTA basis. As the Commission
stated in the *Second Report and Order*, allowing options to be applied
at the BTA level would threaten the interdependency of licenses and
would limit the potential for aggregation of licenses within an
MTA.[^29] It also would permit licensees to \"cherry-pick\" the most
desirable markets within an area.[^30] The return of only the less
desirable markets would discourage participation in the reauction and
could substantially delay the deployment of service to those areas. This
danger does not exist at the MTA level because MTAs are large enough
market areas that the value of an MTA would not be diminished if it was
surrendered and its neighboring MTAs were not.

By allowing elections to be made on an MTA-by-MTA basis, we enable
licensees to make election decisions that are not based solely on the
elements of each option, but rather on their own business plans and
financial situation. For example, a licensee may be successfully
financing its license holdings on the east coast but experiencing
difficulties in financing its west coast holdings. Under the approach
adopted in the *Second Report and Order*, the prepayment option was the
only means by which the licensee could return its west coast licenses
while keeping its east coast licenses.[^31] We believe that the decision
to retain or surrender licenses in an MTA should depend on the
particular circumstances surrounding those licenses. The decision should
not be driven by the terms of the options or by unrelated circumstances
in other areas, which might dictate a universal election unsuitable for
the licenses in that MTA.

Further, we believe that MTA-by-MTA elections will promote rapid
deployment of service to the public.[^32] Licensees will have more
opportunity to localize their business plans by surrendering licenses in
markets where success now seems unlikely due to financial difficulties.
As a result, they will be able to focus on providing service in those
markets where they have retained their licenses. In addition, the
surrendered licenses presumably will be reauctioned to entities better
positioned to provide service in those license areas. Indeed, we
anticipate that MTA-by-MTA elections will produce a more robust and
competitive reauction. We expect more licenses to be returned for
reauction because a licensee choosing disaggregation or resumption will
now be free to surrender licenses it was reluctant to keep, but was
forced to do so under the previous terms of those elections. Allowing
those licenses to be reauctioned to entities that are more committed, or
better able, to serve those markets will stimulate competition and
benefit consumers. Furthermore, permitting elections on an MTA-by-MTA
basis will not undermine the integrity of the auction process because
licensees still must pay the full amount of their licenses.

**V. RESUMPTION OF PAYMENTS**

**A. Background**

In the *Second Report and Order*, the Commission rescinded, effective
March 31, 1998, the Bureau\'s prior suspension of the deadline for all
broadband PCS C block and F block installment payments.[^33] All
payments due and owing after March 31, 1998, were to be made in
accordance with the terms of each licensee\'s Note, associated Security
Agreement, and the Commission\'s Orders and regulations.[^34] The
Commission stated that all rules regarding installment payments and
defaults for the broadband PCS C and F blocks would remain in effect,
except as modified by the *Second Report and Order*.[^35] The Commission
ruled that any licensee that failed to remit the payment due on March
31, 1998, and remained delinquent for more than 60 days (in other words,
failed to make the March 31, 1998, payment on or before May 30, 1998),
would be in default on its license. As the Commission noted, the 60-day
non-delinquency period was an exception to existing Commission rules
that provide for an automatic 90-day non-delinquency period for each
installment payment.[^36]

The Commission directed in the *Second Report and Order* that Suspension
Interest would become due and payable over a two-year period, beginning
on March 31, 1998, on which date broadband PCS C and F block licensees
would be required to submit one-eighth of the Suspension Interest.[^37]
After March 31, 1998, one-eighth of the Suspension Interest was to be
paid along with each regular installment payment on each subsequent
payment due date until the Suspension Interest had been fully paid.[^38]
Payment due dates would conform to those indicated in the Notes executed
by the licensees.[^39]

On February 24, 1998, we issued an order revising the March 31, 1998,
payment resumption date.[^40] We stated that the payment resumption date
would be at least 30 days after the date on which C block licensees must
file a written election notice specifying their decision to resume
payments under the terms of the original installment payment plan or to
proceed under one of the alternative options. The election date was
postponed in the same February 24, 1998, order to 60 days after
publication of this reconsideration order in the *Federal
Register*.[^41] As we stated in that order, the Bureau will announce the
specific dates for election and payment resumption as soon as this
reconsideration order is published.[^42]

**B. Discussion**

By the time they must resume making payments, C and F block licensees
will have enjoyed a respite from their payment obligations substantially
longer than one year. Several parties, however, seek a much longer
deferral of the payment deadline.[^43] We do not find their requests
persuasive. No matter what deadline we establish, it is inevitable that
some licensees will seek more time to pay. As stated in the *Second
Report and Order*, a more extensive deferral would be unfair to
unsuccessful bidders that might not have withdrawn from the auction had
they known of deferral opportunities.[^44] The Commission properly
rejected a further deferral because it did \"not wish to adopt temporary
solutions such as those that might only postpone these difficulties and
further prolong uncertainty.\"[^45] We agree with parties that urge the
Commission to reject any attempts to extend further the suspension of
payments.[^46]

Although we will not grant the lengthy postponement requested by some
parties, we will provide modest relief by extending the non-delinquency
period for licensees that fail to meet the payment resumption deadline.
In response to Urban Communicators\' request, we will extend to 90 days
the automatic 60-day non-delinquency period applicable to payments due
on the payment resumption date.[^47] As mentioned above, the
Commission\'s rules allow a 90-day non-delinquency period for all other
installment payments.[^48] Although we stated in the *Second Report and
Order* that a shorter non-delinquency period was justified in light of
the one-year payment suspension,[^49] we now believe that it is
preferable to make the length of that non-delinquency period consistent
with our rule for all other payments. We are providing this 30-day
extension to assist licensees that are experiencing last-minute delays
in raising capital. We believe that by offering this additional time, we
will help these licensees complete their fund-raising efforts.

Consistent with our rule for all other payments, payments made within
this 90-day non-delinquency period will be assessed the 5 percent late
payment fee that we recently adopted.[^50] However, in light of the more
than one-year suspension and this expanded non-delinquency period, we
believe that a subsequent grace period is not warranted. Therefore,
there will be no subsequent automatic grace period for licensees that
fail to make payment within the 90-day non-delinquency period.[^51]
Subsequent payments, due after the initial resumption payment, will be
subject to the rules adopted in the *Part I Third Report and Order*.

Under this plan, the Suspension Period (as defined in the *Second Report
and Order*) will still end on March 31, 1998.[^52] All interest accrued
from the date of license grant through March 31, 1998, (i.e., Suspension
Interest) will continue to be payable over eight equal payments.
Interest accrued from April 1, 1998, through the payment resumption date
will be due on the payment resumption date, in addition to one-eighth of
the Suspension Interest. We believe that this plan will require
licensees continuing under an installment payment plan, either through
resumption or disaggregation, to demonstrate their financial viability
by making a reasonable payment on the payment resumption date. This
payment will evidence the ability of licensees to access the capital
necessary to both service their government debt obligations and provide
service to the public. In addition, we instruct the Bureau to modify the
payment schedule so that all C and F block installment payments will be
due on a quarterly basis, beginning on the payment resumption date.

We reject Urban Communicators\' suggestion that Suspension Interest be
forgiven, as well as its alternative proposals that Suspension Interest
be paid either in a balloon at the end of the ten-year installment
payment period or over six years in conjunction with other interest
payments.[^53] Because the Commission already has provided sufficient
relief by granting the one-year suspension, we will neither forgive nor
defer payment of the Suspension Interest. The Commission has
accommodated licensees sufficiently by allowing payment of the
Suspension Interest over eight equal payments.

We also reject requests from parties seeking a deviation from the
payment schedule and from amounts established by the licensees\'
Notes.[^54] We are providing all C block licensees with an array of
alternative payment options, designed to accommodate licensees\' various
needs. These options were developed and are now being modified in an
effort to balance complex and competing interests, with the recognition
that it is impossible to devise alternatives that satisfy every entity
with an interest in this proceeding. The record before us does not
provide a sufficient basis for creating additional payment choices;
indeed, there is opposition to our doing so.[^55] Moreover, as explained
above and in the *Second Report and Order*, the Commission purposefully
adopted an approach that does not significantly alter the amounts paid
for individual licenses.[^56] Retroactively changing the payment terms
would be unfair to other applicants that might have bid differently
under more relaxed payment terms.

Finally, we will not adopt the proposal made only by DiGiPH that the
Commission somehow compensate those licensees that timely made the March
31, 1997, payment and, as a consequence, did not benefit from a
suspension of that payment obligation.[^57] Compensating licensees for
complying with Commission rules would establish a precedent we consider
inadvisable.[^58] Furthermore, if a licensee opts to return all its
licenses, we will refund any installment payments previously submitted
for those licenses. If a licensee returns some licenses and retains
others, the licensee will be allowed to apply previously submitted
installment payments toward the prepayment of retained licenses or
toward the Suspension Interest for retained licenses which the licensee
does not prepay. For example, if a licensee elects resumption of
payments for an MTA, any installment payments previously submitted for a
BTA license within that MTA will be applied toward the Suspension
Interest owed for that license, as described in the *Second Report and
Order*.[^59] The treatment of installment payments with respect to the
disaggregation and prepayment options is specified below. Therefore,
because installment payments will either be refunded or credited, we
believe additional compensation is unnecessary.

**VI. SURRENDER OF LICENSES FOR REAUCTION (AMNESTY**)

**A. Background**

In the *Second Report and Order*, the Commission adopted an amnesty
option under which a C block licensee would be permitted to surrender
all of its licenses in exchange for relief from its outstanding
debt.[^60] The Commission would waive any applicable default payments,
subject to coordination with the Department of Justice pursuant to
applicable federal claims collections standards.[^61] Licensees electing
this option would not have their down payments returned; however,
neither would they be deemed in default or delinquent in meeting
government debt obligations.[^62] In addition, they would be eligible to
bid for any and all licenses in the reauction[^63] and would not be
restricted in making post-auction acquisitions.[^64]

Subject to one exception, licensees availing themselves of the amnesty
option would be required to surrender all of their licenses to the
Commission.[^65] The sole exception to this \"all-or-nothing\" rule
allowed licensees that met or exceeded the five-year build-out
requirement on September 25, 1997, the date of adoption of the *Second
Report and Order*, to keep licenses for built-out markets.[^66]
Specifically, a licensee utilizing this exception would be allowed to
retain any built-out BTA, on the condition that it also keep any
additional BTAs in the MTA where the built-out BTA is located and that
it pay for all of those retained licenses under the terms of their
original notes.[^67]

The Commission noted in the *Second Report and Order* that, although the
Bureau had suspended installment payments on C block licenses on March
31, 1997, some licensees had made installment payments after the
suspension.[^68] In addition, some licensees had made their regularly
scheduled installment payments prior to the suspension.[^69] The
Commission directed the Bureau to refund any installment payments made
(whether due on or before March 31, 1997) on any license surrendered
under the amnesty option and announced that it would forgive payment of
any due, but unpaid, installment payments for any surrendered
license.[^70] Licensees retaining licenses under the build-out exception
were to pay over eight equal payments (beginning with the payment due on
March 31, 1998) all Suspension Interest applicable to the retained
licenses. All installment payments previously made by the licensee on
any of its licenses would be applied to reduce the Suspension Interest
applicable to the retained licenses, and any amounts remaining would be
refunded.[^71]

**B. Discussion**

In keeping with our decision on reconsideration to allow licensees to
make elections on an MTA-by-MTA basis, we modify the amnesty option to
permit licensees to select that option for as many of their MTAs as they
choose. Because amnesty no longer requires an \"all-or-nothing\" choice,
we also eliminate as moot the build-out exception.[^72] Our decision is
consistent with DiGiPH\'s recommendation that licensees be permitted
\"to return licenses for all BTAs on a per MTA basis, separate and apart
from having met the five-year build out provisions . . . .\"[^73] The
change also satisfies Alpine\'s request that licensees be entitled to
turn in any or all of their licenses under amnesty.[^74]

The Commission originally adopted the \"all-or-nothing\" requirement for
the amnesty option in order to prevent licensees from \"cherry-picking\"
only the most desirable MTAs.[^75] The Commission believed that
facilitating a \"cherry-picking\" scheme would limit the potential for
licenses to be aggregated, which would decrease their value to bidders
in the reauction.[^76] On reconsideration, we find persuasive DiGiPH\'s
contention that requiring licensees to keep or surrender entire MTAs,
rather than BTAs, will sufficiently limit \"cherry-picking.\"[^77] We
also agree with DiGiPH\'s position that applying the amnesty option on
an MTA-by-MTA basis does not carry a risk of \"cherry-picking\"
significantly different from that connected with the original
disaggregation option.[^78]

Several parties object to the fact that a licensee does not receive any
refund of its down payment under the amnesty option.[^79] As the
Commission explained in the *Second Report and Order*, its intent in
retaining the down payment was to ensure that licensees electing the
amnesty option and participating in the reauction of their surrendered
licenses do so without the undue advantage of having all of their
original funds available to repurchase the same spectrum they
surrendered.[^80] The Commission further explained that licensees
selecting amnesty would benefit substantially by avoiding being declared
in default and thereby being freed from assessments of delinquencies and
other collection costs associated with default payments.[^81] The
rationale of the *Second Report and Order* continues to be valid. If we
were to allow C block licensees to return their licenses, receive a
refund of their down payments, and participate in the reauction, we
would undermine the integrity of the auction process by placing amnesty
licensees in virtually the same position they would have occupied had
the initial C block auction never taken place.

Nevertheless, we recognize that because all elections now are being
applied on an MTA-by-MTA basis, licensees are permitted to return
licenses in certain MTAs and retain licenses in other MTAs, as with the
prepayment option under the *Second Report and Order*. Thus, licensees
electing the amnesty option have the following choice. For licenses in
each MTA returned under the amnesty option, the licensee may choose
either to: (1) receive no credit for its down payment(s) but remain
eligible to bid in the reauction on all its licenses in the returned MTA
(pure amnesty), or (2) obtain credit for 70 percent of its down payment
and forgo for a period of two years from the start date of the reauction
eligibility to reacquire the licenses it surrendered pursuant to this
option through either reauction or any other secondary market
transaction (amnesty/prepayment).[^82] For purposes of this two-year
eligibility restriction, a licensee includes qualifying members of the
licensee\'s control group and their affiliates.[^83] The 70 percent
credit must be applied toward prepayment of the entire principal owed
for a retained MTA with 30 MHz licenses and/or toward prepayment of the
entire principal owed for the retained 15 MHz licenses of an MTA that
has been disaggregated. Providing an additional choice within the
amnesty option substantially increases the level of flexibility
available to licensees and enables them to formulate new business plans
that may be more attractive to lenders and investors. It also reflects a
suggestion made by Alpine that licensees not participating in the C
block reauction lose a substantially smaller portion of their down
payment than that lost by licensees that do participate.[^84]

**VII. PREPAYMENT**

**A. Background**

In the *Second Report and Order*, the Commission offered C block
licensees the option to prepay the outstanding principal debt
obligations for any licenses, on an MTA basis, that they elected to
retain, subject to the restriction described below. The remaining
licenses were required to be surrendered to the Commission for
reauction.[^85] In exchange, the Commission would forgive the debt on
the surrendered licenses, and any associated payments owed.[^86] A
licensee electing this option would make its prepayment by using 70
percent of the total of all down payments made on the licenses it
surrendered to the Commission, plus 100 percent of any installment
payments previously paid for all licenses (collectively, \"Available
Down Payments\"),[^87] plus any \"new money\" it was able to raise.[^88]
The remaining portion of the down payment applicable to the surrendered
licenses would not be refunded or credited but simply would be retained
by the Commission.[^89] Licensees would be prohibited from bidding on
their returned spectrum in the reauction or from reacquiring it in the
secondary market for two years from the start of the reauction.
Licensees could, however, bid on spectrum or licenses surrendered by
other licensees, provided such licensees were not affiliates.

The requirement that a licensee had to prepay all its BTA licenses
within those MTAs that it selected for prepayment prevented
\"cherry-picking\" because licensees could not prepay only the most
desirable BTA licenses within a given MTA and then surrender the
rest.[^90] The one exception to this rule was that any licensee lacking
sufficient funds to prepay every BTA license within a chosen MTA would
be permitted to prepay only those BTA licenses within that MTA that it
could afford.[^91] The licenses for the remaining BTAs within that MTA
which the licensee could not afford to prepay would be surrendered to
the Commission.

**B. Discussion**

By providing a license free and clear of debt and payment conditions,
prepayment makes it easier for licensees to raise the additional capital
necessary to build out their systems and deploy new services. Thus,
consumers benefit by receiving service sooner. Prepayment also removes
the Commission from the role of lender, which sometimes may conflict
with its responsibilities as a regulator.[^92] In addition, prepayment
benefits the public because it assures taxpayers of full payment of
licenses. Indeed, we have implicitly expressed our preference for
prepayment by eliminating installment payments as a means of financing
small business participation for the immediate future.[^93]

Under our modified approach, the prepayment option remains essentially
the same as set forth in the *Second Report and Order*. For any 30 MHz
licenses that are returned to the Commission, the licensee may continue
to apply 70 percent of the down payment made on those licenses toward
the prepayment of the entire outstanding principal owed in retained
MTAs. The licensee may pool any down payment amounts that have been
designated for prepayment, plus installment payments previously paid on
any returned licenses.[^94] We will refer to this pool of credit as a
licensee\'s \"Prepayment Credit.\"[^95] This Prepayment Credit may be
used to prepay any retained MTAs with 30 MHz licenses. As will be
discussed in more detail below, it also may be used to prepay the
retained 15 MHz licenses of any MTAs that have been disaggregated.

As under the *Second Report and Order*, any \"new money\" that is used
to make prepayment must be submitted on or before the election date.
Unlike under the *Second Report and Order*,[^96] affiliated licensees
will be allowed to combine their Prepayment Credits.[^97] However, any
affiliated licensees that choose to pool their Prepayment Credits will
be considered one licensee for purposes of making elections. Therefore,
the elections made by those affiliates must be made in concert and must
be made on an MTA-by-MTA basis, as is required of individual
licensees.[^98] Credit pooling does not require the participation of all
of a licensee\'s affiliates. Any affiliate that chooses not to pool its
credit along with its other affiliates will be considered an individual
licensee for purposes of making elections. We believe on reconsideration
that allowing this flexibility is consistent with the fact that, for
purposes of the reauction, we consider a licensee and its affiliates to
be the same entity. It also will prevent licensees from being
disadvantaged if, without such a rule, they would have been precluded
from electing prepayment by virtue of the fact that they transferred BTA
licenses to affiliates.

In response to a request from DiGiPH, we make one important
clarification. DiGiPH argues that, because affordability is a concept
subject to differing interpretations, the Commission should further
define its requirement that a licensee must prepay all of those BTA
licenses within the MTA \"that it can afford.\"[^99] We clarify that,
for purposes of this exception, a licensee can \"afford\" to prepay all
of its BTA licenses within that MTA if it can prepay all BTA licenses
using only its Prepayment Credit. If this amount is not enough to prepay
all its BTA licenses within an MTA, the licensee must prepay as many BTA
licenses in the MTA as this amount will allow and must surrender for
reauction the remaining BTA licenses that it cannot afford to
prepay.[^100] Only under these circumstances may a licensee choose,
within the given MTA, which BTA licenses to prepay and which to
surrender. Once a licensee adds any \"new money\" at all to make
prepayment, the affordability exception does not apply, and the licensee
must add sufficient \"new money\" that, when added to its Prepayment
Credit, is adequate to prepay all its BTA licenses within its chosen
MTAs. A licensee claiming the affordability exception may choose only
one MTA in which it will apply, and it must prepay all its BTA licenses
within all other MTAs selected for prepayment. The Commission will not
refund any unspent portion of the Prepayment Credit.[^101] We believe
retaining any unspent portion of the Prepayment Credit is a reasonable
price for relieving the requirement that all BTA licenses in all MTAs be
prepaid. The affordability exception also will apply to disaggregated
MTAs that the licensee wishes to prepay.

This clarification provides an objective means for licensees to
implement the affordability exception. It eliminates any doubt or
confusion regarding the scope of the term \"afford,\" and it is an easy,
bright-line test to administer. In addition, we believe the restrictions
we impose on the affordability exception minimize a licensee\'s ability
to \"cherry-pick\" among BTAs. Therefore, we reject Omnipoint\'s request
that the Commission eliminate the affordability exception, or in the
alternative, grant all licensees unlimited flexibility under all options
to select which BTA licenses to retain and which to surrender.[^102]

We reject arguments claiming that the prepayment option should be
revised or eliminated because it benefits only certain licensees.[^103]
Each of the payment relief options presented to C block licensees is
designed to strike a fair balance of competing interests, with benefits
and obligations appropriate to varying circumstances. Although these
options are intended to provide distinct choices for licensees, they
adhere to a consistent set of principles. Moreover, the available
choices complement each other to provide a range of alternatives to the
various C block licensees experiencing financial difficulties. Because
it is an important component in this package of options and because we
continue to believe it is sound as a matter of policy, we decline to
eliminate the prepayment option. A menu of options is provided because
no single solution would be appropriate for every situation; therefore,
eliminating any one option would prejudice those licensees for which it
may be best suited.

We note that we received numerous requests to allow licensees to use
their entire down payment under the prepayment option.[^104] We will
maintain our rule that licensees electing the prepayment option will
receive no refund or credit for 30 percent of the down payment made on
30 MHz licenses they surrender to the Commission. We believe that
retention of this portion of the down payment is necessary to preserve
the integrity of the auction process.[^105] Furthermore, to return the
entire down payment would undermine the purpose of the down payment \--
to help ensure performance on a licensee\'s debt obligation.[^106] We
disagree with parties that characterize retention of a portion of the
down payment as punitive,[^107] a penalty,[^108] or a forfeiture.[^109]
We view 30 percent of the down payment as the fair and reasonable price
for receiving the benefits of this option.[^110] We also note that
AirGate correctly characterizes the prepayment option as a method of
providing licensees with more flexibility in using their down payments
than is permitted under current rules.[^111]

We disagree with NextWave, Cellexis, and other parties that the
Commission should account for the net present value of forgoing
installment payments,[^112] or otherwise discount the principal amount
due under the installment payment plan.[^113] As Sprint points out, the
Commission has considered this argument extensively and properly
rejected it.[^114] In the *Second Report and Order*, the Commission
stated that a licensee should be required to pay the face value of its
auction bid.[^115] Accounting for the net present value of forgoing
installment payments would rewrite the auction results because it would
have the effect of changing the amounts bid for licenses.[^116]
Therefore, to do so would be unfair to those bidders that withdrew from
the auction under the assumption that the winning bid amounts
represented the prices that would be paid for the licenses.[^117]
Because we continue to support the policy that auction bids should be
paid at their face value, we will not discount the principal due.[^118]
Although the Commission provides favorable terms for financing the bid
price, the cost of an installment payment plan is the interest that
accrues over time. The benefit to a licensee for early pay-off of its
financial obligations is the savings in the amount of interest that
otherwise would be owed.[^119] We believe this trade-off provides a
further reason for not discounting the principal.

We decline to provide further flexibility under the prepayment option.
Cellexis requests that the Commission grant the five‑year build‑out
exception provided under the amnesty option to licensees choosing the
prepayment option.[^120] A build-out exception is not needed because,
under our modified approach, licensees are permitted to retain any MTAs
they wish, whether built-out or not. Regardless, even under the approach
adopted in the *Second Report and Order*, a build-out exception was
unnecessary because licensees had the discretion to choose which MTAs to
prepay and which to surrender, as opposed to the \"all-or-nothing\"
approach under the original amnesty option.[^121] In addition, we
decline MFRI\'s request to allow a licensee that holds both C and F
block licenses to use its C block down payment to purchase for cash its
F block licenses.[^122] We do not believe such flexibility is warranted
because the reduction of debt associated with prepayment will help those
licensees address their capital needs in servicing their F block debt.
Finally, Urban Communicators argues that the requirement that prepaying
licensees must purchase all BTA licenses held within an MTA is unfair to
licensees that have licenses in only one MTA.[^123] We disagree. This
restriction is essential to prevent \"cherry-picking,\" and a licensee
that cannot avail itself of this option can either choose another option
or limit its purchases under the affordability exception, if applicable.

**VIII. DISAGGREGATION OF SPECTRUM FOR REAUCTION**

**A. Background**

In the *Second Report and Order*, the Commission offered C block
licensees the option to disaggregate a portion of their spectrum and
return it to the Commission for reauction.[^124] Licensees electing the
disaggregation option would return one-half (i.e., 15 MHz of 30 MHz) of
their spectrum from each of their BTA licenses within the MTAs in which
they chose to disaggregate spectrum.[^125] In other words, licensees
would not be required to disaggregate spectrum for all of the licenses
they hold, but they would have to disaggregate spectrum for all of the
licenses they hold in a given MTA if they disaggregated spectrum for one
license in that MTA. The returned spectrum would have to be at 1895 -
1902.5 MHz paired with 1975 - 1982.5 MHz, which is spectrum contiguous
to the F block.[^126]

In exchange, the Commission would reduce by 50 percent the amount of
debt that was owed on a 30 MHz license before it was
disaggregated.[^127] Fifty percent of the down payment made on the 30
MHz license would be considered the down payment for the retained 15 MHz
of spectrum, but the Commission would not provide a refund or credit for
the remaining 50 percent of the down payment.[^128] Licensees were
required to repay over eight equal payments (beginning with the payment
due on March 31, 1998) all Suspension Interest, adjusted to reflect the
reduction in debt obligation.[^129] Any installment payments that were
paid prior to the suspension would be credited in full against those
amounts.[^130] Licensees were prohibited from bidding on their returned
spectrum in the reauction or from reacquiring it in the secondary market
for two years from the start of the reauction.[^131] Licensees could,
however, bid on spectrum or licenses surrendered by other licensees,
provided such licensees were not affiliates.[^132]

**B. Discussion**

As provided under the *Second Report and Order*, when a licensee
disaggregates an MTA, it will receive full credit for the portion of the
down payment applicable to the spectrum retained from a license (i.e.,
50 percent of the down payment made on the original 30 MHz license).
However, on reconsideration, we modify our decision that licensees
electing the disaggregation option receive no refund or credit for the
portion of the down payment applicable to the returned spectrum. For
each disaggregated license for which the licensee elects to resume
installment payments, rather than prepay, we will provide a credit of 40
percent of the down payment applicable to the 15 MHz of spectrum that is
returned to the Commission. The 40 percent credit may only be used to
reduce the amount owed on the 15 MHz of spectrum retained from the same
BTA license that generated the credit. The credit, at the licensee\'s
option, may be applied either to Suspension Interest and/or to reduce
the principal outstanding.[^133] Any installment payments previously
submitted for a disaggregated license for which the licensee elects to
resume installment payments will be credited as described in the *Second
Report and Order* (i.e., toward Suspension Interest).[^134]

We derived the 40 percent credit because when it is combined with the
100 percent credit associated with the retained spectrum, the licensee
will receive a credit of 70 percent of the total down payment for the
original 30 MHz license. We have decided to allow this additional credit
because we are persuaded by the argument of several parties that the
credit permitted under the disaggregation option should be consistent
with the 70 percent credit permitted under the prepayment option.[^135]
We believe the disparity that existed under the *Second Report and
Order* was unfair to licensees that were precluded from electing
prepayment. Furthermore, allowing this additional credit will advance
the purposes of the disaggregation option. Disaggregation benefits both
licensees and consumers because it provides a means for licensees to
remain in a market area at a significantly reduced cost. By having their
outstanding debt decreased by 50 percent, licensees improve their
ability to finance their retained spectrum and build out their networks.
In addition, disaggregation is pro-competitive because it provides a
means for other competitors to enter a market area. It also gives
unsuccessful bidders an opportunity to rebid on spectrum in market areas
in which they were initially outbid. We believe the additional 40
percent credit will promote these benefits of disaggregation and will
help licensees that have expressed an interest in disaggregation to take
advantage of this option and continue their plans to provide service in
their license areas.

We believe a 40 percent credit is warranted when a licensee resumes
installment payments on a disaggregated MTA because the licensee remains
in the MTA and continues building out its network in order to serve
those consumers. We will not provide such a 40 percent credit to
licensees that resume installment payments on a license in a different
MTA. In contrast to a licensee that uses the 40 percent credit to resume
installments on the retained portion of the disaggregated license, a
licensee that seeks to apply a 40 percent credit from down payments made
on licenses returned under an amnesty election would have, under those
circumstances, abandoned service to the entire licensed area affected by
that election. We believe that licensees that surrender licenses should
not receive a credit for abandoning those markets unless they use the
credit to prepay retained licenses.

We also revise the approach adopted in the *Second Report and Order* to
provide for a combination of disaggregation and prepayment. As we have
discussed, there are many advantages to both prepayment and
disaggregation, and we believe a combination of the two should be
encouraged because it offers the benefits of both options. For example,
the licensee continues to build out its network in the market area, the
Commission is relieved from its position of lender, and competing
entities have the opportunity to bid on the returned spectrum.
Therefore, if a licensee disaggregates an MTA and prepays the
outstanding principal owed on the retained portion of the MTA, we will
provide the licensee with a higher percentage of credit as an incentive
to choose both disaggregation and prepayment. Instead of a 40 percent
credit, a licensee that elects both disaggregation and prepayment will
receive credit for 70 percent of the down payment applicable to the
returned spectrum.[^136] This 70 percent credit will be added to the
licensee\'s Prepayment Credit which, as explained above, may be used to
prepay any retained MTAs with 30 MHz licenses and/or the retained
portions of any MTAs that have been disaggregated. Allowing this 70
percent credit is consistent with our policy of providing a 70 percent
credit for 30 MHz licenses that are returned to the Commission. In both
cases, the credit is 70 percent of the down payment associated with the
amount of spectrum that is returned. In addition, any installment
payments previously submitted for the licenses in an MTA that is both
disaggregated and prepaid will be added to the licensee\'s Prepayment
Credit.

If a licensee elects both disaggregation and prepayment for an MTA, the
licensee must prepay the principal owed on the 15 MHz of spectrum
retained from each BTA license in the MTA. However, if a licensee\'s
Prepayment Credit is insufficient to make full prepayment on the entire
MTA, then the affordability exception will apply. Thus, the licensee
will be required to prepay only what it can afford and it must return
the rest of the spectrum to the Commission for reauction. As with
prepayment of full 30 MHz licenses, the exception will not apply if any
\"new money\" is added to make prepayment, and the exception may be
applied to only one MTA.

We received numerous requests to allow licensees to receive credit for
their entire down payment under the disaggregation option.[^137] We
consider it inadvisable to provide full credit because we believe that
to do so would undermine the integrity of the auction process.[^138] As
the Commission concluded in the *Second Report and Order*, allowing
licensees to use their entire down payment would be unfair to those C
block licensees electing to continue under the existing installment
payment plan and to bidders that were unsuccessful in the auction.[^139]
We note that we already provide a substantial credit, and we believe
that providing any further credit would not be sound public policy. As
Fidelity Capital observes, if a licensee \"believes the Commission is
not providing an attractive disaggregation policy, then it is free to
disaggregate its spectrum privately to another qualifying
entity.\"[^140]

Because numerous benefits are conferred under the disaggregation option,
we disagree with NextWave, ClearComm, and other parties that not
providing a refund or credit for all of the down payment constitutes a
penalty or forfeiture.[^141] Under disaggregation, the Commission
forgives up to half of a licensee\'s outstanding debt, an action that
will facilitate investment and growth by making more funds available to
licensees for build-out. In addition, the Commission provides low-cost,
long-term financing for the retained spectrum. Furthermore, the
Commission renders a valuable service by providing an efficient and
cost-effective mechanism for transferring spectrum that licensees
otherwise might have been forced to resell in the secondary market at
great risk. In exchange, the Commission receives the disaggregated
spectrum and retains a portion of the down payment applicable to that
spectrum. Therefore, retention of part of the down payment is not a
penalty; rather, it is the fair and reasonable price for receiving the
benefits of disaggregation.

We are not persuaded that we should add even greater flexibility to the
disaggregation option. We decline to adopt MFRI\'s suggestion that we
allow C block licensees to retain the 15 MHz of spectrum adjacent to the
F block if they also hold the F block license for the same BTA.[^142]
Allowing certain C block licensees to disaggregate a different portion
of spectrum would create a patchwork pattern of spectrum blocks in the
reauction and would limit the opportunity for F block licensees to
aggregate larger spectrum blocks by bidding on contiguous spectrum in
the reauction. To promote consistency and simplicity in the reauction,
we also reject McBride\'s request that we allow licensees the choice to
disaggregate 10, 15, or 20 MHz of spectrum.[^143] Allowing licensees to
disaggregate different pieces of spectrum would create inefficiency in
the market and would limit the potential for aggregation, thereby
decreasing the value of spectrum in the reauction and delaying service
to the public. Finally, we disagree with Alpine and Urban Communicators
that disaggregation should be permitted on a BTA-by-BTA basis, rather
than on an MTA-by-MTA basis.[^144] As AirGate notes, disaggregation on
an MTA-by-MTA basis will promote participation in the reauction because
licensees are prohibited from selectively retaining 30 MHz of spectrum
in only the most desirable BTAs.[^145]

NextWave and Cellexis argue that the build-out exception permitted under
the amnesty option should be extended to licensees selecting the
disaggregation option.[^146] Under our modified approach, a build-out
exception is unnecessary because licensees have the flexibility to
determine which MTAs to retain and which to surrender. Nonetheless, as
stated in the *Second Report and Order*, a build-out exception was never
needed under the disaggregation option because, unlike the original
amnesty option, the disaggregation option was never an
\"all-or-nothing\" proposition.[^147] Under the original amnesty option,
a licensee was required to surrender all licenses except for those in
MTAs in which it satisfied the build-out requirement. By comparison,
disaggregation was permitted on an MTA-by-MTA basis, and so licensees
were never compelled to disaggregate spectrum in all their MTAs.

Finally, we affirm the statement in the *Second Report and Order* that
upon acceptance of the election notice, the disaggregated spectrum will
be deemed returned to the Commission.[^148] Further, after
disaggregation, notwithstanding the fact that a disaggregating licensee
will continue to hold in its possession a 30 MHz license, that license
will no longer authorize use of the 15 MHz of spectrum that is
surrendered to the Commission but will continue to be valid with respect
to the 15 MHz of spectrum that is retained.

**IX. ELECTION PROCEDURES**

**A. Background**

In the *Second Report and Order*, the Commission established January 15,
1998, as the deadline for C block licensees to elect to continue under
the existing installment payment plan or to elect one of the three
alternative options.[^149] The Commission also required, *inter alia*, C
block licensees whose elections would necessitate ongoing payments to
execute any necessary financing documents pursuant to appropriate
requirements and time frames established by the Bureau. The Commission
specified procedures to be followed by licensees electing to continue
under their existing notes or electing disaggregation, amnesty, or
prepayment.

On January 7, 1998, we changed the election date to February 26, 1998,
in order to allow licensees to submit their elections after final
disposition of arguments raised on reconsideration.[^150] On February
24, 1998, we issued an order changing the election date to 60 days after
publication of this *Order on Reconsideration* in the *Federal
Register*.[^151]

**B. Discussion**

Moving the election date was an appropriate action given the large
number of petitions for reconsideration filed in this proceeding. The
revised deadline has provided sufficient time for us to respond to
arguments raised on reconsideration so that licensees can be assured of
regulatory certainty before making their elections. The postponement
satisfies the requests of several parties that the date be
delayed.[^152] We deny, however, other requests for a still longer
postponement.[^153] Licensees already have had several months in which
to consider the options under the *Second Report and Order*, and we
believe that 60 days after publication in the *Federal Register* will
provide sufficient time for any reevaluation that may be necessary in
light of the modifications we make in this Order.[^154]

We disagree with Omnipoint that NextWave should be required to make its
election in advance of other C block licensees.[^155] Omnipoint claims
that NextWave is so dominant in the market that its election decision
will have a dramatic impact on the relative value of choices made by the
other licensees.[^156] Omnipoint argues that, for example, other
licensees might be reluctant to surrender spectrum if they knew NextWave
was keeping its spectrum because reauction opportunities would be
severely limited without the return of any NextWave licenses.[^157] We
agree with NextWave that all C block licensees should be treated
equally, and we will not discriminate against one licensee in order to
grant others a competitive advantage.[^158]

In the *Second Report and Order*, the Commission inadvertently omitted
reference to the requirement that F block licensees execute fully and
deliver timely all necessary financing documents. Consequently, we now
clarify that F block licensees, as well as C block licensees, must
execute and deliver all necessary financing documents pursuant to
appropriate requirements and time frames as will be established by the
Bureau in a forthcoming public notice on procedures. We modify the
*Second Report and Order* to require both C and F block licensees that
fail to execute fully and deliver timely to the Commission any required
financing documents to pay on the payment resumption date all unpaid
simple interest accruing from the date of license grant through the
payment resumption date.[^159] The Bureau\'s forthcoming public notice
also will set forth updated election procedures for C block licensees,
reflecting our modifications to the *Second Report and Order.*

**X. REAUCTION**

**A. Timing**

On January 7, 1998, we announced that the C block reauction would begin
on September 29, 1998.[^160] In light of the postponement of both the
election date and the payment resumption date, as discussed above, it
will be necessary to establish a new reauction date. We delegate to the
Bureau the authority to establish the reauction date. We instruct the
Bureau to issue a public notice announcing the new date at least three
months in advance of the start of the reauction.

CPCSI, a winning bidder for nine licenses in the C block auction whose
license grants were subject to resolution of an Application for Review
pending at the time of the release of the *Second Report and Order*,
asks the Commission not to begin the reauction until final action on its
Application for Review or, in the event no such action occurs, until the
Pocket and GWI bankruptcy proceedings conclude.[^161] Because the
Commission granted CPCSI\'s Application for Review on December 24,
1997,[^162] CPCSI\'s request is moot and there is no need to address the
merits of CPCSI\'s request.

**B. Eligibility**

1\. [Background]{.underline}

The *Second Report and Order* specified that all entrepreneurs, all
entities that had been eligible for and had participated in the original
C block auction, and all current C block licensees would be eligible to
bid in the reauction.[^163] The Commission, however, created an
exception for incumbent licensees: for a period of two years from the
start date of the reauction, C block licensees (defined as qualifying
members of the licensee\'s control group, and their affiliates) that
opted for the disaggregation or prepayment options would be prohibited
from reacquiring, either through the reauction or through any secondary
market transaction, any spectrum or licenses that they surrendered to
the Commission under those options.[^164] Such licensees, however, would
be permitted to bid on spectrum or licenses surrendered by other
licensees, provided that such licensees were not affiliates.[^165]
Licensees electing the amnesty option would be eligible to bid for any
and all licenses at the reauction, with no restrictions on post-auction
acquisitions.[^166]

2\. [Discussion]{.underline}

The only reauction eligibility issues set forth in the *Second Report
and Order* ripe for reconsideration in this phase of the proceeding are
those related directly to whether and how a licensee\'s election of a
particular payment option should affect its eligibility to participate
in the reauction of, or reacquire an ownership interest in, surrendered
spectrum. We defer to other phases of WT Docket No. 97-82 additional
eligibility issues, including the qualifications of entities that have
defaulted on payments to participate in the reauction[^167] and the use
of a \"controlling interest\" approach rather than \"control group\"
structures to determine financial size in the C block, as well as in all
auctionable services.[^168] We note that, in its comments filed in
response to the *Further Notice*, Nextel Communications, Inc. challenges
the Commission\'s ruling in the *Second Report and Order* that
participation in the C block reauction is limited to qualified
entrepreneurs.[^169] In their petitions for reconsideration, Cellexis
and RFW respond to Nextel\'s arguments and urge the Commission not to
reconsider its decision.[^170] We address Nextel\'s challenge here,
notwithstanding the fact that Nextel\'s request was not filed as a
petition for reconsideration of the *Second Report and Order*. We
conclude that Nextel has not provided a convincing rationale for
deviating from the public interest goals articulated by the Commission
in the *Second Report and Order*.[^171] Consequently, we affirm the
Commission\'s earlier ruling to limit eligibility for participation in
the reauction to applicants meeting the current definition of
\"entrepreneur.\"[^172]

On reconsideration, we make a change to the eligibility requirements,
which already has been discussed above, and also a clarification. As we
stated previously, a licensee that elects the amnesty option for an MTA
and opts to receive partial credit for down payments on its returned
licenses in that MTA will not be eligible to reacquire those licenses
through either reauction or any secondary market transaction for a
period of two years from the start date of the reauction. This
restriction also applies to the licensee\'s affiliates. Likewise, if a
licensee disaggregates an MTA, neither it nor its affiliates may bid on
the returned spectrum in the reauction or reacquire it through a
secondary market transaction for two years after the start date of the
reauction. Licensees that return licenses under the amnesty option or
spectrum under the disaggregation option are not precluded from bidding
in the reauction on licenses or spectrum returned by other
non-affiliated licensees (or from later reacquiring those licenses or
spectrum in post-auction transactions). We clarify that the term
\"affiliate\" is defined by our competitive bidding rules in the *Part 1
Third Report and Order*.[^173]

Several parties believe that we should revise our bidding eligibility
requirements.[^174] Sprint, for example, agrees with the Commission\'s
decision to exclude C block licensees that choose disaggregation or
prepayment from bidding on their surrendered spectrum at reauction, but
contends that the Commission undermines the integrity of the auction
process by not similarly limiting the ability of licensees that select
the amnesty option.[^175] Sprint believes that the lack of such a
restriction will unjustly enrich licensees that select the amnesty
option and then bid for the same spectrum at a likely discount.[^176]
NextWave, on the other hand, claims it is unreasonably discriminatory to
preclude entities choosing disaggregation or prepayment from reacquiring
their surrendered spectrum for two years while allowing entities
choosing the amnesty option to reacquire their spectrum immediately
either by reauction or through secondary markets.[^177]

We believe our modified approach addresses both these arguments. In
response to NextWave, we note that licensees electing disaggregation
and/or prepayment for one MTA now can choose to return licenses in other
MTAs and bid on those licenses in the reauction. However, in response to
Sprint, we point out that licensees electing amnesty for an MTA must
forgo their entire down payment if they wish to bid on their returned
licenses for that MTA. We believe that this cost sufficiently mitigates
any concern of unjust enrichment.

**XI. MISCELLANEOUS MATTERS**

**A. Cross Defaults**

The *Second Report and Order* provided that if a licensee defaulted on a
C block license, the Commission would not pursue cross default remedies
with regard to the licensee\'s other licenses in the C or F
blocks.[^178] In other words, if a licensee defaulted on a given C block
license but was meeting its payment obligations on its other C or F
block licenses, the Commission would not declare the licensee to be in
default with respect to those other C or F block licenses.[^179] We
disagree with CIRI that, by not imposing cross default remedies, we
encourage auction participants to bid speculatively and then
\"cherry-pick\" among the licenses they ultimately decide to keep by
simply defaulting on the ones they no longer desire.[^180] As explained
earlier, we have implemented numerous procedures to safeguard against
\"cherry-picking.\" Moreover, we believe that by not imposing cross
default remedies, we encourage regional financing. Even if a licensee\'s
holdings in one region have proven unattractive to the financial market,
the same licensee\'s holdings in other markets may be financially sound.
Therefore, we will not depart from the decision in the *Second Report
and Order*. We note that licensees that ultimately default will continue
to be subject to debt collection procedures.[^181]

**B. No Extension of C Block Relief to Other Licensees**

We reject various requests to grant F block licensees the same relief
provided to C block licensees.[^182] Cellular Holding contends that C
and F block licensees should be treated similarly because: (1) both are
licensed to provide broadband PCS; (2) they were granted their licenses
within 7.5 months of one another; (3) Section 24.709 of the
Commission\'s rules governs bidder eligibility for both blocks;
(4) their market boundaries are identical; (5) they will have nearly the
same amount of spectrum if C block licensees choose disaggregation; and
(6) they both compete with larger, more experienced competitors that
received a head-start.[^183] Cellular Holding, however, ignores the fact
that C and F block licensees are not similarly situated with respect to
the most relevant factor \-- the need for financial relief.

After careful review, the Commission determined in the *Second Report
and Order* that \"the nature and extent of any financing difficulties
faced by the C block licensees appear to be different from any such
problems facing entrepreneurs in the F block.\"[^184] C block prices
were higher, on average, than F block prices.[^185] We disagree with
several parties that argue that the Commission\'s explanation in the
*Second Report and Order* fails to justify disparate treatment.[^186]
The difficulties in financing the unexpectedly high prices bid in the C
block auctions is a sufficiently distinguishing basis for limiting
relief to C block licensees. As further justification, we agree with
AmeriCall that the C block situation was the result of a unique set of
mostly unpredictable events, including litigation and resulting
licensing delays and the lack of a simultaneous non-entrepreneur auction
that could have been used to ease price pressures.[^187]

The need for C block relief was due to exceptional and urgent
circumstances, and because it is essential to maintain the integrity of
the auction process, only the most exigent situation would cause us to
offer such relief. Even in addressing the C block financing situation,
the Commission provided options that offered only limited relief so as
to be fair to bidders that withdrew from the auction. We therefore are
not persuaded by Central Oregon\'s claim that F block licensees should
be granted relief because A, B, and C block licensees have a competitive
advantage given their earlier licensing date and their larger amounts of
spectrum.[^188] We also reject Omnipoint\'s argument that C block
options should be available to entrepreneurs with D, E, and F block
licenses because C block relief will change the relative values of those
licenses.[^189] These arguments do not present sufficiently compelling
reasons to apply the \"extraordinary procedures\" we adopted for C block
licensees to D, E, and F block licensees.[^190] In addition, CONXUS, the
only party to address this issue, argues that narrowband PCS entities
should receive relief comparable to that afforded C block licensees
because they compete in the same consumer and financial markets and face
similar circumstances.[^191] The record in this reconsideration
proceeding is insufficient to adopt global changes affecting narrowband
PCS entities, but we note that payment matters for these entities are
currently being examined in another proceeding before the
Commission.[^192]

**C. Issues Addressed in Other Proceedings or Requiring Action by
Congress**

A number of parties make requests involving issues either that will be,
or have been, addressed in other proceedings or that require action by
Congress. For example, several petitioners urge the Commission to reduce
the interest rate for C block installment payments.[^193] The Bureau
will address this issue in a forthcoming order. With respect to Northern
Michigan\'s request that we allow commercial lenders to acquire a
security interest in licenses, we note that we previously resolved the
issue in another proceeding.[^194]

TAP encourages the Commission to seek Congressional authority to award
tax certificates to entities that provide investment capital to C block
licensees.[^195] Section 309(j)(4)(D) of the Communications Act mandates
that, in seeking to ensure that designated entities are \"given the
opportunity to participate in the provision of spectrum-based
services,\" the Commission shall \"consider the use of tax
certificates.\"[^196] By allowing a tax deferral of the gain realized on
an investment, tax certificates provide a significant means of enhancing
the value of an investment in an enterprise, and we believe that a tax
certificate program for spectrum-based services would be as beneficial
to the wireless industry as the Commission\'s tax certificate programs
were for the broadcast and cable industries.[^197] However, in view of
Congress\' repeal in 1995 of Section 1071 of the IRS Code,[^198] which
granted the Commission authority to use tax certificates to promote
Commission policies, we believe that legislative action would be
necessary before we could provide such tax relief. Accordingly, we urge
Congress to review the positive impact of the Commission\'s previous tax
certificate programs and to grant us the authority to establish a
similar program for wireless enterprises, which we believe would promote
competition in the telecommunications industry by encouraging investment
in new services.

**XII. PROCEDURAL MATTERS AND ORDERING CLAUSES**

**A. Supplemental Final Regulatory Flexibility Analysis**

The Supplemental Final Regulatory Flexibility Analysis, pursuant to the
Regulatory Flexibility Act, 5 U.S.C. § 604, is attached at Appendix C.

**B. Paperwork Reduction Act Analysis**

This Order contains a modified information collection that was submitted
to the Office of Management and Budget requesting emergency clearance
under the Paperwork Reduction Act of 1995.

**C. Ordering Clauses**

Accordingly, IT IS ORDERED that, pursuant to the authority granted in
Sections 4(i), 303(r), and 309(j) of the Communications Act of 1934, as
amended, 47 U.S.C. §§ 154(i), 303(r), and 309(j), the petitions for
reconsideration filed in response to the *Second Report and Order* are
GRANTED IN PART and DENIED IN PART, as provided herein.

IT IS FURTHER ORDERED that, pursuant to the authority granted in
Sections 4(i), 303(r), and 309(j) of the Communications Act of 1934, as
amended, 47 U.S.C. §§ 154(i), 303(r), and 309(j), the modifications to
the Commission\'s rules, as described herein and in Appendix B, ARE
HEREBY ADOPTED. These modifications shall become effective 60 days after
publication of this *Order on Reconsideration of the Second Report and
Order* in the *Federal Register*.

IT IS FURTHER ORDERED that, pursuant to 47 U.S.C. § 155(c) and 47 C.F.R.
§ 0.331, the Chief of the Wireless Telecommunications Bureau IS GRANTED
DELEGATED AUTHORITY to prescribe and set forth procedures for the
implementation of the provisions adopted herein.

IT IS FURTHER ORDERED that the Commission\'s Office of Public Affairs,
Reference Operations Division, SHALL SEND a copy of this *Order on
Reconsideration of the Second Report and Order*, including the
Supplemental Final Regulatory Flexibility Analysis, to the Chief Counsel
for Advocacy of the Small Business Administration.

FEDERAL COMMUNICATIONS COMMISSION

Magalie Roman Salas

Secretary

**APPENDIX A**

**[Petitions for Reconsideration]{.underline}**

Airtel Communications, Inc. (\"Airtel\")

Alpine PCS, Inc. (\"Alpine\")

AmeriCall International, L.L.C. (\"AmeriCall\")

Carolina PCS I Limited Partnership (\"CPCSI\")

Cellexis International, Inc. (\"Cellexis\")

Cellnet (\"Cellnet\")

Cellular Holding, Inc. (\"Cellular Holding\")

Central Oregon Cellular, Inc. (\"Central Oregon\")

Christensen Engineering & Surveying (\"Christensen\")

ClearComm, L.P. (\"ClearComm\")

CONXUS Communications, Inc. (\"CONXUS\")

Cook Inlet Region, Inc. (\"CIRI\")

CVI Wireless

DiGiPH PCS, Inc. (\"DiGiPH\")

Federal Network

Fox Communications

General Wireless, Inc. (\"GWI\")

Horizon Personal Communications, Inc. (\"Horizon\")

Hyundai Electronics America (\"Hyundai\")

Koll Telecommunication Services (\"Koll\")

Leifer, Marter Architects (\"Leifer, Marter\")

McBride, Vincent (\"McBride\")

Meretel Communications, L.P. (\"Meretel\")

MFRI Incorporated (\"MFRI\")

NextWave Telecom Inc. (\"NextWave\")

New Wave Inc. (\"New Wave\")

Northern Michigan PCS Consortium L.L.C. and Wireless 2000, Inc.
(\"Northern Michigan\")

Omnipoint Corporation (\"Omnipoint\")

One Stop Wireless of America, Inc. (\"One Stop Wireless\")

OnQue Communications, Inc. (\"OnQue\")

Prime Matrix Wireless Communications (\"Prime Matrix\")

RFW PCS Inc. (\"RFW\")

Sprint Corporation (\"Sprint\")

United Calling Network, Inc. (\"UCNI\")

Urban Communicators PCS Limited Partnership (\"Urban Communicators\")

URS Greiner, Inc. (\"URS Greiner\")

Wireless Nation, Inc. (\"Wireless Nation\")

**[Oppositions]{.underline}**

1\. AirGate Wireless, L.L.C. (\"AirGate\")

2.ALLTEL Communications, Inc. (\"ALLTEL\")

3\. AmeriCall International, L.L.C. (\"AmeriCall\")

4\. Antigone Communications Limited Partnership and PCS Devco, Inc.
(\"Antigone/Devco\")

5\. AT&T Wireless Services, Inc. (\"AT&T\")

6\. ClearComm, L.P. (\"ClearComm\")

7\. CONXUS Communications, Inc. (\"CONXUS\")

8\. Duluth PCS, Inc., St. Joseph PCS, Inc., and West Virginia PCS, Inc.
(\"Duluth PCS, et al.\")

9\. Fidelity Capital

10\. MFRI Incorporated (\"MFRI\")

11\. NextWave Telecom Inc. (\"NextWave\")

12\. Northcoast Communications, L.L.C. (\"Northcoast\")

13\. Omnipoint Corporation (\"Omnipoint\")

14\. Polycell Communications, Inc. (\"Polycell\")

15\. PrimeCo Personal Communications, L.P. (\"PrimeCo\")

16\. Sprint Corporation (\"Sprint\")

17\. Third Kentucky PCS \"Third Kentucky\")

**[Replies to Oppositions]{.underline}**

1\. Alpine PCS, Inc. (\"Alpine\")

2\. Cellexis International, Inc. (\"Cellexis\")

3\. ClearComm, L.P. (\"ClearComm\")

4\. CONXUS Communications, Inc. (\"CONXUS\")

5\. CX Systems Int\'l, Inc. (\"CX Systems\")

6\. Eldorado Communications, L.L.C. (\"Eldorado\")

7\. Federal Network

8\. Frontier Corporation (\"Frontier\")

9\. Hyundai Electronics America (\"Hyundai\")

10\. MFRI Incorporated (\"MFRI\")

11\. NextWave Telecom Inc. (\"NextWave\")

12\. Omnipoint Corporation (\"Omnipoint\")

13\. RFW PCS Inc. (\"RFW\")

14\. Telecommunications Advocacy Project (\"TAP\")

15\. Third Kentucky Cellular Corp. (\"Third Kentucky\")

16\. Wireless Ventures, Inc. (\"Wireless Ventures\")

**[Ex Parte Filings]{.underline}**

1\. AirGate Wireless, L.L.C. (\"AirGate\"), February 9, 1998

2\. AmeriCall International, L.L.C. (\"AmeriCall\"), March 12, 1998

3\. Christensen Engineering & Surveying (\"Christensen\"), December 19,
1997

4\. ClearComm, L.P. (\"ClearComm\"), February 23, 1998

5\. ClearComm, L.P. (\"ClearComm\"), March 13, 1998

6\. Congressman Gary L. Ackerman, January 15, 1998

7\. Congressman Xavier Becerra, February 3, 1998

8\. Congresswoman Sue W. Kelly, December 31, 1997

9\. Congressman Albert R. Wynn, February 9, 1998

10\. CX Systems Int\'l, Inc. (\"CX Systems\"), December 10, 1997

11\. Cyber Sites, L.L.C. (\"Cyber Sites\"), December 1, 1997

12\. Datacomm Research Company, February 20, 1998

13\. Dorne & Margolin, December 1, 1997

14\. Florida Power Corporation (\"Florida Power\"), December 19, 1997

15\. Gilder Technology Group, Inc., February 16, 1998

16\. Joint filing by 43 companies, February 20, 1998

17\. Kabbara Engineering (\"Kabbara\"), December 26, 1997

18\. LaBarge Clayco Wireless, L.L.C. (\"LaBarge Clayco\"), December 24,
1997

19\. Leifer, Marter Architects (\"Leifer, Marter\"), December 17, 1997

20\. Members of the Congressional Hispanic Caucus, February 5, 1998

21\. MJA Communications Corp. (\"MJA\"), December 22, 1997

22\. New Wave Inc. (\"New Wave\"), January 20, 1998

23\. New Wave Inc. (\"New Wave\"), February 17, 1998

24\. NextWave Telecom Inc. (\"NextWave\"), January 21, 1998

25\. OPM USA, Inc. (\"OPM\"), December 23, 1997

26\. Praxis Telecom, January 26, 1998

27\. Prudential Securities Inc., February 26, 1998

28\. R&S PCS, Inc., February 11, 1998

29\. RFW PCS Inc. (\"RFW\"), December 23, 1997

30\. Senator Barbara Boxer, February 13, 1998

31\. Senators Richard H. Bryan and Harry Reid, January 29, 1998

32\. Senator Thomas Daschle, February 11, 1998

33\. Senator J. Robert Kerrey, February 12, 1998

34\. Specialty Teleconstructors Inc. (\"Specialty Teleconstructors\"),
December 19, 1997

35\. Structure Consulting Group (\"Structure Consulting\"), December 22,
1997

36\. Wireless Nation, Inc. (\"Wireless Nation\"), January 23, 1998

37\. Xway, Inc. (\"Xway\"), December 16, 1997

38\. 2001 Personal Communication, Inc., January 8, 1998

**APPENDIX B**

**[Revised Rules]{.underline}**

Part 1 of Chapter I of Title 47 of the Code of Federal Regulations is
amended as follows:

**PART 1 -- PRACTICE AND PROCEDURE**

1\. The authority citation for Part 1 continues to read as follows:

Authority: 15 U.S.C. 79 *et seq*.; 47 U.S.C. 151, 154(i), 154(j), 155,
225, and 303(r), unless otherwise noted.

2\. Section 1.2110 is amended by revising paragraph (f)(4)(ii), (iii),
(iv) to read as follows:

**§ 1.2110 Designated Entities**

\* \* \* \* \*

\(f\) \* \* \*

\(4\) \* \* \*

\(i\) \* \* \*

\(ii\) If any licensee fails to make the required payment at the close
of the 90-day period set forth in subsection (i) above, the licensee
will automatically be provided with a subsequent 90-day grace period,
except that no subsequent automatic grace period will be provided for
payments from C or F block licensees that are not made within 90 days of
the payment resumption date for those licensees, as explained in
Amendment of the Commission\'s Rules Regarding Installment Payment
Financing for Personal Communications Services (PCS) Licensees, *Order
on Reconsideration* *of the Second Report and Order*, WT Docket No.
97-82, FCC 98-46 (rel. Mar. 24, 1998). \* \* \*

\(iii\) If an eligible entity making installment payments is more than
one hundred and eighty (180) days delinquent in any payment, it shall be
in default, except that C and F block licensees shall be in default if
their payment due on the payment resumption date, referenced in
subsection (ii) above, is more than ninety (90) days delinquent.

\(iv\) Any eligible entity that submits an installment payment after the
due date but fails to pay any late fee, interest or principal at the
close of the 90-day non-delinquency period and subsequent automatic
grace period, if such a grace period is available, will be declared in
default, its license will automatically cancel, and will be subject to
debt collection procedures.

\* \* \* \* \*

Part 24 of Chapter I of Title 47 of the Code of Federal Regulations is
amended as follows:

**PART 24 -- PERSONAL COMMUNICATIONS SERVICES**

3\. The authority citation for Part 24 continues to read as follows:

Authority: 47 U.S.C. 154, 301, 302, 303, 309 and 332, unless otherwise
noted.

4\. Section 24.709 is amended by revising paragraph (b)(9)(i), (ii)
(A) - (B) to read as follows:

**§ 24.709 Eligibility for licenses for frequency Blocks C and F.**

\(a\) \* \* \*

\(b\) \* \* \*

\(9\) *Special rule for licensees disaggregating or returning certain
spectrum in frequency block C.*

\(i\) In addition to entities qualifying under this section, any entity
that was eligible for and participated in the auctions for frequency
block C, which began on December 18, 1995, and July 3, 1996, will be
eligible to bid in a reauction of block C spectrum surrendered pursuant
to Amendment of the Commission\'s Rules Regarding Installment Payment
Financing for Personal Communications Services (PCS) Licensees, *Second
Report and Order* *and Further Notice of Proposed Rule Making*, WT
Docket No. 97-82, 12 FCC Rcd 16,436 (1997), as modified by the *Order on
Reconsideration* *of the Second Report and Order*, WT Docket No. 97-82,
FCC 98-46 (rel. Mar. 24, 1998).

\(ii\) The following restrictions will apply for any reauction of
frequency block C spectrum conducted after March 24, 1998:

\(A\) Applicants that elected to disaggregate and surrender to the
Commission 15 MHz of spectrum from any or all of their frequency block C
licenses, as provided in Amendment of the Commission\'s Rules Regarding
Installment Payment Financing for Personal Communications Services (PCS)
Licensees, *Second Report and Order* *and Further Notice of Proposed
Rule Making*, WT Docket No. 97-82, 12 FCC Rcd 16,436 (1997), as modified
by the *Order on Reconsideration* *of the Second Report and Order*, WT
Docket No. 97-82, FCC 98-46 (rel. Mar. 24, 1998), will not be eligible
to apply for such disaggregated spectrum until 2 years from the start of
the reauction of that spectrum.

\(B\) Applicants that surrendered to the Commission any of their
frequency block C licenses, as provided in Amendment of the
Commission\'s Rules Regarding Installment Payment Financing for Personal
Communications Services (PCS) Licensees, *Second Report and Order and
Further Notice of Proposed Rule Making*, WT Docket No. 97-82, 12 FCC Rcd
16,436 (1997), as modified by the *Order on Reconsideration of the
Second Report and Order*, WT Docket No. 97-82, FCC 98-46 (rel. Mar. 24,
1998), will not be eligible to apply for the licenses that they
surrendered to the Commission until 2 years from the start of the
reauction of those licenses if they elected to apply a credit of 70% of
the down payment they made on those licenses toward the prepayment of
licenses they did not surrender.

\(C\) \* \* \*

\* \* \* \* \*

**APPENDIX C**

**[Supplemental Final Regulatory Flexibility Analysis]{.underline}**

As required by the Regulatory Flexibility Act (\"RFA\"),[^199] an
Initial Regulatory Flexibility Analysis (\"IRFA\") was incorporated in
the *Order, Memorandum Opinion and Order and Notice of Proposed
Rulemaking (\"Notice\")* in WT Docket No. 97-82.[^200] The Commission
sought written public comment on the proposals in the *Notice*,
including comment on the IRFA. A Final Regulatory Flexibility Analysis
(\"FRFA\") was incorporated in the *Second Report and Order and Further
Notice of Proposed Rule Making* (\"*Second Report and Order*\").[^201]
The Commission received 37 petitions for reconsideration in response to
the *Second Report and Order.* This FRFA analyzes the modifications
adopted in response to those petitions for reconsideration.

**A.Need for, and objectives of, this Order.**

This *Order on Reconsideration of the Second Report and Order*
(\"*Order*\") is designed to assist C block broadband personal
communications services (\"PCS\") licensees to meet their financial
obligations to the Commission while at the same time helping the
Commission meet its goal of ensuring rapid provision of PCS service to
the public. The *Order* provides a variety of relief mechanisms to
assist C block licensees that are experiencing difficulties in meeting
the financial obligations under the installment payment plan. The relief
provided to C block licensees will speed deployment of service to the
public by easing lenders\' concerns regarding regulatory uncertainty and
by potentially making more capital available for investment and growth.
By facilitating the provision of service to consumers, the Commission
advances Congress\' objective to promote \"the development and rapid
deployment of new technologies, products, and services for the benefit
of the public.\"[^202]

**B.Summary of significant issues raised by public comments in response
to the IRFA.**

There were no comments filed in response to the IRFA; however, in this
proceeding we have considered the economic impact on small businesses of
the modifications we have adopted. *See* Section E of this Supplemental
FRFA, *infra.*

**C.Description and estimate of the number of small entities to which
rules will apply.**

The RFA directs agencies to provide a description of and, where
feasible, an estimate of the number of small entities that will be
affected by our rules.[^203] The RFA generally defines the term \"small
entity\" as having the same meaning as the terms \"small business,\"
\"small organization,\" and \"small governmental jurisdiction.\"[^204]
In addition, the term \"small business\" has the same meaning as the
term \"small business concern\" under Section 3 of the Small Business
Act.[^205] Under the Small Business Act, a \"small business concern\" is
one which: (1) is independently owned and operated; (2) is not dominant
in its field of operation; and (3) meets any additional criteria
established by the Small Business Administration (\"SBA\").[^206]

This *Order* applies to broadband PCS C and F block licensees. The
Commission, with respect to broadband PCS, defines small entities to
mean those having gross revenues of not more than \$40 million in each
of the preceding three calendar years.[^207] This definition has been
approved by the SBA.[^208] On May 6, 1996, the Commission concluded the
broadband PCS C block auction. The broadband PCS D, E, and F block
auction closed on Jan. 14, 1997. Ninety bidders (including the C block
reauction winners, prior to any defaults by winning bidders) won 493 C
block licenses and 88 bidders won 491 F block licenses. Small businesses
placing high bids in the C and F block auctions were eligible for
bidding credits and installment payment plans. For purposes of our
evaluations and conclusion in this FRFA, we assume that all of the 90 C
block broadband PCS licensees and 88 F block broadband PCS licensees, a
total of 178 licensees potentially affected by this *Order*, are small
entities.

**D.Description of the projected reporting, recordkeeping, and other
compliance requirements.**

C block licensees must file notice of their elections with the Wireless
Telecommunications Bureau no later than the election date. The election
date will be 60 days after publication of the *Order* in the *Federal
Register*. The *Order* increases the reporting requirements of the
*Second Report and Order* to the extent that elections now may be made
for each Major Trading Area (\"MTA\").[^209] Formerly, licensees were
required to make the same election for all their licenses.

**E.Steps taken to minimize the significant economic impact on small
entities, and significant alternatives considered.**

As noted in the FRFA of the *Second Report and Order*, the Commission
analyzed the significant economic impact on small entities and
considered significant alternatives.[^210] The modifications adopted on
reconsideration will further reduce the burden on C block licensees,
which are small businesses. These modifications include:

\(1\) Elections on an MTA-by-MTA basis. Licensees now will have the
flexibility to make elections on an MTA-by-MTA basis, and so are not
compelled to make the same election for all their licenses. This
modification will afford C block licensees greater flexibility in
fashioning a restructuring plan.

\(2\) Additional flexibility for licensees. The Commission added
flexibility to the amnesty option by offering licensees the choice
between receiving a credit for their returned licenses or having the
opportunity to bid on their return licenses in the reauction. The
Commission also provided additional flexibility by allowing licensees to
combine disaggregation with prepayment.

\(3\) Higher percentage of down payment credit. By crediting a higher
percentage of the down payment under disaggregation, the Commission
better enables these small businesses to remain in the wireless market.
The Commission provides even more credit to licensees choosing a
combination of disaggregation and prepayment in order to encourage
licensees to take advantage of the benefits of both these options.

\(4\) Thirty-day extension of the non-delinquency period for payments
not made on the resumption date. The Commission\'s 30-day extension is
intended to help licensees that are experiencing last-minute delays in
raising capital by providing them additional time to complete their
fund-raising efforts.

\(5\) Clarification of the Affordability Exception. The Commission\'s
clarification of the affordability exception provides an objective means
for licensees to implement the exception. It eliminates any doubt or
confusion regarding the scope of the term \"afford,\" and it is an easy,
bright-line test to administer.

The Commission believes that it is in the public interest to adopt the
above modifications in order to facilitate rapid introduction of service
to the public without further regulatory or marketplace delay. The
Commission\'s decision minimizes the potential significant economic
impact on small entities by permitting C block licensees to choose among
a variety of alternative solutions to reduce their debt to the
Commission. The intent of this *Order* is to alleviate, to some extent,
the financial difficulties faced by these small entities by providing
options that: (1) achieve a degree of fairness to all parties, including
losing bidders in the C block auction; (2) continue to promote
competition and participation by smaller businesses in providing
broadband PCS service; and (3) avoid solutions that merely prolong
uncertainty.

The Commission rejected proposals for a further deferral of the payment
resumption deadline because licensees already have had a sufficient
deferral period. In addition, the Commission does not wish to adopt
temporary solutions that might only postpone the difficulties faced by
the C block licensees and further prolong uncertainty. There is no
guarantee that an extended deferral period would improve the long term
financial outlook facing many licensees. The Commission also rejected
arguments that licensees should receive full credit for down payments
made on licenses or spectrum returned to the Commission for reauction.
The Commission already provides substantial use of a licensee\'s down
payment. Moreover, providing full credit would be unfair to unsuccessful
bidders that withdrew from the C block auction.

**F. Report to Congress.**

The Commission shall send a copy of the *Order*, including this
Supplemental FRFA, in a report to Congress pursuant to the Small
Business Regulatory Enforcement Fairness Act of 1996. *See* 5 U.S.C. §
801(a)(1)(A). A copy of the *Order* and this FRFA (or summary thereof)
will be published in the *Federal Register*. *See* 5 U.S.C. § 604(b). A
copy of the *Order* and this FRFA will also be sent to the Chief Counsel
for Advocacy of the Small Business Administration.

**Statement of**

**Commissioner Susan Ness**

**Concurring in Part, Dissenting in Part**

*Re: Amendment of the Commission\'s Rules Regarding Installment Payment
Financing for*

*C block Personal Communications Service (PCS) Licensees, WT Docket No.
97-82*

I concur in today\'s decision to the extent it affirms the Commission\'s
decision of September 25, 1997, and dissent to the extent it does not. I
am pleased that the majority has generally adhered to the framework
established last fall. But I do not support the revised package of
options being afforded to C block licensees, which I believe is an
excessive and potentially counterproductive government intervention in
the marketplace. In addition, I am troubled by the majority\'s
willingness to indefinitely delay reauction of returned licenses.

My disagreements with the majority are real, and they are substantial,
but they are also respectful. As with many of the judgments the
Commissioners are called upon to make, reasonable people can disagree.
So here.

Although I supported the Commission\'s prior decision, I have welcomed
the opportunity to think anew on these issues. Reconsideration presents
an opportunity ‑‑ and a duty ‑‑ to consider the matter with a fresh eye.
I have used the reconsideration process to test the facts and logic
undergirding the Commission\'s prior decision, to seek additional
information and ideas, and to deliberate with a new group of colleagues
who bring diverse backgrounds and fresh insights to the process.

And yet this process has left unshaken the core convictions that were
central to my thinking last September. Spectrum auctions cannot achieve
their full promise as a method of assigning rights to use the public
airwaves if, after the fact, government interposes itself into the
marketplace to alter market outcomes and favor one group of competitors
over another group of competitors.

It remains my view that the C block auction, like the other spectrum
auctions the Commission has administered, was run fairly. At the time of
the auction, the playing field was level. Everyone believed they were
playing by the same rules. Each bidder was on notice to take our rules
into consideration when they bid, including the installment terms. Every
bid, by every bidder, was entirely voluntary.

As prices rose, some bidders dropped out, believing that others were
misjudging the market, and banked on the opportunity to obtain licenses
in the event of defaults, license cancellation, and reauction \-- the
way the FCC said it would work. Others, judging the market potential
differently, stayed in. The FCC owes an equal duty to all of these
bidders. In my view, today\'s decision breaches that duty.

In September, we departed in a limited fashion from strict adherence to
market mechanisms, and the majority has now moved further down the
slippery slope. In the wake of today\'s decision, we can reasonably
anticipate that these licensees, or those in other spectrum blocks, will
seek other accommodations on future occasions. This is the inevitable
result when government too readily intervenes to protect market
participants from failure.

The real damage here is to our role as steward of the public airwaves.
Our responsibilities are to facilitate use of the spectrum to bring
competitive services to the public, to be fair to all parties (licensees
and disappointed bidders alike), and to rely on marketplace forces
rather than government edict to select winners and losers. Having placed
spectrum in an auction with fair rules known to all parties, we should
not intrude on the marketplace after the auction for the purpose of
assisting some parties to remain licensees. The marketplace is far
better suited than we are to determine the capabilities of licensees,
and to provide support for those business plans that make economic
sense.

Moreover, financial markets need regulatory certainty and predictability
of outcomes. Otherwise the regulatory risk is too great to warrant
investment. Wall Street needs the

C block licensees to get on with business. Our September decision met
with some applause, in part because it contributed certainty to the
marketplace and allowed participants, equipment manufacturers, and
suppliers of venture capital to proceed. The measures the majority takes
today regretfully foster more uncertainty and unpredictability.

**Specific Concerns**

Although the majority has maintained the basic framework of the decision
rendered last September, there are fundamental differences between what
the Commission did then and what it is doing now. The new approach will
entail greater governmental intrusion in the marketplace, more
disruption of business plans, and more delays in C block construction
and operation.

The options afforded last September were painstakingly tailored to
maintain consistency with auction results and to speed the resumption of
normal operation of the market. These options were designed to enable
some licensees to exit their predicaments; others to regroup; and still
others to refocus their energies on executing their business plan. Given
the growing competition in the wireless marketplace, I believed it to be
important to enable those C block licensees which were able to do so to
\"get back to business\" as soon as possible. For that reason, one
virtue of the options set forth in our September decision was that they
were designed to give a modest hand to those most in need,
[not]{.underline} to create incentives for those

licensees capable of proceeding under their original agreements to
abandon their business plans.

As noted above, the majority is retaining the basic framework of
September\'s decision, but changing it in significant ways. Today\'s
decision: (1) increases the ability of licensees to credit deposits that
otherwise would be forfeit; (2) allows some deposits to be applied
against suspension interest; (3) permits licensees to choose among the
options on an MTA-by-MTA basis; (4) extends the time when licensees need
to either resume their payments or face cancellation of their licenses;
*and* (5) indefinitely postpones the reauction. Taken in combination,
the new array of options is complex, confusing, and overly intrusive in
the marketplace.

The decision today takes what had been a menu of measured options and
turns it into a smorgasbord of hearty choices. The enriched menu of
options adopted today may compel [all]{.underline} C block licensees to
stop and reassess their business plans. Each will now feel obligated to
consider whether changing its plans would be more advantageous than
proceeding in accordance with the original auction outcome; and many
will do so. It is ill-advised and unnecessary to offer new terms that
will alter the plans of licensees who were otherwise prepared to
proceed. This has extended the delay in settling the C block, and adds
to the uncertainty in the financial markets. And most important, we are
interfering with market correction mechanisms that would ensure that C
block licenses are held by entrepreneurs financially able to provide
service to the public.

**Use of Down Payments**

Of the changes to the plan adopted last September, I am most troubled by
those pertaining to the disaggregation option. Previously, those
choosing disaggregation were required to forfeit the down payments
associated with the portion of the spectrum that was being returned;
now, they may use a portion of these funds.[^211] But these funds do not
belong to a licensee that cannot meet its commitments \-- any more than
do those paid for an option to buy land that has lapsed or a downpayment
on a car that has been repossessed. Yet the majority allows

these funds to be used to pay down principal on the licenses that are
kept or, worse, to pay suspension interest.

Using deposits that would otherwise be forfeited to pay suspension
interest essentially postpones the time when the licensee\'s financial
ability to construct and operate a service is put to the test. It also
is not fair to the licensees who met their obligations and who must
raise the money to cover suspension interest payments.

**Delays in Resumption of Payments and Reauction**

I am also troubled by yet another extensive delay before the date by
which licensees will need to resume payments on their licenses. Until
such payments are made, the market will not know which licensees are
financially viable. The payments already have been suspended for one
year. Now, additional time is needed for licensees to sort out their
expanded options. At the same time, the grace period for delayed
payments is being extended. So we prolong the time during which the
licenses will be tied up, with no assurance that the licensees will
ultimately be able to finance and construct their systems and provide
service to the public.

In addition, I am concerned by the further delay in the timing of the
reauction of forfeited licenses. A reauction is needed to put licenses
in the hands of those capable of putting them to productive use. It will
also create long-awaited opportunities for those designated entities
that, in the prior auction, consciously and responsibly chose not to bid
more than they could pay. And yet, in today\'s order, the majority
indefinitely postpones the reauction. Last year, we said it would occur
in the third quarter of 1998. Just two months ago, the new Commission
committed to a date of September 29, 1998. Now, the reauction is
deferred until further notice.

Still more delay is inherent in the Commission\'s inaction on rules for
the C block reauction. These rules were proposed in the same September
order that here is under reconsideration and for which the comment
period has ended. Yet even though decisions on some issues in that
proceeding could affect the elections from among the newly expanded
options, the majority has declined to settle those issues today.

**Competing Objectives**

The agency is caught between conflicting concerns. Everyone agrees, at
least as a general principle, that it is vital to maintain the integrity
of the auction process. Yet we naturally are drawn to help C block
licensees who are facing hardship. Behind the corporate names printed on
the licenses and the petitions for relief stand real people ‑‑ small
business owners, entrepreneurs, individual investors, and others, many
of them women and minorities ‑‑ facing real problems. I ‑‑ like my
colleagues ‑‑ am drawn to help them.

But it is impossible to fully reconcile a commitment to fair
market‑driven spectrum assignments with a willingness to change the
rules of the game after it has been played. At

some point, one objective must prevail over the other. In my judgment,
where the objectives collide, the integrity of the process must control,
and the desire to help individual players must yield.

If we really believe in assigning spectrum by auctions as authorized by
Congress in the Omnibus Budget Reconciliation Act of 1993, and the
\"procompetitive, deregulatory\" paradigm of the Telecommunications Act
of 1996, we must accept the reality that some licensees will fail in the
marketplace, and that their conditional licenses will need to be
canceled and reauctioned, as our rules envisioned. Such outcomes are
painful, but necessary, if the marketplace is to work its magic.

My disagreement with the majority concerns the lengths to which the
Commission should go in trying to prevent such outcomes.

Judges and legislators, lawyers and economists \-- all speak to the need
to promote and protect *competition*, not *competitors*. In my opinion,
today\'s decision crosses the line to favor specific competitors over
others. I cannot support that result.

Some parties have suggested that the Commission owes a duty to go to
extra lengths because the C block licensees are all small business
\"designated entities.\" This argument misses the point that, with or
without *post hoc* relief, the C block spectrum will remain exclusively
for designated entities. What is at issue is a clash *not* between the
interests of small entities and those of large conglomerates. Rather,
the issue is whether the FCC should favor one group of designated
entities over another. I do not believe it should.

**The Commission\'s Role**

The Commission\'s intervention in the post-auction market is neither
compelled nor excused by the ongoing financial obligation of the C block
licensees to the U.S. Treasury. The Commission\'s fundamental role is
that of a licensing agency, not that of a lender. Although the agency\'s
C block rules enabled designated entities to purchase spectrum rights
with installment payments, as Congress specifically contemplated (47
U.S.C. §309(j)(4)(A)), our responsibility after the auction was to issue
licenses, which were expressly conditioned upon the licensees\'
fulfillment of their financial commitments.

Those who say the Commission functioned as a banker are mistaken. We
never performed the banker\'s role (which I know well) of reviewing the
bidders\' balance sheets, their business plans, the wisdom of their
planned bids, and the quality of their management. We never assumed the
responsibility of creating \"commercially reasonable alternatives\" for
whatever difficulties the C block licenses encountered. To the contrary,
we repeatedly declared our

commitment to the efficacy of the market mechanism, and our intention to
enforce auction rules.[^212]

**Conclusion**

Today\'s decision may enable the survival of some C block licensees who
might have failed without government intervention. More likely is the
prospect that the significantly sweetened selection of options will lead
directly to more churn in business plans, more deviation from initial
auction results, more confusion in the financial markets, and more delay
in construction of facilities. A further cost is the long-term
skepticism in the market that the Commission will revise its rules
whenever the pressure is great enough.

It is my view that these rule changes prolong uncertainty, and fail to
treat all interested parties equitably. Accordingly, to the extent the
majority goes beyond the terms of last September\'s order, I
respectfully dissent.

**SEPARATE STATEMENT OF COMMISSIONER MICHAEL POWELL, CONCURRING IN PART
AND DISSENTING IN PART**

***Re:*Amendment of the Commission\'s Rules Regarding Installment
Payment Financing For Personal Communications Services (PCS) Licensees
(WT Docket No. 97-82)**

On a fateful day in March of 1997, the Commission\'s Wireless
Telecommunications Bureau \-- at the urging of certain C-block auction
winners and with all good intentions \-- suspended installment payments
for C-block licensees. This action set forth in motion, in my
observation, a calamity of sorts that now culminates in yet another
round (hopefully the last) of \"March Madness.\" We are asked to
reconsider the prior Commission\'s decision from last September which
offered measured relief to the successful C-block auction participants,
primarily out of some concern that licenses might get tied up in
bankruptcy court should many of these companies default. I support that
prior decision and its rationale.

As I explain more fully below, I also endorse our decision to keep the
basic framework established in our prior order and to reject proposals
to radically change the rules of the game. Though I support most of the
modest measures we take here, I believe that more substantial
modifications to help a small subset of C-block companies that find
themselves unable to meet the original terms and conditions of the
auction would do more harm than good. Specifically, I believe that to do
so would severely compromise the prospects for both existing and future
small businesses and other designated entities to raise sufficient
capital to compete effectively in the marketplace.

The C-block was established out of a recognition that small businesses
and entrepreneurs, including minorities and women, faced particularly
difficult challenges in raising sufficient capital to compete at auction
for spectrum and for financing their eventual build-outs. The rules were
designed to ensure a fair opportunity to obtain spectrum (by segregating
a block and holding it out exclusively for these interests) and to
provide more lenient, below-market payment terms to ease the burden of
raising capital to bid for spectrum and to finance build-out. In
hindsight, one might question the financing terms in light of their
unintended consequences, but they were nonetheless the rules of the game
established for all to abide by.

Rules, by their very nature, will always be both over-inclusive and
under‑inclusive. That is, they benefit some they really should not, and
they will disadvantage others that should benefit. The virtue of any
rule, however, is that it provides a degree of certainty and clarity.
Rules should allow all players to understand the terms and conditions of
the contest and to reliably predict the results of complying or failing
to comply with them. In the context of an auction, relying on the
established rules allows participants to evaluate the consequences of
their bids \-- bid too high and fail to make a payment and you will
forfeit your (or your investors\') money and lose your license, bid to
low and you risk losing the opportunity to hold a lucrative license. In
the C-block auction, all participants made these difficult decisions all
along the way \-- some dropped out, some stayed in. The risk assessments
and decisions that each participant made were anchored in the terms and
conditions of the auction as well as their vision of the future market.
As long as the rules were clearly established, the participants could
make their own judgments about their risk tolerance, then knowingly face
the consequences of their judgments and be held responsible in the event
of market failures.

When the referee (in this case, the Commission) starts tinkering with
the rules during the game, or worse after the buzzer has sounded, it
does two very unfortunate things: First, it undermines the fairness of
the contest. This we know from the earliest age and the principle is
echoed on ball fields and gymnasium floors, in olympic arenas, during
board games, and even in politics. The cardinal principle is that
whether the rule is good or bad it must apply equally to all players or
the game is patently arbitrary and unfair and the outcome invalid. There
assuredly are always those that support the referee\'s intervention,
because the resulting changes put them on top, or keep them in the lead.
However, there are others that sit back in the locker room stunned and
dismayed that the rules, advertised as conditions for victory, were
changed to accommodate certain players. Second, and most importantly in
my mind, is that by telegraphing to the world that the game is subject
to unpredictable changes in the rules based on the subjective decisions
of the tournament organizers, you discourage people from playing the
game at all.

If we constantly adjust our rules to \"help\" certain players, no matter
how sympathetic their plight, we run the very severe risk of foreclosing
future opportunities for this very class of players to enter, and
compete effectively, in future games. Most telecommunications contests
require money to enter and more money to win. It is difficult enough for
small, often unproven, companies to raise funds because of the risk
associated with their ventures. The Commission should not, by waxing and
waning on the regulatory structure, make it more difficult by adding to
the uncertainty. If we demonstrate that we are an unreliable referee,
capital markets will be unwilling to take the additional risks
associated with the regulatory uncertainty that befalls a process by
which the rules can be altered at any time based on the sympathies that
happen to win the day .

There are acute risks associated with the type of ventures C-block was
designed to help, over which regulators have no control, but which are
key risk factors for potential investors. This heightens my fear of
tipping the risk scale against these companies. It should be remembered
that to investors, the entities now seeking our help are inherently
risky ventures to begin with. Often their management is less proven,
their business plans are untested and less complete, and their optimism
is sometimes overstated. This is before consideration of the stiff
competition such entities will face in the marketplace if they do win a
license in an auction. The additional risk we introduce by demonstrating
that our rules are not truly reliable may be more than investors can
bear. I sincerely question whether the events of the past and even the
little bit we offer to parties in financial distress today is worth the
further damage we may do to the risk calculations of investors tomorrow.
The sad result being that the very class of people we hope to help now
will be left short later.

This Order provides a number of measures I fully support, for they
should provide each C-block licensee slightly more flexibility and,
consequently, a fighting chance to attract financing, build-out and
compete. Most of them clean up imperfections in the original order
without doing damage to the underlying principles. In particular, with
the added flexibility of the MTA-by-MTA choice of options, we have taken
away the artificial and unnecessary nationalization of the C-block
\"relief\" plan. Instead, business plans and investment pitches can
continue despite the circumstances facing these licensees. I must depart
from the majority on one point, however: allowing participants to use
certain down-payment \"credits\" and continue paying installments.

The prior decision in September made the appropriate cut to allow
licensees that have received a payment respite to spread their payment
of accrued interest over two years. This provided a reasonable deferral
of the payments that could be absorbed into a workable business plan.
However, the majority is allowing a portion of the down payments from
returned licenses to be used to pay down what is rightfully owed to the
government under binding promissory notes and license conditions. While
I do not oppose the use of \"credits\" to encourage licensees to prepay
their debt and get the FCC out of the banking business, I object to the
idea that such credits can be used to give a boost to certain players
with substantial amounts of accumulated interest. In turn, there will be
absolutely no realizable benefit to the American tax payers. From a
lender\'s point of view (which we unfortunately have to take on behalf
of the United States), I do not believe that this is \"commercially
reasonable:\" it will more likely just delay the inevitable for some
licensees, provide free pocket money for key investors and principals,
and not have any guaranteed positive affect on build-out investment. If
credits are available to licensees that disaggregate, I would prefer
that such credits be limited to prepayment of principal instead of this
temporary, partial reprieve that really will not help as much in the
short term as it will hurt in the long term.

Some believe that efficient spectrum management counsels that it is
better to keep as many of the present winners moving forward, rather
than incur the additional administrative expense and risk of reclaiming
licenses and re‑auctioning them. Perhaps, but that is not what we
advertised to the original bidders, many of whom dropped out of the
auction confident they would get a second bite at the apple if and when
the high bidders failed. Furthermore, it seems to me that this belief as
applied precipitously devalues auction integrity and its impact on
future auctions, and has no principled limits to constrain our
subjective benevolence.

I should make one final point. Last summer, it is my understanding that
many parties invoked the fear of bankruptcy in developing options and
arguments, but in reaching today\'s decision I heard very little
discussion whatsoever about more impending bankruptcies. I did not hear
anyone argue that the changes we make today would truly lessen that
troubling possibility for the bulk of the licensees. And, I heard very
little compelling evidence that the threat, whatever it may have been,
is any more likely today than it was in September when the Commission
first offered a number of options. Let me be clear that I too am anxious
to see the C-block winners survive and provide an important source of
competition, but not in a manner that will foreclose real opportunity
for such groups in the future. Indeed, I expect to continue to hear
about more C-block success stories than failures.

At least, however, the regulatory game is over. The buzzer has sounded.
The time has come to compete in the marketplace, not the bureaucracy.
There can be no more regulatory meddling, or horse trading. We must
provide certainty, [now]{.underline}, lest we win the battle only to
lose the war.

**Separate Statement of Commissioner Gloria Tristani**

**In the Matter of**

**Amendment of the Commission\'s Rules Regarding Installment Payment
Financing for Personal Communications Services (PCS) Licenses**

**Order on Reconsideration of the Second Report and Order**

I am heartened that the Commission has agreed to a package of fair,
reasonable, and commercially viable options addressing the financial
issues confronted by C block licensees. And I am hopeful that the
majority of licensees will find among these options the flexibility to
pursue their business plans as they best see fit. I am satisfied that
the Commission has done virtually all that it can to provide C block
licensees flexibility and relief consistent with and required by our
overriding mandate to manage the spectrum in the public interest, and so
I join the majority\'s decision. I write separately, however, to
articulate the fundamental principles guiding my decision. Those
principles would have led me to support greater relief in the treatment
of the down payment credit.

In granting the Commission authority to assign spectrum licenses by
auction, Congress directed us to use that authority for the ends of
promoting the development and rapid deployment of new technologies and
services for the public, facilitating economic opportunity for
designated entities and new entrants, and vigorously fostering
competition. I take these directives as the lodestar of my decision.

Much has been written about the need to protect the integrity and
fundamental fairness of our auctions. With this, I fully agree. But I
also believe that when the Commission acted last September, it was
generally acknowledged that a significant number of C block licensees,
holding licenses covering a majority of the United States, were in
financial distress. The financial difficulties of several of the largest
licensees cast shadows of doubt across many of the smaller licensees
because of the largely interdependent nature of the licenses as building
blocks for a nationwide network.

Recognizing the severity of the problem, and its responsibility to
assure that this spectrum is used in the public interest, the Commission
appropriately decided last year to modify its rules to provide licensees
with modest, but tangible, relief. By offering relief through a public
notice and comment rulemaking, we have been able to uniformly address
the rights of a class of licensees without undermining the integrity of
our auctions program.

Some commenters and licensees would have us go further \-- to discount
and restructure their debt, much as an ordinary commercial lender might.
Yet the Commission is not a commercial lender, and we are confronted by
competing policies as we negotiate a path as both lender and regulator.
In our role as spectrum manager, it is not appropriate for the
Commission to assure the success of any class of licensees. C block is
an entrepreneurs\' block. The truth is that entrepreneurs and small
businesses do fail. And they fail at a rate greater than other
businesses overall. So it would be inadvisable for the Commission to tie
its spectrum management policy to the assured success of any group of
licensees; to seek to avoid bankruptcies at all costs; or to become an
apologist when such bankruptcies do occur. Fairness to *all* auctions
participants requires that we not adopt measures that would

significantly alter the financial obligations that the successful
bidders themselves freely assumed at auction. But we can, and should,
give them the opportunity to survive and thrive.

Today\'s decision provides that opportunity by granting licensees
significant flexibility to modify their holdings in light of market
conditions and business plans. We have upheld the Commission\'s original
decision to provide a variety of options, recognizing that no single
option would be appropriate for all. The character of the relief offered
is to allow licensees to surrender a certain amount of spectrum in
exchange for a proportionate reduction in debt. In addition, we offer
further flexibility, so that licensees may adopt different options in
different regions (on a MTA basis), as well as combine prepayment and
disaggregation.

Inherent in this approach is a focus on whether the licensee chooses to
use or relinquish the spectrum it currently holds. Having decided to
grant licensees this relief through flexibility, I believe that the use
or non-use of the spectrum should remain the central point in
structuring the relief options. Such a view is constructive and
forward-looking, rather than focusing on whether certain licensees
willfully overbid, or inadvertently overbid, or whether they overbid at
all. Such past actions of any individual licensees become irrelevant, I
believe, in light of our affirmation of the Commission\'s decision to
offer comprehensive relief and flexibility to all licensees.

Centering on whether a licensee intends to use its spectrum to provide
service to the public, or whether it plans to return it, my approach
would lead to a different treatment of the licensee\'s 10% down payment
on deposit with the Commission. I do not disagree that it is appropriate
for some small fee or cost to be associated with the abandonment of
spectrum previously bid for, whether surrendered in a 30 MHz or 15 MHz
portion. I join the majority\'s view that 3% of the net bid (equal to
30% of the down payment), which it adopted for most of the options, is
appropriate. However, I view this cost as akin to fee for restructuring,
much as a commercial bank might impose. It acknowledges the cost of the
restructuring, and is in exchange for the benefits of relief from a
substantial portion of debt and the creation of an automatic spectrum
market (in the case of disaggregation), or the opportunity to hold an
unencumbered license (in the case of prepayment). But 3% of the net bid,
or 30% of the down payment, also is minimal enough not to act as a
disincentive or a penalty for a licensee making a choice which the
Commission has otherwise freely offered. I would not view this cost as a
\"deterrent to speculative bidding,\" which is a redressed description
of a penalty for past behavior.

This cost should be associated only with the abandonment of the
spectrum. The licensee would forfeit 30% of the down payment that
relates to the spectrum it chooses to return, whether as a whole 30 MHz
license (under the pure prepayment option) or 15 MHz piece (under either
disaggregation option). Correspondingly, the licensee would retain 100%
of the down payment that relates to the spectrum it chooses to keep.
Critically, licensees are not penalized to the extent that they choose
to go forward with providing service to the public. This approach \--
focusing on the use of the spectrum \-- is consistent with our spectrum
management responsibilities, as expressed in Section 309(j), to promote
service to the public, provide opportunity for new entrants, and foster
competition.

Basing the fee on the amount of spectrum returned results in varying
credits of the down payment. Licensees would receive a 70% credit for a
full license returned under the prepayment option, while receiving 85%
credit for a license disaggregated, whether then prepaid or continued on
installment payments. Some suggest that the lack of parallel treatment
is a problem \-- that each license should be subject to the same fee,
whatever option is chosen. But the size or design of a license is itself
arbitrary, as acknowledged by the fact that the Commission has either
adopted or proposed spectrum partitioning and disaggregation rules for
the majority of commercial mobile radio services. A cost per license
would be a cost merely to participate in the choices we offer. That
analysis is more characteristic of a bank, less a manager of the
spectrum.

Likewise, today\'s Order suggests that we should provide greater
incentives for licensees to select the prepayment option, because it has
the effect of removing the Commission from the banking business. I
believe this analysis has two flaws. First, any modification to the
credit of the 10% down payment will affect a licensee\'s choice of
prepayment marginally, if at all. A decision to prepay will be made on
the overall economic costs and benefits to the licensee. Although
prepayment may be a good option for some \-- particularly those able to
obtain down payment credits for the surrender of other licenses \-- for
others it will not, because it does not account for loss of government
financing substantially below their cost of funds in the private market.
Because the installment payment plan was offered at the government\'s
cost of funds, a prepayment option discounted to the licensee\'s higher
cost of funds would not be economically neutral to the government. For
that reason, and because such a discount would fundamentally change the
terms under which these bidders won (and others lost) these licenses, I
agree with the decision not to discount the debt. Nonetheless, I believe
we must recognize that such a decision affects the overall economic
attractiveness of prepayment. A modest tinkering with the credit of the
down payment to lessen the credit for disaggregation with resumption of
payments, and to increase the credit for disaggregation with prepayment,
will not affect that balance.

In addition, for C block the decision for the Commission to serve as a
banker is over. That decision was complete with the adoption of service
rules. Whether prepayment is a good option for some, we will the remain
banker for many. Though I agreed with our decision in the recent Part 1
Report and Order to temporarily suspend the use of installment payments
in future rulemaking proceedings, I do not believe we should distinguish
the cost of an option based upon whether it minimally reduces our
banking role for this service.

Thus, I would offer an 85% credit for any licensee choosing the
disaggregation option, whether prepaying or continuing on installment
payments. I would not tinker with the calculation of the down payment
credit, merely to make disaggregation with installment payments
cosmetically equal to standard prepayment, or to make disaggregation
with prepayment more attractive than disaggregation with installment
payments. It is easier \-- and more in the public interest \-- simply to
ask whether the licensee is choosing to serve the public by making use
of the spectrum. Despite these decisional differences, I am pleased that
the majority is able to support use of 85% of the down payment for at
least one of the disaggregation options.

There is an additional area where I believe we provide important and
useful flexibility. This is the modification to allow licensees to apply
to the down payment credit either to reduce principal or to apply
against accumulated suspension interest. Suspension interest is, in
effect, a past debt. It has accumulated because the Commission, by
Bureau Order, suspended payments pending resolution of this proceeding.
Allowing application of the credits to suspension interest will provide
licensees modest relief from the burden of paying both past and current
interest simultaneously. At the same time, we do not defer current debt.
To take advantage of this option, licensees must be timely on all
current interest, making a showing of financial viability.

[^1]: ^?^ Amendment of the Commission\'s Rules Regarding Installment
    Payment Financing for Personal Communications Services (PCS)
    Licensees, WT Docket No. 97-82, *Second Report and Order and Further
    Notice of Proposed Rule Making*, 12 FCC Rcd 16,436 (1997).

[^2]: ^?^ A list of the parties that filed pleadings in response to the
    *Second Report and Order*, and the abbreviations used to refer to
    such parties, is attached as Appendix A. Although CX Systems and
    Dorne & Margolin filed petitions for reconsideration after the
    filing deadline, we will accept their filings as *ex parte* filings.
    For the sake of consistency, we refer to filings as oppositions if
    they were filed at the time oppositions were due, even if they are
    supportive of arguments raised in the petitions.

[^3]: ^?^ Communications Act of 1934, as amended (\"Communications
    Act\") § 309(j)(4)(D), 47 U.S.C. § 309(j)(4)(D).

[^4]: ^?^ *See* 47 C.F.R. § 24.711(b)(3). The net bid price is equal to
    the winning bid less any bidding credit for which the licensee was
    eligible. *See* 47 C.F.R. § 24.712.

[^5]: ^?^ *See* Installment Payments for PCS Licenses, *Order*, 12 FCC
    Rcd 17,325 (WTB 1997).

[^6]: ^?^ *Id.*, 12 FCC Rcd at 17,325 para. 1.

[^7]: ^?^ *See* \"FCC Announces Grant of Broadband Personal
    Communications Services D, E, and F Block BTA Licenses,\" *Public
    Notice*, DA 97-883 (released April 28, 1997) at 2.

[^8]: ^?^ *Second Report and Order*, 12 FCC Rcd at 16,448 para. 21.

[^9]: ^?^ *See id.*, 12 FCC Rcd at 16,444-46 paras. 15-17.

[^10]: ^?^ *See id.*, 12 FCC Rcd at 16,437-38 para. 2.

[^11]: ^?^ *Id.*, 12 FCC Rcd at 16,447 para. 20.

[^12]: ^?^ *Id.*, 12 FCC Rcd at 16,470 para. 70.

[^13]: ^?^ Amendment of the Commission\'s Rules Regarding Installment
    Payment Financing For Personal Communications Services (PCS)
    Licensees, WT Docket No. 97-82, *Order*, FCC 98-2 (released January
    7, 1998) at para. 2 (\"*Election Date Order I*\").

[^14]: ^?^ *Id.* at para. 3.

[^15]: ^?^ Amendment of the Commission\'s Rules Regarding Installment
    Payment Financing For Personal Communications Services (PCS)
    Licensees, WT Docket No. 97-82, *Order*, FCC 98-28 (released
    February 24, 1998) (\"*Election Date Order II*\").

[^16]: ^?^ *Id.* at paras. 2-3. The Bureau will issue a public notice
    setting forth the procedures for filing an election notice.

[^17]: ^?^ *Second Report and Order*, 12 FCC Rcd at 16,437-38 para. 2.

[^18]: ^?^ *Id.*, 12 FCC Rcd at 16,437-38 paras. 2-3. *But see* MFRI
    Reply at 2-6 (the real solution to maintaining auction integrity is
    to resolve bid signaling practices; a modest adjustment to the
    installment payment plan is not related to auction integrity);
    Hyundai Reply at 2-3 (auction integrity is not a sufficient basis
    for denying relief).

[^19]: ^?^ *Second Report and Order*, 12 FCC Rcd at 16,437-38 paras.
    2-3.

[^20]: ^?^ *Id.*, 12 FCC Rcd at 16,437-38 para. 2 (citing Communications
    Act § 309(j)(3)(A), (B), 47 U.S.C. § 309(j)(3)(A), (B)).

[^21]: ^?^ *Id.*, 12 FCC Rcd at 16,437-39 paras. 2, 4-5.

[^22]: ^?^ Communications Act § 309(j)(3)(A), 47 U.S.C. § 309(j)(3)(A).

[^23]: ^?^ Communications Act § 309(j)(3)(B), 47 U.S.C. § 309(j)(3)(B).

[^24]: ^?^ *See, e.g.,* New Wave Petition at 2 (the presented options
    are not economically viable for numerous licensees and the punitive
    damages levied will impede network build-out and possibly lead to
    widespread bankruptcies); GWI Petition at 2 (a major reduction in
    the license debt is the only commercially viable way for many small
    businesses to obtain necessary funding); One Stop Wireless Petition
    at 1 (the options offered do not work for C block licensees); OnQue
    Petition at 1 (the Commission\'s options do not provide any
    stability); Omnipoint Petition at 13 (without further clarification
    of the Commission\'s position on bankruptcy, bankruptcy may be a
    licensee\'s lowest risk alternative); RFW Reply at 3 (the
    Commission\'s punitive provisions likely will increase the number of
    bankruptcy filings).

[^25]: ^?^ The Honorable J. Robert Kerrey *ex parte* filing at 1; The
    Honorable Barbara Boxer *ex parte* filing at 1-2; The Honorable
    Albert R. Wynn *ex parte* filing at 1-2; The Honorable Xavier
    Becerra *ex parte* filing at 1-2; Members of the Congressional
    Hispanic Caucus *ex parte* filing at 2; The Honorable Richard H.
    Bryan and The Honorable Harry Reid *ex parte* filing at 1; *see
    also* The Honorable Sue W. Kelly *ex parte* filing at 1; The
    Honorable Thomas Daschle *ex parte* filing at 1; The Honorable Gary
    L. Ackerman *ex parte* filing at 1.

[^26]: ^?^ *See* AT&T Opposition at 2 (the options offered in the
    *Second Report and Order* provide sufficient financial relief
    without undermining the integrity of the auction process); PrimeCo
    Opposition at 5 (\"the *Second Report and Order* reflects a
    reasonable balancing of Congress\' statutory objectives and
    marketplace considerations and should be affirmed\"); Fidelity
    Capital Opposition at 5 (the *Second Report and Order* \"presents a
    fair and balanced plan to provide relief to struggling C-Block
    licensees, while not disadvantaging licensees who are successfully
    building out their systems\"); Northcoast Opposition at 4
    (significant change would be fundamentally unfair to licensees that
    have honored their financial commitments); AirGate Opposition at 5-6
    (the financing options available to C block licensees, including the
    Commission\'s original installment payment plan, are more generous
    than financing offered to any participants in other auctions);
    Frontier Reply at 2 (significant relief would be unfair to bidders
    that were unsuccessful in the auction process).

[^27]: ^?^ NextWave Reply at 8; *ex parte* letter jointly filed by 43
    companies on February 20, 1998, at 1. We also received letters from
    members of Congress generally supporting greater flexibility
    regarding licensees\' ability to choose which licenses may be
    returned. The Honorable Xavier Becerra *ex parte* filing at 1;
    Members of the Congressional Hispanic Caucus *ex parte* filing at 2.

[^28]: ^?^ *Second Report and Order*, 12 FCC Rcd at 16,455, 16,458,
    16,463-64, 16,469 paras. 38, 44, 57, 67.

[^29]: ^?^ *Id.*, 12 FCC Rcd at 16,463, 16,469 paras. 56, 67.

[^30]: ^?^ *Id.*, 12 FCC Rcd at 16,455, 16,463-64, 16,469 paras. 38,
    56-57, 67.

[^31]: ^?^ Note, however, that under the build-out exception to the
    original amnesty option, the licensee could retain any licenses that
    satisfied the build-out requirement. *Id.*, 12 FCC Rcd at 16,463-64
    para. 57.

[^32]: ^?^ *See* Communications Act § 309(j)(3)(A), 47 U.S.C. §
    309(j)(3)(A).

[^33]: ^?^ *Second Report and Order*, 12 FCC Rcd at 16,449-50 para. 25.

[^34]: ^?^ *Id.*

[^35]: ^?^ *Id.*

[^36]: ^?^ *Id.* *See also* 47 C.F.R. § 1.2110(f)(4)(i).

[^37]: ^?^ *Second Report and Order*, 12 FCC Rcd at 16,449-51 paras.
    25-27. For those C block licensees that retained licenses under the
    disaggregation option or under the build-out exception to the
    amnesty option, the Suspension Interest would be adjusted
    accordingly. C block licensees that elected the prepayment option or
    surrendered all licenses under the amnesty option would not be
    charged Suspension Interest.

[^38]: ^?^ *Id.*

[^39]: ^?^ *Id.* We previously provided specific examples of the
    schedule for paying the Suspension Interest. *See id.*, 12 FCC Rcd
    at 16,450-51 para. 27 and nn.53-54.

[^40]: ^?^ *Election Date Order II*.

[^41]: ^?^ *Id.* The election date had been postponed once before on
    January 7, 1998. *Election Date Order I*.

[^42]: ^?^ *Election Date Order II* at para. 3.

[^43]: ^?^ *See* Alpine Petition at 13 and Alpine Reply at 8-9
    (suggesting a moratorium on interest payments for up to five years);
    Cellexis Petition at 1, 5 and Cellexis Reply at 2-5 (supporting an
    earlier proposal by the U.S. Small Business Administration (\"SBA\")
    for a five-year deferral); McBride Petition at 5 (proposing
    elimination of all payments for the first seven years, with no
    interest on the debt for the first five years); Meretel Petition at
    1-2 (asking the Commission to reconsider the deferral issue); MFRI
    Petition at 3 (endorsing a suspension of all payments until the end
    of the fifth year of the license, with the balance of principal and
    interest paid over the remaining five years of the license);
    NextWave Petition at 4-5, 22-25 (proposing a \"modest deferral\" to
    facilitate network deployment, while requiring payment in full with
    accrued interest within the existing license term); NextWave Reply
    at 5-8 (proposing resumption of payments phased in on a graduated
    basis for first three years); New Wave Petition at 1, 2 (requesting
    a deferral spanning a period of five or more years); Northern
    Michigan Petition at 5-6 (indicating a preference for an additional
    two-year suspension); One Stop Wireless Petition at 2-3 (seeking
    consideration of SBA proposal for short-term deferral combined with
    extension of five-year construction deadline, or long-term deferral
    with no change in construction deadline); OnQue Petition at 2
    (supporting a two-year deferral from December 31, 1996); RFW
    Petition at 1, 4-5 (recommending a five-year deferral of principal
    and interest payments); Urban Communicators Petition at ii, 2, 5-7
    (asking for an extension of the suspension until March 31, 1999, and
    two additional one-year deferrals, so long as licensees make certain
    demonstrations of financial ability and substantial construction
    progress and pay an interest rate increased by 0.5 percent for the
    deferral period); CONXUS Opposition at 6 (agreeing with NextWave and
    Alpine); Duluth PCS, et al. Opposition at 5 (advocating a five-year
    deferral of payment obligations); and Polycell Opposition at 5 (same
    as Duluth PCS, et al.). *See also* The Honorable Barbara Boxer *ex
    parte* filing at 1 (asking the Commission to consider a \"limited
    deferral\"); The Honorable Albert R. Wynn *ex parte* filing at 1
    (requesting that the payment resumption date be extended by six
    months).

[^44]: ^?^ *Second Report and Order*, 12 FCC Rcd at 16,446-47 para. 18.

[^45]: ^?^ *Id.*

[^46]: ^?^ *See, e.g.*, Antigone/Devco Opposition at 6 (\"The public
    treasury is harmed by every deferral of payments.\"); AirGate
    Opposition at 10 (\"as time elapses, the prospect for repayment
    diminishes\"); Sprint Opposition at 5 (\"further delay puts C block
    licensees at a competitive disadvantage, making attracting
    investment capital difficult; creates a cloud of uncertainty over
    the wireless sector; and unjustly enriches defaulting licensees by
    affording them financing opportunities not available to those who in
    good faith fulfilled their payment obligations\"); Northcoast
    Opposition at 3-4 (\"additional C Block installment payment rule
    changes would be bad policy because it would create uncertainty as
    to how the Commission will handle situations of licensee default
    that occur outside of the C Block context\").

[^47]: ^?^ Urban Communicators Petition at 7-8.

[^48]: ^?^ 47 C.F.R. § 1.2110(f)(4)(i).

[^49]: ^?^ *Second Report and Order*, 12 FCC Rcd at 16,449-50 para. 25.

[^50]: ^?^ *See* 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*, FCC
    97-413 (released December 31, 1997) at para. 106 (\"*Part 1 Third
    Report and Order*\") (reconsideration pending). *See* 47 C.F.R. §
    1.2110(f)(4)(i).

[^51]: ^?^ *See* *Part 1 Third Report and Order* at para. 106; 47 C.F.R.
    § 1.2110(f)(4)(ii). *But see* The Honorable Albert R. Wynn *ex
    parte* filing at 1 (the Commission\'s newly adopted 180-day payment
    period should apply to C block licensees).

[^52]: ^?^ *See Second Report and Order*, 12 FCC Rcd at 16,448 para. 21
    (the Suspension Period was defined as \"the period beginning with
    the date on which each license was conditionally granted through and
    including March 31, 1998\").

[^53]: ^?^ Urban Communicators Petition at 8-9.

[^54]: ^?^ Alpine asks that: (1) principal and interest payments be
    spread over a period of 20 years; (2) principal and interest
    payments be paid annually, rather than quarterly; and (3) the
    accrual of interest be suspended from the date of license grant
    until 90 days after the issuance of reauctioned licenses. Alpine
    Petition at 12-13, n.6; *see also* Alpine Reply at 8. Alpine also
    argues that licenses awarded in the original C block auction have
    diminished in value and, on that basis, urges the Commission to
    reduce the price for each \"so affected\" license by 15 percent per
    year until 90 days after the grant of reauctioned licenses. Alpine
    Petition at 13 n.6. DiGiPH similarly maintains that reauction will
    result in lower prices for licenses than at the original auction and
    therefore requests that the Commission reduce the debt of original
    licensees in an amount equal to the average reduction in cost for
    licenses sold at reauction. DiGiPH Petition at 8-11. Northern
    Michigan states that cash flow projections are not sufficient to
    support principal repayment over only four years and believes that
    beginning principal payments in year six is feasible if repayment
    occurs over 15 years. Northern Michigan Petition at 5-6. In
    addition, Northern Michigan and McBride seek relaxation of the
    construction requirements for C block licensees but fail to present
    convincing rationales for their proposals. *See* Northern Michigan
    Petition at 9; McBride Petition at 5.

[^55]: ^?^ *See* AT&T Opposition at 3 (\"Bidders in any Commission
    auction understand that there is no guarantee of business success
    even if they win a license. The Commission should not now create an
    expectation that it will shield applicants or licensees from the
    results of bad business decisions, or take actions that suggest that
    some licensees are \'too big to fail.\' The menu of options the
    Commission provided in the *Order* will provide most C-block
    licensees with sufficient financial relief to permit them to
    continue to participate in the wireless marketplace, although it may
    be on a reduced basis.\"); *see also* PrimeCo Opposition at 4
    (\"\[A\] fundamental restructuring of the installment payment terms
    previously established and agreed to would contravene the
    Commission\'s established auction objective of awarding licenses to
    parties who value them the most and are the most likely to rapidly
    deploy service.\" \[citation omitted\]).

[^56]: ^?^ *Second Report and Order*, 12 FCC Rcd at 16,438-39 para. 5.

[^57]: ^?^ *See* DiGiPH Petition at 7-8.

[^58]: ^?^ Moreover, the Commission has no explicit authority to pay
    interest to licensees, which was one of DiGiPH\'s suggestions. *Id.*
    at 8. For example, unsuccessful bidders in Commission auctions do
    not earn interest on their upfront payments or down payments.
    Rather, the accrued interest on these funds is transferred to the
    Telecommunications Development Fund. *See* Communications Act §
    309(j)(8)(C), 47 U.S.C. § 309(j)(8)(C); 47 C.F.R. §§ 1.2106(a) and
    1.2107(b).

[^59]: ^?^ *Second Report and Order*, 12 FCC Rcd at 16,451 n.54 para.
    27.

[^60]: ^?^ *Second Report and Order*, 12 FCC Rcd at 16,462-64 paras.
    53-58.

[^61]: ^?^ *Id.*, 12 FCC Rcd at 16,462 para. 53. *See also* 4 C.F.R.
    Parts 101-105.

[^62]: ^?^ *Second Report and Order*, 12 FCC Rcd at 16,462-63 para. 55.

[^63]: ^?^ *Id.*, 12 FCC Rcd at 16,462 para. 54.

[^64]: ^?^ *Id.*, 12 FCC Rcd at 16,439-40 para. 6.

[^65]: ^?^ *Id.*, 12 FCC Rcd at 16,463 para. 56.

[^66]: ^?^ *Id.*, 12 FCC Rcd at 16,463-64 para. 57.

[^67]: ^?^ *Id.*

[^68]: ^?^ *Id.*, 12 FCC Rcd at 16,464 para. 58. Some of these payments
    were installments due on March 31, 1997; others were amounts due on
    December 31, 1996, but not paid until March 31, 1997, based on the
    Commission\'s automatic 90-day non-delinquency rule. *Id.*

[^69]: ^?^ *Id.*

[^70]: ^?^ *Id.*

[^71]: ^?^ *Id.*

[^72]: ^?^ NextWave\'s request that the Commission \"clarify\" that the
    build-out exception encompasses all licensees that \"invested
    significantly\" in network build-out activities is now moot. *See*
    NextWave Petition at 17. *See also* Airtel Petition at 1;
    Christensen Petition at 1; CVI Wireless Petition at 1; Koll Petition
    at 1; Leifer, Marter Petition at 1; URS Greiner Petition at 1; Dorne
    & Margolin *ex parte* filing at 1. Also moot is Omnipoint\'s
    suggestion that we allow licensees to disaggregate licenses retained
    under the build-out exception. *See* Omnipoint Petition at 5-6;
    Omnipoint Reply at 1-2. Permitting licensees to make elections on an
    MTA-by-MTA basis eliminates any need for Omnipoint\'s proposal
    because licensees are free to disaggregate licenses in any built-out
    MTAs they wish to retain.

[^73]: ^?^ DiGiPH Petition at 4-7. DiGiPH offered this recommendation as
    an alternative to its suggestion that the Commission extend the date
    by which licensees would have to have met the five-year build-out
    requirement for the build-out exception. *Id.* *See also* NextWave
    Reply at 8.

[^74]: ^?^ Alpine Petition at 9-10.

[^75]: ^?^ *Second Report and Order*, 12 FCC Rcd at 16,463 para. 56.

[^76]: ^?^ *See id.*, 12 FCC Rcd at 16,469 para. 67.

[^77]: ^?^ DiGiPH Petition at 4-5.

[^78]: ^?^ *Id.* *See also* NextWave Reply at 8 (\"\[T\]he Commission
    should allow licensees to select options on an MTA basis.
    Establishing an MTA rule across the board eliminates any concern
    that permitting flexible selection of options would result in cherry
    picking.\").

[^79]: ^?^ *See* Alpine Petition at 9-10; Hyundai Petition at 6
    (contending that \"forfeiture of up to 100 percent of a down payment
    does not appear rationally related to any harm\"); Hyundai Reply at
    4-7; McBride Petition at 2, 4 (claiming that the amnesty option is
    punitive in nature and requesting \"100 percent return of all down
    payments, plus all the interest payments\"). *See also* AmeriCall
    Opposition at 5-7 (\"fairness and equity require at least that the
    forfeiture in an amnesty or disaggregation election be no greater
    than the forfeiture by a licensee electing prepayment . . . .\").

[^80]: ^?^ *Second Report and Order*, 12 FCC Rcd at 16,462-63 para. 55.

[^81]: ^?^ *Id.*; *see also* 47 C.F.R. § 1.2110(f)(4)(iii), (iv). We
    note that both AmeriCall and Omnipoint ask that we establish
    specific timing goals for providing refunds to licensees electing
    the amnesty option. AmeriCall Petition at 3; Omnipoint Opposition at
    14. The Bureau will address this issue in a forthcoming public
    notice on procedures.

[^82]: ^?^ As mentioned above, if a licensee opts to return all its
    licenses, we will refund any installment payments previously
    submitted for those licenses.

[^83]: ^?^ *See* Section X.B.2. below for the definition of
    \"affiliate.\"

[^84]: ^?^ *See* Alpine Petition at 9-10 (\"\[W\]ith respect to the
    amnesty option, the Commission should revise the requirement for the
    forfeiture of down payments so that licensees have some incentive to
    accept this option. For those entities *not* participating in the
    re-auction, a substantially lesser penalty, keyed at most to the
    estimated cost incurred in re-auctioning the spectrum, would be a
    more appropriate means of insuring the integrity of the
    Commission\'s auction processes than total loss of the down payment.
    As to those entities who would desire to bid on such spectrum in the
    re-auction, a penalty of at most 30 percent of the previously made
    down payment would be appropriate.\").

[^85]: ^?^ *Second Report and Order*, 12 FCC Rcd at 16,467-70 paras.
    64-69.

[^86]: ^?^ *Id.*, 12 FCC Rcd at 16,467 para. 64.

[^87]: ^?^ We clarify that the term \"Available Down Payments,\" as used
    in paragraph 64 of the *Second Report and Order*, was intended to
    include both 70 percent of the down payment made on surrendered
    licenses and any installment payments previously submitted for those
    licenses. *Id.*

[^88]: ^?^ *Id.* Since the *Second Report and Order* established that
    interest already paid is to be wholly credited toward prepayment
    under this option, Urban Communicators\' request to that effect is
    moot. Urban Communicators Petition at 10.

[^89]: ^?^ *Second Report and Order*, 12 FCC Rcd at 16,467 para. 64.

[^90]: ^?^ *Id.*, 12 FCC Rcd at 16,469 para. 67.

[^91]: ^?^ *Id.*

[^92]: ^?^ *See* FCC Report to Congress on Spectrum Auctions, WT Docket
    No. 97-150, *Report*, FCC 97-353 (released October 9, 1997) at
    39-40.

[^93]: ^?^ *Part 1 Third Report and Order* at paras. 38-40.

[^94]: ^?^ As described below, down payment amounts may also come from
    disaggregated licenses if the licensee uses the credit for
    prepayment. The treatment of installment payments previously
    submitted for disaggregated licenses is also described below.

[^95]: ^?^ The term \"Prepayment Credit\" is essentially a substitution
    for the term \"Available Down Payments,\" updated to account for the
    additional flexibility provided under our modified approach.

[^96]: ^?^ *Second Report and Order*, 12 FCC Rcd 16,467 n.144 para. 64.

[^97]: ^?^ *See* Section X.B.2. below for the definition of
    \"affiliate.\"

[^98]: ^?^ Therefore, if affiliated licensees decide to pool their
    credits, then all BTA licenses held by any of those affiliates must
    be surrendered for credit in any MTA where one of their BTA licenses
    is surrendered for credit. Similarly, those affiliated licensees
    must collectively select MTAs for prepayment, and all BTA licenses
    held by any of those affiliates in those selected MTAs must be
    prepaid, subject to the affordability exception. Likewise, if those
    affiliated licensees choose to disaggregate an MTA, then all BTA
    licenses held by any of those affiliates in that MTA must be
    disaggregated, and so on.

[^99]: ^?^ DiGiPH Petition at 11-12.

[^100]: ^?^ *But see* ClearComm *ex parte* filing at 1 (urging the
    Commission to allow licensees to prepay one or more BTA licenses in
    an MTA while retaining, and resuming payments on, the remaining BTA
    licenses in the MTA).

[^101]: ^?^ For example, assume a licensee owns 30 licenses held in 3
    MTAs as follows: 2 licenses in MTA #1, 12 licenses in MTA #2, and 16
    licenses in MTA #3; that each license cost \$100,000; that the
    licensee made a down payment of \$10,000 on each license leaving
    \$90,000 as the debt on each license; and that the licensee made no
    installment payments. If the licensee chooses to prepay the licenses
    in MTA #1, its Prepayment Credit will be \$196,000 (28 x \$10,000
    down payment for each license not being prepaid x 70 percent).
    Utilizing its Prepayment Credit of \$196,000, the licensee can
    \"afford\" to prepay all of its licenses in MTA #1. The unspent
    portion of its Prepayment Credit \[\$196,000 less (2 x \$90,000) =
    \$16,000\] will be retained by the Commission.

    If instead the licensee decided to prepay licenses in MTA #3, it can
    only \"afford\" to prepay 2 of those 16 licenses calculated as
    follows: 2 x \$90,000 = \$180,000 needed to prepay; Prepayment
    Credit is calculated as follows: 28 x \$10,000 x 70 percent =
    \$196,000. The licensee may elect which 2 licenses to prepay and
    must surrender the remaining 14 licenses. The Commission will retain
    the unspent portion of the Prepayment Credit, which is \$16,000
    \[\$196,000 less (2 x \$90,000) = \$16,000\]. If, however, the
    licensee elects to add \"new money\" to its Prepayment Credit, it
    *must* add enough \"new money\" to the Prepayment Credit to prepay
    the remaining 14 licenses in MTA #3 (i.e., 14 x \$90,000 less
    \$16,000 = \$1,244,000 of \"new money\" needed). The licensee may
    not add only \$74,000 of \"new money\" and prepay a third license
    while surrendering the remaining 13 unprepaid licenses.

[^102]: ^?^ Omnipoint Opposition at 9; Omnipoint Reply at 2.

[^103]: ^?^ *See* McBride Petition at 2‑3 (the prepayment option favors
    large bidders that have multiple licenses from which to choose,
    whereas small bidders seeking to keep licenses with payment relief
    are forced to disaggregate); Central Oregon Petition at 6 (single
    licensees get no benefit from the buy‑out option); Omnipoint Reply
    at 2 (the prepayment option should be eliminated because \"it
    amounts to nothing other than an opportunity for a handful of the
    largest bidders to \'cherry-pick\' licenses\").

[^104]: ^?^ *See* Airtel Petition at 1; Alpine Petition at 10; Cellexis
    Petition at 6; Cellnet Petition at 2; Christensen Petition at 1; CVI
    Wireless Petition at 1; Federal Network Petition at 1; Fox
    Communications Petition at 1; Koll Petition at 1; Leifer, Marter
    Petition at 1; Meretel Petition at 3; MFRI Petition at 4; New Wave
    Petition at 1; NextWave Petition at 10‑15; OnQue Petition at 2; One
    Stop Wireless Petition at 2; Prime Matrix Petition at 1; RFW
    Petition at 5; UCNI Petition at 2; Urban Communicators Petition at
    10; URS Greiner Petition at 1; Wireless Nation Petition at 2; Duluth
    PCS, et al. Opposition at 5‑8; Polycell Opposition at 5‑8; Third
    Kentucky Opposition at 2; CX Systems *ex parte* filing at 1; Cyber
    Sites *ex parte* filing at 1; Dorne & Margolin *ex parte* filing
    at 1. *See also* Hyundai Petition at 4-7; Christensen *ex parte*
    filing at 1; Florida Power *ex parte* filing at 1; Kabbara *ex
    parte* filing at 1; LaBarge Clayco *ex parte* filing at 1; Leifer,
    Marter *ex parte* filing at 1; MJA *ex parte* filing at 1; OPM *ex
    parte* filing at 1; Specialty Teleconstructors *ex parte* filing at
    1; Structure Consulting *ex parte* filing at 1; Xway *ex parte*
    filing at 1; MRFI Reply at 1; Wireless Ventures Reply at 3.

[^105]: ^?^ *See* Communications Act § 309(j), 47 U.S.C. § 309(j).

[^106]: ^?^ *See* Communications Act § 309(j)(4)(B), 47 U.S.C. §
    309(j)(4)(B); In the Matter of BDPCS, Inc., *Order*, 12 FCC Rcd 6606
    (WTB 1997), *application for review pending*.

[^107]: ^?^ *See, e.g.*, Alpine Petition at 8; RFW Petition at 5; MFRI
    Petition at 4.

[^108]: ^?^ *See, e.g.*, NextWave Petition at 10-15; Duluth PCS, et al.
    Opposition at 5-6; Polycell Opposition at 5-6.

[^109]: ^?^ *See, e.g.*, AmeriCall Opposition at 5-7; Hyundai Reply at
    4-6.

[^110]: ^?^ Several parties asking the Commission to reject
    petitioners\' request to use the entire down payment under the
    prepayment option reiterate the Commission\'s discussion on this
    matter in the *Second Report and Order*. *See* Sprint Opposition at
    4‑5 (arguing that giving full credit would be unfair to unsuccessful
    bidders and to licensees that resume payments under their existing
    obligations); Antigone/Devco Opposition at 3‑5 (asking the
    Commission to retain 30 percent of the down payment to preserve the
    integrity of the auction process). Although Omnipoint recognizes
    that retaining the 30 percent down payment on surrendered licenses
    is not punitive, we disagree with its reasoning that it accounts for
    reauction costs to the government. *See* Omnipoint Opposition at
    3‑5.

[^111]: ^?^ AirGate Opposition at 13. AirGate notes that it would
    support \"a limited exception\" to permit licensees that elect to
    prepay all of their C block licenses to use all of their down
    payment toward the cash purchase price. *Id.* at 13 n.22. No such
    exception is necessary, given that AirGate\'s scenario is no
    different from paying off the entire installment debt early.

[^112]: ^?^ *See* NextWave Reply at 8-9 (net present value accurately
    presents the size of PCS debt in light of the licensee\'s higher
    cost of capital compared to the government rate of interest);
    Cellexis Reply at 6 (by charging nominal value rather than net
    present value, the Commission is raising the effective price of the
    license). *See also* Airtel Petition at 1; Alpine Petition at 10;
    Cellexis Petition at 6‑7; Cellnet Petition at 2; Central Oregon
    Petition at 4‑6; Christensen Petition at 1; CVI Wireless Petition at
    1; Federal Network Petition at 1; Fox Communications Petition at 1;
    Koll Petition at 1; Leifer, Marter Petition at 1; MFRI Petition at
    4‑5; New Wave Petition at 1; NextWave Petition at 5‑10; Northern
    Michigan Petition at 7; OnQue Petition at 2; One Stop Wireless
    Petition at 2; Prime Matrix Petition at 1; RFW Petition at 6; URS
    Greiner Petition at 1; UCNI Petition at 2; Urban Communicators
    Petition at 10; Wireless Nation Petition at 2; Meretel Petition at
    2; Polycell Opposition at 9; Duluth PCS, et al. Opposition at 9;
    Third Kentucky Opposition at 2; Christensen *ex parte* filing at 1;
    CX Systems *ex parte* filing at 1; Cyber Sites *ex parte* filing at
    1; Dorne & Margolin *ex parte* filing at 1; Florida Power *ex parte*
    filing at 1; LaBarge Clayco *ex parte* filing at 1; Leifer, Marter
    *ex parte* filing at 1; MJA *ex parte* filing at 1; OPM *ex parte*
    filing at 1; Specialty Teleconstructors *ex parte* filing at 1;
    Structure Consulting *ex parte* filing at 1; Xway *ex parte* filing
    at 1; Wireless Ventures Reply at 3.

[^113]: ^?^ *Compare* Alpine Petition at 10 (a 59 percent discount from
    the face amount of the note would account for the present value of
    the Commission\'s financing) *with* NextWave Petition at 5‑10
    (arguing for a discount rate of at least 15 percent) and Third
    Kentucky Opposition at 2 (same as NextWave). S*ee also* Meretel
    Petition at 2 (prepayment is not a viable option unless the prepaid
    amount is equal to or below that of the price paid for A and B block
    licenses).

[^114]: ^?^ Sprint Opposition at 4.

[^115]: ^?^ *Second Report and Order*, 12 FCC Rcd at 16,468 para. 66.
    *See also id.*, Separate Statement of Susan Ness, 12 FCC Rcd at
    16,511 (\"In my view, the price bid is the price bid. Bidders were
    not offered a cash versus credit price.\").

[^116]: ^?^ *See* AirGate Opposition at 7‑9 (a reduction in bid amounts
    would translate into a rewrite of the auction results).

[^117]: ^?^ *See* Omnipoint Opposition at 6‑7 (a net present value
    discount would be fundamentally unfair to other bidders in the
    auction that properly relied on the Commission\'s rule that high
    bidders must pay the entire nominal amount of their bids or their
    licenses automatically cancel).

[^118]: ^?^ Moreover, if we were to discount the debt at a licensee\'s
    cost of capital it would be impossible to determine accurately a
    cost of capital for all licensees. The cost of capital varies for
    each licensee because it is based on a licensee\'s individual cost
    of debt and equity and on the ratio of debt to equity. Therefore, no
    single discount rate would be appropriate for every licensee. *See*
    Omnipoint Opposition at 6‑8 (a net present value discount \"would be
    impossible to implement in a manner that is fair and avoids unjust
    enrichment, because all parties \-- including each Block C licensee
    and the U.S. Government \-- have separate costs of capital\").

[^119]: ^?^ *See* ALLTEL Opposition at 2‑4; Northcoast Opposition at 5;
    Antigone/Devco Opposition at 2; Fidelity Capital Opposition at 3‑4.

[^120]: ^?^ Cellexis Petition at 6.

[^121]: ^?^ *See Second Report and Order*, 12 FCC Rcd at 16,469 para.
    68.

[^122]: ^?^ MFRI Petition at 5.

[^123]: ^?^ Urban Communicators Petition at 10. *But see* AirGate
    Opposition at 14‑15 (licensees should not be permitted to return
    licenses on a BTA-by-BTA basis).

[^124]: ^?^ *Second Report and Order*, 12 FCC Rcd at 16,455 para. 38.

[^125]: ^?^ *Id.*

[^126]: ^?^ *Id.*, 12 FCC Rcd at 16,456 para. 39.

[^127]: ^?^ *Id.*, 12 FCC Rcd at 16,456 para. 40.

[^128]: ^?^ *Id.*

[^129]: ^?^ *Id.*

[^130]: ^?^ *Id.*

[^131]: ^?^ *Id.*, 12 FCC Rcd at 16,457 para. 42.

[^132]: ^?^ *Id.*

[^133]: ^?^ *See* The Honorable Albert R. Wynn *ex parte* filing at 1-2
    (licensees electing disaggregation should be allowed \"to apply
    their excess down payments and interest payments they have made to
    their upcoming installment payments, thereby providing them, in
    exchange for actual money already paid to the U.S. Government, a
    brief extension of time to complete their financing\").

[^134]: ^?^ *Second Report and Order*, 12 FCC Rcd at 16,456 para. 40.

[^135]: ^?^ Omnipoint Petition at 8-9; McBride Petition at 1-2;
    AmeriCall Opposition at 6. *See also* ClearComm Petition at 18-21
    (if the Commission refuses to allow licensees full use of their down
    payments, then licensees electing disaggregation should at least not
    be subject to a greater penalty than those electing prepayment).
    *But see* AirGate Opposition at 12 (the Commission\'s decision to
    retain 50 percent of the down payment is reasonable).

    As discussed above, a licensee that selects the amnesty option and
    chooses to bid on its returned licenses in the reauction will not
    receive credit for any of its down payment made on its returned
    licenses. We believe a licensee\'s opportunity to bid on its
    returned licenses is equitable compensation for not receiving any
    down payment credit.

[^136]: ^?^ The portion of the down payment applicable to the returned
    spectrum is the equivalent of 50 percent of the down payment made on
    the original 30 MHz license.

[^137]: ^?^ *See* Airtel Petition at 1; Alpine Petition at 9; Cellexis
    Petition at 6; Cellnet Petition at 2; Christensen Petition at 1;
    ClearComm Petition at 6-18; CVI Wireless Petition at 1; Federal
    Network Petition at 1; Fox Communications Petition at 1; Koll
    Petition at 1; Leifer, Marter Petition at 1; Meretel Petition at 3;
    MFRI Petition at 4; NextWave Petition at 10-15; New Wave Petition at
    1; One Stop Wireless Petition at 2; Prime Matrix Petition at 1; RFW
    Petition at 5; UCNI Petition at 2; URS Greiner Petition at 1;
    Wireless Nation Petition at 2; ClearComm Opposition at 2-4; Duluth
    PCS, et al. Opposition at 5-8; Polycell Opposition at 5-8; Third
    Kentucky Opposition at 2; ClearComm Reply at 3-6; Hyundai Reply at
    4-7; Wireless Ventures Reply at 3; CX Systems *ex parte* filing at
    1; Dorne & Margolin *ex parte* filing at 1. *See also* Hyundai
    Petition at 4-7; Christensen *ex parte* filing at 1; Cyber Sites *ex
    parte* filing at 1; Florida Power *ex parte* filing at 1; Kabbara
    *ex parte* filing at 1; LaBarge Clayco *ex parte* filing at 1;
    Leifer, Marter *ex parte* filing at 1; MJA *ex parte* filing at 1;
    OPM *ex parte* filing at 1; Specialty Teleconstructors *ex parte*
    filing at 1; Structure Consulting *ex parte* filing at 1; Xway *ex
    parte* filing at 1.

[^138]: ^?^ *See* Communications Act § 309(j), 47 U.S.C. § 309(j).

[^139]: ^?^ *Second Report and Order*, 12 FCC Rcd at 16,468 para. 65;
    *see also* Sprint Opposition at 4-5.

[^140]: ^?^ Fidelity Capital Opposition at 4-5 (the present terms of the
    disaggregation option are fair). *But see* ClearComm Reply at 7
    (Fidelity Capital\'s argument favoring private disaggregation
    overlooks the fact that the Commission can more efficiently
    redistribute the disaggregated spectrum).

[^141]: ^?^ NextWave Petition at 10-15 (no rational basis exists for the
    penalty because no rule has been violated and no default or bid
    withdrawal has occurred); ClearComm Petition at 6-18 (there is no
    equitable or legal justification for the penalty because
    disaggregating licensees willingly surrender a *pro rata* portion of
    spectrum); ClearComm Reply at 2-6 (by imposing a penalty on
    disaggregating licensees, the Commission\'s action is inconsistent
    with that of a reasonable commercial lender). *See, e.g.,* Cellexis
    Petition at 6; Hyundai Petition at 4-7; Meretel Petition at 3; MFRI
    Petition at 4; New Wave Petition at 2; ClearComm Opposition at 2-4;
    Duluth PCS, et al. Opposition at 5-8; Polycell Opposition at 5-8;
    Hyundai Reply at 4-7.

[^142]: ^?^ MFRI Petition at 6.

[^143]: ^?^ McBride Petition at 5. In addition, McBride claims that, by
    allowing the entry of more competitors through disaggregation, the
    Commission has frustrated expectations that a maximum of six PCS
    licenses would exist in each market (one each for blocks A through
    F). *Id.* at 2. McBride\'s argument is misplaced because Section
    24.714 of the Commission\'s rules permit broadband PCS licensees in
    blocks A through F to disaggregate any amount of spectrum through
    the marketplace to qualified entities. 47 C.F.R. § 24.714. Moreover,
    it has always been the Commission\'s goal to encourage the widest
    participation in the wireless market, in accordance with Congress\'
    mandate. *See* Communications Act § 309(j)(3)(B), 47 U.S.C. §
    309(j)(3)(B).

[^144]: ^?^ Alpine Petition at 9; Urban Communicators Petition at 9.
    Alpine offers no rationale for a BTA-by-BTA requirement, and Urban
    Communicators makes an unpersuasive claim that an MTA-by-MTA
    requirement provides little relief for licensees that hold licenses
    in only one MTA. A licensee disaggregating spectrum in its only MTA
    would receive all the benefits of disaggregation, including the
    forgiveness of half its outstanding debt.

[^145]: ^?^ AirGate Opposition at 14-15; *see also Second Report and
    Order*, 12 FCC Rcd at 16,455 para. 38.

[^146]: ^?^ NextWave Petition at 15-16; Cellexis Petition at 6. In
    addition, a number of parties argue generally that licensees should
    be allowed to retain licenses in which they have made significant
    build-out. *See* Airtel Petition at 1; Christensen Petition at 1;
    CVI Wireless Petition at 1; Koll Petition at 1; Leifer, Marter
    Petition at 1; URS Greiner Petition at 1; Dorne & Margolin *ex
    parte* filing at 1.

[^147]: ^?^ *Second Report and Order*, 12 FCC Rcd at 16,455 para. 38.

[^148]: ^?^ *Id.*, 12 FCC Rcd at 16,470 para. 73.

[^149]: ^?^ *Id.*, 12 FCC Rcd at 16,470 para. 70.

[^150]: ^?^ *Election Date Order I* at para. 2.

[^151]: ^?^ *Election Date Order II*.

[^152]: ^?^ *See, e.g.,* Horizon Petition at 2 (requesting that the
    election deadline be moved to March 15, 1998); MFRI Opposition at 2;
    Third Kentucky Opposition at 2; RFW *ex parte* filing at 1-2. *But
    see* AirGate Opposition at 15-16 (the January 15, 1998, election
    date should be maintained).

[^153]: ^?^ *See* NextWave Petition at 19-22 (before requiring licensees
    to make an election, the Commission should resolve control group
    issues, clarify the role of the Department of Justice, and adopt
    final World Trade Organization implementation rules); Polycell
    Opposition at 4-5 (same as NextWave); Duluth PCS, et al. Opposition
    at 4-5 (same as NextWave); Omnipoint Petition at 13-14 (before
    licensees relinquish valuable spectrum assets, the Commission should
    clarify its position on bankruptcy and its jurisdiction to engage in
    debt forgiveness); Omnipoint Opposition at 13-14 (before licensees
    are required to make irreversible elections, the Commission should
    issue final decisions on the note interest rate, the procedures for
    implementing resumption of payments, election filing procedures, the
    Commission\'s position on bankruptcy, and the role of the Department
    of Justice). MFRI asks that the election date be postponed until the
    bid signaling practices in the D, E, and F block auction have been
    resolved. MFRI Petition at 3. We note that on September 5, 1997, the
    Commission announced the implementation of click-box bidding, one
    purpose of which is to prevent bid signaling practices. *See* \"FCC
    Announces Changes to Auction Procedures for the 800 MHz SMR Auction
    (Auction No. 16),\" *Public Notice*, 12 FCC Rcd 13,449 (WTB 1997).

[^154]: ^?^ *See* Northern Michigan Petition at 10 (the election date
    should be at least 60 days after the release of the order on
    reconsideration of the *Second Report and Order*).

[^155]: ^?^ Omnipoint Petition at 6-8; Omnipoint Reply at 2-5.

[^156]: ^?^ Omnipoint Petition at 6.

[^157]: ^?^ *Id.* at 7-8.

[^158]: ^?^ NextWave Opposition at 2.

[^159]: ^?^ *See Second Report and Order*, 12 FCC Rcd at 16,471 para. 76
    (requiring payment of all Suspension Interest, which included
    interest only through the previous payment resumption date of March
    31, 1998).

[^160]: ^?^ *See Election Date Order I* at para. 3. The Commission has
    proposed including the following licenses in the reauction: (1) all
    licenses representing the disaggregated spectrum surrendered to the
    Commission under the disaggregation option; (2) all licenses
    surrendered to the Commission by licensees taking advantage of the
    Commission\'s prepayment or amnesty options; and (3) all PCS C block
    licenses currently held by the Commission as the result of previous
    defaults. *See Further Notice*, 12 FCC Rcd at 16,474 para. 83.

[^161]: ^?^ CPCSI Petition at 4‑9. *But see* AirGate Opposition at 16
    (encouraging the Commission to reject CPCSI\'s Application for
    Review in time for those licenses to be included in the reauction
    and arguing that the reauction should not be delayed by the
    bankruptcy proceedings).

[^162]: ^?^ *See* Carolina PCS I Limited Partnership Request for Waiver
    of Section 24.711(a)(2) of the Commission\'s Rules Regarding BTA
    Nos. B016, B072, B091, B147, B177, B178, B312, B335, and B436,
    Frequency Block C, *Memorandum Opinion and Order*, FCC 97‑417
    (released December 24, 1997).

[^163]: ^?^ *Second Report and Order*, 12 FCC Rcd at 16,448 para. 22;
    *see also Further Notice*, 12 FCC Rcd at 16,474 para. 84.

[^164]: ^?^ *Second Report and Order*, 12 FCC Rcd at 16,457, 16,470
    paras. 42, 69.

[^165]: ^?^ *Id.*, 12 FCC Rcd at 16,457 para. 42; *see also id.*, 12 FCC
    Rcd at 16,470 para. 69.

[^166]: ^?^ *Id.*, 12 FCC Rcd at 16,462 para. 54.

[^167]: ^?^ Comment is sought on this issue in the *Further Notice*, 12
    FCC Rcd at 16,474 para. 84.

[^168]: ^?^ NextWave Petition at 20; *accord* Duluth PCS, et al.
    Opposition at 4‑5; Polycell Opposition at 4‑5; *cf.* AmeriCall
    Opposition at 7-8 (arguing that the 10 percent control group
    institutional investor rule, 47 C.F.R. § 24.709(b)(5)(i)(C), and the
    25 percent nonattributable ownership limit, 47 C.F.R.
    § 24.709(b)(3)(i), should be eliminated because they unnecessarily
    restrict access to capital from noncontrolling investors). Comment
    is sought on this issue in *Part 1 Third Report and Order*; *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, 5693
    n.17, 5703 paras. 11, 28 (1997).

[^169]: ^?^ *See* Comments filed by Nextel Communications, Inc. on
    November 13, 1997 at 7-9.

[^170]: ^?^ *See* Cellexis Petition at 7‑8; RFW Petition at 6‑7. *See
    also* MFRI Reply at 6‑7 (expressing concern that large incumbents
    advocate opening the C block reauction to all bidders); Wireless
    Ventures Reply at 4 (same).

[^171]: ^?^ *See Second Report and Order*, 12 FCC Rcd at 16,448 para.
    22.

[^172]: ^?^ *Id.*

[^173]: ^?^ 47 C.F.R. § 1.2110(b)(4); *Part 1 Third Report and Order* at
    paras. 29-30.

[^174]: ^?^ *Compare* Northern Michigan Petition at 6 (licensees
    electing disaggregation should be allowed to participate in the
    reauction) *and* Cellexis Petition at 6 (the C block reauction
    should be open to all non‑defaulting C block licensees, irrespective
    of the chosen option) *with* Antigone/Devco Opposition at 5‑6
    (bidders electing any of the special relief options should be barred
    from participating in any future C block reauctions).

[^175]: ^?^ Sprint Petition at 3-4.

[^176]: ^?^ *Id.* at 2‑3; Sprint Opposition at 3.

[^177]: ^?^ NextWave Petition at 18‑19; *accord* Polycell Opposition at
    8‑9; Duluth PCS, et al. Opposition at 8‑9.

[^178]: ^?^ *Second Report and Order*, 12 FCC Rcd at 16,472-73 para. 79.

[^179]: ^?^ *Id.*

[^180]: ^?^ *See* CIRI Petition at 6-8. *But see* AmeriCall Opposition
    at 8-11 (\"Suffering default penalties is not an encouragement to
    \'cherry-pick.\'\").

[^181]: ^?^ 47 C.F.R. § 1.2110(f)(4)(iv).

[^182]: ^?^ Central Oregon Petition at 2-4; Cellular Holding Petition at
    2-5; Duluth PCS, et al. Opposition at 10; Polycell Opposition at 10;
    Eldorado Reply at 2-4.

[^183]: ^?^ Cellular Holding Petition at 2-3.

[^184]: ^?^ *Second Report and Order*, 12 FCC Rcd at 16,447 para. 20.

[^185]: ^?^ *See* \"D/E/F Band PCS Auction Results in Lower Spectrum
    Prices But Another Win for CDMA Proponents,\" U.S.
    Telecommunications, SBC Warburg Inc. (January 28, 1997) (D, E, and F
    spectrum prices 75 percent lower than C band auction); Donaldson,
    Lufkin & Jenrette, The Wireless Communications Industry (Spring
    1997) at 20 (\"D, E and F Auction Prices Surprisingly Low\").

[^186]: ^?^ *See* Central Oregon Petition at 2-4; Omnipoint Opposition
    at 12; Eldorado Reply at 3-4.

[^187]: ^?^ AmeriCall Opposition at 3-4. *See also* NextWave Reply at 3.

[^188]: ^?^ Central Oregon Petition at 2-4.

[^189]: ^?^ Omnipoint Petition at 9-10; Omnipoint Opposition at 11-12.

[^190]: ^?^ *Second Report and Order*, 12 FCC Rcd at 16,437-38 para. 2.

[^191]: ^?^ CONXUS Petition at 3-5; CONXUS Opposition at 2-8; CONXUS
    Reply at 4-10. CONXUS claims its experience is similar to the C
    block situation, including delays in market entry, its problems in
    raising capital, high bid amounts, a post-auction rule change, and
    the lack of a simultaneous non-entrepreneur auction.

[^192]: ^?^ *See* Implementation of Section 309(j) of the Communications
    Act \-- Competitive Bidding, Narrowband PCS, PP Docket No. 93-253,
    *Report and Order and Further Notice of Proposed Rulemaking*, 12 FCC
    Rcd 12,972 (1997).

[^193]: ^?^ Northern Michigan Petition at 8-9 (interest rate for C block
    licensees should be standardized at 6.5 percent); Alpine Petition at
    11-12 and Alpine Reply at 6-8 (interest rate should be reduced to
    5.56 percent); McBride Petition at 4 (the Commission should set the
    interest rate uniformly at 5.75 percent).

[^194]: ^?^ Northern Michigan Petition at 8. *See also* McBride Petition
    at 4. Our position on this issue was addressed in 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*, FCC 97-60 (released February 28, 1997) at
    para. 12 (\"debtors may grant to other parties a subordinated
    security interest in the proceeds of an authorized assignment or
    transfer of the license to a third party, provided however that any
    such security interest shall be subordinated to and in no way
    inconsistent with the Commission\'s security interest in the
    license\").

[^195]: ^?^ TAP Reply at 4-10. *See also* McBride Petition at 5.

[^196]: ^?^ Communications Act § 309(j)(4)(D), 47 U.S.C. § 309(j)(4)(D).

[^197]: ^?^ *See* TAP Reply at 5-6 (citing Erwin G. Krasnow, \"A Case
    for Minority Tax Certificates,\" Broadcasting & Cable, December 15,
    1997, at 80) (the Commission\'s tax certificate program greatly
    increased minority ownership of broadcast and cable entities and
    \"gave minority entrepreneurs increased access to the market for
    broadcast and cable properties, gave them a chip at the bargaining
    table and opened doors at financial institutions that had been
    closed\").

[^198]: ^?^ Pub. L. No. 104-7, § 2, 109 Stat. 93, 93-94 (1995).

[^199]: ^?^ 5 U.S.C. § 604.

[^200]: ^?^ 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 Rulemaking*, FCC
    97-60 (released February 28, 1997).

[^201]: ^?^ Amendment of the Commission\'s Rules Regarding Installment
    Payment Financing For Personal Communications Services (PCS)
    Licensees, WT Docket No. 97-82, *Second Report and Order and Further
    Notice of Proposed Rule Making*, 12 FCC Rcd 16,436 (1997).

[^202]: ^?^ Communications Act § 309(j)(3)(A), 47 U.S.C. § 309(j)(3)(A).

[^203]: ^?^ 5 U.S.C. §§ 603(b)(3), 604(a)(3).

[^204]: ^?^ 5 U.S.C. § 601(6).

[^205]: ^?^ 5 U.S.C. § 601(3) (incorporating by reference the definition
    of \"small business concern\" in 15 U.S.C. § 632).

[^206]: ^?^ 15 U.S.C. § 632.

[^207]: ^?^ *See* 47 C.F.R. § 24.720(b)(1).

[^208]: ^?^ *See* Implementation of Section 309(j) of the Communications
    Act \-- Competitive Bidding, *Third Memorandum Opinion and Order and
    Further Notice of Proposed Rulemaking,* 10 FCC Rcd 175, 196 (1995);
    Implementation of Section 309(j) of the Communications Act \--
    Competitive Bidding, *Fifth Report and Order*, 9 FCC Rcd 5581-84
    (1995); 47 C.F.R. §§ 24.320(b), 24.720(b).

[^209]: ^?^ *See Second Report and Order*, Appendix C.

[^210]: ^?^ *Id.*

[^211]: ^?^ The prior decision allowed licensees to redeploy a portion
    of their down payments only in one limited circumstance \--
    prepayment. The key considerations that made this approach
    acceptable to me were that: (1) such licensees were paying the full
    bid amount on the licenses they retained; and (2) election of this
    option removed the government entirely from installment payments \--
    some licenses were fully purchased, and the remaining licenses were
    returned to the FCC for reauction. The result was that the electing
    licensee was relieved of suspension interest and all debt owed, in
    return for purchasing or returning all licenses. The same benefits
    do not accrue in the disaggregation context, where the licensee
    continues to receive below-market interest rates and the government
    continues to administer installment debt.

[^212]: ^?^ I note that the Commission acted without hesitation when
    some successful C block bidders failed to make their down payments
    although they had made their deposits. The FCC immediately defaulted
    the bidders and assessed maximum forfeitures, applying all payments
    to the forfeitures. [See]{.underline} \"18 Defaulted PCS licenses to
    be Reauctioned; Reauction to Begin July 3rd,\" [Public
    Notice]{.underline}, DA 96-872 (rel. May 30, 1996); [Mountain
    Solutions LTD, Inc.]{.underline}, [Order]{.underline}, 12 FCC Rcd
    5904 (WTB 1997), application for review pending; [BDPCS,
    Inc.]{.underline}, [Order]{.underline}, 12 FCC Rcd 6606 (WTB 1997),
    application for review pending; [C.H. PCS Inc.]{.underline},
    [Order]{.underline}, 11 FCC Rcd 22430 (WTB 1996). These bidders, and
    those who dropped out in the course of the auction, had no reason to
    expect that the Commission would subsequently change the rules of
    the game. It is of course impossible to sort out how these bidders
    would have behaved differently if they could have foreseen the
    accommodations that would later be offered.