**Description of Auction 58 C-Block Resolution Proposal**

The Emerging Technology Subcommittee of the FCC's Advisory Committee on
Diversity for Communications in the Digital Age ("Diversity Advisory
Committee") should recommend to the full Diversity Advisory Committee
that it pass a resolution urging the FCC in Auction 58 (scheduled to
begin on January 12, 2005) to enforce its existing Designated Entity
("DE") rules, including the rules setting aside certain C-Block
broadband PCS spectrum for bidding only by "entrepreneurial" companies
(i.e., small, minority or women-owned companies whose gross revenues and
total assets are less than \$125 million and \$500 million
respectively).[^1]/ The Commission should be requested to maintain the
existing C-Block rules despite recent requests by the Cellular
Telecommunications and Internet Association ("CTIA") and the nation's
larger wireless carriers to allow bidding on these licenses by the
larger, non-entrepreneurial companies.

The PCS C-Block was initially established by the FCC for bidding
exclusively by entrepreneurial companies. Under the original C-Block
rules, the larger nationwide wireless carriers could not qualify to
participate as applicants in any auction for C-Block licenses. The FCC
barred the larger carriers from acquiring C-Block licenses in an effort
to satisfy sections 257 and 309(j) of the Communications Act, which
mandated that the FCC ensure that small businesses and businesses owned
by minorities and women have meaningful opportunities to participate in
the provision of spectrum-based services. [^2]/

In 2000, the FCC, in a compromise, modified its C-Block eligibility
rules to allow all auction applicants, including the larger wireless
carriers, to bid on C-Block licenses covering geographic areas with 2.5
million POPs or greater[^3]/ that were taken away from bankrupt company
Nextwave on account of Nextwave's inability to pay required license
installment payments. That decision effectively made more than half of
the C-Block licenses available for bidding by the larger wireless
carriers.

Despite the presence of a large number of successful entrepreneurial
company bidders, the C-Block spectrum auction held immediately following
modification of the C-Block eligibility rules was largely unsuccessful.
This was due to the fact that the U.S. Supreme Court in its Nextwave
bankruptcy decision subsequently invalidated the auction and required
the FCC to reinstate Nextwave's licenses. Thus, none of the
entrepreneurial companies that ended up as high bidders for the Nextwave
C-Block spectrum were able to realize their dreams of accessing the
spectrum.

Earlier this year, however, Nextwave and the FCC reached a bankruptcy
settlement providing that Nextwave would return some of its reinstated
C-Block licenses to the FCC. Soon thereafter the FCC announced that it
would put these C-Block licenses up for auction, indicated its intention
to apply the existing C-Block eligibility rules and set an auction date
of January 12, 2005. Despite the presence of clear language in the 2000
C-Block decision indicating that the bidder eligibility rules
established in that decision would apply to any subsequent auction of
C-Block spectrum, [^4]/ CTIA and several of the larger wireless carriers
are now urging the FCC to eliminate completely the C-Block spectrum
set-aside for entrepreneurial companies and allow the larger wireless
carriers to bid on all available C-Block licenses.

If the request to eliminate the C-Block spectrum set-aside is granted,
small, minority-owned and women-owned businesses will lose their last
and best opportunity to gain a foothold in the wireless market place.
Because this issue goes to the heart of the Diversity Advisory
Committee's mandate, it is incumbent upon the Diversity Advisory
Committee to take a strong and principled position against any further
erosion of the FCC's C-Block rules, including the current C-Block
spectrum set-aside.

**Draft Resolution Supporting Retention of C-Block Eligibility Rules for
Auction 58**

Whereas:

The Commission's Designated Entity ("DE") rules, including the broadband
PCS C-Block spectrum set-aside, 47 C.F.R. § 24.709, were developed to
satisfy the Commission's obligations under Section 309(j) of the
Communications Act to provide small and minority and women-owned
businesses ("Entrepreneurial Companies") with meaningful access to the
spectrum needed to provide wireless services;

The capital-intensive nature of broadband PCS and the difficulties
experienced by Entrepreneurial Companies in accessing capital make it
virtually impossible for Entrepreneurial Companies to secure broadband
PCS licenses when bidding against well-capitalized incumbents;

Decisions by the Commission since the promulgation of the original
C-Block rules have eroded the opportunity of Entrepreneurial Companies
to offer broadband PCS;

Notwithstanding significant market challenges, Entrepreneurial Companies
have successfully launched and expanded broadband PCS businesses and
stand ready to participate in the FCC's upcoming Auction 58;

Entrepreneurial Companies will be successful in raising the capital
needed to acquire and build out broadband PCS licenses only if the
capital markets perceive that the FCC's C-Block eligibility rules will
remain stable and certain;

Therefore, be it

RESOLVED that the Advisory Committee on Diversity for Communications in
the Digital Age strongly urges the Commission to maintain in Auction 58
its current DE rules, including the C-Block eligibility rules
established in 2000.

**Outline of the Arguments in Favor of Maintaining Existing C-Block
Rules for Auction 58**

-   **An overwhelming Number of Parties, Representing a Breadth of
    Interests, Have Urged the Commission to Continue to Enforce the
    C-Block Set-Aside As Is**

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-   **32 of 43 parties commenting have endorsed the Commission's
    existing C-Block rules**

-   **The Commission heard from a broad cross-section of interested
    parties**

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-   Individual designated entities ("DEs"), DE carriers, rural carriers
    and investors

-   "DE Supporters" coalition representing 11 national minority
    organizations, including League of United Latin American Citizens,
    NAACP and National Urban League support the existing rules

-   American Women in Radio and Television support the existing rules

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-   **The Commission Should Not Undertake to Weaken These Rules Even
    Further**

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-   **The Commission already scaled-back the DE rules for C-Block
    licenses in 2000**

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-   Very substantially reduced the number of Closed licenses in Auction
    No. 35

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-   **Auction No. 35 would have been highly successful (entrepreneurial
    businesses won 45% of spectrum) had the Supreme Court not required
    the FCC to reinstate the Nextwave licenses**

-   **The Commission is now merely enforcing the decisions reached in
    2000**

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-   With Auction No. 35, the Commission announced that those rules
    "*will apply to any subsequent actions of C or F block licenses,
    including any spectrum made available or reclaimed from bankruptcy
    proceedings in the future*"

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-   **"Changed circumstances" widely cited by CTIA and the larger
    carriers to eliminate Closed licenses actually point to the need to
    [increase]{.underline}, or at least maintain, Closed licenses**

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-   Increasing demand for spectrum by the larger carriers places even
    more pressure on small, minority-owned and women-owned business
    participation, as does continuing industry consolidation

-   Closed licenses are critical to DE participation, as the Commission
    originally recognized

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-   **39% fewer Closed licenses are available today vs. Auction No. 35**

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-   Closed licenses stayed with Nextwave or were assigned to Cingular

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-   **Current DE rules fulfill Congress's mandate under 47 U.S.C. §§ 257
    and 309(j) to enhance small business presence and participation of
    women and minorities**

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-   At a time marked by the decline of such participation in
    communications

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-   **Rule changes at this time would delay the C-Block auction, disrupt
    the capital markets and disrupt DE financing plans**

[^1]: / *See* 47 C.F.R. § 24.709.

[^2]: / Implementation of Section 309(j) of the Communications Act --
    Competitive Bidding, *Fifth Memorandum Opinion and Order*, 10 FCC
    Rcd 403, 414-15 ¶ 16 (1994).

[^3]: / *See* Amendment of the Commission's Rules Regarding Installment
    Payment Financing for Personal Communications Services (PCS)
    Licensees, *Sixth Report & Order and Order on Reconsideration*, 15
    FCC Rcd 16266 (2000).

[^4]: / *See* *Sixth Report & Order and Order on Reconsideration, 15 FCC
    Rcd at 16267 ¶1.*