**Before the**

**FEDERAL COMMUNICATIONS COMMISSION**

**Washington D.C. 20554**

In the Matter of )

)

BDPCS, Inc. ) )

)

BTA Nos. B008, B036, B055, B089 )

B110, B133, B149, B261, B298, B331 )

B347, B358, B391, B395, B407, B413, )

and B447, Frequency Block C )

**MEMORANDUM OPINION AND ORDER**

**Adopted: July 5, 2000 Released: July 11, 2000**

By the Commission:

**I**. **INTRODUCTION**

1\. The Commission has before it an Application for Review filed by
BDPCS, Inc. (\"BDPCS\")[^1]on June 19, 1997. BDPCS seeks review of a May
21, 1997, *Order*[^2] by the Wireless Telecommunications Bureau
(\"Bureau\") denying BDPCS\'s Petition for Reconsideration of the
Bureau\'s October 28, 1996, *Payment Order*[^3] assessing a default
payment against BDPCS with regard to the above-captioned licenses. The
*Payment Order* assessed a default payment against BDPCS in the amount
of \$67,695,653.23, pursuant to Section 24.704(a)(2) of the
Commission\'s rules.[^4] In its Application for Review, BDPCS requests
that its default payment obligation be reduced to \$24,930,564.73, and
that it obtain a three year extension of time in which to tender the
balance of the default payment.[^5] Subsequently, BDPCS filed two
supplements to its Application for Review,[^6] where BDPCS argues that
under the Commission's rules, no default payment should be imposed and
that it is entitled to a reimbursement of its \$7 million upfront
payment.[^7] In the alternative, BDPCS requests that the Commission
waive the default payment rule, Section 24.704,[^8] or the default
payment.[^9] Finally, BDPCS has offered to withdraw its pending filings
in exchange for a reduction in the default payment to \$3.5 million and
the release of the remaining \$3.5 million of the original \$7 million
upfront payment. For the reasons discussed below, we deny BDPCS\'s
Application for Review. In so doing, we also deny BDPCS's waiver request
contained in its Second Supplement to Application for Review.

**II. Background**

2\. On May 6, 1996, the Commission concluded the Broadband PCS C block
auction (Auction No. 5). BDPCS was the successful high bidder on 17
licenses, with a cumulative total net bid price of \$873,783,912.75. On
May 8, 1996, the Commission announced by Public Notice[^10] that,
pursuant to 47 C.F.R. § 24.711(a)(2), winning bidders would be required
to submit their first down payment (five percent of their net winning
bids) by May 15, 1996.[^11] Accordingly, BDPCS, a winning bidder
claiming small business status, was required to bring its total funds on
deposit with the Commission to five percent of its total net bid amount,
or \$43,689,195.64.[^12] Accounting for BDPCS\'s \$7,000,000 upfront
payment, BDPCS was required to remit a down payment in the amount of
\$36,689,196.64.[^13]

3\. On May 15, 1996, BDPCS filed an Emergency Petition seeking a limited
waiver of the down payment deadline because of the withdrawal of all of
its intended sources of financing.[^14] In its petition, BDPCS detailed
a series of events that it claims resulted in its loss of financing.
BDPCS claimed that its parent company, QuestCom, Inc., ("QuestCom") had
made arrangements with US West Communications (\"US West\") to receive a
bridge loan for the required down payment.[^15] BDPCS also claimed that
QuestCom intended to repay the bridge loan after completing an initial
public offering that was to take place while BDPCS\'s C block license
applications were pending.[^16] BDPCS contended that QuestCom continued
to search for additional and alternative short-term and permanent
financing from several parties. In particular, QuestCom focused on
obtaining a loan from a large financial institution, and an initial
public offering with Merrill Lynch as the lead underwriter.[^17] BDPCS
stated that financing of its payment obligations seemed secure until May
2, four days before the PCS C block auction closed, when it lost its US
West bridge loan.[^18] In addition, BDPCS noted that four days later, on
May 6, Merrill Lynch withdrew as the lead underwriter for QuestCom\'s
initial public offering.[^19] Finally, BDPCS claimed that because of the
short time remaining before the first down payment was due, it was
unable to complete its financing transactions with a substitute
financial institution.[^20] BDPCS stated that, after the down payment
deadline, QuestCom selected Bear Stearns to serve as lead investment
banker, thereby giving BDPCS the financial capability to attract capital
for the deployment and operation of its PCS systems.[^21]

4\. On May 20, 1996, the Bureau denied BDPCS's request for waiver of the
Commission's down payment deadline because BDPCS failed to show that
special circumstances warranted a deviation from the general down
payment rule, or that such a deviation would serve the public
interest.[^22] On May 22, 1996, BDPCS filed a Petition for
Reconsideration of the *Waiver Order*, contending that the Bureau failed
to give BDPCS\'s waiver request the \"hard look\"[^23] required by the
Commission\'s rules and applicable case law.[^24] Specifically, BDPCS
contended that the Bureau ignored the unique facts and circumstances of
its case. According to BDPCS, these circumstances included the fact that
BDPCS acted with reasonable diligence to meet the down payment deadline,
and that BDPCS could not have predicted that it would lose its expected
sources of funding shortly before payment was due.[^25] BDPCS also
claimed that the Bureau inappropriately relied upon Commission IVDS
auction waiver decisions that are factually distinguishable from its
case because BDPCS, unlike the IVDS bidders, attempted to secure back-up
financing and made attempts to raise funds from several sources.[^26] In
addition, BDPCS stated that the Bureau did not address, or recognize,
the fact that until the week before the close of the auction, BDPCS
reasonably believed that it would be capable of meeting its financial
obligations.[^27] On May 30, 1996, the Bureau denied the Petition for
Reconsideration, reaffirming its decision that BDPCS failed to present
facts that warranted a deviation from the general rule, and failed to
show that the grant of a waiver would be in the public interest.[^28]

5\. On May 30, 1996, the Bureau also released a *Public Notice*
announcing that the 17 licenses on which BDPCS had defaulted would be
offered in a subsequent auction, Auction No. 10.[^29] On July 16, 1996,
Auction No. 10 concluded and bidders other than BDPCS won the 17
licenses on which BDPCS had defaulted.[^30] On June 28, 1996, BDPCS
filed an Application for Review of the Bureau\'s decision denying the
waiver request.[^31] The Commission denied that Application for Review
on January 6, 1997.[^32]

6\. On October 28, 1996, the Bureau released the *Payment Order*,
assessing BDPCS a default payment in the amount of \$67,695,653.23. The
default payment contains two separate payments:

-   The first portion of the default payment represents the total
    difference between BDPCS\'s winning bids and the amount of the
    winning bids in Auction No. 10 for those licenses that attracted
    lower winning bids in Auction No. 10 (cumulatively
    \$42,765,088.50).[^33]

-   The second portion of the default payment is an additional three
    percent of the lower of BDPCS\'s winning bid and the subsequent
    winning bid for each of the 17 defaulted licenses (cumulatively
    \$24,930,564.73).[^34]

-   For a total default payment in the amount of \$67,695,653.23.

7\. On November 27, 1996, BDPCS filed a Petition for Reconsideration of
the *Payment Order*,[^35] seeking to reduce the amount of the default
payment and to obtain a three-year deferral of the payment deadline. On
May 21, 1997, the Bureau denied the Petition for Reconsideration,
reaffirming its decision that the facts presented by BDPCS did not
provide a valid basis for reconsidering the Bureau\'s imposition of a
\$67,695,653.23 default payment on BDPCS.[^36] In response to the
Bureau\'s denial of its petition, BDPCS filed the Application for Review
that is now before us. In its Application for Review, BDPCS raises the
same arguments with the Commission that have been previously rejected by
the Bureau. In addition, in its supplemental filings, BDPCS argues,
under a variety of novel theories, that no default payment should be
imposed and that BDPCS is entitled to a reimbursement of its \$7 million
upfront payment.[^37] Finally, BDPCS has offered to withdraw its pending
filings in exchange for a reduction in the default payment to \$3.5
million and the release of the remaining \$3.5 million of the original
\$7 million upfront payment. For the reasons discussed below, we deny
BDPCS\'s Application for Review[^38] and its Waiver Request.[^39]

**III. DISCUSSION**

8\. In its Application for Review, BDPCS seeks to have its default
payment obligation reduced to \$24,930,564.73, which would represent a
payment of three percent of the lower of BDPCS\'s bid or the winning bid
when the licenses were subsequently offered for auction, as mandated in
Sections 1.2104(g)(2) and 24.704(a)(2) of the Commission\'s rules.[^40]
BDPCS requests that it be excused from paying the remainder of the
default payment required in our rules, *i.e.*, the total difference
between BDPCS\'s winning bids and the amount of the winning bids in
Auction No. 10 for those licenses that attracted lower winning bids in
the subsequent auction (cumulatively \$42,765,088.50). BDPCS reasons
that assessment of a default payment of more than \$67 million on a
small start-up company would be inequitable and contrary to the public
interest.[^41] BPDCS makes this argument despite the fact that it
defaulted on bids totaling \$873,783,912.75.

9\. In its supplemental filings, BDPCS argues that the Commission lacks
statutory authority to impose the default payment. Further, BDPCS alters
its argument with respect to Sections 1.2104(g)(2) and 24.704(a)(2), and
argues that under the Commission's rules no default payment should be
imposed and that BDPCS is entitled to a reimbursement of its \$7 million
upfront payment.[^42] In addition, BDPCS maintains that the default
payment is commercially unreasonable, and violates both the Due Process
clause of the Fifth Amendment[^43]and the Eighth Amendment's prohibition
against excessive fines.[^44] Finally, BDPCS has offered to withdraw its
pending filings in exchange for a reduction in the default payment to
\$3.5 million and the release of the remaining \$3.5 million of the
original \$7 million upfront payment.[^45]

10\. We note here that the First Supplement to the Application for
Review and the Second Supplement to the Application for Review are not
timely as they are outside the pleading cycle established in Section
1.115 of our rules, which requires Applications for Review and
supplements thereto to be filed within 30 days of public notice of the
Commission's action on delegated authority.[^46] Further, even if the
supplement had been timely filed so that it properly could be considered
part of BDPCS's Application for Review, the supplement is also
procedurally deficient because it raised new questions of law and seeks
a new remedy that were not presented to the Bureau. Section 1.115 (c) of
the Commission's rules states that no application for review will be
granted if it relies on questions of law upon which the designated
authority had been afforded no opportunity to pass. Thus, the First
Supplement to the Application for Review and the Second Supplement to
the Application for Review are procedurally deficient and warrant
dismissal on their face. Further, as we establish below, even if we
assume that the First and Second Supplements to the Application for
Review were timely filed, we believe the application for review should
be denied on the merits.

11\. After careful review of the facts, we find that the Bureau was
correct in assessing BDPCS a default payment in the amount of
\$67,695,653.23 in accordance with our rules governing defaults by high
bidders after the close of an auction. We conclude that the
circumstances presented here do not support a reduction in, or waiver
of, BDPCS\'s default payment.

A. The FCC Possesses Authority Under the Communications Act to Impose
the Default Payment

12\. In its Second Supplement to Application for Review, BDPCS contends
that the Commission lacks authority under either Sections 309(j)(4)(B)
or 4(i) of the Communications Act to impose a \$67 million default
payment.[^47] BDPCS claims that Section 309(j) only authorizes penalties
for a "licensee's" failure to perform, and not for a performance failure
by a "bidder" in an auction.[^48] Additionally, BDPCS argues that
Section 4(i),[^49] which provides the Commission with rule making
authority, does not give the Commission substantive authority "to impose
commercially unreasonable penalties on auction participants."[^50] As we
explain below, we reject BDPCS's argument as it ignores the language and
purpose of Section 309(j) of the Communications Act and mischaracterizes
the nature of the default payment rule.

13\. The Communications Act itself specifically directs the Commission
to establish a competitive bidding system and provides that in designing
auction methodologies the Commission "shall include safeguards to
protect the public interest in the use of the spectrum and shall seek to
promote the . . . development and rapid deployment of new technologies,
products, and services for the benefit of the public, . . . promoting
economic opportunity and competition . . . recovery for the public of a
portion of the value of the public spectrum resource made available for
commercial use and avoidance of unjust enrichment through the methods
employed to award uses of the resources . . . ."[^51] Thus, Congress
specifically tasked the Commission with establishing a competitive
bidding methodology that promotes a broad range of goals. Implicit in
the directive is the authority to establish regulations that protect the
integrity of the competitive bidding system. Specifically, when
prescribing regulations to implement the auction methodologies, Congress
directed the Commission to "include performance requirements, such as
appropriate deadlines and penalties for performance failures . .
.."[^52] BDPCS argues that this language only applies to licensees, and
not to bidders.[^53] However, the plain text of the statute does not
support such a limited interpretation. Thus, as we have previously
recognized when enacting the default payment rule, Sections 309(j)(3)
and 309(j)(4)(B) provide us with the requisite statutory authority.[^54]

14\. The broader purpose of Section 309(j) was to create an efficient
regulatory regime based on the congressional determination that
competitive bidding is the most effective way of allocating resources to
their most productive uses.[^55] As the House Committee on Energy and
Commerce explained, "\[a\] carefully designed system to obtain
competitive bids from competing qualified applicants can speed delivery
of services, promote efficient and intensive use of the electromagnetic
spectrum, prevent unjust enrichment, and produce revenues to compensate
the public for the use of the public airwaves."[^56] Our bidding rules
are an intrinsic part of the "carefully designed system" Congress tasked
the Commission with implementing.

15\. In keeping with our statutory mandate, we recognized that
"\[a\]uction designs that award licenses to the parties that value them
most highly will best achieve" the goals set forth by Congress.[^57]
Accordingly, through our rulemaking process, we established rules to
protect the integrity of the auction process. In the *Competitive
Bidding* *Second Report and Order*, we established the requirement of
full and timely down payment to ensure that bidders are financially
capable of constructing and operating their systems.[^58] We indicated
that the down payment provisions in Sections 1.2107(b) and 24.711(a)(2)
of our rules were designed to ensure that the ultimate purpose of the
auction, which is to encourage and facilitate the provision of reliable
service to the public, is not undermined by winning bidders that lack
the financial capability to pay for the license, construct systems, and
provide service to the public.[^59] Timely payment of both upfront and
down payment obligations is one of the best indicators prior to award of
licenses of a bidder\'s *bona fide* ability to pay.[^60] In fact, the
Court of Appeals for the District of Columbia, in affirming a denial of
a waiver request, recently noted that the Commission "could reasonably
focus on the importance of meeting payment deadlines" and could also
"reasonably rely on strict enforcement of the deadlines to provide an
'early warning' that a winning bidder unable to comply with the payment
deadlines may be financially unable to meet its obligation to provide
service to the public."[^61]

16\. Similarly, the default payment provisions are critical for
maintaining the integrity of the auction process by discouraging
insincere bidding and ensuring that licenses end up in the hands of
those parties that value them the most and have the financial
qualifications necessary to construct operational systems and provide
service.[^62] The announcement of the winning bidder in an auction
conducted by the Commission, like the acceptance of high bids in
auctions in other settings, [^63] terminates the bidding and
establishes, as of the moment of the acceptance of the high bid, the
binding obligation to pay the winning bid price for the licenses.[^64]
As the United States Court of Appeals for the Second Circuit recently
noted, a high bidder becomes "obligated to the FCC for the full amount
of its winning bid at the close of the . . . auction."[^65] Whether a
payment default or disqualification thereafter breaches the obligation,
the winning bidder\'s liability remains a function of the high bid and
is based on the obligation that was incurred at auction.[^66] Without
the default payment rules, a winning bidder might consider adopting a
strategy of waiting until the actual license grant before deciding
whether or not to accept the license, to the detriment of other bidders
and the efficient and fair functioning of the auction process. Given the
importance of the down payment requirement, we previously declined to
grant BDPCS a waiver of the down payment deadline for the 17 licenses it
won in the broadband PCS C block auction.[^67]

17\. As described in the *Competitive Bidding Second Report and Order*,
the default payment rule has two parts.[^68] The first part of the
default payment rule, the deficiency portion, applies when a high bidder
withdraws before the close of the simultaneous multiple round auction,
and when a winning bidder defaults after the close of such an auction.
Under either factual situation, the Commission imposes a payment equal
to the difference between the withdrawn bid and the amount of the
winning bid the next time the license is offered by the Commission.[^69]
However, under the second part of the rule, if a winning bidder defaults
after the close of such an auction, the defaulting bidder will be
required to pay the penalty contained in the first part of the rule,
plus an additional payment of three percent of the winning bid the next
time the license is offered by the Commission, or three percent of the
amount of the defaulting bidder's bid, whichever is less.[^70] We added
this additional payment for those that withdraw after the auction closed
"to provide incentive for bidders wishing to withdraw their bids to do
so prior to the close of the auction." We noted that:

> It is appropriate to create such an incentive because a withdrawal
> that occurs after the auction closes (default) is likely to be more
> harmful than one that occurs before closing. First, default reduces
> the efficiency of the assignment process. If withdrawal occurs before
> the auction closes other bidders will have greater opportunities to
> revise their bidding strategies to account for the availability of the
> withdrawn license. Once the auction closes, however, only those
> licenses on which bidders defaulted (plus any license not sold during
> the auction) will be put up for re-auction, so other bidders will have
> little opportunity to revise their strategies. Thus, default would
> reduce the likelihood that licenses will be assigned to those who
> value them the most. Second, default imposes extra costs on the
> government. If a bidder defaults, the government must generally incur
> the additional expense of re-auctioning the license. In contrast, the
> administrative cost of announcing a bid withdrawal prior to the close
> of an auction and accepting additional bids would be minimal.[^71]

In establishing this rule, we recognized that "\[a\]llowing bidders to
withdraw bids without ever paying a penalty would encourage insincere
bidding. Insincere bidding, whether purely frivolous or strategic,
distorts the price information generated by the auction process and
reduces its efficiency."[^72] We also addressed the issue of our
statutory authority and expressly stated that Section 309(j)(3) and
(4)(B) "afford us with ample authority to impose such" payments for bid
withdrawal.[^73]

18\. Thus, the default payment rules have a regulatory purpose related
directly to the Commission's implementation of the congressional mandate
to conduct competitive spectrum auctions. As the Second Circuit noted in
*Nextwave*, the Commission gave considerable thought to the problem of
how to "deter frivolous or insincere bidding."[^74] The Commission
decided that it would be "critically important to the success of our
system of competitive bidding . . .\[to\] provide strong incentives for
potential bidders to make certain of their qualification and financial
capabilities before the auction so as to avoid delays in the deployment
of new services to the public that would result from litigation,
disqualification, and reauction."[^75]

19\. In light of the statutory mandate to create a competitive bidding
methodology and establish regulations to implement the methodology, the
Commission possesses authority to establish rules that protect the
integrity of the auction process. As shown above, our rules have a
regulatory purpose expressly tied to the statutory mandate. Accordingly,
BDPCS's challenge to our authority to institute default payment rules is
rejected.

B.  **Application of the Default Payment Rule**

20\. In its Application for Review, BDPCS continues to urge that its
default obligation be reduced because some of the defaulted licenses
attracted higher bids in Auction No. 10.[^76] It argues that gains
realized from the subsequent auction of licenses for which the
subsequent winning bid was higher than BDPCS\'s bid should be used to
offset losses incurred on those licenses for which the winning bid was
lower than the defaulting bid.[^77] In essence, BDPCS is asking to
aggregate "gains" on the licenses against losses on all the licenses.
BDPCS ignores the fact that each bid was a separate and independent
obligation. Thus, BDPCS argues that it should only pay the three percent
payment, which amounts to \$24.9 million.[^78] BDPCS disagrees with the
Bureau\'s decision that such a reduction in the default payment would
run counter to the purpose of the default payment rule, which is to
deter the type of conduct engaged in by BDPCS.[^79] Finally, BDPCS
argues that the Commission itself has recognized that any default
payment that exceeds the amount of funds the bidder has on deposit is,
in and of itself, too severe.[^80]

21\. In its First Supplement to the Application for Review, BDPCS
changes its aggregation argument alleging that the "\$30.6 million gain"
from the subsequent auction should be used as an offset in calculating
the three percent payment.[^81] Thus, the \$24.9 million three percent
payment would be offset by the \$30.6 million gain, resulting in a
negative amount of \$5.7 million. Having concluded that the default
payment is a negative number, BDPCS seeks return of its entire upfront
payment. For the reasons we will explain below, BDPCS's original and
subsequent arguments are incorrect and are rejected.

22\. As detailed above, the default payment rule contains two parts. The
first part, the deficiency portion, is applicable to the high bidder
that withdraws during the course of the auction, and to a high bidder
that defaults after the auction closes.[^82] The second part of the
rule, the three percent payment, is only applicable to the high bidder
that defaults after the auction is closed.[^83] Notably, the
*Competitive Bidding Second Report and Order* specifically refers to
these two parts as separate penalties the defaulting bidder will be
required to pay.[^84]

23\. As a preliminary matter, the clear reading of the rules does not
support BDPCS's aggregation argument. The Commission\'s default rules
contemplate that default payments will be calculated on a
license-by-license basis.[^85] Thus, if one bidder defaults on multiple
licenses, the total default payment assessed relative to those licenses
would be the same as if a different bidder had defaulted on each of the
licenses. Further, BDPCS's contention that either of the separate
penalties the defaulting bidder is required to pay could be a negative
number is unpersuasive. We agree with the Bureau that allowing default
payments to be reduced in the manner sought by BDPCS would have the
effect of minimizing the impact of our default payment rule.[^86]

24\. BDPCS's newly raised argument that the first portion of the default
payment calculated under the first part of the rule might lead to a
negative number is incorrect. As we explained above, the first part of
the default payment rule, the deficiency portion of the rule, provides
that no "withdrawal penalty"[^87] will be assessed if the subsequent
winning bid exceeds the withdrawn bid. Thus, the rule provides that the
default payment paid by the winning bidder that defaults after the
auction is concluded is subject to a default payment under the first
part of the rule, the "deficiency" portion, plus a default payment under
the second part of the rule, the additional three percent payment. The
default payment rule does not state, as BDPCS contends, that the
Commission will add the three percent to the "calculation" made in first
part of the rule. Under the interpretation of the default payment rule
that BDPCS now advances, any time a subsequent auction results in a
winning bid that is at least three percent higher than the defaulting
bidder's winning bid, the defaulting bidder would owe no default payment
at all. Clearly, such a result is contrary to the plain reading of the
rule, and the Commission's intent to establish a system that would
"deter frivolous or insincere bidding." Further, such a reading of the
rule undermines the integrity of the auction process.

25\. BDPCS also argues that the Commission itself recognized that any
default payment that exceeds the amount of the funds the bidder has on
deposit is, in and of itself, too severe.[^88] However, the Commission
did not conclude that any default payment that exceeds the amount of
funds the bidder has on deposit is, in and of itself, too severe. To the
contrary, the Commission merely observed that in some cases, forfeiture
of all funds on deposit could be too severe a payment, and for this
reason established the two-part default payment.[^89] Thus, the
formulated default payment rule allows a bidder the return of any
portion of its deposit that exceeds a payment calculated according to
the formula. In adopting the two-part default payment rule, the
Commission did not conclude that the defaulting bidder should always owe
the lesser of the amount on deposit or the payment calculated under the
rule. The Commission therefore did not preclude a situation where the
payment owed under the adopted default payment rule is greater than the
amount of the bidder has on deposit. The language of the rule evidences
that the rule was intended to be applied to bidders that might default
or be disqualified in different points in the application process, and
therefore would have different types or numbers of payments on deposit
with the Commission. As the *Competitive Bidding Second Report and
Order* makes clear, the payment described in Section 24.704 of our rules
is a formula that was devised to ensure that the default payment bears a
rational relationship to the harm caused. Accordingly, for the above
mentioned reasons, we reject BDPCS\'s interpretation of our rules.

> **C. BDPCS's Financial Difficulties Do Not Constitute Grounds For
> Waiver of the Rules**

26\. In support of its Application for Review, BDPCS argues that the
unexpected unavailability of a bridge loan from US West and the
withdrawal of Merrill Lynch as the lead underwriter of (BDPCS parent)
QuestCom's initial public offering are \"dire\" circumstances that
warrant waiver of the default payment rule, or the default payment
itself, in whole or in part.[^90]

27\. BDPCS argues that it merits a reduction of its default payment
because its financial difficulties began only four days before the close
of the C block PCS auction, and because it lost not one, but two
expected sources of funding.[^91] Additionally, BDPCS cites the loss of
its 17 PCS licenses due to its default, along with the assessment of its
substantial default payment, as circumstances so \"dire\" as to be
worthy of special consideration.[^92] We find this reasoning somewhat
circular. We do not think that assessment of the very payment that BDPCS
seeks to have reduced constitutes, in and of itself, a \"special\"
circumstance that necessitates our reduction of such payment. Moreover,
with respect to BDPCS\'s loss of its expected sources of funding, we
have previously stated that the failure of a third party to perform its
contractual obligations in dealing with an auction applicant cannot
constitute a special circumstance justifying waiver of the Commission\'s
rules governing auctions.[^93] This holds true regardless of whether the
rules in question are the down payment rules or default payment rules. A
departure from this position would require that the Commission
effectively police the private business activities of each bidder.[^94]
If BDPCS believes that the position in which it now finds itself is due,
in whole or in part, to the wrongful actions of third parties with which
it was dealing, then BDPCS could seek an adequate remedy available to it
in a court of competent jurisdiction.

28\. Furthermore, we continue to believe that BDPCS\'s efforts to seek
back-up financing until the down payment deadline are not circumstances
that justify special consideration.[^95] Although BDPCS may have
attempted to secure back-up financing and to obtain new sources of funds
up until its down payment was due, such conduct does not warrant a
reduction of the default payment, because, as we have previously
explained, BDPCS could have first withdrawn from all or some markets in
the auction and then continued to pursue back-up financing.[^96] BDPCS
has admitted that four days prior to the close of the auction, it began
to experience financial difficulties, and yet it remained active in the
auction. Had BDPCS withdrawn from the auction, and then continued to
pursue its back-up financing, it would have been subject to withdrawal
payments, which would have been significantly less than the default
payment actually assessed.[^97] The three percent payment in the
Commission\'s default payment rule was designed to encourage a bidder in
BDPCS\'s position to withdraw prior to the close of the auction,
resulting in less disruption to the auction process.[^98] Although it
had sufficient time to withdraw its bids, BDPCS remained in the auction
and continued to bid, rather than avail itself of the bid withdrawal
option. Under such circumstances we do not find that it would serve the
public interest to reduce BDPCS\'s default payment obligation.

29\. We agree with the Bureau\'s finding that the loss of all intended
sources of financing does not diminish BDPCS\'s financial responsibility
under down payment and default payment rules. We have previously
recognized that it is critically important to the success of our
competitive bidding system that potential bidders understand that a
substantial payment will be assessed against them if they default on a
balance due.[^99] In seeking to reduce the damages it is obligated to
pay as a result of its breach of this underlying obligation, BDPCS would
alter the balance between encouraging participation in the auction and
providing the redress for default that the Commission struck in
establishing the damages provisions set forth in Sections 1.2104(g)(2)
and 24.704(a)(2) of our rules. Sections 1.2104(g)(2) and 24.704(a)(2)
establish the damages that are incurred in the event the winning bidder
breaches its obligation to pay the auction price for the licenses. These
rules are central to the integrity of the Commission\'s auction process
and have been strictly enforced.[^100]

30\. The very purpose of the default payment rules is \"to provide
strong incentives for potential bidders to make certain of their
qualifications and financial capabilities before the auction so as to
discourage default and avoid delays in the deployment of new services to
the public that would result from litigation, disqualification, and
reauction.\"[^101] The default payment rules are intended to encourage
bidders to make secondary or back-up financial arrangements to ensure
timely payment in the event of unanticipated difficulties.[^102] We have
previously held, and we reaffirm here, that \"the Commission cannot take
into account the private business arrangements that an applicant has
made to finance its successful bid.\"[^103] The Commission has been
consistent in strictly enforcing this standard, emphasizing that the
unanticipated lack of financing is not a special circumstance warranting
a deviation from the rule requiring a full and timely down
payment.[^104] Similarly, we believe that BDPCS has not presented a
special circumstance warranting deviation from the default payment
rules.

31\. BDPCS also argues that it would be in the public interest to reduce
its default payment, because, as BDPCS maintains, it did not act
irresponsibly or in bad faith during the auction.[^105] However, in
affirming our denial of BDPCS\'s request for waiver of the down payment
rule, we made clear that BDPCS\'s motivation in not withdrawing from the
auction on May 2, 1996, was not relevant to our determination that
withdrawal was the appropriate option when BDPCS lost its
financing.[^106] We do not find it necessary at this point to engage in
the characterizations that BDPCS suggests, because our default payment
rules do not require us to make a specific finding of \"bad faith\" as a
prerequisite to imposition of the full payment specified in Sections
1.2104(g)(2) and 24.704(a)(2) of the Commission\'s rules.[^107] Contrary
to BDPCS\'s assertion, the decision of the Bureau did not rest on a
finding of "bad faith" or that BDPCS knew with certainty on May 2, 1996,
that it would not have financing.[^108] As we explained in our *Waiver
Order on Reconsideration*, such a finding is immaterial to our
analysis.[^109] However, the fact remains that once US West withdrew its
financial support, BDPCS at least knew that its financing was uncertain,
but refrained from withdrawing its standing high bids and submitted
several high bids on one license (License B391) without any assurance
that it could meet its payment obligations. When it decided not to
withdraw before the close of the auction, BDPCS either knew or should
have known of the substantial default payments that ultimately would be
imposed on it if it did not secure financing. BDPCS should have been
cognizant of the risk that it was assuming by not withdrawing.
Regardless of BDPCS's motivations for its actions, its action is the
sort our rules are intended to deter. For these reasons, we do not agree
with BDPCS that a waiver of its default payment would be in the public
interest.

> **D. The Application of the Default Payment Rule Accords with Due
> Process**

32\. In its second supplement to the Application for Review, BDPCS's
argues that application of the default payment rule to it violates the
Due Process clause of the Fifth Amendment. The Due Process clause of the
Constitution requires that notice be given before a payment is
imposed.[^110] BDPCS argues that the application of the default payment
in this instance violated due process as it could not have anticipated,
and accordingly had no notice, that the Commission would assess a \$67
million default payment.[^111] As we discussed above, the application of
the rule in this case is clearly in accord with the rule's plain reading
and our explanation of the rule in the *Competitive Bidding Second
Report and Order*.[^112] Any reasonable individual reading the rules
prior to the auction would have been aware of the risks entailed in
withdrawing or defaulting on a high bid. Further, as we discussed above,
BDPCS's interpretation of the rule is strained and leads to illogical
results (*e.g*., the assessment of a negative payment).[^113] Thus, as
the application of the rule in this case accords with the rule's plain
meaning, and the interpretation offered by BDPCS is unreasonable, notice
was given, and the imposition of the default payment comports with the
Due Process clause of the Fifth Amendment. Accordingly, BDPCS's argument
is rejected.

E. Application of the Default Payment Rule Does Not Violate the
Excessive Fines Clause of the Constitution

33\. In its Second Supplement to Application for Review, BDPCS argues
that the Excessive Fines clause of the Eighth Amendment[^114] prohibits
the imposition of the default payment in this case. The Supreme Court
has recognized that a civil penalty may violate the Eighth Amendment\'s
proscription against excessive fines.[^115] However, to prevail on its
argument, BDPCS must not only establish that the default payment is
punitive in nature, but also establish that it is grossly
disproportionate to the harm caused.[^116] BDPCS has failed to do so,
accordingly, its argument is rejected.

34\. As the Supreme Court has stated, "at the time of the drafting of
the \[Eighth\] Amendment, the word 'fine' was understood to mean a
payment to a sovereign as punishment for some offense."[^117] Thus, in
order to violate the Excessive Fines clause a fine must be punitive in
nature.[^118] BDPCS's argument fails here as the default payment is not
punitive in nature. In fact, as explained at length in the *Competitive
Bidding Second Report and Order*, and as noted above, the default
payment rule was expressly constructed to be in proportion to the injury
caused, thus it is remedial in nature.[^119] Assuming, however, for the
sake of argument, that the default payment could be considered punitive
in nature, it is not grossly disproportionate to the harm caused. On the
contrary, the default payment is proportionate to the number of licenses
and amount of bids that BDPCS defaulted on. Although BDPCS defaulted on
bids totaling \$873,783,912.75, the total default payment is only
approximately seven percent of that figure. Thus, the default payment is
proportionate to the injury occasioned by BDPCS's default.[^120]
Further, as explained above, the payment under the first part of the
rule, the deficiency portion of the rule represents a rough estimate of
the direct damages suffered. Specifically, the first part of the rule
ensures that the Commission will not suffer where the ultimate purchase
price paid for a license is less than the high bid made by the
defaulting bidder. The second part of the default payment rule, the
three percent payment, roughly apportions a commission that would be
paid in the secondary market if the high bidder was forced to
subsequently offer the license for sale.[^121] Accordingly, as the rule
is remedial in nature and proportionate to the injury caused, it does
not violate the Excessive Fines clause of the Eighth Amendment.
Therefore, we reject BDPCS's argument.

**F. The Default Payment Is Commercially Reasonable**

35\. Finally, BDPCS argues that the default payment is commercially
unreasonable and operates as a punitive penalty.[^122] BDPCS is
mistaken. As we established above, the default payment is remedial in
nature, and accordingly, is authorized under the statute. Thus, the
contract law principles cited by BDPCS are not directly applicable.
However, even when viewed under the rubric of commercial cases cited by
BDPCS, the default payment rule is appropriate and enforceable.
Accordingly, we reject BDPCS's argument.

36\. When parties enter into a contract, the law allows them to
apportion risk through the establishment of a liquidated damages
clause.[^123] A liquidated damages clause will be enforced as long as
\"the amount stipulated for is not so extravagant, or disproportionate
to the amount of property loss, as to show that compensation was not the
object aimed at or as to imply fraud, mistake, circumvention or
oppression.\"[^124] With that narrow exception, "\[t\]here is no sound
reason why persons competent and free to contract may not agree upon
this subject as fully as upon any other, or why their agreement, when
fairly and understandingly entered into with a view to just compensation
for the anticipated loss, should not be enforced." [^125] The
reasonableness of the clause is viewed as of the commencement of the
contract, and not with twenty-twenty hindsight.[^126] At the time BDPCS
entered into the auction, the rules clearly provided for the existence
of a default payment. Such default payment approximately functions as a
rough estimate for damages suffered by the Commission in the event of
default. This rule, similar to liquidated damages clauses, apportions
risk in a fair and equitable manner. Further, the rule serves to protect
against the tangible injuries suffered by the public in general and
other bidders in particular when a bidder engages in frivolous bidding.
The fact that BDPCS is dissatisfied with the actual application of the
rule to the facts presented here does not make the rule commercially
unreasonable or otherwise contrary to basic principles of contract law.
Accordingly, BDPCS's argument is rejected.

**G. Deferral of Payment**

37\. Finally, BDPCS asks us to reduce its default payment and grant it a
three-year deferral of the default payment deadline, because BDPCS
cannot pay the \$67,695,653.23 payment at this time.[^127] BDPCS
contends that its chances of raising \"some or all of the requisite
funds\" will be enhanced if we grant it the relief that it
requests.[^128] Again, we decline to do so because it would
significantly reduce the impact of our default payment rule and
undermine the integrity of our competitive bidding system. However, we
note that BDPCS has, in effect, received a deferral of payment, as the
*Payment Order* was originally assessed on October 28, 1996.
Accordingly, we agree with the Bureau\'s reasoning that we would
contravene Commission policy if we were to reduce default payment
obligations based on a bidder\'s inability to pay, because such a
practice would encourage bidders to bid without secure financial
backing.

**IV. ORDERING CLAUSES**

38\. For the reasons discussed above, we hereby deny BDPCS\'s
application for review of the Commission\'s default payment order in
connection with BDPCS\'s failure to submit the required down payment for
the seventeen licenses it won in the broadband PCS C block auction. We
also deny BDPCS's waiver request.

39\. Accordingly, it is ORDERED that the Application for Review filed by
BDPCS, Inc. on June 19, 1997 IS DENIED.

40\. It is FURTHER ORDERED that the Waiver Request contained in BDPCS's
Second Supplement to Application for Review, filed by BDPCS, Inc. on
November 30, 1998 IS DENIED.

41\. It is FURTHER ORDERED that the First Supplement to Application for
Review filed by BDPCS, Inc. on October 16, 1998, and the Second
Supplement to Application for Review filed by BDPCS on November 30, 1998
ARE DISMISSED.

42\. It is FURTHER ORDERED that BDPCS is assessed a default payment in
the amount of \$67,695,653.23, as computed in Attachment A of the
October 28, 1996 *Payment Order*. It is FURTHER ORDERED that payment of
\$60,695,653.23 of this amount is to be made in accordance with the
instructions set forth in Attachment A to this Order within thirty (30)
days from the release of this Order.

43\. It is FURTHER ORDERED that this Order SHALL BE sent to the
applicant by certified mail, return receipt requested.

FEDERAL COMMUNICATIONS COMMISSION

Magalie Roman Salas

Secretary

[^1]: BDPCS, Inc., BTA Nos. B008, B036, B055, B089, B110, B133, B149,
    B261, B298, B331, B347, B358, B391, B395, B407, B413, and B447,
    Frequency Block C, Application for Review (filed June 19, 1997)
    (\"Application for Review\").

[^2]: BDPCS, Inc., BTA Nos. B008, B036, B055, B089, B110, B133, B149,
    B261, B298, B331, B347, B358, B391, B395, B407, B413, and B447,
    Frequency Block C, *Order*, DA 97-1066, 12 FCC Rcd. 6606 (WTB 1997)
    (\"*Order*\").

[^3]: BDPCS, Inc., BTA Nos. B008, B036, B055, B089, B110, B133, B149,
    B261, B298, B331, B347, B358, B391, B395, B407, B413, and B447,
    Frequency Block C, *Order*, DA 96-1768, 11 FCC Rcd. 14399 (WTB 1996)
    (\"*Payment Order*\").

[^4]: Section 24.704(a)(2) previously provided that \"\[i\]f a winning
    bidder defaults or is disqualified after the close of such an
    auction, the defaulting bidder will be subject to the penalty in
    paragraph (a)(1) of this section plus an additional penalty equal to
    three (3) percent of the subsequent winning bid. If the subsequent
    winning bid exceeds the defaulting bidder\'s bid amount, the 3
    percent penalty will be calculated based on the defaulting bidder\'s
    bid amount. These amounts will be deducted from any upfront payments
    or down payments that the defaulting or disqualified bidder has
    deposited with the Commission.\" 47 C.F.R. § 24.704(a)(2) (1996);
    s*ee also,* 47 C.F.R. § 1.2104(g)(2) (1996). Section 1.2104(g), and
    Section 24.704(a) originally contained the same language. However,
    in connection with the Commission's adoption of generic auction
    rules in 1997, the Commission amended § 24.704 to read " See §
    1.2104 of this chapter." The language of Section 1.2104(g) itself
    was only changed to replace the word "penalty" with the word
    "payment." In all other respects, the rule remained the same. As the
    rule has not changed, other than the substitution of the word
    "payment" for the word "penalty," our discussion here is equally
    applicable to the current version of Section 1.2104.

[^5]: Application for Review at 4, Second Supplement to Application for
    Review at 6-14.

[^6]: BDPCS, Inc., BTA Nos. B008, B036, B055, B089, B110, B133, B149,
    B261, B298, B331, B347, B358, B391, B395, B407, B413, and B447,
    Frequency Block C, Supplement to Application for Review (filed
    October 16, 1998) (\"First Supplement to Application for Review\");
    BDPCS, Inc., BTA Nos. B008, B036, B055, B089, B110, B133, B149,
    B261, B298, B331, B347, B358, B391, B395, B407, B413, and B447,
    Frequency Block C, Petition for Waiver and Supplement to Application
    For Review (filed November 30, 1998) (\"Second Supplement to
    Application for Review\"); BDPCS, Inc., BTA Nos. B008, B036, B055,
    B089, B110, B133, B149, B261, B298, B331, B347, B358, B391, B395,
    B407, B413, and B447, Frequency Block C, Settlement Offer (filed
    November 23, 1999) (\"Settlement Offer\").

[^7]: First Supplement to Application for Review at 2-3.

[^8]: 47 C.F.R. § 24.704 (1996).

[^9]: Second Supplement to Application for Review at 1-14.

[^10]: *See* \"Entrepreneurs\' C block Auction Closes,\" *Public
    Notice*, DA 96-716 (rel. May 8, 1996) (\"*Closing Public Notice*\").

[^11]: 47 C.F.R. § 24.711(a)(2) (1996).

[^12]: *Payment Order*, 11 FCC Rcd. at 14400 ¶ 2.

[^13]: *Id.*

[^14]: BDPCS, Inc., Emergency Petition for Waiver of Deadline for
    Submission of Down Payment for the Broadband PCS C block Auction
    (filed May 15, 1996), at 3-4 (\"Emergency Petition\"); s*ee also*,
    Certification of Robert H. Kyle, CEO and Chairman of the Board of
    BDPCS, Inc. and QuestCom, Inc., May 15, 1996 (attached to the
    Emergency Petition).

[^15]: Emergency Petition at 3.

[^16]: *Id.*

[^17]: *Id.* at 3-4.

[^18]: Emergency Petition at 4; Application for Review at 5.

[^19]: Emergency Petition at 4; Application for Review at 5.

[^20]: Emergency Petition at 4; BDPCS, Inc., BTA Nos. B008, B036, B055,
    B089, B110, B133, B149, B261, B298, B298, B331, B347, B358, B391,
    B395, B407, B413, and B447, Frequency C Block, Petition for
    Reconsideration (filed November 27, 1996), at 4 n.8 (\"Petition for
    Reconsideration\").

[^21]: Emergency Petition at 5.

[^22]: Emergency Petition for Waiver of Deadline for Submission of Down
    Payment for the Broadband PCS C Block Auction filed by BDPCS, Inc.,
    *Order*, DA 96-811 (WTB rel. May 20, 1996) (\"*Waiver Order*\"), as
    modified by *Order on Reconsideration*, DA No. 96-874, 11 FCC Rcd.
    12165 (WTB 1996); s*ee* 47 C.F.R. § 24.819.

[^23]: Under the "hard look doctrine" a Court will sustain agency action
    when it is apparent that the agency took "a hard look" at a party's
    contentions. *See* *Wait Radio v. FCC*, 418 F.2d 1153, 1157 (D.C.
    Cir. 1969).

[^24]: BDPCS, Inc., Emergency Petition for Waiver of Deadline for
    Submission of Down Payment for the Broadband PCS C Block Auction,
    Petition for Reconsideration (filed May 22, 1996), at 3.

[^25]: *Id.*

[^26]: *Id*. at 3-4.

[^27]: *Id.* at 4-6*.* BDPCS claimed that the denial of its Emergency
    Petition reflected a lack of support for small businesses and
    therefore was not in the public interest. *Id.*

[^28]: Emergency Petition for Waiver of Deadline of Submission of Down
    Payment for the Broadband PCS C Block Auction filed by BDPCS, Inc.,
    *Order on Reconsideration*, 11 FCC Rcd. 12165 (1996).

[^29]: *See* \"18 Defaulted PCS Licenses To Be Reauctioned; Reauction To
    Begin July 3rd,\" *Public Notice*, DA 96-872 (rel. May 30, 1996).

[^30]: *See* \"FCC Announces Winning Bidders in the Reauction of 18
    Licenses to Provide Broadband PCS in Basic Trading Areas: Auction
    Event No. 10,\" *Public Notice*, DA 96-1153 (rel. July 17, 1996).

[^31]: BDPCS, Inc., Application for Review - In re Emergency Petition
    for Waiver of Deadline for Submission of Down Payment for the
    Broadband PCS C Block Auction (filed June 28, 1996).

[^32]: ^?^ BDPCS, Inc., Emergency Petition for Waiver of Section
    24.711(a)(2) of the Commission\'s Rules,

    *Memorandum Opinion and Order,* 12 FCC Rcd. 3230 (1997) (\"*BDPCS MO
    & O*\").

[^33]: The high bids in the C block reauction for licenses B008, B036,
    B089, B133, B347, B358, B395, B407, B447 exceeded the high bids that
    BDPCS placed on those same licenses in the first C block auction.
    However, the high bids received for licenses B055, B110, B149, B261,
    B298, B331, B391, and B413 in the reauction were less than the high
    bids placed by BDPCS on those licenses in the first C block auction.

[^34]: *See Payment Order,* 11 FCC Rcd. at 14402 ¶ 6; s*ee also*, 47
    C.F.R. §§ 24.704(a)(2), 1.2104(g) (1996).

[^35]: BDPCS, Inc., BTA Nos. B008, B036, B055, B089, B110, B133, B149,
    B261, B298, B298, B331, B347,

    B358, B391, B395, B407, B413, and B447, Frequency C Block, Petition
    for Reconsideration (filed November 27, 1996) (\"Petition for
    Reconsideration\").

[^36]: *Order*, 12 FCC Rcd. at 6610 ¶ 8.

[^37]: First Supplement to Application for Review at 2-3.

[^38]: Applications for Review must specify, with particularity, the
    factor or factors that warrant Commission consideration from among
    the following questions: (1) is the action taken pursuant to
    delegated authority in conflict with statute, regulation, case
    precedent, or established Commission policy; (2) does the action
    involve a question of law or policy that has not previously been
    resolved by the Commission; (3) does the action involve application
    of a precedent or policy that should be overturned or revised; (4)
    was there an erroneous finding as to an important or material
    question of fact, or (5) did prejudicial procedural error occur. 47
    C.F.R. § 1.115(b)(2)(i)-(v). We will not grant an application for
    review if it relies on questions of fact or law upon which the
    delegated authority has been afforded no opportunity to pass. 47
    C.F.R. § 1.115(c). Subject to §1.106 of our regulations, new
    questions of fact or law may be presented to the delegated authority
    in a petition for reconsideration. 47 C.F.R. § 1.115(c).

[^39]: Under the Commission's rules, waivers will not be granted except
    upon an affirmative showing: (i) That the underlying purpose of the
    rule will not be served, or would be frustrated, by its application
    in a particular case, and that grant of the waiver is otherwise in
    the public interest; or (ii) That the unique facts and circumstances
    of a particular case render application of the rule inequitable,
    unduly burdensome or otherwise contrary to the public interest.
    Applicants must also show the lack of a reasonable alternative. 47
    C.F.R. § 24.819(a)(1)(i), (ii) (1996).

[^40]: 47 C.F.R. §§ 1.2104(g)(2), 24.704(a)(2) (1996).

[^41]: Application for Review at 4.

[^42]: First Supplement to Application for Review at 2-3.

[^43]: *Bolling v. Sharpe*, 347 U.S. 497 (1954) (the Fifth Amendment\'s
    Due Process Clause applicable against the Federal Government is
    coextensive with the Fourteenth Amendment's Due Process clause
    applicable against the States).

[^44]: Second Supplement to Application for Review at 6-8, 11-14.

[^45]: Settlement Offer at 2.

[^46]: 47 C.F.R. § 1.115.

[^47]: Second Supplement to Application for Review at 9.

[^48]: Second Supplement to Application for Review at 9.

[^49]: 47 U.S.C. § 4(i), provides that "\[t\]he Commission may perform
    any and all acts, make such rules and regulations, and issue such
    orders, not inconsistent with this Act, as may be necessary in the
    execution of its functions."

[^50]: Second Supplement to Application for Review at 9.

[^51]: 47 U.S.C. § 309(j)(3).

[^52]: 47 U.S.C. § 309(j)(4)(B).

[^53]: Second Supplement to Application for Review at 9.

[^54]: Implementation of Section 309(j) of the Communications Act -
    Competitive Bidding, PP Docket No. 93-253*, Second Report and
    Order*, 9 FCC Rcd. 2348, 2373, note 114 (1994) (\"*Competitive
    Bidding Second Report and Order*\").

[^55]: *Nextwave Personal Communications, Inc. v. FCC*, 200 F. 3d 43, at
    52 (2^nd^ Cir. 1999), *aff'd* Docket No. 99-5063 (2^nd^ Cir. May 25,
    2000).

[^56]: *See* H.R. Rep. No. 103-111, at 253 (1993), reprinted in 1993
    U.S.C.C.A.N. 378, 580; s*ee also*, *Nextwave*, 200 F.3d at 51.

[^57]: *Competitive Bidding Second Report and Order*, 9 FCC Rcd. 2348,
    2360 ¶ 70; s*ee also*, *Nextwave,* 200 F.3d at 52.

[^58]: *Competitive Bidding Second Report and Order*, 9 FCC Rcd. at
    2382-84 ¶¶ 195-205 (1994); s*ee also* *Mountain Solutions Ltd., Inc.
    v. Federal Communications Commission*, 197 F. 3d 512, 519, note 12
    (D.C. Cir. 1999) (upholding the Commission\'s denial of a request
    for waiver of the down payment rules)(*citing Competitive Bidding
    Second Report and Order*, 9 FCC Rcd. at 2382 ¶ 197).

[^59]: *Id*. at 2381; s*ee also, Nextwave,* 200 F. 3d at 52.

[^60]: *See* *BDPCS MO & O*, 12 FCC Rcd. at 3234 ¶ 7; s*ee also*,
    Interactive Video and Data Service (IVDS) Licenses - Requests to
    Extend Payment Deadline, *Order*, 10 FCC Rcd. 4520 ¶ 5 (1995).

[^61]: *Mountain Solutions*, 197 F.3d at 518 (citations omitted).

[^62]: *See* Amendment of Part 1 of the Commission\'s Rules \--
    Competitive Bidding Procedures, WT Docket No. 9*7-82, Third Report
    and Order and Second Further Notice of Proposed Rulemaking*, 13 FCC
    Rcd. 374, 433-34 ¶ 101 (\"*Part 1 Third Report and Order*\"); *see
    also*, Requests for Waivers in the First Auction of Interactive
    Video and Data Service (IVDS) Licenses, *Memorandum Opinion &
    Order*, 10 FCC Rcd. 12153, 12155 (1995), *recon. denied*, 11 FCC
    Rcd. 8211, 8216-17 (1996).

[^63]: *See* *Blossom v. Milwaukee & Chicago R.R. Co*., 70 U.S. (3
    Wall.) 196, 206‑07 (1865); *Commodities Recovery Corp. v. United
    States*, 34 Fed. Cl. 282, 289 (1995) (federal government auctions
    \"are viewed under the same rules pertaining to the formation of
    contracts generally\") (*citing* 1 S. Williston, *Williston on
    Contracts*, § 29 (3rd ed. 1957)); U.C.C. § 2‑328(b) (1990) (\"A sale
    by auction is complete when the auctioneer so announces by the fall
    of the hammer or in other customary manner\"); s*ee also,* 7 Am Jur.
    2d *Auctions & Auctionee*rs, § 16 (1980 & Supp. 1991) (auction is a
    \"declaration of intention to hold an auction at which bids will be
    received. It is a mere invitation to those attending the sale to
    make offers by bids. The contract becomes complete only when the bid
    is accepted, this being ordinarily denoted by the fall of the
    hammer.\")

[^64]: In re Application for Assignment of Broadband PCS Licenses, FCC
    No. 98-301, 14 FCC Rcd. 1126, ¶1 (rel. Dec. 23, 1998); Auction of C,
    D, E, F Block Broadband PCS Licenses, *Public Notice*, DA. 98-2604
    (rel. Dec. 23, 1998).

[^65]: *Nextwave*, 200 F. 3d. at 56.

[^66]: After the close of the auction, the winning bidder must file its
    long-form application for the license grant and await resolution of
    any petitions to deny or objections to the application. However,
    under the Commission\'s default and disqualification rules, the
    obligation to pay the winning bid is imposed at the close of the
    auction, and neither the pendency of the license application, nor
    the filing of any petition to deny or objection, relieves the
    winning bidder of that obligation.

[^67]: *BDPCS MO & O*, 12 FCC Rcd. at 3238 ¶ 14; s*ee Mountain
    Solutions*, 197 F.3d at 518 ("Having established a more lenient
    payment structure for designated entities, which by definition
    usually faced problems of accessing financial resources, the
    Commission could reasonably focus on the importance of meeting
    payment deadlines to deter such entities from abusing the lenient
    structure by ' \'shop \[ping\]\' a winning bid in order to obtain
    financing for a payment.' The Commission also could reasonably rely
    on strict enforcement of the deadlines to provide an 'early warning'
    that a winning bidder unable to comply with the payment deadlines
    may be financially unable to meet its obligation to provide service
    to the public.") (citations omitted).

[^68]: See also previous section and note 4 *supra*.

[^69]: 47 C.F.R. § 24.704(a)(1)(1996); *Competitive Bidding Second
    Report and Order*, 9 FCC Rcd. at 2373 ¶ 146.

[^70]: *Competitive Bidding Second Report and Order*, 9 FCC Rcd. at 2374
    ¶ 154.

[^71]: *Competitive Bidding Second Report and Order*, 9 FCC Rcd. at 2374
    ¶ 154.

[^72]: *Competitive Bidding Second Report and Order*, 9 FCC Rcd. at 2373
    ¶ 147.

[^73]: *Competitive Bidding Second Report and Order*, 9 FCC Rcd. at
    2373, note 114.

[^74]: *Nextwave*, 200 F. 3d at 52 (*citing* *Competitive Bidding Second
    Report and Order*, 9 FCC Rcd. at 2378 ¶ 171).

[^75]: *Competitive Bidding Second Report and Order*, 9 FCC Rcd. at 2382
    ¶ 197.

[^76]: Application for Review at 4.

[^77]: *Id.*

[^78]: Application for Review at 4.

[^79]: *See* *id.* at 6-7.

[^80]: First Supplement to Application for Review at 2 (memorandum
    attached to filing).

[^81]: First Supplement to Application for Review at 3-5 (memorandum
    attached to filing).

[^82]: Section 24.704(a) provides that "A bidder who withdraws a high
    bid during the course of an auction will be subject to a penalty
    equal to the difference between the amount bid and the amount of the
    winning bid the next time the license is offered by the Commission.
    No withdrawal penalty would be assessed if the subsequent winning
    bid exceeds the withdrawn bid. This penalty amount will be deducted
    from any upfront payments or down payments that the withdrawing
    bidder has deposited with the Commission." 47 C.F.R. §
    24.704(a)(1)(1996).

[^83]: *See* note 4 above.

[^84]: *Competitive Bidding Second Report and Order*, 9 FCC Rcd. at
    2373, 2374 ¶¶ 146, 154.

[^85]: We note that in our pending rule making to consider further
    amendment of our competitive bidding rules, we seek comment on
    whether Section 1.2104(g) of our rules should be amended to provide
    that where a winning bidder defaults on multiple licenses the
    default payment will be determined based upon the aggregate winning
    bid and the aggregate winning bid when the licenses are subsequently
    offered for auction. *See* Amendment of Part 1 of the Commission\'s
    Rules ‑‑ Competitive Bidding Procedures, *Third Report and Order and
    Second Further Notice of Proposed Rule Making*, 13 FCC Rcd. 374 ¶
    188-89 (1997).

[^86]: *Order*, 12 FCC Rcd. at 6612 ¶11.

[^87]: 47 C.F.R. § 24.702(a)(2). In the revised § 1.2104(g), the rule
    reads "withdrawal payment."

[^88]: Second Supplement to Application for Review at 4-5.

[^89]: *Competitive Bidding Second Report and Order*, 9 FCC Rcd. at 2382
    ¶ 197.

[^90]: Application for Review at 6.

[^91]: Application for Review at 5-6.

[^92]: *Id.* at 6

[^93]: *See* *BDPCS MO & O*, 12 FCC Rcd. at 3235 ¶ 8.

[^94]: *Id.*

[^95]: *See Id.*

[^96]: *Id.* at 3237 ¶ 13.

[^97]: *Id.* at 3236-37 ¶ 11.

[^98]: *Competitive Bidding Second Report and Order*, 9 FCC Rcd. at 2374
    ¶ 154.

[^99]: *Competitive Bidding Second Report and Order*, 9 FCC. Rcd. at
    2382 ¶ 197.

[^100]: *See* \"Wireless Telecommunications Bureau Will Strictly Enforce
    Default Payment Rules; Bureau to Re‑Auction Licenses Quickly,\"
    *Public Notice*, DA 96‑481 (rel. April 4, 1996), 61 Fed.Reg. 16914
    (April 18, 1996). After the close of the C-block auction, the
    Commission and the Wireless Bureau have denied requests for waivers
    of the rules. *See* *National Telecom PCS, Inc.*, 12 FCC Rcd. 10163
    (1997), petition for recon. den'd, Petition for Reconsideration
    Request for Waiver of Bid Withdrawal Payment and Application for
    Authority to Construct a Personal Communications System on Frequency
    Block C in American Samoa, Market No. B492*, Order on
    Reconsideration of Memorandum Opinion and Order*, FCC 99-319 (rel.
    November 2, 1999); *C.H. PCS, Inc.*, 11 FCC Rcd. 22430 (WTB 1996);
    s*ee also,* *Mountain Solutions*, 197 F. 3d 512.

[^101]: *Id.*

[^102]: *See* *Competitive Bidding Second Report and Order*, 9 FCC Rcd.
    at 2383 ¶ 198; s*ee also, Part 1 Third Report and Order*, 13 FCC
    Rcd. 374, 433, ¶ 101.

[^103]: *See* *BDPCS MO & O*, 12 FCC Rcd. at 3235 ¶ 8; Requests for
    Waivers in the First Auction of 594 Interactive Video and Data
    Service Licenses, *Order*, 9 FCC Rcd. 6384, 6385 (CAB 1994) (\"*IVDS
    Waiver Order*\"), *review denied*, 10 FCC Rcd. 12153, 12155 (1995),
    *recon. denied*, 11 FCC Rcd. 8211, 8216-17 (1996).

[^104]: *See* Requests for Waivers in the First Auction of Interactive
    Video and Data Service (IVDS) Licenses, *Memorandum Opinion &
    Order*, 10 FCC Rcd. 12153, 12155 (1995), *recon. denied*, 11 FCC
    Rcd. 8211, 8216-17 (1996).

[^105]: Application for Review at 7.

[^106]: BDPCS, Inc., Emergency Petition for Waiver of Section
    24.711(a)(2) of the Commission\'s Rules, *Memorandum Opinion and
    Order,* 12 FCC Rcd. 15341, 15347-48 ¶ 10 (1997) (\"*Waiver Order on
    Reconsideration*\").

[^107]: 47 C.F.R. §§ 1.2104(g)(2), 24.704(a)(2) (1996).

[^108]: *See* Application for Review at 7.

[^109]: *Waiver Order on Reconsideration,* 12 FCC Rcd. at 15348 ¶ 12.

[^110]: *Bouie v. City of Columbia*, 378 U.S. 347 (1964) (retroactive
    application of new construction of statute violated due process).

[^111]: Second Supplement to Application for Review at 11-12 (*citing*
    *BMW of N. America v. Gore*, 116 S. Ct. 1589 (1996)(punitive damage
    award in a case between two private parties violates Due Process
    where there is a disparity between the harm or potential harm
    suffered and the punitive award, and a disparity between the
    punitive damage award and the civil penalties authorized or imposed
    in comparable cases); *Satellite Broadcasting* *Co. v. FCC*, 824 F.
    2d 1, 3 (D.C. Cir. 1987)(where regulations identifying the
    appropriate place for filing an application are inconsistent and
    ambiguous, administrative due process prohibits an agency from
    dismissing an application where a party followed a reasonable
    application of the rule)).

[^112]: See Section II (B).

[^113]: See Section II (B).

[^114]: The Eighth Amendment provides: "Excessive bail shall not be
    required, nor excessive fines imposed, nor cruel and unusual
    punishments inflicted." U.S. Const., Amdt. 8.

[^115]: *Austin v. United States*, 509 U.S. 602 (1993).

[^116]: *United States v. Bajakajian*, 524 U.S. 321, 323 (1998)
    (adopting the standard of gross disproportionality articulated in
    the Cruel and Unusual Punishment cases).

[^117]: *Browning-Ferris Industries of Vt., Inc. v. Kelco Disposal,
    Inc.*, 492 U.S. 257, 265 (1989).

[^118]: *Austin*, 509 U.S. at 622, n. 14 ("The Clause prohibits only the
    imposition of \"excessive\" fines, and a fine that serves purely
    remedial purposes cannot be considered \"excessive\" in any event.")

[^119]: *Competitive Bidding Second Report and Order*, 9 FCC Rcd. at
    2374 ¶¶ 152, 155.

[^120]: *Cole v. United States Department of Agriculture*, 133 F. 3d 803
    (11^th^ Cir. 1998) (holding that a 75 percent remedial penalty
    assessed for above quote tobacco production did not violate the
    excessive fines clause); *United States v. Dean*, 949 F.Supp. 782,
    786 (D.Or.1996)(\"Where the amount of restitution is geared directly
    to the amount of the victim\'s loss caused by the defendant\'s
    illegal activity, proportionality is already built into the
    order.\"), *aff'd United States v. Dubose*, 146 F.3d 1141 (9^th^
    Cir.), *cert. denied*, 119 S.Ct. 430 (1998).

[^121]: *Competitive Bidding Second Report and Order*, 9 FCC Rcd. at
    2374 ¶ 155.

[^122]: Second Supplement to Application for Review at 6, 8 (*citing*
    *D.J. Manufacturing Corp. v. United State*s, 86 F.3d 1130 (Fed. Cir.
    1996)).

[^123]: *Priebe & Sons, Inc. v. United States*, 332 U.S. 407, 411 (1947)
    ("Today the law does not look with disfavor upon 'liquidated
    damages' provisions in contracts. When they are fair and reasonable
    attempts to fix just compensation for anticipated loss caused by
    breach of contract, they are enforced.")(citations omitted); *D.J.
    Manufacturing Corp.*, 86 F.3d at 1133 ("By fixing in advance the
    amount to be paid in the event of a breach, liquidated damages
    clauses save the time and expense of litigating the issue of
    damages. Such clauses 'serve a particularly useful function when
    damages are uncertain in nature or amount or are
    unmeasurable,')(*citing Priebe & Sons*, supra at 411).

[^124]: *Wise v. United States*, 249 U.S. 361, 365 (1919); *see United
    States v. Bethlehem Steel Co.*, 205 U.S. 105, 121 (1907) (\"The
    amount is not so extraordinarily disproportionate to the damage
    which might result from the \[breach\] as to show that the parties
    must have intended a penalty and could not have meant liquidated
    damages.\"); *Sun Printing & Publishing Ass\'n v. Moore*, 183 U.S.
    642, 674 (1902) (except where \"the sum fixed is greatly
    disproportionate to the presumed actual damages,\" a court \"has no
    right to erroneously construe the intention of the parties, when
    clearly expressed, in the endeavor to make better contracts for them
    than they have made for themselves\").

[^125]: *Wise*, 249 U.S. at 365.

[^126]: *See, e.g. Young Assocs., Inc. v. United States*, 471 F.2d 618,
    622 (Ct. Cl. 1973) (a liquidated damages clause will be enforced
    \"if the amount stipulated is reasonable for the particular
    agreement at the time it is made.\"); s*ee also, Higgs v. United
    States*, 546 F.2d 373, 377 (Ct. Cl. 1976) (standard five percent
    earnest money forfeiture upheld as reasonable liquidated damages,
    even though not specifically tailored to a particular contract).

[^127]: Application for Review at 8.

[^128]: *Id.* BDPCS states that it cannot pay the \$67,695,653.23
    penalty at this time. *Id.* BDPCS has not, however, indicated that
    it *could* currently pay the \$24,930,564.73 default payment that it
    proposes.