Before the
                Federal Communications Commission
                      Washington, D.C. 20554

In the Matter of                )
                                )
Auction of Local Multipoint Distribution )Service (LMDS))
                                )
                                )
Minimum Opening Bids or         )
Reserve Prices                  )
                                )
                                 
                             ORDER


   Adopted:  January 14, 1998           Released:  January 14, 1998

By the Chief, Wireless Telecommunications Bureau:

Introduction

     1.  By this Order, the Wireless Telecommunications Bureau ("Bureau") establishes
minimum opening bid requirements for the auction of 986 Local Multipoint Distribution Service
(LMDS) licenses set to begin February 18, 1998.   The Balanced Budget Act of 1997 creates a
presumption that the use of minimum opening bids or reserve prices is in the public interest in
FCC auctions unless the Commission determines otherwise.  Commenters have failed to persuade
us that the use of minimum opening bids or reserve prices is contrary to the public interest in this
instance.  Accordingly, as explained below, the Bureau adopts minimum opening bids, subject to
reduction, and establishes a formula for calculating the minimum opening bids.

Background

     2.  The Balanced Budget Act of 1997 directs the Commission to prescribe methods to
establish reasonable reserve prices or minimum opening bids for licenses subject to auction, unless
the Commission determines that such reserve prices or minimum opening bids are not in the public
interest.  On October 17, 1997, the Bureau sought comment by Public Notice regarding the
establishment of reserve prices or minimum opening bids.  The Bureau received 23 comments
and 4 reply comments.

     3.  In the October 17 Public Notice, the Bureau proposed to establish minimum opening
bids for the LMDS auction and retain discretion to lower the minimum opening bids.  The
October 17 Public Notice stated our belief that minimum opening bids were more appropriate for
LMDS than reserve prices.  A minimum opening bid, we noted, can be an effective bidding tool
that regulates the pace of the auction and provides flexibility.

     4.  In the October 17 Public Notice, we proposed the following formula for calculating
minimum opening bids for the LMDS auction:

Population of license area    A Block Min. Opening Bid B Block Min. Opening Bid
Less than 100,000        $0.75 x population       10% of A Block
100,000 - 1,000,000      $1.50 x population       10% of A Block
More than 1,000,000      $2.25 x population       10% of A Block

We sought comment on this proposal.  We also asked that commenters who believed that the
proposed formula would result in substantial numbers of unsold licenses, or is not a reasonable
amount, or should instead operate as a reserve price, explain why this is so, and comment on the
desirability of an alternative approach.  Commenters were advised to support their claims with
valuation analyses and suggested reserve prices or minimum opening bid levels or formulas. 
Alternatively, we sought comment on whether, consistent with the Balanced Budget Act, the
public interest dictates having no minimum opening bid or reserve price.

     5.  Comments. Most commenters favor reducible minimum opening bids over reserve
prices.  Commenters in favor of minimum opening bids believe they have the ability to greatly
speed the auction, ensure the licenses are not dramatically undervalued, deter
frivolous bidders, ensure fair recovery for the public, and provide immediate feedback on
appropriateness of the floor price set as opposed to a reserve price.  Several commenters cite the
importance of being able to reduce the amount of the minimum opening bid to guard against the
risk of setting the opening bid too high, as spectrum valuation is very difficult.

     6.  Those commenters who oppose minimum opening bids do so for a variety of reasons. 
Several allege that minimum opening bids will work against an open market concept.  Bosch
argues that they will work against broad participation, and Wavelink asserts that they are not
needed because this auction will be competitive.  Some commenters oppose minimum opening
bids for certain markets by asserting, for example, that they are not appropriate for Basic Trading
Areas (BTAs) with population density under 75 persons per square mile, or that they are not
appropriate for anything below the top 100 markets.  Commenters also allege that there is a risk
that they may be set above fair market value and delay service to the public, and they will hurt
small businesses.  Finally, many commenters opposing minimum opening bids argue that they
cannot be appropriately set because valuation is very difficult due to geography, complexity of
service and propagation, and lack of existing systems.

     7.  Many commenters state, however, that if minimum opening bids are adopted, they
should be lower than those proposed.  Commenters offer several alternatives, including: setting
them equal to the upfront payment; setting them at one-third of the upfront payment;
establishing no minimum bid on markets with fewer than 50 persons per square mile; establishing
a ceiling for the minimum opening bids at $0.40 per pop; adding a fourth tier and using a lower
value; setting a single dollar amount minimum opening bid for each tier; and finally, if
population density is under 25 persons per square mile, set the minimum opening bid at 25 percent
of the comparable opening bid of places with higher density population.  Spectraware also offers
a proposal for reducing the minimum opening bid during the course of the auction.

     8.  Several commenters argue that minimum opening bids or reserve prices in LMDS are
not in the public interest because they don't foster competition, will be arbitrary,  will require a
delay in the auction per the Budget Act, will result in a substantial number of unsold licenses, will
harm the ability of small businesses to participate and delay, or eliminate LMDS in rural areas. 
WebCel, however, argues that minimum bids are in the public interest because they will ensure
that only serious parties participate, deter speculators, and have the potential to speed the auction
by eliminating "low ball" speculation.

Discussion 

     9.  We adopt minimum opening bids for the LMDS auction that are reducible at the
discretion of the Bureau.  The levels will be set as follows:

Population of the license area     A Block Min. Opening Bid B Block Min. Opening Bid
Less than 100,000             $0.50 x population       10% of A Block
100,000 - 1,000,000           $1.00 x population       10% of A Block
More than 1,000,000           $2.25 x population       10% of A Block
     
     10.  As was the case in prescribing minimum opening bids in the auction of the upper
channels in the 800 MHz SMR service, Congress has enacted a presumption that unless the
Commission determines otherwise, minimum opening bids or reserve prices are in the public
interest.  The Bureau is not persuaded by commenters' assertions that minimum opening bids for
LMDS do not fulfill the public interest objectives set forth in Section 309(j) of the
Communications Act of 1934, as amended.  We reject commenters' arguments that the use of
minimum opening bids works against an open market concept.  The use of competitive bidding
implements the principle that the marketplace should determine the value of this spectrum.  The
use of a minimum opening bid does not undermine that principle.  As commenters have suggested,
minimum opening bids can help speed the auction process and ensure that licenses are not
dramatically undervalued.  Further, these goals are fully consistent with the public interest goals
set forth in the Communications Act. We do agree with commenters that setting the level of the
minimum opening bids is a very difficult task, especially in the case of LMDS where geography
and climate may have a significant effect on propagation.  To address this concern, the minimum
opening bids adopted here are reducible.  This will allow the Bureau flexibility to adjust the
minimum opening bids if circumstances warrant.  We emphasize, however, that such discretion
will be exercised sparingly and early in the auction, i.e., before bidders lose all waivers and begin
to lose eligibility.  During the course of the auction, the Bureau will not entertain any bidder
requests to reduce the minimum opening bid.

     11.  We conclude that the revised formula presented here best meets the objectives of our
auction authority in establishing a reasonable minimum opening bid.  We have noted in the past
that the reserve price and minimum opening bid provision is not a requirement to maximize
auction revenue, but rather a protection against assigning licenses at unacceptably low prices and
in noncompetitive markets, and that we must balance the revenue raising objective against our
other public interest objectives in setting the minimum bid level.  In doing so, we have
recognized the special characteristics of LMDS services, especially in small and less dense
markets and, accordingly, have reduced the minimum opening bid from what was proposed for
the lower two tiers.  Minimum opening bids for the two lower tiers that are less than those
proposed will, we believe, assist small businesses and facilitate service for rural and other sparsely
populated areas.  The revised minimum opening bid levels for licenses in the two tiers with
populations below 1,000,000 will balance the objective of providing a fair return for the public
while still encouraging broad participation and avoiding a delay of service to smaller markets.

     12.  Accordingly, IT IS ORDERED that, under the authority contained in Sections
0.131(c), 0.331 and 1.2104 of the Commission's Rules,  47 C.F.R.  0.131(c), 0.331, and
1.2104, and pursuant to the authority of Sections 4(i), 303(r), 309(j), and 332(a)(2) of the
Communications Act of 1934, as amended, 47 U.S.C.  154(i), 303(r), and 332(a), minimum
opening bids subject to reduction are established for this auction as specified in this Order.

     13.  IT IS FURTHER ORDERED that the amount of the minimum opening bid for each
auctionable license is set pursuant to the formula adopted in this Order and specified for each
license in Appendix B to this Order.


                              FEDERAL COMMUNICATIONS COMMISSION




                              Daniel Phythyon
                              Chief, Wireless Telecommunications BureauAPPENDIX A
                                              
Commenters

BroadBand, Inc. (BroadBand)
Cornerstone Wireless Communications, L.L.C. (Cornerstone)
East Ascension Telephone Company, Inc. (EATEL)
Eclipse Communications Corporation (Eclipse)
Fremont Telcom Co. (Fremont)
HighSpeed.Com, L.L.C. (HSC)
Horizon Personal Communications, Inc. (Horizon)
JATO Communications Corp. (JATO)
Midwest Wireless Communications, L.L.C. (Midwest)
Montana Wireless, Inc. (MWI)
North Alabama Cellular, LLC (NACELL)
Pioneer Telephone Association, Inc. (PTA)
Richard L. Vega Group, Inc. (Vega)
Spectraware Corporation (Spectraware)
Tel/Logic Inc. (Tel/Logic)
Thomas F. Mitts and Pappas Telecasting Companies (Mitts and Pappas)
U.S. WaveLink Telecommunications, L.P. (WaveLink)
U.S. Wireless Communications, Inc. (U.S. Wireless)
Vanguard Cellular Systems, Inc. (Vanguard)
VIPC (VIPC)
Virginia Tech Foundation, Inc. (Virginia Tech)
WinStar Communications, Inc. (WinStar)
Zip Communications Corporation (Zip)

Reply Commenters

Bosch Telecom, Inc. (Bosch)
Marshfield Electric and Water Department (MEWD)
National Telephone Cooperative Association (NTCA)
Webcel Communications, Inc. (WebCel)