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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           )
                   SECOND REPORT AND ORDER AND
         FURTHER NOTICE OF PROPOSED RU  LE MAKING
Adopted:  September 25, 1997                 Released: October 16, 1997
Comments Due:  November 13, 1997
Reply Comments Due:  November 24, 1997
By the Commission:  Chairman Hundt affirming and dissenting in part and issuing a statement;
                    Commissioner Quello issuing a separate statement at a later date,
                    Commissioners Ness and Chong issuing separate statements.
                             TABLE OF CONTENTS
                                                              Paragraph no.
I.  Introduction . . . . . . . . . . . . . . . . . . . . . . . . . . . . .1
II.  Executive Summary . . . . . . . . . . . . . . . . . . . . . . . . . .2
III.  Background . . . . . . . . . . . . . . . . . . . . . . . . . . . . .8
IV.  Second Report and Order . . . . . . . . . . . . . . . . . . . . . . 21
  A.  Resumption of Payments . . . . . . . . . . . . . . . . . . . . . . 23
  B.  Disaggregation of Spectrum for Reauction . . . . . . . . . . . . . 32
  C.  Surrender Licenses for Reauction (Amnesty) . . . . . . . . . . . . 46
  D.  Prepayment . . . . . . . . . . . . . . . . . . . . . . . . . . . . 59
  E.  Election Procedures. . . . . . . . . . . . . . . . . . . . . . . . 70
  F.  Cross Defaults . . . . . . . . . . . . . . . . . . . . . . . . . . 77
V.  Further Notice of Proposed Rule Making . . . . . . . . . . . . . . . 81
  A.  Proposals Regarding the Reauction of Surrendered Spectrum. . . . . 81
     1.  Licenses To Be Reauctioned. . . . . . . . . . . . . . . . . . . 83
     2.  Eligibility for Participation . . . . . . . . . . . . . . . . . 84
     3.  Reauction Procedures. . . . . . . . . . . . . . . . . . . . . . 85
       a.  Competitive Bidding Design. . . . . . . . . . . . . . . . . . 86
       b.  Bidding Procedures. . . . . . . . . . . . . . . . . . . . . . 90
       c.  Procedural and Payment Issues . . . . . . . . . . . . . . . . 93
       d.  Anti-Collusion Rules. . . . . . . . . . . . . . . . . . . . . 99
       e.  Designated Entity Provisions. . . . . . . . . . . . . . . . .100
VI.  Conclusion. . . . . . . . . . . . . . . . . . . . . . . . . . . . .102
VII.  Procedural Matters and Ordering Clauses. . . . . . . . . . . . . .103
APPENDIX A:  List of Commenting Parties
APPENDIX B:  Final Rules
APPENDIX C:  Final Regulatory Flexibility Analysis
APPENDIX D:  Initial Regulatory Flexibility Analysis
                             I.  INTRODUCTION
  1.  By this Second Report and Order, we order resumption of installment payments for
the broadband Personal Communications Services (PCS) C and F blocks, with the payment
deadline reinstated as of March 31, 1998.  We adopt disaggregation, amnesty, and
prepayment options designed to assist C block licensees experiencing financial difficulties to
build systems that will promote competition or surrender spectrum to the Commission for
reauction.  These provisions will create opportunities to provide service to the public while
maintaining the fairness and integrity of our auctions program.  We seek comment on
proposed changes to our C block rules to govern the reauction of surrendered spectrum in the
C block in the accompanying Further Notice of Proposed Rule Making.
 II.  EXECUTIVE SUMMARY
  2.  The extraordinary procedures we adopt today apply to all C block licensees.  In
considering the many options presented, which range from merely enforcing our existing
rules to completely rewriting our rules after the auction closed, we have considered and
balanced the following policy goals.
         Maintaining the integrity of the Commission's rules and auction processes.
      Ensuring fairness to all participants in our auctions, including those who won
       licenses in the auctions and those who did not, as well as licensees in competing
       services.
         Resolving issues now in a manner that does not merely postpone the problem.
         Complying with the mandate of our auction authority in Section 309(j) of the
          Communications Act of 1934, as amended ("Communications Act"), that we
          ensure "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 . . ."
         Promoting economic opportunity and competition in the marketplace.
   3. Maintaining the integrity of our rules and auction processes is an essential goal.  As
Senator John McCain observed on September 18, the Balanced Budget Act mandates a series
of future spectrum auctions, and the Commission's decisions on C block must not "adversely
impact the integrity of the auction process or the confidence that parties would have in the
stability of the Commission's auction rules."  We are not looking to maximize revenues, but
to maintain the integrity for all of our future auctions and to ensure that all participants are
treated fairly and impartially.  These elements are essential if the financial community is to
have the stability it requires to fund the new communications enterprises and services for
which this spectrum should be used.
   4.  We conclude that it is in the public interest to immediately adopt provisions to
facilitate use of C block licenses without further regulatory or marketplace delay.  Certainty
is beneficial to all C block licensees and will foster the increased competition we expect in
the marketplace.  Many small licensees bid amounts comparable to those of other PCS
spectrum, yet are being delayed in acquiring financing for their construction while these
matters are pending before the Commission.  Some of the larger licensees also find that they
can move forward only when we settle the regulatory issues.  Our actions today are intended
to restore regulatory certainty to the marketplace.
   5.  Consistent with our goals, we have rejected a number of restructuring proposals that
would have dramatically changed the amount bid for licenses, and instead offer relief that is
more modest in nature.  Our menu approach is intended to provide options to facilitate the
rapid introduction of service to the public, while recognizing that ultimately the decisions
concerning competition and services appropriately are marketplace decisions and should not
be determined by government intervention.  Our decisions are intended to be fair to current
C block licensees, to bidders who were not successful in their attempts to obtain licenses in
this spectrum, and to the public desiring new and innovative competitive services.
   6.  On March 31, 1997, in response to a joint request from several C block licensees
seeking to modify their existing installment payment obligations, and because of other debt
collection issues, the Wireless Telecommunications Bureau ("Bureau") suspended the
deadline for payment of all C block installment payments.  On April 28, 1997, the Bureau
extended the suspension to F block licensees.  We rescind the suspension of payments,
effective March 31, 1998.  On that date, all F block licensees must resume payments under
their original Installment Payment Plan Note (hereinafter in the singular, "Note" and in the
plural, "Notes").  Any C block licensee may elect to continue making payments under its
Note(s) or may elect one of three options described below.  These three options are designed
to provide limited relief for C block licensees having difficulty meeting their financial
obligations to the Commission while maintaining the fairness and integrity of our auctions
program.  The election must be made no later than January 15, 1998.  Any C block licensee
that fails to elect on a timely basis either to continue under its existing Note or one of the
available options, will be held to strict adherence with the terms of its existing Note(s).  The
options are as follows:
     Disaggregation.  Any C block licensee may elect to disaggregate one-half of its
   spectrum (15 MHz of its 30 MHz) and surrender such spectrum to the Commission
   for reauction.  A licensee must disaggregate spectrum for all of the Basic Trading
   Area (BTA) licenses it holds within any Major Trading Area (MTA), but need not
   disaggregate the licenses it holds in other MTAs.  In return, the licensee will have the
   proportionate amount, i.e., 50%, of its down payment on such licenses forgiven.
   Fifty percent of the down payment for those licenses will be applied towards the debt
   for the retained spectrum; the licensee will not get a refund or credit of the other 50%
   of its deposit.  The licensee will be prohibited from rebidding for this spectrum, or
   otherwise acquiring it in the secondary market, for two years from the date of the
   start of the reauction.  C block licensees electing this option will repay over eight
   equal payments (beginning with the payment due on March 31, 1998) all interest that
   has accrued and was unpaid due to the payment suspension, adjusted to reflect the
   reduction in debt obligation.  Any prior installment payments made will be credited in
   full against those amounts.
     Amnesty.  Any C block licensee may surrender all of its licenses, and in return
   will have all of its outstanding C block debt forgiven.  The single exception to the
   "all-or-nothing" requirement for a grant of amnesty applies to licensees that met or
   exceeded the five-year build-out requirement by September 25, 1997. Those licensees
   meeting this build-out exception may retain their built-out BTAs, but must also keep
   the other BTAs in the MTA where the build-out requirement has been met.  The
   licensee choosing the amnesty option will not have its down payment amounts
   returned.  All installment payments made will be refunded or applied to previously
   accrued interest for retained markets, subject to applicable federal debt collection
   laws.  The licensee may bid on any of its surrendered licenses or any other licenses in
   the reauction, and there is no restriction on after-market acquisitions.
     Prepayment.  Any C block licensee may use an amount equal to 70% of its total
   down payments for the licenses that it wishes to surrender as a credit toward the
   prepayment of any of its licenses, at face value of the Note.  Subject to the amounts
   available for license prepayment, a licensee must pay off the outstanding principal
   debt obligations for all BTA licenses it holds within any single MTA, up to the
   amount of funds it has available.  A licensee may also use additional monies
   (hereinafter referred to as "new money"), to prepay as many of its Notes as it desires.
   Installment payments made will be available to the licensee as a credit towards
   prepaying any of its Notes.  Interest accrued from the date of the conditional license
   grant through the Election Date will be forgiven.  Licenses that are not prepaid in
   accordance with this option must be surrendered to the Commission for reauction, in
   exchange for the Commission's forgiveness of the corresponding debt and permitting
   prepayment on other licenses under these terms.  The remaining 30% of the down
   payments plus any unapplied portions of the first 70% of the down payments will not
   be returned or available to licensees.  The licensee may not rebid in the reauction for
   any of the licenses that the licensee relinquishes, and for a period of two years from
   the start date of the reauction may not otherwise acquire any such licenses in the
   secondary market.
   7.  These options will lead to a reauction of C block spectrum that will be open to all
entrepreneurs, all applicants to the original C block auction, and, with the exceptions we
outline under the disaggregation and prepayment options, all current C block licensees.
In the Further Notice of Proposed Rule Making, the Commission seeks comment on
proposed rules and procedures for the reauction of any available C block licenses,
including auction design, activity requirements, minimum opening bids for each license,
application and payment procedures, procedures for filing petitions to deny, and
proposals regarding the use of bidding credits.
                            III.  BACKGROUND
   8.  Incentives to ensure participation by small businesses and other "designated
entities" were required by Congress when enacting our authority to conduct auctions, as
set forth in Section 309(j) of the Communications Act.  In accordance with its statutory
mandate, in the Competitive Bidding Fifth Report and Order, the Commission established
a variety of incentives to encourage small businesses to participate in the auction of C
block 30 MHz and F block 10 MHz broadband PCS licenses.  Provisions to promote
participation by small businesses in broadband PCS included limiting eligibility in the
initial C and F block auctions to entrepreneurs and small businesses, offering varying
bidding credits, and offering installment payment plans.  The installment payment plan
for C block permitted licensees that qualified as small businesses to pay 90% of the bid
price over a period of ten years, with interest only paid for the first six years and interest
and principal for the remaining four.  Installment payments for small business F block
licensees were limited to 80% of the bid price over ten years, and payments consist of
interest only for the first two years, then interest and principal for the remaining eight
years.
   9.   On May 6, 1996 and July 16, 1996, the Commission concluded its broadband
PCS C block auctions.  Ninety bidders (including the C block reauction winners) won
493 C block licenses.  The broadband PCS D, E, and F block auction concluded on
January 14, 1997, and 88 bidders won 491 F block licenses.  Net high bids received
for C block 30 MHz licenses, including C block reauction bids, totalled approximately
$10.2 billion; net high bids received for F block 10 MHz licenses totalled $642.3
million.
   10.  While many C block licenses were purchased for prices below or comparable to
those for the A or B blocks, a handful of large bidders bid extremely high prices per pop
for major markets, even adjusted for the value of the government financing we provide.
The aggregate results of the C block auction, when measured in average price per pop
paid, are markedly higher than the other PCS bands, even after adjusting for financing,
and even though many individual small licensees bid prices comparable to those paid for
the A and B block PCS licenses.
   11.  Earlier this year, the Commission received several requests, from both C and F
block licensees, for relief associated with the installment payment program.  Some
licensees sought relatively modest relief (e.g., changing from quarterly to annual
payments).  Other licensees sought more dramatic restructuring.  These requests
described a range of apparent difficulties in accessing the capital markets, which many
licensees argue were exacerbated by the relatively high prices per MHz per population
("per pop") paid for some of the C block licenses.
   12.  When formulating its original auction rules in 1994, the Commission considered
the possibility of debt restructuring and observed that "if we allow a grace period or
restructuring of the payment plan, we would follow our procedures . . . under the
Commission's existing debt collection rules and procedures."  We also said that in
deciding whether to grant grace period requests "or to pursue other measures," we would
consider a variety of factors, including payment history, how far into the license term the
default occurs, and the level of build-out.  We noted that if a grace period was granted,
a licensee could use that time to "maintain its construction efforts and/or operations while
seeking funds to continue payments or seek from the Commission a restructured payment
plan."  When we later revisited the issue of licensee default, we stated that we would
approve debt restructuring whereby a licensee and its lenders agree that in the event of
licensee default on its installment payments, the lenders will cure the default by assuming
the payments (barring assumption of license control).  Aside from these statements, the
Commission has not discussed debt restructuring.
   13.  The Notice of Proposed Rule Making to revise our Part 1 auction rules sought
comment on several topics related to auction installment debt.  For example, we asked
whether we should offer higher bidder credits in lieu of installment payments, or whether
we should require, in an effort to reduce the likelihood of defaults, supplementation of
the upfront payment during an auction when the cumulative high bids exceed some
multiple of the upfront payment.  We sought comment on (1) imposing late payment
fees on installment payments; (2) the default provisions of Section 1.2104(g) in the event
of installment payment defaults; and (3) revised procedures for granting grace period
requests.  Many commenters opposed any new fees for late submission of installment
payments, and many favored simplified grace period procedures.
   14.  On March 31, 1997, in response to a joint request from several C block licensees
seeking to modify their installment payment obligations, and because of other debt
collection issues, the Bureau suspended the deadline for payment of installment payments
for all C block licensees.  On April 28, 1997, the Bureau extended the suspension to F
block licensees.
   15.  On June 2, 1997, the Bureau, explaining that it had received several proposals
from C block licensees regarding alternative financing arrangements and a petition for
rule making regarding the issue of broadband PCS C block installment payments, issued
the Installment Public Notice seeking comment on these proposals and invited any
"additional proposals for addressing the C and F block broadband PCS financing
terms."  The Bureau also sought comment on whether C block licensees should be
permitted to prepay their installment debt.  In response to the Installment Public Notice,
the Commission received over 160 filings.  The majority of commenters favor some
type of relief, including debt restructuring, spectrum disaggregation, or a penalty-free
license surrender ("amnesty"), followed by a reauction.  Other commenters express
disapproval of any relief, and urge the Commission to strictly enforce its rules.  These
comments were incorporated into the record in this docket.
   16.  On June 30, 1997, the Bureau conducted a public forum in Washington, D.C.
("FCC Public Forum") to discuss broadband PCS C and F block installment payment
issues, including the alternative financing arrangements proposed in connection with the
Public Notices issued on June 2, 1997.  The FCC Public Forum consisted of two panels.
The first discussed whether the Commission should consider modification of its
installment payment program, and the second discussed alternative financing
arrangements and debt restructuring.  FCC staff members and the public audience also
participated throughout the discussions.  An FCC Task Force also was established
which included representatives from the Bureau, the Office of Plans and Policy, the
Office of General Counsel, and the Office of Communications Business Opportunities.
This Task Force was charged with evaluating proposals for alternative financing
arrangements submitted by PCS C and F block licensees and recommending to the
Commission how to respond to those proposals.
   17.  Both before and after the FCC Public Forum, numerous comments, reply
comments, and ex parte letters and presentations were submitted to the Commission as
part of this proceeding.  Some commenters argue both for and against various proposals
for licensee relief, while others argue that the Commission should enforce its rules as
they currently exist to preserve the integrity of the auction program.  The Commission
thus has before it a wide range of proposals from entrepreneur block licensees, financial
institutions and investors, equipment vendors, and other interested parties.  We also have
received a number of letters from individual Senators and Congressmen suggesting
various approaches to resolving these issues and urging this Commission to act swiftly.
After consideration of the extensive record in this proceeding, we conclude that the
options presented in this Second Report and Order offer the most appropriate and fair
method of resolving C and F block financial concerns.
   18.  Although some commenters in this proceeding recommend deferral of the C
block debt, the Commission declines to further explore these proposals.  We do not
wish to adopt temporary solutions such as those that might only postpone these difficulties
and further prolong uncertainty.  Although these approaches would not necessarily result
in a reduction of the current nominal debt owed to the Commission, there is no certainty
the long term financial outlook facing many licensees would be improved.  Finally, we
believe that any further deferral of payments would be unfair to unsuccessful bidders who
may have withdrawn from the C block when prices became too high, but might have
remained had deferral opportunities been known.
   19.  Similarly, we do not wish to adopt proposals that result in a dramatic forgiveness
of the debt owed.  Although such an approach would not defer the problem, we believe
that is would be very unfair to other bidders, and would gravely undermine the credibility
and integrity of our rules.  In fact, in his remarks at the Senate Hearing on High-
Definition Television, Senator Hollings stated, ". . . [r]ules are rules . . . . If they cannot
comply with their particular auction bid, out they go, and we will start over again.  But
this is not welfare.  This is business."  Other Senators also urged the Commission to
maintain the integrity of its rules for benefit of its overall auction program.  Other
commenters assert that lowering the effective price after the auction unfairly advantages
those who bid too high compared with those who withdrew.  In effect, the result could
be interpreted as the Commission picking winners and losers on an unsupportable basis,
instead of the marketplace determining winners based upon an auction.  This concern was
also expressed by Senator McCain.  Such a result would be contrary to our long-held
goal to put licenses into the hands of those who value them the most.
   20.  In addition, we decline to make the disaggregation, amnesty, or prepayment
options available to F block licensees.  We believe 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.  We note that even after considering the
difference in the spectrum block size and providing a discount for the government
financing, C block prices were higher than F block prices on average.  We therefore
conclude that the options we adopt today will not apply to F block licensees.
IV.  SECOND REPORT AND ORDER
   21.  As discussed above, we require that C and F block licensees resume their Note
payments on March 31, 1998.  They will also be required to pay on that date one-eighth
of the Suspension Interest, and thereafter, pay one-eighth of the Suspension Interest with
each regular installment payment made until the Suspension Interest is paid in full.  As
used herein, "Suspension Interest" means the entire amount of the unpaid simple interest
that was accrued at the rate set forth in each licensee's Note(s) during the period
beginning with the date on which each license was conditionally granted through and
including March 31, 1998 ("Suspension Period").  After March 31, 1998, payment due
dates will conform to those indicated in the Notes executed by the licensees.  We believe
that there are C block licensees who will elect to continue making payments under their
original C block Notes, as described above, which they will be entitled to do.  In
addition, we adopt three options relating to the rules governing installment payments for
the C block.  These are designed to help to resolve the financing issues facing C block
licensees and restore certainty to the marketplace, while at the same time helping the
Commission meet its statutorily mandated public interest considerations set forth under
Section 309(j) of the Communications Act.
   22.  These goals will also be furthered by generally applying the same rules regarding
eligibility that were used in the C block auction to the reauction of C block licenses.
Thus, all applicants meeting the current definition of "entrepreneur" will be eligible to
bid in the reauction.  We also will allow all entities that were eligible for and participated
in the original C block auction to bid in the reauction.  Further, with the exception of
incumbent licensees who choose to disaggregate portions of spectrum they currently hold
(see Section IV.B., infra), and those licensees who surrender licenses under the
prepayment option (see Section IV.D., infra), all C block licensees who return licenses to
the Commission will be eligible to bid on all markets in the reauction.
A.  Resumption of Payments
   23.  Background.  On March 31, 1997, the Bureau suspended the deadline for
payment of all broadband PCS C block installment payments until further notice.  By
Public Notice issued on April 28, 1997, the Bureau extended the suspension to F block
licensees.  (The March 31, 1997 Order and April 28, 1997 Public Notice will be
referred to collectively as the "Suspension Order").  In the Suspension Order, we
indicated that the suspension would remain in effect until further action to reinstate
payment deadlines, and that interest would continue to accrue until such action was taken.
   24.  Discussion.  The majority of commenters in this proceeding, including many
members of Congress, agree that the Commission must act quickly to make a decision on
what course of action to take.  Those favoring restructuring suggest that any further
delay will make any relief ineffective because further delay to market puts C block
licensees at a competitive disadvantage and makes attracting investment capital to support
their build-out even more difficult.  In addition, many commenters opposed to
restructuring also support a timely decision, believing that a cloud of uncertainty hangs
over the wireless sector until the Commission decides what action to take.  We therefore
believe that it is necessary to remove any uncertainties surrounding the installment
payment program by announcing a date certain for the resumption of installment
payments.
   25.  Accordingly, effective March 31, 1998, we rescind the Suspension Order and
reinstate the installment payment plans for all C and F block licensees.  We also direct
that all payments due and owing on and after March 31, 1998 be made in accordance
with the terms of each licensee's Note, associated Security Agreement, and the
Commission Orders and regulations.  All Suspension Interest will become due and
payable over a two-year period as discussed in paragraph 27, infra.  With the exception
of the modifications provided in this Second Report and Order, all Commission rules
regarding installment payments and defaults for the broadband PCS C and F blocks will
remain in effect.  Any licensee that fails to remit the payment due on March 31, 1998,
and remains delinquent for more than 60 days (i.e., fails to make the March 31, 1998,
payment on or before May 30, 1998), will be in default on its license.  Given the one
year suspension, we believe that providing a shorter automatic grace period is justified.
See paragraph 30, infra.
   26.  We conclude that any licensee that continues under its original Note(s), will be
required to pay on March 31, 1998, one-eighth of the Suspension Interest in accordance
with the provision of paragraph 27, infra.  Thereafter, regular payments will become due
and payable in accordance with the provisions of the licensee's original Note.
   27.  We conclude that it could place a significant burden on licensees to require
payment of the entire amount of the Suspension Interest on March 31, 1998.  We
therefore require that broadband PCS C and F block licensees submit one-eighth of the
Suspension Interest on March 31, 1998, and one-eighth of the Suspension Interest with
each regular installment payment made thereafter until the Suspension Interest is paid in
full.  After March 31, 1998, payment due dates will conform to those indicated in the
Note(s) executed by the licensees.  While the first regular installment payment next made
after March 31, 1998, will be pro-rated to account for the resumption of payments on
March 31, 1998, all regular installment payments thereafter will be in the amounts shown
on the amortization schedule attached to and made a part of each Note, as amended, plus
the applicable payments of Suspension Interest.  For example, for those licensees granted
in September, 1996 whose regular installments occur on March 31, June 30, September
30, and December 31 of each year, the next regular payment due after March 31, 1998,
will be due on June 30, 1998, and will include the amount of interest accrued from April
1, 1998, through and including June 30, 1998, plus one-eighth of the Suspension Interest.
The next regular payment will be due on September 30, 1998, and will be due in the
amount shown on the amortization schedule attached to the Note (i.e., interest from July
1, 1998, through and including September 30, 1998), plus one-eighth of the Suspension
Interest.  Regular payments will continue on each and every December 31, March 31,
June 30, and September 30 thereafter until the Note is paid in full.  For these licensees,
the payment due on December 31, 1999, will be the last payment due that includes any
amortized Suspension Interest.  All payments after that date will continue in accordance
with the terms of the amortization schedule attached to the Note executed by the licensee.
All installment payments previously made by licensees who elect one of the three options
will be applied in accordance with the provisions set forth under the discussion of each
option, see Section IV., infra.
   28.  We delegate to the Bureau authority to set forth all procedures for implementing
the resumption of payments.
   29.  Broadband PCS C block licensees choosing to surrender their licenses pursuant
to the amnesty option described in Section IV.C., infra and those surrendering licenses
that are not prepaid pursuant to the prepayment option described in Section IV.D., infra,
will be required to return to the Commission each original Note and Security Agreement
for cancellation by the Commission.
   30.  We will not entertain any requests for an extension of the March 31, 1998
deadline beyond the automatic 60-day non-default period set forth in paragraph 25, supra.
The Suspension Order already has afforded a significant period to licensees during which
payments were not required.  Therefore, we intend to deny any requests for a grace
period beyond the automatic 60-day non-default period we adopt herein, including any
requests made pursuant to Section 1.2110 of the Commission's rules.
   31.  C block licensees may resume payments under their current Note or elect one of
the three options described below.
B.  Disaggregation of Spectrum for Reauction
   32.  Background.  Existing Commission rules permit broadband PCS licensees to
disaggregate their spectrum.  Under these rules, a broadband PCS licensee in the A, B,
D, or E block may file an application with the Commission requesting permission to
disaggregate any portion of its spectrum to other eligible entities at any time following
the issuance of its license.  The existing rules also permit a C or F entrepreneur block
licensee to disaggregate spectrum to other C and F block eligible entities for the first five
years following the issuance of a license.  After the first five years of holding a license,
an entrepreneur block licensee also may disaggregate to any qualified non-entrepreneur,
provided that the non-entrepreneur compensates the federal government through an unjust
enrichment payment proportionate to the amount of spectrum disaggregated.  If the
entrepreneur block licensee has elected to pay using installment payments, the qualified
entity receiving the disaggregated spectrum will also be permitted to make installment
payments equaling its pro rata portion of the remaining government obligation.  The
rules require that new notes and security agreements be executed by both the former and
the new licensee.
   33.  A number of  C block licensees, as well as several financial advisors and
equipment manufacturers, have requested that the Commission permit licensees to
disaggregate spectrum and surrender it to the Commission for reauction in exchange for a
pro rata reduction in debt.  Generally, these proposals differ in: (1) the amount of
spectrum that could be surrendered to the Commission; (2) the amount and form of credit
for the spectrum surrendered; and (3) the terms and eligibility requirements for reauction
of the disaggregated spectrum.
   34.  AmeriCall proposes "amnesty by thirds," which would permit each licensee to
disaggregate its C block license into three 10 MHz portions, any one of which the
licensee could surrender to the Commission for forgiveness of its related installment
debt.  Under this proposal, surrendered spectrum would be reauctioned and the
Commission would retain the down payments made by the initial licensee.  AmeriCall
suggests allowing a licensee to participate in reauctions of C block spectrum, but only
reauctions for spectrum other than that surrendered by the licensee.  AmeriCall also
suggests that a licensee be required to wait two years before being allowed to reacquire
spectrum that it has surrendered to the Commission.  AmeriCall proposes that C block
licensees continue operating under the terms and conditions of the initial payment
obligation, but that the Note be reduced in proportion to the amount of spectrum
surrendered and the associated Security Agreements and Uniform Commercial Code
("UCC") filings modified accordingly.
   35.  A number of other commenters propose that the Commission adopt variations of
AmeriCall's disaggregation proposal.  BIA Capital's disaggregation proposal generally
tracks AmeriCall's proposal, but would allow licensees to surrender 10, 20 or 30 MHz of
spectrum.  Magnacom proposes that parties be allowed to disaggregate up to 15 MHz of
spectrum and that all payments be applied to the portion of the license retained.   Urban
Comm advocates that parties be allowed to disaggregate up to 10 MHz of spectrum.  In
a recent joint filing, AmeriCall, Clearcomm, and Chase support a disaggregation option
that would allow a licensee to disaggregate 15 MHz from one or more of the C block
licenses it now holds, on a license-by-license basis, and to have its indebtedness reduced
proportionately (i.e., by 50%).  The disaggregated spectrum would be reauctioned
expeditiously and the disaggregating licensee would be precluded from rebidding on
spectrum it has disaggregated.
   36.  Parties advocating a disaggregation option cite a number of benefits.  AmeriCall
contends its "amnesty by thirds" proposal would help the Commission avoid both wide
scale bankruptcies as well as the need for a "bail-out" in the form of radical debt
restructuring.  It contends that by requiring licensees to forfeit all down payments for
the surrendered spectrum, disaggregation imposes a penalty on C and F block licensees
who choose this option.  AmeriCall argues further that spectrum disaggregation benefits
participating licensees by allowing them to reduce their debt, which would in turn
increase their access to capital markets.  AmeriCall contends that because it avoids the
"more substantial financial fixes" advocated by other debtors, disaggregation is a fairer
proposal, and one less prone to subsequent litigation.  Finally, AmeriCall contends that
the "amnesty by thirds" proposal is pro-competitive in that it will introduce numerous
new competitors, including licensees from other spectrum blocks.  GWI indicates that
spectrum disaggregation "works well" for C block licensees in small markets where a full
30 MHz of spectrum is not required.  Urban Comm cites several public interest benefits
deriving from spectrum disaggregation.  According to Urban Comm, disaggregation
provides spectrum to qualified designated entities without delay, decreases time to market
for existing licensees, and injects new competition into the marketplace.
   37.  In opposition to the disaggregation option, CONXUS, a narrowband PCS
licensee, argues that the option does not confer on narrowband licensees benefits
comparable to those accorded to broadband licensees since there is insufficient bandwidth
in narrowband to allow disaggregation to occur without interfering with nationwide
programs.  Omnipoint argues that any type of "amnesty solution," including spectrum
disaggregation, would require the Commission to adopt rules protecting companies that
have substantially built-out their networks.
   38.  Discussion.  In view of the substantial support and public interest benefits
accruing from an alternative that would permit a voluntary surrender of spectrum to the
Commission while maintaining the fairness and integrity of the auction, we adopt a
disaggregation option.  Under the disaggregation option we adopt today, any C block
licensee may disaggregate a portion of its spectrum from each of its licenses and
surrender it to the Commission for reauction.  The licensee must disaggregate 15 MHz
of spectrum it holds across all BTAs in an MTA.  These provisions prevent licensees
from selectively surrendering spectrum for which they may believe they paid too much,
or otherwise discarding spectrum in markets that may be more difficult to serve
(commonly referred to as "cherry-picking" of licenses or spectrum).  We limit the
ability of licensees to selectively disaggregate spectrum within an MTA also to facilitate
attempts by new bidders to aggregate spectrum and initiate service.  Because we are
allowing disaggregation on an MTA-by-MTA basis, special exemptions for built-out
systems -- such as the one we adopt under the amnesty option discussed below in
paragraphs 53-58 -- are unnecessary.  In cases where a licensee has built-out a BTA, it
can choose either to retain all 30 MHz in each of the BTAs it has licenses for in an
MTA, or it can operate its built-out system with 15 MHz.  We believe that this
flexibility, compared to the "all-or-nothing" approach, mitigates the need for a build-out
exception for this option.
   39.  Licensees electing this option will be required to return half of their spectrum at
1895 - 1902.5 MHz paired with 1975 - 1982.5 MHz, which is spectrum contiguous to the
PCS F block.  The surrender of spectrum adjacent to the F block will provide sufficient
contiguous spectrum for both the incumbent and new licensees to offer competitive PCS
services.
   40.  Under the disaggregation option, the Commission will reduce the amount of the
debt owed by an amount equal to the pro rata portion of the spectrum returned to the
Commission, i.e.,by 50%, subject to coordination with the Department of Justice
pursuant to applicable federal claims collection standards.  The Commission will retain
the pro rata portion of the down payments applicable to the spectrum.  The following
illustrates how this proposal would operate in practice:
   Company X holds a 30 MHz license in a BTA market; paid the Commission $100,000
   in its down payment; and owes the Commission $900,000 on a net bid of $1,000,000.
   Company X could disaggregate 15 MHz and surrender it to the Commission for
   reauction, and the Commission would retain $50,000 of the down payment.  In return,
   the Commission would reduce the licensee's obligation to the government to $450,000.
The face amount of the licensee's Note will be adjusted to reflect the new principal, and
the Note will then be amortized from the original date of execution to calculate the
payments at the new face amount of the Note.  All installment payments made as of
March 31, 1997, will be applied to reduce the amount of the Suspension Interest
calculated on the new principal balance to be made in eight equal payments beginning
March 31, 1998.
   41.  Where applicable, the existing disaggregation rules will govern this option.
However, the broadband disaggregation rules were not designed for the surrender of
spectrum to the Commission.  Thus, existing rule provisions on designated entity
transfer restrictions, unjust enrichment, installment payments, abbreviated license
terms and construction requirements, restrictions on the amount of spectrum that can
be disaggregated, and similar rules will not apply to disaggregation to the Commission
authorized by this option.  In order to take advantage of the disaggregation option,
licensees will be required to make an election consistent with the procedures specified in
Section IV.E., infra.
   42.  In order to avoid unjust enrichment, licensees (defined as qualifying members of
the licensee's control group, and their affiliates) will be prohibited from bidding in the
subsequent reauction for spectrum the incumbent licensee has disaggregated.  However,
they will be permitted to acquire spectrum for any BTA for which the incumbent licensee
has not disaggregated spectrum.  We do not believe that it would be fair for these entities
to benefit from a reauction after taking advantage of the disaggregation option.  This
prohibition against subsequent participation in the reauction for the spectrum
disaggregated by the same party is supported by a number of commenters.  To ensure
further against unjust enrichment, these entities will also be barred from reacquiring the
spectrum they have surrendered to the Commission through a secondary market
transaction for a period of two years from the start of a reauction.
   43.  We believe that the disaggregation option set forth above is consistent with our
goals in this proceeding and serves the public interest.  First, this option preserves the
credibility and integrity of the Commission's rules.  The relief we provide is another
means of making more efficient use of the spectrum.  It does not provide a windfall or
unfair advantage to the C block licensees availing themselves of the disaggregation
option.  The disaggregating licensee continues to pay for spectrum at its net high bid
price, and the Commission receives full payment for the spectrum retained by the
licensee.  In addition, the Commission will retain 50% of the down payment consistent
with the amount of spectrum being surrendered to the Commission.  Moreover,
disaggregation with a pro rata adjustment in debt is consistent with the Commission's
rules with regard to private party disaggregation.
   44.  Second, the disaggregation option is fair and equitable to all interested parties.
Losing bidders and other eligible parties will have an opportunity to bid on the
disaggregated spectrum in the reauction.  Also, by limiting disaggregation of spectrum to
15 MHz blocks on a BTA within an MTA basis, we increase the likelihood that the
licenses available for reauction will be in quantities and geographic clusters that are
commercially viable.  In addition, by providing this limited opportunity to "pick and
choose" which licenses to disaggregate, and not requiring the surrender of all 30 MHz of
the spectrum it holds in an MTA, we make this option fair to those who have built-out
some of their markets.  Although this option is not being made available to the
narrowband or F block licensees, we do not believe that it is unfair to these parties or to
other Commercial Mobile Radio Service ("CMRS") providers.  This option does not
materially alter the competitive landscape for CMRS services.  Given the current state of
the market and the Commission's existing rules, it is reasonable to expect that some C
block spectrum will be transferred to competitors through reauction or private sale.  Our
actions here facilitate this process, by reducing the amount of spectrum that would
otherwise be marketed in a piecemeal fashion.  Moreover, as noted above, other parties
will have an opportunity to bid on this spectrum in the reauction and, because of the
spectrum's proximity to the F block, the spectrum may be particularly attractive to
prospective licensees.
   45.  Third, the disaggregation option is consistent with our Section 309(j) obligation
to promote opportunities for designated entities, including small businesses.  According to
a number of commenters, including those in the financial community, a reduced
government debt burden and the resulting lower cost per MHz pop will enhance prospects
for existing small business licensees to attract debt and equity capital.  This, in turn,
should assist current C block licensees in moving forward with the deployment of their
service offerings.  Disaggregation will also provide opportunities for other small
businesses to enter the PCS market in the future.  Finally, by requiring C block licensees
to disaggregate the 15 MHz of spectrum adjacent to the F block, we provide
opportunities for existing F block licensees to aggregate spectrum in a manner that could
benefit their planned or prospective service offerings.
C.  Surrender Licenses for Reauction (Amnesty)
   46.  Background.  In response to our Installment Public Notice seeking comment on
broadband PCS installment payment issues, a number of commenters express support for
an option that would permit C block licensees to surrender their licenses to the
Commission for reauction in exchange for forgiveness of the related debt and any interest
and penalties (generally referred to as "amnesty").  Commenters have submitted a
variety of proposals for the terms of an amnesty option.  Horizon states that an amnesty
program should be designed to prevent a large scale surrender of licenses, and should
encourage return of a license only in advance of a business failure.  Horizon would
permit a licensee to be selective in surrendering licenses, but would prohibit a licensee
from rebidding on any license it surrendered and would prohibit a licensee's participation
in the reauction entirely if it surrendered a total of more than five licenses.  To facilitate
this plan, Horizon asks that we waive our current cross default policies so that a licensee
able to construct some, but not all, of its licenses will be able to return those licenses it
cannot construct without placing all of its licenses in default.  Horizon concludes that
adopting such an amnesty plan would serve the public interest by getting licenses in the
hands of companies willing and able to provide service to the public.
   47.  R&S and Cyber Sites propose that the Commission permit C block licensees
to surrender their licenses and obtain a full refund of all payments without penalty.  GWI
suggests that the Commission allow licensees to exchange all licenses in return for a
"store credit" equal to 100% of the original down payment, which could be applied to
licenses won in a "cash upfront" reauction.  GWI contends that there should be no
restriction on the licensee's bidding in the reauction.  NextWave, too, supports an
"amnesty day" for the surrender of licenses and a subsequent reauction, but stresses that
licensees should be allowed to retain their most desirable licenses.  NextWave submits
that the total amount of the original down payments should be credited toward reauction
bids "with a reasonable penalty."
   48.  Other commenters, including C block licensees AmeriCall and Chase,
endorse a "simple amnesty" program pursuant to which a licensee would be obliged to
surrender all of its C block licenses in return for forgiveness of its debt and an
opportunity to participate in any reauction of the returned licenses or other licenses.
Equipment manufacturer Nokia also endorses an amnesty program that would permit a
licensee to surrender all of its C block licenses in return for forgiveness of all associated
debt and an opportunity to bid at the reauction.
   49.  Fortunet states that a simple amnesty program does not provide sufficient relief,
and asks that licensees receive a refund of their down payments and interest payments
made on those licenses surrendered.  MCI also supports permitting licensees to
surrender all of their C block licenses with no further financial obligation, but suggests
that a licensee be permitted to receive only "a fraction" of the down payment already
made.
   50.  In addition to the many commenters who oppose any rule changes, including a
grant of amnesty, a number of commenters have resisted implementation of an amnesty
plan and have identified various problems specific to the amnesty option.  Cook Inlet
recommends that the Commission strictly enforce its rules as they currently exist, and
take aggressive  measures to collect all debt, noting that other alternatives, including an
amnesty plan, invite litigation and threaten the auction program's integrity.  However,
Cook Inlet states that, if an amnesty program is adopted, certain limitations should be
imposed, including prohibitions against participation in the reauction of their licenses by
those who participate in amnesty (principals and control group members), against
participation by any entity in bankruptcy, and against cherry picking among those licenses
to be surrendered.  In order to expedite reauction, Cook Inlet suggests that the
Commission refund 25% of their down payments to licensees who surrender their licenses
-- as "walk away" money.
   51.  Omnipoint opposes amnesty because "operational" C block companies would be
left with no recourse under any of the amnesty proposals, and would face a significant
relative disadvantage in accessing capital markets.  Omnipoint points out that this might
deprive the public of the service that such licensees are providing.  Omnipoint states
that it and other operational C block licensees have "operating businesses [that] are
completely tied to specific C block licenses" and do not have the same flexibility to
cancel licenses voluntarily.  Omnipoint asserts that these licensees' access to public
capital markets will be hampered by policies that would, in effect, reduce per pop prices
paid for similar properties i.e., the surrendered C block licenses, and will strand those
licensees that have been significantly built-out with licenses that have "artificially higher
prices" per pop.
   52.  Like Omnipoint, Alpine argues that entities like itself, which bid in good faith
and intend to construct their markets, will not be helped by an amnesty program.
However, Alpine supports an amnesty plan structured to encourage overextended
licensees to take prompt remedial action and free up the C block for reauction and
subsequent development.  Alpine explains that the ability to roam is essential to the
viability of its system and to that of other operational C block systems, but cannot be
offered to potential customers if significant portions of the C block have not been
developed.  Therefore, Alpine endorses an amnesty option that would encourage speedy
surrender and reauction by permitting licensees to turn in one or more of their licenses
and to receive credit for the down payments, to be applied against other obligations.
   53. Discussion.  We conclude that it serves the public interest as articulated in our
goals, Section II, supra, to adopt an amnesty option that permits any C block licensee to
surrender all of its licenses in exchange for relief from its outstanding debt and waive any
applicable default payments, subject to coordination with the Department of Justice
pursuant to applicable federal claims collections standards.  We adopt the amnesty
option for purposes of speeding use of the C block spectrum to provide services to the
American public.  The surrender of licenses under this option will provide qualified
parties with an opportunity to obtain C block licenses at the market value of the licenses
prevailing at the time of the reauction.  The amnesty option we adopt today is equitable
to all parties because, while amnesty relieves a licensee from further debt obligations and
any applicable default payments, a coordinated surrender of licenses facilitates
expeditious reauctioning of the spectrum and will provide new market opportunities for
all eligible entities.  In addition, we note that rapid reauction of those licenses
surrendered will also comply with the Congressional directive that we promote
competition and participation in the telecommunications industry by small businesses.
   54.  A C block licensee must make the amnesty election in accordance with the
procedures set forth in Section E, infra.  The Commission will reauction those licenses
surrendered on an expedited basis under the reauction rules discussed in the Further
Notice of Proposed Rule Making adopted with this Second Report and Order.  See Section
V., infra.  Licensees electing the amnesty option will be eligible to bid for any and all
licenses at the reauction.
   55.  Licensees electing the amnesty option will not have their down payment returned.
This will discourage speculation and ensure that all bidders, new entrants as well as
existing licensees, participate in the reauction without undue advantage.  Retention of the
down payments -- 10% of the bid price for most licensees -- is consistent with our
previous decisions and actions affecting C block bidders in that we have retained any
payments made by those C block bidders who have failed to make their first or second
down payments.  We believe that by not finding these licensees in default and assessing
any applicable default payments, we are according them a substantial benefit.  In
forgiving the outstanding debt we afford significant relief to the licensees by allowing
them to avoid anticipated defaults.  In addition, these licensees will not be deemed in
default or delinquent in meeting government debt obligations.  Nor will they be subject to
any applicable default payments or in violation of any FCC rules or license conditions.
Thus, their creditworthiness, financial qualifications, and other qualifications are
preserved should they wish to take part in other federal loan programs or apply for any
future spectrum auctions or licenses.
    56.  Subject to one exception identified below, licensees choosing to take advantage of
the amnesty option will be required to surrender all of their licenses to the Commission.
The requirement that all licenses be surrendered precludes licensees from "cherry
picking."  The simultaneous multiple-round auction design enables bidders to place bids
on many licenses at once and to aggregate desired licenses in a manner that facilitates
workable business plans.  If we were to permit licensees to "cherry pick" which licenses
to surrender, the interdependency of the licenses would be harmed.  Licenses surrendered
pursuant to such a "cherry picking" scheme might lack the potential for beneficial
aggregation within MTAs, and therefore would likely be less valuable to potential bidders
and impair business plans of new investors.
    57.  As an exception to the "all-or-nothing" requirement, licensees that have met or
exceeded the five year build-out requirements by September 25, 1997, the date of
adoption of this Second Report and Order, will not be required to surrender licenses for
built-out markets.  In addition, these licensees will be permitted to retain those BTA
licenses in which such build-out has occurred.  However, licensees availing themselves of
this exception may not pick and choose BTAs within an MTA but will be required,
instead, to keep all of the other BTAs in the MTA in which the build-out requirement has
been met and to pay for those licenses under the terms of their Notes.  The build-out
exception facilitates the achievement of the statutory goal set forth in Section 309(j) that
we encourage the rapid provision of service to the public, and responds to the needs of
licensees that have already commenced operations or have otherwise invested significantly
in certain of their C block licenses.  The Commission has an interest in minimizing the
competitive impact of the changes that it makes to the auction rules, consistent with its
broader policy objectives. The exception we adopt today is one method by which we can
ensure that the menu of options available to the C block is fair to those licensees that
have rapidly built-out their markets and initiated provision of competitive service.
    58.  Although the Bureau suspended installment payments on C block licenses on
March 31, 1997, some licensees made their installment payments (i.e., installments due
on that date, and amounts due on December 31, 1996, but not paid until March 31, 1997,
based on our automatic 90-day non-default rule) after the suspension.  In addition, prior
to the suspension of payments, many C block licensees made their regularly scheduled
installment payments.  We believe that due to the actions we take in this Second Report
and Order, it would be unjust and inequitable for C block licensees to be treated
differently merely because some C block licensees made prior payments while others did
not.  Consequently, we direct the Wireless Telecommunications Bureau to refund any
installment payments made (whether due on or before March 31, 1997) on any license
that is surrendered pursuant to this Second Report and Order.  In addition, we will
forgive payment of any due, but unpaid, installment payments for any surrendered
license.  For licensees exercising the build-out exception and retaining certain licenses,
all previously made installment payments will be applied first to reduce the Suspension
Interest applicable to those licenses, and any amounts remaining will be refunded.
D.  Prepayment
   59.  Background.  In the Installment Public Notice, the Bureau sought comment on
whether PCS licensees should be permitted to prepay their installment debt at a discount,
and on proposals for calculating the net present value of the debt.  In his presentation
at the FCC Public Forum held on this issue, John Bensche of Lehman Brothers
recommended prepayment by bidders as a way to avoid further restructuring in the future
and to remove the government from its role as creditor to the wireless industry.  Bear
Stearns also indicates that a prepayment option will improve the financial flexibility of C
block licenses by eliminating the uncertainty surrounding the threat that a license will be
revoked for financial reasons because lenders could collateralize their obligations with the
licenses, at least indirectly, using the shares of the license-holding entity.
   60.  Other commenters also support some form of prepayment option for C block
licensees.  In a letter dated September 16, 1997, Representatives Edward J. Markey
and W.J. "Billy" Tauzin urged the Commission to consider a "full price buy-out"
proposal as part of a menu of options approach.  Under this proposal, licensees could
purchase at "full price" as many of their existing licenses as they desire with cash up
front, for the net present value of the net bid prices for such licenses.  They suggested
that the licensees be allowed to use any monies on deposit with the Commission and any
"new money" that the licensee may immediately muster.  They agreed that this option
had the benefit of allowing licensees to proceed with build-outs immediately, thereby
bringing service to the public as quickly as possible, while also providing a meaningful
opportunity for all interested parties to participate in an auction for the bulk of the
licenses.
   61.  Many commenters argue that a prepayment option should include a discount to
lower the net high bid price of the licenses below A and B block prices.  For example,
NextWave believes that a discount to A and B block prices is necessary due to the
headstart that A and B block licensees have experienced in time to market, coupled with
the restraints of the C block control group rules and the deterioration of the financial
market conditions for wireless companies.  Other commenters believe that a
prepayment discount should reflect the average of D and E block winning bids, with a
multiplier of 2.25 applied to secondary and tertiary markets and 3.0 for top 100
markets.   In its ex parte letter, Triumph Capital suggests that the Commission apply a
discount ranging from 15 percent to 30 percent to determine the present value of C block
debt to the FCC.  GWI proposes to scale the C block bid using the ratio of the A/B
block average cash bid to C block average bid.  This scale factor would then be
multiplied by the actual C block bid for that license to determine the scaled C block cash
bid.  This scaled C block bid would then be discounted at a 14 percent discount rate
for the government debt to determine the prepayment price.  NextWave suggests that a
two-year period would be necessary for licensees to fund this prepayment as well as
sustain operating expenses.
   62.  Cook Inlet Region argues that any discounting of the net high bid price for
purposes of prepayment would be unfair to the losing bidders in the C block auction and
investors and creditors of the bidders in the auction.  Omnipoint also believes that a
prepayment option is discriminatory against all of the winning bidders except the very
large.  AirGate Wireless believes that permitting licensees to pay the net present value
of their license costs at a discount would have the effect of rewriting the outcome of the
C block auction, denying licenses to bidders who expressed through their bids a
willingness to pay more than a discounted bid, and thereby arbitrarily choosing winners
and losers.  Additionally, the SBA does not support a discount in the net bid
amounts.  The SBA indicates that absent a detailed analysis of the bidders, the bidding
process, round activity, financial environment and marketplace circumstances during each
of the auctions, including a regression analysis to isolate individual factors, it cannot be
determined that the adjusted marketplace value of C block should be based on either A
and B block or D-F block bid amounts.  The SBA also indicates that "a reduction in
principal would seriously undermine the integrity of the auction as well as set a
dangerous precedent for small business participation in future auctions."
   63.  Other commenters argue that a prepayment option is not viable for small
businesses, or that it is otherwise inappropriate.  BIA Capital contends that a prepayment
option is not feasible because it would require small businesses to trade in debt capital
from the government, which costs 7%, for private equity, which has a capital cost
ranging from 30% to 40%.
   64.  Discussion.  Under the prepayment option we adopt, any C block licensee may
prepay selective licenses subject to the restrictions described in this Subsection IV.D.  All
licenses that are not prepaid in accordance with this option must be surrendered to the
Commission in exchange for a forgiveness of the corresponding debt and any penalties.
A licensee selecting this option may apply 70% of the total of all down payments it made
on the licenses that it elects to surrender to the Commission ("Available Down
Payments"), to a prepayment of the Notes for as many of its licenses it wishes to keep.
The remaining down payments not applied to prepayment will be retained by the
Commission.  Additionally, an incumbent may use any "new money" to prepay as many
of its own licenses as it desires.  Any installment payments previously made by the
licensee for all its licenses will be added to the Available Down Payments to increase the
funds available to prepay its Notes.  Interest accrued from the date of the conditional
license grant through the Election Date will be forgiven.  For purposes of this option, the
down payment associated with licenses that are transferred as of the Election Date to
subsidiaries or affiliates will be considered transferred with the licenses and the
corresponding debt.
   65.  We believe that this prepayment option fairly balances competing interests, while
maintaining the fairness and integrity of our rules and auctions.  We note that 30% of the
down payments is equal to 3% of the net high bids and is consistent with the approach
adopted previously for down payments.  Under our existing rules, an applicant is
subject to a 3% payment if it fails to make the required down payment.  Furthermore,
previously we have indicated that these payments will discourage default and ensure that
bidders have adequate financing and that they meet all eligibility and qualification
requirements.  In this manner, we believe it to be most fair to apply this provision to
those licensees who seek the relief provided by this option.  If licensees were able to use
all of their down payment, they would recoup in full what they paid, and there would be
no deterrent effect against bidding excessively in the auction or otherwise gaming the
process.  Thus, in the next auction to which our default payments apply, these rules could
be ignored with impunity.  Such a result would severely harm our market-based auction
program.  It would make it impossible to impose the charges we already have imposed in
past cases, including in C block cases.  Further, we emphasize that permitting C block
licensees access to the down payments they previously made for licenses they no longer
wish to retain is a substantial benefit and fair to these licensees.  To allow them to use
100% of those funds would be unfair to other C block licensees who choose to continue
to pay under their existing obligations, and to bidders who were unsuccessful in the
auction.
   66.  While some have argued that C block licensee loan payoffs made under a
prepayment plan should be determined using a net present value formula, we decline to
discount the Notes.  We believe it is fair to other bidders and to the credibility and
integrity of our rules for the prepayment to be in the amount of the outstanding debt for
the net high bid.  In other words, licensees should pay what they bid.  To offer deep
discounts off the amount of the debt is outside normal commercial practices and
otherwise appears to be a "bail-out" of C block licensees who have encountered financial
difficulties long after the auction was completed and the financial commitments were
made.  Debt paid off in advance of the maturity date allows the debtor to reap the benefit
of not incurring additional interest due on the principal amount owed.  To discount the
amount of the principal, as has been suggested, would unfairly permit a windfall to the
licensee electing this option.  While we are cognizant of the financial difficulties for some
C block licensees, we are also mindful of our duty to the other C block licensees who are
successfully meeting their obligations and continuing build-out efforts for wireless
services.  Therefore, we believe that we strike the proper balance by allowing a licensee
the benefit of prepaying its debt obligations, thereby reducing the amount of interest that
would be payable over the full term of the Note, while avoiding fundamental changes to
our rules that unfairly harm other licensees who followed our rules and who continue to
meet their payment obligations.
   67.  Under this prepayment option, an incumbent must prepay all of the BTA licenses
in a particular MTA and cannot arbitrarily select individual BTA licenses in a given
MTA to prepay while surrendering other licenses in that MTA, with one exception.  We
conclude that while a licensee must prepay the debt on all of the BTAs for which it holds
licenses in an MTA, we recognize that a licensee may not have sufficient funds available
to it to prepay all of its Notes for the BTA licenses in a given MTA.  Therefore, any
licensee that has enough funds on hand to prepay one or more BTAs within an MTA, but
not enough for the entire MTA, must prepay all of those BTAs within that MTA that it
can afford.  We conclude that a requirement that all licenses in a given MTA be prepaid
precludes licensees from "cherry picking."  The simultaneous multiple-round auction
design discussed in paragraphs 86-89, infra, enables bidders to place bids on many
licenses at once.  If we were to permit licensees to "cherry pick" which licenses in an
MTA to prepay and which to surrender under this option, the interdependency of the
licenses would be threatened.  Licenses surrendered pursuant to such a "cherry picking"
scheme would lack the potential for aggregation, and consequently would hold much less
value to other bidders in the subsequent reauction.
   68.  We decline to provide an exception for markets in which the five-year build-out
requirement has been met as provided under the amnesty option.  Under the prepayment
option, licensees have the flexibility to select which markets they will retain subject to the
restrictions in paragraph 67, supra.  For this reason, licensees have the option of
selecting and prepaying for licenses where they have invested capital to meet the build-
out requirements and not prepaying in an MTA where they have not.  We believe that
this flexibility, compared to the all or nothing approach of simple amnesty, mitigates the
need for this exception.
   69.  Finally, for a period of two years from the start date of the reauction, licensees
(defined as qualifying members of the licensee's control group, and their affiliates) will
be prohibited from reacquiring the licenses surrendered pursuant to this option either
through a reauction or any other secondary market transaction.  We do not believe that it
would be fair to other licensees and bidders for these licensees to benefit from a reauction
of those licenses after taking advantage of this option.  Furthermore, we do not believe
that this option should provide opportunities for licensees to "selectively" reduce their
license obligations by surrendering a license in hopes of re-obtaining it in a reauction at a
lower price.
E. Election Procedures
   70.  We conclude that a licensee electing to continue under its existing installment
payment plan or electing one of the options set forth in this Second Report and Order,
must file a written notice of such election with the Wireless Telecommunications Bureau
on or before the Election Date ("Election Notice") as specified in this section.  As used
herein, "Election Date" means January 15, 1998.
   71.  We require that those licensees electing (i) to continue making payments under
their original C block Notes, (ii) the disaggregation option, or (iii) the amnesty option
who elect to take advantage of the build-out exception and retain certain of their licenses
make the appropriate payment by March 31, 1998 (or by the end of the 60-day grace
period allowed, see paragraph 25, supra), and execute any necessary financing documents
pursuant to appropriate requirements and time frames established by the Bureau in order
to continue to be eligible under the option chosen.
   72.  Continuation Under Existing Note(s).  Any licensee that wishes to continue
making installment payments in accordance with the terms of its original C block Note,
must elect to do so by submitting the Election Notice of such election.
   73.  Disaggregation.  For licensees electing the disaggregation option, the Election
Notice must include (i) a list of all licenses being disaggregated, (ii) the original of all
licenses being disaggregated, and (iii) all originals of the Notes and Security Agreements
for those licenses being disaggregated for cancellation by the Commission.  Upon
acceptance of the Election Notice, the disaggregated spectrum will be deemed returned to
the Commission.
   74.  Amnesty.  For licensees electing the amnesty option, the Election Notice must
include (i) a list of all licenses being surrendered, (ii) if applicable, a statement indicating
that it intends to avail itself of the build-out exception together with a list of those BTA
licenses it intends to retain and pertinent information concerning build-out pursuant to
the Commission's rules, (iii) the original of all licenses being surrendered, and (iv) all
originals of the Notes and Security Agreements for those licenses being surrendered for
cancellation by the Commission.
   75.  Prepayment.  For licensees electing the prepayment option, the Election Notice
must include (i) a list of all licenses being prepaid, (ii) a payment in the amount of any
additional "new money" a licensee desires to apply to the prepayment of its licenses, (iii)
the original of all licenses not being prepaid in accordance with this option, and (iv) all
originals of the Notes and Security Agreements for those licenses not being prepaid for
cancellation by the Commission.  Notes which are prepaid will be marked "Paid-In-Full"
and returned to the licensee.
   76.  We further conclude that any C block licensee that (i) fails to elect one of the
options set forth, Section IV.A.-D., supra on or before the Election Date, or (ii) fails to
elect on or before the Election Date to continue making payments under its original C
block Note(s), or (iii) fails to fully and timely execute and deliver to the Commission (or
its agent) any required financing documents within the period of time specified by the
Bureau, will not be afforded the opportunity granted to licensees who do make a timely
election to repay the Suspension Interest over a period of eight equal payments.  In such
event, the licensee will be required, on or before March 31, 1998, to make all payments
that would have been due under its Note(s) but for the effect of the Suspension Order.
For example, a licensee whose regular installment due date was March 31, 1997, who did
not make payment on that date because of the Suspension Order, will owe on March 31,
1998, all payments that were due and payable earlier, but unpaid due to the Suspension
Order, in addition to the regularly scheduled March 31, 1998, payment.
F.  Cross Defaults
   77.  Background.  In the Notice of Proposed Rule Making in this proceeding, we
sought comment on whether the Commission should cross default its installment payment
plan loans with other installment payment plan loans to the same licensee.  We asked if
we should cross default licensees across services or blocks (e.g., from PCS licenses to
SMR licenses, or from PCS C and F block licenses), whether we should pursue default
remedies against single licenses only (e.g., from C block to C block licenses only), and
what factors should influence our decision to pursue cross defaults.  In response, several
commenters specifically requested that the Commission clarify its rules regarding cross
default in the context of defaults on installment payments if licenses are held by licensees
with the same or overlapping control groups.
   78.  Further, several commenters request the Commission to affirmatively decide that
there will be no cross default.  BIA Capital states that one perceived disincentive to
providing financing to C block licensees is cross default.  In this regard, BIA Capital
suggests that the Commission quickly clarify its position on cross defaults, and
recommends that a default on payments for some licenses not result in cross default on
other licenses which the company is using successfully.  ClearComm agrees and urges
the Commission to allow licensees to place their licenses in separate entities so that
potential financiers may invest in specific markets that meet their investment criteria.
AmeriCall and Hughes Network Systems state the effectiveness of the disaggregation
option can be assured if the Commission clarifies that it will not pursue cross defaults.
AmeriCall and Hughes Network Systems state most regional equity funds are unwilling to
look at this sector until they are reassured that their investment in one state is sheltered
from events in other states that would impact licenses in those different markets.
   79.  Discussion.  We will not pursue cross default remedies against C block licensees
who default on installment payments with regard to other licenses in the C or F blocks.
For example, if a licensee defaults on a C block license and that licensee holds other C
block licenses on which it is making its payments, we will not declare it to be in default
on its debt associated with the other C block licenses.  Similarly, if a licensee defaults on
a C block license, and also holds F block licenses on which it is making its payments, we
will not declare it to be in default on its F block debt.
   80.  This decision is warranted in light of our efforts to provide current C block
licensees who are experiencing financing difficulties with options for meeting their
financial obligations to the Commission.  We emphasize that our decision only
addresses the context of a licensee's default on an installment payment for a C block
license upon other licenses held by that licensee in the C or F blocks.  We defer to
completion of the Part 1 Rule Making our decision on whether to amend more
comprehensively our policy of cross defaults.  We also emphasize that existing
installment payment default rules and license conditions will continue to apply for those
particular licenses in default after March 31, 1998.  Accordingly, upon default, a license
will automatically cancel and the Commission will initiate debt collection procedures
against the licensee and accountable affiliates.
V.  FURTHER NOTICE OF PROPOSED RULE MAKING
A.  Proposals Regarding the Reauction of Surrendered Licenses
   81.  Background.  Several commenters suggest that a reauction of C block licenses is
the best method by which the Commission can place C block licenses in the hands of
licensees capable of constructing systems and offering service to the public rapidly.
Triumph Capital, MCI, and Cook Inlet Communications all support a reauction within
four to six months.
   82.  Discussion.  Under the options adopted above, licensees have three options for
the surrender of licenses or spectrum to the Commission.  A reauction of licenses will
assure rapid provision of service to the public.  A reauction also will ensure that these
licenses are available to all applicants in a rapid and fair fashion.  A simultaneous
reauction of all the licenses turned in to the Commission will benefit all bidders because
they will be able to bid for a number of licenses in a single reauction, instead of a series
of piecemeal auctions after defaults and revocations, in which opportunities for
aggregation might be less favorable.
   1.  Licenses to be reauctioned
   83.  We propose that the reauction include the following licenses: (1) all licenses
representing the disaggregated spectrum surrendered to the Commission under the
disaggregation option; (2) all licenses surrendered to the Commission on or before
January 15, 1998, by incumbent licensees who choose to take advantage of the
Commission's prepayment or amnesty options; and (3) all PCS C block licenses currently
held by the Commission as a result of previous defaults.  By including all available
licenses in the reauction, the Commission can efficiently and fairly speed service to the
public.  In addition, offering all available licenses will allow for the most efficient
aggregation of licenses.  We seek comment on this proposal.
   2.  Eligibility for Participation
   84.  As we stated in the Second Report and Order, all entrepreneurs, all entities that
applied for the original C block auction, and all current C block licensees with
exceptions, are eligible to bid in the reauction.  We seek comment on whether we should
restrict participation in the reauction to entities that have not defaulted on any FCC
payments.  Should we presume that an entity's prior default on payments for an FCC
license or authorization makes that entity not financially or otherwise fit to acquire a
reauctioned C block license?  Alternatively, we could review financial qualifications
through several other means.  For instance, we could allow such entity to participate in
an auction, but if the applicant is a winning bidder, set for expedited hearing the financial
qualifications of the bidder, and allow the applicant to rebut a presumption that it is not
financially qualified.  Another alternative would be to request that the entity submit
more detailed financial information at the application stage, or require that the entity
submit a higher upfront payment amount (e.g., a 50% upfront payment requirement) to
participate in the reauction.  With regard to C block licensees who elect the
disaggregation, amnesty, or prepayment options adopted in the Second Report and Order,
we observe that by making such election and related payments they are not in default on
their C block licenses and, thus, would not be restricted from participation in the
reauction (except as otherwise set forth in the Second Report and Order).
  3.  Reauction Procedures
  85.  We propose below auction design and application procedures for the reauction of
C block licenses.
     a.  Competitive Bidding Design
  86.  We propose that all licenses and spectrum surrendered to the Commission be
awarded by means of a simultaneous multiple-round electronic auction.  We base this
proposal on our desire to quickly auction available licenses and thereby to promote the
most efficient assignment of the spectrum.  Consistent with our normal practice, the
specific procedural requirements of the auction would be set out by Public Notice prior to
the auction.  In general, we have indicated that the auction procedures chosen for each
service should be those that will best promote the policy objectives identified by
Congress.  We further concluded in the Competitive Bidding Second Report and Order
that in most cases the goals set forth in Section 309(j) will be best achieved by designing
auctions that award authorizations to the parties that value them most highly.  As we
explained, such parties are most likely to deploy new technologies and services rapidly,
and to promote the development of competition for the provision of those and other
services.
   87.  Also, multiple-round bidding during the auction will provide more information to
bidders about the value of licenses than single round bidding.  With better information,
bidders have less incentive to shade their bids downward in order to avoid the "winner's
curse," that is, the tendency for the winner to be the bidder who most overestimates the
value of the item being auctioned.  Finally, multiple-round bidding is likely to be fairer
than single-round bidding.  Every bidder has the opportunity to win if it is willing to pay
the most for it.  Thus, we tentatively conclude that multiple-round bidding would be the
best method of auctioning all available licenses and we seek comment on this tentative
conclusion.
   88.  We also tentatively conclude that all surrendered C block licenses should be
awarded in a single simultaneous multiple-round auction.  A single simultaneous auction
will facilitate any aggregation strategies that bidders may have, and it would provide the
most information to bidders about license values at a time that they can best put that
information to use.  We seek comment on this tentative conclusion.
   89.  Finally, if we adopt simultaneous multiple-round bidding as our method of
auctioning all available licenses, we tentatively conclude that bidding should be allowed
only by electronic means, rather than by telephone.  Given our desire to conduct the
reauction quickly, as well as recent improvements in our electronic bidding software, we
tentatively conclude that telephonic bidding should be permitted only in exceptional
circumstances, to be determined by the Wireless Telecommunications Bureau in each
instance.
      b.  Bidding Procedures
   90.  Subject to the exceptions discussed below, which are designed to speed the
reauction process, we tentatively conclude that the reauction should be conducted in
conformity with the general competitive bidding rules set forth in Part 1, Subpart Q of
the Commission's rules, as revised, and substantially consistent with the auctions that
have been employed in other wireless services.  We also propose to use our Part 24 rules
applicable to the C block to the extent that such rules do not conflict with our Part 1 rules
or rules specifically adopted or proposed in this Second Report and Order and Notice of
Proposed Rule Making for the reauction of C block licenses.  Specifically, except as set
forth herein, we propose to apply the Part 1 rules regarding competitive bidding
mechanisms, bidding application and certification procedures and prohibition of
collusion, submission of upfront payment, down payment and filing of long-form
applications, procedures for filing long form applications, and procedures regarding
license grant, denial and default.  We seek comment on this
proposal.
   91.  Activity Rules.  We tentatively conclude that, as we have done in other
simultaneous multiple-round auctions, we will conduct the reauction in three stages.
Three stages, with bidders required to be more active in each stage, serves to provide
bidders with the flexibility to pursue backup strategies as the auction progresses.
However, because we believe that efficiently assigning these licenses for rapid service to
the public and increased competition in the CMRS marketplace requires a swift reauction
of the licenses, we propose to use high activity requirements in the reauction.  In recent
auctions, for example, we have required bidders to be active on 80% of their eligible
licenses in Stage I, 90% in Stage II, and 98% in Stage III.  We propose to use similar
activity levels in the C block reauction and, to further expedite the auction, require the
Bureau to use its delegated authority to aggressively schedule bidding rounds, quickly
transition into the next stage of the auction when bidding activity falls, and use higher
minimum bid increments for very active licenses.  We seek comment on these proposals
and tentative conclusions.
   92.  Reserve Price, Minimum Opening Bid, and Minimum Bid Increments.  Section
1.2104 of our rules provides that the Commission may establish reserve prices or
suggested minimum opening bids.  The Balanced Budget Act directed the Commission
to prescribe methods by which a reasonable reserve price will be required or a minimum
opening bid will be established, unless the Commission determines that a reserve price or
a minimum opening bid is not in the public interest.  This legislative directive
establishes a presumption in favor of reserve prices or minimum opening bids in the
reauction.  A minimum opening bid is the minimum bid price set at the beginning of the
auction below which no bids are accepted.  Customarily, an auctioneer has the discretion
to lower a minimum opening bid in the course of the auction.  A minimum opening bid
in the C block reauction, more than a reserve price, will help make certain that the public
is fairly compensated for spectrum surrendered to the Commission, expedite the auction
and give us the flexibility to make adjustments based on the competitiveness of the
auction.  We seek comment on this proposal.  We also seek comment on the
methodology we should use to establish minimum opening bids and what factors we
should consider in doing so.  We propose minimum opening bids for each market equal
to 10% of the corresponding high bid for the market in the original C block auction.
Such an approach will scale the minimum opening bids in a way that reflects the relative
value of the licenses.  We also ask that commenters address whether the amount of the
minimum opening bid should be capped to ensure that bidding is not deterred on high
valuation markets, in particular.  Finally, if commenters believe that a minimum opening
bid equal to 10% of the high bid in the original C block auction will result in substantial
unsold licenses, or is not a reasonable amount, they should explain why this is so, and
comment on the desirability of a higher or lower minimum opening bid.
      c.  Procedural and Payment Issues
   93.  Pre-Auction Application Procedures.  Auction applicants are required to file a
short-form application, FCC Form 175, prior to the start of each auction.  Although we
have previously allowed both electronic and manual filing of such applications, we
tentatively conclude that we should require electronic filing of all short-form applications
for the reauction.  We believe that electronic filing of applications would serve the best
interests of auction participants as well as the members of the public monitoring the
reauction.  We also believe that an electronic filing requirement will help ensure that the
reauction will be completed within the time frame contemplated by this Further Notice of
Proposed Rule Making. We have developed user-friendly electronic filing software and
Internet World Wide Web forms to give applicants the ability to easily and inexpensively
file and review applications.  This software helps applicants ensure the accuracy of their
applications as they are filling them out, and assists them in avoiding errors and
omissions.  In addition, by shortening the time required for the Commission to process
applications before the auction, electronic filing will increase the lead time available to
applicants to pursue business plans and arrange necessary financing before the short-form
deadline.  Our experiences from recent auctions show that bidders are confident that the
electronic filing system is reliable.  For example, in the broadband PCS D, E, and F
block auction, 94% of the qualified bidders filed their short-form applications
electronically.  In the recently completed WCS auction, all winning bidders filed their
long-form applications electronically.  In addition, we note that in the Part 1 Proceeding,
we tentatively concluded that Sections 1.2105(a) and 1.2107(c) of our rules should be
amended to require electronic filing of all short-form and long-form applications.  We
seek comment on this tentative conclusion.
   94.  Upfront Payment.  The Part 1 rules require the submission of an upfront
payment as a prerequisite to participation in spectrum auctions.  We propose to set the
amount of the upfront payment for the reauction at $.06 per MHz per pop.  We adopted
the same upfront payment amount for our most recent broadband PCS auction, the D, E,
and F block auction, in which all applicants for all blocks made a $.06 per MHz per pop
upfront payment.  In the Competitive Bidding Second Report and Order, we indicated
that the upfront payment should be set using a formula based upon the amount of
spectrum and population (or "pops") covered by the license or licenses for which parties
intend to bid.  We reasoned that this method of determining the required upfront
payment would enable prospective bidders to tailor their upfront payment to their bidding
strategies.  At the same time, however, we noted that determining an appropriate
upfront payment involved balancing the goal of encouraging bidders to submit serious,
qualified bids with the desire to simplify the bidding process and minimize
implementation costs imposed on bidders.  We concluded that the best approach would
be to maintain the flexibility to determine the amount of the upfront payment on an
auction-by-auction basis because this balancing may yield different results depending upon
the particular licenses being auctioned.  In light of the our desire that only serious,
qualified applicants participate in the reauction, our proposal of a $.06 per MHz per pop
is appropriate.  We seek comment on this proposal.  We also seek comment on
alternative methods of establishing an upfront payment, and in particular, on how the
Commission may estimate the present market value of the spectrum to be auctioned.
   95.  Down Payment and Full Payment.  Consistent with the procedures used in prior
auctions, we tentatively conclude that every winning bidder in an auction should be
required to tender a down payment sufficient to bring its total amount on deposit with the
Commission up to 20% of its winning bid within 10 business days after the issuance of a
public notice announcing the winning bidder for the license.  We seek comment on this
tentative conclusion.
   96.  If a winning bidder makes its down payment in a timely manner, we propose that
it file an FCC Form 600 long-form application and follow the long-form application
procedures in Section 1.2107 of the Commission's rules.  After reviewing the winning
bidder's long-form application, and after verifying receipt of the winning bidder's 20%
down payment, the Commission would announce the application's acceptance for filing,
thus triggering the filing window for petitions to deny.  We note that the Balanced Budget
Act of 1997 authorizes the Commission to establish a shortened period for the filing of
petitions to deny.  In light of this authority, as well as our desire to conclude the
reauction process as quickly as possible, we propose that parties then have 15 days
following public notice that an application was accepted for filing to file a petition to
deny.  If, pursuant to Section 309(d) of the Communications Act, the Commission
dismisses or denies any and all petitions to deny, the Commission would announce by
public notice that it is prepared to award the license, and the winning bidder would then
have 10 business days to submit the balance of its winning bid.  If the bidder does so, the
license would be granted.  If the bidder fails to submit the required down payment or the
balance of the winning bid or the license is otherwise denied, we would assess a default
payment as discussed below.  We seek comment on these proposals.
   97.  Amendments and Modifications of Applications. To encourage maximum bidder
participation, we propose to allow applicants to amend or modify their short-form
applications as provided in Section 1.2105.  In the broadband PCS context, we
modified our rules to permit ownership changes that result when consortium investors
drop out of bidding consortia, even if control of the consortium changes due to this
restructuring.  We propose to adopt the same exception to our rule prohibiting major
amendments in the reauction.  We seek comment on these proposals.
   98.  Bid Withdrawal, Default and Disqualification. We tentatively conclude that the
withdrawal, default, and disqualification rules for the reauction should be based upon the
procedures established in our general competitive bidding rules.  With regard to bids that
are submitted in error, we propose to apply the guidelines that the Commission has
fashioned to provide for relief from the bid withdrawal payment requirements under
certain circumstances.  We seek comment on this approach.
      d.  Anti-Collusion Rules
   99.  In the Competitive Bidding Second Report and Order, we adopted rules to
prevent collusion in connection with competitive bidding, explaining that these rules,
which are codified at 47 C.F.R.  1.2105, would enhance the competitiveness of both the
auction process and the post-auction market structure.  We propose to apply these same
rules to the reauction of licenses surrendered to the Commission.  We seek comment on
this proposal.
      e.  Designated Entity Provisions
   100.  We propose to provide small business bidders in the C block reauction with a
two tiered bidding credit, which will provide a greater discount to very small businesses.
In the C block auction, a winning bidder that qualified as a small business or a
consortium of small businesses was able to use a bidding credit equal to 25% of its
winning bid.  For the reauction, however, we tentatively conclude that we should offer
tiered bidding credits, as we did for F block and, more recently, Local Multipoint
Distribution Service (LMDS) small business bidders.  We propose to define a second
tier of small business, which we will refer to as "very small businesses," as entities that,
together with their affiliates and persons or entities that hold interest in such entities and
their affiliates, have average gross revenues of not more that $15 million for the
preceding three years.  Creation of this subcategory of small business enables us to tailor
a bidding credit to meet the needs of entities that may be interested in bidding on
spectrum surrendered by C block licensees.  Thus, we propose a 35% bidding credit for
very small businesses and a 25% bidding credit for small businesses.  We seek comment
on our proposals and tentative conclusions.
   101.  We also tentatively conclude that an installment payment program will not be
offered in the reauction.  We have conducted several auctions without installment
payments.  The Commission must balance competing objectives in Section 309(j) that
require, inter alia, that it promote the development and rapid deployment of new
spectrum-based services and ensure that designated entities are given the opportunity to
participate in the provision of such services.  In assessing the public interest, we must
try to ensure that all the objectives of Section 309(j) are considered.  We have found, for
example, that obligating licensees to pay for their licenses as a condition of receipt
ensures greater financial accountability from applicants.  Thus, we tentatively conclude
that we should not extend installment payments to winners in the reauction, given the
incentives to entrepreneurs established through the various proposals discussed above.
We seek comment on these tentative conclusions.
                             VI. CONCLUSION
   102.  In this Second Report and Order, we order resumption of installment payments
for the broadband PCS C and F blocks, with the payment deadline reinstated as of March
31, 1998.  We also adopt options designed to assist C block licensees that are
experiencing financial difficulties to build systems that will promote competition, or to
surrender spectrum to the Commission for reauction. These options include
disaggregation, amnesty, and prepayment.  These provisions will create opportunities for
C block licensees to provide service to the public while maintaining the fairness and
integrity of our auctions program.  We also adopt a Further Notice of Proposed Rule
Making seeking comment on proposed changes to our C block rules to govern the
reauction of surrendered spectrum in the C block.
VII.  PROCEDURAL MATTERS AND ORDERING CLAUSES
A.  Regulatory Flexibility Analysis
   103.  The Final Regulatory Flexibility Analysis, pursuant to the Regulatory Flexibility
Act, 5 U.S.C.  604, is contained in Appendix C.  The Initial Regulatory Flexibility
Analysis is contained in Appendix D.
B.  Paperwork Reduction Act Analysis
   104.  This Second Report and Order contains a modified information collection.  As
part of its continuing effort to reduce paperwork burdens, we invite the general public
and the Office of Management and Budget (OMB) to take this opportunity to comment on
the information collections contained in this Second Report and Order, as required by the
Paperwork Reduction Act of 1995, Pub. L. No. 104-13.  Public and agency comments
are due December 1, 1997.  OMB comments are due December 1, 1997.  Comments
should address: (a) whether the proposed collection of information is necessary for the
proper performance of the functions of the Commission, including whether the
information shall have practical utility; (b) the accuracy of the Commission's burden
estimates; (c) ways to enhance the quality, utility, and clarity of the information
collected; and (d) ways to minimize the burden of the collection of information on the
respondents, including the use of automated collection techniques or other forms of
information technology.
   105.  This Further Notice of Proposed Rule Making contains either a proposed or
modified information collection.  As part of its continuing effort to reduce paperwork
burdens, we invite the general public and the Office of Management and Budget (OMB)
to take this opportunity to comment on the information collections contained in this
Further Notice of Proposed Rule Making, as required by the Paperwork Reduction Act of
1995, Pub. L. No. 104-13.  Public and agency comments are due at the same time as
other comments on this Further Notice of Proposed Rule Making; OMB comments are
due 60 days from date of publication of this Further Notice of Proposed Rule Making in
the Federal Register.  Comments should address: (a) whether the proposed collection of
information is necessary for the proper performance of the functions of the Commission,
including whether the information shall have practical utility; (b) the accuracy of the
Commission's burden estimates; (c) ways to enhance the quality, utility, and clarity of the
information collected; and (d) ways to minimize the burden of the collection of
information on the respondents, including the use of automated collection techniques or
other forms of information technology.
C.  Paperwork Reduction Act Comment Filing Procedures
   106.  Written comments by the public on the modified information collections in this
Second Report and Order are due on or before December 1, 1997.  Written comments
must be submitted by OMB on the modified information collections on or before
December 1, 1997.  In addition to filing comments with the Secretary, a copy of any
comments on the information collections contained herein should be submitted to Judy
Boley, Federal Communications Commission, Room 234, 1919 M Street, N.W.,
Washington, DC  20554, or via the Internet to jboley@fcc.gov and to Timothy Fain,
OMB Desk Officer, 10236 NEOB, 725 - 17th Street, N.W., Washington, DC  20503 or
via the Internet to fain_t@al.eop.gov.
   107.  Written comments by the public on the modified information collections in this
Further Notice of Proposed Rule Making are due November 13, 1997.  Written comments
must be submitted by OMB on the modified information collections on or before 60 days
after date of publication in the Federal Register.  In addition to filing comments with the
Secretary, a copy of any comments on the information collections contained herein should
be submitted to Judy Boley, Federal Communications Commission, Room 234, 1919 M
Street, N.W., Washington, DC  20554, or via the Internet to jboley@fcc.gov and to
Timothy Fain, OMB Desk Officer, 10236 NEOB, 725 - 17th Street, N.W., Washington,
DC  20503 or via the Internet to fain_t@al.eop.gov.
D.  Ordering Clauses
   108.  Accordingly, IT IS ORDERED THAT, pursuant to Sections 4(i), 5(b), 5(c)(1),
303(r), and 309(j) of the Communications Act of 1934, as amended, 47 U.S.C. Sections
154(i), 155(b), 156(c)(1), 303(r), and 309(j), this Second Report and Order and Further
Notice of Proposed Rule Making is hereby ADOPTED, and Sections 1.2110 and 24.709
of the Commission's rules are amended as set forth in Appendix B, effective 60 days
after publication in the Federal Register.  The information collection contained in these
rules becomes effective 60 days after publication in the Federal Register, following OMB
approval, unless a notice is published in the Federal Register stating otherwise.
   109.  IT IS FURTHER ORDERED THAT the Wireless Telecommunications Bureau's
Suspension Order dated March 31, 1997, suspending the installment payment obligations
for Personal Communications Services (PCS) C block licensees, and the subsequent
Public Notice dated April 28, 1997, suspending those obligations for PCS F block
licensees are rescinded, effective March 31, 1998, and installment payments for C and F
block PCS licensees are reinstated as of that date.
   110.  IT IS FURTHER ORDERED THAT on or before January 15, 1998, the
Election Date, all C block broadband PCS licensees must elect either (1) to continue
making payments under their original C block Notes, or (2) one of the options set forth
in Section IV of this Second Report and Order.  The Election Notice must be filed on or
before January 15, 1998 with the Office of the Secretary, Federal Communications
Commission, Washington, DC 20554 (Attn: Wireless Telecommunications Bureau,
Auctions and Industry Analysis Division -- Election Notice).
   111.  IT IS FURTHER ORDERED THAT the Secretary shall send a copy of this
Second Report and Order and Further Notice of Proposed Rule Making, including the
Final Regulatory Flexibility Analysis, to the Chief Counsel for Advocacy of the Small
Business Administration, in accordance with Section 605(b) of the Regulatory Flexibility
Act, 5 U.S.C.  601 et seq.
   112.  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.
E.  Ex Parte Presentations
   113.  The Further Notice of Proposed Rule Making is a permit but disclose notice and
comment rule making proceeding.  Ex parte presentations are permitted, provided they
are disclosed as provided in Commission rules.  See generally 47 C.F.R. Sections
1.1202, 1.1203, and 1.1206(a).
F.  Comments
   114.  Pursuant to applicable procedures set forth in Sections 1.415 and 1.419 of the
Commission's Rules, interested parties may file comments on or before November 13,
1997, and reply comments on or before November 24, 1997.  In addition, a courtesy
copy should be delivered to Mark Bollinger, Auctions and Industry Analysis Division,
Wireless Telecommunications Bureau, Federal Communications Commission, 2025 M
Street, Room 5202, Washington, DC 20554.  All relevant and timely comments will be
considered by the Commission before final action is taken in this proceeding.  To file
formally in this proceeding, participants must file an original and five copies of all
comments, reply comments, and supporting comments.  If participants want each
Commissioner to receive a personal copy of their comments, an original plus ten copies
must be filed.  Comments and reply comments should be sent to Office of the Secretary,
Federal Communications Commission, Washington, DC 20554.  Comments and reply
comments will be available for public inspection during regular business hours in the
FCC Reference Center (Room 239) of the Federal Communications Commission, 1919 M
Street, N.W., Washington, DC 20554.
G.  Additional Information
   115.  For further information concerning the Second Report and Order, contact
Jerome Fowlkes or Sandra Danner, Auctions and Industry Analysis Division, Wireless
Telecommunications Bureau, Federal Communications Commission, Washington, DC
20554, (202) 418-0660.  For further information concerning the Further Notice of
Proposed Rule Making, contact Mark Bollinger, Auctions and Industry Analysis Division,
Wireless Telecommunications Bureau, Federal Communications Commission,
Washington, DC 20554, (202) 418-0660.
      FEDERAL COMMUNICATIONS COMMISSION
      William F. Caton
      Acting Secretary
                               APPENDIX A
                           List of Commenters
Initial Comments
1.  Airadigm Communications, Inc. (Airadigm)
2.  ALLTEL Communications, Inc. (ALLTEL)
3.  Alpine PCS, Inc. (Alpine)
4.  AmeriCall International, L.L.C. (AmeriCall)
5.  Bay Springs Telephone Company, Inc. (Bay Springs)
6.  Bear Stearns
7.  BellSouth Corporation
8.  BIA Capital Corporation (BIA Capital)
9.  Brookings Municipal Utilities (BMU)
10.  Central Wireless Partnership (CWP)
11.  Chase Telecommunications, Inc. (Chase)
12.  ClearComm, L.P.
13.  Comcast Corporation
14.  Community Service Communications, Inc. (CSCI)
15.  ComScape Telecommunications of Charleston License, Inc. (ComScape)
16.  Conestoga Wireless Company (Conestoga)
17.  CONXUS Communications, Inc. (CONXUS)
18.  Cook Inlet Region, Inc., Cook Inlet Western Wireless, PV/SS PCS, L.P., Western
Wireless Corporation, AirGate Wireless, L.L.C., Aerial Communications, Inc.,
TeleCorp, Inc., and Airadigm Communications, Inc. (collectively, CIRI)
19.  Creative Airtime Services, L.L.C. (Creative)
20.  Cyber Sites, L.L.C.
21.  Dewey Ballantine
22.  DiGiPH PCS, Inc. (DiGiPH)
23.  Duluth PCS, Inc., St. Joseph PCS, Inc., and West Virginia PCS, Inc. (collectively,
Duluth PCS)
24.  Eldorado Communications, L.L.C. (Eldorado)
25.  Fortunet Communications, L.P. (Fortunet)
26.  General Wireless Inc. (GWI)
27.  Holland Wireless, L.L.C., Wireless 2000, Inc., and Northern Michigan PCS
Consortium, (collectively, Holland)
28.  Horizon Personal Communications, Inc. (Horizon)
29.  Indus, Inc.
30.  Integrated Communications Group (Integrated)
31.  Kansas Personal Communications Services, Ltd. (KPCS)
32.  Ken W. Bray
33.  Magnacom Wireless, L.L.C., PCSouth, Inc., and Communications Venture PCS
Limited Partnership (collectively, Magnacom)
34.  MCI Communications Corporation (MCI)
35.  Meretel Communications Limited Partnership (Meretel)
36.  MFRI, Inc.
37.  Morris Communications, Inc. (Morris)
38.  National Wireless Resellers Association (NWRA)
39.  National Association of Black-Owned Broadcasters, Inc. (NABOB)
40.  National Association of Black Telecommunications Professionals, Inc. (NABTP)
41.  National Telephone Cooperative Association (NTCA)
42.  Nextel Communications, Inc. (Nextel)
43.  NextWave Telecom, Inc. (NextWave)
44.  Northcoast Communications, L.L.C. (Northcoast)
45.  Official Committee of Unsecured Creditors of Pocket Communications, Inc. (Pocket
Creditors)
46.  Omnipoint Corporation
47.  OneStop Wireless
48.  OnQue Communications, Inc. (OnQue)
49.  PCS Plus L.L.C. and McKenzie Telecommunications Group, Inc. (collectively, PCS
Plus)
50.  Pioneer Telephone Association, Inc. (Pioneer)
51.  Pocket Communications, Inc. (Pocket)
52.  Point Enterprises, Inc. (Point)
53.  R&S PCS, Inc. (R&S)
54.  RFW, Inc.
55.  Rural Telephone Finance Corporation (RTFC)
56.  Small Business Coalition (SBC)
57.  SouthEast Telephone Limited Partnership, Ltd. (SouthEast Telephone)
58.  Southwestern Bell Mobile Systems (SBMS)
59.  SpectrumWatch
60.  Sprint Spectrum L.P.
61.  Sprint Corporation
62.  Tennessee L.P. 121 (Tennessee)
63.  Toronto Dominion Bank and Toronto Dominion Securities (collectively, Toronto
Dominion)
64.  Urban Communicators PCS Limited Partnership (Urban Comm)
Reply Comments
1.  Airtel Communications, Inc. (Airtel)
2.  ALLTEL
3.  Alpine
4.  American Mobile Telecommunications Association, Inc. (AMTA)
5.  Antigone Communications Limited Partnership and PCS Devco, Inc. (collectively,
Antigone/Devco)
6.  BellSouth Corporation
7.  Carlson Technologies, Inc. (Carlson)
8.  Cellexis International, Inc. (Cellexis)
9.  ClearComm, L.P.
10.  Comcast Corporation
11.  Conestoga
12.  CONXUS
13.  CIRI
14.  Duluth PCS
15.  Fortunet
16.  GWI
17.  GTE Service Corporation (GTE)
18.  Ken W. Bray
19.  MCI
20.  Millison Investment Management, Inc. (MIM)
21.  Mountain Solutions LTD, Inc. (Mountain Solutions)
22.  Nextel
23.  NextWave
24.  Northcoast
25.  Omnipoint Corporation
26.  OnQue
27.  PCS Wisconsin, LLC
28.  PrimeCo Personal Communications, L.P. (PrimeCo)
29.  Radiofone PCS, L.L.C. (Radiofone)
30.  R&S
31.  RTFC
32.  Sprint Spectrum L.P.
33.  Stan P. Doyle
34.  Telecommunications Resellers Association (TRA)
35.  UniDial Communications (UniDial)
36.  Urban Comm
37.  U.S. Airwaves, Inc.
38.  Wireless Nation, Inc.
Ex Parte Comments
1.  AirGate Wireless, July 18, 1997
2.  AirGate Wireless, July 22, 1997
3.  AirGate Wireless, September 9, 1997
4.  Alpine, September 17, 1997
5.  Alpine, September 23, 1997
6.  AmeriCall, July 11, 1997
7.  AmeriCall, August 5, 1997
8.  AmeriCall and Hughes Network Systems, Inc., September 16, 1997
9.  AmeriCall, ClearComm, and Chase, September 17, 1997
10.  BIA Capital, August 4, 1997
11.  Chase, August 11, 1997
12.  ClearComm, August 7, 1997
13.  Congressman Rick Boucher, July 25, 1997
14.  Congressman Richard Burr, August 11, 1997
15.  Congressman Thomas Davis, July 30, 1997
16.  Congressman John D. Dingell, September 16, 1997
17.  Congressman Steny H. Hoyer, August 7, 1997
18.  Congresswoman Sue W. Kelly, August 11, 1997
19.  Congressman W.J. "Billy" Tauzin, August 13, 1997
20.  Congressmen W.J. "Billy" Tauzin and Edward J. Markey, September 16, 1997
21.  CONXUS, August 27, 1997
22.  Cook Inlet Communications, August 5, 1997
23.  Cook Inlet Communications, August 15, 1997
24.  Cook Inlet Region, Inc., September 23, 1997
25.  El Dorado, August 13, 1997
26.  GWI, August 4, 1997
27.  GWI, August 15, 1997
28.  GWI, August 18, 1997
29.  Magnacom Wireless, LLC, August 13, 1997
30.  MCI, August 14, 1997
31.  NextWave, June 23, 1997
32.  NextWave, July 29, 1997
33.  NextWave, August 5, 1997
34.  Nokia, September 15, 1997
35.  Nokia, September 16, 1997
36.  Northern Michigan PCS Consortium, L.L.C., August 14, 1997
37.  Omnipoint Corporation, August 18, 1997
38.  Omnipoint Corporation, September 3, 1997
39.  Omnipoint Corporation, September 5, 1997
40.  Omnipoint Corporation, September 23, 1997
41.  R&S, August 11, 1997
42.  Senator Christoper S. Bond, July 14, 1997
43.  Senator Paul D. Coverdell, September 24, 1997
44.  Senator Pete V. Domenici, September 10, 1997
45.  Senators James M. Inhofe, Don Nickles, and Conrad Burns, August 7, 1997
46.  Senator John McCain, August 19, 1997
47.  Senator John McCain, September 18, 1997
48.  Senator Daniel Patrick Moynihan, August 4, 1997
49.  Triumph Capital, August 7, 1997
50.  Triumph Capital, September 23, 1997 ("McCarthy Letter")
51.  Urban Comm, August 21, 1997
52.  Urban Comm, September 17, 1997
53.  U.S. Small Business Administration, September 8, 1997 ("Glover Letter")
                               APPENDIX B
                               FINAL RULES
Part 1 of Chapter I of Title 47 of the Code of Federal Regulations is amended as follows:
PART 1 - PRACTICE AND PROCEDURE
   1.  Section 1.2110 is amended by amending paragraph (e)(4)(i) to read as follows.
 1.2110 Designated Entities
(a) * * * *
(b) * * * *
(c) * * * *
(d) * * * *
(e) * * *
 (4) * * *
   (i)  If an eligible entity making installment payments is more than ninety (90) days
   delinquent in any payment, it shall be in default, except that broadband PCS
   frequency block C licensees making the March 31, 1998, interest payment pursuant to
   their elections under the Amendment of the Commission's Rules Regarding
   Installment Payment Financing for Personal Communications Services Licensees,
   Second Report and Order, WT Docket No. 97-82 (rel.  Oct. 16, 1997), shall be in
   default if they are more than sixty (60) days delinquent on such payment.
Part 24 of Chapter I of Title 47 of the Code of Federal Regulations is amended as
follows:
PART 24 - PERSONAL COMMUNICATIONS SERVICES
             2.  The authority citation for Part 24 continues to read as follows:
AUTHORITY: Secs. 4, 301, 302, 303, 309 and 332, 48 Stat. 1066, 1082, as amended;
47 U.S.C.  154, 301, 302, 303, 309 and 332, unless otherwise noted.
             3.  Section 24.709 is amended by adding paragraph (b)(9) 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 first auction for frequency block C, which began on
             December 18, 1995, will be eligible to bid in a reauction of licenses for frequency
             block C conducted after March 31, 1998.
             (ii) The following restrictions will apply for any reauction of frequency block C
             licenses conducted after March 31, 1998:
             (A)  Applicants that elected to disaggregate 15 MHz of spectrum from any or all
             of their frequency block C licenses, as provided in subsection IV.B., Amendment
             of the Commission's Rules Regarding Installment Payment Financing for Personal
             Communications Services Licensees, Second Report and Order, WT Docket No.
             97-82 (rel.  Oct. 16, 1997), will not be eligible to apply for such disaggregated
             licenses until 2 years from the start of the reauction of those licenses.
             (B)  Applicants that surrendered any of their frequency block C licenses as
             provided in subsection IV.D. (the "prepayment option") Amendment of the
             Commission's Rules Regarding Installment Payment Financing for Personal
             Communications Services Licensees, Second Report and Order, WT Docket No.
             97-82 (rel.  Oct. 16, 1997), 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.
             (C) For purposes of this paragraph, applicant shall mean the applicant and its
             affiliates and any present or former qualifying member of a control group and
             their affiliates.
                               APPENDIX C
                  Final Regulatory Flexibility Analysis
                        (Second Report and Order)
             As required by the Regulatory Flexibility Act (RFA), an Initial Regulatory
Flexibility Analysis (IRFA) was incorporated in the Order, Memorandum Opinion and
Order and Notice of Proposed Rulemaking in WT Docket No. 97-82.  The Commission
sought written public comment on the proposals in the Part 1 Proceeding, including
comment on the IRFA.  This Final Regulatory Flexibility Analysis (FRFA) conforms to
the IRFA.
A.           Need for, and objectives of, the Second Report and Order (Order) in WT Docket
             No. 97-82
             This 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 goals of ensuring the rapid provision of
PCS service to the public.
B.           Summary of significant issues raised by public comments in response to the Initial
             Regulatory Flexibility Analysis (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 rules
adopted herein.  See section E, 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.  The RFA
generally defines the term "small entity" as having the same meaning as the terms "small
business," "small organization," and "small governmental jurisdiction."  In addition,
the term "small business" has the same meaning as the term "small business concern"
under Section 3 of the Small Business Act.  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).
             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.
This definition has been approved by the SBA.  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
             A licensee electing one of the options set forth in the Order must file a written
notice of such election (the "Election Notice") with the Wireless Telecommunications
Bureau, Auctions and Industry Analysis Division no later than the Election Date.  The
"Election Date" is January 15, 1998.  Those licensees electing either (1) to continue
making payments under their original C block Notes; (2) the disaggregation option; or (3)
the amnesty option but elect to take advantage of the build-out exception and retain
certain of their licenses, will be required to execute and submit a modification of their
Notes, Security Agreements, Uniform Commercial Code ("UCC") Financing Statements
and any other related documents securing their Notes within the time frame established
by the Bureau.
             Continuation under Existing Note(s).  Any licensee that wishes to continue making
installment payments in accordance with the terms of its original C block Note, must
elect to do so by submitting the Election Notice.
             Disaggregation.  For licensees electing the disaggregation option, the Election
Notice must include the following:  (1) a list of all licenses being disaggregated; (2) the
original of all licenses being disaggregated; and (3) all originals of the Notes and Security
Agreements for those licenses being disaggregated for cancellation by the Commission.
             Amnesty.  For licensees electing the amnesty option, the Election Notice must
include the following:  (1) a list of all licenses being surrendered; (2) if applicable, a
statement indicating that the licensee intends to avail itself of the build-out exception
together with a list of those BTA licenses it intends to retain and pertinent information
concerning build-out; (3) the original of all licenses being surrendered; and (4) originals
of the Notes and Security Agreements for those licenses being surrendered for
cancellation by the Commission.
             Prepayment.  For licensees electing the prepayment option, the Election Notice
must include the following:  (1) a list of all licenses being prepaid; (2) a payment in the
amount of any additional "new money" as a licensee desires to apply to the prepayment
of its licenses; (3) the original of all licenses not being prepaid in accordance with this
option; and (4) all originals of the Notes and Security Agreements for those licenses not
being prepaid for cancellation by the Commission.
E.           Steps taken to minimize significant economic impact on small entities, and
             significant alternatives considered
             The Commission believes that it is in the public interest to adopt these provisions
to facilitate use of C block licenses without further regulatory or marketplace delay.  The
menu approach adopted in this Order is intended to provide options to facilitate the rapid
introduction of service to the public, while recognizing that ultimately the decisions
concerning competition and services appropriately are marketplace decisions and should
not be determined by government intervention.  This decision is intended to be fair to
current C block licensees (including small entities), to bidders who were not successful in
their attempts to obtain licenses in this spectrum, and to the public desiring new and
innovative competitive services.  These options minimize the potential significant
economic impact on small entities because they meet the unique circumstances facing the
C block licensees and permit these small entities to choose one of three alternative
solutions to reduce their debt to the Commission.  All of the entities affected by this
Order are small entities, and the intent of this Order is to alleviate, to some extent, the
financial difficulties faced by these small entities.  These options are relatively
straightforward, achieve a degree of fairness to all parties, including losing bidders in the
C block auction, continue to promote competition and participation by smaller businesses
in providing broadband PCS service, and avoid solutions that merely prolong uncertainty.
             The Commission received numerous comments and ex parte comments that
addressed these issues at great length.  The majority of commenters favor some type of
relief, including debt restructuring, spectrum disaggregation, or a penalty-free license
surrender (i.e., amnesty) followed by a reauction.  Other commenters express disapproval
of any relief, and urge the Commission to strictly enforce its rules.  Several
commenters contend that the Commission should enforce the applicable installment
payment plan terms and not modify its current designated entity rules.  These
commenters generally argue that the Commission should act immediately to enforce the
current installment payment rules, as any continued delay causes unnecessary confusion
for both licensees and others.  The Commission declines to adopt this alternative due to
the financial difficulties reported to be facing many C block licensees.  The Commission
believes that there may be a need for some measure of relief for these small entities in
addition to the suspension of payments previously granted.
             Several commenters urge the Commission to restructure the C block debt because
doing so is in the public interest.  Some commenters recommend deferral of the C block
debt.  Representatives Tauzin and Markey support specific prepayment options.  The
Commission declines to adopt these proposals.  The Commission does not wish to adopt
temporary solutions that might only postpone the difficulties faced by the C block
licensees, including small entities, and further prolong uncertainty.  Under such an
approach there is no certainty that the long term financial outlook facing many licensees
would be improved.  The Commission believes that the options adopted in this Order are
relatively straightforward and achieve a degree of fairness to all parties, including small
entities.  Finally, the Commission rejects any proposal of a deferral of payments on the
grounds that such proposal would be unfair to unsuccessful bidders who may have
withdrawn from the C block when prices became too high.
             Among other goals, Section 309(j) directs the Commission to disseminate licenses
among a wide variety of applicants, including small businesses and other designated
entities.  At the same time, Section 309(j) requires that the Commission ensure the
development and rapid deployment of new technologies, products and services for the
benefit of the public, and recover for the public a portion of the value of the public
spectrum resource made available for commercial use.  In assessing the public interest,
the Commission must try to ensure that all the objectives of Section 309(j) are
considered.  The Commission believes that those goals are best met by promoting
efficient competition while maintaining fairness and efficiencies of process in the
Commission's rules.
F.           Report to Congress
             The Commission shall send a copy of the Order, including this 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.C.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.
                               APPENDIX D
                Initial Regulatory Flexibility Analysis
                 (Further Notice of Proposed Rulemaking)
             As required by the Regulatory Flexibility Act (RFA), the Commission has
prepared an Initial Regulatory Flexibility Analysis (IRFA) of the expected impact on
small entities of the rules proposed in the Further Notice of Proposed Rulemaking
(Notice) in WT Docket No. 97-82.  Written public comments are requested on the IRFA.
Comments on the IRFA must have a separate and distinct heading designating them as
responses to the IRFA and must be filed by the deadlines for comments on the Notice.
The Commission will send a copy of the Notice, including this IRFA, to the Chief
Counsel for Advocacy of the Small Business Administration.  In addition, the Notice and
IRFA (or summaries thereof) will be published in the Federal Register.
A.           Need for, and objectives of, the proposed rules
             This Notice is being initiated to secure comment on proposed changes to auction
rules to govern the reauction of returned broadband PCS spectrum in the C block.
Among other goals, Section 309(j) of the Communications Act of 1934, as amended,
directs the Commission to disseminate licenses among a wide variety of applicants,
including small businesses and other designated entities.  Section 309(j) also requires
that the Commission ensure the development and rapid deployment of new technologies,
products, and services for the benefit of the public, and recover for the public a portion
of the value of the public spectrum resource made available for commercial use.  The
Commission is seeking comment on proposed changes to auction rules to govern the
reauction of returned broadband PCS spectrum in the C block.
B.           Legal basis
             This action is taken pursuant to Sections 4(i), 5(b), 5(c)(1), 303(r), and 309 (j) of
the Communications Act of 1934, as amended, 47 U.S.C. Sections 154(i), 155(b),
155(c)(1), 303(r), and 309(j).
C.           Description and estimate of the number of small entities to which the proposed
             rules will apply
             The Commission is required to provide a description of and, where feasible, an
estimate of the number of small entities that will be affected by our rules.  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.  The RFA generally defines
the term "small entity" as having the same meaning as the terms "small business," "small
organization," and "small governmental jurisdiction."  In addition, the term "small
business" has the same meaning as the term "small business concern" under Section 3 of
the Small Business Act.  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).
             The rule changes proposed in the Notice will affect all small businesses which
avail themselves of these rule changes, including small businesses currently holding C
block and F block broadband PCS licenses who choose to participate and other small
businesses who may acquire licenses through reauction.  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.  This definition
has been approved by the SBA.  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 IRFA, 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.  In addition to the 178 current small business licensees who
may participate at the reauction of C block licenses, a number of additional small
business entities may seek to acquire licenses through reauction, and thus be affected by
these rules.
             In addition, the Commission proposes to provide small business bidders in the C
block reauction with bidding credits, and to that end proposes a two tiered bidding credit
which will provide a greater discount to "very small businesses."  The Commission
proposes to define the second tier of very small business as entities that, together with
their affiliates and persons or entities that hold interest in such entities and their affiliates,
have average gross revenues of not more that $15 million for the preceding three years.
Creation of this subcategory of small business will enable the Commission to tailor a
bidding credit to meet the needs of entities that may be interested in bidding on spectrum
returned by C block licensees.  Thus, the Commission proposes a 35 percent bidding
credit for very small businesses and a 25 percent bidding credit for small businesses.
             To assist the Commission analyzing the total number of affected small entities,
commenters are requested to provide information regarding how many total broadband
PCS small business entities would be affected by the rules proposed in this Notice.  In
particular, the Commission seeks estimates of how many broadband PCS entities, existing
and potential, will be considered small businesses or very small businesses.
D.           Description of reporting, recordkeeping, and other compliance requirements
             There are no additional reporting, recordkeeping, or other compliance
requirements as a result of the Notice.
E.           Steps taken to minimize significant economic impact on small entities, and
             significant alternatives considered
             The Commission proposes to apply the same rules that were used in the C block
auction to the reauction of C block licenses, with some modifications designed to
encourage participation by small businesses while at the same time helping to ensure the
best use of the spectrum through the competitive bidding process.
             The Commission proposes to conduct the C block reauction in three stages.
Having three stages, with bidders required to be more active in each stage, serves to
provide bidders with the flexibility to pursue backup strategies as the auction progresses.
The Commission proposes to use high activity requirements in the reauction.  In addition,
the Commission proposes to use similar activity levels in the C block reauction and, to
further expedite the auction, require the Wireless Telecommunications Bureau to use its
delegated authority to aggressively schedule bidding rounds, quickly transition into the
next stage of the auction when bidding activity falls, and use higher minimum bid
increments for very active licenses.
             The Commission proposes to establish a  minimum opening bid for the reauction.
A minimum opening bid is the minimum bid price set at the beginning of the auction
below which no bids are accepted.  A minimum opening bid in the C block reauction will
help ensure that the public is fairly compensated for licenses returned to the Commission,
expedite the auction and give the Commission the flexibility to make adjustments based
on the competitiveness of the auction.  The Commission  proposes minimum opening bids
for each market equal to ten percent of the corresponding high bid for the market in the
original C block auction.  Such an approach will scale the minimum opening bids in a
way that reflects the relative value of the licenses.
             The Commission proposes to require electronic filing of all short-form
applications for the reauction.  Electronic filing of applications would serve the best
interests of auction participants as well as the members of the public monitoring the
reauction.  The Commission believes that an electronic filing requirement will help
ensure that the reauction will be completed within the time frame contemplated by this
Notice.
             The Commission proposes to set the amount of the upfront payment for the
reauction at $.06 per megahertz per population ("MHz per pop").
             The Commission proposes that parties have fifteen (15) days to file a petition to
deny following public notice that an application was accepted for filing.  If, pursuant to
Section 309(d) of the Communications Act, the petitions to deny are dismissed or denied,
the Commission would announce by public notice that it is prepared to award the license,
and the winning bidder would then have ten (10) business days to submit the balance of
its winning bid.  If the bidder does so, the license would be granted.  If the bidder fails
to submit the required down payment or the balance of the winning bid or the license is
otherwise denied, a default payment would be assessed.
             Section 309(j) of the Communications Act of 1934, as amended, directs the
Commission to disseminate licenses among a wide variety of applicants, including small
businesses and other designated entities.  Section 309(j) also requires that the
Commission ensure the development and rapid deployment of new technologies, products,
and services for the benefit of the public, and recover for the public a portion of the
value of the public spectrum resource made available for commercial use.  The
Commission believes these provisions in the Notice help meet those goals and promote
efficient competition while maintaining fairness and efficiencies of process in the
Commission's rules.
F.           Federal rules which overlap, duplicate, or conflict with these rules
             None.
              Affirming and Dissenting Separate Statement
                                  of
                        Chairman Reed E. Hundt
                     Re: C Block Financing Issues
             The C block is the long-desired fifth wireless license: the third so-called PCS
license to be added to the two outstanding cellular licenses.  A half-dozen holders of the
C block licenses for about two-thirds of the country by population are in financial distress
and apparently unable to pay monies promised to the government by these licensees in a
fair auction of the C block licenses.  The question presented today is what should the
FCC do as a creditor and a policymaker in this situation.  For ten months I have been
stating that the key policy goal in wireless is competition, not debt collection.  However,
it is also true that this Commission, as a creditor, ought to behave in a commercially
reasonable manner.  In America debtors who cannot pay are not thrown into prison, nor
ought they be consigned to a Serbonian bog of Commission deliberation in which armies
of lawyers and lobbyists and Commission staff are sunk.  Yet for almost a year my
colleagues on this Commission have been unwilling to make a commercially reasonable
restructuring proposal of any kind to any of the financially troubled C block licensees.
Nor have they been willing to promote competition by expediting some solution to the
need to restructure and finance the C block.
             Having this fifth license used in the marketplace is a longstanding goal of policy
in this country; allowing it to be unfinanceable due to moralistic arguments against
commercially reasonable structuring of debtridden licensees faced with unsolvable
financial problems is inconsistent with all the wireless competition policies of this
Commission and the repeated public statements by all commissioners for many years.
Today the Commission, after ten months of inaction in response to my repeated urgings,
finally decides to take some significant steps consistent with the reasonable commercial
practices of any debt holder and consistent with our oft-stated commitment to
competition.
             The Commission has a history dating back to 1993 of seeking to promote small
business entrepreneurial activity in wireless with these C block licenses.  This history
included the current Commissioners' decision in 1994 to reallocate the PCS spectrum so
as to make sure the C block licenses were of equal viability to the two other 30 MHz
PCS licenses auctioned in 1994.  Subsequently, the Commission  designated the C block
as an entrepreneur's block expressly to promote participation by small businesses and
businesses owned by minorities and women.  After the Supreme Court's Adarand
decision, that plan had to be revised to eliminate provisions for minorities and women but
the Commission retained its primary objective of providing entrepreneurial opportunities
for small businesses.  All current Commissioners supported this objective.
             After the FCC successfully persuaded the Supreme Court to lift an appellate court
stay, the C block auction began in 1995.  To the dismay of many, some of the winners
bid at levels far beyond apparently prudent ranges.  Most did not; dozens of financially
prudent bidders won at reasonable prices.  But a handful of bidders submitted bids that
cannot be explained other than by assuming they made their decisions according to
erroneous market predictions, bad financial advice or a triumph of hope over thought.
Regrettably, these bidders -- irrationally exuberant in hindsight and, according to many,
even at the time of bidding -- won nearly three quarters of the United States market
measured by population.
             Some of these bidders have subsequently criticized the FCC's auction process and
other FCC actions.  None of this criticism has the slightest basis in fact.  All amount to
unworthy attempts to shift blame from the bidders to the auction conductor.  Nothing
about this history discredits auctions as a means of distributing licenses.  Moreover, the
installment payment and bidding credit plan that facilitated entrepreneurial entry into the
C block in fact worked very well with respect to the majority of the licensees.  More
small business participation in wireless resulted from prudent bids in the C block than in
virtually all other FCC license distributions in this decade.
             However, the current situation, and indeed the situation for almost a year, has
been that a handful of large C block licensees have been unable to attract sufficient
financing to create viable businesses.  These are at least Nextwave, Pocket, GWI,
ChaseTel and ClearComm.
             Unfortunately, all other C block bidders have their business futures occluded by
the financial troubles of these large, financially troubled bidders.  That is because Wall
Street financiers are interested in seeing the build out of the entire block with the
attendant possibilities for roaming that would be realized by complete buildout.  In other
words, the financial difficulties of the largest troubled bidders are in fact visited on
otherwise financeable C block bidders.
             Furthermore, the country's wise policy of encouraging wireless competition is
hampered by the financial troubles of the C block.  The sooner this block of licenses can
be financed, the quicker we will see long overdue robust price and quality competition in
wireless.
             In addition, our decision not to adopt a single standard, and to permit competition
among CDMA, TDMA and GSM, is also undercut by a failure to put the C block on
reasonable financial footing.  It is simply necessary to have at least three PCS firms
operating in major markets to permit each of these technologies a fair chance to gain
adherents.
             I was aware last December that the market was unlikely to finance many of the
largest bidders.  That is why, in my year end statement entitled,"The Hard Road Ahead,
"I stated that "commercial lenders often reassess the terms of loans to address changes in
the marketplace" and that C block licenses "perhaps ... should be able to request
renegotiation of their financing where it is necessary and appropriate to do so."
             I made this suggestion because it is necessary for creditors, such as the United
States in this situation, to act in a commercially reasonable manner.  And it is necessary
for the Commission to focus persistently on major policy goals and not to make the
blunder of thinking that Congress has tasked us to attempt to maximize revenue from the
C block auction.  Here the goals are, as a matter of statute, not to maximize revenue
from the C block, nor to punish debtors for their unwise bids, but rather we are
commanded by Congress to promote competition, deployment of service and small
business entry.
             For the greater part of the last ten months my colleagues and I have disagreed
over these objectives.  They have focussed instead on questioning whether the largest
licensees were really financially troubled, or they have evinced disinterest in the
significance to consumers of these licensees' business prospects, or they have dwelled on
the disappointment of other C block bidders who dropped out of the bidding in markets
where price levels reached the heights now universally seen as imprudent and
unsustainable.  Finally, they have expressed indifference to the risk of  bankruptcy filings
by the subject licensees, rather than negotiating restructuring of their debt according to
market-based principles.
             With perfect hindsight, had Congress written the law to state with inexorable
clarity that the auctioning of wireless licenses does not suddenly make them property
subject to bankruptcy jurisdiction, this latter point would be moot.  Indeed, if tying up
licenses in bankruptcy litigation were foreclosed as an option for a troubled C block
licensee, then the Commission could simply retrieve licenses from defaulters, and
reauction them to other small businesses. This is why I asked Congress this summer to
amend the law to make clear that such action could be taken.  No other commissioners
joined me at that time.  Powerful lobbying forces defeated my efforts.  I am glad that, at
least in recent days, all commissioners have joined this effort.  However, responsible
leaders in Congress have assured us that no such legislation is likely this year.
             Pocket Communications, one of the largest C block licensees, is already in
Chapter 11.  An objective of the Commission therefore ought to be to compromise the
Pocket litigation, as we have been advised by Sidley & Austin, Gordian Group,and many
other experts.  I had hoped that today's decision would offer a market-based compromise
Pocket would accept.  I have doubts that  the decision today will accomplish that result.
             Another objective ought to be to reach market-based compromises with the other
troubled C block licensees that would at least roughly approximate results that could be
obtained in bankruptcy settlements -- because that strategy would save the time and
money expended trying to retrieve unused licenses in bankruptcy.
               I might be the only FCC commissioner in history who has actually litigated as
an attorney for creditors in bankruptcy court.  Normally this would be of small relevance
to my job.  However, from personal experience, as well as from the advice of our
experts, I am quite confident that bankruptcy litigation can cause substantial delay even
when the creditor's legal position is impregnable.  That is the case here.  Some debtor's
attorneys have suggested that such issues as perfection of UCC-1's are a legal problem
for the Commission.  This is a frivolous assertion, that underscores the desperate
ingenuity of a bankrupt firm's counsel but plays no role in our thinking or actions.
Highly skilled outside counsel, Department of Justice lawyers, our own General
Counsel's office, and my own personal experience all convince me beyond any doubt that
we will prevail in bankruptcy court.  But the process of bankruptcy litigation takes time
and money.  Meanwhile, the assets in question are, based on all advice, declining in
value while lawyers talk and commissioners deliberate and lobbyists advocate.  The
reason is the lead time granted to the other licensees.  If we truly want small business
entrepreneurs to make use of the C block spectrum, we simply have to permit them to
restructure their government debt or obtain the debtor's voluntary agreement to return the
licenses quickly for prompt reauction.  This is why it is so important for the Commission
to make proposals that might obtain such agreement at least from some of the C block
licensees.  This action is overdue, and although the Commission may not have made a
perfect decision today, some decision was better than none.
               The test of any work-out plan for the financially-troubled C block licensees
appears to be this: Does the plan avoid protracted bankruptcy, with the attendant costs of
debtor and creditor litigation, while also generally treating fairly the competing interests
of the taxpayers, consumers, non-government creditors, equity holders and other
interested parties?
             Today we adopt at least one plan that is highly likely to obtain a voluntary and
fair restructuring settlement agreement from several of the troubled bidders.  I refer to
the disaggregation plan, which allows licensees to return 15 Mhz of spectrum in return
for a proportionate reduction in the amount of their outstanding debt.  This will help
small or rural area licensees who may not need the full 30 Mhz of spectrum to serve their
markets.  If long delayed, at least we are at last adopting this change in our rules.
             The so called "amnesty" option we adopt today is also a good idea and I would
have been happy to extend it to any licensee at any time.  The problem of course is that
it does not provide any incentives to the licensees' non-government creditors to consent to
a return of licenses and therefore is not a workable solution.  Congressman Dingell has
told us that in his view "Giving licensees a choice between walking away from
investments already made and facilities already constructed, or taking a chance in
bankruptcy court, is tantamount to giving them no choice whatsoever."  Nonetheless, I
don't object to our decision to offer this as an option.
             Another plan we considered including in our Order today had real promise for
practical use -- the so-called "full price buy out plan."  This plan, proposed originally by
the bipartisan leadership coalition of Congressmen Markey and Tauzin, would have
permitted a licensee to retain as many of its licenses as it could pay for in cash today (at
net present value) using the full amount of funds on deposit plus any additional sums it
could immediately raise.  Licenses that could not be paid for in this manner would be
returned and reauctioned in exchange for discharge of the debt obligations associated with
these licenses.
             Unfortunately, the prepayment plan included in today's Order fails by a number of
key measures to be consistent with the Markey/Tauzin suggestion and with good policy.
I register my strong dissent as to this part of the Order.
             First, it is questionable why a majority of Commissioners departs from the
bipartisan consensus in Congress on this issue.  Just two weeks ago, Senator Domenici
wrote the Commission urging that we adopt a "comprehensive solution ... [that would]
put into productive use the spectrum."  He also advised against pursuing "options that
forestall the commercial application of Block C spectrum because of time-consuming and
costly litigation resulting ... from extended bankruptcy proceedings."  This sentiment is
also reflected in  letters from Senator McCain received over the past six weeks.
Likewise, Senators Inhofe, Nickles and Burns expressed their view in early August that
"debt restructuring of the PCS licensees may be necessary to address the concerns that
have been raised by the interested parties."  Congressmen Markey, Tauzin and Dingell
have each supported the full price buy out plan described above.
             This correspondence makes plain Congress' direction that we adopt a workable,
comprehensive plan for the C block.  That is consistent with the statute.  The
Congressional mandate has not been adequately met by the Order we adopt today.
             The Order requires licensees to forfeit 30% of their deposits if they elect the
"buy-out" option, even though this money has already been paid and would be used to
purchase licenses at the price bid in the original C Block auction.  That penalty is more
than 50 times higher than any previous penalty in FCC history.  The bipartisan view
from Congress is that no such forfeiture should be imposed -- a difference which
potentially represents hundreds of millions of dollars lost by incumbent licensees for
reasons that bear no relation to the policy goals included in Section 309(j) of the
Communications Act which granted the Commission's original auction authority.
Today's Order also ignores the bipartisan conclusion of Congress that prepayment prices
should be set based on "the net present value of the ... prices for such licenses".  Instead,
the prepayment alternative ignores the time value of money and extracts an additional
penalty from licensees on the order of several hundred million more dollars.
             Second, the prepayment option we adopt today stands fundamentally at odds with
basic principles of commercial reasonableness.  By requiring licensees that elect the
option to prepay their licenses at the "nominal" bid price, the plan ignores the time value
of money and inflates the effective price paid by the licensees that it purportedly seeks to
assist.  Put simply, the value of a bid paid out over ten years is significantly less --around
40% less -- than that same bid paid in cash.  The consequence of this oversight is a
massive penalty for any licensee that might otherwise elect this alternative.  The
prepayment option layers on an additional penalty by requiring licensees to forfeit 30% of
their deposit.  Note that this forfeiture of deposited monies is ordered even though the
licensees would use their deposits to prepay licenses at effective prices higher than the
amount that they bid.  At base, the plan ignores fundamental principles of finance and, as
a result, cannot reasonably be expected to appeal to licensees or their creditors.
             Third, the prepayment plan adopted today has too much risk of not being helpful
to the financing of the licenses held by the very large bidders that constitute the vast
majority of the C block licensed POPs in the United States.  The acid test of any work
out plan is whether the deal is accepted by the debtor; if not, the plan is not a work-out
but rather only works us deeper into the toils of a drawn out bankruptcy litigation.  In
this case, the prepayment plan extracts the two extraordinary penalties described above
and offers little in the way of incentives for licensees to accept it.  According to the
Congressional Budget Office Report,  bankruptcies could cost consumers in excess of
$5.5 in lost benefits. Taxpayers lose because the re-auction of licenses is conducted in a
piecemeal fashion at the end of lengthy bankruptcy litigations, ensuring smaller proceeds
as the value of the licenses deteriorates from delay.  Such are the costs of the
Commission majority's sanctimonious rigidity.
             The majority's unwillingness to adopt a comprehensive plan for addressing the
financial situation of the C block is inexcusable and inexplicable.  The legacy of that
decision is a substantial risk of bankruptcies that Congress and any commercially
reasonable enterprise would have us eliminate.    By focussing on punishment and
ignoring the need to make the work-out "workable", the majority sacrifices consumer and
taxpayer interests.  This approach is fundamentally misdirected and contrary to our
statutory directives.  In short, today's decision will delay more competition for most
Americans.  Competition delayed is competition denied.
             Finally, it is not clear to me that the parameters of our Order today and the
accompanying Notice treat fairly those C block companies -- such as Omnipoint, Cook
Inlet and Airadigm -- that have accepted our challenge to bring service to market and
who, as result, have invested heavily in build out.  These licensees have operating
businesses that are tied to specific C block licenses.  Consequently, they do not have the
same flexibility as other licensees to disaggregate or participate in a "full price buy out",
which would require a dramatic reduction in the size of their existing service footprints.
This concern with fairness is more than a metaphysics.  These licensees must compete for
capital in the public markets with other C block licensees, including winners of the
subsequent re-auction.  To the extent that such a re-auction of spectrum returned under
any of the options in our Order today "resets" the market price for spectrum, it could
impair access to capital for those licenses that are significantly built out but which carry
artificially higher prices per pop.
             The concerns I have identified do not subtract from the following facts:
1.           After many months of discussion the Commission has finally recognized the need
             to restructure certain debt in the C block.
2.           Today's decision will permit us to obtain some licenses for reauction and will
             permit some licensees to get financing, based on all available information.
3.           And we have, at the very least, not simply extended the payment dates on the
             existing notes by the many years sought by some licensees.  This proposal was
             unfair to the taxpayer and an unnecessary windfall to most C block licensees.
Therefore, I affirm in part and dissent with respect to the so-called "full price buy-out"
plan.
Separate Statement
of
                             Commissione                  r Susan Ness
Re:        Amendment of the Commission's Rules Regarding Installment Payment Financing
           for Personal Communications Services (PCS) Licensees, WT Docket No. 97-82
A little over a year ago, we conducted an auction for the "C-block" PCS licenses.  Like
our other auctions, this auction was carefully conceived to operate on market-based
principles, allowing licenses to be obtained by those who valued them most at prices to
be set by free market mechanisms.  It was also crafted to fulfill a Congressional mandate
to bring "designated entities" -- especially small businesses, often owned by women and
minorities -- into the marketplace.  And it did.
I supported our commitment to market-driven auctions and to designated entities.  I
reaffirm that commitment today.
Our auction was conducted properly, our rules were clear, and numerous licensees stand
ready to meet their payment obligations fully and on time.  And while it is truly
unfortunate that a handful of bidders overbid and/or overleveraged,  it is clearly not our
responsibility to prevent them from failing in the marketplace, or from going into
bankruptcy.  It is our responsibility to manage the spectrum, including the auction
process, with fairness and integrity.
Although I sincerely regret that some licensees now find themselves unable to meet their
commitments, I remain unpersuaded that the FCC should alter the outcome of the auction
by providing bidders vastly more favorable terms than those to which they previously
agreed.  To grant overly generous accommodations to certain C-block licensees, after the
auction, would be to forsake the marketplace and return to the government picking
winners and losers.  I do not think that this should be our spectrum policy for the future.
Such a result also would be unfair to those C-block licensees that counted on us to
enforce our rules; unfair to disappointed C-block bidders who dropped out of the auction
when the licenses they desired became too expensive;  unfair to licensees in other
spectrum blocks who are offering competing services; and unfair to the U.S. taxpayer.
I do support, however, modest options that would facilitate the return of spectrum and
reauction in a timely and fair manner.  The menu of options we offer to all C-block
licensees today provides an appropriate balance.
Clear Rules; A Fair Auction
Everyone participating in the C-block auction was subject to the same rules.  The auction
was run fairly.  Even now there are no serious complaints about our conduct of the
auction or the clarity of our rules.
Our rules were designed, as Congress intended, to create opportunities for small
businesses.  Eligibility to bid was limited, and favorable payment terms were available.
While we offered licensees the opportunity to pay for the licenses in  installments,  we
were not a lender in the traditional sense:   the payment terms were available to all small
businesses without regard to their credit-worthiness or soundness of their business plans.
First and foremost, we acted as a licensing agency and, as our rules clearly specified, the
licenses were granted conditionally.
Each license was conditioned upon timely payments according to a predetermined
payment schedule, with the caveat that the license would automatically cancel if the
payments were not made.  The conditional interest granted is clearly noted on the face of
the license itself, and in the relevant Commission rules and orders.  (Indeed, the
conditional nature of the license and the attendant penalties and loss of downpayment are
duly acknowledged in at least one large bidder's public filings with the Securities and
Exchange Commission.)
The Problem
The C-block auction resulted in licenses being won by a handful of large players -- each
with license bids in excess of a billion dollars -- and a multitude of smaller players.
Several of the largest winners paid well in excess of prices comparable to those paid by
the A and B block licensees.  Compounding the problem, some of these same large
players have highly leveraged capital structures with debt/equity ratios as high as 10 - 1,
tying their future to conducting a successful public offering.  In contrast to the larger
players, the majority of the C-block winners have smaller holdings, paid considerably
less per pop for their licenses and/or had more prudent capitalization.  For the most part,
the smaller licensees do not appear to be in financial trouble.
Last spring, a handful of the largest winners requested relief from their obligations --
essentially to keep their licenses on more favorable terms than those they voluntarily
agreed to just sixteen months ago.  They were outnumbered by many smaller licensees
who have not sought relief and who are ready to build out their markets.
Nonetheless, as the campaign for significant modifications won some support at the
Commission, other licensees echoed the call,  reflecting a natural desire to pay less
should the Commission be willing to rewrite the terms of the agreement.  That chorus
transcended the C-block and has now spilled over into other radio services.  Interest
payments were temporarily suspended as of March 31, 1997, pending Commission
consideration of what , if any, measures should be taken to assist financially troubled
licensees.
Other interested parties include many small companies -- some of which failed to win any
licenses and dissolved -- who feel the prices were unreasonably driven up by certain
bidders during the auction.  Many of the investors in these companies and in those C-
block licensees currently meeting their obligations believe fairness dictates that defaulting
parties forego their licenses,  that the licenses be reauctioned, and that everyone have a
fair chance to acquire the licenses in a subsequent auction.
Marketplace Disruption
We must, however, consider certain countervailing factors.   The financial markets
became unsettled subsequent to our suspension of C-block installment payments.
Licensees with sound business plans have been enveloped by the cloud of marketplace
uncertainty, and the flow of capital needed for continued build-out has been impeded.  C-
block licensees, to varying degrees, have plans on hold, as the financial community
awaits the outcome of this proceeding.
The Commission must take action now to get the C-block of licensees back to business.
While there has been a wide range of proposals offered and considered, the one thing that
almost all parties have agreed upon is that final resolution is needed immediately to
enable rapid build-out and foster competition.
A Menu of Options
We adopt a menu of options that is likely to help many of the troubled licensees, without
jeopardizing the principles of fairness and  integrity that are essential to market-driven
auctions.  In developing these options, the majority of Commissioners have discarded
proposals that would have fundamentally changed auction outcomes or created incentives
for licensees to alter otherwise achievable business plans.   In addition, we have avoided
giving anyone a "thumb on the scales" in a subsequent auction.
Specifically, we are continuing the deferral of installment payments until March 31,
1998, making the total suspension period a full year.  This resumption date ensures that
all C-block licensees and prospective financial backers will have sufficient time to
complete their deals.  Some will also benefit from the access to foreign equity that is
permitted, beginning January 1, 1998, under the recent WTO Agreement.  (This is all the
relief that was initially sought by one bidder that is now urging us to adopt a very
substantial restructuring.)
All C-block licensees who do not choose one of the three following options will be
expected to resume payments under their existing agreements.  I hope and anticipate that
the vast majority of successful bidders will proceed in this fashion.
The three options are:
First, under the amnesty option, licensees may forfeit all of their licenses and their
downpayments.  In return, the Commission will (in coordination with the Department of
Justice) approve forgiveness of their outstanding debt and cancellation of the additional
penalties, including a deficiency payment (representing the difference between the net bid
price and the price obtained in a subsequent auction), that otherwise would be due.  The
licenses will then be reauctioned.
Second, under the disaggregation option, licensees may return half of their spectrum in a
given market or markets in exchange for a corresponding reduction of debt.  This is
consistent with our existing disaggregation rules, facilitates new spectrum-based
competition in the marketplace, and better enables the cash flows of the licensees to
service the significantly reduced debt.  We will re-auction licenses for the 15-megahertz
spectrum blocks that are returned under the same designated entity terms as apply to all
other C-block licenses.  Several of the largest licensees have endorsed this option.
Third, under the prepayment option, licensees may apply 70 percent of their
downpayments from licenses they now choose to abandon and 100 percent of their
downpayments for licenses they now choose to keep to pay for as many licenses at the
original auction price as they can afford.  This is a buy-out, not a bail-out.  Again,
returned spectrum will be re-auctioned under the same terms as apply to all other C-block
licenses.
Rejected Options
We carefully considered and discarded other options.  For example, our dissenting
colleague would have offered vastly more generous buy-out options.  His actions suggest
that the prospect of a large licensee filing for bankruptcy must be avoided at all costs.  I
cannot agree.
Substantial Discounts:  Under the approach advocated by the Chairman, the debt owed by
the licensees would be drastically discounted -- a 40% haircut to the American taxpayer -
-  well below the prices that other, subsequently disappointed, bidders were clearly
willing to pay.  This would be replacing a market-based outcome with an FCC-directed
outcome.  I agree with the Chairman's prior statements that the market -- not the FCC  --
should pick the winners and losers.
In my view, the price bid is the price bid.  Bidders were not offered a cash versus credit
price.  The notes do not provide for prepayment discounts.   If  the FCC wanted to
induce licensees to prepay, we would have included a prepayment schedule in our notes
and rules. To the contrary, the favorable financing terms offered -- at an interest rate
reflecting the cost of capital to the U.S. government -- were designed, in part, to induce
designated entities to hold their licenses for a full ten years.  This was consistent with
Congress's stated goals to bring small business, including women and minorities, into the
market -- on a sustained basis.  Therefore a licensee would be unjustly enriched if it
received the full ten year benefit of attractive financing without the burden of holding the
license for the full term.
Use of All Downpayments:  I also disagree with the Chairman that the C-block licensees
should be permitted to "spend" 100 percent of their deposits from licenses they no longer
want, to pay for licenses they do want.  These funds have been paid to the U.S. Treasury
and are not the licensees' to redeploy as they wish.  That policy was clearly stated in our
rules and documentation.  Indeed, the Chairman reiterated that view in an April 30,
1997,  speech to the Federal Communications Bar Association:
  Some say that the C-block licensees will not pay the total of their commitments to
  installment payments.  If that is true, they will not hold the licenses any longer.
  But still the taxpayers will have received all the installment payments to that date,
  and we will reauction the licenses. . .
A buyer of an option to purchase a piece of property is not entitled to apply the price of that
option to the purchase price of another property.  If licensees were able to use 100 percent of
their deposits to cherry-pick which licenses they want to keep and which they want to return,
they would recoup in full what they paid and there would be no deterrent in future auctions
against bidding excessively.   Such a result surely would poison a market-based auction.
Moreover, we have repeatedly refused to allow defaulting licensees to recoup their
downpayment -- not just in the C-block auction, but in other auctions.  Again, the purpose is
to ensure the integrity of the auction.
Nonetheless, to accommodate some of the troubled licensees, the majority has agreed to
allow them to apply up to 70 percent of the downpayments on licenses returned and 100
percent of the downpayment on licenses kept toward payment for selected licenses.  The
remaining 30 percent of the downpayment on returned licenses equates to the 3% of bid price
default penalty specified in our rules.
The Wireless Telecommunications Bureau has routinely assessed such penalties, including
loss of downpayment, on defaulting bidders.  It also has assessed similar penalties against
defaulting auction winners in other spectrum bands.  While the amount at stake for the
largest C-block licensees is not insignificant, surely it cannot be the policy of the FCC that
we grant generous breaks to the largest bidders while we strictly apply our rules -- including
the penalty provisions -- to the smaller bidders.
Transferable Bidding Credit:  Finally, the Chairman would have allowed licensees to return
all licenses and then apply 100% of their downpayments as a transferable bidding credit in a
subsequent auction.  This option, too, was carefully considered and discarded as being
grossly unfair to losing C-block bidders, and to those bidders who already have built out
their systems and cannot risk returning their licenses.  It would have put a "thumb on the
scales" in the subsequent auction in favor of the defaulting bidders.  Those who bid up the
original auction would now be rewarded by receiving full use of their downpayments toward
the same licenses, at presumably significantly lower prices with "use it or lose it" dollars, or
to cash out through another bidder.   No wonder this concept found few policy adherents.
Other Misconceptions
Declining value of the licenses:  Clearly, it would be better if C-block licensees did not file
for bankruptcy.  As a former communications lender, I am painfully aware of the problems
and timeframes associated with bankruptcy proceedings.  Nonetheless, I do not share the
view that the C-block spectrum is a declining value asset, or that if the licenses were tied up
in protracted litigation, they would ultimately yield a small fraction of today's worth.   Our
PCS service rules are extremely flexible, allowing licensees to provide both fixed and mobile
services.  With changing technology constantly creating new services, there is every
likelihood that demand for this spectrum will be there whenever the licenses are reauctioned.
Forestalled Competition:  Nor do I believe that C-block licensees must build their systems
now or consumers will suffer from lack of competition in mobile communications.   Even if
buildout of a substantial portion of the C-block licenses were delayed, consumers still have
the benefit of competition from the A and B blocks, wide area SMR,  and the PCS D, E, and
F blocks, in addition to the two cellular licenses in each market.  Consumers in many
markets already enjoy a substantial reduction in rates as a result of PCS competition.
Moreover, licensees are obligated to have built their systems only by the fifth year.  Thus
even if bankruptcy were avoided, there is no guarantee that service would commence
immediately.
I reject the argument that if we do not provide extraordinary relief to the largest C-block
licensees, other C-block licensees will be stymied by lack of roaming opportunities for their
customers.  The marketplace recognizes the problem, and has been working on a solution.
Equipment manufacturers are helping to forge agreements that will enable the PCS equipment
to roam nationwide, and new handsets operate on both cellular and PCS frequencies.  I am
confident that wireless telephone competition will not come to a grinding halt if there were a
delay in the buildout of some of these licenses.
Conclusion
The FCC's primary responsibilities are to write fair rules, run fair auctions, and issue
licenses to successful bidders.  We have an obligation of fairness and impartiality to those
who bid but chose not to overbid or overleverage.  And we owe it to the C-block licensees
who seek no special treatment but just want to get about their business to avoid changing the
rules in any fundamental way that is detrimental to their business plans.
I believe the approach we adopt today fairly balances the competing interests.  Restoring
regulatory certainty to the marketplace promotes investment, competition, and service to the
American public.  Even though the approach we adopt today is the product of negotiation
and compromise, and does not reflect the first-choice preferences of any individual
Commissioner, I am satisfied that under present circumstances adoption of this order is the
course of action that best serves the public interest.

SEPARATE STATEMENT OF
     COMMISSIONER RACHELLE B. CHONG
     Re:               Amendment of the Commission's Rules Regarding Installment Payment Financing for
                  Personal Communications Services Licensees, WT Docket No. 97-82, Second Report
                  and Order and Further Notice of Proposed Rulemaking
Introduction
          Three years ago, we set up a series of new rules for the conduct of a historic auction,
the first U.S. auction of spectrum for the purpose of providing Personal Communications
Service (PCS).  Our previous assignment methods of lotteries and comparative hearings were
time-consuming, resource-intensive, and encouraged losing applicants to tie up the licenses in
years of litigation.  We believed that auctions would speed the development and deployment
of new services to the public; encourage the efficient use of spectrum; and generally award
licenses to those parties who value them most highly and who are thus most likely to
introduce service rapidly to the public.  Finally, auctions recovered for the public a portion
of the value of the spectrum.  Thus, we firmly believed that the public interest would be
served by having market forces, rather than regulators, decide who should be assigned
licenses for the PCS spectrum.  We also put our trust in market forces to determine which
licensees would succeed and which would fail.
           Consistent with our statutory mandate under section 309(j), however, we
incorporated in our auction rules some special assistance to "designated entities," including
small businesses, minorities, women, and rural telephone companies.  After some unexpected
delay caused by the release of the Supreme Court's Adarand decision, this assistance was
narrowed to apply only to small businesses.  Because the main problem small business faced
was access to capital, we gave them a number of regulatory advantages to address this
problem and to give them opportunities to succeed.  These tools included a smaller down
payment, installment payments and their own block (C Block) so they would not have to bid
against larger, "deep pocket" companies.
            Despite these advantages, some C Block licensees have found themselves in financial
trouble.  These licensees allege that the higher per pop values they paid for their C Block
licenses as compared to their counterparts in the A and B Blocks, together with alleged
recent downturns in the wireless financial markets, have made it difficult for them to obtain
financing.  A number of C Block licensees have petitioned this Commission asking for relief.
They have made impassioned pleas for very dramatic restructuring of their installment
payment plans.  Some have gone so far as to claim that if we do not restructure their debt,
they will go into bankruptcy, pointing to one large C Block licensee who has already gone
into bankruptcy.
            Since the beginning of this debate, my initial reaction to these requests for relief was
to turn them down.  No one disputes that our rules at the time of the auction were clear.
Every applicant knew exactly what would happen if a licensee failed to pay in a timely
manner.  In our rules and in the notes signed by the C block licensees, the Commission
could not have been clearer that we granted these licenses subject to conditions.  If a licensee
failed to meet a condition, including making a timely installment payment, it would be in
default; in such an event, the license would be returned to the Commission.
Major Restructuring Requests
            Regardless of these clear rules and executed financial agreements, some C Block
licensees have asked us for dramatic restructuring, including up to a 70-80% reduction of
their debt or deferrals of all payments for a number of years.  I believe it would be unwise
for the Commission to agree to any such major restructuring.  First, I believe that a major
restructuring -- or any other dramatic after-the-fact rule change designed to bail out every
financially-troubled C Block licensee -- harms beyond repair the integrity and credibility of
our auction rules.  Such a major restructuring would make a mockery of our entire auction
process.  In addition, I believe major restructuring would encourage speculation in any
future auctions, because bidders may rely upon anticipated regulatory relief in making bids
that are higher than prudence would warrant.  Further, any major restructuring might also
deter future investment because of the uncertainty caused by our regulatory actions.  It is not
just the integrity of our auctions rules that is at stake; if we were to permit major
restructuring, we would head down a very slippery slope which could have dire consequences
for the agency and all of its rules.
            Second, I opposed any major restructuring because I felt that it would be inherently
unfair to other bidders and licensees, including the following:  (1) losing C Block bidders
who made prudent bids in accordance with our rules but were outbid by those now in
financial trouble;  (2) rule-abiding C Block licensees who are promptly making their
payments and building out their systems just the way Congress and the Commission wanted
them to; and (3) other broadband and narrowband PCS licenses who are competing with the
C Block licensees for financial support in the marketplace.  These other bidders and licensees
have expressed tremendous frustration and downright anger that the Commission would even
consider breaching its duty to the American taxpayers and to our other licensees by changing
our rules after the fact to give unwarranted relief to financially troubled C block licensees.
These licensees are right -- every notion of fair play is violated by a bailout.  If we go too
far to help the financially troubled C Block licensees, we end up skewing the marketplace
and rendering more serious harm to others who played by our rules.
The Menu Approach
            It has been my consistent position that the wisest thing for us to have done was to
decide quickly to enforce our rules.  Having said that, some of my colleagues wished to go
much farther.  In the spirit of compromise and because I felt strongly that we needed to
resolve the C Block question as quickly as possible, I initiated the idea of a menu approach
and agreed to compromise on the ultimate menu that we adopt today in order provide some
modest and limited relief for troubled C Block licensees.
The Prepayment Option
            Although I support the majority decision, I remain concerned that we may have gone
too far, particularly with the prepayment option.  I would have preferred not to include this
option at all, or if so, to allow the parties to use only 50% of their deposits.   Again, due to
the need to get the proceeding concluded, and because I felt that the 70% figure was
consistent with our rules, I ultimately agreed to the majority's proposal.  This proposal was,
however, as far as I thought we could prudently go, without endangering the integrity and
credibility of our rules.
            My dissenting colleague makes clear that he would have preferred to allow the
licensees to use 100% of the downpayment and to allow a discount on the net bid price to the
net present value.  I believe his proposal would have been bad public policy for a variety of
reasons.  First, I believe that it would have been unfair and commercially unreasonable for
us to have discounted the face value of the notes to their net present value.  It is clearly fair
to other bidders and to the integrity and credibility of our rules for the prepayment to be in
the amount of the note, i.e. to make the licensees pay what they bid.  If we offered an
arbitrary discount to net present value, then every C Block licensee -- even those who can
pay what they bid -- would demand the same discount.  Clearly, the loser would be the
American taxpayer, and the culprit the agency that cannot abide by its own rules.  Further,
to offer deep discounts off the net amount of the debt is outside normal commercial
practices.  By allowing C Block licensees to pay off their debt in advance of the maturity
date, we are allowing them to reap the benefit of not incurring additional interest due on the
principal amount owed.  To discount the amount of principal owed by C Block licensees
would unfairly permit a windfall.
            Second, I object to my dissenting colleague's characterization of our decision to allow
licensees to use only 70% of their deposits (as opposed to 100%) as an unreasonable
imposition of a "penalty."  This is no penalty!  The prepayment option is simply that -- an
option.  If a licensee wishes to continue to make installment payments under the terms of its
agreement with the Commission, it may do so and all of the monies on deposit with the
Commission will go to pay for the purchase of those licenses.  Allowing parties to take
deposits that were targeted for a specific market's license, aggregate those deposits and use
them to buy other licenses for other markets is an enormous benefit that our rule abiding C
Block licensees can't enjoy.  Under our rules, no such aggregation is allowed; those monies
on deposit would have been forfeited to the Commission if the installment payments were not
made on each license.  Thus, allowing a licensee to use any percentage of deposits for any
license they return to the Commission is an enormous benefit; allowing licensees to use 70%
of those deposits is downright generous.
            Nor do I believe that our failure to adopt the Chairman's prepayment plan makes our
C Block approach unworkable.  As an initial matter, I do not agree that, as my dissenting
colleague asserts, the acid test of our decision is how many licensees avail themselves of the
options we set forth here today.  At the time we put in place our C Block auction rules, I
expected there to be winners and losers.  There will be some who may not have prudently
bid or who are overcome by subsequent market events; I do not believe it to be the
Commission's job to bail out every licensee who finds itself in financial trouble.  This notion
is inherently inconsistent with an auction and market forces process.
            Further, I believe that the more modest relief we have adopted herein does provide
some reasonable alternatives for financially troubled C Block licensees.  I am optimistic that
our menu of options will be attractive to a wide range of licensees.  Several of the options
we presented have been specifically advocated by and supported by commenters.  We also
have taken steps to make our option attractive to those who have built out their systems.  In
addition, it appears from recent press reports, that our options may even be attractive to
those licensees who are in bankruptcy.  A third party has petitioned the bankruptcy court in
the Pocket bankruptcy matter, seeking to purchase Pocket's assets and resume its installment
payments.  This development generally confirms the wisdom of my initial position that the
best thing to do was to simply enforce the rules, and let the market work.  In any event, this
development supports the majority's belief that the options we have adopted are sufficiently
attractive to encourage parties to invest in even the most troubled of C Block licensees.
Bankruptcy Concerns
            It may well be, however, that our menu approach does not appeal to every licensee
and that some C Block licensees will reject all the options and go into bankruptcy.  This is
neither a surprise to me nor a development that causes me any serious alarm.  In fact, this is
a risk I am willing to take.  My dissenting colleague's statements to the contrary
notwithstanding, it is not the Commission's job to bail out every C Block licensee.  Some
bidders simply made imprudent business decisions, and despite our desire to assist small
businesses in starting wireless businesses, the Commission's C Block auction process only
offered opportunities, not guarantees of success.  Our job here is to make sure that the
public interest is served.  The decision we make today strikes the right balance between our
responsibility to preserve the integrity and credibility of our rules and our obligation to be
fair to all licensees -- including those who are successful and those who find themselves in
trouble.
            Although I am not indifferent to the sad plight of the financially troubled licensees, or
to the delays in service and costs to the Commission associated with a bankruptcy
proceeding, I disagree with my dissenting colleague that we should make the threat of
bankruptcy the key driver of our decision today.   There are three main reasons for my view.
First, bankruptcies are a normal activity of our commercial world and, in our role as lender,
should be expected.  In fact, since, as Commissioner Ness astutely noted, the Commission
did not even check applicants' financial status as a traditional lender would have, it truly
would have been extraordinary had there been no C Block bankruptcies.  The Commission
has litigated many a bankruptcy before, and I have full faith in our counsel to obtain the best
result possible given our strong case.
            Second, despite assertions by my dissenting colleague to the contrary, I do not think
the presence of a C Block licensee as the "fifth competitor" in the market is the key to
competition in the wireless industry.  Even without a C Block licensee in all of the markets,
competition in the wireless market will continue to flourish.  The combination of four PCS
and cellular players, each with more than 25 MHz of spectrum, together with the D, E and F
Block licensees, each with 10 MHz, and an enhanced SMR provider makes for a vibrant
competitive mix.  Nor do I believe that the whole C Block will fail if the largest competitors
do not build out their systems immediately.  When we declined to adopt a single technology
standard for PCS, we left open the possibility that there would be situations where parties
would have to roam on PCS blocks other than their own.  Although a delay in the roll out of
service by a third PCS competitor may make roaming agreements a bit more difficult to
negotiate, with the recent advancements of dual mode phones, carriers will soon have four
wireless systems on which to roam.
            Finally, I disagree with my dissenting colleague's characterization of the C Block as
"a wasting asset."  If there is one thing that I have learned in my years in the dynamic
wireless industry, it is foolish to try and predict the future.  Spectrum and services once
thought to have little value have often proven to be extremely valuable.  For example, C
Block spectrum -- which some knowledgeable parties thought would sell for significantly less
than A and B block spectrum -- far outstripped those values.  Although time to market is
certainly one factor in determine the value of spectrum, I think the value of the C Block
licenses in the future will depend on many factors, including developments in technology and
the amount and type of other spectrum available for similar uses.
Conclusion
            In sum, I support the majority's decision today with full confidence that we have
made a wise and fair decision.  I hope that the regulatory certainty that will flow from our
menu approach will finally allow the C Block licensees to get back to the business of
building out their systems.