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 Federal  Communications  Commission  FCC  98-  46 
 Before  the  Federal  Communications  Commission 
 Washington,  D.  C.  20554 


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


 ORDER  ON  RECONSIDERATION  OF  THE  SECOND  REPORT  AND  ORDER 
 Adopted:  March  23,  1998  Released:  March  24,  1998 
 By  the  Commission:  Commissioners  Ness  and  Powell  concurring  in  part,  dissenting  in  part,  and  issuing  separate  statements;  Commissioner  Tristani  issuing  a  statement. 


 TABLE  OF  CONTENTS 
 Paragraph  No. 
 I.  Introduction..........................................................................................................................  1  II.  Background..........................................................................................................................  3 
 III.  Overview..............................................................................................................................  7  IV.  MTA-  by-  MTA  Elections  ...................................................................................................  16 
 V.  Resumption  of  Payments  ...................................................................................................  21  VI.  Surrender  of  Licenses  for  Reauction  (Amnesty)  ...............................................................  31 
 VII.  Prepayment  ........................................................................................................................  38  VIII.  Disaggregation  of  Spectrum  for  Reauction  .......................................................................  49 
 IX.  Election  Procedures  ...........................................................................................................  61  X.  Reauction  ...........................................................................................................................  66 
 XI.  Miscellaneous  Matters  .......................................................................................................  73  A.  Cross  Defaults........................................................................................................  73 
 B.  No  Extension  of  C  Block  Relief  to  Other  Licensees  .............................................  74  C.  Issues  Addressed  in  Other  Proceedings  or  Requiring  Action  by  Congress...........  77 
 XII.  Procedural  Matters  and  Ordering  Clauses  .........................................................................  79 
 Appendix  A:  List  of  Pleadings  Appendix  B:  Revised  Rules 
 Appendix  C:  Supplemental  Final  Regulatory  Flexibility  Analysis 
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 I.  INTRODUCTION 
 1.1.1  On  September  25,  1997,  the  Commission  adopted  a  Second  Report  and  Order  and  Further  Notice  of  Proposed  Rule  Making  ("  Second  Report  and  Order"  and  "Further  Notice") 
 establishing  March  31,  1998,  as  the  deadline  for  broadband  Personal  Communications  Services  ("  PCS")  C  and  F  block  licensees  to  resume  installment  payments.  1  In  addition,  the  Commission 
 offered  C  block  licensees  a  choice  of  three  alternative  payment  options  in  lieu  of  resuming  payments  under  the  terms  of  the  original  payment  plan.  The  three  options  were  intended  to  provide  limited 
 relief  to  C  block  licensees  experiencing  financial  difficulties,  while  preserving  the  fairness  and  integrity  of  the  auction  process. 


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


 II.  BACKGROUND 
 1.1.3  Consistent  with  Congress'  mandate  to  promote  the  participation  of  small  businesses  and  other  "designated  entities"  in  the  provision  of  spectrum-  based  services,  3  the  Commission  limited 
 eligibility  in  the  initial  C  block  auctions  to  entrepreneurs  and  small  businesses.  The  C  block  auction  concluded  on  May  6,  1996,  and  the  subsequent  reauction  of  defaulted  licenses  concluded  on  July  16, 
 1996,  with  a  total  of  90  bidders  winning  493  licenses.  The  winning  bidders  were  permitted  to  pay  90  percent  of  their  net  bid  price  over  a  period  of  ten  years,  paying  only  interest  for  the  first  six  years 
 and  paying  both  interest  and  principal  for  the  remaining  four  years.  4 
 1  Amendment  of  the  Commission's  Rules  Regarding  Installment  Payment  Financing  for  Personal 
 Communications  Services  (PCS)  Licensees,  WT  Docket  No.  97-  82,  Second  Report  and  Order  and  Further  Notice  of  Proposed  Rule  Making,  12  FCC  Rcd  16,436  (1997). 


 2  A  list  of  the  parties  that  filed  pleadings  in  response  to  the  Second  Report  and  Order,  and  the  abbreviations 
 used  to  refer  to  such  parties,  is  attached  as  Appendix  A.  Although  CX  Systems  and  Dorne  &  Margolin  filed  petitions  for  reconsideration  after  the  filing  deadline,  we  will  accept  their  filings  as  ex  parte  filings.  For  the  sake  of  consistency, 


 we  refer  to  filings  as  oppositions  if  they  were  filed  at  the  time  oppositions  were  due,  even  if  they  are  supportive  of  arguments  raised  in  the  petitions. 


 3  Communications  Act  of  1934,  as  amended  ("  Communications  Act")    309(  j)(  4)(  D),  47  U.  S.  C.    309(  j)(  4)(  D). 
 4  See  47  C.  F.  R.    24.711(  b)(  3).  The  net  bid  price  is  equal  to  the  winning  bid  less  any  bidding  credit  for  which 
 the  licensee  was  eligible.  See  47  C.  F.  R.    24.712. 
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 1.1.4  On  March  31,  1997,  the  Wireless  Telecommunications  Bureau  (the  "Bureau")  suspended  the  deadline  for  payment  of  installment  payments  for  all  C  block  licensees.  5  The 
 suspension  was  implemented  in  response  to  a  joint  request  from  several  C  block  licensees  seeking  modification  of  their  installment  payment  obligations  and  to  allow  more  time  for  discussions  with 
 other  federal  agencies  concerning  "the  transfer  of  responsibilities  for  certain  debt  functions  related  to  [the  installment  payment]  program."  6  On  April  28,  1997,  the  Bureau  extended  the  suspension  to  F 
 block  licensees.  7  As  mentioned  above,  on  September  25,  1997,  the  Commission  ended  this  suspension  and  established  March  31,  1998,  as  the  deadline  for  C  and  F  block  licensees  to  resume 
 their  installment  payments.  8 
 1.1.5  After  reviewing  various  proposals  for  relief,  the  Commission  decided  in  the  Second  Report  and  Order  to  allow  each  C  block  licensee  to  elect  one  of  three  options  for  all  of  its  licenses  in 
 lieu  of  continuing  payments  under  the  licensee's  original  installment  payment  plan.  9  Each  of  the  three  options  --  disaggregation,  amnesty,  and  prepayment  --  was  intended  to  provide  limited  relief  to 
 financially  troubled  licensees  without  harming  the  integrity  of  the  auction  process.  10  The  Commission  determined  that  further  relief  for  F  block  licensees  was  unnecessary.  11 
 1.1.6  In  the  Second  Report  and  Order,  the  Commission  required  C  block  licensees  to  file  a  written  election  notice  on  or  before  January  15,  1998,  specifying  whether  they  would  resume 
 payments  under  the  terms  of  the  original  installment  payment  plan  or  would  proceed  under  one  of  the  alternative  options.  12  On  January  7,  1998,  we  postponed  the  election  date  until  February  26, 
 1998,  in  order  to  resolve  issues  raised  on  reconsideration  before  licensees  submitted  their  elections.  13  In  addition,  we  announced  that  the  reauction  of  spectrum  surrendered  by  C  block  licensees  pursuant 
 to  their  elections  would  begin  on  September  29,  1998.  14  On  February  24,  1998,  we  revised  both  the 
 5  See  Installment  Payments  for  PCS  Licenses,  Order,  12  FCC  Rcd  17,325  (WTB  1997). 


 6  Id.,  12  FCC  Rcd  at  17,325  para.  1. 
 7  See  "FCC  Announces  Grant  of  Broadband  Personal  Communications  Services  D,  E,  and  F  Block  BTA 
 Licenses,"  Public  Notice,  DA  97-  883  (released  April  28,  1997)  at  2. 
 8  Second  Report  and  Order,  12  FCC  Rcd  at  16,448  para.  21. 


 9  See  id.,  12  FCC  Rcd  at  16,444-  46  paras.  15-  17. 
 10  See  id.,  12  FCC  Rcd  at  16,437-  38  para.  2. 
 11  Id.,  12  FCC  Rcd  at  16,447  para.  20. 
 12  Id.,  12  FCC  Rcd  at  16,470  para.  70. 
 13  Amendment  of  the  Commission's  Rules  Regarding  Installment  Payment  Financing  For  Personal 
 Communications  Services  (PCS)  Licensees,  WT  Docket  No.  97-  82,  Order,  FCC  98-  2  (released  January  7,  1998)  at  para.  2  ("  Election  Date  Order  I"). 


 14  Id.  at  para.  3. 
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 February  26,  1998,  election  date  and  the  March  31,  1998,  payment  resumption  date.  15  We  changed  the  election  date  to  60  days  from  publication  of  this  Order  in  the  Federal  Register  and  the  payment 
 resumption  date  to  at  least  30  days  after  the  new  election  date.  16 
 III.  OVERVIEW 
 1.1.7  The  Commission  determined  in  the  Second  Report  and  Order  that  it  would  serve  the  public  interest  to  provide  a  variety  of  relief  mechanisms  to  assist  C  block  licensees  that  were 
 experiencing  difficulties  in  meeting  the  financial  obligations  under  the  installment  payment  plan.  The  Commission  believed  the  "extraordinary  procedures"  it  adopted  to  offer  relief  to  C  block 
 licensees  appropriately  balanced  a  number  of  important  policy  goals.  17  In  formulating  a  resolution  to  the  complex  issues  involved,  one  of  the  Commission's  foremost  objectives  was  to  preserve  the 
 integrity  of  the  auction  process  and  to  maintain  public  confidence  in  the  stability  of  the  Commission's  auction  rules.  18  The  Commission  also  believed  it  was  essential  to  ensure  fair  and 
 impartial  treatment  for  all  auction  participants,  including  winning  bidders,  unsuccessful  bidders,  and  licensees  in  competing  services.  19  At  the  same  time,  the  Commission  was  cognizant  of  its  statutory 
 mandate  to  promote  economic  opportunity  and  to  encourage  broad  participation  in  the  provision  of  spectrum-  based  services.  20  In  addition,  the  Commission  attempted  to  implement  a  workable 
 solution  in  a  timely  manner  that  would  facilitate  rapid  introduction  of  service  to  the  public  without  further  regulatory  or  marketplace  delay.  21 


 1.1.8  We  believe  the  approach  adopted  in  the  Second  Report  and  Order  largely  accomplishes  these  objectives.  The  relief  provided  C  block  licensees  will  speed  deployment  of 
 service  to  the  public  by  easing  lenders'  and  investors'  concerns  regarding  regulatory  uncertainty  and  by  potentially  making  more  capital  available  for  investment  and  growth.  By  facilitating  the 
 provision  of  service  to  consumers,  the  Commission  advanced  Congress'  objective  to  promote  "the 
 15  Amendment  of  the  Commission's  Rules  Regarding  Installment  Payment  Financing  For  Personal 
 Communications  Services  (PCS)  Licensees,  WT  Docket  No.  97-  82,  Order,  FCC  98-  28  (released  February  24,  1998)  ("  Election  Date  Order  II"). 


 16  Id.  at  paras.  2-  3.  The  Bureau  will  issue  a  public  notice  setting  forth  the  procedures  for  filing  an  election 
 notice. 
 17  Second  Report  and  Order,  12  FCC  Rcd  at  16,437-  38  para.  2. 


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


 19  Second  Report  and  Order,  12  FCC  Rcd  at  16,437-  38  paras.  2-  3. 
 20  Id.,  12  FCC  Rcd  at  16,437-  38  para.  2  (citing  Communications  Act    309(  j)(  3)(  A),  (B),  47  U.  S.  C.   
 309(  j)(  3)(  A),  (B)). 
 21  Id.,  12  FCC  Rcd  at  16,437-  39  paras.  2,  4-  5. 
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 development  and  rapid  deployment  of  new  technologies,  products,  and  services  for  the  benefit  of  the  public."  22  In  addition,  the  mechanisms  the  Commission  created  to  help  these  small  businesses 
 remain  viable  competitors  in  the  marketplace  furthered  its  statutory  mandate  to  "promot[  e]  economic  opportunity  and  competition  and  ensur[  e]  that  new  and  innovative  technologies  are  readily 
 accessible  to  the  American  people  by  avoiding  excessive  concentration  of  licenses  and  by  disseminating  licenses  among  a  wide  variety  of  applicants,  including  small  businesses  .  .  .  ."  23 
 However,  out  of  fairness  to  bidders  that  withdrew  from  the  auction  and  to  maintain  the  integrity  of  the  auction  process,  the  Commission  rejected  proposals  that  would  have  significantly  altered  the 
 amounts  paid  for  individual  licenses.  Mindful  of  the  effect  its  decision  would  have  on  future  auctions,  the  Commission  opted  for  a  more  modest  approach. 


 1.1.9  Although  we  believe  the  decision  adopted  in  the  Second  Report  and  Order  largely  should  be  maintained,  we  believe  that  certain  aspects  of  the  adopted  approach  were  overly 
 restrictive.  A  number  of  petitioners  claim  that  the  options  presented  by  the  Commission  do  not  provide  economically  viable  alternatives  for  financially  troubled  licensees.  24  Indeed,  a  frequent 
 complaint  expressed  throughout  the  numerous  petitions  is  that  the  available  options  fall  short  of  providing  meaningful  relief.  We  also  received  several  letters  from  members  of  Congress  asking  that 
 we  take  additional  measures  to  assist  C  block  licensees.  25 
 1.1.10  After  reviewing  the  extensive  record  on  reconsideration,  we  believe  that  a  radical  departure  from  the  Second  Report  and  Order  is  not  warranted.  26  The  Second  Report  and  Order 


 22  Communications  Act    309(  j)(  3)(  A),  47  U.  S.  C.    309(  j)(  3)(  A). 
 23  Communications  Act    309(  j)(  3)(  B),  47  U.  S.  C.    309(  j)(  3)(  B). 
 24  See,  e.  g.,  New  Wave  Petition  at  2  (the  presented  options  are  not  economically  viable  for  numerous  licensees 
 and  the  punitive  damages  levied  will  impede  network  build-  out  and  possibly  lead  to  widespread  bankruptcies);  GWI  Petition  at  2  (a  major  reduction  in  the  license  debt  is  the  only  commercially  viable  way  for  many  small  businesses  to 


 obtain  necessary  funding);  One  Stop  Wireless  Petition  at  1  (the  options  offered  do  not  work  for  C  block  licensees);  OnQue  Petition  at  1  (the  Commission's  options  do  not  provide  any  stability);  Omnipoint  Petition  at  13  (without  further 
 clarification  of  the  Commission's  position  on  bankruptcy,  bankruptcy  may  be  a  licensee's  lowest  risk  alternative);  RFW  Reply  at  3  (the  Commission's  punitive  provisions  likely  will  increase  the  number  of  bankruptcy  filings). 


 25  The  Honorable  J.  Robert  Kerrey  ex  parte  filing  at  1;  The  Honorable  Barbara  Boxer  ex  parte  filing  at  1-  2;  The 
 Honorable  Albert  R.  Wynn  ex  parte  filing  at  1-  2;  The  Honorable  Xavier  Becerra  ex  parte  filing  at  1-  2;  Members  of  the  Congressional  Hispanic  Caucus  ex  parte  filing  at  2;  The  Honorable  Richard  H.  Bryan  and  The  Honorable  Harry  Reid 


 ex  parte  filing  at  1;  see  also  The  Honorable  Sue  W.  Kelly  ex  parte  filing  at  1;  The  Honorable  Thomas  Daschle  ex  parte  filing  at  1;  The  Honorable  Gary  L.  Ackerman  ex  parte  filing  at  1. 


 26  See  AT&  T  Opposition  at  2  (the  options  offered  in  the  Second  Report  and  Order  provide  sufficient  financial 
 relief  without  undermining  the  integrity  of  the  auction  process);  PrimeCo  Opposition  at  5  ("  the  Second  Report  and  Order  reflects  a  reasonable  balancing  of  Congress'  statutory  objectives  and  marketplace  considerations  and  should  be 


 affirmed");  Fidelity  Capital  Opposition  at  5  (the  Second  Report  and  Order  "presents  a  fair  and  balanced  plan  to  provide  relief  to  struggling  C-  Block  licensees,  while  not  disadvantaging  licensees  who  are  successfully  building  out  their 
 systems");  Northcoast  Opposition  at  4  (significant  change  would  be  fundamentally  unfair  to  licensees  that  have  honored  their  financial  commitments);  AirGate  Opposition  at  5-  6  (the  financing  options  available  to  C  block  licensees,  including 
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 created  an  innovative  solution  to  requests  from  C  block  licensees  needing  financial  relief.  Certain  requirements,  however,  may  constrain  many  C  block  licensees  from  making  use  of  the  relief 
 measures  offered.  We  believe  that,  with  a  few  adjustments  to  the  adopted  approach,  we  can  better  effectuate  the  Commission's  intent  to  provide  C  block  licensees  a  limited  measure  of  relief  under  the 
 unique  but  varied  circumstances  presented.  We  therefore  will  leave  the  basic  framework  intact,  but  we  will  alter  it  slightly  to  allow  licensees  to  be  more  flexible  in  making  their  elections  for  licenses  in 
 different  geographic  areas,  to  use  more  of  the  down  payments  already  on  deposit,  and  to  be  more  flexible  in  the  use  of  those  down  payments.  We  believe  that  this  approach  improves  upon  the 
 Second  Report  and  Order  by  better  enabling  C  block  licensees  to  remain  participants  in  the  wireless  market,  which  will  promote  competition  and  the  delivery  of  new  services  to  the  public. 


 1.1.11  First,  we  will  eliminate  the  requirement  that  a  licensee  must  make  the  same  election  for  all  its  licenses.  Instead,  a  licensee  may  make  different  elections  for  the  different  Major  Trading 
 Areas  ("  MTAs")  in  which  it  holds  licenses.  The  election  made  for  an  MTA  will  apply  to  every  Basic  Trading  Area  ("  BTA")  license  held  by  the  licensee  in  that  MTA.  As  under  the  Second  Report 
 and  Order,  the  possible  elections  include  resumption  of  payments,  amnesty,  prepayment,  or  disaggregation.  As  part  of  the  modifications  to  the  adopted  approach,  we  will  also  permit  a 
 combination  of  disaggregation  and  prepayment.  Resumption  of  payments  and  prepayment  of  30  MHz  licenses  will  remain  essentially  the  same  as  in  the  Second  Report  and  Order.  We  will, 
 however,  modify  the  amnesty  and  disaggregation  options,  as  follows. 
 1.1.12  Under  the  revised  amnesty  option,  a  licensee  may  return  to  the  Commission  licenses  in  any  MTA  it  wishes  so  long  as  it  returns  all  its  BTA  licenses  within  the  MTA.  The  entire 
 outstanding  debt  on  the  returned  licenses  will  be  forgiven.  For  each  MTA  that  is  returned,  the  licensee  will  have  two  choices,  and  its  decision  will  apply  to  all  its  BTA  licenses  within  the  MTA.  If 
 the  licensee  wishes  to  bid  on  those  licenses  it  returns  in  the  reauction,  none  of  the  down  payment  associated  with  such  licenses  will  be  available,  consistent  with  the  Second  Report  and  Order. 
 Alternatively,  the  licensee  may  opt  to  forgo  the  opportunity  to  bid  on  its  returned  licenses  in  exchange  for  a  credit  of  70  percent  of  the  down  payment  made  on  the  licenses.  This  credit  may  be 
 used  to  prepay  the  entire  principal  owed  for  a  retained  MTA  with  30  MHz  licenses.  This,  essentially,  is  the  prepayment  option  as  adopted  in  the  Second  Report  and  Order.  Alternatively,  we 
 permit  a  combination  of  prepayment  and  disaggregation,  so  that  the  licensee  may  prepay  the  entire  principal  owed  for  the  retained  15  MHz  licenses  of  an  MTA  that  has  been  disaggregated. 


 1.1.13  As  under  the  Second  Report  and  Order,  a  licensee  that  disaggregates  an  MTA  may  continue  making  installment  payments  on  the  retained  spectrum.  However,  for  each  disaggregated 
 license,  the  licensee  will  now  receive  credit  for  40  percent  of  the  down  payment  applicable  to  the  returned  15  MHz  of  spectrum.  This  40  percent  credit  may  be  applied  only  to  the  15  MHz  of 
 spectrum  retained  from  the  same  license.  It  may  be  used  to  reduce  the  principal  outstanding  and/  or 


 the  Commission's  original  installment  payment  plan,  are  more  generous  than  financing  offered  to  any  participants  in  other  auctions);  Frontier  Reply  at  2  (significant  relief  would  be  unfair  to  bidders  that  were  unsuccessful  in  the  auction 
 process). 
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 to  pay  "Suspension  Interest"  (i.  e.,  all  unpaid  simple  interest  accruing  from  the  date  of  license  grant  through  March  31,  1998).  Because  the  down  payment  applicable  to  the  retained  spectrum  will  be 
 considered  the  down  payment  for  that  spectrum  and  the  licensee  thus  retains  100  percent  of  that  portion  of  the  down  payment,  the  licensee  in  effect  receives  a  blended  credit  of  70  percent  of  the 
 total  down  payment  made  on  the  full  30  MHz  license. 
 1.1.14  Alternatively,  under  our  modified  approach,  a  licensee  will  be  allowed  to  prepay  a  disaggregated  MTA.  In  that  case,  the  licensee  will  receive  credit  for  70  percent  of  the  down 
 payment  applicable  to  the  returned  spectrum.  Because  the  licensee  retains  100  percent  of  the  portion  of  the  down  payment  associated  with  the  retained  portion  of  the  license,  the  licensee  in  effect 
 receives  a  blended  credit  of  85  percent  of  the  total  down  payment.  The  70  percent  credit  may  be  applied  toward  the  prepayment  of  a  retained  MTA  with  30  MHz  licenses  (so  long  as  the  retained  15 
 MHz  license  is  prepaid)  and/  or  toward  the  prepayment  of  the  retained  15  MHz  licenses  of  an  MTA  that  has  been  disaggregated. 


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


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


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


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


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


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


 Hispanic  Caucus  ex  parte  filing  at  2. 
 28  Second  Report  and  Order,  12  FCC  Rcd  at  16,455,  16,458,  16,463-  64,  16,469  paras.  38,  44,  57,  67. 


 29  Id.,  12  FCC  Rcd  at  16,463,  16,469  paras.  56,  67. 
 30  Id.,  12  FCC  Rcd  at  16,455,  16,463-  64,  16,469  paras.  38,  56-  57,  67. 
 31  Note,  however,  that  under  the  build-  out  exception  to  the  original  amnesty  option,  the  licensee  could  retain  any 
 licenses  that  satisfied  the  build-  out  requirement.  Id.,  12  FCC  Rcd  at  16,463-  64  para.  57. 
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 terms  of  the  options  or  by  unrelated  circumstances  in  other  areas,  which  might  dictate  a  universal  election  unsuitable  for  the  licenses  in  that  MTA. 
 1.1.20  Further,  we  believe  that  MTA-  by-  MTA  elections  will  promote  rapid  deployment  of  service  to  the  public.  32  Licensees  will  have  more  opportunity  to  localize  their  business  plans  by 
 surrendering  licenses  in  markets  where  success  now  seems  unlikely  due  to  financial  difficulties.  As  a  result,  they  will  be  able  to  focus  on  providing  service  in  those  markets  where  they  have  retained 
 their  licenses.  In  addition,  the  surrendered  licenses  presumably  will  be  reauctioned  to  entities  better  positioned  to  provide  service  in  those  license  areas.  Indeed,  we  anticipate  that  MTA-  by-  MTA 
 elections  will  produce  a  more  robust  and  competitive  reauction.  We  expect  more  licenses  to  be  returned  for  reauction  because  a  licensee  choosing  disaggregation  or  resumption  will  now  be  free  to 
 surrender  licenses  it  was  reluctant  to  keep,  but  was  forced  to  do  so  under  the  previous  terms  of  those  elections.  Allowing  those  licenses  to  be  reauctioned  to  entities  that  are  more  committed,  or  better 
 able,  to  serve  those  markets  will  stimulate  competition  and  benefit  consumers.  Furthermore,  permitting  elections  on  an  MTA-  by-  MTA  basis  will  not  undermine  the  integrity  of  the  auction 
 process  because  licensees  still  must  pay  the  full  amount  of  their  licenses. 
 V.  RESUMPTION  OF  PAYMENTS 
 A.  Background 
 1.1.21  In  the  Second  Report  and  Order,  the  Commission  rescinded,  effective  March  31,  1998,  the  Bureau's  prior  suspension  of  the  deadline  for  all  broadband  PCS  C  block  and  F  block 
 installment  payments.  33  All  payments  due  and  owing  after  March  31,  1998,  were  to  be  made  in  accordance  with  the  terms  of  each  licensee's  Note,  associated  Security  Agreement,  and  the 
 Commission's  Orders  and  regulations.  34  The  Commission  stated  that  all  rules  regarding  installment  payments  and  defaults  for  the  broadband  PCS  C  and  F  blocks  would  remain  in  effect,  except  as 
 modified  by  the  Second  Report  and  Order.  35  The  Commission  ruled  that  any  licensee  that  failed  to  remit  the  payment  due  on  March  31,  1998,  and  remained  delinquent  for  more  than  60  days  (in  other 
 words,  failed  to  make  the  March  31,  1998,  payment  on  or  before  May  30,  1998),  would  be  in  default  on  its  license.  As  the  Commission  noted,  the  60-  day  non-  delinquency  period  was  an  exception  to 
 existing  Commission  rules  that  provide  for  an  automatic  90-  day  non-  delinquency  period  for  each  installment  payment.  36 


 32  See  Communications  Act    309(  j)(  3)(  A),  47  U.  S.  C.    309(  j)(  3)(  A). 
 33  Second  Report  and  Order,  12  FCC  Rcd  at  16,449-  50  para.  25. 
 34  Id. 
 35  Id. 
 36  Id.  See  also  47  C.  F.  R.    1.2110(  f)(  4)(  i). 
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 1.1.22  The  Commission  directed  in  the  Second  Report  and  Order  that  Suspension  Interest  would  become  due  and  payable  over  a  two-  year  period,  beginning  on  March  31,  1998,  on  which 
 date  broadband  PCS  C  and  F  block  licensees  would  be  required  to  submit  one-  eighth  of  the  Suspension  Interest.  37  After  March  31,  1998,  one-  eighth  of  the  Suspension  Interest  was  to  be  paid 
 along  with  each  regular  installment  payment  on  each  subsequent  payment  due  date  until  the  Suspension  Interest  had  been  fully  paid.  38  Payment  due  dates  would  conform  to  those  indicated  in 
 the  Notes  executed  by  the  licensees.  39 
 1.1.23  On  February  24,  1998,  we  issued  an  order  revising  the  March  31,  1998,  payment  resumption  date.  40  We  stated  that  the  payment  resumption  date  would  be  at  least  30  days  after  the 
 date  on  which  C  block  licensees  must  file  a  written  election  notice  specifying  their  decision  to  resume  payments  under  the  terms  of  the  original  installment  payment  plan  or  to  proceed  under  one 
 of  the  alternative  options.  The  election  date  was  postponed  in  the  same  February  24,  1998,  order  to  60  days  after  publication  of  this  reconsideration  order  in  the  Federal  Register.  41  As  we  stated  in  that 
 order,  the  Bureau  will  announce  the  specific  dates  for  election  and  payment  resumption  as  soon  as  this  reconsideration  order  is  published.  42 


 B.  Discussion 
 1.1.24  By  the  time  they  must  resume  making  payments,  C  and  F  block  licensees  will  have  enjoyed  a  respite  from  their  payment  obligations  substantially  longer  than  one  year.  Several  parties, 
 however,  seek  a  much  longer  deferral  of  the  payment  deadline.  43  We  do  not  find  their  requests 
 37  Second  Report  and  Order,  12  FCC  Rcd  at  16,449-  51  paras.  25-  27.  For  those  C  block  licensees  that  retained 
 licenses  under  the  disaggregation  option  or  under  the  build-  out  exception  to  the  amnesty  option,  the  Suspension  Interest  would  be  adjusted  accordingly.  C  block  licensees  that  elected  the  prepayment  option  or  surrendered  all  licenses  under 


 the  amnesty  option  would  not  be  charged  Suspension  Interest. 
 38  Id. 


 39  Id.  We  previously  provided  specific  examples  of  the  schedule  for  paying  the  Suspension  Interest.  See  id.,  12 
 FCC  Rcd  at  16,450-  51  para.  27  and  nn.  53-  54. 
 40  Election  Date  Order  II. 


 41  Id.  The  election  date  had  been  postponed  once  before  on  January  7,  1998.  Election  Date  Order  I. 
 42  Election  Date  Order  II  at  para.  3. 
 43  See  Alpine  Petition  at  13  and  Alpine  Reply  at  8-  9  (suggesting  a  moratorium  on  interest  payments  for  up  to  five 
 years);  Cellexis  Petition  at  1,  5  and  Cellexis  Reply  at  2-  5  (supporting  an  earlier  proposal  by  the  U.  S.  Small  Business  Administration  ("  SBA")  for  a  five-  year  deferral);  McBride  Petition  at  5  (proposing  elimination  of  all  payments  for  the 


 first  seven  years,  with  no  interest  on  the  debt  for  the  first  five  years);  Meretel  Petition  at  1-  2  (asking  the  Commission  to  reconsider  the  deferral  issue);  MFRI  Petition  at  3  (endorsing  a  suspension  of  all  payments  until  the  end  of  the  fifth  year 
 of  the  license,  with  the  balance  of  principal  and  interest  paid  over  the  remaining  five  years  of  the  license);  NextWave  Petition  at  4-  5,  22-  25  (proposing  a  "modest  deferral"  to  facilitate  network  deployment,  while  requiring  payment  in  full 
 with  accrued  interest  within  the  existing  license  term);  NextWave  Reply  at  5-  8  (proposing  resumption  of  payments 
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 persuasive.  No  matter  what  deadline  we  establish,  it  is  inevitable  that  some  licensees  will  seek  more  time  to  pay.  As  stated  in  the  Second  Report  and  Order,  a  more  extensive  deferral  would  be  unfair  to 
 unsuccessful  bidders  that  might  not  have  withdrawn  from  the  auction  had  they  known  of  deferral  opportunities.  44  The  Commission  properly  rejected  a  further  deferral  because  it  did  "not  wish  to 
 adopt  temporary  solutions  such  as  those  that  might  only  postpone  these  difficulties  and  further  prolong  uncertainty."  45  We  agree  with  parties  that  urge  the  Commission  to  reject  any  attempts  to 
 extend  further  the  suspension  of  payments.  46 
 1.1.25  Although  we  will  not  grant  the  lengthy  postponement  requested  by  some  parties,  we  will  provide  modest  relief  by  extending  the  non-  delinquency  period  for  licensees  that  fail  to  meet  the 
 payment  resumption  deadline.  In  response  to  Urban  Communicators'  request,  we  will  extend  to  90  days  the  automatic  60-  day  non-  delinquency  period  applicable  to  payments  due  on  the  payment 
 resumption  date.  47  As  mentioned  above,  the  Commission's  rules  allow  a  90-  day  non-  delinquency  period  for  all  other  installment  payments.  48  Although  we  stated  in  the  Second  Report  and  Order  that 
 a  shorter  non-  delinquency  period  was  justified  in  light  of  the  one-  year  payment  suspension,  49  we 


 phased  in  on  a  graduated  basis  for  first  three  years);  New  Wave  Petition  at  1,  2  (requesting  a  deferral  spanning  a  period  of  five  or  more  years);  Northern  Michigan  Petition  at  5-  6  (indicating  a  preference  for  an  additional  two-  year 
 suspension);  One  Stop  Wireless  Petition  at  2-  3  (seeking  consideration  of  SBA  proposal  for  short-  term  deferral  combined  with  extension  of  five-  year  construction  deadline,  or  long-  term  deferral  with  no  change  in  construction 
 deadline);  OnQue  Petition  at  2  (supporting  a  two-  year  deferral  from  December  31,  1996);  RFW  Petition  at  1,  4-  5  (recommending  a  five-  year  deferral  of  principal  and  interest  payments);  Urban  Communicators  Petition  at  ii,  2,  5-  7 
 (asking  for  an  extension  of  the  suspension  until  March  31,  1999,  and  two  additional  one-  year  deferrals,  so  long  as  licensees  make  certain  demonstrations  of  financial  ability  and  substantial  construction  progress  and  pay  an  interest  rate 
 increased  by  0.5  percent  for  the  deferral  period);  CONXUS  Opposition  at  6  (agreeing  with  NextWave  and  Alpine);  Duluth  PCS,  et  al.  Opposition  at  5  (advocating  a  five-  year  deferral  of  payment  obligations);  and  Polycell  Opposition  at 
 5  (same  as  Duluth  PCS,  et  al.).  See  also  The  Honorable  Barbara  Boxer  ex  parte  filing  at  1  (asking  the  Commission  to  consider  a  "limited  deferral");  The  Honorable  Albert  R.  Wynn  ex  parte  filing  at  1  (requesting  that  the  payment 
 resumption  date  be  extended  by  six  months). 
 44  Second  Report  and  Order,  12  FCC  Rcd  at  16,446-  47  para.  18. 


 45  Id. 
 46  See,  e.  g.,  Antigone/  Devco  Opposition  at  6  ("  The  public  treasury  is  harmed  by  every  deferral  of  payments."); 
 AirGate  Opposition  at  10  ("  as  time  elapses,  the  prospect  for  repayment  diminishes");  Sprint  Opposition  at  5  ("  further  delay  puts  C  block  licensees  at  a  competitive  disadvantage,  making  attracting  investment  capital  difficult;  creates  a 


 cloud  of  uncertainty  over  the  wireless  sector;  and  unjustly  enriches  defaulting  licensees  by  affording  them  financing  opportunities  not  available  to  those  who  in  good  faith  fulfilled  their  payment  obligations");  Northcoast  Opposition  at  3- 
 4  ("  additional  C  Block  installment  payment  rule  changes  would  be  bad  policy  because  it  would  create  uncertainty  as  to  how  the  Commission  will  handle  situations  of  licensee  default  that  occur  outside  of  the  C  Block  context"). 


 47  Urban  Communicators  Petition  at  7-  8. 
 48  47  C.  F.  R.    1.2110(  f)(  4)(  i). 
 49  Second  Report  and  Order,  12  FCC  Rcd  at  16,449-  50  para.  25. 
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 now  believe  that  it  is  preferable  to  make  the  length  of  that  non-  delinquency  period  consistent  with  our  rule  for  all  other  payments.  We  are  providing  this  30-  day  extension  to  assist  licensees  that  are 
 experiencing  last-  minute  delays  in  raising  capital.  We  believe  that  by  offering  this  additional  time,  we  will  help  these  licensees  complete  their  fund-  raising  efforts. 


 1.1.26  Consistent  with  our  rule  for  all  other  payments,  payments  made  within  this  90-  day  non-  delinquency  period  will  be  assessed  the  5  percent  late  payment  fee  that  we  recently  adopted.  50 
 However,  in  light  of  the  more  than  one-  year  suspension  and  this  expanded  non-  delinquency  period,  we  believe  that  a  subsequent  grace  period  is  not  warranted.  Therefore,  there  will  be  no  subsequent 
 automatic  grace  period  for  licensees  that  fail  to  make  payment  within  the  90-  day  non-  delinquency  period.  51  Subsequent  payments,  due  after  the  initial  resumption  payment,  will  be  subject  to  the  rules 
 adopted  in  the  Part  I  Third  Report  and  Order. 
 1.1.27  Under  this  plan,  the  Suspension  Period  (as  defined  in  the  Second  Report  and  Order)  will  still  end  on  March  31,  1998.  52  All  interest  accrued  from  the  date  of  license  grant  through  March 
 31,  1998,  (i.  e.,  Suspension  Interest)  will  continue  to  be  payable  over  eight  equal  payments.  Interest  accrued  from  April  1,  1998,  through  the  payment  resumption  date  will  be  due  on  the  payment 
 resumption  date,  in  addition  to  one-  eighth  of  the  Suspension  Interest.  We  believe  that  this  plan  will  require  licensees  continuing  under  an  installment  payment  plan,  either  through  resumption  or 
 disaggregation,  to  demonstrate  their  financial  viability  by  making  a  reasonable  payment  on  the  payment  resumption  date.  This  payment  will  evidence  the  ability  of  licensees  to  access  the  capital 
 necessary  to  both  service  their  government  debt  obligations  and  provide  service  to  the  public.  In  addition,  we  instruct  the  Bureau  to  modify  the  payment  schedule  so  that  all  C  and  F  block 
 installment  payments  will  be  due  on  a  quarterly  basis,  beginning  on  the  payment  resumption  date. 
 1.1.28  We  reject  Urban  Communicators'  suggestion  that  Suspension  Interest  be  forgiven,  as  well  as  its  alternative  proposals  that  Suspension  Interest  be  paid  either  in  a  balloon  at  the  end  of  the 
 ten-  year  installment  payment  period  or  over  six  years  in  conjunction  with  other  interest  payments.  53  Because  the  Commission  already  has  provided  sufficient  relief  by  granting  the  one-  year  suspension, 
 we  will  neither  forgive  nor  defer  payment  of  the  Suspension  Interest.  The  Commission  has  accommodated  licensees  sufficiently  by  allowing  payment  of  the  Suspension  Interest  over  eight 
 equal  payments. 
 50  See  Amendment  of  Part  1  of  the  Commission's  Rules  --  Competitive  Bidding  Procedures,  WT  Docket  No.  97-82, 
 Third  Report  and  Order  and  Second  Further  Notice  of  Proposed  Rule  Making,  FCC  97-  413  (released  December  31,  1997)  at  para.  106  ("  Part  1  Third  Report  and  Order")  (reconsideration  pending).  See  47  C.  F.  R.    1.2110(  f)(  4)(  i). 


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


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


 53  Urban  Communicators  Petition  at  8-  9. 
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 1.1.29  We  also  reject  requests  from  parties  seeking  a  deviation  from  the  payment  schedule  and  from  amounts  established  by  the  licensees'  Notes.  54  We  are  providing  all  C  block  licensees  with 
 an  array  of  alternative  payment  options,  designed  to  accommodate  licensees'  various  needs.  These  options  were  developed  and  are  now  being  modified  in  an  effort  to  balance  complex  and  competing 
 interests,  with  the  recognition  that  it  is  impossible  to  devise  alternatives  that  satisfy  every  entity  with  an  interest  in  this  proceeding.  The  record  before  us  does  not  provide  a  sufficient  basis  for  creating 
 additional  payment  choices;  indeed,  there  is  opposition  to  our  doing  so.  55  Moreover,  as  explained  above  and  in  the  Second  Report  and  Order,  the  Commission  purposefully  adopted  an  approach  that 
 does  not  significantly  alter  the  amounts  paid  for  individual  licenses.  56  Retroactively  changing  the  payment  terms  would  be  unfair  to  other  applicants  that  might  have  bid  differently  under  more 
 relaxed  payment  terms. 
 1.1.30  Finally,  we  will  not  adopt  the  proposal  made  only  by  DiGiPH  that  the  Commission  somehow  compensate  those  licensees  that  timely  made  the  March  31,  1997,  payment  and,  as  a 
 consequence,  did  not  benefit  from  a  suspension  of  that  payment  obligation.  57  Compensating  licensees  for  complying  with  Commission  rules  would  establish  a  precedent  we  consider 
 inadvisable.  58  Furthermore,  if  a  licensee  opts  to  return  all  its  licenses,  we  will  refund  any  installment 
 54  Alpine  asks  that:  (1)  principal  and  interest  payments  be  spread  over  a  period  of  20  years;  (2)  principal  and 
 interest  payments  be  paid  annually,  rather  than  quarterly;  and  (3)  the  accrual  of  interest  be  suspended  from  the  date  of  license  grant  until  90  days  after  the  issuance  of  reauctioned  licenses.  Alpine  Petition  at  12-  13,  n.  6;  see  also  Alpine 


 Reply  at  8.  Alpine  also  argues  that  licenses  awarded  in  the  original  C  block  auction  have  diminished  in  value  and,  on  that  basis,  urges  the  Commission  to  reduce  the  price  for  each  "so  affected"  license  by  15  percent  per  year  until  90  days 
 after  the  grant  of  reauctioned  licenses.  Alpine  Petition  at  13  n.  6.  DiGiPH  similarly  maintains  that  reauction  will  result  in  lower  prices  for  licenses  than  at  the  original  auction  and  therefore  requests  that  the  Commission  reduce  the  debt  of 
 original  licensees  in  an  amount  equal  to  the  average  reduction  in  cost  for  licenses  sold  at  reauction.  DiGiPH  Petition  at  8-  11.  Northern  Michigan  states  that  cash  flow  projections  are  not  sufficient  to  support  principal  repayment  over  only 
 four  years  and  believes  that  beginning  principal  payments  in  year  six  is  feasible  if  repayment  occurs  over  15  years.  Northern  Michigan  Petition  at  5-  6.  In  addition,  Northern  Michigan  and  McBride  seek  relaxation  of  the  construction 
 requirements  for  C  block  licensees  but  fail  to  present  convincing  rationales  for  their  proposals.  See  Northern  Michigan  Petition  at  9;  McBride  Petition  at  5. 


 55  See  AT&  T  Opposition  at  3  ("  Bidders  in  any  Commission  auction  understand  that  there  is  no  guarantee  of 
 business  success  even  if  they  win  a  license.  The  Commission  should  not  now  create  an  expectation  that  it  will  shield  applicants  or  licensees  from  the  results  of  bad  business  decisions,  or  take  actions  that  suggest  that  some  licensees  are 


 'too  big  to  fail.  '  The  menu  of  options  the  Commission  provided  in  the  Order  will  provide  most  C-  block  licensees  with  sufficient  financial  relief  to  permit  them  to  continue  to  participate  in  the  wireless  marketplace,  although  it  may  be  on  a 
 reduced  basis.");  see  also  PrimeCo  Opposition  at  4  ("[  A]  fundamental  restructuring  of  the  installment  payment  terms  previously  established  and  agreed  to  would  contravene  the  Commission's  established  auction  objective  of  awarding 
 licenses  to  parties  who  value  them  the  most  and  are  the  most  likely  to  rapidly  deploy  service."  [citation  omitted]). 
 56  Second  Report  and  Order,  12  FCC  Rcd  at  16,438-  39  para.  5. 


 57  See  DiGiPH  Petition  at  7-  8. 
 58  Moreover,  the  Commission  has  no  explicit  authority  to  pay  interest  to  licensees,  which  was  one  of  DiGiPH's 
 suggestions.  Id.  at  8.  For  example,  unsuccessful  bidders  in  Commission  auctions  do  not  earn  interest  on  their  upfront 
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 payments  previously  submitted  for  those  licenses.  If  a  licensee  returns  some  licenses  and  retains  others,  the  licensee  will  be  allowed  to  apply  previously  submitted  installment  payments  toward  the 
 prepayment  of  retained  licenses  or  toward  the  Suspension  Interest  for  retained  licenses  which  the  licensee  does  not  prepay.  For  example,  if  a  licensee  elects  resumption  of  payments  for  an  MTA,  any 
 installment  payments  previously  submitted  for  a  BTA  license  within  that  MTA  will  be  applied  toward  the  Suspension  Interest  owed  for  that  license,  as  described  in  the  Second  Report  and  Order.  59 
 The  treatment  of  installment  payments  with  respect  to  the  disaggregation  and  prepayment  options  is  specified  below.  Therefore,  because  installment  payments  will  either  be  refunded  or  credited,  we 
 believe  additional  compensation  is  unnecessary. 
 VI.  SURRENDER  OF  LICENSES  FOR  REAUCTION  (AMNESTY) 
 A.  Background 
 1.1.31  In  the  Second  Report  and  Order,  the  Commission  adopted  an  amnesty  option  under  which  a  C  block  licensee  would  be  permitted  to  surrender  all  of  its  licenses  in  exchange  for  relief 
 from  its  outstanding  debt.  60  The  Commission  would  waive  any  applicable  default  payments,  subject  to  coordination  with  the  Department  of  Justice  pursuant  to  applicable  federal  claims  collections 
 standards.  61  Licensees  electing  this  option  would  not  have  their  down  payments  returned;  however,  neither  would  they  be  deemed  in  default  or  delinquent  in  meeting  government  debt  obligations.  62  In 
 addition,  they  would  be  eligible  to  bid  for  any  and  all  licenses  in  the  reauction  63  and  would  not  be  restricted  in  making  post-  auction  acquisitions.  64 


 1.1.32  Subject  to  one  exception,  licensees  availing  themselves  of  the  amnesty  option  would  be  required  to  surrender  all  of  their  licenses  to  the  Commission.  65  The  sole  exception  to  this  "all-  or-nothing" 
 rule  allowed  licensees  that  met  or  exceeded  the  five-  year  build-  out  requirement  on  September  25,  1997,  the  date  of  adoption  of  the  Second  Report  and  Order,  to  keep  licenses  for  built- 


 payments  or  down  payments.  Rather,  the  accrued  interest  on  these  funds  is  transferred  to  the  Telecommunications  Development  Fund.  See  Communications  Act    309(  j)(  8)(  C),  47  U.  S.  C.    309(  j)(  8)(  C);  47  C.  F.  R.    1.2106(  a)  and 
 1.2107(  b). 
 59  Second  Report  and  Order,  12  FCC  Rcd  at  16,451  n.  54  para.  27. 


 60  Second  Report  and  Order,  12  FCC  Rcd  at  16,462-  64  paras.  53-  58. 
 61  Id.,  12  FCC  Rcd  at  16,462  para.  53.  See  also  4  C.  F.  R.  Parts  101-  105. 
 62  Second  Report  and  Order,  12  FCC  Rcd  at  16,462-  63  para.  55. 
 63  Id.,  12  FCC  Rcd  at  16,462  para.  54. 
 64  Id.,  12  FCC  Rcd  at  16,439-  40  para.  6. 
 65  Id.,  12  FCC  Rcd  at  16,463  para.  56. 
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 out  markets.  66  Specifically,  a  licensee  utilizing  this  exception  would  be  allowed  to  retain  any  built-out  BTA,  on  the  condition  that  it  also  keep  any  additional  BTAs  in  the  MTA  where  the  built-  out 
 BTA  is  located  and  that  it  pay  for  all  of  those  retained  licenses  under  the  terms  of  their  original  notes.  67 


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


 B.  Discussion 
 1.1.34  In  keeping  with  our  decision  on  reconsideration  to  allow  licensees  to  make  elections  on  an  MTA-  by-  MTA  basis,  we  modify  the  amnesty  option  to  permit  licensees  to  select  that  option 
 for  as  many  of  their  MTAs  as  they  choose.  Because  amnesty  no  longer  requires  an  "all-  or-  nothing"  choice,  we  also  eliminate  as  moot  the  build-  out  exception.  72  Our  decision  is  consistent  with 


 66  Id.,  12  FCC  Rcd  at  16,463-  64  para.  57. 
 67  Id. 
 68  Id.,  12  FCC  Rcd  at  16,464  para.  58.  Some  of  these  payments  were  installments  due  on  March  31,  1997;  others 
 were  amounts  due  on  December  31,  1996,  but  not  paid  until  March  31,  1997,  based  on  the  Commission's  automatic  90-  day  non-  delinquency  rule.  Id. 


 69  Id. 
 70  Id. 
 71  Id. 
 72  NextWave's  request  that  the  Commission  "clarify"  that  the  build-  out  exception  encompasses  all  licensees  that 
 "invested  significantly"  in  network  build-  out  activities  is  now  moot.  See  NextWave  Petition  at  17.  See  also  Airtel  Petition  at  1;  Christensen  Petition  at  1;  CVI  Wireless  Petition  at  1;  Koll  Petition  at  1;  Leifer,  Marter  Petition  at  1;  URS 


 Greiner  Petition  at  1;  Dorne  &  Margolin  ex  parte  filing  at  1.  Also  moot  is  Omnipoint's  suggestion  that  we  allow  licensees  to  disaggregate  licenses  retained  under  the  build-  out  exception.  See  Omnipoint  Petition  at  5-  6;  Omnipoint 
 Reply  at  1-  2.  Permitting  licensees  to  make  elections  on  an  MTA-  by-  MTA  basis  eliminates  any  need  for  Omnipoint's  proposal  because  licensees  are  free  to  disaggregate  licenses  in  any  built-  out  MTAs  they  wish  to  retain. 
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 DiGiPH's  recommendation  that  licensees  be  permitted  "to  return  licenses  for  all  BTAs  on  a  per  MTA  basis,  separate  and  apart  from  having  met  the  five-  year  build  out  provisions  .  .  .  ."  73  The 
 change  also  satisfies  Alpine's  request  that  licensees  be  entitled  to  turn  in  any  or  all  of  their  licenses  under  amnesty.  74 


 1.1.35  The  Commission  originally  adopted  the  "all-  or-  nothing"  requirement  for  the  amnesty  option  in  order  to  prevent  licensees  from  "cherry-  picking"  only  the  most  desirable  MTAs.  75  The 
 Commission  believed  that  facilitating  a  "cherry-  picking"  scheme  would  limit  the  potential  for  licenses  to  be  aggregated,  which  would  decrease  their  value  to  bidders  in  the  reauction.  76  On 
 reconsideration,  we  find  persuasive  DiGiPH's  contention  that  requiring  licensees  to  keep  or  surrender  entire  MTAs,  rather  than  BTAs,  will  sufficiently  limit  "cherry-  picking."  77  We  also  agree 
 with  DiGiPH's  position  that  applying  the  amnesty  option  on  an  MTA-  by-  MTA  basis  does  not  carry  a  risk  of  "cherry-  picking"  significantly  different  from  that  connected  with  the  original  disaggregation 
 option.  78 
 1.1.36  Several  parties  object  to  the  fact  that  a  licensee  does  not  receive  any  refund  of  its  down  payment  under  the  amnesty  option.  79  As  the  Commission  explained  in  the  Second  Report  and 
 Order,  its  intent  in  retaining  the  down  payment  was  to  ensure  that  licensees  electing  the  amnesty  option  and  participating  in  the  reauction  of  their  surrendered  licenses  do  so  without  the  undue 
 advantage  of  having  all  of  their  original  funds  available  to  repurchase  the  same  spectrum  they  surrendered.  80  The  Commission  further  explained  that  licensees  selecting  amnesty  would  benefit 
 substantially  by  avoiding  being  declared  in  default  and  thereby  being  freed  from  assessments  of 
 73  DiGiPH  Petition  at  4-  7.  DiGiPH  offered  this  recommendation  as  an  alternative  to  its  suggestion  that  the 
 Commission  extend  the  date  by  which  licensees  would  have  to  have  met  the  five-  year  build-  out  requirement  for  the  build-  out  exception.  Id.  See  also  NextWave  Reply  at  8. 


 74  Alpine  Petition  at  9-  10. 
 75  Second  Report  and  Order,  12  FCC  Rcd  at  16,463  para.  56. 
 76  See  id.,  12  FCC  Rcd  at  16,469  para.  67. 
 77  DiGiPH  Petition  at  4-  5. 
 78  Id.  See  also  NextWave  Reply  at  8  ("[  T]  he  Commission  should  allow  licensees  to  select  options  on  an  MTA 
 basis.  Establishing  an  MTA  rule  across  the  board  eliminates  any  concern  that  permitting  flexible  selection  of  options  would  result  in  cherry  picking."). 


 79  See  Alpine  Petition  at  9-  10;  Hyundai  Petition  at  6  (contending  that  "forfeiture  of  up  to  100  percent  of  a  down 
 payment  does  not  appear  rationally  related  to  any  harm");  Hyundai  Reply  at  4-  7;  McBride  Petition  at  2,  4  (claiming  that  the  amnesty  option  is  punitive  in  nature  and  requesting  "100  percent  return  of  all  down  payments,  plus  all  the  interest 


 payments").  See  also  AmeriCall  Opposition  at  5-  7  ("  fairness  and  equity  require  at  least  that  the  forfeiture  in  an  amnesty  or  disaggregation  election  be  no  greater  than  the  forfeiture  by  a  licensee  electing  prepayment  .  .  .  ."). 


 80  Second  Report  and  Order,  12  FCC  Rcd  at  16,462-  63  para.  55. 
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 delinquencies  and  other  collection  costs  associated  with  default  payments.  81  The  rationale  of  the  Second  Report  and  Order  continues  to  be  valid.  If  we  were  to  allow  C  block  licensees  to  return  their 
 licenses,  receive  a  refund  of  their  down  payments,  and  participate  in  the  reauction,  we  would  undermine  the  integrity  of  the  auction  process  by  placing  amnesty  licensees  in  virtually  the  same 
 position  they  would  have  occupied  had  the  initial  C  block  auction  never  taken  place. 
 1.1.37  Nevertheless,  we  recognize  that  because  all  elections  now  are  being  applied  on  an  MTA-  by-  MTA  basis,  licensees  are  permitted  to  return  licenses  in  certain  MTAs  and  retain  licenses 
 in  other  MTAs,  as  with  the  prepayment  option  under  the  Second  Report  and  Order.  Thus,  licensees  electing  the  amnesty  option  have  the  following  choice.  For  licenses  in  each  MTA  returned  under  the 
 amnesty  option,  the  licensee  may  choose  either  to:  (1)  receive  no  credit  for  its  down  payment(  s)  but  remain  eligible  to  bid  in  the  reauction  on  all  its  licenses  in  the  returned  MTA  (pure  amnesty),  or 
 (2)  obtain  credit  for  70  percent  of  its  down  payment  and  forgo  for  a  period  of  two  years  from  the  start  date  of  the  reauction  eligibility  to  reacquire  the  licenses  it  surrendered  pursuant  to  this  option 
 through  either  reauction  or  any  other  secondary  market  transaction  (amnesty/  prepayment).  82  For  purposes  of  this  two-  year  eligibility  restriction,  a  licensee  includes  qualifying  members  of  the 
 licensee's  control  group  and  their  affiliates.  83  The  70  percent  credit  must  be  applied  toward  prepayment  of  the  entire  principal  owed  for  a  retained  MTA  with  30  MHz  licenses  and/  or  toward 
 prepayment  of  the  entire  principal  owed  for  the  retained  15  MHz  licenses  of  an  MTA  that  has  been  disaggregated.  Providing  an  additional  choice  within  the  amnesty  option  substantially  increases  the 
 level  of  flexibility  available  to  licensees  and  enables  them  to  formulate  new  business  plans  that  may  be  more  attractive  to  lenders  and  investors.  It  also  reflects  a  suggestion  made  by  Alpine  that 
 licensees  not  participating  in  the  C  block  reauction  lose  a  substantially  smaller  portion  of  their  down  payment  than  that  lost  by  licensees  that  do  participate.  84 


 VII.  PREPAYMENT 
 A.  Background 


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


 82  As  mentioned  above,  if  a  licensee  opts  to  return  all  its  licenses,  we  will  refund  any  installment  payments 
 previously  submitted  for  those  licenses. 
 83  See  Section  X.  B.  2.  below  for  the  definition  of  "affiliate." 


 84  See  Alpine  Petition  at  9-  10  ("[  W]  ith  respect  to  the  amnesty  option,  the  Commission  should  revise  the 
 requirement  for  the  forfeiture  of  down  payments  so  that  licensees  have  some  incentive  to  accept  this  option.  For  those  entities  not  participating  in  the  re-  auction,  a  substantially  lesser  penalty,  keyed  at  most  to  the  estimated  cost  incurred  in 


 re-  auctioning  the  spectrum,  would  be  a  more  appropriate  means  of  insuring  the  integrity  of  the  Commission's  auction  processes  than  total  loss  of  the  down  payment.  As  to  those  entities  who  would  desire  to  bid  on  such  spectrum  in  the  re-auction, 
 a  penalty  of  at  most  30  percent  of  the  previously  made  down  payment  would  be  appropriate."). 
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 1.1.38  In  the  Second  Report  and  Order,  the  Commission  offered  C  block  licensees  the  option  to  prepay  the  outstanding  principal  debt  obligations  for  any  licenses,  on  an  MTA  basis,  that 
 they  elected  to  retain,  subject  to  the  restriction  described  below.  The  remaining  licenses  were  required  to  be  surrendered  to  the  Commission  for  reauction.  85  In  exchange,  the  Commission  would 
 forgive  the  debt  on  the  surrendered  licenses,  and  any  associated  payments  owed.  86  A  licensee  electing  this  option  would  make  its  prepayment  by  using  70  percent  of  the  total  of  all  down 
 payments  made  on  the  licenses  it  surrendered  to  the  Commission,  plus  100  percent  of  any  installment  payments  previously  paid  for  all  licenses  (collectively,  "Available  Down  Payments"),  87 
 plus  any  "new  money"  it  was  able  to  raise.  88  The  remaining  portion  of  the  down  payment  applicable  to  the  surrendered  licenses  would  not  be  refunded  or  credited  but  simply  would  be  retained  by  the 
 Commission.  89  Licensees  would  be  prohibited  from  bidding  on  their  returned  spectrum  in  the  reauction  or  from  reacquiring  it  in  the  secondary  market  for  two  years  from  the  start  of  the  reauction. 
 Licensees  could,  however,  bid  on  spectrum  or  licenses  surrendered  by  other  licensees,  provided  such  licensees  were  not  affiliates. 


 1.1.39  The  requirement  that  a  licensee  had  to  prepay  all  its  BTA  licenses  within  those  MTAs  that  it  selected  for  prepayment  prevented  "cherry-  picking"  because  licensees  could  not 
 prepay  only  the  most  desirable  BTA  licenses  within  a  given  MTA  and  then  surrender  the  rest.  90  The  one  exception  to  this  rule  was  that  any  licensee  lacking  sufficient  funds  to  prepay  every  BTA  license 
 within  a  chosen  MTA  would  be  permitted  to  prepay  only  those  BTA  licenses  within  that  MTA  that  it  could  afford.  91  The  licenses  for  the  remaining  BTAs  within  that  MTA  which  the  licensee  could 
 not  afford  to  prepay  would  be  surrendered  to  the  Commission. 
 B.  Discussion 
 1.1.40  By  providing  a  license  free  and  clear  of  debt  and  payment  conditions,  prepayment  makes  it  easier  for  licensees  to  raise  the  additional  capital  necessary  to  build  out  their  systems  and 


 85  Second  Report  and  Order,  12  FCC  Rcd  at  16,467-  70  paras.  64-  69. 
 86  Id.,  12  FCC  Rcd  at  16,467  para.  64. 
 87  We  clarify  that  the  term  "Available  Down  Payments,"  as  used  in  paragraph  64  of  the  Second  Report  and 
 Order,  was  intended  to  include  both  70  percent  of  the  down  payment  made  on  surrendered  licenses  and  any  installment  payments  previously  submitted  for  those  licenses.  Id. 


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


 89  Second  Report  and  Order,  12  FCC  Rcd  at  16,467  para.  64. 
 90  Id.,  12  FCC  Rcd  at  16,469  para.  67. 
 91  Id. 
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 deploy  new  services.  Thus,  consumers  benefit  by  receiving  service  sooner.  Prepayment  also  removes  the  Commission  from  the  role  of  lender,  which  sometimes  may  conflict  with  its 
 responsibilities  as  a  regulator.  92  In  addition,  prepayment  benefits  the  public  because  it  assures  taxpayers  of  full  payment  of  licenses.  Indeed,  we  have  implicitly  expressed  our  preference  for 
 prepayment  by  eliminating  installment  payments  as  a  means  of  financing  small  business  participation  for  the  immediate  future.  93 


 1.1.41  Under  our  modified  approach,  the  prepayment  option  remains  essentially  the  same  as  set  forth  in  the  Second  Report  and  Order.  For  any  30  MHz  licenses  that  are  returned  to  the 
 Commission,  the  licensee  may  continue  to  apply  70  percent  of  the  down  payment  made  on  those  licenses  toward  the  prepayment  of  the  entire  outstanding  principal  owed  in  retained  MTAs.  The 
 licensee  may  pool  any  down  payment  amounts  that  have  been  designated  for  prepayment,  plus  installment  payments  previously  paid  on  any  returned  licenses.  94  We  will  refer  to  this  pool  of  credit 
 as  a  licensee's  "Prepayment  Credit."  95  This  Prepayment  Credit  may  be  used  to  prepay  any  retained  MTAs  with  30  MHz  licenses.  As  will  be  discussed  in  more  detail  below,  it  also  may  be  used  to 
 prepay  the  retained  15  MHz  licenses  of  any  MTAs  that  have  been  disaggregated. 
 1.1.42  As  under  the  Second  Report  and  Order,  any  "new  money"  that  is  used  to  make  prepayment  must  be  submitted  on  or  before  the  election  date.  Unlike  under  the  Second  Report  and 
 Order,  96  affiliated  licensees  will  be  allowed  to  combine  their  Prepayment  Credits.  97  However,  any  affiliated  licensees  that  choose  to  pool  their  Prepayment  Credits  will  be  considered  one  licensee  for 
 purposes  of  making  elections.  Therefore,  the  elections  made  by  those  affiliates  must  be  made  in  concert  and  must  be  made  on  an  MTA-  by-  MTA  basis,  as  is  required  of  individual  licensees.  98 


 92  See  FCC  Report  to  Congress  on  Spectrum  Auctions,  WT  Docket  No.  97-  150,  Report,  FCC  97-  353  (released 
 October  9,  1997)  at  39-  40. 
 93  Part  1  Third  Report  and  Order  at  paras.  38-  40. 


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


 95  The  term  "Prepayment  Credit"  is  essentially  a  substitution  for  the  term  "Available  Down  Payments,"  updated 
 to  account  for  the  additional  flexibility  provided  under  our  modified  approach. 
 96  Second  Report  and  Order,  12  FCC  Rcd  16,467  n.  144  para.  64. 


 97  See  Section  X.  B.  2.  below  for  the  definition  of  "affiliate." 
 98  Therefore,  if  affiliated  licensees  decide  to  pool  their  credits,  then  all  BTA  licenses  held  by  any  of  those 
 affiliates  must  be  surrendered  for  credit  in  any  MTA  where  one  of  their  BTA  licenses  is  surrendered  for  credit.  Similarly,  those  affiliated  licensees  must  collectively  select  MTAs  for  prepayment,  and  all  BTA  licenses  held  by  any  of 


 those  affiliates  in  those  selected  MTAs  must  be  prepaid,  subject  to  the  affordability  exception.  Likewise,  if  those  affiliated  licensees  choose  to  disaggregate  an  MTA,  then  all  BTA  licenses  held  by  any  of  those  affiliates  in  that  MTA 
 must  be  disaggregated,  and  so  on. 
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 Credit  pooling  does  not  require  the  participation  of  all  of  a  licensee's  affiliates.  Any  affiliate  that  chooses  not  to  pool  its  credit  along  with  its  other  affiliates  will  be  considered  an  individual  licensee 
 for  purposes  of  making  elections.  We  believe  on  reconsideration  that  allowing  this  flexibility  is  consistent  with  the  fact  that,  for  purposes  of  the  reauction,  we  consider  a  licensee  and  its  affiliates  to 
 be  the  same  entity.  It  also  will  prevent  licensees  from  being  disadvantaged  if,  without  such  a  rule,  they  would  have  been  precluded  from  electing  prepayment  by  virtue  of  the  fact  that  they  transferred 
 BTA  licenses  to  affiliates. 
 1.1.43  In  response  to  a  request  from  DiGiPH,  we  make  one  important  clarification.  DiGiPH  argues  that,  because  affordability  is  a  concept  subject  to  differing  interpretations,  the  Commission 
 should  further  define  its  requirement  that  a  licensee  must  prepay  all  of  those  BTA  licenses  within  the  MTA  "that  it  can  afford."  99  We  clarify  that,  for  purposes  of  this  exception,  a  licensee  can  "afford"  to 
 prepay  all  of  its  BTA  licenses  within  that  MTA  if  it  can  prepay  all  BTA  licenses  using  only  its  Prepayment  Credit.  If  this  amount  is  not  enough  to  prepay  all  its  BTA  licenses  within  an  MTA,  the 
 licensee  must  prepay  as  many  BTA  licenses  in  the  MTA  as  this  amount  will  allow  and  must  surrender  for  reauction  the  remaining  BTA  licenses  that  it  cannot  afford  to  prepay.  100  Only  under 
 these  circumstances  may  a  licensee  choose,  within  the  given  MTA,  which  BTA  licenses  to  prepay  and  which  to  surrender.  Once  a  licensee  adds  any  "new  money"  at  all  to  make  prepayment,  the 
 affordability  exception  does  not  apply,  and  the  licensee  must  add  sufficient  "new  money"  that,  when  added  to  its  Prepayment  Credit,  is  adequate  to  prepay  all  its  BTA  licenses  within  its  chosen  MTAs. 
 A  licensee  claiming  the  affordability  exception  may  choose  only  one  MTA  in  which  it  will  apply,  and  it  must  prepay  all  its  BTA  licenses  within  all  other  MTAs  selected  for  prepayment.  The 
 Commission  will  not  refund  any  unspent  portion  of  the  Prepayment  Credit.  101  We  believe  retaining  any  unspent  portion  of  the  Prepayment  Credit  is  a  reasonable  price  for  relieving  the  requirement  that 


 99  DiGiPH  Petition  at  11-  12. 
 100  But  see  ClearComm  ex  parte  filing  at  1  (urging  the  Commission  to  allow  licensees  to  prepay  one  or  more  BTA 
 licenses  in  an  MTA  while  retaining,  and  resuming  payments  on,  the  remaining  BTA  licenses  in  the  MTA). 
 101  For  example,  assume  a  licensee  owns  30  licenses  held  in  3  MTAs  as  follows:  2  licenses  in  MTA  #1,  12 
 licenses  in  MTA  #2,  and  16  licenses  in  MTA  #3;  that  each  license  cost  $100,000;  that  the  licensee  made  a  down  payment  of  $10,000  on  each  license  leaving  $90,000  as  the  debt  on  each  license;  and  that  the  licensee  made  no 


 installment  payments.  If  the  licensee  chooses  to  prepay  the  licenses  in  MTA  #1,  its  Prepayment  Credit  will  be  $196,000  (28  x  $10,000  down  payment  for  each  license  not  being  prepaid  x  70  percent).  Utilizing  its  Prepayment 
 Credit  of  $196,000,  the  licensee  can  "afford"  to  prepay  all  of  its  licenses  in  MTA  #1.  The  unspent  portion  of  its  Prepayment  Credit  [$  196,000  less  (2  x  $90,000)  =  $16,000]  will  be  retained  by  the  Commission. 


 If  instead  the  licensee  decided  to  prepay  licenses  in  MTA  #3,  it  can  only  "afford"  to  prepay  2  of  those  16  licenses  calculated  as  follows:  2  x  $90,000  =  $180,000  needed  to  prepay;  Prepayment  Credit  is  calculated  as  follows: 
 28  x  $10,000  x  70  percent  =  $196,000.  The  licensee  may  elect  which  2  licenses  to  prepay  and  must  surrender  the  remaining  14  licenses.  The  Commission  will  retain  the  unspent  portion  of  the  Prepayment  Credit,  which  is  $16,000 
 [$  196,000  less  (2  x  $90,000)  =  $16,000].  If,  however,  the  licensee  elects  to  add  "new  money"  to  its  Prepayment  Credit,  it  must  add  enough  "new  money"  to  the  Prepayment  Credit  to  prepay  the  remaining  14  licenses  in  MTA  #3  (i.  e.,  14  x 
 $90,000  less  $16,000  =  $1,244,000  of  "new  money"  needed).  The  licensee  may  not  add  only  $74,000  of  "new  money"  and  prepay  a  third  license  while  surrendering  the  remaining  13  unprepaid  licenses. 
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 all  BTA  licenses  in  all  MTAs  be  prepaid.  The  affordability  exception  also  will  apply  to  disaggregated  MTAs  that  the  licensee  wishes  to  prepay. 
 1.1.44  This  clarification  provides  an  objective  means  for  licensees  to  implement  the  affordability  exception.  It  eliminates  any  doubt  or  confusion  regarding  the  scope  of  the  term 
 "afford,"  and  it  is  an  easy,  bright-  line  test  to  administer.  In  addition,  we  believe  the  restrictions  we  impose  on  the  affordability  exception  minimize  a  licensee's  ability  to  "cherry-  pick"  among  BTAs. 
 Therefore,  we  reject  Omnipoint's  request  that  the  Commission  eliminate  the  affordability  exception,  or  in  the  alternative,  grant  all  licensees  unlimited  flexibility  under  all  options  to  select  which  BTA 
 licenses  to  retain  and  which  to  surrender.  102 
 1.1.45  We  reject  arguments  claiming  that  the  prepayment  option  should  be  revised  or  eliminated  because  it  benefits  only  certain  licensees.  103  Each  of  the  payment  relief  options  presented 
 to  C  block  licensees  is  designed  to  strike  a  fair  balance  of  competing  interests,  with  benefits  and  obligations  appropriate  to  varying  circumstances.  Although  these  options  are  intended  to  provide 
 distinct  choices  for  licensees,  they  adhere  to  a  consistent  set  of  principles.  Moreover,  the  available  choices  complement  each  other  to  provide  a  range  of  alternatives  to  the  various  C  block  licensees 
 experiencing  financial  difficulties.  Because  it  is  an  important  component  in  this  package  of  options  and  because  we  continue  to  believe  it  is  sound  as  a  matter  of  policy,  we  decline  to  eliminate  the 
 prepayment  option.  A  menu  of  options  is  provided  because  no  single  solution  would  be  appropriate  for  every  situation;  therefore,  eliminating  any  one  option  would  prejudice  those  licensees  for  which 
 it  may  be  best  suited. 
 1.1.46  We  note  that  we  received  numerous  requests  to  allow  licensees  to  use  their  entire  down  payment  under  the  prepayment  option.  104  We  will  maintain  our  rule  that  licensees  electing  the 
 prepayment  option  will  receive  no  refund  or  credit  for  30  percent  of  the  down  payment  made  on  30 
 102  Omnipoint  Opposition  at  9;  Omnipoint  Reply  at  2. 


 103  See  McBride  Petition  at  2-  3  (the  prepayment  option  favors  large  bidders  that  have  multiple  licenses  from 
 which  to  choose,  whereas  small  bidders  seeking  to  keep  licenses  with  payment  relief  are  forced  to  disaggregate);  Central  Oregon  Petition  at  6  (single  licensees  get  no  benefit  from  the  buy-  out  option);  Omnipoint  Reply  at  2  (the 


 prepayment  option  should  be  eliminated  because  "it  amounts  to  nothing  other  than  an  opportunity  for  a  handful  of  the  largest  bidders  to  'cherry-  pick'  licenses"). 


 104  See  Airtel  Petition  at  1;  Alpine  Petition  at  10;  Cellexis  Petition  at  6;  Cellnet  Petition  at  2;  Christensen  Petition 
 at  1;  CVI  Wireless  Petition  at  1;  Federal  Network  Petition  at  1;  Fox  Communications  Petition  at  1;  Koll  Petition  at  1;  Leifer,  Marter  Petition  at  1;  Meretel  Petition  at  3;  MFRI  Petition  at  4;  New  Wave  Petition  at  1;  NextWave  Petition  at 


 10-  15;  OnQue  Petition  at  2;  One  Stop  Wireless  Petition  at  2;  Prime  Matrix  Petition  at  1;  RFW  Petition  at  5;  UCNI  Petition  at  2;  Urban  Communicators  Petition  at  10;  URS  Greiner  Petition  at  1;  Wireless  Nation  Petition  at  2;  Duluth 
 PCS,  et  al.  Opposition  at  5-  8;  Polycell  Opposition  at  5-  8;  Third  Kentucky  Opposition  at  2;  CX  Systems  ex  parte  filing  at  1;  Cyber  Sites  ex  parte  filing  at  1;  Dorne  &  Margolin  ex  parte  filing  at  1.  See  also  Hyundai  Petition  at  4-  7; 
 Christensen  ex  parte  filing  at  1;  Florida  Power  ex  parte  filing  at  1;  Kabbara  ex  parte  filing  at  1;  LaBarge  Clayco  ex  parte  filing  at  1;  Leifer,  Marter  ex  parte  filing  at  1;  MJA  ex  parte  filing  at  1;  OPM  ex  parte  filing  at  1;  Specialty 
 Teleconstructors  ex  parte  filing  at  1;  Structure  Consulting  ex  parte  filing  at  1;  Xway  ex  parte  filing  at  1;  MRFI  Reply  at  1;  Wireless  Ventures  Reply  at  3. 
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 MHz  licenses  they  surrender  to  the  Commission.  We  believe  that  retention  of  this  portion  of  the  down  payment  is  necessary  to  preserve  the  integrity  of  the  auction  process.  105  Furthermore,  to  return 
 the  entire  down  payment  would  undermine  the  purpose  of  the  down  payment  --  to  help  ensure  performance  on  a  licensee's  debt  obligation.  106  We  disagree  with  parties  that  characterize  retention 
 of  a  portion  of  the  down  payment  as  punitive,  107  a  penalty,  108  or  a  forfeiture.  109  We  view  30  percent  of  the  down  payment  as  the  fair  and  reasonable  price  for  receiving  the  benefits  of  this  option.  110  We 
 also  note  that  AirGate  correctly  characterizes  the  prepayment  option  as  a  method  of  providing  licensees  with  more  flexibility  in  using  their  down  payments  than  is  permitted  under  current  rules.  111 


 1.1.47  We  disagree  with  NextWave,  Cellexis,  and  other  parties  that  the  Commission  should  account  for  the  net  present  value  of  forgoing  installment  payments,  112  or  otherwise  discount  the 
 105  See  Communications  Act    309(  j),  47  U.  S.  C.    309(  j). 
 106  See  Communications  Act    309(  j)(  4)(  B),  47  U.  S.  C.    309(  j)(  4)(  B);  In  the  Matter  of  BDPCS,  Inc.,  Order,  12 
 FCC  Rcd  6606  (WTB  1997),  application  for  review  pending. 
 107  See,  e.  g.,  Alpine  Petition  at  8;  RFW  Petition  at  5;  MFRI  Petition  at  4. 


 108  See,  e.  g.,  NextWave  Petition  at  10-  15;  Duluth  PCS,  et  al.  Opposition  at  5-  6;  Polycell  Opposition  at  5-  6. 
 109  See,  e.  g.,  AmeriCall  Opposition  at  5-  7;  Hyundai  Reply  at  4-  6. 
 110  Several  parties  asking  the  Commission  to  reject  petitioners'  request  to  use  the  entire  down  payment  under  the 
 prepayment  option  reiterate  the  Commission's  discussion  on  this  matter  in  the  Second  Report  and  Order.  See  Sprint  Opposition  at  4-  5  (arguing  that  giving  full  credit  would  be  unfair  to  unsuccessful  bidders  and  to  licensees  that  resume 


 payments  under  their  existing  obligations);  Antigone/  Devco  Opposition  at  3-  5  (asking  the  Commission  to  retain  30  percent  of  the  down  payment  to  preserve  the  integrity  of  the  auction  process).  Although  Omnipoint  recognizes  that 
 retaining  the  30  percent  down  payment  on  surrendered  licenses  is  not  punitive,  we  disagree  with  its  reasoning  that  it  accounts  for  reauction  costs  to  the  government.  See  Omnipoint  Opposition  at  3-  5. 


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


 installment  debt  early. 
 112  See  NextWave  Reply  at  8-  9  (net  present  value  accurately  presents  the  size  of  PCS  debt  in  light  of  the 
 licensee's  higher  cost  of  capital  compared  to  the  government  rate  of  interest);  Cellexis  Reply  at  6  (by  charging  nominal  value  rather  than  net  present  value,  the  Commission  is  raising  the  effective  price  of  the  license).  See  also  Airtel  Petition 


 at  1;  Alpine  Petition  at  10;  Cellexis  Petition  at  6-  7;  Cellnet  Petition  at  2;  Central  Oregon  Petition  at  4-  6;  Christensen  Petition  at  1;  CVI  Wireless  Petition  at  1;  Federal  Network  Petition  at  1;  Fox  Communications  Petition  at  1;  Koll 
 Petition  at  1;  Leifer,  Marter  Petition  at  1;  MFRI  Petition  at  4-  5;  New  Wave  Petition  at  1;  NextWave  Petition  at  5-  10;  Northern  Michigan  Petition  at  7;  OnQue  Petition  at  2;  One  Stop  Wireless  Petition  at  2;  Prime  Matrix  Petition  at  1;  RFW 
 Petition  at  6;  URS  Greiner  Petition  at  1;  UCNI  Petition  at  2;  Urban  Communicators  Petition  at  10;  Wireless  Nation  Petition  at  2;  Meretel  Petition  at  2;  Polycell  Opposition  at  9;  Duluth  PCS,  et  al.  Opposition  at  9;  Third  Kentucky 
 Opposition  at  2;  Christensen  ex  parte  filing  at  1;  CX  Systems  ex  parte  filing  at  1;  Cyber  Sites  ex  parte  filing  at  1;  Dorne  &  Margolin  ex  parte  filing  at  1;  Florida  Power  ex  parte  filing  at  1;  LaBarge  Clayco  ex  parte  filing  at  1;  Leifer,  Marter 
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 principal  amount  due  under  the  installment  payment  plan.  113  As  Sprint  points  out,  the  Commission  has  considered  this  argument  extensively  and  properly  rejected  it.  114  In  the  Second  Report  and 
 Order,  the  Commission  stated  that  a  licensee  should  be  required  to  pay  the  face  value  of  its  auction  bid.  115  Accounting  for  the  net  present  value  of  forgoing  installment  payments  would  rewrite  the 
 auction  results  because  it  would  have  the  effect  of  changing  the  amounts  bid  for  licenses.  116  Therefore,  to  do  so  would  be  unfair  to  those  bidders  that  withdrew  from  the  auction  under  the 
 assumption  that  the  winning  bid  amounts  represented  the  prices  that  would  be  paid  for  the  licenses.  117  Because  we  continue  to  support  the  policy  that  auction  bids  should  be  paid  at  their  face 
 value,  we  will  not  discount  the  principal  due.  118  Although  the  Commission  provides  favorable  terms  for  financing  the  bid  price,  the  cost  of  an  installment  payment  plan  is  the  interest  that  accrues  over 
 time.  The  benefit  to  a  licensee  for  early  pay-  off  of  its  financial  obligations  is  the  savings  in  the  amount  of  interest  that  otherwise  would  be  owed.  119  We  believe  this  trade-  off  provides  a  further 
 reason  for  not  discounting  the  principal. 
 1.1.48  We  decline  to  provide  further  flexibility  under  the  prepayment  option.  Cellexis  requests  that  the  Commission  grant  the  five-  year  build-  out  exception  provided  under  the  amnesty 


 ex  parte  filing  at  1;  MJA  ex  parte  filing  at  1;  OPM  ex  parte  filing  at  1;  Specialty  Teleconstructors  ex  parte  filing  at  1;  Structure  Consulting  ex  parte  filing  at  1;  Xway  ex  parte  filing  at  1;  Wireless  Ventures  Reply  at  3. 
 113  Compare  Alpine  Petition  at  10  (a  59  percent  discount  from  the  face  amount  of  the  note  would  account  for  the 
 present  value  of  the  Commission's  financing)  with  NextWave  Petition  at  5-  10  (arguing  for  a  discount  rate  of  at  least  15  percent)  and  Third  Kentucky  Opposition  at  2  (same  as  NextWave).  See  also  Meretel  Petition  at  2  (prepayment  is  not  a 


 viable  option  unless  the  prepaid  amount  is  equal  to  or  below  that  of  the  price  paid  for  A  and  B  block  licenses). 
 114  Sprint  Opposition  at  4. 


 115  Second  Report  and  Order,  12  FCC  Rcd  at  16,468  para.  66.  See  also  id.,  Separate  Statement  of  Susan  Ness,  12 
 FCC  Rcd  at  16,511  ("  In  my  view,  the  price  bid  is  the  price  bid.  Bidders  were  not  offered  a  cash  versus  credit  price."). 
 116  See  AirGate  Opposition  at  7-  9  (a  reduction  in  bid  amounts  would  translate  into  a  rewrite  of  the  auction 
 results). 
 117  See  Omnipoint  Opposition  at  6-  7  (a  net  present  value  discount  would  be  fundamentally  unfair  to  other  bidders 
 in  the  auction  that  properly  relied  on  the  Commission's  rule  that  high  bidders  must  pay  the  entire  nominal  amount  of  their  bids  or  their  licenses  automatically  cancel). 


 118  Moreover,  if  we  were  to  discount  the  debt  at  a  licensee's  cost  of  capital  it  would  be  impossible  to  determine 
 accurately  a  cost  of  capital  for  all  licensees.  The  cost  of  capital  varies  for  each  licensee  because  it  is  based  on  a  licensee's  individual  cost  of  debt  and  equity  and  on  the  ratio  of  debt  to  equity.  Therefore,  no  single  discount  rate  would 


 be  appropriate  for  every  licensee.  See  Omnipoint  Opposition  at  6-  8  (a  net  present  value  discount  "would  be  impossible  to  implement  in  a  manner  that  is  fair  and  avoids  unjust  enrichment,  because  all  parties  --  including  each  Block  C 
 licensee  and  the  U.  S.  Government  --  have  separate  costs  of  capital"). 
 119  See  ALLTEL  Opposition  at  2-  4;  Northcoast  Opposition  at  5;  Antigone/  Devco  Opposition  at  2;  Fidelity  Capital 
 Opposition  at  3-  4. 
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 option  to  licensees  choosing  the  prepayment  option.  120  A  build-  out  exception  is  not  needed  because,  under  our  modified  approach,  licensees  are  permitted  to  retain  any  MTAs  they  wish,  whether  built-out 
 or  not.  Regardless,  even  under  the  approach  adopted  in  the  Second  Report  and  Order,  a  build-out  exception  was  unnecessary  because  licensees  had  the  discretion  to  choose  which  MTAs  to 
 prepay  and  which  to  surrender,  as  opposed  to  the  "all-  or-  nothing"  approach  under  the  original  amnesty  option.  121  In  addition,  we  decline  MFRI's  request  to  allow  a  licensee  that  holds  both  C  and 
 F  block  licenses  to  use  its  C  block  down  payment  to  purchase  for  cash  its  F  block  licenses.  122  We  do  not  believe  such  flexibility  is  warranted  because  the  reduction  of  debt  associated  with  prepayment 
 will  help  those  licensees  address  their  capital  needs  in  servicing  their  F  block  debt.  Finally,  Urban  Communicators  argues  that  the  requirement  that  prepaying  licensees  must  purchase  all  BTA  licenses 
 held  within  an  MTA  is  unfair  to  licensees  that  have  licenses  in  only  one  MTA.  123  We  disagree.  This  restriction  is  essential  to  prevent  "cherry-  picking,"  and  a  licensee  that  cannot  avail  itself  of  this 
 option  can  either  choose  another  option  or  limit  its  purchases  under  the  affordability  exception,  if  applicable. 


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


 120  Cellexis  Petition  at  6. 
 121  See  Second  Report  and  Order,  12  FCC  Rcd  at  16,469  para.  68. 
 122  MFRI  Petition  at  5. 
 123  Urban  Communicators  Petition  at  10.  But  see  AirGate  Opposition  at  14-  15  (licensees  should  not  be  permitted 
 to  return  licenses  on  a  BTA-  by-  BTA  basis). 
 124  Second  Report  and  Order,  12  FCC  Rcd  at  16,455  para.  38. 


 125  Id. 
 126  Id.,  12  FCC  Rcd  at  16,456  para.  39. 
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 1.1.50  In  exchange,  the  Commission  would  reduce  by  50  percent  the  amount  of  debt  that  was  owed  on  a  30  MHz  license  before  it  was  disaggregated.  127  Fifty  percent  of  the  down  payment 
 made  on  the  30  MHz  license  would  be  considered  the  down  payment  for  the  retained  15  MHz  of  spectrum,  but  the  Commission  would  not  provide  a  refund  or  credit  for  the  remaining  50  percent  of 
 the  down  payment.  128  Licensees  were  required  to  repay  over  eight  equal  payments  (beginning  with  the  payment  due  on  March  31,  1998)  all  Suspension  Interest,  adjusted  to  reflect  the  reduction  in  debt 
 obligation.  129  Any  installment  payments  that  were  paid  prior  to  the  suspension  would  be  credited  in  full  against  those  amounts.  130  Licensees  were  prohibited  from  bidding  on  their  returned  spectrum  in 
 the  reauction  or  from  reacquiring  it  in  the  secondary  market  for  two  years  from  the  start  of  the  reauction.  131  Licensees  could,  however,  bid  on  spectrum  or  licenses  surrendered  by  other  licensees, 
 provided  such  licensees  were  not  affiliates.  132 


 127  Id.,  12  FCC  Rcd  at  16,456  para.  40. 
 128  Id. 
 129  Id. 
 130  Id. 
 131  Id.,  12  FCC  Rcd  at  16,457  para.  42. 
 132  Id. 
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 B.  Discussion 
 1.1.51  As  provided  under  the  Second  Report  and  Order,  when  a  licensee  disaggregates  an  MTA,  it  will  receive  full  credit  for  the  portion  of  the  down  payment  applicable  to  the  spectrum 
 retained  from  a  license  (i.  e.,  50  percent  of  the  down  payment  made  on  the  original  30  MHz  license).  However,  on  reconsideration,  we  modify  our  decision  that  licensees  electing  the  disaggregation 
 option  receive  no  refund  or  credit  for  the  portion  of  the  down  payment  applicable  to  the  returned  spectrum.  For  each  disaggregated  license  for  which  the  licensee  elects  to  resume  installment 
 payments,  rather  than  prepay,  we  will  provide  a  credit  of  40  percent  of  the  down  payment  applicable  to  the  15  MHz  of  spectrum  that  is  returned  to  the  Commission.  The  40  percent  credit  may  only  be 
 used  to  reduce  the  amount  owed  on  the  15  MHz  of  spectrum  retained  from  the  same  BTA  license  that  generated  the  credit.  The  credit,  at  the  licensee's  option,  may  be  applied  either  to  Suspension 
 Interest  and/  or  to  reduce  the  principal  outstanding.  133  Any  installment  payments  previously  submitted  for  a  disaggregated  license  for  which  the  licensee  elects  to  resume  installment  payments 
 will  be  credited  as  described  in  the  Second  Report  and  Order  (i.  e.,  toward  Suspension  Interest).  134 
 1.1.52  We  derived  the  40  percent  credit  because  when  it  is  combined  with  the  100  percent  credit  associated  with  the  retained  spectrum,  the  licensee  will  receive  a  credit  of  70  percent  of  the 
 total  down  payment  for  the  original  30  MHz  license.  We  have  decided  to  allow  this  additional  credit  because  we  are  persuaded  by  the  argument  of  several  parties  that  the  credit  permitted  under  the 
 disaggregation  option  should  be  consistent  with  the  70  percent  credit  permitted  under  the  prepayment  option.  135  We  believe  the  disparity  that  existed  under  the  Second  Report  and  Order  was 
 unfair  to  licensees  that  were  precluded  from  electing  prepayment.  Furthermore,  allowing  this  additional  credit  will  advance  the  purposes  of  the  disaggregation  option.  Disaggregation  benefits 
 both  licensees  and  consumers  because  it  provides  a  means  for  licensees  to  remain  in  a  market  area  at  a  significantly  reduced  cost.  By  having  their  outstanding  debt  decreased  by  50  percent,  licensees 
 improve  their  ability  to  finance  their  retained  spectrum  and  build  out  their  networks.  In  addition,  disaggregation  is  pro-  competitive  because  it  provides  a  means  for  other  competitors  to  enter  a 
 market  area.  It  also  gives  unsuccessful  bidders  an  opportunity  to  rebid  on  spectrum  in  market  areas 
 133  See  The  Honorable  Albert  R.  Wynn  ex  parte  filing  at  1-  2  (licensees  electing  disaggregation  should  be  allowed 
 "to  apply  their  excess  down  payments  and  interest  payments  they  have  made  to  their  upcoming  installment  payments,  thereby  providing  them,  in  exchange  for  actual  money  already  paid  to  the  U.  S.  Government,  a  brief  extension  of  time  to 


 complete  their  financing"). 
 134  Second  Report  and  Order,  12  FCC  Rcd  at  16,456  para.  40. 


 135  Omnipoint  Petition  at  8-  9;  McBride  Petition  at  1-  2;  AmeriCall  Opposition  at  6.  See  also  ClearComm  Petition 
 at  18-  21  (if  the  Commission  refuses  to  allow  licensees  full  use  of  their  down  payments,  then  licensees  electing  disaggregation  should  at  least  not  be  subject  to  a  greater  penalty  than  those  electing  prepayment).  But  see  AirGate 


 Opposition  at  12  (the  Commission's  decision  to  retain  50  percent  of  the  down  payment  is  reasonable). 
 As  discussed  above,  a  licensee  that  selects  the  amnesty  option  and  chooses  to  bid  on  its  returned  licenses  in  the  reauction  will  not  receive  credit  for  any  of  its  down  payment  made  on  its  returned  licenses.  We  believe  a  licensee's 
 opportunity  to  bid  on  its  returned  licenses  is  equitable  compensation  for  not  receiving  any  down  payment  credit. 
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 in  which  they  were  initially  outbid.  We  believe  the  additional  40  percent  credit  will  promote  these  benefits  of  disaggregation  and  will  help  licensees  that  have  expressed  an  interest  in  disaggregation  to 
 take  advantage  of  this  option  and  continue  their  plans  to  provide  service  in  their  license  areas. 
 1.1.53  We  believe  a  40  percent  credit  is  warranted  when  a  licensee  resumes  installment  payments  on  a  disaggregated  MTA  because  the  licensee  remains  in  the  MTA  and  continues  building 
 out  its  network  in  order  to  serve  those  consumers.  We  will  not  provide  such  a  40  percent  credit  to  licensees  that  resume  installment  payments  on  a  license  in  a  different  MTA.  In  contrast  to  a  licensee 
 that  uses  the  40  percent  credit  to  resume  installments  on  the  retained  portion  of  the  disaggregated  license,  a  licensee  that  seeks  to  apply  a  40  percent  credit  from  down  payments  made  on  licenses 
 returned  under  an  amnesty  election  would  have,  under  those  circumstances,  abandoned  service  to  the  entire  licensed  area  affected  by  that  election.  We  believe  that  licensees  that  surrender  licenses 
 should  not  receive  a  credit  for  abandoning  those  markets  unless  they  use  the  credit  to  prepay  retained  licenses. 


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


 1.1.55  If  a  licensee  elects  both  disaggregation  and  prepayment  for  an  MTA,  the  licensee  must  prepay  the  principal  owed  on  the  15  MHz  of  spectrum  retained  from  each  BTA  license  in  the 
 MTA.  However,  if  a  licensee's  Prepayment  Credit  is  insufficient  to  make  full  prepayment  on  the  entire  MTA,  then  the  affordability  exception  will  apply.  Thus,  the  licensee  will  be  required  to 
 prepay  only  what  it  can  afford  and  it  must  return  the  rest  of  the  spectrum  to  the  Commission  for 


 136  The  portion  of  the  down  payment  applicable  to  the  returned  spectrum  is  the  equivalent  of  50  percent  of  the 
 down  payment  made  on  the  original  30  MHz  license. 
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 reauction.  As  with  prepayment  of  full  30  MHz  licenses,  the  exception  will  not  apply  if  any  "new  money"  is  added  to  make  prepayment,  and  the  exception  may  be  applied  to  only  one  MTA. 
 1.1.56  We  received  numerous  requests  to  allow  licensees  to  receive  credit  for  their  entire  down  payment  under  the  disaggregation  option.  137  We  consider  it  inadvisable  to  provide  full  credit 
 because  we  believe  that  to  do  so  would  undermine  the  integrity  of  the  auction  process.  138  As  the  Commission  concluded  in  the  Second  Report  and  Order,  allowing  licensees  to  use  their  entire  down 
 payment  would  be  unfair  to  those  C  block  licensees  electing  to  continue  under  the  existing  installment  payment  plan  and  to  bidders  that  were  unsuccessful  in  the  auction.  139  We  note  that  we 
 already  provide  a  substantial  credit,  and  we  believe  that  providing  any  further  credit  would  not  be  sound  public  policy.  As  Fidelity  Capital  observes,  if  a  licensee  "believes  the  Commission  is  not 
 providing  an  attractive  disaggregation  policy,  then  it  is  free  to  disaggregate  its  spectrum  privately  to  another  qualifying  entity."  140 


 1.1.57  Because  numerous  benefits  are  conferred  under  the  disaggregation  option,  we  disagree  with  NextWave,  ClearComm,  and  other  parties  that  not  providing  a  refund  or  credit  for  all 
 of  the  down  payment  constitutes  a  penalty  or  forfeiture.  141  Under  disaggregation,  the  Commission  forgives  up  to  half  of  a  licensee's  outstanding  debt,  an  action  that  will  facilitate  investment  and 
 growth  by  making  more  funds  available  to  licensees  for  build-  out.  In  addition,  the  Commission 
 137  See  Airtel  Petition  at  1;  Alpine  Petition  at  9;  Cellexis  Petition  at  6;  Cellnet  Petition  at  2;  Christensen  Petition  at 
 1;  ClearComm  Petition  at  6-  18;  CVI  Wireless  Petition  at  1;  Federal  Network  Petition  at  1;  Fox  Communications  Petition  at  1;  Koll  Petition  at  1;  Leifer,  Marter  Petition  at  1;  Meretel  Petition  at  3;  MFRI  Petition  at  4;  NextWave 


 Petition  at  10-  15;  New  Wave  Petition  at  1;  One  Stop  Wireless  Petition  at  2;  Prime  Matrix  Petition  at  1;  RFW  Petition  at  5;  UCNI  Petition  at  2;  URS  Greiner  Petition  at  1;  Wireless  Nation  Petition  at  2;  ClearComm  Opposition  at  2-  4;  Duluth 
 PCS,  et  al.  Opposition  at  5-  8;  Polycell  Opposition  at  5-  8;  Third  Kentucky  Opposition  at  2;  ClearComm  Reply  at  3-  6;  Hyundai  Reply  at  4-  7;  Wireless  Ventures  Reply  at  3;  CX  Systems  ex  parte  filing  at  1;  Dorne  &  Margolin  ex  parte  filing 
 at  1.  See  also  Hyundai  Petition  at  4-  7;  Christensen  ex  parte  filing  at  1;  Cyber  Sites  ex  parte  filing  at  1;  Florida  Power  ex  parte  filing  at  1;  Kabbara  ex  parte  filing  at  1;  LaBarge  Clayco  ex  parte  filing  at  1;  Leifer,  Marter  ex  parte  filing  at  1; 
 MJA  ex  parte  filing  at  1;  OPM  ex  parte  filing  at  1;  Specialty  Teleconstructors  ex  parte  filing  at  1;  Structure  Consulting  ex  parte  filing  at  1;  Xway  ex  parte  filing  at  1. 


 138  See  Communications  Act    309(  j),  47  U.  S.  C.    309(  j). 
 139  Second  Report  and  Order,  12  FCC  Rcd  at  16,468  para.  65;  see  also  Sprint  Opposition  at  4-  5. 
 140  Fidelity  Capital  Opposition  at  4-  5  (the  present  terms  of  the  disaggregation  option  are  fair).  But  see 
 ClearComm  Reply  at  7  (Fidelity  Capital's  argument  favoring  private  disaggregation  overlooks  the  fact  that  the  Commission  can  more  efficiently  redistribute  the  disaggregated  spectrum). 


 141  NextWave  Petition  at  10-  15  (no  rational  basis  exists  for  the  penalty  because  no  rule  has  been  violated  and  no 
 default  or  bid  withdrawal  has  occurred);  ClearComm  Petition  at  6-  18  (there  is  no  equitable  or  legal  justification  for  the  penalty  because  disaggregating  licensees  willingly  surrender  a  pro  rata  portion  of  spectrum);  ClearComm  Reply  at  2-  6 


 (by  imposing  a  penalty  on  disaggregating  licensees,  the  Commission's  action  is  inconsistent  with  that  of  a  reasonable  commercial  lender).  See,  e.  g.,  Cellexis  Petition  at  6;  Hyundai  Petition  at  4-  7;  Meretel  Petition  at  3;  MFRI  Petition  at  4; 
 New  Wave  Petition  at  2;  ClearComm  Opposition  at  2-  4;  Duluth  PCS,  et  al.  Opposition  at  5-  8;  Polycell  Opposition  at  5-  8;  Hyundai  Reply  at  4-  7. 
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 provides  low-  cost,  long-  term  financing  for  the  retained  spectrum.  Furthermore,  the  Commission  renders  a  valuable  service  by  providing  an  efficient  and  cost-  effective  mechanism  for  transferring 
 spectrum  that  licensees  otherwise  might  have  been  forced  to  resell  in  the  secondary  market  at  great  risk.  In  exchange,  the  Commission  receives  the  disaggregated  spectrum  and  retains  a  portion  of  the 
 down  payment  applicable  to  that  spectrum.  Therefore,  retention  of  part  of  the  down  payment  is  not  a  penalty;  rather,  it  is  the  fair  and  reasonable  price  for  receiving  the  benefits  of  disaggregation. 


 1.1.58  We  are  not  persuaded  that  we  should  add  even  greater  flexibility  to  the  disaggregation  option.  We  decline  to  adopt  MFRI's  suggestion  that  we  allow  C  block  licensees  to 
 retain  the  15  MHz  of  spectrum  adjacent  to  the  F  block  if  they  also  hold  the  F  block  license  for  the  same  BTA.  142  Allowing  certain  C  block  licensees  to  disaggregate  a  different  portion  of  spectrum 
 would  create  a  patchwork  pattern  of  spectrum  blocks  in  the  reauction  and  would  limit  the  opportunity  for  F  block  licensees  to  aggregate  larger  spectrum  blocks  by  bidding  on  contiguous 
 spectrum  in  the  reauction.  To  promote  consistency  and  simplicity  in  the  reauction,  we  also  reject  McBride's  request  that  we  allow  licensees  the  choice  to  disaggregate  10,  15,  or  20  MHz  of 
 spectrum.  143  Allowing  licensees  to  disaggregate  different  pieces  of  spectrum  would  create  inefficiency  in  the  market  and  would  limit  the  potential  for  aggregation,  thereby  decreasing  the  value 
 of  spectrum  in  the  reauction  and  delaying  service  to  the  public.  Finally,  we  disagree  with  Alpine  and  Urban  Communicators  that  disaggregation  should  be  permitted  on  a  BTA-  by-  BTA  basis,  rather  than 
 on  an  MTA-  by-  MTA  basis.  144  As  AirGate  notes,  disaggregation  on  an  MTA-  by-  MTA  basis  will  promote  participation  in  the  reauction  because  licensees  are  prohibited  from  selectively  retaining  30 
 MHz  of  spectrum  in  only  the  most  desirable  BTAs.  145 
 1.1.59  NextWave  and  Cellexis  argue  that  the  build-  out  exception  permitted  under  the  amnesty  option  should  be  extended  to  licensees  selecting  the  disaggregation  option.  146  Under  our 


 142  MFRI  Petition  at  6. 
 143  McBride  Petition  at  5.  In  addition,  McBride  claims  that,  by  allowing  the  entry  of  more  competitors  through 
 disaggregation,  the  Commission  has  frustrated  expectations  that  a  maximum  of  six  PCS  licenses  would  exist  in  each  market  (one  each  for  blocks  A  through  F).  Id.  at  2.  McBride's  argument  is  misplaced  because  Section  24.714  of  the 


 Commission's  rules  permit  broadband  PCS  licensees  in  blocks  A  through  F  to  disaggregate  any  amount  of  spectrum  through  the  marketplace  to  qualified  entities.  47  C.  F.  R.    24.714.  Moreover,  it  has  always  been  the  Commission's  goal 
 to  encourage  the  widest  participation  in  the  wireless  market,  in  accordance  with  Congress'  mandate.  See  Communications  Act    309(  j)(  3)(  B),  47  U.  S.  C.    309(  j)(  3)(  B). 


 144  Alpine  Petition  at  9;  Urban  Communicators  Petition  at  9.  Alpine  offers  no  rationale  for  a  BTA-  by-  BTA 
 requirement,  and  Urban  Communicators  makes  an  unpersuasive  claim  that  an  MTA-  by-  MTA  requirement  provides  little  relief  for  licensees  that  hold  licenses  in  only  one  MTA.  A  licensee  disaggregating  spectrum  in  its  only  MTA 


 would  receive  all  the  benefits  of  disaggregation,  including  the  forgiveness  of  half  its  outstanding  debt. 
 145  AirGate  Opposition  at  14-  15;  see  also  Second  Report  and  Order,  12  FCC  Rcd  at  16,455  para.  38. 


 146  NextWave  Petition  at  15-  16;  Cellexis  Petition  at  6.  In  addition,  a  number  of  parties  argue  generally  that 
 licensees  should  be  allowed  to  retain  licenses  in  which  they  have  made  significant  build-  out.  See  Airtel  Petition  at  1;  Christensen  Petition  at  1;  CVI  Wireless  Petition  at  1;  Koll  Petition  at  1;  Leifer,  Marter  Petition  at  1;  URS  Greiner 


 Petition  at  1;  Dorne  &  Margolin  ex  parte  filing  at  1. 
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 modified  approach,  a  build-  out  exception  is  unnecessary  because  licensees  have  the  flexibility  to  determine  which  MTAs  to  retain  and  which  to  surrender.  Nonetheless,  as  stated  in  the  Second 
 Report  and  Order,  a  build-  out  exception  was  never  needed  under  the  disaggregation  option  because,  unlike  the  original  amnesty  option,  the  disaggregation  option  was  never  an  "all-  or-  nothing" 
 proposition.  147  Under  the  original  amnesty  option,  a  licensee  was  required  to  surrender  all  licenses  except  for  those  in  MTAs  in  which  it  satisfied  the  build-  out  requirement.  By  comparison, 
 disaggregation  was  permitted  on  an  MTA-  by-  MTA  basis,  and  so  licensees  were  never  compelled  to  disaggregate  spectrum  in  all  their  MTAs. 


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


 IX.  ELECTION  PROCEDURES 
 A.  Background 
 1.1.61  In  the  Second  Report  and  Order,  the  Commission  established  January  15,  1998,  as  the  deadline  for  C  block  licensees  to  elect  to  continue  under  the  existing  installment  payment  plan  or 
 to  elect  one  of  the  three  alternative  options.  149  The  Commission  also  required,  inter  alia,  C  block  licensees  whose  elections  would  necessitate  ongoing  payments  to  execute  any  necessary  financing 
 documents  pursuant  to  appropriate  requirements  and  time  frames  established  by  the  Bureau.  The  Commission  specified  procedures  to  be  followed  by  licensees  electing  to  continue  under  their 
 existing  notes  or  electing  disaggregation,  amnesty,  or  prepayment. 
 1.1.62  On  January  7,  1998,  we  changed  the  election  date  to  February  26,  1998,  in  order  to  allow  licensees  to  submit  their  elections  after  final  disposition  of  arguments  raised  on 
 reconsideration.  150  On  February  24,  1998,  we  issued  an  order  changing  the  election  date  to  60  days  after  publication  of  this  Order  on  Reconsideration  in  the  Federal  Register.  151 


 B.  Discussion 
 147  Second  Report  and  Order,  12  FCC  Rcd  at  16,455  para.  38. 
 148  Id.,  12  FCC  Rcd  at  16,470  para.  73. 
 149  Id.,  12  FCC  Rcd  at  16,470  para.  70. 
 150  Election  Date  Order  I  at  para.  2. 
 151  Election  Date  Order  II. 
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 1.1.63  Moving  the  election  date  was  an  appropriate  action  given  the  large  number  of  petitions  for  reconsideration  filed  in  this  proceeding.  The  revised  deadline  has  provided  sufficient 
 time  for  us  to  respond  to  arguments  raised  on  reconsideration  so  that  licensees  can  be  assured  of  regulatory  certainty  before  making  their  elections.  The  postponement  satisfies  the  requests  of 
 several  parties  that  the  date  be  delayed.  152  We  deny,  however,  other  requests  for  a  still  longer  postponement.  153  Licensees  already  have  had  several  months  in  which  to  consider  the  options  under 
 the  Second  Report  and  Order,  and  we  believe  that  60  days  after  publication  in  the  Federal  Register  will  provide  sufficient  time  for  any  reevaluation  that  may  be  necessary  in  light  of  the  modifications 
 we  make  in  this  Order.  154 
 1.1.64  We  disagree  with  Omnipoint  that  NextWave  should  be  required  to  make  its  election  in  advance  of  other  C  block  licensees.  155  Omnipoint  claims  that  NextWave  is  so  dominant  in  the 
 market  that  its  election  decision  will  have  a  dramatic  impact  on  the  relative  value  of  choices  made  by  the  other  licensees.  156  Omnipoint  argues  that,  for  example,  other  licensees  might  be  reluctant  to 
 surrender  spectrum  if  they  knew  NextWave  was  keeping  its  spectrum  because  reauction  opportunities  would  be  severely  limited  without  the  return  of  any  NextWave  licenses.  157  We  agree 
 with  NextWave  that  all  C  block  licensees  should  be  treated  equally,  and  we  will  not  discriminate  against  one  licensee  in  order  to  grant  others  a  competitive  advantage.  158 


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


 153  See  NextWave  Petition  at  19-  22  (before  requiring  licensees  to  make  an  election,  the  Commission  should 
 resolve  control  group  issues,  clarify  the  role  of  the  Department  of  Justice,  and  adopt  final  World  Trade  Organization  implementation  rules);  Polycell  Opposition  at  4-  5  (same  as  NextWave);  Duluth  PCS,  et  al.  Opposition  at  4-  5  (same  as 


 NextWave);  Omnipoint  Petition  at  13-  14  (before  licensees  relinquish  valuable  spectrum  assets,  the  Commission  should  clarify  its  position  on  bankruptcy  and  its  jurisdiction  to  engage  in  debt  forgiveness);  Omnipoint  Opposition  at  13-  14 
 (before  licensees  are  required  to  make  irreversible  elections,  the  Commission  should  issue  final  decisions  on  the  note  interest  rate,  the  procedures  for  implementing  resumption  of  payments,  election  filing  procedures,  the  Commission's 
 position  on  bankruptcy,  and  the  role  of  the  Department  of  Justice).  MFRI  asks  that  the  election  date  be  postponed  until  the  bid  signaling  practices  in  the  D,  E,  and  F  block  auction  have  been  resolved.  MFRI  Petition  at  3.  We  note  that  on 
 September  5,  1997,  the  Commission  announced  the  implementation  of  click-  box  bidding,  one  purpose  of  which  is  to  prevent  bid  signaling  practices.  See  "FCC  Announces  Changes  to  Auction  Procedures  for  the  800  MHz  SMR  Auction 
 (Auction  No.  16),"  Public  Notice,  12  FCC  Rcd  13,449  (WTB  1997). 
 154  See  Northern  Michigan  Petition  at  10  (the  election  date  should  be  at  least  60  days  after  the  release  of  the  order 
 on  reconsideration  of  the  Second  Report  and  Order). 
 155  Omnipoint  Petition  at  6-  8;  Omnipoint  Reply  at  2-  5. 


 156  Omnipoint  Petition  at  6. 
 157  Id.  at  7-  8. 
 158  NextWave  Opposition  at  2. 
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 1.1.65  In  the  Second  Report  and  Order,  the  Commission  inadvertently  omitted  reference  to  the  requirement  that  F  block  licensees  execute  fully  and  deliver  timely  all  necessary  financing 
 documents.  Consequently,  we  now  clarify  that  F  block  licensees,  as  well  as  C  block  licensees,  must  execute  and  deliver  all  necessary  financing  documents  pursuant  to  appropriate  requirements  and 
 time  frames  as  will  be  established  by  the  Bureau  in  a  forthcoming  public  notice  on  procedures.  We  modify  the  Second  Report  and  Order  to  require  both  C  and  F  block  licensees  that  fail  to  execute 
 fully  and  deliver  timely  to  the  Commission  any  required  financing  documents  to  pay  on  the  payment  resumption  date  all  unpaid  simple  interest  accruing  from  the  date  of  license  grant  through  the 
 payment  resumption  date.  159  The  Bureau's  forthcoming  public  notice  also  will  set  forth  updated  election  procedures  for  C  block  licensees,  reflecting  our  modifications  to  the  Second  Report  and 
 Order. 
 X.  REAUCTION 
 A.  Timing 
 1.1.66  On  January  7,  1998,  we  announced  that  the  C  block  reauction  would  begin  on  September  29,  1998.  160  In  light  of  the  postponement  of  both  the  election  date  and  the  payment 
 resumption  date,  as  discussed  above,  it  will  be  necessary  to  establish  a  new  reauction  date.  We  delegate  to  the  Bureau  the  authority  to  establish  the  reauction  date.  We  instruct  the  Bureau  to  issue  a 
 public  notice  announcing  the  new  date  at  least  three  months  in  advance  of  the  start  of  the  reauction. 
 1.1.67  CPCSI,  a  winning  bidder  for  nine  licenses  in  the  C  block  auction  whose  license  grants  were  subject  to  resolution  of  an  Application  for  Review  pending  at  the  time  of  the  release  of 
 the  Second  Report  and  Order,  asks  the  Commission  not  to  begin  the  reauction  until  final  action  on  its  Application  for  Review  or,  in  the  event  no  such  action  occurs,  until  the  Pocket  and  GWI 
 bankruptcy  proceedings  conclude.  161  Because  the  Commission  granted  CPCSI's  Application  for 


 159  See  Second  Report  and  Order,  12  FCC  Rcd  at  16,471  para.  76  (requiring  payment  of  all  Suspension  Interest, 
 which  included  interest  only  through  the  previous  payment  resumption  date  of  March  31,  1998). 
 160  See  Election  Date  Order  I  at  para.  3.  The  Commission  has  proposed  including  the  following  licenses  in  the 
 reauction:  (1)  all  licenses  representing  the  disaggregated  spectrum  surrendered  to  the  Commission  under  the  disaggregation  option;  (2)  all  licenses  surrendered  to  the  Commission  by  licensees  taking  advantage  of  the 


 Commission's  prepayment  or  amnesty  options;  and  (3)  all  PCS  C  block  licenses  currently  held  by  the  Commission  as  the  result  of  previous  defaults.  See  Further  Notice,  12  FCC  Rcd  at  16,474  para.  83. 


 161  CPCSI  Petition  at  4-  9.  But  see  AirGate  Opposition  at  16  (encouraging  the  Commission  to  reject  CPCSI's 
 Application  for  Review  in  time  for  those  licenses  to  be  included  in  the  reauction  and  arguing  that  the  reauction  should  not  be  delayed  by  the  bankruptcy  proceedings). 
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 Review  on  December  24,  1997,  162  CPCSI's  request  is  moot  and  there  is  no  need  to  address  the  merits  of  CPCSI's  request. 
 162  See  Carolina  PCS  I  Limited  Partnership  Request  for  Waiver  of  Section  24.711(  a)(  2)  of  the  Commission's 
 Rules  Regarding  BTA  Nos.  B016,  B072,  B091,  B147,  B177,  B178,  B312,  B335,  and  B436,  Frequency  Block  C,  Memorandum  Opinion  and  Order,  FCC  97-  417  (released  December  24,  1997). 
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 B.  Eligibility 
 1.  Background 
 1.1.68  The  Second  Report  and  Order  specified  that  all  entrepreneurs,  all  entities  that  had  been  eligible  for  and  had  participated  in  the  original  C  block  auction,  and  all  current  C  block 
 licensees  would  be  eligible  to  bid  in  the  reauction.  163  The  Commission,  however,  created  an  exception  for  incumbent  licensees:  for  a  period  of  two  years  from  the  start  date  of  the  reauction, 
 C  block  licensees  (defined  as  qualifying  members  of  the  licensee's  control  group,  and  their  affiliates)  that  opted  for  the  disaggregation  or  prepayment  options  would  be  prohibited  from  reacquiring,  either 
 through  the  reauction  or  through  any  secondary  market  transaction,  any  spectrum  or  licenses  that  they  surrendered  to  the  Commission  under  those  options.  164  Such  licensees,  however,  would  be 
 permitted  to  bid  on  spectrum  or  licenses  surrendered  by  other  licensees,  provided  that  such  licensees  were  not  affiliates.  165  Licensees  electing  the  amnesty  option  would  be  eligible  to  bid  for  any  and  all 
 licenses  at  the  reauction,  with  no  restrictions  on  post-  auction  acquisitions.  166 
 2.  Discussion 
 1.1.69  The  only  reauction  eligibility  issues  set  forth  in  the  Second  Report  and  Order  ripe  for  reconsideration  in  this  phase  of  the  proceeding  are  those  related  directly  to  whether  and  how  a 
 licensee's  election  of  a  particular  payment  option  should  affect  its  eligibility  to  participate  in  the  reauction  of,  or  reacquire  an  ownership  interest  in,  surrendered  spectrum.  We  defer  to  other  phases 
 of  WT  Docket  No.  97-  82  additional  eligibility  issues,  including  the  qualifications  of  entities  that  have  defaulted  on  payments  to  participate  in  the  reauction  167  and  the  use  of  a  "controlling  interest" 
 approach  rather  than  "control  group"  structures  to  determine  financial  size  in  the  C  block,  as  well  as  in  all  auctionable  services.  168  We  note  that,  in  its  comments  filed  in  response  to  the  Further  Notice, 


 163  Second  Report  and  Order,  12  FCC  Rcd  at  16,448  para.  22;  see  also  Further  Notice,  12  FCC  Rcd  at  16,474 
 para.  84. 
 164  Second  Report  and  Order,  12  FCC  Rcd  at  16,457,  16,470  paras.  42,  69. 


 165  Id.,  12  FCC  Rcd  at  16,457  para.  42;  see  also  id.,  12  FCC  Rcd  at  16,470  para.  69. 
 166  Id.,  12  FCC  Rcd  at  16,462  para.  54. 
 167  Comment  is  sought  on  this  issue  in  the  Further  Notice,  12  FCC  Rcd  at  16,474  para.  84. 
 168  NextWave  Petition  at  20;  accord  Duluth  PCS,  et  al.  Opposition  at  4-  5;  Polycell  Opposition  at  4-  5;  cf. 
 AmeriCall  Opposition  at  7-  8  (arguing  that  the  10  percent  control  group  institutional  investor  rule,  47  C.  F.  R.    24.709(  b)(  5)(  i)(  C),  and  the  25  percent  nonattributable  ownership  limit,  47  C.  F.  R.    24.709(  b)(  3)(  i),  should  be 


 eliminated  because  they  unnecessarily  restrict  access  to  capital  from  noncontrolling  investors).  Comment  is  sought  on  this  issue  in  Part  1  Third  Report  and  Order;  see  also  Amendment  of  Part  1  of  the  Commission's  Rules  --  Competitive 
 Bidding  Proceeding,  WT  Docket  No.  97-  82,  Order,  Memorandum  Opinion  and  Order  and  Notice  of  Proposed  Rule  Making,  12  FCC  Rcd  5686,  5693  n.  17,  5703  paras.  11,  28  (1997). 
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 Nextel  Communications,  Inc.  challenges  the  Commission's  ruling  in  the  Second  Report  and  Order  that  participation  in  the  C  block  reauction  is  limited  to  qualified  entrepreneurs.  169  In  their  petitions 
 for  reconsideration,  Cellexis  and  RFW  respond  to  Nextel's  arguments  and  urge  the  Commission  not  to  reconsider  its  decision.  170  We  address  Nextel's  challenge  here,  notwithstanding  the  fact  that 
 Nextel's  request  was  not  filed  as  a  petition  for  reconsideration  of  the  Second  Report  and  Order.  We  conclude  that  Nextel  has  not  provided  a  convincing  rationale  for  deviating  from  the  public  interest 
 goals  articulated  by  the  Commission  in  the  Second  Report  and  Order.  171  Consequently,  we  affirm  the  Commission's  earlier  ruling  to  limit  eligibility  for  participation  in  the  reauction  to  applicants 
 meeting  the  current  definition  of  "entrepreneur."  172 
 1.1.70  On  reconsideration,  we  make  a  change  to  the  eligibility  requirements,  which  already  has  been  discussed  above,  and  also  a  clarification.  As  we  stated  previously,  a  licensee  that  elects  the 
 amnesty  option  for  an  MTA  and  opts  to  receive  partial  credit  for  down  payments  on  its  returned  licenses  in  that  MTA  will  not  be  eligible  to  reacquire  those  licenses  through  either  reauction  or  any 
 secondary  market  transaction  for  a  period  of  two  years  from  the  start  date  of  the  reauction.  This  restriction  also  applies  to  the  licensee's  affiliates.  Likewise,  if  a  licensee  disaggregates  an  MTA, 
 neither  it  nor  its  affiliates  may  bid  on  the  returned  spectrum  in  the  reauction  or  reacquire  it  through  a  secondary  market  transaction  for  two  years  after  the  start  date  of  the  reauction.  Licensees  that  return 
 licenses  under  the  amnesty  option  or  spectrum  under  the  disaggregation  option  are  not  precluded  from  bidding  in  the  reauction  on  licenses  or  spectrum  returned  by  other  non-  affiliated  licensees  (or 
 from  later  reacquiring  those  licenses  or  spectrum  in  post-  auction  transactions).  We  clarify  that  the  term  "affiliate"  is  defined  by  our  competitive  bidding  rules  in  the  Part  1  Third  Report  and  Order.  173 


 1.1.71  Several  parties  believe  that  we  should  revise  our  bidding  eligibility  requirements.  174  Sprint,  for  example,  agrees  with  the  Commission's  decision  to  exclude  C  block  licensees  that  choose 
 disaggregation  or  prepayment  from  bidding  on  their  surrendered  spectrum  at  reauction,  but  contends  that  the  Commission  undermines  the  integrity  of  the  auction  process  by  not  similarly  limiting  the 
 ability  of  licensees  that  select  the  amnesty  option.  175  Sprint  believes  that  the  lack  of  such  a 
 169  See  Comments  filed  by  Nextel  Communications,  Inc.  on  November  13,  1997  at  7-  9. 


 170  See  Cellexis  Petition  at  7-  8;  RFW  Petition  at  6-  7.  See  also  MFRI  Reply  at  6-  7  (expressing  concern  that  large 
 incumbents  advocate  opening  the  C  block  reauction  to  all  bidders);  Wireless  Ventures  Reply  at  4  (same). 
 171  See  Second  Report  and  Order,  12  FCC  Rcd  at  16,448  para.  22. 


 172  Id. 
 173  47  C.  F.  R.    1.2110(  b)(  4);  Part  1  Third  Report  and  Order  at  paras.  29-  30. 
 174  Compare  Northern  Michigan  Petition  at  6  (licensees  electing  disaggregation  should  be  allowed  to  participate 
 in  the  reauction)  and  Cellexis  Petition  at  6  (the  C  block  reauction  should  be  open  to  all  non-  defaulting  C  block  licensees,  irrespective  of  the  chosen  option)  with  Antigone/  Devco  Opposition  at  5-  6  (bidders  electing  any  of  the  special 


 relief  options  should  be  barred  from  participating  in  any  future  C  block  reauctions). 
 175  Sprint  Petition  at  3-  4. 
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 restriction  will  unjustly  enrich  licensees  that  select  the  amnesty  option  and  then  bid  for  the  same  spectrum  at  a  likely  discount.  176  NextWave,  on  the  other  hand,  claims  it  is  unreasonably 
 discriminatory  to  preclude  entities  choosing  disaggregation  or  prepayment  from  reacquiring  their  surrendered  spectrum  for  two  years  while  allowing  entities  choosing  the  amnesty  option  to  reacquire 
 their  spectrum  immediately  either  by  reauction  or  through  secondary  markets.  177 
 1.1.72  We  believe  our  modified  approach  addresses  both  these  arguments.  In  response  to  NextWave,  we  note  that  licensees  electing  disaggregation  and/  or  prepayment  for  one  MTA  now  can 
 choose  to  return  licenses  in  other  MTAs  and  bid  on  those  licenses  in  the  reauction.  However,  in  response  to  Sprint,  we  point  out  that  licensees  electing  amnesty  for  an  MTA  must  forgo  their  entire 
 down  payment  if  they  wish  to  bid  on  their  returned  licenses  for  that  MTA.  We  believe  that  this  cost  sufficiently  mitigates  any  concern  of  unjust  enrichment. 


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


 176  Id.  at  2-  3;  Sprint  Opposition  at  3. 
 177  NextWave  Petition  at  18-  19;  accord  Polycell  Opposition  at  8-  9;  Duluth  PCS,  et  al.  Opposition  at  8-  9. 
 178  Second  Report  and  Order,  12  FCC  Rcd  at  16,472-  73  para.  79. 
 179  Id. 
 180  See  CIRI  Petition  at  6-  8.  But  see  AmeriCall  Opposition  at  8-  11  ("  Suffering  default  penalties  is  not  an 
 encouragement  to  'cherry-  pick.  '"). 
 181  47  C.  F.  R.    1.2110(  f)(  4)(  iv). 
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 B.  No  Extension  of  C  Block  Relief  to  Other  Licensees 
 1.1.74  We  reject  various  requests  to  grant  F  block  licensees  the  same  relief  provided  to  C  block  licensees.  182  Cellular  Holding  contends  that  C  and  F  block  licensees  should  be  treated 
 similarly  because:  (1)  both  are  licensed  to  provide  broadband  PCS;  (2)  they  were  granted  their  licenses  within  7.5  months  of  one  another;  (3)  Section  24.709  of  the  Commission's  rules  governs 
 bidder  eligibility  for  both  blocks;  (4)  their  market  boundaries  are  identical;  (5)  they  will  have  nearly  the  same  amount  of  spectrum  if  C  block  licensees  choose  disaggregation;  and  (6)  they  both  compete 
 with  larger,  more  experienced  competitors  that  received  a  head-  start.  183  Cellular  Holding,  however,  ignores  the  fact  that  C  and  F  block  licensees  are  not  similarly  situated  with  respect  to  the  most 
 relevant  factor  --  the  need  for  financial  relief. 
 1.1.75  After  careful  review,  the  Commission  determined  in  the  Second  Report  and  Order  that  "the  nature  and  extent  of  any  financing  difficulties  faced  by  the  C  block  licensees  appear  to  be 
 different  from  any  such  problems  facing  entrepreneurs  in  the  F  block."  184  C  block  prices  were  higher,  on  average,  than  F  block  prices.  185  We  disagree  with  several  parties  that  argue  that  the 
 Commission's  explanation  in  the  Second  Report  and  Order  fails  to  justify  disparate  treatment.  186  The  difficulties  in  financing  the  unexpectedly  high  prices  bid  in  the  C  block  auctions  is  a  sufficiently 
 distinguishing  basis  for  limiting  relief  to  C  block  licensees.  As  further  justification,  we  agree  with  AmeriCall  that  the  C  block  situation  was  the  result  of  a  unique  set  of  mostly  unpredictable  events, 
 including  litigation  and  resulting  licensing  delays  and  the  lack  of  a  simultaneous  non-  entrepreneur  auction  that  could  have  been  used  to  ease  price  pressures.  187 


 1.1.76  The  need  for  C  block  relief  was  due  to  exceptional  and  urgent  circumstances,  and  because  it  is  essential  to  maintain  the  integrity  of  the  auction  process,  only  the  most  exigent  situation 
 would  cause  us  to  offer  such  relief.  Even  in  addressing  the  C  block  financing  situation,  the  Commission  provided  options  that  offered  only  limited  relief  so  as  to  be  fair  to  bidders  that  withdrew 
 from  the  auction.  We  therefore  are  not  persuaded  by  Central  Oregon's  claim  that  F  block  licensees  should  be  granted  relief  because  A,  B,  and  C  block  licensees  have  a  competitive  advantage  given 


 182  Central  Oregon  Petition  at  2-  4;  Cellular  Holding  Petition  at  2-  5;  Duluth  PCS,  et  al.  Opposition  at  10;  Polycell 
 Opposition  at  10;  Eldorado  Reply  at  2-  4. 
 183  Cellular  Holding  Petition  at  2-  3. 


 184  Second  Report  and  Order,  12  FCC  Rcd  at  16,447  para.  20. 
 185  See  "D/  E/  F  Band  PCS  Auction  Results  in  Lower  Spectrum  Prices  But  Another  Win  for  CDMA  Proponents," 
 U.  S.  Telecommunications,  SBC  Warburg  Inc.  (January  28,  1997)  (D,  E,  and  F  spectrum  prices  75  percent  lower  than  C  band  auction);  Donaldson,  Lufkin  &  Jenrette,  The  Wireless  Communications  Industry  (Spring  1997)  at  20  ("  D,  E  and  F 


 Auction  Prices  Surprisingly  Low"). 
 186  See  Central  Oregon  Petition  at  2-  4;  Omnipoint  Opposition  at  12;  Eldorado  Reply  at  3-  4. 


 187  AmeriCall  Opposition  at  3-  4.  See  also  NextWave  Reply  at  3. 
37
 Federal  Communications  Commission  FCC  98-  46 
 -38  - 
 their  earlier  licensing  date  and  their  larger  amounts  of  spectrum.  188  We  also  reject  Omnipoint's  argument  that  C  block  options  should  be  available  to  entrepreneurs  with  D,  E,  and  F  block  licenses 
 because  C  block  relief  will  change  the  relative  values  of  those  licenses.  189  These  arguments  do  not  present  sufficiently  compelling  reasons  to  apply  the  "extraordinary  procedures"  we  adopted  for  C 
 block  licensees  to  D,  E,  and  F  block  licensees.  190  In  addition,  CONXUS,  the  only  party  to  address  this  issue,  argues  that  narrowband  PCS  entities  should  receive  relief  comparable  to  that  afforded  C 
 block  licensees  because  they  compete  in  the  same  consumer  and  financial  markets  and  face  similar  circumstances.  191  The  record  in  this  reconsideration  proceeding  is  insufficient  to  adopt  global 
 changes  affecting  narrowband  PCS  entities,  but  we  note  that  payment  matters  for  these  entities  are  currently  being  examined  in  another  proceeding  before  the  Commission.  192 


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


 188  Central  Oregon  Petition  at  2-  4. 
 189  Omnipoint  Petition  at  9-  10;  Omnipoint  Opposition  at  11-  12. 
 190  Second  Report  and  Order,  12  FCC  Rcd  at  16,437-  38  para.  2. 
 191  CONXUS  Petition  at  3-  5;  CONXUS  Opposition  at  2-  8;  CONXUS  Reply  at  4-  10.  CONXUS  claims  its 
 experience  is  similar  to  the  C  block  situation,  including  delays  in  market  entry,  its  problems  in  raising  capital,  high  bid  amounts,  a  post-  auction  rule  change,  and  the  lack  of  a  simultaneous  non-  entrepreneur  auction. 


 192  See  Implementation  of  Section  309(  j)  of  the  Communications  Act  --  Competitive  Bidding,  Narrowband  PCS, 
 PP  Docket  No.  93-  253,  Report  and  Order  and  Further  Notice  of  Proposed  Rulemaking,  12  FCC  Rcd  12,972  (1997). 
 193  Northern  Michigan  Petition  at  8-  9  (interest  rate  for  C  block  licensees  should  be  standardized  at  6.5  percent); 
 Alpine  Petition  at  11-  12  and  Alpine  Reply  at  6-  8  (interest  rate  should  be  reduced  to  5.56  percent);  McBride  Petition  at  4  (the  Commission  should  set  the  interest  rate  uniformly  at  5.75  percent). 


 194  Northern  Michigan  Petition  at  8.  See  also  McBride  Petition  at  4.  Our  position  on  this  issue  was  addressed  in 
 Amendment  of  Part  1  of  the  Commission's  Rules  --  Competitive  Bidding  Proceeding,  WT  Docket  No.  97-  82,  Order,  Memorandum  Opinion  and  Order  and  Notice  of  Proposed  Rule  Making,  FCC  97-  60  (released  February  28,  1997)  at 


 para.  12  ("  debtors  may  grant  to  other  parties  a  subordinated  security  interest  in  the  proceeds  of  an  authorized  assignment  or  transfer  of  the  license  to  a  third  party,  provided  however  that  any  such  security  interest  shall  be 
 subordinated  to  and  in  no  way  inconsistent  with  the  Commission's  security  interest  in  the  license"). 
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 Federal  Communications  Commission  FCC  98-  46 
 -39  - 
 1.1.78  TAP  encourages  the  Commission  to  seek  Congressional  authority  to  award  tax  certificates  to  entities  that  provide  investment  capital  to  C  block  licensees.  195  Section  309(  j)(  4)(  D) 
 of  the  Communications  Act  mandates  that,  in  seeking  to  ensure  that  designated  entities  are  "given  the  opportunity  to  participate  in  the  provision  of  spectrum-  based  services,"  the  Commission  shall 
 "consider  the  use  of  tax  certificates."  196  By  allowing  a  tax  deferral  of  the  gain  realized  on  an  investment,  tax  certificates  provide  a  significant  means  of  enhancing  the  value  of  an  investment  in  an 
 enterprise,  and  we  believe  that  a  tax  certificate  program  for  spectrum-  based  services  would  be  as  beneficial  to  the  wireless  industry  as  the  Commission's  tax  certificate  programs  were  for  the 
 broadcast  and  cable  industries.  197  However,  in  view  of  Congress'  repeal  in  1995  of  Section  1071  of  the  IRS  Code,  198  which  granted  the  Commission  authority  to  use  tax  certificates  to  promote 
 Commission  policies,  we  believe  that  legislative  action  would  be  necessary  before  we  could  provide  such  tax  relief.  Accordingly,  we  urge  Congress  to  review  the  positive  impact  of  the  Commission's 
 previous  tax  certificate  programs  and  to  grant  us  the  authority  to  establish  a  similar  program  for  wireless  enterprises,  which  we  believe  would  promote  competition  in  the  telecommunications 
 industry  by  encouraging  investment  in  new  services. 
 XII.  PROCEDURAL  MATTERS  AND  ORDERING  CLAUSES 
 A.  Supplemental  Final  Regulatory  Flexibility  Analysis 
 1.1.79  The  Supplemental  Final  Regulatory  Flexibility  Analysis,  pursuant  to  the  Regulatory  Flexibility  Act,  5  U.  S.  C.    604,  is  attached  at  Appendix  C. 


 B.  Paperwork  Reduction  Act  Analysis 
 1.1.80  This  Order  contains  a  modified  information  collection  that  was  submitted  to  the  Office  of  Management  and  Budget  requesting  emergency  clearance  under  the  Paperwork  Reduction 
 Act  of  1995. 
 C.  Ordering  Clauses 
 1.1.81  Accordingly,  IT  IS  ORDERED  that,  pursuant  to  the  authority  granted  in  Sections  4(  i),  303(  r),  and  309(  j)  of  the  Communications  Act  of  1934,  as  amended,  47  U.  S.  C.    154(  i), 


 195  TAP  Reply  at  4-  10.  See  also  McBride  Petition  at  5. 
 196  Communications  Act    309(  j)(  4)(  D),  47  U.  S.  C.    309(  j)(  4)(  D). 
 197  See  TAP  Reply  at  5-  6  (citing  Erwin  G.  Krasnow,  "A  Case  for  Minority  Tax  Certificates,"  Broadcasting  & 
 Cable,  December  15,  1997,  at  80)  (the  Commission's  tax  certificate  program  greatly  increased  minority  ownership  of  broadcast  and  cable  entities  and  "gave  minority  entrepreneurs  increased  access  to  the  market  for  broadcast  and  cable 


 properties,  gave  them  a  chip  at  the  bargaining  table  and  opened  doors  at  financial  institutions  that  had  been  closed"). 
 198  Pub.  L.  No.  104-  7,    2,  109  Stat.  93,  93-  94  (1995). 
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 Federal  Communications  Commission  FCC  98-  46 
 -40  - 
 303(  r),  and  309(  j),  the  petitions  for  reconsideration  filed  in  response  to  the  Second  Report  and  Order  are  GRANTED  IN  PART  and  DENIED  IN  PART,  as  provided  herein. 
 1.1.82  IT  IS  FURTHER  ORDERED  that,  pursuant  to  the  authority  granted  in  Sections  4(  i),  303(  r),  and  309(  j)  of  the  Communications  Act  of  1934,  as  amended,  47  U.  S.  C.    154(  i),  303(  r),  and 
 309(  j),  the  modifications  to  the  Commission's  rules,  as  described  herein  and  in  Appendix  B,  ARE  HEREBY  ADOPTED.  These  modifications  shall  become  effective  60  days  after  publication  of  this 
 Order  on  Reconsideration  of  the  Second  Report  and  Order  in  the  Federal  Register. 
 1.1.83  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. 


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


 FEDERAL  COMMUNICATIONS  COMMISSION 
 Magalie  Roman  Salas  Secretary 
40
 Federal  Communications  Commission  FCC  98-  46 
 APPENDIX  A 


 Petitions  for  Reconsideration 
 I.  Airtel  Communications,  Inc.  ("  Airtel")  II.  Alpine  PCS,  Inc.  ("  Alpine") 
 III.  AmeriCall  International,  L.  L.  C.  ("  AmeriCall")  IV.  Carolina  PCS  I  Limited  Partnership  ("  CPCSI") 
 V.  Cellexis  International,  Inc.  ("  Cellexis")  VI.  Cellnet  ("  Cellnet") 
 VII.  Cellular  Holding,  Inc.  ("  Cellular  Holding")  VIII.  Central  Oregon  Cellular,  Inc.  ("  Central  Oregon") 
 IX.  Christensen  Engineering  &  Surveying  ("  Christensen")  X.  ClearComm,  L.  P.  ("  ClearComm") 
 XI.  CONXUS  Communications,  Inc.  ("  CONXUS")  XII.  Cook  Inlet  Region,  Inc.  ("  CIRI") 
 XIII.  CVI  Wireless  XIV.  DiGiPH  PCS,  Inc.  ("  DiGiPH") 
 XV.  Federal  Network  XVI.  Fox  Communications 
 XVII.  General  Wireless,  Inc.  ("  GWI")  XVIII.  Horizon  Personal  Communications,  Inc.  ("  Horizon") 
 XIX.  Hyundai  Electronics  America  ("  Hyundai")  XX.  Koll  Telecommunication  Services  ("  Koll") 
 XXI.  Leifer,  Marter  Architects  ("  Leifer,  Marter")  XXII.  McBride,  Vincent  ("  McBride") 
 XXIII.  Meretel  Communications,  L.  P.  ("  Meretel")  XXIV.  MFRI  Incorporated  ("  MFRI") 
 XXV.  NextWave  Telecom  Inc.  ("  NextWave")  XXVI.  New  Wave  Inc.  ("  New  Wave") 
 XXVII.  Northern  Michigan  PCS  Consortium  L.  L.  C.  and  Wireless  2000,  Inc.  ("  Northern  Michigan") 
 XXVIII.  Omnipoint  Corporation  ("  Omnipoint")  XXIX.  One  Stop  Wireless  of  America,  Inc.  ("  One  Stop  Wireless") 
 XXX.  OnQue  Communications,  Inc.  ("  OnQue")  XXXI.  Prime  Matrix  Wireless  Communications  ("  Prime  Matrix") 
 XXXII.  RFW  PCS  Inc.  ("  RFW")  XXXIII.  Sprint  Corporation  ("  Sprint") 
 XXXIV.  United  Calling  Network,  Inc.  ("  UCNI")  XXXV.  Urban  Communicators  PCS  Limited  Partnership  ("  Urban  Communicators") 
 XXXVI.  URS  Greiner,  Inc.  ("  URS  Greiner")  XXXVII.  Wireless  Nation,  Inc.  ("  Wireless  Nation") 
41
 Federal  Communications  Commission  FCC  98-  46 
 -2  - 
 Oppositions 
 1.  AirGate  Wireless,  L.  L.  C.  ("  AirGate")  2.  ALLTEL  Communications,  Inc.  ("  ALLTEL") 
 3.  AmeriCall  International,  L.  L.  C.  ("  AmeriCall")  4.  Antigone  Communications  Limited  Partnership  and  PCS  Devco,  Inc. 
 ("  Antigone/  Devco")  5.  AT&  T  Wireless  Services,  Inc.  ("  AT&  T") 
 6.  ClearComm,  L.  P.  ("  ClearComm")  7.  CONXUS  Communications,  Inc.  ("  CONXUS") 
 8.  Duluth  PCS,  Inc.,  St.  Joseph  PCS,  Inc.,  and  West  Virginia  PCS,  Inc.  ("  Duluth  PCS,  et  al.") 
 9.  Fidelity  Capital  10.  MFRI  Incorporated  ("  MFRI") 
 11.  NextWave  Telecom  Inc.  ("  NextWave")  12.  Northcoast  Communications,  L.  L.  C.  ("  Northcoast") 
 13.  Omnipoint  Corporation  ("  Omnipoint")  14.  Polycell  Communications,  Inc.  ("  Polycell") 
 15.  PrimeCo  Personal  Communications,  L.  P.  ("  PrimeCo")  16.  Sprint  Corporation  ("  Sprint") 
 17.  Third  Kentucky  PCS  "Third  Kentucky") 


 Replies  to  Oppositions 
 1.  Alpine  PCS,  Inc.  ("  Alpine")  2.  Cellexis  International,  Inc.  ("  Cellexis") 
 3.  ClearComm,  L.  P.  ("  ClearComm")  4.  CONXUS  Communications,  Inc.  ("  CONXUS") 
 5.  CX  Systems  Int'l,  Inc.  ("  CX  Systems")  6.  Eldorado  Communications,  L.  L.  C.  ("  Eldorado") 
 7.  Federal  Network  8.  Frontier  Corporation  ("  Frontier") 
 9.  Hyundai  Electronics  America  ("  Hyundai")  10.  MFRI  Incorporated  ("  MFRI") 
 11.  NextWave  Telecom  Inc.  ("  NextWave")  12.  Omnipoint  Corporation  ("  Omnipoint") 
 13.  RFW  PCS  Inc.  ("  RFW")  14.  Telecommunications  Advocacy  Project  ("  TAP") 
 15.  Third  Kentucky  Cellular  Corp.  ("  Third  Kentucky")  16.  Wireless  Ventures,  Inc.  ("  Wireless  Ventures") 
42
 Federal  Communications  Commission  FCC  98-  46 
 -3  - 
 Ex  Parte  Filings 
 1.  AirGate  Wireless,  L.  L.  C.  ("  AirGate"),  February  9,  1998  2.  AmeriCall  International,  L.  L.  C.  ("  AmeriCall"),  March  12,  1998 
 3.  Christensen  Engineering  &  Surveying  ("  Christensen"),  December  19,  1997  4.  ClearComm,  L.  P.  ("  ClearComm"),  February  23,  1998 
 5.  ClearComm,  L.  P.  ("  ClearComm"),  March  13,  1998  6.  Congressman  Gary  L.  Ackerman,  January  15,  1998 
 7.  Congressman  Xavier  Becerra,  February  3,  1998  8.  Congresswoman  Sue  W.  Kelly,  December  31,  1997 
 9.  Congressman  Albert  R.  Wynn,  February  9,  1998  10.  CX  Systems  Int'l,  Inc.  ("  CX  Systems"),  December  10,  1997 
 11.  Cyber  Sites,  L.  L.  C.  ("  Cyber  Sites"),  December  1,  1997  12.  Datacomm  Research  Company,  February  20,  1998 
 13.  Dorne  &  Margolin,  December  1,  1997  14.  Florida  Power  Corporation  ("  Florida  Power"),  December  19,  1997 
 15.  Gilder  Technology  Group,  Inc.,  February  16,  1998  16.  Joint  filing  by  43  companies,  February  20,  1998 
 17.  Kabbara  Engineering  ("  Kabbara"),  December  26,  1997  18.  LaBarge  Clayco  Wireless,  L.  L.  C.  ("  LaBarge  Clayco"),  December  24,  1997 
 19.  Leifer,  Marter  Architects  ("  Leifer,  Marter"),  December  17,  1997  20.  Members  of  the  Congressional  Hispanic  Caucus,  February  5,  1998 
 21.  MJA  Communications  Corp.  ("  MJA"),  December  22,  1997  22.  New  Wave  Inc.  ("  New  Wave"),  January  20,  1998 
 23.  New  Wave  Inc.  ("  New  Wave"),  February  17,  1998  24.  NextWave  Telecom  Inc.  ("  NextWave"),  January  21,  1998 
 25.  OPM  USA,  Inc.  ("  OPM"),  December  23,  1997  26.  Praxis  Telecom,  January  26,  1998 
 27.  Prudential  Securities  Inc.,  February  26,  1998  28.  R&  S  PCS,  Inc.,  February  11,  1998 
 29.  RFW  PCS  Inc.  ("  RFW"),  December  23,  1997  30.  Senator  Barbara  Boxer,  February  13,  1998 
 31.  Senators  Richard  H.  Bryan  and  Harry  Reid,  January  29,  1998  32.  Senator  Thomas  Daschle,  February  11,  1998 
 33.  Senator  J.  Robert  Kerrey,  February  12,  1998  34.  Specialty  Teleconstructors  Inc.  ("  Specialty  Teleconstructors"),  December  19,  1997 
 35.  Structure  Consulting  Group  ("  Structure  Consulting"),  December  22,  1997  36.  Wireless  Nation,  Inc.  ("  Wireless  Nation"),  January  23,  1998 
 37.  Xway,  Inc.  ("  Xway"),  December  16,  1997  38.  2001  Personal  Communication,  Inc.,  January  8,  1998 
43
 Federal  Communications  Commission  FCC  98-  46 
 APPENDIX  B 
 Revised  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.  The  authority  citation  for  Part  1  continues  to  read  as  follows: 
 Authority:  15  U.  S.  C.  79  et  seq.;  47  U.  S.  C.  151,  154(  i),  154(  j),  155,  225,  and  303(  r),  unless  otherwise  noted. 


 2.  Section  1.2110  is  amended  by  revising  paragraph  (f)(  4)(  ii),  (iii),  (iv)  to  read  as  follows: 
   1.2110  Designated  Entities 
 *  *  *  *  * 
 (f)  *  *  * 
 (4)  *  *  * 
 (i)  *  *  * 
 (ii)  If  any  licensee  fails  to  make  the  required  payment  at  the  close  of  the  90-  day  period  set  forth  in  subsection  (i)  above,  the  licensee  will  automatically  be  provided  with  a  subsequent  90-  day  grace 
 period,  except  that  no  subsequent  automatic  grace  period  will  be  provided  for  payments  from  C  or  F  block  licensees  that  are  not  made  within  90  days  of  the  payment  resumption  date  for  those  licensees, 
 as  explained  in  Amendment  of  the  Commission's  Rules  Regarding  Installment  Payment  Financing  for  Personal  Communications  Services  (PCS)  Licensees,  Order  on  Reconsideration  of  the  Second 
 Report  and  Order,  WT  Docket  No.  97-  82,  FCC  98-  46  (rel.  Mar.  24,  1998).  *  *  * 
 (iii)  If  an  eligible  entity  making  installment  payments  is  more  than  one  hundred  and  eighty  (180)  days  delinquent  in  any  payment,  it  shall  be  in  default,  except  that  C  and  F  block  licensees  shall  be  in 
 default  if  their  payment  due  on  the  payment  resumption  date,  referenced  in  subsection  (ii)  above,  is  more  than  ninety  (90)  days  delinquent. 


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


 *  *  *  *  * 
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 Federal  Communications  Commission  FCC  98-  46 
 -2  - 
 Part  24  of  Chapter  I  of  Title  47  of  the  Code  of  Federal  Regulations  is  amended  as  follows: 
 PART  24    PERSONAL  COMMUNICATIONS  SERVICES 
 3.  The  authority  citation  for  Part  24  continues  to  read  as  follows: 
 Authority:  47  U.  S.  C.  154,  301,  302,  303,  309  and  332,  unless  otherwise  noted. 
 4.  Section  24.709  is  amended  by  revising  paragraph  (b)(  9)(  i),  (ii)  (A)  -  (B)  to  read  as  follows: 
   24.709  Eligibility  for  licenses  for  frequency  Blocks  C  and  F. 
 (a)  *  *  * 
 (b)  *  *  * 
 (9)  Special  rule  for  licensees  disaggregating  or  returning  certain  spectrum  in  frequency  block  C. 
 (i)  In  addition  to  entities  qualifying  under  this  section,  any  entity  that  was  eligible  for  and  participated  in  the  auctions  for  frequency  block  C,  which  began  on  December  18,  1995,  and  July  3, 
 1996,  will  be  eligible  to  bid  in  a  reauction  of  block  C  spectrum  surrendered  pursuant  to  Amendment  of  the  Commission's  Rules  Regarding  Installment  Payment  Financing  for  Personal  Communications 
 Services  (PCS)  Licensees,  Second  Report  and  Order  and  Further  Notice  of  Proposed  Rule  Making,  WT  Docket  No.  97-  82,  12  FCC  Rcd  16,436  (1997),  as  modified  by  the  Order  on  Reconsideration  of 
 the  Second  Report  and  Order,  WT  Docket  No.  97-  82,  FCC  98-  46  (rel.  Mar.  24,  1998). 
 (ii)  The  following  restrictions  will  apply  for  any  reauction  of  frequency  block  C  spectrum  conducted  after  March  24,  1998: 


 (A)  Applicants  that  elected  to  disaggregate  and  surrender  to  the  Commission  15  MHz  of  spectrum  from  any  or  all  of  their  frequency  block  C  licenses,  as  provided  in  Amendment  of  the  Commission's 
 Rules  Regarding  Installment  Payment  Financing  for  Personal  Communications  Services  (PCS)  Licensees,  Second  Report  and  Order  and  Further  Notice  of  Proposed  Rule  Making,  WT  Docket  No. 
 97-  82,  12  FCC  Rcd  16,436  (1997),  as  modified  by  the  Order  on  Reconsideration  of  the  Second  Report  and  Order,  WT  Docket  No.  97-  82,  FCC  98-  46  (rel.  Mar.  24,  1998),  will  not  be  eligible  to 
 apply  for  such  disaggregated  spectrum  until  2  years  from  the  start  of  the  reauction  of  that  spectrum. 
 (B)  Applicants  that  surrendered  to  the  Commission  any  of  their  frequency  block  C  licenses,  as  provided  in  Amendment  of  the  Commission's  Rules  Regarding  Installment  Payment  Financing  for 
 Personal  Communications  Services  (PCS)  Licensees,  Second  Report  and  Order  and  Further  Notice  of  Proposed  Rule  Making,  WT  Docket  No.  97-  82,  12  FCC  Rcd  16,436  (1997),  as  modified  by  the 
 Order  on  Reconsideration  of  the  Second  Report  and  Order,  WT  Docket  No.  97-  82,  FCC  98-  46  (rel.  Mar.  24,  1998),  will  not  be  eligible  to  apply  for  the  licenses  that  they  surrendered  to  the  Commission 
 until  2  years  from  the  start  of  the  reauction  of  those  licenses  if  they  elected  to  apply  a  credit  of  70% 
45
 Federal  Communications  Commission  FCC  98-  46 
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 of  the  down  payment  they  made  on  those  licenses  toward  the  prepayment  of  licenses  they  did  not  surrender. 
 (C)  *  *  * 
 *  *  *  *  * 
46
 Federal  Communications  Commission  FCC  98-  46 
 APPENDIX  C 
 Supplemental  Final  Regulatory  Flexibility  Analysis 


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


 A.  Need  for,  and  objectives  of,  this  Order. 
 This  Order  on  Reconsideration  of  the  Second  Report  and  Order  ("  Order")  is  designed  to  assist  C  block  broadband  personal  communications  services  ("  PCS")  licensees  to  meet  their  financial 
 obligations  to  the  Commission  while  at  the  same  time  helping  the  Commission  meet  its  goal  of  ensuring  rapid  provision  of  PCS  service  to  the  public.  The  Order  provides  a  variety  of  relief 
 mechanisms  to  assist  C  block  licensees  that  are  experiencing  difficulties  in  meeting  the  financial  obligations  under  the  installment  payment  plan.  The  relief  provided  to  C  block  licensees  will  speed 
 deployment  of  service  to  the  public  by  easing  lenders'  concerns  regarding  regulatory  uncertainty  and  by  potentially  making  more  capital  available  for  investment  and  growth.  By  facilitating  the 
 provision  of  service  to  consumers,  the  Commission  advances  Congress'  objective  to  promote  "the  development  and  rapid  deployment  of  new  technologies,  products,  and  services  for  the  benefit  of  the 
 public."  202 
 B.  Summary  of  significant  issues  raised  by  public  comments  in  response  to  the  IRFA. 
 There  were  no  comments  filed  in  response  to  the  IRFA;  however,  in  this  proceeding  we  have  considered  the  economic  impact  on  small  businesses  of  the  modifications  we  have  adopted.  See 
 Section  E  of  this  Supplemental  FRFA,  infra. 


 199  5  U.  S.  C.    604. 
 200  Amendment  of  Part  1  of  the  Commission's  Rules  --  Competitive  Bidding  Proceeding,  WT  Docket  No.  97-  82, 
 Order,  Memorandum  Opinion  and  Order  and  Notice  of  Proposed  Rulemaking,  FCC  97-  60  (released  February  28,  1997). 


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


 202  Communications  Act    309(  j)(  3)(  A),  47  U.  S.  C.    309(  j)(  3)(  A). 
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 C.  Description  and  estimate  of  the  number  of  small  entities  to  which  rules  will  apply. 
 The  RFA  directs  agencies  to  provide  a  description  of  and,  where  feasible,  an  estimate  of  the  number  of  small  entities  that  will  be  affected  by  our  rules.  203  The  RFA  generally  defines  the  term 
 "small  entity"  as  having  the  same  meaning  as  the  terms  "small  business,"  "small  organization,"  and  "small  governmental  jurisdiction."  204  In  addition,  the  term  "small  business"  has  the  same  meaning 
 as  the  term  "small  business  concern"  under  Section  3  of  the  Small  Business  Act.  205  Under  the  Small  Business  Act,  a  "small  business  concern"  is  one  which:  (1)  is  independently  owned  and  operated; 
 (2)  is  not  dominant  in  its  field  of  operation;  and  (3)  meets  any  additional  criteria  established  by  the  Small  Business  Administration  ("  SBA").  206 


 This  Order  applies  to  broadband  PCS  C  and  F  block  licensees.  The  Commission,  with  respect  to  broadband  PCS,  defines  small  entities  to  mean  those  having  gross  revenues  of  not  more 
 than  $40  million  in  each  of  the  preceding  three  calendar  years.  207  This  definition  has  been  approved  by  the  SBA.  208  On  May  6,  1996,  the  Commission  concluded  the  broadband  PCS  C  block  auction. 
 The  broadband  PCS  D,  E,  and  F  block  auction  closed  on  Jan.  14,  1997.  Ninety  bidders  (including  the  C  block  reauction  winners,  prior  to  any  defaults  by  winning  bidders)  won  493  C  block  licenses 
 and  88  bidders  won  491  F  block  licenses.  Small  businesses  placing  high  bids  in  the  C  and  F  block  auctions  were  eligible  for  bidding  credits  and  installment  payment  plans.  For  purposes  of  our 
 evaluations  and  conclusion  in  this  FRFA,  we  assume  that  all  of  the  90  C  block  broadband  PCS  licensees  and  88  F  block  broadband  PCS  licensees,  a  total  of  178  licensees  potentially  affected  by 
 this  Order,  are  small  entities. 
 D.  Description  of  the  projected  reporting,  recordkeeping,  and  other  compliance  requirements. 
 C  block  licensees  must  file  notice  of  their  elections  with  the  Wireless  Telecommunications  Bureau  no  later  than  the  election  date.  The  election  date  will  be  60  days  after  publication  of  the 
 Order  in  the  Federal  Register.  The  Order  increases  the  reporting  requirements  of  the  Second  Report 


 203  5  U.  S.  C.    603(  b)(  3),  604(  a)(  3). 
 204  5  U.  S.  C.    601(  6). 
 205  5  U.  S.  C.    601(  3)  (incorporating  by  reference  the  definition  of  "small  business  concern"  in  15  U.  S.  C.    632). 
 206  15  U.  S.  C.    632. 
 207  See  47  C.  F.  R.    24.720(  b)(  1). 
 208  See  Implementation  of  Section  309(  j)  of  the  Communications  Act  --  Competitive  Bidding,  Third 
 Memorandum  Opinion  and  Order  and  Further  Notice  of  Proposed  Rulemaking,  10  FCC  Rcd  175,  196  (1995);  Implementation  of  Section  309(  j)  of  the  Communications  Act  --  Competitive  Bidding,  Fifth  Report  and  Order,  9  FCC 


 Rcd  5581-  84  (1995);  47  C.  F.  R.    24.320(  b),  24.720(  b). 
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 and  Order  to  the  extent  that  elections  now  may  be  made  for  each  Major  Trading  Area  ("  MTA").  209  Formerly,  licensees  were  required  to  make  the  same  election  for  all  their  licenses. 
 E.  Steps  taken  to  minimize  the  significant  economic  impact  on  small  entities,  and  significant  alternatives  considered. 
 As  noted  in  the  FRFA  of  the  Second  Report  and  Order,  the  Commission  analyzed  the  significant  economic  impact  on  small  entities  and  considered  significant  alternatives.  210  The 
 modifications  adopted  on  reconsideration  will  further  reduce  the  burden  on  C  block  licensees,  which  are  small  businesses.  These  modifications  include: 


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


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


 (3)  Higher  percentage  of  down  payment  credit.  By  crediting  a  higher  percentage  of  the  down  payment  under  disaggregation,  the  Commission  better  enables  these  small  businesses  to  remain  in 
 the  wireless  market.  The  Commission  provides  even  more  credit  to  licensees  choosing  a  combination  of  disaggregation  and  prepayment  in  order  to  encourage  licensees  to  take  advantage  of 
 the  benefits  of  both  these  options. 
 (4)  Thirty-  day  extension  of  the  non-  delinquency  period  for  payments  not  made  on  the  resumption  date.  The  Commission's  30-  day  extension  is  intended  to  help  licensees  that  are  experiencing  last-minute 
 delays  in  raising  capital  by  providing  them  additional  time  to  complete  their  fund-  raising  efforts. 


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


 The  Commission  believes  that  it  is  in  the  public  interest  to  adopt  the  above  modifications  in  order  to  facilitate  rapid  introduction  of  service  to  the  public  without  further  regulatory  or 


 209  See  Second  Report  and  Order,  Appendix  C. 
 210  Id. 
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 marketplace  delay.  The  Commission's  decision  minimizes  the  potential  significant  economic  impact  on  small  entities  by  permitting  C  block  licensees  to  choose  among  a  variety  of  alternative  solutions 
 to  reduce  their  debt  to  the  Commission.  The  intent  of  this  Order  is  to  alleviate,  to  some  extent,  the  financial  difficulties  faced  by  these  small  entities  by  providing  options  that:  (1)  achieve  a  degree  of 
 fairness  to  all  parties,  including  losing  bidders  in  the  C  block  auction;  (2)  continue  to  promote  competition  and  participation  by  smaller  businesses  in  providing  broadband  PCS  service;  and 
 (3)  avoid  solutions  that  merely  prolong  uncertainty. 
 The  Commission  rejected  proposals  for  a  further  deferral  of  the  payment  resumption  deadline  because  licensees  already  have  had  a  sufficient  deferral  period.  In  addition,  the 
 Commission  does  not  wish  to  adopt  temporary  solutions  that  might  only  postpone  the  difficulties  faced  by  the  C  block  licensees  and  further  prolong  uncertainty.  There  is  no  guarantee  that  an 
 extended  deferral  period  would  improve  the  long  term  financial  outlook  facing  many  licensees.  The  Commission  also  rejected  arguments  that  licensees  should  receive  full  credit  for  down  payments 
 made  on  licenses  or  spectrum  returned  to  the  Commission  for  reauction.  The  Commission  already  provides  substantial  use  of  a  licensee's  down  payment.  Moreover,  providing  full  credit  would  be 
 unfair  to  unsuccessful  bidders  that  withdrew  from  the  C  block  auction. 
 F.  Report  to  Congress. 
 The  Commission  shall  send  a  copy  of  the  Order,  including  this  Supplemental  FRFA,  in  a  report  to  Congress  pursuant  to  the  Small  Business  Regulatory  Enforcement  Fairness  Act  of  1996. 
 See  5  U.  S.  C.    801(  a)(  1)(  A).  A  copy  of  the  Order  and  this  FRFA  (or  summary  thereof)  will  be  published  in  the  Federal  Register.  See  5  U.  S.  C.    604(  b).  A  copy  of  the  Order  and  this  FRFA  will 
 also  be  sent  to  the  Chief  Counsel  for  Advocacy  of  the  Small  Business  Administration. 
50
 Statement  of  Commissioner  Susan  Ness 
 Concurring  in  Part,  Dissenting  in  Part 


 Re:  Amendment  of  the  Commission's  Rules  Regarding  Installment  Payment  Financing  for  C  block  Personal  Communications  Service  (PCS)  Licensees,  WT  Docket  No.  97-  82 
 I  concur  in  today's  decision  to  the  extent  it  affirms  the  Commission's  decision  of  September  25,  1997,  and  dissent  to  the  extent  it  does  not.  I  am  pleased  that  the  majority  has  generally  adhered 
 to  the  framework  established  last  fall.  But  I  do  not  support  the  revised  package  of  options  being  afforded  to  C  block  licensees,  which  I  believe  is  an  excessive  and  potentially  counterproductive 
 government  intervention  in  the  marketplace.  In  addition,  I  am  troubled  by  the  majority's  willingness  to  indefinitely  delay  reauction  of  returned  licenses. 


 My  disagreements  with  the  majority  are  real,  and  they  are  substantial,  but  they  are  also  respectful.  As  with  many  of  the  judgments  the  Commissioners  are  called  upon  to  make, 
 reasonable  people  can  disagree.  So  here. 
 Although  I  supported  the  Commission's  prior  decision,  I  have  welcomed  the  opportunity  to  think  anew  on  these  issues.  Reconsideration  presents  an  opportunity  --  and  a  duty  --  to  consider  the 
 matter  with  a  fresh  eye.  I  have  used  the  reconsideration  process  to  test  the  facts  and  logic  undergirding  the  Commission's  prior  decision,  to  seek  additional  information  and  ideas,  and  to 
 deliberate  with  a  new  group  of  colleagues  who  bring  diverse  backgrounds  and  fresh  insights  to  the  process. 


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


 It  remains  my  view  that  the  C  block  auction,  like  the  other  spectrum  auctions  the  Commission  has  administered,  was  run  fairly.  At  the  time  of  the  auction,  the  playing  field  was  level. 
 Everyone  believed  they  were  playing  by  the  same  rules.  Each  bidder  was  on  notice  to  take  our  rules  into  consideration  when  they  bid,  including  the  installment  terms.  Every  bid,  by  every 
 bidder,  was  entirely  voluntary. 
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 As  prices  rose,  some  bidders  dropped  out,  believing  that  others  were  misjudging  the  market,  and  banked  on  the  opportunity  to  obtain  licenses  in  the  event  of  defaults,  license  cancellation,  and 
 reauction  --  the  way  the  FCC  said  it  would  work.  Others,  judging  the  market  potential  differently,  stayed  in.  The  FCC  owes  an  equal  duty  to  all  of  these  bidders.  In  my  view,  today's 
 decision  breaches  that  duty. 
 In  September,  we  departed  in  a  limited  fashion  from  strict  adherence  to  market  mechanisms,  and  the  majority  has  now  moved  further  down  the  slippery  slope.  In  the  wake  of  today's  decision,  we 
 can  reasonably  anticipate  that  these  licensees,  or  those  in  other  spectrum  blocks,  will  seek  other  accommodations  on  future  occasions.  This  is  the  inevitable  result  when  government  too  readily 
 intervenes  to  protect  market  participants  from  failure. 
 The  real  damage  here  is  to  our  role  as  steward  of  the  public  airwaves.  Our  responsibilities  are  to  facilitate  use  of  the  spectrum  to  bring  competitive  services  to  the  public,  to  be  fair  to  all  parties 
 (licensees  and  disappointed  bidders  alike),  and  to  rely  on  marketplace  forces  rather  than  government  edict  to  select  winners  and  losers.  Having  placed  spectrum  in  an  auction  with  fair 
 rules  known  to  all  parties,  we  should  not  intrude  on  the  marketplace  after  the  auction  for  the  purpose  of  assisting  some  parties  to  remain  licensees.  The  marketplace  is  far  better  suited  than 
 we  are  to  determine  the  capabilities  of  licensees,  and  to  provide  support  for  those  business  plans  that  make  economic  sense. 


 Moreover,  financial  markets  need  regulatory  certainty  and  predictability  of  outcomes.  Otherwise  the  regulatory  risk  is  too  great  to  warrant  investment.  Wall  Street  needs  the 
 C  block  licensees  to  get  on  with  business.  Our  September  decision  met  with  some  applause,  in  part  because  it  contributed  certainty  to  the  marketplace  and  allowed  participants,  equipment 
 manufacturers,  and  suppliers  of  venture  capital  to  proceed.  The  measures  the  majority  takes  today  regretfully  foster  more  uncertainty  and  unpredictability. 


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


 The  options  afforded  last  September  were  painstakingly  tailored  to  maintain  consistency  with  auction  results  and  to  speed  the  resumption  of  normal  operation  of  the  market.  These  options 
 were  designed  to  enable  some  licensees  to  exit  their  predicaments;  others  to  regroup;  and  still  others  to  refocus  their  energies  on  executing  their  business  plan.  Given  the  growing  competition 
 in  the  wireless  marketplace,  I  believed  it  to  be  important  to  enable  those  C  block  licensees  which  were  able  to  do  so  to  "get  back  to  business"  as  soon  as  possible.  For  that  reason,  one  virtue  of 
 the  options  set  forth  in  our  September  decision  was  that  they  were  designed  to  give  a  modest  hand  to  those  most  in  need,  not  to  create  incentives  for  those 
52
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 licensees  capable  of  proceeding  under  their  original  agreements  to  abandon  their  business  plans. 
 As  noted  above,  the  majority  is  retaining  the  basic  framework  of  September's  decision,  but  changing  it  in  significant  ways.  Today's  decision:  (1)  increases  the  ability  of  licensees  to  credit 
 deposits  that  otherwise  would  be  forfeit;  (2)  allows  some  deposits  to  be  applied  against  suspension  interest;  (3)  permits  licensees  to  choose  among  the  options  on  an  MTA-  by-  MTA 
 basis;  (4)  extends  the  time  when  licensees  need  to  either  resume  their  payments  or  face  cancellation  of  their  licenses;  and  (5)  indefinitely  postpones  the  reauction.  Taken  in 
 combination,  the  new  array  of  options  is  complex,  confusing,  and  overly  intrusive  in  the  marketplace. 


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


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


 211  The  prior  decision  allowed  licensees  to  redeploy  a  portion  of  their  down  payments  only  in 
 one  limited  circumstance  --  prepayment.  The  key  considerations  that  made  this  approach  acceptable  to  me  were  that:  (1)  such  licensees  were  paying  the  full  bid  amount  on  the  licenses  they  retained; 


 and  (2)  election  of  this  option  removed  the  government  entirely  from  installment  payments  --  some  licenses  were  fully  purchased,  and  the  remaining  licenses  were  returned  to  the  FCC  for  reauction. 
 The  result  was  that  the  electing  licensee  was  relieved  of  suspension  interest  and  all  debt  owed,  in  return  for  purchasing  or  returning  all  licenses.  The  same  benefits  do  not  accrue  in  the  disaggregation 
 context,  where  the  licensee  continues  to  receive  below-  market  interest  rates  and  the  government  continues  to  administer  installment  debt. 
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 -4  - 
 these  funds  to  be  used  to  pay  down  principal  on  the  licenses  that  are  kept  or,  worse,  to  pay  suspension  interest. 
 Using  deposits  that  would  otherwise  be  forfeited  to  pay  suspension  interest  essentially  postpones  the  time  when  the  licensee's  financial  ability  to  construct  and  operate  a  service  is  put  to  the  test. 
 It  also  is  not  fair  to  the  licensees  who  met  their  obligations  and  who  must  raise  the  money  to  cover  suspension  interest  payments. 


 Delays  in  Resumption  of  Payments  and  Reauction 
 I  am  also  troubled  by  yet  another  extensive  delay  before  the  date  by  which  licensees  will  need  to  resume  payments  on  their  licenses.  Until  such  payments  are  made,  the  market  will  not  know 
 which  licensees  are  financially  viable.  The  payments  already  have  been  suspended  for  one  year.  Now,  additional  time  is  needed  for  licensees  to  sort  out  their  expanded  options.  At  the  same 
 time,  the  grace  period  for  delayed  payments  is  being  extended.  So  we  prolong  the  time  during  which  the  licenses  will  be  tied  up,  with  no  assurance  that  the  licensees  will  ultimately  be  able  to 
 finance  and  construct  their  systems  and  provide  service  to  the  public. 
 In  addition,  I  am  concerned  by  the  further  delay  in  the  timing  of  the  reauction  of  forfeited  licenses.  A  reauction  is  needed  to  put  licenses  in  the  hands  of  those  capable  of  putting  them  to 
 productive  use.  It  will  also  create  long-  awaited  opportunities  for  those  designated  entities  that,  in  the  prior  auction,  consciously  and  responsibly  chose  not  to  bid  more  than  they  could  pay.  And 
 yet,  in  today's  order,  the  majority  indefinitely  postpones  the  reauction.  Last  year,  we  said  it  would  occur  in  the  third  quarter  of  1998.  Just  two  months  ago,  the  new  Commission  committed 
 to  a  date  of  September  29,  1998.  Now,  the  reauction  is  deferred  until  further  notice. 
 Still  more  delay  is  inherent  in  the  Commission's  inaction  on  rules  for  the  C  block  reauction.  These  rules  were  proposed  in  the  same  September  order  that  here  is  under  reconsideration  and 
 for  which  the  comment  period  has  ended.  Yet  even  though  decisions  on  some  issues  in  that  proceeding  could  affect  the  elections  from  among  the  newly  expanded  options,  the  majority  has 
 declined  to  settle  those  issues  today. 
 Competing  Objectives 
 The  agency  is  caught  between  conflicting  concerns.  Everyone  agrees,  at  least  as  a  general  principle,  that  it  is  vital  to  maintain  the  integrity  of  the  auction  process.  Yet  we  naturally  are 
 drawn  to  help  C  block  licensees  who  are  facing  hardship.  Behind  the  corporate  names  printed  on  the  licenses  and  the  petitions  for  relief  stand  real  people  --  small  business  owners,  entrepreneurs, 
 individual  investors,  and  others,  many  of  them  women  and  minorities  --  facing  real  problems.  I  --  like  my  colleagues  --  am  drawn  to  help  them. 


 But  it  is  impossible  to  fully  reconcile  a  commitment  to  fair  market-  driven  spectrum  assignments  with  a  willingness  to  change  the  rules  of  the  game  after  it  has  been  played.  At 
54
 -5  - 
 some  point,  one  objective  must  prevail  over  the  other.  In  my  judgment,  where  the  objectives  collide,  the  integrity  of  the  process  must  control,  and  the  desire  to  help  individual  players  must 
 yield. 
 If  we  really  believe  in  assigning  spectrum  by  auctions  as  authorized  by  Congress  in  the  Omnibus  Budget  Reconciliation  Act  of  1993,  and  the  "procompetitive,  deregulatory"  paradigm  of  the 
 Telecommunications  Act  of  1996,  we  must  accept  the  reality  that  some  licensees  will  fail  in  the  marketplace,  and  that  their  conditional  licenses  will  need  to  be  canceled  and  reauctioned,  as  our 
 rules  envisioned.  Such  outcomes  are  painful,  but  necessary,  if  the  marketplace  is  to  work  its  magic. 


 My  disagreement  with  the  majority  concerns  the  lengths  to  which  the  Commission  should  go  in  trying  to  prevent  such  outcomes. 
 Judges  and  legislators,  lawyers  and  economists  --  all  speak  to  the  need  to  promote  and  protect  competition,  not  competitors.  In  my  opinion,  today's  decision  crosses  the  line  to  favor  specific 
 competitors  over  others.  I  cannot  support  that  result. 
 Some  parties  have  suggested  that  the  Commission  owes  a  duty  to  go  to  extra  lengths  because  the  C  block  licensees  are  all  small  business  "designated  entities."  This  argument  misses  the  point 
 that,  with  or  without  post  hoc  relief,  the  C  block  spectrum  will  remain  exclusively  for  designated  entities.  What  is  at  issue  is  a  clash  not  between  the  interests  of  small  entities  and  those  of  large 
 conglomerates.  Rather,  the  issue  is  whether  the  FCC  should  favor  one  group  of  designated  entities  over  another.  I  do  not  believe  it  should. 


 The  Commission's  Role 
 The  Commission's  intervention  in  the  post-  auction  market  is  neither  compelled  nor  excused  by  the  ongoing  financial  obligation  of  the  C  block  licensees  to  the  U.  S.  Treasury.  The 
 Commission's  fundamental  role  is  that  of  a  licensing  agency,  not  that  of  a  lender.  Although  the  agency's  C  block  rules  enabled  designated  entities  to  purchase  spectrum  rights  with  installment 
 payments,  as  Congress  specifically  contemplated  (47  U.  S.  C.  309(  j)(  4)(  A)),  our  responsibility  after  the  auction  was  to  issue  licenses,  which  were  expressly  conditioned  upon  the  licensees' 
 fulfillment  of  their  financial  commitments. 
 Those  who  say  the  Commission  functioned  as  a  banker  are  mistaken.  We  never  performed  the  banker's  role  (which  I  know  well)  of  reviewing  the  bidders'  balance  sheets,  their  business  plans, 
 the  wisdom  of  their  planned  bids,  and  the  quality  of  their  management.  We  never  assumed  the  responsibility  of  creating  "commercially  reasonable  alternatives"  for  whatever  difficulties  the  C 
 block  licenses  encountered.  To  the  contrary,  we  repeatedly  declared  our 
55
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 commitment  to  the  efficacy  of  the  market  mechanism,  and  our  intention  to  enforce  auction  rules.  212 
 Conclusion 
 Today's  decision  may  enable  the  survival  of  some  C  block  licensees  who  might  have  failed  without  government  intervention.  More  likely  is  the  prospect  that  the  significantly  sweetened 
 selection  of  options  will  lead  directly  to  more  churn  in  business  plans,  more  deviation  from  initial  auction  results,  more  confusion  in  the  financial  markets,  and  more  delay  in  construction  of 
 facilities.  A  further  cost  is  the  long-  term  skepticism  in  the  market  that  the  Commission  will  revise  its  rules  whenever  the  pressure  is  great  enough. 


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


 212  I  note  that  the  Commission  acted  without  hesitation  when  some  successful  C  block  bidders 
 failed  to  make  their  down  payments  although  they  had  made  their  deposits.  The  FCC  immediately  defaulted  the  bidders  and  assessed  maximum  forfeitures,  applying  all  payments  to  the  forfeitures. 


 See  "18  Defaulted  PCS  licenses  to  be  Reauctioned;  Reauction  to  Begin  July  3rd,"  Public  Notice,  DA  96-  872  (rel.  May  30,  1996);  Mountain  Solutions  LTD,  Inc.,  Order,  12  FCC  Rcd  5904  (WTB  1997), 
 application  for  review  pending;  BDPCS,  Inc.,  Order,  12  FCC  Rcd  6606  (WTB  1997),  application  for  review  pending;  C.  H.  PCS  Inc.,  Order,  11  FCC  Rcd  22430  (WTB  1996).  These  bidders,  and  those 
 who  dropped  out  in  the  course  of  the  auction,  had  no  reason  to  expect  that  the  Commission  would  subsequently  change  the  rules  of  the  game.  It  is  of  course  impossible  to  sort  out  how  these  bidders 
 would  have  behaved  differently  if  they  could  have  foreseen  the  accommodations  that  would  later  be  offered. 
56
 SEPARATE  STATEMENT  OF  COMMISSIONER  MICHAEL  POWELL,  CONCURRING  IN  PART  AND  DISSENTING  IN  PART 
 Re:  Amendment  of  the  Commission's  Rules  Regarding  Installment  Payment  Financing  For  Personal  Communications  Services  (PCS)  Licensees  (WT  Docket  No.  97-  82) 
 On  a  fateful  day  in  March  of  1997,  the  Commission's  Wireless  Telecommunications  Bureau  --  at  the  urging  of  certain  C-  block  auction  winners  and  with  all  good  intentions  -- 
 suspended  installment  payments  for  C-  block  licensees.  This  action  set  forth  in  motion,  in  my  observation,  a  calamity  of  sorts  that  now  culminates  in  yet  another  round  (hopefully  the  last)  of 
 "March  Madness."  We  are  asked  to  reconsider  the  prior  Commission's  decision  from  last  September  which  offered  measured  relief  to  the  successful  C-  block  auction  participants, 
 primarily  out  of  some  concern  that  licenses  might  get  tied  up  in  bankruptcy  court  should  many  of  these  companies  default.  I  support  that  prior  decision  and  its  rationale. 


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


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


 Rules,  by  their  very  nature,  will  always  be  both  over-  inclusive  and  under-  inclusive.  That  is,  they  benefit  some  they  really  should  not,  and  they  will  disadvantage  others  that  should 
 benefit.  The  virtue  of  any  rule,  however,  is  that  it  provides  a  degree  of  certainty  and  clarity.  Rules  should  allow  all  players  to  understand  the  terms  and  conditions  of  the  contest  and  to 
 reliably  predict  the  results  of  complying  or  failing  to  comply  with  them.  In  the  context  of  an  auction,  relying  on  the  established  rules  allows  participants  to  evaluate  the  consequences  of  their 
 bids  --  bid  too  high  and  fail  to  make  a  payment  and  you  will  forfeit  your  (or  your  investors')  money  and  lose  your  license,  bid  to  low  and  you  risk  losing  the  opportunity  to  hold  a  lucrative 
 license.  In  the  C-  block  auction,  all  participants  made  these  difficult  decisions  all  along  the  way  --  some  dropped  out,  some  stayed  in.  The  risk  assessments  and  decisions  that  each  participant 
 made  were  anchored  in  the  terms  and  conditions  of  the  auction  as  well  as  their  vision  of  the  future  market.  As  long  as  the  rules  were  clearly  established,  the  participants  could  make  their 
 own  judgments  about  their  risk  tolerance,  then  knowingly  face  the  consequences  of  their  judgments  and  be  held  responsible  in  the  event  of  market  failures. 
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 -2- 
 When  the  referee  (in  this  case,  the  Commission)  starts  tinkering  with  the  rules  during  the  game,  or  worse  after  the  buzzer  has  sounded,  it  does  two  very  unfortunate  things:  First,  it 
 undermines  the  fairness  of  the  contest.  This  we  know  from  the  earliest  age  and  the  principle  is  echoed  on  ball  fields  and  gymnasium  floors,  in  olympic  arenas,  during  board  games,  and  even  in 
 politics.  The  cardinal  principle  is  that  whether  the  rule  is  good  or  bad  it  must  apply  equally  to  all  players  or  the  game  is  patently  arbitrary  and  unfair  and  the  outcome  invalid.  There  assuredly  are 
 always  those  that  support  the  referee's  intervention,  because  the  resulting  changes  put  them  on  top,  or  keep  them  in  the  lead.  However,  there  are  others  that  sit  back  in  the  locker  room  stunned 
 and  dismayed  that  the  rules,  advertised  as  conditions  for  victory,  were  changed  to  accommodate  certain  players.  Second,  and  most  importantly  in  my  mind,  is  that  by  telegraphing  to  the  world 
 that  the  game  is  subject  to  unpredictable  changes  in  the  rules  based  on  the  subjective  decisions  of  the  tournament  organizers,  you  discourage  people  from  playing  the  game  at  all. 


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


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


 This  Order  provides  a  number  of  measures  I  fully  support,  for  they  should  provide  each  C-  block  licensee  slightly  more  flexibility  and,  consequently,  a  fighting  chance  to  attract 
 financing,  build-  out  and  compete.  Most  of  them  clean  up  imperfections  in  the  original  order  without  doing  damage  to  the  underlying  principles.  In  particular,  with  the  added  flexibility  of 
 the  MTA-  by-  MTA  choice  of  options,  we  have  taken  away  the  artificial  and  unnecessary  nationalization  of  the  C-  block  "relief"  plan.  Instead,  business  plans  and  investment  pitches  can 
 continue  despite  the  circumstances  facing  these  licensees.  I  must  depart  from  the  majority  on 
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 -3- 
 one  point,  however:  allowing  participants  to  use  certain  down-  payment  "credits"  and  continue  paying  installments. 
 The  prior  decision  in  September  made  the  appropriate  cut  to  allow  licensees  that  have  received  a  payment  respite  to  spread  their  payment  of  accrued  interest  over  two  years.  This 
 provided  a  reasonable  deferral  of  the  payments  that  could  be  absorbed  into  a  workable  business  plan.  However,  the  majority  is  allowing  a  portion  of  the  down  payments  from  returned  licenses 
 to  be  used  to  pay  down  what  is  rightfully  owed  to  the  government  under  binding  promissory  notes  and  license  conditions.  While  I  do  not  oppose  the  use  of  "credits"  to  encourage  licensees 
 to  prepay  their  debt  and  get  the  FCC  out  of  the  banking  business,  I  object  to  the  idea  that  such  credits  can  be  used  to  give  a  boost  to  certain  players  with  substantial  amounts  of  accumulated 
 interest.  In  turn,  there  will  be  absolutely  no  realizable  benefit  to  the  American  tax  payers.  From  a  lender's  point  of  view  (which  we  unfortunately  have  to  take  on  behalf  of  the  United  States),  I 
 do  not  believe  that  this  is  "commercially  reasonable:"  it  will  more  likely  just  delay  the  inevitable  for  some  licensees,  provide  free  pocket  money  for  key  investors  and  principals,  and  not  have  any 
 guaranteed  positive  affect  on  build-  out  investment.  If  credits  are  available  to  licensees  that  disaggregate,  I  would  prefer  that  such  credits  be  limited  to  prepayment  of  principal  instead  of 
 this  temporary,  partial  reprieve  that  really  will  not  help  as  much  in  the  short  term  as  it  will  hurt  in  the  long  term. 


 Some  believe  that  efficient  spectrum  management  counsels  that  it  is  better  to  keep  as  many  of  the  present  winners  moving  forward,  rather  than  incur  the  additional  administrative 
 expense  and  risk  of  reclaiming  licenses  and  re-  auctioning  them.  Perhaps,  but  that  is  not  what  we  advertised  to  the  original  bidders,  many  of  whom  dropped  out  of  the  auction  confident  they 
 would  get  a  second  bite  at  the  apple  if  and  when  the  high  bidders  failed.  Furthermore,  it  seems  to  me  that  this  belief  as  applied  precipitously  devalues  auction  integrity  and  its  impact  on  future 
 auctions,  and  has  no  principled  limits  to  constrain  our  subjective  benevolence. 
 I  should  make  one  final  point.  Last  summer,  it  is  my  understanding  that  many  parties  invoked  the  fear  of  bankruptcy  in  developing  options  and  arguments,  but  in  reaching  today's 
 decision  I  heard  very  little  discussion  whatsoever  about  more  impending  bankruptcies.  I  did  not  hear  anyone  argue  that  the  changes  we  make  today  would  truly  lessen  that  troubling  possibility 
 for  the  bulk  of  the  licensees.  And,  I  heard  very  little  compelling  evidence  that  the  threat,  whatever  it  may  have  been,  is  any  more  likely  today  than  it  was  in  September  when  the 
 Commission  first  offered  a  number  of  options.  Let  me  be  clear  that  I  too  am  anxious  to  see  the  C-  block  winners  survive  and  provide  an  important  source  of  competition,  but  not  in  a  manner 
 that  will  foreclose  real  opportunity  for  such  groups  in  the  future.  Indeed,  I  expect  to  continue  to  hear  about  more  C-  block  success  stories  than  failures. 


 At  least,  however,  the  regulatory  game  is  over.  The  buzzer  has  sounded.  The  time  has  come  to  compete  in  the  marketplace,  not  the  bureaucracy.  There  can  be  no  more  regulatory 
 meddling,  or  horse  trading.  We  must  provide  certainty,  now,  lest  we  win  the  battle  only  to  lose  the  war. 
59
 Separate  Statement  of  Commissioner  Gloria  Tristani 
 In  the  Matter  of  Amendment  of  the  Commission's  Rules  Regarding  Installment  Payment  Financing  for 
 Personal  Communications  Services  (PCS)  Licenses 
 Order  on  Reconsideration  of  the  Second  Report  and  Order 


 I  am  heartened  that  the  Commission  has  agreed  to  a  package  of  fair,  reasonable,  and  commercially  viable  options  addressing  the  financial  issues  confronted  by  C  block  licensees. 
 And  I  am  hopeful  that  the  majority  of  licensees  will  find  among  these  options  the  flexibility  to  pursue  their  business  plans  as  they  best  see  fit.  I  am  satisfied  that  the  Commission  has  done 
 virtually  all  that  it  can  to  provide  C  block  licensees  flexibility  and  relief  consistent  with  and  required  by  our  overriding  mandate  to  manage  the  spectrum  in  the  public  interest,  and  so  I  join 
 the  majority's  decision.  I  write  separately,  however,  to  articulate  the  fundamental  principles  guiding  my  decision.  Those  principles  would  have  led  me  to  support  greater  relief  in  the 
 treatment  of  the  down  payment  credit. 
 In  granting  the  Commission  authority  to  assign  spectrum  licenses  by  auction,  Congress  directed  us  to  use  that  authority  for  the  ends  of  promoting  the  development  and  rapid  deployment 
 of  new  technologies  and  services  for  the  public,  facilitating  economic  opportunity  for  designated  entities  and  new  entrants,  and  vigorously  fostering  competition.  I  take  these  directives  as  the 
 lodestar  of  my  decision. 
 Much  has  been  written  about  the  need  to  protect  the  integrity  and  fundamental  fairness  of  our  auctions.  With  this,  I  fully  agree.  But  I  also  believe  that  when  the  Commission  acted  last 
 September,  it  was  generally  acknowledged  that  a  significant  number  of  C  block  licensees,  holding  licenses  covering  a  majority  of  the  United  States,  were  in  financial  distress.  The 
 financial  difficulties  of  several  of  the  largest  licensees  cast  shadows  of  doubt  across  many  of  the  smaller  licensees  because  of  the  largely  interdependent  nature  of  the  licenses  as  building  blocks 
 for  a  nationwide  network. 
 Recognizing  the  severity  of  the  problem,  and  its  responsibility  to  assure  that  this  spectrum  is  used  in  the  public  interest,  the  Commission  appropriately  decided  last  year  to  modify 
 its  rules  to  provide  licensees  with  modest,  but  tangible,  relief.  By  offering  relief  through  a  public  notice  and  comment  rulemaking,  we  have  been  able  to  uniformly  address  the  rights  of  a  class  of 
 licensees  without  undermining  the  integrity  of  our  auctions  program. 
 Some  commenters  and  licensees  would  have  us  go  further  --  to  discount  and  restructure  their  debt,  much  as  an  ordinary  commercial  lender  might.  Yet  the  Commission  is  not  a 
 commercial  lender,  and  we  are  confronted  by  competing  policies  as  we  negotiate  a  path  as  both  lender  and  regulator.  In  our  role  as  spectrum  manager,  it  is  not  appropriate  for  the  Commission 
 to  assure  the  success  of  any  class  of  licensees.  C  block  is  an  entrepreneurs'  block.  The  truth  is  that  entrepreneurs  and  small  businesses  do  fail.  And  they  fail  at  a  rate  greater  than  other 
 businesses  overall.  So  it  would  be  inadvisable  for  the  Commission  to  tie  its  spectrum  management  policy  to  the  assured  success  of  any  group  of  licensees;  to  seek  to  avoid 
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 bankruptcies  at  all  costs;  or  to  become  an  apologist  when  such  bankruptcies  do  occur.  Fairness  to  all  auctions  participants  requires  that  we  not  adopt  measures  that  would 
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 significantly  alter  the  financial  obligations  that  the  successful  bidders  themselves  freely  assumed  at  auction.  But  we  can,  and  should,  give  them  the  opportunity  to  survive  and  thrive. 
 Today's  decision  provides  that  opportunity  by  granting  licensees  significant  flexibility  to  modify  their  holdings  in  light  of  market  conditions  and  business  plans.  We  have  upheld  the 
 Commission's  original  decision  to  provide  a  variety  of  options,  recognizing  that  no  single  option  would  be  appropriate  for  all.  The  character  of  the  relief  offered  is  to  allow  licensees  to  surrender 
 a  certain  amount  of  spectrum  in  exchange  for  a  proportionate  reduction  in  debt.  In  addition,  we  offer  further  flexibility,  so  that  licensees  may  adopt  different  options  in  different  regions  (on  a 
 MTA  basis),  as  well  as  combine  prepayment  and  disaggregation. 
 Inherent  in  this  approach  is  a  focus  on  whether  the  licensee  chooses  to  use  or  relinquish  the  spectrum  it  currently  holds.  Having  decided  to  grant  licensees  this  relief  through  flexibility,  I 
 believe  that  the  use  or  non-  use  of  the  spectrum  should  remain  the  central  point  in  structuring  the  relief  options.  Such  a  view  is  constructive  and  forward-  looking,  rather  than  focusing  on  whether 
 certain  licensees  willfully  overbid,  or  inadvertently  overbid,  or  whether  they  overbid  at  all.  Such  past  actions  of  any  individual  licensees  become  irrelevant,  I  believe,  in  light  of  our  affirmation  of 
 the  Commission's  decision  to  offer  comprehensive  relief  and  flexibility  to  all  licensees. 
 Centering  on  whether  a  licensee  intends  to  use  its  spectrum  to  provide  service  to  the  public,  or  whether  it  plans  to  return  it,  my  approach  would  lead  to  a  different  treatment  of  the 
 licensee's  10%  down  payment  on  deposit  with  the  Commission.  I  do  not  disagree  that  it  is  appropriate  for  some  small  fee  or  cost  to  be  associated  with  the  abandonment  of  spectrum 
 previously  bid  for,  whether  surrendered  in  a  30  MHz  or  15  MHz  portion.  I  join  the  majority's  view  that  3%  of  the  net  bid  (equal  to  30%  of  the  down  payment),  which  it  adopted  for  most  of 
 the  options,  is  appropriate.  However,  I  view  this  cost  as  akin  to  fee  for  restructuring,  much  as  a  commercial  bank  might  impose.  It  acknowledges  the  cost  of  the  restructuring,  and  is  in 
 exchange  for  the  benefits  of  relief  from  a  substantial  portion  of  debt  and  the  creation  of  an  automatic  spectrum  market  (in  the  case  of  disaggregation),  or  the  opportunity  to  hold  an 
 unencumbered  license  (in  the  case  of  prepayment).  But  3%  of  the  net  bid,  or  30%  of  the  down  payment,  also  is  minimal  enough  not  to  act  as  a  disincentive  or  a  penalty  for  a  licensee  making  a 
 choice  which  the  Commission  has  otherwise  freely  offered.  I  would  not  view  this  cost  as  a  "deterrent  to  speculative  bidding,"  which  is  a  redressed  description  of  a  penalty  for  past 
 behavior. 
 This  cost  should  be  associated  only  with  the  abandonment  of  the  spectrum.  The  licensee  would  forfeit  30%  of  the  down  payment  that  relates  to  the  spectrum  it  chooses  to  return,  whether 
 as  a  whole  30  MHz  license  (under  the  pure  prepayment  option)  or  15  MHz  piece  (under  either  disaggregation  option).  Correspondingly,  the  licensee  would  retain  100%  of  the  down  payment 
 that  relates  to  the  spectrum  it  chooses  to  keep.  Critically,  licensees  are  not  penalized  to  the  extent  that  they  choose  to  go  forward  with  providing  service  to  the  public.  This  approach  -- 
 focusing  on  the  use  of  the  spectrum  --  is  consistent  with  our  spectrum  management  responsibilities,  as  expressed  in  Section  309(  j),  to  promote  service  to  the  public,  provide 
 opportunity  for  new  entrants,  and  foster  competition. 
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 Basing  the  fee  on  the  amount  of  spectrum  returned  results  in  varying  credits  of  the  down  payment.  Licensees  would  receive  a  70%  credit  for  a  full  license  returned  under  the  prepayment 
 option,  while  receiving  85%  credit  for  a  license  disaggregated,  whether  then  prepaid  or  continued  on  installment  payments.  Some  suggest  that  the  lack  of  parallel  treatment  is  a  problem 
 --  that  each  license  should  be  subject  to  the  same  fee,  whatever  option  is  chosen.  But  the  size  or  design  of  a  license  is  itself  arbitrary,  as  acknowledged  by  the  fact  that  the  Commission  has  either 
 adopted  or  proposed  spectrum  partitioning  and  disaggregation  rules  for  the  majority  of  commercial  mobile  radio  services.  A  cost  per  license  would  be  a  cost  merely  to  participate  in  the 
 choices  we  offer.  That  analysis  is  more  characteristic  of  a  bank,  less  a  manager  of  the  spectrum. 


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


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


 Thus,  I  would  offer  an  85%  credit  for  any  licensee  choosing  the  disaggregation  option,  whether  prepaying  or  continuing  on  installment  payments.  I  would  not  tinker  with  the 
 calculation  of  the  down  payment  credit,  merely  to  make  disaggregation  with  installment  payments  cosmetically  equal  to  standard  prepayment,  or  to  make  disaggregation  with 
 prepayment  more  attractive  than  disaggregation  with  installment  payments.  It  is  easier  --  and  more  in  the  public  interest  --  simply  to  ask  whether  the  licensee  is  choosing  to  serve  the  public 
 by  making  use  of  the  spectrum.  Despite  these  decisional  differences,  I  am  pleased  that  the  majority  is  able  to  support  use  of  85%  of  the  down  payment  for  at  least  one  of  the  disaggregation 
 options. 
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 There  is  an  additional  area  where  I  believe  we  provide  important  and  useful  flexibility.  This  is  the  modification  to  allow  licensees  to  apply  to  the  down  payment  credit  either  to  reduce 
 principal  or  to  apply  against  accumulated  suspension  interest.  Suspension  interest  is,  in  effect,  a  past  debt.  It  has  accumulated  because  the  Commission,  by  Bureau  Order,  suspended  payments 
 pending  resolution  of  this  proceeding.  Allowing  application  of  the  credits  to  suspension  interest  will  provide  licensees  modest  relief  from  the  burden  of  paying  both  past  and  current  interest 
 simultaneously.  At  the  same  time,  we  do  not  defer  current  debt.  To  take  advantage  of  this  option,  licensees  must  be  timely  on  all  current  interest,  making  a  showing  of  financial  viability. 
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