Federal Register / Vol. 60, No. 86 / Thursday, May 4, 1995 / Proposed Rules 22023

interested parties should serve the

petitioner’s consultant, as follows:

Dennis Silver, P.E., 3404 West 2640

South, West Valley City, Utah 84119–

1625.

FOR FURTHER INFORMATION CONTACT:

Nancy Joyner, Mass Media Bureau, (202)

418–2180.

SUPPLEMENTARY INFORMATION: This is a

synopsis of the Commission’s Notice of

Proposed Rule Making, MM Docket No.

95–50, adopted April 17, 1995, and

released May 1, 1995. The full text of

this Commission decision is available

for inspection and copying during

normal business hours in the FCC’s

Reference Center (Room 239), 1919 M

Street, NW, Washington, D.C. The

complete text of this decision may also

be purchased from the Commission’s

copy contractors, International

Transcription Service, Inc., (202) 857–

3800, 2100 M Street, NW, Suite 140,

Washington, D.C. 20037.

Provisions of the Regulatory

Flexibility Act of 1980 do not apply to

this proceeding.

Members of the public should note

that from the time a Notice of Proposed

Rule Making is issued until the matter

is no longer subject to Commission

consideration or court review, all ex

parte contacts are prohibited in

Commission proceedings, such as this

one, which involve channel allotments.

See 47 CFR 1.1204(b) for rules

governing permissible ex parte contacts.

For information regarding proper

filing procedures for comments, See 47

CFR 1.415 and 1.420.

List of Subjects in 47 CFR Part 73

Radio broadcasting.

Federal Communications Commission.

John A. Karousos,

Chief, Allocations Branch, Policy and Rules

Division, Mass Media Bureau.

[FR Doc. 95–11017 Filed 5–3–95; 8:45 am]

BILLING CODE 6712–01–F

47 CFR Part 90

[PR Docket No. 89–553, GN Docket No. 93–

252, PP Docket No. 93–253, FCC 95–159]

Implementation of Section 309(j) of the

Communications Act—900 MHz SMR

AGENCY: Federal Communications

Commission.

ACTION: Proposed rule.

SUMMARY: The Commission adopted a

Second Further Notice of Proposed Rule

Making seeking comment on proposed

licensing and auction rules to complete

the licensing of the 900 MHz

Specialized Mobile Radio (SMR)

service. This Order implements the

Commission’s decision in the Third

Report & Order in GN Docket No. 93–

252, 59 FR 59,945 (Nov. 21, 1994)

(CMRS Third Report & Order), to license

the 900 MHz band on a Major Trading

Area (MTA) basis, and to use

competitive bidding to select from

among mutually exclusive applicants.

This Second Further Notice requests

comment on proposed new licensing

rules and auction procedures for the

service, including special provisions for

small businesses, minority-owned and

women-owned entities, and rural

telephone companies.

DATES: Comments must be filed on or

before May 24, 1995, and reply

comments must be filed on or before

June 1, 1995.

ADDRESSES: Federal Communications

Commission, 1919 M Street, N.W.,

Washington, D.C. 20554.

FOR FURTHER INFORMATION CONTACT:

Amy Zoslov, (202) 418–0620, Wireless

Telecommunications Bureau,

Commercial Wireless Division.

SUPPLEMENTARY INFORMATION: This is a

synopsis of the Commission’s Second

Further Notice of Proposed Rule

Making, in PR Docket No. 89–553, FCC

95–159, adopted April 14, 1995, and

released April 17, 1995. The complete

text of this Second Further Notice of

Proposed Rule Making is available for

inspection and copying during normal

business hours in the FCC Dockets

Branch, Room 239, 1919 M Street, N.W.,

Washington, D.C., and also may be

purchased from the Commission’s copy

contractor, International Transcription

Service, at (202) 857–3800, 2100 M

Street, N.W., Suite 140, Washington,

D.C. 20037.

Synopsis of the Second Further Notice

of Proposed Rule Making

I. Introduction

1. When the Commission established

the 900 MHz SMR service in 1986, it

elected to use a two-phase licensing

process. In Phase I, licenses were

assigned in 46 ‘‘Designated Filing

Areas’’ (DFAs) comprised of the top 50

markets. Phase II licensing, for facilities

outside the DFAs, was frozen after 1986,

when the Commission opened its filing

window for the DFAs. In 1989, the

Commission adopted a Notice of

Proposed Rule Making in PR Docket 89–

553, 55 FR 00744, proposing to begin

Phase II licensing of SMR facilities

nationwide. In 1993, the Commission

adopted a First Report & Order &

Further Notice of Proposed Rule Making

in PR Docket 89–553, 58 FR 12176

(March 3, 1993) (Phase II First R&O &

Further Notice), modifying its Phase II

proposal and seeking comment on

whether to license the 900 MHz SMR

band to a combination of nationwide,

regional and local systems. 8 FCC Rcd

1469 (1993). Shortly thereafter, Congress

amended the Communications Act to

reclassify most SMR licensees as

Commercial Mobile Radio Service

(CMRS) providers and establish the

authority to use competitive bidding to

select from among mutually exclusive

applicants for certain services. The

Commission deferred further

consideration of Phase II and

incorporated the 900 MHz SMR docket

into its CMRS proceeding.

2. In the CMRS Third Report & Order,

FR 59,945 (Nov. 21, 1994), the

Commission further revised its Phase II

proposals and established the broad

outlines for the completion of licensing

in the 900 MHz SMR band. The

Commission left the specific auction

rules for the Phase II proceeding.

3. The Commission seeks comment on

the following proposals: adoption of a

single simultaneous multiple round

auction; establishment of upfront

payment requirements; adoption of the

Milgrom-Wilson activity rule; adoption

of application procedures; adoption of

procedures governing timing and

duration of auction rounds, stopping

rules and bid increments; adoption of

bid withdrawal and default rules;

adoption of procedures governing down

payment and full payment for winning

bidders; adoption of anti-collusion rules

for bidders; and adoption of transfer

disclosure and performance

requirements for winning bidders.

4. With respect to rules for designated

entities (i.e. small businesses, womenowned and minority-owned entities,

and rural telephone companies), the

Commission seeks comment on the

following proposals: insulating certain

spectrum blocks from large bidders;

providing small businesses bidding

credits, reduced down payment

requirements, and installment payment

options; whether reduced upfront

payments are necessary; adoption of

partitioning rule for rural telephone

companies; adoption of eligibility

standards for small business and rural

telephone companies; and for small

businesses, adoption of restrictions on

transfer or assignment of their licenses.

II. Discussion

A. Competitive Bidding

5. In the CMRS Third Report & Order,

59 FR 59,945 (Nov. 21, 1994), the

Commission determined that it would

use competitive bidding to select from

among mutually exclusive applicants in
22024 Federal Register / Vol. 60, No. 86 / Thursday, May 4, 1995 / Proposed Rules

the 900 MHz SMR service. Accordingly,

under the Commission’s auction

authority, if mutually exclusive

applications for an MTA 10-channel

block are accepted for filing, the

Commission will award that license

through competitive bidding. The

Commission requests comment on

specific bidding procedures, as set forth

below.

6. Competitive Bidding Design. In the

Second Report & Order, PP Docket No.

93–253, 59 FR 22980 (May 4, 1994)

(Auctions Second Report and Order),

the Commission stated that (1) licenses

with strong value interdependencies

should be auctioned simultaneously;

and (2) multiple round auctions

generally will yield more efficient

allocations of licenses and higher

revenues by providing bidders with

information regarding other bidders’

valuations of licenses, especially where

there is substantial uncertainty as to

value. Thus, where the licenses to be

auctioned are interdependent and their

value is expected to be high,

simultaneous multiple round auctions

would best achieve the Commission’s

goals for competitive bidding. Based on

these factors, the Commission

tentatively concluded that simultaneous

multiple round auctions are appropriate

for the 900 MHz SMR service. The

expected value of 900 MHz SMR

licenses is high, the licenses are

interdependent, and licensees will

likely aggregate across spectrum blocks

and geographic regions. Because,

however, the presence of incumbents on

certain channels could affect the relative

desirability and value of otherwise

identical MTA licenses, the Commission

proposes to delegate authority to the

Wireless Telecommunications Bureau to

revisit the issue of whether another

auction design would be more

appropriate. The Commission seeks

comments on this tentative conclusion

and proposal.

7. License Grouping. The Commission

determined in the Auctions Second

Report & Order, 59 FR 22980 (May 4,

1994), that in a multiple round auction,

highly interdependent licenses should

be grouped together and put up for bid

at the same time because such grouping

provides bidders with the most

information about the prices of

complementary and substitutable

licenses during the course of an auction.

The Commission also determined that

the greater the degree of

interdependence among the licenses,

the greater the benefit of auctioning a

group of licenses together in a

simultaneous multiple round auction.

The Commission tentatively concludes

that all 51 MTAs in the 900 MHz band

should be auctioned simultaneously.

While this may entail more

administrative costs than breaking the

licenses into groups, the added cost will

be outweighed by the informational and

bidding flexibility advantages afforded

by a single auction. Moreover, the 1020

MTA licenses to be auctioned are less

than half the number of broadband PCS

licenses to be auctioned in Blocks A

through F, and all licenses will be for

the same amount of spectrum and use

a single service area definition. The

Commission also proposes to reserve the

discretion to inform applicants by

Public Notice if the Commission

determines to hold more than one

auction, on the basis that a single

auction proves administratively

unworkable.

B. Bidding Issues

8. Bid Increments. The bid increment

is the amount or percentage by which a

bid must be raised above the previous

round’s high bid in order to be accepted

as valid in the current bidding round.

The Commission proposes to start the

900 MHz auction with relatively large

increments, and adjust the increments

as bidding activity indicates. In Stage I

of the auction, the minimum bid

increment would be five percent of the

high bid in the previous round or $.02

per MHz-pop, whichever is greater. In

Stage II, the Commission would reduce

the minimum bid increment to the

greater of five percent of $.01 per MHzpop, and in Stage III, the greater of five

percent of $.01 per MHz-pop. The

Commission also proposes to retain the

discretion to vary the minimum bid

increments for individual license or

groups of licenses at any time before or

during the course of the auction, based

on the number of bidders, bidding

activity, and the aggregate high bid

amounts. Finally, the Commission

proposes to retain the discretion to keep

an auction open if there is a round in

which no bids are submitted.

9. Stopping Rules. In the CMRS Third

Report & Order, 59 Fed. Reg. 59,945

(Nov. 21, 1994), the Commission noted

that in multiple round auctions, a

stopping rule must be established for

determining when the auction is over.

The Commission proposes to adopt a

simultaneous stopping rule for 900 MHz

SMR. Under this approach, bidding

remains open on all licenses until there

is no new acceptable bid for any license.

This approach also provides full

flexibility to bid for any license as more

information becomes available during

the course of the auction. MTA licenses

are expected to have relatively high

values because of the substantial

amount of clear spectrum that remains

available, the high valuation of SMR

spectrum in secondary market

transactions, the substitutability

between licenses within the same MTA

and the ability to pursue back-up

strategies. Likewise, the use of MTAs,

rather than BTAs or more numerous

service areas, should reduce complexity

of a simultaneous stopping rule.

Because the Commission proposes to

impose an activity rule, this approach

will not lead to excessively long

auctions while affording bidders

flexibility to pursue back-up strategies.

10. The Commission also proposes to

retain the discretion to announce at any

time during the auction that the auction

will end after a specified number of

additional rounds. Bids would only be

accepted on licenses where the high bid

has increased in the last three rounds.

This would deter bidders from

continuing to bid on a few low value

licenses solely to delay the closing of

the auction. It would also enable the

Commission to end the auction when it

determines that the benefits of

terminating the auction and issuing

licenses exceed likely benefits of

continuing to allow bidding. The

Commission proposes that this

mechanism be used only in case of

extremely dilatory bidding and that

final bidding procedures would be

announced by public notice. The

Commission also proposes to retain the

discretion to conduct market by market

closings, if circumstances so warrant, to

be announced during the auction.

Finally, the Commission proposes to

retain discretion to keep an auction

open in a round in which no new

acceptable bids are submitted if the

Commission receives a ‘‘proactive’’

waiver of the activity rules, and to retain

discretion to keep an auction open even

if no proactive waivers are filed.

11. Duration of Bidding Rounds. The

Commission reserves the discretion to

vary the duration of bidding rounds or

the interval at which bids are accepted

(e.g. run more than one round per day)

in order to move the auction toward

closure more quickly. The Commission

will announce any changes to the

duration of and intervals between

bidding rounds either by public notice

prior to the auction or by announcement

during the auction.

12. Activity Rules. The MilgromWilson activity rule encourages bidders

to participate in early rounds by

limiting their maximum participation to

some multiple of their minimum

participation level. The Commission

tentatively concludes that the MilgromWilson activity rule should be used in

conjunction with the simultaneous

stopping rule to award 900 MHz SMR
Federal Register / Vol. 60, No. 86 / Thursday, May 4, 1995 / Proposed Rules 22025

licenses. Under this approach, the

minimum activity level increases during

the course of the auction. Absent

waivers, a bidder’s eligibility in the

current round is determined by the

bidder’s activity level and eligibility in

the previous round; in the first round,

however, eligibility is determined by the

bidder’s upfront payment and is equal

to the upfront payment divided by $.02

per MHz-pop. Bidders are required to

declare their maximum eligibility in

terms of MHz-pops, and made an

upfront payment equal to $0.02 per

MHz-pop. In each round, bidders are

limited to bidding on licenses

encompassing no more than the number

of MHz-pops covered by their upfront

payment, and licenses on which a

bidder is the high bidder from the

previous round count toward this

bidding limit. Bidders have flexibility to

shift their bids among any license for

which they have applied so long as,

within each round, the total MHz-pops

encompassed by those licenses does not

exceed the total number of MHz-pops

on which they are eligible to bid. This

approach would best achieve the

Commission’s goals of affording bidders

flexibility to pursue backup strategies,

while at the same time ensuring that

simultaneous auctions are concluded

within a reasonable period of time. The

Commission seeks comment on these

issues.

13. During Stage I, the Commission

tentatively concludes that a bidder must

be active on licenses encompassing onehalf of the MHz-pops for which it is

eligible. In Stage II and Stage III, the

Commission tentatively concludes that

the bidder must be active on 75 and 95

percent, respectively, of the MHz-pops

for which it is eligible. The penalty for

falling below the minimum activity

level at any stage would be a reduction

in maximum eligibility to bid in future

rounds. The transition from one stage of

the auction to the next would be

determined by the aggregate level of

bidding activity, subject to the

Commission’s discretion. Once an

auction proceeds from one stage to the

next, it could not revert to any previous

stage. Moreover, the Commission

proposes to reserve the discretion to

increase or decrease these activity levels

as well as to vary the timing of stages

and activity levels for each stage

through public notices issued after

applications are filed and before the

auction begins, as circumstances

warrant. The Commission seeks

comment on these proposals.

14. In the Fourth Memorandum

Opinion & Order, PP Docket No. 93–

253, 59 FR 53364 (October 24, 1994), the

Commission clarified that it retained the

discretion to modify the method and

timing of submitting waivers and to

allow for both ‘‘proactive’’ and

‘‘automatic’’ waivers. Proactive waivers

are submitted by the bidder, while

automatic waivers would be submitted

automatically for a bidder whenever its

eligibility would be reduced because of

insufficient bidding activity and a

waiver is available unless the bidder

specifically chooses not to have the

automatic waiver apply. The

Commission proposes to use these

waiver procedures with respect to the

900 SMR auctions.

15. Specifically, the Commission

proposes to implement a waiver

procedure permitting each bidder to

request and automatically receive a

certain number of waivers of the activity

rule during the auction. The

Commission would announce by Public

Notice how many waivers bidders will

receive. A waiver would permit a bidder

to maintain its eligibility at the same

level as in the round for which the

waiver is submitted; it could not,

however, be used to correct an error in

the amount bid. Under this proposal, a

bidder may request a waiver either in

the round in which its bidding falls

below the minimum required level or

prior to submitting a bid in the next

round. If an activity rule waiver is

proactively requested in a round in

which no other bidding activity occurs,

the auction would remain open. The

Commission seeks comment on these

proposals. Finally, the Commission

retains discretion to use an alternative

activity rule for 900 MHz SMR if it

determines that the Milgrom-Wilson

rule is too complicated or costly to

administer. Any such change would be

announced by public notice before

commencement of the auction.

16. Rules Prohibiting Collusion.

Section 1.2105(c) of the Commission’s

Rules, 47 CFR 1.2105(c) prohibits

collusive conduct in the context of

competitive bidding. This rule prohibits

bidders from communicating with one

another after short-form applications

have been filed regarding the substance

of their bids or bidding strategies, and

also prohibits bidders from entering into

consortium arrangements or joint

bidding agreements after the deadline

for short-form applications has passed.

47 C.F.R. 1.2105(c)(1)–(2). The

Commission proposes to apply Section

1.2105(c) to 900 MHz SMR auctions.

Bidders who have not filed form 175

applications for any of the same MTA

licenses would be permitted enter into

such discussions, consortia, or

arrangements, or add equity partners,

during the course of an auction. Also,

communications among bidders

concerning matters unrelated to the

auctions would be permitted. The

Commission seeks comment on this

proposal.

17. Under the collusion rules, bidders

would also identify on their Form 175

applications parties with whom they

have entered into any agreements

relating to the competitive bidding

process, and certify that they will not

enter into any such agreements with any

parties other than those identified. 47

CFR 1.2105(a)(2). Furthermore, winning

bidders in the 900 MHz SMR auctions

would attach as an exhibit to the Form

600 long-form application a detailed

explanation of the terms and conditions

and parties involved in any such

agreement entered into prior to the close

of bidding. All such arrangements

would have been entered into prior to

filing of short-form applications to

comply with the Commission’s rules. 47

CFR 1.2107. Allegations of specific

instances of collusion in violation of

these rules would be investigated by the

Commission or referred to the

Department of Justice. The Commission

also proposes that bidders found to have

violated the Commission’s rules or the

antitrust laws may be subject to

forfeiture of their down payment or

their full bid amount, revocation of their

licenses, and prohibition from

participation in future auctions. The

Commission seeks comment on these

proposals.

C. Procedural, Payment and Penalty

Issues

18. Pre-Auction Application

Procedures. The Commission proposes

to follow generally the processing and

procedural rules established in 47 CFR

Part 1, Subpart Q with certain

modifications designed to address the

particular characteristics of the 900

MHz SMR service. Unlike incumbent

900 MHz SMR licensees that are

essentially confined to the smaller DFA

region, MTA licensees will gain use of

a large geographic area and the freedom

to locate base stations anywhere within

that larger geographic region. Thus, the

Commission proposes to treat MTA

applicants as initial applicants for

public notice, application processing,

and auction purposes, regardless of

whether they are already incumbent

operators.

19. The 1993 Budget Act expressly

provides the Commission authority to

require that bidders’ applications

contain all information and

documentation sufficient to demonstrate

that the application is not in violation

of Commission rules, and to dismiss

applications not meeting those

requirements prior to the competitive
22026 Federal Register / Vol. 60, No. 86 / Thursday, May 4, 1995 / Proposed Rules

bidding. 47 U.S.C. 309(j)(5). See also H.

R. Rep. No. 111, 103d Cong., 1st Sess.

28 (1993). In furtherance of this policy,

the Commission decided to require only

a short-form application prior to

competitive bidding, and determined

that only winning bidders should be

required to submit a long-form license

application after the auction. 47 CFR

1.2104, 1.207. Because this procedure

fulfills the statutory requirements and

adequately protects the public interest

here, the Commission proposes to

extend application of these rules to the

competitive bidding process for 900

MHz SMR.

20. Under this proposal, the Wireless

Telecommunications Bureau would

release an initial Public Notice

announcing the auction. The Public

Notice would specify the following:

licenses to be auctioned; time and place

of the auction method of competitive

bidding to be used; applicable bid

submission procedures; stopping rules;

activity rules; the deadline by which

short-form applications must be filed;

and the amounts and deadlines for

submitting the unfront payment.

Applications submitted before the

release of the Public Notice would be

returned as premature. Likewise,

applications submitted after the

deadline specified by Public Notice

would be dismissed, with prejudice, as

untimely.

21. All bidders would be required to

submit short-form applications on FCC

Form 175 (and FCC Form 175–S, if

applicable), by the date specified in the

initial Public Notice. See CFR

1.2105(a)(2). Applications could be filed

manually or electronically. Each

applicant would specify on its

applications certain information,

including its status as a designated

entity (if applicable), its classification

(i.e., individual, corporation,

partnership, trust, or other), the markets

and frequency blocks for which it is

applying, and the names of persons

authorized to place or withdraw a bid

on its behalf. If there is no mutual

exclusivity for a particular license, and

no petitions to deny are filed, the

application would be grantable after 30

days. The Commission seeks comment

on the proposals discussed above.

22. Amendments and Modifications.

To encourage maximum bidder

participation, the Commission proposes

to provide 900 MHz SMR applicants

with an opportunity to correct minor

defects in their short form applications

prior to the auction. The Commission

also proposes to waive the ex parte rules

as they apply to submission of amended

short-form applications to maximize

applicants’ opportunities to seek

Commission staff advice on making

such amendments. Also, applicants

would be permitted to modify their

applications to reflect formation of

consortia or changes in ownership at

any time before or during an auction,

provided that (1) such changes do not

result in a change in control of the

applicant, and (2) parties forming

consortia or entering into ownership

agreements have not applied for licenses

in any of the same geographic licenses.

Applicants would not, however, be

permitted to make major modifications

to their applications, including changes

in markets, changes in control of the

applicant, or additions of the other

bidders into the bidding consortia, until

after the auction. Applications that are

not signed would be dismissed as

unacceptable. The Commission seeks

comment on these proposals.

23. Applications with defects, minor

or otherwise, would be listed in a public

notice. After reviewing corrected

applications, the Commission would

release a second public notice

announcing applicants whose

applications have been accepted or

filing. This second public notice would

announce the date by which applicants

must submit an upfront payment to the

Commission, generally no later than 14

days before the scheduled auction. The

Commission would release a third

public notice announcing the names of

all applicants that have been

determined as qualified to bid. An

applicant who fails to submit a

sufficient upfront payment to qualified

it to bid on any license being auctioned

would not be identified on this Public

Notice as a qualified bidder. The

Commission seeks comment on these

proposals.

24. Upfront Payments. The

Commission tentatively concludes that

applicants that have been determined as

qualified to bid should be required to

submit a payment of $0.02 per MHzpop, based on the number of 10-channel

blocks in each MTA identified by an

applicant on its Form 175. This

requirement would help ensure that

only serious and qualified bidders

participate and that any bid withdrawal

or default penalties are paid. See

Auctions Second Report & Order at

¶ 171. This formula would also afford

bidders the flexibility to change their

strategy during an auction and bid on a

larger number of smaller licenses or a

smaller number of larger licenses, so

long as the total MHz-pops combination

does not exceed that amount covered by

the upfront payment. Population

information for each license would be

announced in the initial Public Notice

released prior to the auction. The

Commission seeks comment on these

proposals.

25. Down payment and Full Payment.

The Commission tentatively concludes

that winning bidders in 900 MHz SMR

auctions should be required to

supplement their upfront payments

with a down payment sufficient to bring

their total deposits up to 20 percent of

their winning bid(s). Under this

proposal, if the upfront payment already

tendered by a winning bidder, after

deducting any bid withdrawal and

default penalties due, amounts to 20

percent or more of its winning bids, no

additional deposit would be required. If

the upfront payment amount on deposit

is greater than 20 percent of the winning

bid amount after deducting any bid

withdrawal and default penalties due,

the additional monies would be

refunded. If a bidder has withdrawn a

bid or defaulted but the amount of the

penalty cannot yet be determined, the

bidder would be required to make a

deposit of 20 percent of the amount bid

on such licenses. When it becomes

possible to calculate and assess the

penalty, any excess deposit would be

refunded. Upfront payments would be

applied to such deposits and to bid

withdrawal and default penalties due

before being applied toward the bidder’s

down payment on licenses the bidder

has won and seeks to acquire. The

Commission seeks comment on these

proposals.

26. The Commission proposes to

require winning bidders to submit the

required down payment by cashier’s

check or wire transfer to its lock-box

bank by a date to be specified by Public

Notice, generally within five business

days following the close of bidding. The

balance of their winning bids would be

made within five business days

following public notice that the

Commission is about to award the

license, and grant of the license would

be conditioned on this payment. An

auction winner that is eligible to make

payments through an installment plan,

however, would be required to submit a

deposit up to five percent of its winning

bid, and would submit an additional

five percent of its winning bid after the

license granted. This would ensure that

auction winners have the necessary

financial capabilities to complete

payment for the license and pay for the

costs of constructing a system, without

hindering growth or diminishing access

to the auctions. The Commission seeks

comment on this proposal.

27. Bid Withdrawal, Default, and

Disqualification. The Commission

proposes that bidders who withdraw a

high bid, are found unqualified to hold

licenses, or default on payment of a
Federal Register / Vol. 60, No. 86 / Thursday, May 4, 1995 / Proposed Rules 22027

balance due, would be assessed a

substantial penalty. Any bidder that

withdraws a high bid during an auction

before the Commission declares bidding

closed would be required to reimburse

the Commission in the amount of the

difference between its high bid and the

amount of the winning bid the next time

the license is offered by the

Commission, if this subsequent winning

bid is lower than the withdrawn bid. If

a license is re-offered by auction, the

‘‘winning bid’’ would refer to the high

bid in the auction in which the license

is re-offered. If a license is re-offered in

the same auction, the ‘‘winning bid’’

would refer to the high bid amount,

made subsequent to the withdrawal, in

that auction. If the subsequent high

bidder also withdraws its bid, that

bidder would be required to pay a

penalty equal to the difference between

its withdrawn bid and the amount of the

subsequent willing bid the next time the

license is offered by the Commission. If

a license which is the subject of

withdrawal or default is not reauctioned, but is instead offered to the

highest losing bidders in the initial

auction, the ‘‘winning bid’’ would refer

to the bid of the highest bidder who

accepts the offer. Losing bidders would

not be required to accept the offer, and

therefore may decline without penalty.

The Commission seeks comment on

these proposals.

28. The Commission also proposes

that after bidding closes, a defaulting

winner would be assessed an additional

penalty of three percent of the

subsequent winning bid or three percent

of the amount of the defaulting bid,

whichever is less. See 47 CFR 1.2104(g),

1.2109. If a default or disqualification

involves an applicant’s gross

misconduct, misrepresentation, or bad

faith, the Commission would be able to

declare the applicant ineligible to bid in

future auctions or take other action.

These penalties would adequately

discourage default and ensure that

bidders have adequate financing and

meet all eligibility and qualification

requirements.

29. Finally, the Commission proposes

that if the MTA winner defaults, is

otherwise disqualified after having

made the required down payment, or

the license is terminated or revoked,

then the Commission would re-auction

the license. If the default occurs within

five days after bidding has closed, the

Commission would retain the discretion

to offer the license to the second highest

bidder at its final bid level, and

thereafter to other bidders (in

descending order of their bid amounts).

If only a small number of relatively lowvalue licenses were to be re-auctioned

and only a short time has passed since

the initial auction, the Commission

would have authority to choose to offer

the license to the highest losing bidders

if the cost of running another auction

exceed the benefits. The Commission

seeks comment on these proposals.

30. Long-Form Applications. If the

winning bidder makes the down

payment in a timely manner, the

Commission proposes the following

procedures: A long-form application

filed on FCC Form 600 must be filed by

a date specified by Public Notice,

generally within ten business days after

the close of bidding. Designated entities

must also submit evidence to support

their claim to any special provision,

such as bidding credits or installment

payment options. Once the long-form is

accepted for filing, the Commission will

issue a Public Notice announcing this

fact, triggering the filing window for

petitions to deny. If the Commission

denies all petitions to deny, and is

otherwise satisfied that the applicant is

qualified, the license(s) will be granted

to the auction winner. See generally 47

CFR 90.163–90.166. The Commission

seeks comment on this proposal.

31. Petitions to Deny and Limitations

on Settlements. A party filing a petition

to deny will be required to demonstrate

standing and meet all other applicable

filing requirements. 47 CFR 90.163. The

Commission also adopted ‘‘greenmail’’

restrictions to prevent filing of

speculative applications and pleadings

(or threats of the same) designed to

extract money from 900 MHz SMR

applicants. 47 CFR 90.162. Thus, the

consideration than an applicant or

petitioner is permitted to receive for

agreeing to withdraw an application or

petition to deny is limited to the

legitimate and prudent expenses of the

withdrawing party. Finally, the

Commission need not conduct a hearing

before denying an application if it

determines that an applicant is not

qualified and no substantial issue of fact

exists concerning that determination.

32. Transfer Disclosure Requirements.

In the 1993 Budget Act amendments to

the Communications Act, Congress

directed the Commission to ‘‘require

such transfer disclosures and antitrafficking restrictions and payment

schedules as may be necessary to

prevent unjust enrichment as a result of

the methods employed to issue licenses

and permits. 47 U.S.C. 309(j)(4)(E)). To

ensure that these statutory requirements

are met, the Commission concluded in

the Auctions Second Report & Order, 59

FR 22980 (May 4, 1994), that transfer

disclosure requirements will enable the

Commission to accumulate the

necessary data to evaluate auction

designs and judge whether licenses have

been issued for bids that fall short of the

true market value of the license. The

Commission tentatively concludes to

apply these same requirements to all

900 MHz SMR licenses obtained

through the competitive bidding

process. See 47 CFR 1.2111(a).

Generally, licensees transferring their

licenses within three years after the

initial license grant would be required

to file, together with their transfer

applications, the associated contracts for

sale, option agreements, management

agreements, and all other documents

disclosing the total consideration

received in return for the transfer of the

license. The Commission would give

particular scrutiny to auction winners

who have not yet begun commercial

service and who seek approval for a

transfer of control or assignment of their

licenses, so it may determine if any

unforeseen problems relating to unjust

enrichment have arisen outside the

small business context. The

Commission seeks comment on this

proposal.

33. Performance Requirements. The

Communications Act requires the

Commission to ‘‘include performance

requirements, such as appropriate

deadlines and penalties for performance

failures, to ensure prompt delivery of

service to rural areas, to prevent

stockpiling or warehousing of spectrum

by licensees or permittees, and to

promote investment in and rapid

deployment of new technologies and

services. 47 U.S.C. 309(j)(4)(B). The

Commission tentatively concludes that

additional performance requirements,

beyond those already provided in the

service rules, and that coverage

requirements adopted in this Order will

sufficiently prevent warehousing of

spectrum. The Commission seeks

comment on this proposal.

D. Treatment of Designated Entities

34. Overview and Objectives. Congress

provided that in establishing eligibility

criteria and bidding methodologies, the

Commission shall ‘‘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, rural telephone companies,

and businesses owned by members of

minority groups and women.’’ 47 U.S.C.

309(j)(3). Congress also provided that to

promote these objectives, the

Commission shall ‘‘consider alternative

payment schedules and methods of

calculation, including lump sums or
22028 Federal Register / Vol. 60, No. 86 / Thursday, May 4, 1995 / Proposed Rules

guaranteed installment payments, with

or without royalty payments, or other

schedules or methods * * * and

combinations of such schedules and

methods.’’ 47 U.S.C. 309(j)(3)(B). The

statute also requires the Commission to

‘‘ensure that small businesses rural

telephone companies, and businesses

owned by members of minority groups

and women are given the opportunity to

participate in the provision of spectrumbased services. Id. § 309(j)(4)(D). To

achieve this goal, the statute indicates

that the Commission should ‘‘consider

the use of tax certificates, bidding

preferences, and other procedures.’’ Id.

35. Congress was particularly

concerned that difficulties in accessing

capital would prevent designated

entities from meaningful participation

in auctions and spectrum-based

services. See H.R. Rep. No. 111, 103d

Cong., 1st Sess. 254–55 (1993). In other

services, the Commission has employed

a wide range of special provisions and

eligibility criteria designed to meet this

statutory objective. See, e.g., Third

Report & Order. PP Docket No. 93–253,

59 FR 26741 (May 24, 1994). The

Commission states its intention to meet

this objective in the 900 MHz SMR

service, and tentatively concludes that it

should provide for bidding credits,

installment payments and reduced

down payments to promote

opportunities for small businesses,

including small businesses owned by

women and minorities—on all channel

blocks in each MTA. These provisions

would reduce barriers to accessing

capital faced by all small businesses. In

addition, to facilitate the introduction of

service to rural areas, the Commission

proposes to allow rural telephone

companies to obtain geographically

partitioned 900 MHz SMR licenses in

areas where they provide telephone

service.

36. Bidding Credits. Bidding credits

allow eligible designated entities to

receive a payment discount (or credit)

for their winning bid in an auction. In

the Auctions Second Report & Order, 59

FR 22980 (May 4, 1994), the

Commission determined that

competitive bidding rules applicable to

individual services would specify the

designated entities eligible for bidding

credits and the amounts of the available

bidding credits for that particular

service. The Commission has since

adopted bidding credits for narrowband

PCS, broadband PCS, and Interactive

Video and Data Service. See Third

Memorandum Opinion & Order &

Further Notice of Proposed Rule

Making, PP Docket No. 93–253, 59 FR

44058 (August 26, 1994); Fifth Report &

Order, PP Docket No. 93–253, 59 FR

37566 (July 22, 1994); Fourth Report &

Order, PP Docket No. 93–253, 59 FR

24947 (May 13, 1994). For 900 MHz

SMR service, the Commission proposes

to offer a 10 percent bidding credit to

small businesses bidding on any of the

ten-channel blocks within each MTA.

These bidding credit designations

would help achieve the objectives of the

Budget Act and provide small

businesses with a meaningful

opportunity to participate in the 900

MHz SMR auction, while taking into

account the concerns of incumbents

within the DFAs. Because of the large

number of licenses available in this

service, the Commission states that a

higher bidding credit would be

unnecessary.

37. The Commission seeks comment

on this proposal. Specifically, is a 10

percent credit sufficient to enhance

bidding opportunities? Also, how

should the presence of incumbents on

all channel blocks affect the availability

of bidding credits on all blocks? In

previous auctions where bidding credits

for women and minorities have been

available, varying degrees of

participation in spectrum-based services

has resulted, and the Commission’s

auction experience to date has not

included a small business bidding credit

available on all blocks. Also, the

Commission proposes to limit eligibility

for bidding credits to small businesses.

The Commission seeks comment on

whether eligibility should be expanded

to include businesses owned by

minorities and/or women, even if they

do not fall within the Commission’s

small business size standards for 900

MHz SMRs.

38. In the event that the Commission

modifies the bidding credit eligibility

proposal for minority- and womenowned entities, the Commission also

seeks comment on a second bidding

credit alternative, which would entitle

small businesses and minority- and

women-owned entities to receive

bidding credits on the five least

encumbered blocks in each MTA. In the

event the Commission adopts a proposal

to limit bidding credits to small

businesses, should it also limit

availability of the credit to the channel

blocks with the fewest incumbents, or

would this limitation dilute the

effectiveness of a small business credit

as a means of attracting broad

designated entity participation in the

900 MHz SMR service? What bidding

credit amounts should apply to women

and minority-owned businesses and

small businesses? Should womenowned and minority-owned businesses

that are also small businesses receive an

aggregate bidding credit? The

Commission seeks comment on the

ramifications of each proposal for

incumbents in each block. Finally, the

Commission seeks comment on any

possible alternative bidding credit

schemes.

39. Reduced Down Payments/

Installment Payments. The Commission

proposes to adopt an installment

payment option for small businesses

that are winning bidders in the 900 MHz

SMR auction. Under this proposal,

small businesses that are winning

bidders in the 900 MHz SMR auction

would be entitled to pay their bid in

installments over the term of the

license, with interest charges to be fixed

at the time of licensing at a rate equal

to the rate for ten-year U.S. Treasury

obligations plus 2.5 percent. Under this

proposed rule, qualified licensees

would make interest-only payments

during the first two years of the

remaining license term. Timely payment

of all installments would be a condition

of the license grant and failure to make

such timely payment would be grounds

for revocation of the license.

Additionally, the Commission

tentatively concludes that small

businesses that are eligible for

installment payments also would be

allowed to pay a reduced down

payment (five percent of the winning

bid) five days after the auction closes,

with the remaining five percent down

payment due five days after Public

Notice that the license is ready for grant.

This proposal would mitigate the effect

of limited access to capital by small

businesses, especially those owned by

minorities and/or women.

40. The Commission seeks comment

on these payment procedures. If the

Commission expands its installment

payment eligibility proposal for womenand minority-owned entities, should

those entities also receive reduced down

payment and installment payment

provisions and, if so, on what terms? In

the event the Commission adopts

provisions for minority- and womenowned applicants, should enhanced

installment payments be made

available?

41. Eligibility for Bidding Credits,

Installment Payments and Reduced

Down Payments. The Commission

proposes to limit eligibility for bidding

credits, installment payments and

reduced down payments to small

businesses, including those owned by

members of minority groups and women

and those rural telephone companies

that meet the small business size

standards. The Commission proposes to

define small businesses as those entities

with less than $3 million in average

gross revenues for each of the preceding
Federal Register / Vol. 60, No. 86 / Thursday, May 4, 1995 / Proposed Rules 22029

three years. The Commission states that

it is unnecessary to propose different

eligibility criteria for minority- and

women-owned entities that do not meet

the small business size standards in

order to achieve the goals of Section

309(j) in the 900 MHz SMR service.

Broadening the scope of opportunities

for very small businesses in all channel

blocks still has the potential to result in

substantial participation by women and

minorities in the provision of 900 MHz

SMR service. Moreover, the Commission

expects that because capital entry

requirements are lower than PCS,

minority- and women-owned businesses

will have greater opportunities to

participate.

42. To enhance the Commission’s

understanding, however, of the capital

requirements the 900 MHz service is

likely to entail, the Commission seeks

comment on the projected costs

associated with acquisition,

construction and operation of 900 MHz

MTA licenses. In addition, to gain

insight into which the degree of small

business participation has resulted in

opportunities for women and minorityowned businesses, the Commission

seeks comment on the composition of

existing 900 MHz SMR operators as well

as providers in other similar services

such as 800 MHz SMR. For example,

what proportion of existing 900 MHz

SMR businesses are owned by women

or minorities? To what extent have

participants in 900 MHz SMR networks

been small businesses owned by women

and minorities? What is the likelihood

that management agreements are likely

to serve as a vehicle for participation in

the 900 MHz SMR service by minority

and women-owned businesses? Finally,

regardless of whether the Commission

adopts its proposal for small businesses,

the Commission proposes to request

bidder information on the short-form

filings as to minority and/or womenowned status in order to monitor the

applicant pool and monitor

participation by women and minorities.

The Commission seeks comment on this

monitoring proposal.

43. Small Business Definition. The

Commission defines eligibility

requirements for small businesses on a

service-specific basis, taking into

account capital requirements and other

characteristics of each particular

service. Second Memorandum Opinion

& Order, PP Docket No. 93–253, 59 FR

44272 (August 26, 1994). Because 900

MHz SMR is expected to be less capitalintensive than PCS, a much lower gross

revenue threshold is warranted.

Therefore, the Commission proposes to

define a small business as an entity that,

together with affiliates and attributable

investors, has average gross revenues for

the three preceding years of less than $3

million. This standard appropriately

accounts for build-out costs, abundant

license supply, and low acquisition

costs. The Commission seeks comment

on this proposal. For example, is it an

appropriate threshold? Should it be

higher or lower, based on the types of

companies that are likely to benefit from

the special provisions proposed here?

The Commission also tentatively

concludes that it will consider the

revenues of affiliates and certain

investors and it proposes to apply the 25

percent attribution threshold and

affiliation rules similar to those used in

the PCS auction rules. See 47 CFR

24.320(b)(2)(iv), 24.720(j)(1). The

Commission seeks comment on these

issues.

44. Finally, if the Commission adopts

separate provisions for minority-owned

and women-owned entities, it also seeks

comment on whether it should adopt

the definition of minority-owned and

women owned businesses contained in

Section 1.2110(b)(2) of the

Commission’s rules, 47 CFR

1.2110(b)(2), i.e., businesses in which

minorities and/or women who control

the applicant have at least 50.1 percent

equity ownership and, in the case of a

corporate applicant, a 50.1% voting

interest. Every general partner in a

partnership either must be a minority

and/or a woman who individually or

together own at least 50.1 percent of the

partnership equity.

45. Transfer Restrictions and Unjust

Enrichment Provisions. In the Fifth

Report & Order, PP Docket No. 93–253,

59 FR 37566 (July 22 1994), the

Commission adopted restrictions on the

transfer or assignment of licenses to

ensure that designated entities do not

take advantage of special provisions by

immediately assigning or transferring

control of their licenses. The

Commission proposes to adopt these

restrictions on transfer and assignment

of 900 MHz SMR licenses won by

designated entities. Under this proposal,

a designated entity would be prohibited

from voluntarily assigning or

transferring control of its license to any

other entity during the three years after

license grant. In the fourth and fifth

years of the license term, the designated

entity would only be able to assign or

transfer control of its license to another

qualified designated entity, and no

unjust enrichment could be gained

through the transfer. Thus, if the entity

to which the designated entity transfers

or assigns the license were not eligible

for the same provisions, the difference

would have to be paid back to the U.S.

Treasury as a condition of approval of

the transfer or assignment. The

Commission seeks comment on these

proposals.

46. For the remainder of the license

term, the Commission proposes to

continue to impose unjust enrichment

rules on designated entities. These

unjust enrichment provisions would

deter speculation and participation in

the licensing process by those who do

not intend to offer service to the public,

or who intend to use the Commission’s

provisions to obtain a license at a lower

cost than they otherwise would have to

pay, and later to sell it at the market

price. Under this proposal, licensees

seeking to transfer their licenses for

profit must, within a specified time,

remit to the government a penalty equal

to a portion of the total value of the

benefit conferred by the government.

Therefore, if a designated entity making

installment payments sells its license to

an entity that does not qualify as a

designated entity, the Commission

would require payment of the remaining

principal and any interest accrued

through the date of assignment as a

condition of the license assignment or

transfer. If a transfer is made to another

eligible designated entity, no penalty

would be assessed against the original

designated entity license holder. If

bidding credits were awarded to a

licensee, the Commission would require

a designated entity approval for a

transfer of control or an assignment of

license to a non-designated entity, or

who proposes to take any other action

relating to ownership or control that

will result in loss of status as an eligible

designated entity, to reimburse the

government for the amount for the

amount of the bidding credit before

transfer of the license will be permitted.

The Commission proposes to apply

these payment requirements for the

entire license term. The Commission

seeks comment on this proposal.

47. Rural Telephone Company

Partitioning. Congress directed the

Commission to ensure that rural

telephone companies have the

opportunity to participate in the

provision of spectrum-based services.

Rural areas tend to be less profitable to

serve than more densely populated

urban areas. Therefore, service to these

areas may not be a priority or feasible

for many licensees. Rural telephone

companies, however, are well

positioned to serve these areas because

of their existing infrastructure.

Therefore, the Commission proposes a

geographic partitioning scheme to

encourage participation by rural

telephone companies.

48. Under this proposal, rural

telephone companies would be
22030 Federal Register / Vol. 60, No. 86 / Thursday, May 4, 1995 / Proposed Rules

permitted to acquire partitioned 900

MHz SMR licenses either by: (1) forming

bidding consortia consistent entirely of

rural telephone companies to participate

in auctions, and then partition the

licenses won among consortia

participants; or (2) acquiring partitioned

900 MHz SMR licenses from other

licenses through private negotiation and

agreement either before or after the

auction. The Commission would require

that partitioned areas conform to

established geopolitical boundaries and

include all portions of the wireline

service area of the rural telephone

company applicant that lies within the

service area. This partitioning scheme

would prevent rural telephone

companies from having to bid on the

entire MTA license to obtain licenses

covering their wireline service areas. In

addition, rural telephone companies

would have the flexibility to serve areas

in which they already provide service,

while the remainder of the service area

could be served by other providers. The

Commission also proposes to use the

definition for rural telephone companies

implemented in the Fifth Report &

Order, PP Docket No. 93–253, 59 FR

37566 (July 22, 1994), for broadband

PCS. Rural telephone companies would

be defined as local exchange carriers

having 100,000 or fewer access lines,

including all affiliates. The Commission

seeks comment on this proposal.

E. Other Provisions

49. Reduced Upfront Payments. The

Commission proposes not to adopt a

reduced upfront payment option in the

900 MHz SMR service for designated

entities. The other provisions adopted

here render a reduced upfront payment

option unnecessary and, in the absence

of an entrepreneurs’ block, may be too

costly to administer in the 900 MHz

SMR service. The Commission seeks

comment on this proposal. Also, if the

Commission adopts provisions for

minority and women-owned entities,

should the Commission apply a reduced

upfront payment provision to those

entities only?

50. Set-aside Spectrum. In the Fifth

Report & Order, PP Docket No. 93–253,

59 FR 37566 (July 22, 1994), the

Commission established entrepreneurs’

blocks on which only qualified

entrepreneurs, including designated

entities, could bid. See also 47 CFR

24.709. The Commission tentatively

concludes not to adopt an

entrepreneurs’ block for the 900 MHz

SMR auction. First, the large numbers of

licenses available and relatively small

spectrum allocations in the 900 MHz

SMR service should allow for extensive

small business participation. Second,

the effectiveness of bidding credits and

other provisions will be diluted, due to

the smaller capital outlay anticipated for

this service. Third, it may be impractical

to choose particular blocks to set aside

for bidding solely by entrepreneurs due

to incumbent 900 MHz SMR operators

in 19 of the 46 DFAs. The Commission

seeks comment on this proposal. Are the

capital requirements of this service

anticipated to be so substantial that the

Commission should insulate certain

blocks from very large bidders in order

to provide meaningful opportunities for

designated entities?

III. Procedural Matters

Initial Regulatory Flexibility Analysis.

As required by Section 603 of the

Regulatory Flexibility Act, the

Commission has prepared an Initial

Regulatory Flexibility Analysis (IRFA)

of the expected impact on small entities

of the policies and rules proposed in

this Further Notice of Proposed Rule

Making. Written public comments are

requested on the IRFA.

Reason for Action: This rule making

proceeding was initiated to secure

comment on proposals for establishing a

flexible regulatory scheme for the 900

MHz Specialized Mobile Radio (SMR)

service that would promote efficient

licensing and enhance the service’s

competitive potential in the commercial

mobile radio marketplace. The

proposals advanced in the Second

Further Notice of Proposed Rule Making

are also designed to implement

Congress’s goal of regulatory symmetry

in the regulation of competing

commercial mobile radio services as

described in Sections 3(n) and 332 of

the Communications Act, 47 U.S.C.

153(n), 332, as amended by Title VI of

the Omnibus Budget Reconciliation Act

of 1993 (Budget Act). The Commission

also seeks to adopt rules regarding

competitive bidding in the 900 MHz

SMR service based on Section 309(j) of

the Communications Act, 47 U.S.C.

309(j), which delegates authority to the

Commission to use auctions to select

among mutually exclusive initial

applications in certain services,

including 900 MHz SMR.

Objectives: The Commission proposes

to adopt rules for the 900 MHz SMR

service that are intended to promote the

growth of incumbent 900 MHz SMR

systems, and emerging MTA SMR

licensees, and to enhance the ability of

all SMR providers to compete in the

larger commercial mobile services

market. The Further Notice of Proposed

Rule Making seeks to establish

competitive bidding procedures and a

new licensing mechanism for the 900

MHz SMR service that will expedite

service to the public and promote

competition in the CMRS marketplace.

Legal Basis: The proposed action is

authorized under the Budget Act, Pub.

L. No. 103–66, Title VI, 6002, and

Sections 2(a), 3(n), 4(i), 302, 303(g),

303(r), 309(i), 309(j), 332(a), 332(c), and

332(d) of the Communications Act of

1934, 47 U.S.C. 152(a), 153(n), 154(i),

302, 303(g), 303(r), 309(i), 309(j), 332(a),

332(c) and 332(d), as amended.

Reporting, Recordkeeping, and Other

Compliance Requirements: Under the

proposal contained in the Further

Notice of Proposed Rule Making, SMR

licensees who obtain MTA-based

licenses may be required to report

information regarding location of their

facilities and coverage of their service

areas. SMR applicants seeking treatment

as ‘‘designated entities’’ may also be

subject to reporting and recordkeeping

requirements to demonstrate

compliance with the Commission’s

competitive bidding rules.

Federal Rules Which Overlap,

Duplicate or Conflict With These Rules:

None.

Description, Potential Impact, and

Number of Small Entities Involved: The

Further Notice of Proposed Rule Making

potentially affects numerous small

entities already operating 900 MHz SMR

systems in Designated Filing Areas that

will co-exist with 900 MHz SMR MTA

licensees. The competitive bidding

proposals contained in the Further

Notice of Proposed Rule Making also

could affect small entities seeking initial

licenses in the 900 MHz SMR service.

The Further Notice of Proposed Rule

Making proposes special provisions in

the Commission’s auction rules to

benefit ‘‘designated entity’’ applicants,

including small businesses. After

evaluating comments filed in response

to the Further Notice of Proposed Rule

Making, the Commission will examine

further the impact of all rule changes on

small entities and set forth its findings

in the Final Regulatory Flexibility

Analysis.

Significant Alternatives Minimizing

the Impact on Small Entities Consistent

with the Stated Objectives: This Further

Notice of Proposed Rule Making solicits

comment on a variety of alternatives.

Any additional significant alternatives

presented in the comments will also be

considered.

IRFA Comments: The Commission

requests written public comment on the

foregoing Initial Regulatory Flexibility

Analysis. Comments must have a

separate and distinct heading

designating them as responses to the

IRFA and must be filed by the deadlines

provided above.
Federal Register / Vol. 60, No. 86 / Thursday, May 4, 1995 / Proposed Rules 22031

List of Subjects in 47 CFR Part 90

Radio.

Federal Communications Commission,

William F. Caton,

Acting Secretary.

Amendatory Text

Part 90 of Chapter I of Title 47 of the

Code of Federal Regulations is proposed

to be amended as follows:

1. The authority citation for Part 90

continues to read as follows:

Authority: 47 U.S.C. 154, 303, 309 and 332.

2. A new Subpart U consisting of

§§ 90.801 through 90.814 is proposed to

be added to Part 90 to read as follows:

PART 90—PRIVATE LAND MOBILE

RADIO SERVICES

Subpart U—Competitive Bidding

Procedures for 900 MHz Specialized

Mobile Radio

Sec.

90.801 900 MHz SMR subject to

competitive bidding.

90.802 Competitive bidding for 900 MHz

SMR licensing..

90.803 Competitive bidding mechanisms.

90.804 Aggregation of 900 MHz SMR

licenses.

90.805 Withdrawal, default and

disqualification payments.

90.806 Bidding application (FCC Form 175

and 175–S Short-form).

90.807 Submission of upfront payments

and down payments.

90.808 Long-form applications.

90.809 License grant, denial, default, and

disqualification.

90.810 Bidding credits for small businesses.

90.811 Reduced down payment for licenses

won by small businesses.

90.812 Installment payments for licenses

won by small businesses.

90.813 Procedures for partitioned licenses.

90.814 Definitions.

§ 90.801 900 MHz SMR subject to

competitive bidding.

Mutually exclusive initial

applications to provide 900 MHz SMR

service are subject to competitive

bidding procedures. The general

competitive bidding procedures found

in 47 CFR Part 1, Subpart Q will apply

unless otherwise provided in this part.

§ 90.802 Competitive bidding design for

900 MHz SMR licensing.

The Commission will employ a

simultaneous multiple round auction

design when choosing from among

mutually exclusive initial applications

to provide 900 MHz SMR service, unless

otherwise specified by the Wireless

Telecommunications Bureau before the

auction.

§ 90.803 Competitive bidding mechanisms.

(a) Sequencing. The Commission will

establish and may vary the sequence in

which 900 MHz SMR licenses will be

auctioned.

(b) Grouping. All 900 MHz SMR

licenses for each of the MTAs will be

auctioned simultaneously, unless the

Wireless Telecommunications Bureau

announces, by Public Notice prior to the

auction, an alternative auction scheme.

(c) Minimum Bid Increments. The

Commission will, by announcement

before or during an auction, require

minimum bid increments in dollar or

percentage terms.

(d) Stopping Rules. The Commission

will establish stopping rules before or

during multiple round auctions in order

to terminate an auction within a

reasonable time.

(e) Activity Rules. The Commission

will establish activity rules which

require a minimum amount of bidding

activity. In the event that the

Commission establishes an activity rule

in connection with a simultaneous

multiple round auction, each bidder

will be entitled to request and will be

automatically granted a certain number

of waivers of such rule during the

auction.

§ 90.804 Aggregation of 900 MHz SMR

licenses.

The Commission will license each 10-

channel block in the 900 MHz SMR

spectrum separately. Applicants may

aggregate across spectrum blocks within

the limitation specified in § 20.6(b) of

this Chapter.

§ 90.805 Withdrawal, default and

disqualification payments.

(a) During the course of an auction

conducted pursuant to § 90.802, the

Commission will impose payments on

bidders who withdraw high bids during

the course of an auction, who default on

payments due after an auction closes, or

who are disqualified.

(b) Bid withdrawal prior to close of

auction. A bidder who withdraws a high

bid during the course of an auction will

be subject to a payment equal to the

difference between the amount bid and

the amount of the winning bid the next

time the license if offered by the

Commission. No withdrawal payment

would be assessed if the subsequent

winning bid exceeds the withdrawn bid.

This payment amount will be deducted

from any upfront payments or down

payments that the withdrawing bidder

has deposited with the Commission.

(c) Default or disqualification after

close of auction. If a high bidder

defaults or is disqualified after the close

of such an auction, the defaulting bidder

will be subject to the payment in

paragraph (a) of this section plus an

additional penalty equal to three (3)

percent of the subsequent winning bid.

If the subsequent winning bid exceeds

the defaulting bidder’s bid amount, the

3 percent payment will be calculated

based on the defaulting bidder’s bid

amount. These amounts will be

deducted from any upfront payments or

down payments that the defaulting or

disqualified bidder has deposited with

the Commission.

§ 90.806 Bidding application (FCC Form

175 and 175–S Short-form).

All applicants to participate in

competitive bidding for 900 MHz SMR

licenses must submit applications on

FCC Forms 175 and 175–S pursuant to

the provisions of § 1.2105 of this

Chapter. The Wireless

Telecommunications Bureau will issue

a Public Notice announcing the

availability of 900 MHz SMR licenses

and, in the event that mutually

exclusive applications are filed, the date

of the auction for those licenses. This

Public Notice also will specify the date

on or before which applicants intending

to participate in a 900 MHz SMR

auction must file their application in

order to be eligible for that auction, and

it will contain information necessary for

completion of the application as well as

other important information such as the

materials which must accompany the

Forms, any filing fee that must

accompany the application or any

upfront payment that will need to be

submitted, and the location where the

application must be filed. In addition to

identifying its status as a small business

or rural telephone company, each

applicant must indicate whether it is a

minority-owned entity, as defined in

§ 90.814(g) and/or a women-owned

entity.

§ 90.807 Submission of upfront payments

and down payments.

(a) Bidders in the 900 MHz SMR

auction will be required to submit an

upfront payment of $0.02 per pop per

MHz, in accordance with § 1.2106 of

this Chapter.

(b) Winning bidders in a 900 MHz

SMR auction must submit a down

payment to the Commission in an

amount sufficient to bring their total

deposits up to 20 percent of their

winnings bids, and in accordance with

§ 1.2107(b) of this chapter, except for

small businesses that are winning

bidders, which are governed by

§ 90.811.
22032 Federal Register / Vol. 60, No. 86 / Thursday, May 4, 1995 / Proposed Rules

§ 90.808 Long-form applications.

Each winning bidder will be required

to submit a long-form application on

FCC Form 600 within ten (10) business

days after being notified by Public

Notice that it is the winning bidder.

Applications on FCC Form 600 shall be

submitted pursuant to the procedures

set forth in 90.119 of this Part and any

associated Public Notices. Only auction

winners (and rural telephone companies

seeking partitioned licenses pursuant to

agreements with auction winners under

§ 90.813) will be eligible to file

applications on FCC Form 600 for initial

900 MHz SMR licenses in the event of

mutual exclusivity between applicants

filing Form 175.

§ 90.809 License grant, denial, default, and

disqualification.

(a) Except with respect to entities

eligible for installment payments (see

§ 90.812) each winning bidder will be

required to pay the balance of its

winning bid in a lump sum payment

within five (5) business days following

Public Notice that the license is ready

for grant. The Commission will grant the

license within ten (10) business days

after receipt of full and timely payment

of the winning bid amount.

(b) A bidder who withdraws its bid

subsequent to the close of bidding,

defaults on a payment due, or is

disqualified, will be subject to the

payments specified in § 90.805 or

§ 1.2109 of this Chapter, as applicable.

(c) MTA licenses pursued through

competitive bidding procedures will be

granted pursuant to the requirements

specified in § 90.166.

§ 90.810 Bidding credits for small

businesses.

(a) A winning bidder that qualifies as

a small business or a consortium of

small businesses, (as defined in

§ 90.814) may use a bidding credit of 10

percent to lower the cost of its winning

bid on any of the blocks identified in

§ 90.617(d), Table 4B.

(b) Unjust Enrichment. (1) If a licensee

that utilizes a bidding credit under this

section seeks to assign or transfer

control of its license to an entity not

meeting the eligibility standards for

bidding credits or seeks to make any

other change in ownership that would

result in the licensee no longer

qualifying for bidding credits under this

section, the licensee must seek

Commission approval of such

assignment, transfer or other ownership

change.

(2) If a licensee that utilizes a bidding

credit under this section seeks to assign

or transfer control of its license to an

entity meeting the eligibility standards

for lower bidding credits or seeks to

make any other change in ownership

that would result in the licensee

qualifying for a lower bidding credit

under this section, the licensee must

seek Commission approval and

reimburse the government for the

difference between the amount of the

bidding credit obtained by the licensee

and the bidding credit for which the

assignee, transferee or licensee is

eligible under this section as a condition

of the approval of such assignment,

transfer or other ownership change.

§ 90.811 Reduced down payment for

licenses won by small businesses.

Each winning bidder that qualifies as

a small business shall make a down

payment equal to ten percent of its

winning bid (less applicable bidding

credits); a winning bidder shall bring its

total amount on deposit with the

Commission (including upfront

payment) to five percent of its net

winning bid within five (5) business

days after the auction closes, and the

remainder of the down payment (five

percent) shall be paid within five (5)

business days following Public Notice

that the license is ready for grant. The

Commission will grant the license

within ten (10) business days after

receipt of the remainder of the down

payment.

§ 90.812 Installment payments for licenses

won by small businesses.

(a) Each licensee that qualifies as a

small business may pay the remaining

90 percent of the net auction price for

the license in installment payments

pursuant to § 1.210(e) of this chapter.

(b) Interest shall be imposed based on

the rate for ten-year U.S. Treasury

obligations applicable on the date the

license is granted, plus 2.5 percent;

payments shall include interest only for

the first two years and payments of

interest and principal amortized over

the remaining eight years of the license

term.

(c) Unjust Enrichment. (1) If a licensee

that utilizes installment financing under

this section seeks to assign or transfer

control of its license to an entity not

meeting the eligibility standards for

installment payments, the licensee must

make full payment of the remaining

unpaid principal and any unpaid

interest accrued through the date of

assignment or transfer as a condition of

approval.

(2) If a licensee that utilizes

installment financing under this section

seeks to make any change in ownership

structure that would result in the

licensee losing eligibility for installment

payments, the licensee shall first seek

Commission approval and must make

full payment of the remaining unpaid

principal and any unpaid interest

accrued through the date of such change

as a condition of approval.

§ 90.813 Procedures for partitioned

licenses.

(a) Notwithstanding § 90.661, an

applicant that is rural telephone

company, as defined in § 90.814, may be

granted a 900 MHz SMR license that is

geographically partitioned from a

separately licensed MTA, so long as the

MTA applicant or licensee has

voluntarily agreed (in writing) to

partition a portion of the license to the

rural telephone company.

(b) If partitioned licenses are being

applied for in conjunction with a

license(s) to be awarded through

competitive bidding procedures—

(1) The applicable procedures for

filing short-form applications and for

submitting upfront payments and down

payments contained in this Part and

Part 1 of this Chapter shall be followed

by the applicant, who must disclose as

part of its short-form application all

parties to agreement(s) with or among

rural telephone companies to partition

the license pursuant to this section, if

won at auction (see 47 CFR

§ 1.2105(a)(2)(viii) of this Chapter);

(2) Each rural telephone company that

is a party to an agreement to partition

the license shall file a long-form

application for its respective, mutually

agreed-upon geographic area together

with the application for the remainder

of the MTA filed by the auction winner.

(c) If the partitioned license is being

applied for as a partial assignment of the

MTA license following grant of the

initial license, request for authorization

for partial assignment of a license shall

be made pursuant to § 90.153.

(d) Each application for a partitioned

area (long-form initial application or

partial assignment application) shall

contain a partitioning plan that must

propose to establish a partitioned area to

be licensed that meets the following

criteria:

(1) Conforms to established

geopolitical boundaries (such as county

lines);

(2) Includes the wireline service area

of the rural telephone company

applicant; and

(3) Is reasonable related to the rural

telephone company’s wireline service

area.

Note: A partitioned service area will be

presumed to be reasonably related to the

rural telephone company’s wireline service

area if the partitioned service area contains

no more than twice the population overlap

between the rural telephone company’s
Federal Register / Vol. 60, No. 86 / Thursday, May 4, 1995 / Proposed Rules 22033

wireline service area and the partitioned

area.

(e) Each licensee in each partitioned

area will be responsible for meeting the

construction requirements in its area

(see § 90.665).

§ 90.814 Definitions.

(a) Scope. The definitions in this

section apply to §§ 90.810 through

90.813, unless otherwise specified in

those sections.

(b) Small Business: Consortium of

Small Businesses. (1) A small business

is an entity that, together with its

affiliates and persons or entities that

hold attributable interests in such entity

and their affiliates, have average gross

revenues for the three preceding years of

less than $3 million.

(2) A small business consortium is

conglomerate organization formed as a

joint venture between or among

mutually-independent business firms,

each of which individually satisfies the

definition of a small business in

paragraphs (b)(1) and (b)(2) of this

section.

(c) Rural Telephone Company. A rural

telephone company is a local exchange

carrier having 100,000 or fewer access

lines, including all affiliates.

(d) Gross Revenues. Gross revenues

shall mean all income received by an

entity, whether earned or passive, before

any deductions are made for costs of

doing business (e.g., cost of goods sold),

as evidenced by audited financial

statements for the relevant number of

calendar years preceding January 1,

1994, or, If audited financial statements

were not prepared on a calendar-year

basis, of the most recently completed

fiscal years preceding the filing of the

applicant’s short-form application

(Form 175). For applications filed after

December 31, 1994, gross revenues shall

be evidenced by audited financial

statements for the preceding relevant

number of calendar or fiscal years. If an

entity was not in existence for all or part

of the relevant period, gross revenues

shall be evidenced by the audited

financial statements of the entity’s

predecessor-in-interest or, if there is no

identifiable predecessor-in-interest,

unaudited financial statements certified

by the applicant as accurate.

(e) Business Owned by Members of

Minority Groups and/or Women. A

business owned by members of minority

groups and/or women is one in which

minorities and/or women who are U.S.

citizens control the applicant, have at

least 50.1 percent equity ownership and,

in the case of a corporate applicant, a

50.1 percent voting interest. For

applicants that are partnerships, every

general partner either must be a

minority and/or woman (or minorities

and/or women) who are U.S. citizens

and who individually or together own at

least 50.1 percent of the partnership

equity, or an entity that is 100 percent

owned and controlled by minorities

and/or women who are U.S. citizens.

The interest of minorities and women

are to be calculated on a fully-diluted

basis; agreements such as stock options

and convertible debentures shall be

considered to have a present effect on

the power to control an entity and shall

be treated as if the rights thereunder

already have been fully exercised.

However, upon a demonstration that

options or conversion rights held by

non-controlling principals will not

deprive the minority and female

principals of a substantial financial

stake in the venture or impair their

rights to control the designated entity, a

designated entity may seek a waiver of

the requirement that the equity of the

minority and female principals must be

calculated on a fully-diluted basis.

(f) Members of Minority Groups.

Members of minority groups includes

Blacks, Hispanics, American Indians,

Alaskan Natives, Asians, and Pacific

Islanders.

(g) Nonattributable Equity.

Nonattributable equity shall mean:

(1) For corporations, voting stock or

non-voting stock that includes no more

than 25 percent of the total voting

equity, including the right to vote such

stock through a voting trust or other

arrangement;

(2) For partnerships, joint ventures

and other non-corporate entities, limited

partnership interests and similar

interests that do not afford the power to

exercise control of the entity.

(h) Affiliate. (1) Basis for Affiliation.

An individual or entity is an affiliate of

an applicant or of a person holding an

attributable interest in an applicant

(both referred to herein as ‘‘the

applicant’’) if such individual or entity:

(i) Directly or indirectly controls or

has the power to control the applicant,

or

(ii) Is directly or indirectly controlled

by the applicant, or

(iii) Is directly or indirectly controlled

by a third party or parties that also

controls or has the power to control the

applicant, or

(iv) Has an ‘‘identity of interest’’ with

the applicant.

(2) Nature of control in determining

affiliation.

(i) Every business concern is

considered to have one or more parties

who directly or indirectly control or

have the power to control it. Control

may be affirmative or negative and it is

immaterial whether it is exercised so

long as the power to control exists.

Example for paragraph (h)(2)(i). An

applicant owning 50 percent of the voting

stock of another concern would have

negative power to control such concern since

such party can block any action of the other

stockholders. Also, the bylaws of a

corporation may permit a stockholder with

less than 50 percent of the voting to block

any actions taken by the other stockholders

in the other entity. Affiliation exists when

the applicant has the power to control a

concern while at the same time another

person, or persons, are in control of the

concern at the will of the party or parties

with the power of control.

(ii) Control can arise through stock

ownership; occupancy of director,

officer or key employee positions;

contractual or other business relations;

or combinations of these and other

factors. A key employee is an employee

who, because of his/her position in the

concern, has a critical influence in or

substantive control over the operations

or management of the concern.

(iii) Control can arise through

management positions where a

concern’s voting stock is so widely

distributed that no effective control can

be established.

Example for paragraph (h)(2)(iii). In a

corporation where the officers and directors

own various size blocks of stock totaling 40

percent of the corporation’s voting stock, but

no officer or director has a block sufficient

to give him or her control or the power to

control and the remaining 60 percent is

widely distributed with no individual

stockholder having a stock interest greater

than 10 percent, management has the power

to control. If persons with such management

control of the other entity are persons with

attributable interests in the applicant, the

other entity will be deemed an affiliate of the

applicant.

(3) Identity of interest between and

among persons. Affiliation can arise

between or among two or more persons

with an identity of interest, such as

members of the same family or persons

with common investments. In

determining if the applicant controls or

is controlled by a concern, persons with

an identity of interest will be treated as

though they were one person.

Example 1 for paragraph (h)(3)

introductory text. Two shareholders in

Corporation Y each have attributable

interests in the same SMR application. While

neither shareholder has enough shares to

individually control Corporation Y, together

they have the power to control Corporation

Y. The two shareholders with these common

investments (or identity of interest) are

treated as though they are one person and

Corporation Y would be deemed an affiliate

of the applicant.

Example 2 for paragraph (h)(3)

introductory text. One shareholder in
22034 Federal Register / Vol. 60, No. 86 / Thursday, May 4, 1995 / Proposed Rules

Corporation Y, shareholder A, has an

attributable interest in a SMR application.

Another shareholder in Corporation Y,

shareholder B, has a nonattributable interest

in the same SMR application. While neither

shareholder has enough shares to

individually control Corporation Y, together

they have the power to control Corporation

Y. Through the common investment of

shareholders A and B in the SMR

application, Corporation Y would still be

deemed an affiliate of the applicant.

(i) Spousal Affiliation. Both spouses

are deemed to own or control or have

the power to control interests owned or

controlled by either of them, unless they

are subject to a legal separation

recognized by a court of competent

jurisdiction in the United States.

(ii) Kinship Affiliation. Immediate

family members will be presumed to

own or control or have the power to

control interests owned or controlled by

other immediate family members. In

this context ‘‘immediate family

member’’ means father, mother,

husband, wife, son, daughter, brother,

sister, father- or mother-in-law, son- or

daughter-in-law, brother- or sister-inlaw, step-father, or -mother, stepbrother, or -sister, step-son, or

-daughter, half brother or sister. This

presumption may be rebutted by

showing that

(A) The family members are

estranged,

(B) The family ties are remote, or

(C) The family members are not

closely involved with each in business

matters.

Example for paragraph (h)(3)(ii). A owns a

controlling interest in Corporation X. A’s

sister-in-law, B, has an attributable interest in

an SMR application. Because A and B have

a presumptive kinship affiliation, A’s interest

in Corporation X is attributable to B, and thus

to the applicant, unless B rebuts the

presumption with the necessary showing.

(4) Affiliation through stock

ownership. (i) An applicant is presumed

to control or have the power to control

a concern if he or she owns or controls

or has the power to control 50 percent

or more of its voting stock.

(ii) An applicant is presumed to

control or have the power to control a

concern even though he or she owns,

controls or has the power to control less

than 50 percent of the concern’s voting

stock, if the block of stock he or she

owns, controls or has the power to

control is large as compared with any

other outstanding block of stock.

(iii) If two or more persons each owns,

controls or has the power to control less

than 50 percent of the voting stock of a

concern, such minority holdings are

equal or approximately equal in size,

and the aggregate of these minority

holdings is large as compared with any

other stock holding, the presumption

arises that each one of these persons

individually controls or has the power

to control the concern; however, such

presumption may be rebutted by a

showing that such control or power to

control, in fact, does not exist.

(5) Affiliation arising under stock

options, convertible debentures, and

agreements to merge. Stock options,

convertible debentures, and agreements

to merge (including agreements in

principle) are generally considered to

have a present effect on the power to

control the concern. Therefore, in

making a size determination, such

options, debentures, and agreements

will generally be treated as though the

rights held thereunder had been

exercised. However, neither an affiliate

nor an applicant can use such options

and debentures to appear to terminate

its control over another concern before

it actually does so.

Example 1 for paragraph (h)(5). If company

B holds an option to purchase a controlling

interest in company A, who holds an

attributable interest in an SMR application,

the situation is treated as though company B

had exercised its rights and had become

owner of a controlling interest in company A.

The gross revenues of company B must be

taken into account in determining the size of

the applicant.

Example 2 for paragraph (h)(5). If a large

company, BigCo, holds 70% (70 of 100

outstanding shares) of the voting stock of

company A, who holds an attributable

interest in an SMR application, and gives a

third party, SmallCo, an option to purchase

50 of the 70 shares owned by BigCo, BigCo

will be deemed to be an affiliate of company,

and thus the applicant, until SmallCo

actually exercises its options to purchase

such shares. In order to prevent BigCo from

circumventing the intent of the rule which

requires such options to be considered on a

fully diluted basis, the option is not

considered to have present effect in this case.

Example 3 for paragraph (h)(5). If company

A has entered into an agreement to merge

with company B in the future, the situation

is treated as though the merger has taken

place.

(6) Affiliation under voting trusts. (i)

Stock interests held in trust shall be

deemed controlled by any person who

holds or shares the power to vote such

stock, to any person who has the sole

power to sell such stock, and to any

person who has the right to revoke the

trust at will or to replace the trustee at

will.

(ii) If a trustee has a familial, personal

or extra-trust business relationship to

the grantor or the beneficiary, the stock

interests held in trust will be deemed

controlled by the grantor or beneficiary,

as appropriate.

(iii) If the primary purpose of a voting

trust, or similar agreement, is to separate

voting power from beneficial ownership

of voting stock for the purpose of

shifting control of or the power to

control a concern in order that such

concern or another concern may meet

the Commission’s size standards, such

voting trust shall not be considered

valid for this purpose regardless of

whether it is or is not recognized within

the appropriate jurisdiction.

(7) Affiliation through common

management. Affiliation generally arises

where officers, directors, or key

employees serve as the majority or

otherwise as the controlling element of

the board of directors and/or the

management of another entity.

(8) Affiliation through common

facilities. Affiliation generally arises

where one concern shares office space

and/or employees and/or other facilities

with another concern, particularly

where such concerns are in the same or

related industry or field of operations,

or where such concerns were formerly

affiliated, and through these sharing

arrangements one concern has control,

or potential control, of the other

concern.

(9) Affiliation through contractual

relationships. Affiliation generally

arises where one concern is dependent

upon another concern for contracts and

business to such a degree that one

concern has control, or potential

control, of the other concern.

(10) Affiliation under joint venture

arrangements. (i) A joint venture for size

determination purposes is an

association of concerns and/or

individuals, with interests in any degree

or proportion, formed by contract,

express or implied, to engage in and

carry out a single, specific business

venture for joint profit for which

purpose they combine their efforts,

property, money, skill and knowledge,

but not on a continuing or permanent

basis for conducting business generally.

The determination whether an entity is

a joint venture is based upon the facts

of the business operation, regardless of

how the business operation may be

designated by the parties involved. An

agreement to share profits/losses

proportionate to each party’s

contribution to the business operation is

a significant factor in determining

whether the business operation is a joint

venture.

(ii) The parties to a joint venture are

considered to be affiliated with each

other.

[FR Doc. 95–11010 Filed 5–2–95; 12:52 pm]

BILLING CODE 6712–01–M