[Federal Register Volume 67, Number 194 (Monday, October 7, 2002)]
[Notices]
[Pages 62470-62472]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 02-25348]
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FEDERAL COMMUNICATIONS COMMISSION
[WT Docket No. 02-276; FCC 02-248]
Commission Seeks Comment on Disposition of Down Payments and
Pending Applications for Licenses Won During Auction No. 35
AGENCY: Federal Communications Commission.
ACTION: Notice.
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SUMMARY: This document seeks comment on whether the Commission should
take further action with regard to the pending applications for
licenses won during Auction No. 35, which would consist of one of two
scenarios described in the document. Under these scenarios, the
Commission would refund certain amounts on deposit with the Commission
for licenses subject to pending litigation or regulatory proceedings,
and allow individual applicants to request voluntary dismissal of their
license applications, with prejudice, for some or all of the licenses
subject to pending litigation or regulatory proceedings.
DATES: Comments are due on or before October 11, 2002, and reply
comments are due on or before October 21, 2002.
ADDRESSES: Office of the Secretary, Federal Communications Commission,
445 12th Street, SW., TW-A325, Washington, DC 20554 or hand carry
comments to 236 Massachusetts Avenue, NE., Suite 110, Washington, DC
20002. The filing hours at this location are 8 a.m. to 7 p.m.
FOR FURTHER INFORMATION CONTACT: Scott Delacourt at (202) 418-0639.
SUPPLEMENTARY INFORMATION: This is a summary of the Auction No. 35
Pending License Applications Public Notice released September 12, 2002.
The complete text of the Auction No. 35 Pending License Applications
Public Notice, including the statement, is available for public
inspection and copying during regular business hours at the FCC
Reference Information Center, Portals II, 445 12th Street, SW., Room
CY-A257, Washington, DC, 20554. The Auction No. 35 Pending License
Applications Public Notice may also be purchased from the Commission's
duplicating contractor, Qualex International, Portals II, 445 12th
Street, SW., Room CY-B402, Washington, DC, 20554, telephone 202-863-
2893, facsimile 202-863-2898, or via e-mail [email protected].
Background
1. On March 26, 2002, the Commission granted partial refunds of the
down payments made by certain winning bidders in Auction No. 35 Partial
Refund Order, 17 FCC Rcd 6283 (not published in the Federal Register).
These winning bidders had made down payments and filed long-form
applications for spectrum associated with licenses that had previously
been issued to NextWave Personal Communications Inc., NextWave Power
Partners Inc. (collectively ``NextWave'') and Urban Comm-North
Carolina, Inc. (``Urban Comm''). This spectrum, as well as Auction No.
35, continues to be the subject of extensive litigation and pending
regulatory proceedings. Key issues over the effectiveness of the
Commission's automatic cancellation rules with respect to NextWave's
licenses are scheduled for oral argument before the Supreme Court on
October 8, 2002.
2. Pursuant to the Partial Refund Order, the Commission has already
refunded approximately $2.8 billion to the Auction No. 35 winning
bidders who have not yet received their licenses, but it retained an
amount equal to three percent of the net winning bids for these
licenses and maintained the pending status of the applications for
these licenses. The total amount still on deposit with the Commission
is $489,548,061. The total amount of these Auction No. 35 winners'
obligations, including the refunded down payments, to the government
for the former NextWave and Urban Comm licenses won at the auction is
$16,318,268,700. The Commission has already received $504,419,150 in
final payments for other licenses won and granted based on Auction No.
35.
3. As noted in the Partial Refund Order, the Commission was
sympathetic to the needs of the auction winners, many of whom are small
businesses, to have access to their funds to continue to operate their
businesses. At the same time, the Commission held that it must protect
the integrity of Auction No. 35 in the event the Commission is
ultimately successful in its litigation. It therefore struck a balance
between the hardship that would be imposed by continuing to retain the
entirety of the down payments and the need to protect the integrity of
the auction. Accordingly, it refunded to the payors of record a
substantial portion of the monies on deposit.
[[Page 62471]]
4. However, the Commission's Partial Refund Order also found, inter
alia, that the continued litigation associated with particular licenses
did not relieve the winning bidders of the obligation to pay their full
bid amounts for licenses won in Auction No. 35. In this regard, the
Commission disposed of matters raised by Verizon in a letter to the
Commission's Deputy General Counsel in which Verizon argued that it no
longer had an obligation to pay the amount it bid in Auction No. 35
based on the theory that spectrum auctions create contractual
relationships between the Commission and winning bidders, and that the
Commission's failure to make timely delivery of the licenses rendered
the contract void. No other Auction No. 35 applicant advanced this
contract theory. In response to Verizon's letter, the Partial Refund
Order stated that auctions are a regulatory mechanism for distributing
licenses and that the relationship between the Commission and winning
bidders of spectrum licenses is governed by the Communications Act, the
Commission's competitive bidding regulations, and Public Notices
setting forth specific conditions on particular auctions. Those
conditions, the Commission stated, included the auction's contingency
on the ``final'' outcome of the Next Wave litigation. Therefore, the
Commission held that the fact that spectrum associated with the former
NextWave licenses was not yet available for use by the Auction No. 35
winning bidders did not require the Commission to relieve Verizon of
its bid obligations.
5. Verizon challenged the Commission's Partial Refund Order in two
courts. In the D.C. Circuit, in case No. 02-1110, Verizon seeks a
ruling that the delay in licensing caused by the NextWave litigation
entitles Verizon to declare its auction obligations void. In the Court
of Federal Claims, in case No. 02-280c, Verizon seeks a declaration
nullifying Auction No. 35 as well as consequential damages. We stand by
our legal conclusions in the Partial Refund Order, and do not through
the Auction No. 35 Pending License Applications Public Notice suggest
any support for Verizon's legal argument.
Discussion
6. Since the Commission issued its Partial Refund Order several
months ago, the state of the capital markets for entities, including
the applicants, engaged in the provision of wireless telecommunications
services, as well as other telecommunications services, has continued
to decline rapidly. Specifically, since March, the Commission has
received submissions asserting that unique and troubling financial
circumstances have led to difficulties in accessing capital and other
problems for companies of all sizes, which in turn has affected the
customers they serve. For instance, these commenters suggest that the
impact of continuing contingent liabilities on credit ratings in the
midst of a severe downturn in capital markets could potentially
frustrate other policy objectives as well as quality of service.
Moreover, as we have seen in the past, market downturns affect the
value of spectrum licenses won at auction and licensees' (or
applicants') ability to meet auction payment obligations. At the same
time, the Commission remains concerned about protecting the integrity
of its spectrum auction program. Concerns about the state of the
capital markets must be balanced against this important public interest
consideration.
7. Taking official notice of the status of the capital markets and
other economic events, the Commission, on its own motion, seeks comment
on these observations and whether it should take further action with
regard to the pending applications for licenses won during Auction No.
35 for spectrum formerly licensed to NextWave and Urban Comm.
8. Specifically, the Commission seeks comment on whether it should
consider further, inter alia, the following scenarios:
(i) Full Refund and Option to Dismiss All Pending Applications.
Upon request, the Commission would refund to the payor of record the
full amount of monies on deposit with the Commission for the licenses
subject to the NextWave litigation and Urban Comm proceedings. The
Commission would also provide a period of time for individual
applicants to request voluntary dismissal of all of their applications,
with prejudice.
Under this scenario, applicants obtaining a full refund and
choosing to dismiss their applications would lose all claims to the
affected Auction No. 35 licenses. Should the Commission prevail in the
litigation, new initial licenses for the spectrum would be assigned by
auction at a future date. In addition, the Commission would waive, in
whole or part, its default rules for these licenses and, subject to
coordination with the Department of Justice pursuant to applicable
federal claims collection standards, forgive the debt incurred on them
at Auction No. 35. The Commission seeks comment on whether it would be
advisable to waive the default rules, or to extend debt forgiveness, in
whole or in part, to a bidder opting for dismissal of its
application(s). In addition, we seek comment on whether a bidder
receiving a waiver or debt forgiveness should be barred from
participating in the reauction of the licenses or otherwise obtaining
such licenses for a period of time. Finally, the Commission seeks
comment on whether applicants that would like to keep their
applications pending should reaffirm their commitment to their Auction
No. 35 obligations or just remain silent.
(ii) Selective Opt-Out for Pending Applications. The Commission
would grant individual applicant requests for voluntary dismissal of
their applications, with prejudice, for certain licenses and not
others.
Under this scenario, the Commission would provide applicants the
opportunity to pick and choose licenses for which to keep the
applications pending and which to dismiss. The Commission seeks comment
on whether all of the down payments should be refunded or only down
payments associated with the dismissed licenses. As with the first
scenario, applicants choosing to dismiss their applications would lose
all claims to the affected licenses. Should the Commission prevail in
the litigation, new initial licenses for the spectrum would be assigned
by auction at a future date. In addition, the Commission would, in
whole or part, waive its default rules for dismissed license
applications and, subject to coordination with the Department of
Justice pursuant to applicable federal claims collection standards,
forgive the debt on them incurred at Auction No. 35. Again, the
Commission seeks comment on whether a bidder opting for dismissal of
its application(s) and receiving a full or partial waiver of the
default payment rules should be barred from participating in the
reauction of the licenses or otherwise obtaining such licenses for a
period of time.
9. Although the oral argument in the Supreme Court case is fast
approaching and the Commission has the utmost confidence in the merits
of its case, the Commission and winning bidders in Auction No. 35 still
face the possibility of prolonged litigation over such licenses during
uncertain and trying economic conditions. The Commission also
recognizes that should the Supreme Court rule in the government's
favor, there may nevertheless be unresolved issues over the licenses,
that would prolong the litigation. Depending on the length of the
delay, capital market conditions may continue to change, increasing the
possibility that winning bidders in Auction 35 will be in a
significantly different position that at the time of the auction.
Accordingly, the
[[Page 62472]]
Commission seeks comment on the scenarios discussed based on the
changed circumstances since issuance of its Partial Refund Order. The
Commission also seeks comment on whether granting relief under any of
the options discussed herein would promote or disserve the public
interest objectives outlined in section 309(j) of the Communications
Act, including ``promoting economic opportunity and competition'' and
ensuring ``efficient and intensive use of the electromagnetic
spectrum.''
Procedural Matters
10. Pursuant to 47 CFR 1.1200(a), the Commission may adopt modified
ex parte procedures in particular proceedings if the public interest so
requires. Accordingly, issues related to the Auction No. 35 Pending
License Applications Public Notice will be governed by ``permit-but-
disclose'' ex parte procedures that are applicable to non-restricted
proceedings under 47 CFR 1.1206. Designating this matter as ``permit
but disclose'' will provide an opportunity for all interested parties
to comment on the policy questions concerning the treatment of the
funds on deposit. All other matters concerning Auction No. 35
applications that are the subject of NextWave's Petition to Defer and
other petitions to deny remain restricted, pending further action by
Public Notice.
11. Pursuant to Sec. Sec. 1.415 and 1.419 of the Commission's
rules, 47 CFR 1.415, 1.419, interested parties may file comments on or
before October 11, 2002, and reply comments on or before October 21,
2002. Comments may be filed using the Commission's Electronic Comment
Filing System (ECFS) or by filing paper copies. See Electronic Filing
of Documents in Rulemaking Proceedings, 63 FR 24121 (May 1, 1998).
12. Comments filed through the ECFS can be sent as an electronic
file via the Internet to <http://www.fcc.gov/e-file/ecfs.html. Generally, only one copy of an electronic
submission must be filed. In completing the transmittal screen,
commenters should include their full name, U.S. Postal Service mailing
address, and the applicable docket or rulemaking number. Parties may
also submit an electronic comment by Internet e-mail. To get filing
instructions for e-mail comments, commenters should send an e-mail to
[email protected], and should include the following words in the body of the
message, ``get form .'' A sample form
and directions will be sent in reply. Parties who choose to file by
paper must file an original and four copies of each filing. Filings can
be sent by hand or messenger delivery, by commercial overnight courier,
or by first-class or overnight U.S. Postal Service mail (although we
continue to experience delays in receiving U.S. Postal Service mail).
The Commission's contractor, Vistronix, Inc., will receive hand-
delivered or messenger-delivered paper filings for the Commission's
Secretary at 236 Massachusetts Avenue, NE., Suite 110, Washington, DC
20002. The filing hours at this location are 8 a.m. to 7 p.m. All hand
deliveries must be held together with rubber bands or fasteners. Any
envelopes must be disposed of before entering the building. Commercial
overnight mail (other than U.S. Postal Service Express Mail and
Priority Mail) must be sent to 9300 East Hampton Drive, Capitol
Heights, MD 20743. U.S. Postal Service first-class mail, Express Mail,
and Priority Mail should be addressed to 445 12th Street, SW.,
Washington, DC 20554. All filings must be addressed to the Marlene H.
Dortch, Secretary, Office of the Secretary, Federal Communications
Commission.
Federal Communications Commission.
Marlene H. Dortch,
Secretary.
[FR Doc. 02-25348 Filed 10-4-02; 8:45 am]
BILLING CODE 6712-01-P