*Pages 1--6 from Microsoft Word - 11439.doc* Federal Communications Commission FCC 01- 248 Before the Federal Communications Commission Washington, D. C. 20554 In the Matter of DiGiPH Application for Review Of Public Notice DA 98- 2604 Mountain Solutions Application for Review Of Public Notice DA 98- 2604 ) ) ) ) ) ) ) ) ) MEMORANDUM OPINION AND ORDER Adopted: August 31, 2001 Released: September 11, 2001 By the Commission: 1. Introduction. We have before us two Applications for Review, filed by DiGiPH PCS, Inc. (“ DiGiPH”) 1 and Mountain Solutions Ltd., Inc. (“ Mountain Solutions”). 2 Both of these parties seek review of a Wireless Telecommunications Bureau (“ Bureau”) Public Notice that established procedures and minimum opening bids for the March 23, 1999 auction of broadband Personal Communications Services (“ PCS”) spectrum in the C, D, E, and F blocks (“ Auction No. 22”). 3 For the reasons set forth below, we deny DiGiPH’s Application for Review and deny Mountain Solutions’s Application for Review. 2. Background. Both DiGiPH and Mountain Solutions (collectively, the “Applicants”) participated in earlier PCS auctions. DiGiPH was the high bidder on eight licenses in the original C block auction (“ Auction No. 5”) and a potential bidder in Auction No. 22. Mountain Solutions was the high bidder on ten licenses in Auction No. 5 and two licenses in the second C block auction (“ Auction No. 10”). 4 3. At the time of the first two C block auctions, Commission rules allowed winning bidders to 1 Auction of C, D, E, and F Block Broadband Personal Communications Services Licenses Scheduled for March 23, 1999, Application for Review, filed by Kurtis and Associates, P. C. on behalf of DiGiPH PCS, Inc., January 22, 1999 (“ DiGiPH Application”). 2 Auction of C, D, E, and F Block Broadband Personal Communications Services Licenses Scheduled for March 23, 1999, Application for Review, filed by Kurtis and Associates, P. C. on behalf of Mountain Solutions Ltd,, Inc., January 22, 1999 (“ Mountain Solutions Application”). 3 See “Auction of C, D, E, and F Block Broadband PCS Licenses — Notice and Filing Requirements for Auction of C, D, E, and F Block Personal Communications Services Licenses Scheduled for March 23, 1999,” Auction Report No. AUC- 98- 22- C (Auction No. 22), Public Notice, DA 98- 2604, 13 FCC Rcd 24540 (1998) (“ December 23d Public Notice”). 4 See “Entrepreneurs’ C Block Reauction Closes,” Public Notice, 11 FCC Rcd 8183 (1996). 1 Federal Communications Commission FCC 01- 248 2 pay for certain licenses, including C and F block PCS licenses, in installments over a ten year period. 5 The rules at that time also required these bidders to pay two separate five percent down payments, a first down payment and a second down payment. 6 Mountain Solutions made its initial five percent down payment on the ten licenses on which it was the net high bidder in Auction No. 5, but requested waiver of the second down payment deadline. 7 The Bureau denied Mountain Solutions’s waiver request. 8 DiGiPH, on the other hand, made its first and second down payments. 9 4. In October 1998, the Commission affirmed the Bureau’s denial of Mountain Solutions’s request for waiver of the Commission’s down payment rule. 10 Mountain Solutions filed an appeal of the Commission’s decision with the U. S. Court of Appeals for the District of Columbia Circuit. This appeal was pending at the time the Bureau announced the date for Auction No. 22. 11 5. The ten licenses at issue in Mountain Solutions’s appeal before the appellate court were listed as available for auction in the Bureau’s December 23 rd Public Notice. Furthermore, Mountain Solutions had pending before the Commission a request for waiver of the long- form deadlines for the two licenses on which it was the net high bidder in Auction No. 10. These two licenses were also included in the auction inventory announced in the December 23 rd Public Notice. On March 16, 1999, CWD granted Mountain Solutions’s request for waiver of the deadline for submission of long- form applications by high 5 See 47 C. F. R. § 24.711( b)( 3) (1996). Subsequently, the Commission suspended the installment payment program; therefore, installment payments were not available to winning bidders in Auction No. 22. See Amendment of Part 1 of the Commission’s Rules- Competitive Bidding Procedures, Allocation of Spectrum Below 5 GHz Transferred from Federal Government Use, 4660- 4685 MHz, Third Report and Order and Second Further Notice of Proposed Rulemaking, 13 FCC Rcd 374, 397 (1997) (“ Part 1 Third Report and Order”); aff’d In the Matter of Amendment of the Commission’s Rules — Competitive Bidding Procedures, Order on Reconsideration of the Third Report and Order, Fifth Report and Order, and Fourth Further Notice of Proposed Rule Making, 15 FCC Rcd 15293 (2000). 6 47 C. F. R. § 24.711( a)( 2) (1996). 7 Mountain Solutions Ltd., Inc. FCC Account No. 0841199078, Request for Waiver of Rule 24.711( a)( 2), Emergency Petition for Waiver, filed September 24, 1996. 8 In the Matter of Mountain Solutions Ltd, Inc. Request for Waiver of Section 24.711( a)( 2) of the Commission's Rules Regarding Market Nos. B053, B168, B172, B187 B188, B224, B247, B275, B366, and B381, Order, 12 FCC Rcd 5904 (WTB) (1997). 9 On December 13, 2000, the Commission granted the assignment of the DiGiPH’s eight licenses to Eliska Wireless Ventures License Subsidiary I, LLC. See In Re Application Of DiGiPH PCS, Inc. and Eliska Wireless Ventures License Subsidiary I, L. L. C. , Memorandum Opinion and Order, 2000 WL 1827693 (rel. Dec. 13, 2000). 10 See In the Matter of Mountain Solutions Ltd., Inc. Emergency Petition for Waiver of Section 24.711( a)( 2) of the Commission’s Rules Regarding Various BTA Markets in the Broadband Personal Communications Services (PCS) C Block Auction, Memorandum Opinion and Order, FCC 98- 220, 13 FCC Rcd 21983 (1998) (“ Memorandum Opinion and Order”). 11 See Mountain Solutions Ltd., Inc. v. FCC, Case No. 98- 1503, Notice of Appeal, filed October 30, 1998, U. S. Court of Appeals for the District of Columbia. In December 1999, the appellate court denied Mountain Solutions’s request for review of the Memorandum Opinion and Order. Mountain Solutions Ltd, Inc. v. FCC, 197 F. 3d 512 (D. C. Cir. 1999). 2 Federal Communications Commission FCC 01- 248 3 bidders in Auction No. 10. 12 Accordingly, on March 17, 1999, the Bureau released a Public Notice in which it removed the two licenses on which Mountain Solutions was the net high bidder in Auction No. 10 from the inventory of licenses for Auction No. 22. 13 6. Mountain Solutions and DiGiPH requested that the Commission stay Auction No. 22 until the pending Commission or judicial proceedings were resolved. In the alternative, Mountain Solutions requested that the Commission remove the licenses at issue from the inventory for Auction No. 22 or, in the event the licenses remained in the inventory, that the Commission waive any default payment that would be assessed based on subsequent winning bids for the ten licenses on which Mountain Solutions was the net high bidder in Auction No. 5. 14 7. On February 17, 1999, the Bureau’s Commercial Wireless Division (“ CWD”) released a Public Notice, in which it dismissed Mountain Solutions’s applications for the ten licenses for which it was the net high bidder in Auction No. 5. 15 Additionally, on February 24, 1999, the Bureau released a Public Notice in which it stated the Commission would return the payments made by winning bidders on licenses in Auction No. 22 in the event such bidders were required to surrender their licenses to the Commission as a result of final determinations reached in pending proceedings. 16 8. The U. S. Court of Appeals for the District of Columbia Circuit denied Mountain Solutions’s request for stay of Auction No. 22 on March 22, 1999. 17 Auction No. 22 began on March 23, 1999 and concluded on April 15, 1999. 18 Seven out of the ten licenses on which Mountain Solutions was the net high bidder in Auction No. 5 were sold at Auction No. 22. The remaining three were sold at 12 In Re Mountain Solutions, Ltd., Inc., Request for Waiver of Deadline for Submission of Form 600 Applications File Nos. 00561- CW- L- 96 and 00562- CW- L- 96, Order, 14 FCC Rcd 4020 (CWD) (1999). 13 “Auction of C, D, E, and F Block Broadband PCS Licenses,” Public Notice, DA 99- 528 (WTB) (rel. March 17, 1999). 14 Mountain Solutions Application at 4. 15 “Wireless Telcommunications Bureau Dismisses Mountain Solutions’ Broadband PCS C Block Applications,” Public Notice, 14 FCC Rcd 3346 (WTB) (1999). 16 See “Auction of C, D, E, and F Block Broadband PCS Licenses Status of Applications to Participate in the Auction, Clarification of Payment Issue Relating to Licenses Subject to Pending Proceedings,” Public Notice, DA 99- 375 (WTB) (rel. February 24, 1999) (“ February 24 th Public Notice”). 17 The U. S. Court of Appeals for the District of Columbia found that Mountain Solutions failed to meet the standard for issuance of a stay set forth in Virginia Petroleum Jobbers Ass'n v. FPC, 259 F. 2d 921 (D. C. Cir. 1958), as modified in Washington Metropolitan Area Transit Comm'n v. Holiday Tours, Inc., 559 F. 2d 841, 843 (D. C. Cir. 1977). Under this test, a stay is warranted if the movant can demonstrate that: (1) it is likely to prevail on the merits; (2) it will suffer irreparable harm absent a stay; (3) interested parties will not be harmed if the stay is granted; and (4) the public interest would favor a grant of the stay. Mountain Solutions, Ltd., Inc. v. Federal Communications Commission, 1999 WL 229027 (D. C. Cir.). 18 See “C, D, E, and F Block Broadband PCS License Auction Closes — Winning Bidders of 302 Licenses Announced,” Public Notice, DA 99- 757 (WTB) (rel. April 20, 1999). 3 Federal Communications Commission FCC 01- 248 4 Auction No. 35, which concluded on January 26, 2001. 19 9. Discussion. Mountain Solutions and DiGiPH raised similar but not identical arguments to support their contention that the December 23rd Public Notice failed to adequately address questions regarding pending Commission or judicial proceedings. 20 Both Applicants requested that the Commission postpone Auction No. 22 until the pending proceedings were resolved. 21 As previously noted, the Court of Appeals denied Mountain Solutions’s request for stay of Auction No. 22 on March 22, 1999. 22 To the extent that their Applications for Review request stay of Auction No. 22, we find that the decision of the Court of Appeals has rendered them moot. However, we will address the alternative arguments raised by the Applicants as well as Mountain Solutions's waiver request on their merits. 23 10. Applicants claim that the Bureau should not have scheduled an auction of only a small fraction of C block licenses, including mostly rural licenses and licenses that were subject to pending proceedings. DiGiPH claims that such an auction would result in low bids for the licenses offered in Auction No. 22, threatening the value of licenses already held and providing little chance for meaningful deployment of services. 24 Mountain Solutions claims that the uncertainties connected with licenses subject to pending proceedings would reduce the bids in Auction No. 22 and consequently increase the default payment owed by Mountain Solutions if its appeal failed. 25 While we recognize the Applicants’ concerns, their arguments ignore the countervailing public interest benefits of proceeding to auction despite the existence of pending proceedings. Such benefits include, but are not limited to, facilitating the rapid provision of service to the public. 26 Furthermore, here the Bureau notified potential bidders that certain 19 “C and F Block Broadband PCS Auction Closes; Winning Bidders Announced; Down Payments Due February 12, 2001,” Public Notice, DA 01- 211 (WTB) (rel. Jan. 29, 2001). 20 Mountain Solutions Application at 7- 9; DiGiPH Application at 3- 6. 21 Section 1.115 of the Commission's rules requires an application for review to specify, from among the following, the factor( s) which warrant Commission consideration of the questions presented: (i) the action taken pursuant to delegated authority is in conflict with statute, regulation, case precedent, or established Commission policy; (ii) the action involves a question of law or policy which has not previously been resolved by the Commission; (iii) the action involves application of a precedent or policy which should be overturned or revised; (iv) an erroneous finding as to an important or material question of fact; (v) or prejudicial procedural error. 47 C. F. R. § 1.115( b)( 2) (2000). 22 Mountain Solutions, Ltd., Inc., 197 F. 3d 512, 522 (D. C. Cir. 1999). 23 In addition, Mountain Solutions argues that the Bureau improperly included in the inventory, licenses as to which Mountain Solutions’s long- form applications were still pending. Mountain Solutions Application at 12- 14. As stated above, CWD released an order on March 16, 1999 in which it acted upon Mountain Solutions’s pending waiver request with respect to the two licenses for which it was high bidder in Auction No. 10. See n. 15, supra. The Bureau released a Public Notice on March 17, 1999 in which it removed them from the inventory for Auction No. 22, rendering Mountain Solutions’s concerns regarding these licenses moot. See n. 16, supra. 24 DiGiPH Application at 3- 6. 25 Mountain Solutions Application at 5- 10. 26 See Amendment of the Commission’s Rules Regarding Installment Payment Financing for Personal Communications Services Licensees, WT Docket No. 97- 82, Fourth Report and Order, FCC 98- 176, 13 FCC Rcd 15743; 15746- 15747, ¶¶ 5- 6 (1998) (“ Fourth Report and Order”); see also In the Matter of Amendment of the (continued….) 4 Federal Communications Commission FCC 01- 248 5 licenses were subject to pending proceedings. 27 11. Applicants raise two final issues charging that the Bureau improperly created uncertainty with respect to the Auction. First, Applicants argue that the Bureau did not state whether the Commission would return a winning bidder’s monies. 28 Second, they also contend that the Bureau did not address what would happen to construction investments made by winning bidders in the event that a license was subsequently lost due to the resolution of the pending proceedings. 29 However, the Bureau addressed the first issue in the February 24 th Public Notice, which stated that the Commission would return the payments made by winning bidders in the event such bidders were required to surrender their licenses to the Commission as a result of final determinations reached in pending proceedings. 30 With regard to the second issue, it is well settled that the Commission is not liable for costs expended in constructing a system for a license that is subject to pending proceedings. 31 This approach is consistent with our policy regarding pre- grant construction, under which applicants for licenses awarded by competitive bidding may construct facilities to provide service prior to grant of their applications, but must assume the risk for any losses that result from their licenses not being granted. 32 12. Alternatively, while not explicitly requesting waiver of the Commission's default payment rule, in the context of seeking to remove the licenses from the Auction No. 22 inventory, Mountain Solutions contends that it should not be liable for any default payments based on winning bids in Auction No. 22 on the grounds that the uncertainty surrounding its then pending appeal of the Memorandum Opinion and Order would decrease the bids for licenses in Auction No. 22, therefore increasing the amount of Mountain Solutions’s default payments. 33 Here too, we disagree. The Commission’s rules require that in order to receive a waiver of a rule, an applicant must demonstrate either that the underlying purpose of the rule will not be served, or will be frustrated, by its application in a particular case, and that grant of the waiver is otherwise in the public interest; or that the unique facts and circumstances of a particular case render application of the rule inequitable, unduly burdensome or otherwise contrary to the public interest. 34 As discussed above, the D. C. Circuit denied a motion to stay Auction 22. Further, the uncertainties referenced by the Applicants relating to Auction No. 22 do not constitute unique circumstances because all (Continued from previous page) Commission's Rules Regarding Installment Payment Financing for Personal Communications Services (PCS) Licensees, Sixth Report and Order and Order on Reconsideration, 15 FCC Rcd 16266, 16285, ¶ 37 (2000); see also 47 U. S. C. 309( j)( 3)( a) (requiring the FCC to facilitate “the development and rapid deployment of new technologies, products and services for the benefit of the public, including those residing in rural areas, without administrative or judicial delays.”) 27 See December 23 rd Public Notice at 4- 5; February 24 th Public Notice at 4. 28 DiGiPH Application at 7- 8; Mountain Solutions Application at 11 29 DiGiPH Application at 8; Mountain Solutions Application at 11. 30 See February 24 th Public Notice. 31 See 47 C. F. R. § 1.2113( c) (1998); see also Part 1 Third Report and Order, 13 FCC Rcd 374, 469- 470. 32 Id. 33 Mountain Solutions Application at 9- 10. 34 47 C. F. R. § 1.925 (2000). 5 Federal Communications Commission FCC 01- 248 6 bidders who default on their down payment obligations are similarly situated in that they cannot know, at the time of default, the market conditions and the number of additional licenses that will be offered in a subsequent auction. Accordingly, Mountain Solutions does not present unique circumstances that justify our granting a waiver. 35 Moreover, as we have previously noted, our default payment rule is “critical for maintaining the integrity of the auction process by discouraging insincere bidding and ensuring that licenses end up in the hands of those parties that value them the most and have the financial qualifications necessary to construct operational systems and provide service.” 36 Mountain Solutions does not demonstrate how application of the default payment rule would frustrate the underlying purpose of the rule. 13. For the reasons set forth above, we find that the public interest does not weigh in favor of granting Mountain Solutions’s request for relief from the default payment rule. 37 Under the Commission’s rules, the default payment is equal to the difference between the amount bid and the winning bid the next time the license is offered by the Commission, plus a payment equal to three percent of the winning bid or the defaulted bid, whichever is lower. 38 We previously assessed an initial default payment of three percent of the defaulted bid. 39 Accordingly, the Bureau will issue a separate order assessing the final default payment. 14. Therefore, ACCORDINGLY, IT IS ORDERED pursuant to Section 4( i) of the Communications Act of 1934, as amended, 47 U. S. C. § 154( i), and Section 1.115 of the Commission's rules, 47 C. F. R. § 1.115, that DiGiPH’s and Mountain Solutions’s Applications for Review ARE DENIED. FEDERAL COMMUNICATIONS COMMISSION Magalie Roman Salas Secretary 35 47 C. F. R. § 1.925 (2000); see, e. g., WAIT Radio v. FCC, 418 F. 2d 1153 (D. C. Cir. 1969), cert. denied, 409 U. S. 1027 (1972). 36 In the Matter of BDPCS, Inc. BTA Nos. B008, B036, B055, B089, B110, B133, B149, B261, B298, B331, B347, B358, B391, B395, B407, B413, and B447, Frequency Block C, Memorandum Opinion and Order, 15 FCC Rcd 17590, 17599, ¶ 16 (2000) (“ BDPCS”); see also Part 1 Third Report and Order, 13 FCC Rcd. 374, 433- 34, ¶ 101. 37 See In the Matter of Licenses of 21st Century Telesis, Inc. for Facilities In the Broadband Personal Communications Services, Memorandum Opinion and Order, 2000 WL 1862889 (rel. Dec. 21, 2000); BDPCS, 15 FCC Rcd 17590. 38 47 C. F. R. §§ 24.704( a)( 2) and 1.2104( g)( 2). 39 Memorandum Opinion and Order, 13 FCC Rcd at 21996- 21997. 6