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This is an unofficial announcement of Commission action. Release of the full text of a Commission order constitutes official action. See MCI v. FCC. 515 F 2d 385 (D.C. Circ 1974).

Report WT 97-35 WIRELESS TELECOMMUNICATIONS BUREAU September 12, 1997


FCC ELIMINATES INSTALLMENT PAYMENTS FOR LMDS AUCTION
Larger Bidding Credits for Small Businesses Offered In the Alternative
(CC DOCKET 92-297)


The FCC has modified its rules for Local Multipoint Distribution Service (LMDS) to eliminate installment payment provisions for that service, but has alternatively offered more sizeable bidding credits that are expected to assist small business bidders. An LMDS auction is presently scheduled for December 1997. In its Second Order on Reconsideration in CC Docket No. 92-297, the Commission (1) repealed the installment payment plans previously offered to certain LMDS bidder; (2) created an additional small business size category; and (3) increased the size of the bidding credits available to entrepreneurs and small businesses participating in that auction. Qualifying bidders will now be eligible for a 25, 35 or 45 percent bidding credits depending on their size.

In its decision, the Commission expressed concerns about installments payments and noted that it is examining the problems posed by the FCC acting as a banker in more depth in other proceedings. The Commission noted that Congress did not require installment payments in all cases, and that the agency has the flexibility under the Communications Act to experiment with different provisions to increase participation in its auctions. It was also noted, for example, that the recently passed Balanced Budget Act of 1997 does not provide for installment payments for certain future auctions because all the monies must be in the U.S. Treasury by the year 2002.

The Commission adopted a "very small business" category for LMDS. As in the broadband Personal Communications Services (PCS) F Block auction, the FCC defined very small businesses as entities that, together with controlling principals and affiliates, have average gross revenues for the preceding three years of not more than $15 million. Thus, the FCC re-defined small businesses as entities that, together with controlling principals and affiliates, have average gross revenues for the preceding three years of more than $15 million but not more than $40 million.

The Commission also increased the size of the bidding credits offered in the LMDS auction. The FCC adopted a 25 percent bidding credit for "entrepreneurs," defined as entities with average gross revenues for the proceeding three years of more than $40 million but not more than $75 million; a 35 percent bidding credit for small businesses; and a 45 percent bidding credit for very small businesses.

Action by the Commission September 9, 1997, by Order on Reconsideration (FCC 97-323). Chairman Hundt, Commissioners Quello, Chong, and Ness, with Commissioner Chong issuing a statement in which Commissioner Quello joins.

-FCC-

News Media contact: Audrey Spivack at (202) 418-0654
Wireless Telecommunications Bureau: Mathew Moses at (202) 418-0660




September 11, 1997

Separate Statement
of Commissioner Rachelle B. Chong,
in which Commissioner James H. Quello Joins

Re: Rulemaking to Amend Parts 1, 2, 21, and 25 of the Commission's Rules to Redesignate the 27.5-29.5 GHz Frequency Band, to Establish Rules and Policies for Local Distribution Service and for Fixed Satellite Services, CC Docket No. 92-297, Second Order on Reconsideration

It is with some concern that I cast my vote to eliminate installment payments for the LMDS auction. I supported this decision because I share my colleagues' concerns about the difficulties associated with the Commission's administration of the installment payment program, and I strongly felt that we should not delay the LMDS auctions while we worked through these larger issues. I am concerned, however, that the timing of our decision may have a regretable negative impact on the ability of small businesses and woman and minority-owned businesses to participate in the LMDS auction.

The decision we issue today comes just ninety days before the start of the LMDS auction. By now, the potential bidders in the LMDS auction have prepared their business plans and have secured their financial support to participate in the auction. The bidders who are small businesses and who relied on the availability of installment payments will now be forced to make last minute significant adjustments to their plans.

That being said, given the Commission's recent experiences with the installment payment program, I agree with my colleagues that we could not go forward with another auction that included installment payments without careful consideration of all of the ramifications of that decision. Unfortunately, there was no way to do that without delaying the LMDS auction -- something I simply was not willing to do given the long and arduous road we have travelled to get to this auction. I am anxious to get LMDS up and running to provide new and vigorous competition to incumbent multichannel video providers and data providers.

In the last three-and-a-half years, many small businesses have emphasized to me how important installment payments are to them, due to the "access to capital" problem small businesses face in the real world. They argue that bidding credits are not a perfect substitute for installment payments. I recognize the validity of this argument, but I must balance this against the Commission's deep concern about our installment payment programs. I am hopeful that our significant increases in the LMDS bidding credits, together with the establishment of a new "very small" business category, will help small businesses participate in the upcoming auction.