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A. 1. a.(1)(a) i) a) 1. 1. A. a.(1)(a) i) a)  | X4V I Federal Communications Commission `u(#FCC 9842 ă   yxdddy X + Before the w KFederal Communications Commission  X'}Washington, D.C. 20554 ă (#҇In re Application of  X_' Western PCS BTA I Corporation For Facilities in the Broadband Personal Communications Systems in the D, E, and F Blocks" ,**qq " ) ) ) ) ) ) ) H ,**qqi $ .^ **qqHԯ  X 4  NOTICE OF APPARENT LIABILITY FOR FORFEITURE  X'Adopted:` ` WMarch 16, 1998hhWReleased:March 16, 1998  By the Commission:  p$\N   p$\N   X4M I. INTRODUCTION ă 1. By this Order, we find Western PCS BTA I Corporation ("Western") apparently liable for a forfeiture in the amount of $1,200,000. For the reasons stated below, we conclude that Western, a participant in the Commission's Broadband Personal Communications Services (PCS) D, E and F block auction, apparently violated Sections 1.2105(c) and 1.65 of the Commission's Rules, 47 C.F.R. 1.2105(c) and 1.65, by discussing bidding strategy during the auction with a competing auction participant, US WEST Communications, Inc. ("US WEST") for the Olympia, Washington market; cooperating with US WEST during the auction; and failing to timely notify the Commission of the prohibited disclosure, discussion and arrangement.  X 4g II. BACKGROUND ă 2. Western is a wireless service provider with a cellular and PCS service area centering in the western United States. US WEST is the incumbent local exchange carrier ("LEC") in a 14state region that includes the State of Washington. Both companies  X"4participated in the Commission's Broadband PCS D, E, and F block auction, which consisted of 493 Basic Trading Area ("BTA") licenses for 10 megahertz of spectrum in each of the three blocks. During the auction, both Western and US WEST placed bids on BTA Market 331 (Olympia, Washington) (hereinafter "Olympia, Washington BTA"). Western's Director"Q%,**qq#"  X4and Senior Vice President for Corporate Development, Cregg Baumbaugh," yOy'ԍMr. Baumbaugh also held the position of Director and Senior Vice PresidentCorporate Development of  {OA'Western Wireless Corporation ("WWC"), the parent company of Western. See Letter dated December 15, 1997, from Western PCS BTA I Corporation, submitted in response to the Wireless Telecommunications Bureau Enforcement Division's letter of inquiry ("Western Response"), at Declaration. was a member of Western's D, E, and F block auction team and reported directly to John Stanton, the Chairman/Chief Executive Officer of Western's parent company, Western Wireless  X4Corporation ("WWC").\ {O 'ԍWestern Response, supra, Question 12.\ US WEST's Vice President of Business Development and External Affairs, Corey Ford, was the head of US WEST's D, E, and F block auction team. Apparently Messrs. Baumbaugh and Ford had both a professional and personal acquaintance  Xv4that antedated the auction.vD yOk 'ԍLetter dated December 16, 1997, from US WEST Communications, Inc., submitted in response to the Wireless Telecommunications Bureau Enforcement Division's letter of inquiry ("US WEST Response"), Question 1. According to Western, since approximately 1992, Messrs. Baumbaugh and Ford have had a professional  {O'relationship arising out of their respective roles within their companies. See, Western Response, supra, Question 1. As described below, the communications between these corporate officials form the basis of this Notice.  X143. Conversations Prior to ShortForm Filing Deadline. It appears that before the D, E, and F block auction, the PCS markets in general, and the PCS markets in the State of Washington in particular, had been the subject of conversation between Messrs. Ford and Baumbaugh. According to Western, more than one year before the D, E, and F block auction commenced, "Messrs. Ford and Baumbaugh first had a conversation about the PCS auctions following the A/B PCS block auction in the March/April 1995 time frame in which they  X 4generally discussed their respective companies' interests in PCS."[  {ON'ԍWestern Response, supra, Question 1.[ Western reported that Mr. Ford and Ken Denman, US WEST's thenVice President of Wholesale Wireless Markets, met  Xy4with Mr. Baumbaugh and Robert Stapleton, WWC's President.[y  {O'ԍWestern Response, supra, Question 1.[ During the meeting, the two US WEST representatives purportedly stated "that it was US WEST's intention to obtain D or E block PCS licenses within its landline service area and inquired whether [Western] would  X44be interested in sharing infrastructure (and possibly spectrum) with US WEST."[4 {O!'ԍWestern Response, supra, Question 1.[ According to Western, the "US WEST proposal did not fit within [Western's] PCS strategy and therefore  X4[Western] chose not to pursue US WEST's proposal."[ {Oc%'ԍWestern Response, supra, Question 1.[ 4. Western's discussions with a third party confirmed Western's understanding that US WEST intended to acquire PCS licenses within its landline service area. According to">,))qq"  X4Western, later in 1995 and prior to the C block auction yOy'ԍThe Commission's C block Broadband PCS auction commenced on December 18, 1995 and closed on May 6, 1996., a principal of BDPCS, Inc., visited  X4Western in an effort to enlist Western as a C block partner.[  {O'ԍWestern Response, supra, Question 1.[ The BDPCS, Inc. principal subsequently informed Western that it had reached an agreement with US WEST with respect  X4to participation in the C block auction.[  {O 'ԍWestern Response, supra, Question 1.[ Western reported that "[c]onsistent with the intent suggested by US WEST in the March/April 1995 meeting, BDPCS, Inc. bid on licenses  X4within US WEST's landline service area."[ D {O 'ԍWestern Response, supra, Question 1.[  Xv4 5. Another discussion took place between Messrs. Ford and Baumbaugh approximately one month before the shortform application (FCC Form 175) filing deadline for the D, E, and F block auction. According to US WEST, during a round of golf played on  X 4June 30, 1996 $  yO'ԍAccording to US WEST, although Mr. Ford was unable to pinpoint the exact date of the golf game, his  {Oi'expense report showed that it took place June 30, 1996. US WEST Response, supra, Question 1. According to Western, WWC's General Counsel, Alan Bender, also participated in the June 30 golf game. Western Response,  {O'supra, Question 1., "Mr. Baumbaugh casually asked [Mr. Ford] whether the rumor was true that  X 4US WEST had entered into an agreement with another carrier for PCS spectrum in the Seattle area. Mr. Ford reported that he declined to answer and the two completed their golf game  X 4without further discussion of the matter."[  {OH'ԍUS WEST Response, supra, Question 1.[ According to Western, during that golf game, Mr. Ford also made an unsolicited comment to Mr. Baumbaugh to the effect that US WEST was  X 4likely to bid in those PCS markets in which it had existing landline telephone operations.[ T  {O'ԍWestern Response, supra, Question 1.[ Mr. Ford reported to US WEST that "he does not recall making such a comment but that such a comment was consistent with earlier discussions with other companies, including Western, which occurred prior to US WEST's filing of the FCC Form 175, regarding potential joint  XK4ventures."[K {O!'ԍUS WEST Response, supra, Question 1.[ US WEST further maintains that "[s]uch a comment was also consistent with  X44information US WEST publicly provided to the investment community."$4x {O]$'ԍUS WEST Response, supra, Question 1. In its response, US WEST notes that "such a comment would be consistent with a public comment filed by US WEST with the FCC on March 15, 1996, which indicated that US WEST 'plans to provide 10 MHz PCS on an integrated basis to customers within USWC's landline service  {O&'area.'" Id.  Apparently, Mr."4d,))qq|"  X4Baumbaugh made no comment in response to Mr. Ford's unsolicited comment.[ {Oy'ԍWestern Response, supra, Question 1.[ According to Western, the information about US WEST's bidding plans "did not come as a surprise to [Western] because of the earlier comment by US WEST in March/April 1995 meeting and because it was generally understood that US WEST would bid on licenses within their service  X4areas, to the extent they could."f\Z {O'ԍWestern Response, supra, Question 1. According to Western, the strategy of pursuing PCS licenses within a local exchange carrier's service area was pursued by several telephone companies in the A/B block PCS  {OA 'auction, including BellSouth, Ameritech, Pacific Bell, and SBC. Id.f  Xv46. FCC Form 175. Pursuant to the Commission's rules, in order to participate in the D, E, and F block auction, each applicant was required to submit by July 29, 1996 an FCC Form 175 (shortform application) which, among other things, lists the licenses on which an  X14applicant intends to bid and identifies the names of the applicant's authorized bidders.W1~ {O`'ԍSee 47 C.F.R.  1.2105(a)(2).W Each applicant must certify under penalty of perjury that "it has not entered into and will not enter into any explicit or implicit agreements or understandings of any kind with parties not identified in [its] application regarding the amount to be bid, bidding strategies or the  X 4particular license on which the applicant or other parties will or will not bid."  {O'ԍSee FCC Form 175, at Certification (4); see also 47 C.F.R.  1.2105(a)(2)(ix). 7. Western indicated in its shortform application that it intended to bid for all  X4licenses in the D and E blocks.X yO'ԍAlthough the auction was for the Broadband PCS D, E, and F blocks, Western was only eligible to apply for frequencies in the D and E blocks. The F block was designated as an entrepreneurial block and reserved for small businesses. Western identified three authorized bidders for the company, including Mr. Baumbaugh. Mr. Baumbaugh executed the certification on behalf of Western. Western certified in the affirmative that it had not and would not enter into any explicit or implicit agreement or understandings of any kind with parties not identified in its application regarding the amount to be bid, bidding strategies or the particular license on which it would or would not bid. In its application, Western identified only one company, Cook Inlet Western Wireless PV/SS, L.P., with which it had entered into a joint bidding  X4arrangement.S  yOb"'ԍWestern's FCC Form 175, Exhibit B.S 8. US WEST indicated in its shortform application that it intended to bid for all  X4licenses in the D and E blocks.R  yO&'ԍSimilarly, US WEST was only eligible to apply for frequencies in the D and E blocks. US WEST identified three authorized bidders for the company, including Mr. Ford. Like Western, US WEST certified that it did not have any",))qq`" agreements or understandings with any undisclosed parties. US WEST's application listed 69 companies with which it had "entered into partnerships, joint ventures, consortia or other agreements, arrangements or understandings relating to the D, E, and F block licenses,  X4including agreements relating to the postauction market structure."S yO4'ԍUS WEST's FCC Form 175, Exhibit B.S Western was not among the identified companies.  Xv49. Communications During the Auction. The Broadband PCS D, E, and F block auction commenced on August 26, 1996. During the auction, six bidders actually placed bids  XH4for the E block, Olympia, Washington BTA, including Western, US WEST, Whidbey Telephone Company ("Whidbey"), OPCSEGalloway Consortium a/k/a Omnipoint Corporation ("Omnipoint"), NorthCoast Operating Co., Inc. ("NorthCoast") and Electric  X 4Lightwave, Inc. ("Lightwave"). X X yO 'ԍWith the exception of Omnipoint, the same participants bidding for the E block, Olympia, Washington BTA license were also bidding for the D block license, along with one additional participant, AT&T Wireless PCS Inc.   X 410. The first bids for the E block, Olympia, Washington BTA were placed on August 27, 1996, in round 2, with Lightwave's bid in the amount of $1,000 and NorthCoast's bid of  X 4$11.~ x {O'ԍSee Bidding Record for block E, Olympia, Washington BTA, at Attachment.~ On September 9, in round 10, US WEST placed a new high bid in the amount of $27,000. On September 10, in round 11, Western countered with a bid of $79,088. This remained the high bid until September 19, when US WEST placed a bid in round 24, in the  Xb4amount of $105,000. US WEST states that this was the first time it had bid on a license for  XK4which Western held the high bid.[K  {O'ԍUS WEST Response, supra, Question 7.[ According to US WEST, Mr. Ford was unaware that the US WEST auction team had bid on the Olympia, Washington BTA license unseating  X4Western's standing high bid.a {Oj'ԍUS WEST Response, supra, Question 1.a Apparently, Mr. Ford "had not wanted US WEST to bid directly against Western because from watching Western's activity in the auction, he believed  X4Western was a vindictive bidder, and he feared that bidding against Western could trigger  X4retaliatory bidding by that company in markets important to US WEST."a.  {O!'ԍUS WEST Response, supra, Question 1.a 11. After placement of the round 24 bid, Mr. Ford left a voice mail message for Mr.  X4Baumbaugh, informing him that "one of US WEST's bids had been mistakenly placed."  {O&' " ЍSee Statement for the Information of the Commission filed by US WEST, dated August 1, 1997 ("US WEST Statement").  X|4According to Western, the substance of Mr. Ford's voice mail message was "that US WEST,"|,))qq=" without Mr. Ford's knowledge and while he was out of town, inadvertently placed a bid in  X4Round 24 in the Olympia BTA, thereby displacing [Western] as the high bidder."l {Ob'ԍSee Western Response, supra, Questions 1 and 2.l US WEST's account of the voice mail message is less specific than that of Western. According to US WEST's account, the message "did not mention any specific round or market," rather it  X4"stated generically that the auction process was stimulating and hectic and that mistakes could  X4be made."[ Z {O'ԍUS WEST Response, supra, Question 1.[ US WEST later determined that the bid to which Mr. Ford's voice mail message referred was the bid placed by US WEST in round 24 for block E in the Olympia,  X_4Washington BTA, where Western had previously held the high bid.{!_ {O 'ԍUS WEST Statement, supra; US WEST Response, supra, Question 7.{ According to US WEST, although Mr. Ford did not recall the precise date of his voice mail message, Mr.  X14Ford's cellular telephone records show that he placed two calls to Mr. Baumbaugh on  X 4September 19, 1996, which corresponds to round 24 of the auction.[" ~ {OI'ԍUS WEST Response, supra, Question 7.[ US WEST's conclusion that Mr. Ford was referring to the Olympia, Washington BTA is corroborated by Western's account of the voice mail message, as indicated above.  X 412. According to Western, shortly after receiving the voice mail message from Mr. Ford, Mr. Baumbaugh briefly discussed the message with Alan Bender, WWC's Senior Vice  X4President/General Counsel, and Mr. Stanton, the Chairman/Chief Executive Officer.b# {OQ'ԍWestern Response, supra, Questions 1 and 2.b On September 19 or 20, 1996, after receiving legal advice from the General Counsel during that  Xb4discussion, Mr. Baumbaugh left a voice mail message for Mr. Ford,[$b {O'ԍWestern Response, supra, Question 2.[ which "indicated that in an auction it was inevitable that bidders would bid against each other, that he did not take the  X44matter personally, and that Mr. Ford should likewise not take the process personally."%44  {O'ԍWestern Response, supra, Question 1. US WEST's account differs slightly from that of Western. According to the US WEST Statement, this information was relayed in a telephone conversation apparently initiated by Mr. Ford, and not a voice mail message from Mr. Baumbaugh, wherein "[Mr. Ford] believes that [Mr. Baumbaugh] communicated that he was not upset about the bid." In response to this point, Western denies  {O;!'that Mr. Baumbaugh told Mr. Ford that he was "not upset". See Letter dated August 6, 1997, from Louis Gurman to William Caton ("Western Statement").  X413. Thereafter, Mr. Ford called Mr. Baumbaugh on or about September 20, 1996.[& {Og%'ԍWestern Response, supra, Question 1.[ At the outset of this conversation, Messrs. Ford and Baumbaugh acknowledged that "they"B&,))qq"  X4would not discuss the particulars of the D/E/F auction."' {Oy'ЍUS WEST Response, supra, Question 1. See also Western Response, supra, Question 1. According to Western, "Mr. Ford did comment that the auction process was as intellectually stimulating as Mr. Baumbaugh had advised him it would be. Mr. Baumbaugh is certain, however, that there was no discussion of  X4bidding information (including, but not limited to, bidding intentions, plans and strategies)."[(Z {O'ԍWestern Response, supra, Question 1.[ According to Western, "Mr. Baumbaugh did not interpret Mr. Ford's voice message (or the  X4later call) as a possible basis for future action by the parties in the auction. Rather, Mr. Baumbaugh thought that perhaps because of his previous professional relationship with [Mr. Ford], the call was only meant to convey that nothing personal was intended by US WEST's  XH4bidding activity in the prior round."\)H {O 'ԍWestern Response, supra, Question 10.\ Western stated that "Mr. Baumbaugh perceived the call as something of a nonevent for [Western] and it had no bearing on [Western's] subsequent  X 4bidding or bidding strategies."\* ~ {OI'ԍWestern Response, supra, Question 10.\ Western "concluded that the subject incident did not render any Form 175 information previously submitted by [Western] inaccurate, nor did it have any significance to the outcome of the licensing process. Accordingly, in [Western's] view, the  X 4matter did not need to be reported."\+  {O'ԍWestern Response, supra, Question 11.\ 14. According to the Commission's bidding record, after the subject disclosure, US  X4WEST held the high bid until round 40, when a fifth bidder, Whidbey, placed a bid for $150,000. An apparent "bidding war" ensued in rounds 40 through 48, between US WEST and Whidbey. In round 48, US WEST held the high bid in the amount of $283,000. In round 53, Whidbey placed a bid in the amount of $311,000. In that same round, Western matched Whidbey's bid, however, because Whidbey had placed its bid before Western, under  X4the auction rules, Whidbey was designated the high bidder of that round.,Z yOp'ԍThe Commission date and timestamps each bid upon receipt. In the event of tie bids, the Commission  {O8'identifies the high bidder on the basis of the order in which bids are received, starting with the earliest bid. See Bidder Information Package, FCC Broadband PCS Auction, D/E/F Blocks (1996), at 50,  3.  In round 54, US WEST placed the high bid in the amount of $342,000. In round 56, Western placed a bid in the amount of $376,320, once again becoming the high bidder. Thereafter, US WEST ceased bidding for that particular license. Western held the high bid until round 83, when Whidbey placed a bid for $414,000. Thereafter, an apparent "bidding war" ensued in rounds 83  X4through 120, between Western and Whidbey. In round 120, Whidbey held the high bid in the amount of $579,000. On November 19, 1996, in round 121, Omnipoint placed its first and only bid for the market in the amount of $637,000. In that same round, Western placed a bid in the amount of $637,001, becoming the high bidder for the market. No other bids were placed for that license, rendering Western the winning bidder on the block E, Olympia,"N ,,))qq"  X4Washington BTA license.- {Oy'ԍPublic Notice, Broadband Personal Communications Services D, E, and F blocks Service Information, Applications Accepted for Filing, DA 97356 (rel. February 19, 1997). 15. On January 14, 1997, after 276 rounds, the auction closed. On February 19,  X41997, the Commission released a Public Notice announcing the winning bidders.k." {O'ԍPublic Notice (rel. February 19, 1997), supra.k The Public Notice indicated that Western was the high bidder on 100 licenses and that US WEST was the  X4high bidder on 53 licenses, of which approximately 48 were those PCS licenses located within  Xv4US WEST's landline service region.k/v {O 'ԍPublic Notice (rel. February 19, 1997), supra.k  XH416. PostAuction Conduct. On March 21, 1997, Western filed a Petition to Condition [or Deny] Grant of Licenses against US WEST's applications for D and E block PCS licenses. In its Petition, Western requested that the Commission deny, or in the alternative,  X 4condition the grant of the 48 licenses to US WEST upon US WEST's provision of local exchange access for Western, as required by Commission rules. Western further requested that the Commission take action to require US WEST to meet its interconnection and reciprocal compensation obligations. The Petition contained no mention of the Messrs. Ford and Baumbaugh communications during the auction. On April 3, US WEST filed an  X4opposition to the Petition and, on April 14, Western filed a reply. On April 28, the Commission granted three of US WEST's D and E block PCS licenses. The three licenses  Xb4did not involve markets within US WEST's landline service area./0ZbF {OY'ԍ Public Notice, FCC Announces Grant of Broadband Personal Communications Services D, E, and F Block BTA Licenses Balance of Winning Bids (D and E Block) and Final Down Payment (F Block) are Due by May 12, 1997, DA 97883 (rel. April 28, 1997)./ On April 28, the Commission granted 95 of Western's D and E block PCS licenses, which included the license  X44for the Olympia, Washington BTA, E block.t14h  {OM'ԍ Public Notice (rel. April 28, 1997), supra.t  X4 17. By early 1997, the United States Department of Justice launched an investigation into bidding practices employed by participants during the Commission's PCS auctions. In connection with the investigation, the Department of Justice issued Civil Investigative Demands ("CIDs") regarding potential violations of Section 1 of the Sherman Act to the  X4auction participants. On April 25, 1997, the Department of Justice sent a CID to US WEST.[2  {OU$'ԍUS WEST Response, supra, Question 5.[ "After receiving the CID, US WEST began an extensive internal investigation of its activities  X|4during the D/E/F auction."[3|  {O''ԍUS WEST Response, supra, Question 5.[ US WEST states that as part of its investigation, US WEST's"|3,))qq"  X4lawyers interviewed each member of the company's auction team, including Mr. Ford.[4 {Oy'ԍUS WEST Response, supra, Question 5.[  X4According to US WEST, an initial interview of Mr. Ford occurred on May 1, at which time "Mr. Ford disclosed that he had spoken to Mr. Baumbaugh during the auction but insisted on close questioning that the conversation consisted only of Mr. Ford expressing to Mr.  X4Baumbaugh that the auction was exciting."[5Z {O'ԍUS WEST Response, supra, Question 5.[ Apparently, during the May 1 interview, Mr. Ford maintained "that he and Mr. Baumbaugh carefully avoided discussing bidding information" and "that he knew that auction rules prohibited communication of bidding  X_4information with other bidders and that he did not discuss bidding information with Mr.  XH4Baumbaugh or with any other bidders."[6H {O 'ԍUS WEST Response, supra, Question 5.[ Apparently a second interview of Mr. Ford,  X14conducted on May 19, disclosed no additional information on the subject communication.[71~ {O`'ԍUS WEST Response, supra, Question 5.[  X 418. On June 26, 1997, the Bureau dismissed Western's Petition.8  {O'ԍSee In re Applications of US WEST Communications, Inc. for Various D & E Block Broadband PCS  {O'Licenses, Memorandum Opinion & Order, DA 971346 (rel. June 26, 1998) ("June 26 MO&O"). The June 26  X 4MO&O further granted US WEST's pending applications for 48 licenses in the D and E  X 4blocks.K9 l  {O'ԍJune 26 MO&O, supra.K On June 27, the Commission granted US WEST's application with regard to two  X 4additional D and E block PCS licenses.:  {Om'ԍ In re Applications ACCPCS, Inc et. al, Memorandum Opinion and Order, 12 FCC Rcd 8449 (WTB 1997). 19. Western had also received a CID from the Department of Justice. In June 1997,  Xy4in the context of preparing a response to the Justice Department inquiry, Western reviewed  Xb4"the existence of the Ford/Baumbaugh communications".[;bX  {Ok'ԍWestern Response, supra, Question 5.[ In connection with the company's internal investigation, Western's outside counsel interviewed Mr. Baumbaugh, Mr. Stanton  X44(WWC's Chairman/Chief Executive Officer), and Mr. Bender (WWC's General Counsel).[<4 {O"'ԍWestern Response, supra, Question 5.[  X4 20. According to US WEST, on July 5, 1997, the company's outside counsel disclosed to Western's outside counsel, "the existence of a conversation between Mr. Ford and Mr. Baumbaugh as Mr. Ford had reported it to US WEST's counsel during his first interview" |<,))qq"  X4[held on May 1]."[= {Oy'ԍUS WEST Response, supra, Question 4.[ On July 11, 1997, at a meeting between outside counsel for US WEST  X4and Western, Western's outside counsel disclosed to US WEST's attorneys "that Mr. Ford had  X4left the subject voice mail for Mr. Baumbaugh."[>Z {O'ԍUS WEST Response, supra, Question 4.[ On July 14, US WEST's outside and in X4house counsel again interviewed Mr. Ford[? {OX'ԍUS WEST Response, supra, Question 5.[ where it appears that after being "confronted with  X4this new information Mr. Ford confirmed that he had left the message."P@~ {O 'ԍUS WEST Statement, supra.P According to US  X4WEST, following this interview, Mr. Ford retained personal counsel.[A {ON 'ԍUS WEST Response, supra, Question 5.[ On July 17, after being orally advised of the subject communication, the senior management unanimously  X_4determined to terminate Mr. Ford's employment with US WEST.\B_ {O'ԍUS WEST Response, supra, Question 10.\ On July 18, Mr. Ford was  XH4dismissed.\CH4  {O-'ԍUS WEST Response, supra, Question 10.\ 21. During the period from July 15 through August 1, 1997, US WEST conducted interviews of Mr. Ford's supervisors and subordinates, as well as other senior company officials involved in the auction process, to determine who had been aware of the Ford/Baumbaugh communications and to determine whether any other communications  X 4occurred.[D  {O5'ԍUS WEST Response, supra, Question 5.[ US WEST states that the interviews of Mr. Ford's supervisors and other senior company officials involved in the auction process revealed no evidence that any of them was aware of the incident. The company further indicates that some of the subordinates recalled having heard during the auction period that Mr. Ford had spoken with an acquaintance at  Xb4Western, but none was aware of the details or timing of the conversation.[EbX  {Ok'ԍUS WEST Response, supra, Question 5.[ 22. On July 22, 1997, US WEST representatives met with Commission staff to  X4informally reveal the incidence of the Ford/Baumbaugh communications. Sometime during July 1997, Western learned that US WEST was "preparing to make a disclosure of the  X4incident" pursuant to Section 1.65 of the Commission's Rules, 47 C.F.R.  1.65.[F {O%'ԍUS WEST Response, supra, Question 5.[ Western further states that around this time, Western's outside counsel again interviewed Mr. Baumbaugh, Mr. Stanton (WWC's Chairman/Chief Executive Officer), and Mr. Bender (WWC's General Counsel), and it was around this time that Western's FCC counsel was" |F,))qq"  X4"apprised of the incident."[G {Oy'ԍWestern Response, supra, Question 5.[ 23. On July 28, 1997, Western filed an Application for Review of the Bureau's June 26 MO&O, which denied Western's Petition to Condition [or Deny] Grant of US WEST's D and E block Licenses. Western's Application for Review did not raise the issue of the Ford/Baumbaugh communications. 24. On August 1, 1997, US WEST submitted a "Statement for the Information of the Commission in accordance with Section 1.65 of the Commission's Rules" ("US WEST Statement"), which formally disclosed Mr. Ford's voice mail message, the receipt of Mr.  X 4Baumbaugh's return voice mail message, and a telephone conversation with Mr. Baumbaugh during the auction. In the statement, US WEST conceded that the "[Ford/Baumbaugh]  X 4communications raise an issue under Section 1.2105(c) of the [Commission's] Rules."ZH Z {O'ԍSee US WEST Statement, supra.Z In response to US WEST's Statement, Western submitted a letter on August 6, for the purpose of "providing the Commission with [Western's] view of the US WEST 1.65 submission on  X 4the subject incident."\I  {OD'ԍWestern Response, supra, Question 11.\ Western maintained that the voice mail message and subsequent conversation between Messrs. Ford and Baumbaugh, did not implicate Rule 1.65 of the  Xy4Commission's Rules.\Jy~ {O'ԍWestern Response, supra, Question 11.\ 25. On August 12, 1997, US WEST filed an opposition to Western's Application for  X44Review, and on August 27, Western filed its reply. The Commission has not issued a final ruling on Western's Application for Review. On September 26, 1997, the Commission  X4granted the remaining five PCS licenses to Western.K {O'ԍ Public Notice, FCC Announces Grant of Broadband Personal Communications Services D and E Block Licenses to Western PCS BTA I Corporation, 12 FCC Rcd 15264 (WTB 1997). 26. On November 21, 1997, the Bureau's Enforcement and Consumer Information Division issued each company a letter of inquiry pursuant to Section 308 of the Communications Act of 1934, as amended, 47 U.S.C.  308(b). Western submitted its response to the Division's letter of inquiry on December 15 ("Western Response"), and US WEST submitted its response to the letter on December 16 ("US WEST Response"). In Western's response, it indicated that no disciplinary action was taken against Mr. Baumbaugh, as the company had "concluded that Mr. Baumbaugh acted at all times with the highest degree  X74of integrity and in a manner consistent with the FCC's anticollusion rules."[L7j  {OR''ԍWestern Response, supra, Question 9.[ Furthermore, Western argued that the Ford/Baumbaugh communications did not need to be reported under"  L,))qq" Section 1.65 of the Commission's Rules because "the subject incident did not render any Form 175 information previously submitted by [Western] inaccurate, nor did it have any  X4significance to the outcome of the licensing process."\M {OK'ԍWestern Response, supra, Question 11.\  X4C III. DISCUSSION ă 27. Given the Commission's statutory obligation to use auctions as a primary licensing tool, the protection of the integrity of the auction process is of paramount importance. Consequently, we are concerned about actions that compromise the integrity of the auction process. This is particularly true with regard to behavior that violates the anticollusion rule, Section 1.2105(c) of the Commission's Rules. 28. Section 1.2105(c) states in pertinent part: ` ` all applicants are prohibited from cooperating, collaborating, discussing, or disclosing in any manner the substance of their bids or bidding strategies, or discussing or negotiating settlement agreements, with other applicants until after the high bidder makes the required down payment, unless such applicants are members of a bidding consortium or other joint bidding arrangement identified on the bidder's shortform application  X4pursuant to 1.2105(a)(2)(viii).x` 47 C.F.R. 1.2105(c)(1). 29. The purpose of the anticollusion rule is to preserve the integrity and  X4competitiveness of the auction process.oNZ {O'ЍSecond Report and Order, 9 FCC Rcd at 238687.o Just two days after the commencement of the Broadband PCS D, E, and F block auction, the Bureau warned "auction applicants who have applied for the same geographic areas ...[to] avoid all discussions with each other which affect, or in their reasonable assessment, have the potential to affect their bids or bidding  XN4strategies."ON {O ' " ЍPublic Notice, Wireless Telecommunications Bureau Provides Guidance on the AntiCollusion Rule for D,  yO!'E, and F Block Bidders, DA 961460 (rel. August 28, 1996). A few weeks later, the Bureau again emphasized to applicants that the anticollusion rule prohibits them from "cooperating, collaborating, discussing, or disclosing in any  X 4manner the substance of their bids or bidding strategies."P F yO%' "y ЍLetter from Kathleen O'Brien Ham, Chief, Auctions Division, to David L. Nace, Esq., 11 FCC Rcd 11363 (September 17, 1996). Further, the Commission has stressed that any bidder found in violation of the anticollusion rule faces potential sanctions of license revocation or forfeiture and may even be prohibited from participating in future" P,))qq"  X4auctions.TQ {Oy' "t ЍImplementation of Section 309(j) of the Communications Act Competitive Bidding, Fifth Report and Order,  x 9 FCC Rcd 5532, 557071 (1994) ("Fifth Report and Order"). The United States Department of Justice supported  {O ' x7 efforts by the Commission to minimize the risk of tacit collusion in the Commission's auctions. See Comments of  x the United States Department of Justice, dated October 8, 1997, in W.T. Docket No. 9782 ("DOJ Comments"), at 2.T 30. The Commission rejects Western's contention that the subject disclosure and communications between Messrs. Ford and Baumbaugh during the auction do not violate the anticollusion rule set forth in Section 1.2105(c) of the Commission's Rules. Here, US WEST, a competing bidder in the auction, disclosed information about the company's bidding strategy concerning a particular market to Western through its vice president, an authorized  X_4bidding representative. The message, i.e., US WEST's bid in round 24 was mistakenly placed, is precisely the type of disclosure prohibited under the anticollusion rule. The voice mail message revealed to Western that although US WEST was bidding in the market, US WEST was not interested in winning the Olympia, Washington BTA. Once the disclosure was made, Western was privy to information concerning US WEST's bidding strategy which was unavailable to other auction participants bidding on that market. Rather than reporting the incident to the Commission, Mr. Baumbaugh left a return voice mail message concerning the disclosure for Mr. Ford. Messrs. Baumbaugh and Ford subsequently engaged in a telephone discussion wherein US WEST's disclosure was referenced again. According to US WEST, the information was disclosed for the purpose of affecting Western's bidding strategy  X{4in the auction, i.e., to avoid retaliatory bidding by Western in markets important to US  Xf4WEST.[Rf| {O'ԍUS WEST Response, supra, Question 1.[ This series of communications violates the anticollusion rule. 31. Furthermore, it appears that the behavior of US WEST and Western was influenced by the disclosure and, in addition, that they may have cooperated in order to influence the outcome of the auction. The Commission's bidding record shows that after Mr. Ford's voice mail message was sent at or about the time of round 24, Western stopped bidding on the Olympia, Washington market. At the same time, US WEST, which by its own account was not interested in the Olympia, Washington market, nevertheless continued to bid actively for the license and engaged in a "bidding war" with a third bidder (Whidbey) over the market. However, after Western became the high bidder in round 56, US WEST stopped bidding for the license. Thereafter, a "bidding war" ensued between Western and Whidbey,  Xi4after which Western ultimately won the E block Olympia, Washington BTA license.Si {O(#' " ЍSee Public Notice, DA 9781 (released January 15, 1997) (identifying Western as the winning bidder for the Olympia, Washington BTA, E block). 32. These facts refute Western's assertion that the subject disclosure and discussion had no impact on the outcome of the auction. The factual record shows that the subject communications very likely benefitted Western and US WEST and disadvantaged other"  h S,))qq" bidders. Western benefitted from the communications by learning of US WEST's lack of interest in Olympia and, thus, learning more about the true overall demand for that market. Western also got a window into US WEST's overall auction plan and strategy. Mr. Ford's disclosure gave Western unique and exclusive information to the effect that US WEST's bidding strategy was not what it appeared. Until the voice mail message, Western possessed evidence (i.e., through the March/April 1995 meeting with US West representatives; the June 1996 golf game; and discussions with a third party, BDPCS, Inc.) of US West's desire to win the Olympia, Washington BTA. It also appears that US WEST avoided directly competing with Western in Olympia, as evidenced by the fact that US WEST immediately removed itself from bidding on the market once Western returned as the high bidder in round 56. 33. US WEST likely benefitted from the communications as well, by reducing the possibility that Western would compete in markets of interest to US West. Indeed, the bidding record shows that in the 20 rounds following the disclosure, Western began bidding in 11 new markets and US WEST began bidding in 33 new markets. In no case did either company bid on a market in which the other was designated the high bidder. Additionally, it appears that after the subject disclosure, US WEST obtained a relatively safe haven (the  Xy4Olympia market) in which to "park eligibility."Ty yO'ԍUnder the auction rules, bidders were required to actively bid on a certain percentage of their maximum  {O'eligibility, as initially determined by their upfront payment, in each round of the auction. See, Public Notice, Auction of Broadband PCS (D, E, and F Blocks), Qualified Bidders and Bidder Instructions, 11 FCC Rcd 9958, 9960 (WTB 1996). Rather than bidding directly on markets of interest, some auction participants bid elsewhere to preserve eligibility while not driving prices higher in markets of interest to themselves. This strategy is informally known as "parking eligibility." Normally, an auction participant that parks eligibility runs the risk of having to either purchase the license or pay a substantial withdrawal  XK4payment if another bidder does not subsequently place a higher bid on the market."U|KB yO>'ԍUnder the auction rules, a bidder is permitted to withdraw a bid it previously placed in a particular market, subject to certain withdrawal payments. Where no subsequent bid is placed, the penalty is assessed at a  {O'percentage of the total amount of the withdrawn bid until the full amount can be assessed, i.e., when the license is reauctioned. If another bidder subsequently places a bid for the market, the bidder that placed the withdrawn bid is subject to a payment equivalent to the difference between the amount of the withdrawn bid and the amount of the winning bid. No withdrawal payment is assessed if the subsequent winning bid exceeds the withdrawn  {O'bid. See, e.g., 47 C.F.R. 24.704." US WEST reduced this risk by disclosing to Western that it was not a serious contender for the Olympia market. In so doing, US WEST had effectively guaranteed that Western would later outbid US WEST in that market, since Western would have no fear of triggering a "bidding war" against US WEST over the Olympia market. US WEST subsequently placed four bids for Olympia (in rounds 41, 45, 48, and 54) with minimal risk that such bids would result in winning the license or in a withdrawal payment for the company. 34. It is apparent that US WEST and Western's conduct unfairly disadvantaged the other bidders in the market by creating an impermissible asymmetry of information. Western alone was privy to US WEST's strategic bidding information. Other bidders were at a competitive disadvantage visavis Western because of their inability to access, analyze, and"N U,))qq4" act upon this strategic information. In particular, Whidbey expended its auction time, energy and resources responding to the insincere bids of US WEST in Olympia, an expenditure Western was able to avoid. In addition, the continued presence of US WEST, a bidder with vast resources, may have had considerable impact on other bidders' estimates of the overall demand for the Olympia market and, thus, on their willingness to enter or to remain in the BTA. 35. The fact that Messrs. Ford and Baumbaugh may have had a prior acquaintance does not make their conversation permissible. Indeed, their relationship should have placed Western and US WEST on notice that heightened precautions may have been needed to ensure that prohibited discussions did not occur. Furthermore, the fact that the PCS markets  X 4had been the topic of preauction conversations (i.e., at the March/April 1995 meeting and the June 30, 1996 golf game) between Messrs. Ford and Baumbaugh does not mitigate the violation. Rather, the preauction conversations may have given further substance and context to Mr. Ford's voice mail message. 36. Although the record in this matter appears to show that the disclosed information was used to advantage US WEST and Western, such a finding is not necessary to issue a penalty under the anticollusion rule. Irrespective of whether the information was used, a  XM4violation results from the mere communication or conveyance of prohibited information. It would severely hamper the Commission's ability to maintain the integrity of its auctions if a penalty for violations of Section 1.2105(c) could result only after a showing that prohibited information was actually used in an anticompetitive manner. The basis for the rule is to prohibit such disclosures in the first instance. 37. Further, the Commission rejects Western's contention that the matter did not need to be reported under Section 1.65 of the Commission's Rules. Section 1.65 requires an applicant to maintain the accuracy and completeness of information furnished in its pending application and to notify the Commission within 30 days of any substantial change that may  Xg4be of decisional significance to that application.V"g {O'ԍ47 C.F.R.  1.65. See also Letter from Kathleen O'Brien Ham, Chief, Auctions Division, Wireless Telecommunications Bureau, to Jonathan D. Blake and Robert J. Rini, DA 952404 (rel. November 28, 1995) ("Blake Letter") (noting that Section 1.65 requires an auction applicant to bring to the Commission's attention any communication not permissible under the applicant's certification pursuant to Section 1.2105(c)). In its shortform application, Western certified that it had not or would not enter into any explicit or implicit agreements, arrangements or understandings of any kind with any undisclosed parties regarding the amount of their bids, bidding strategies or particular licenses on which they would or would not bid.  X 4Here, the subject conduct i.e., receiving information from a competing bidder about its bidding strategy and cooperating with a competing bidder in obtaining a license invalidated Western's certification, thereby comprising a "substantial change" in its application. As such, the incident was a reportable event under Section 1.65 and required Western to bring the" V,))qq;"  X4matter to the Commission within 30 days.WZ yOy'ԍ47 C.F.R.  1.65. The United States Department of Justice stressed that the Commission's imposition of notification requirements for auction competitors engaging in discussions or negotiations during the auction  {O 'would facilitate detection of potential anticompetitive arrangements. See DOJ Comments, at 3. By its own admission, Western's Director/Senior Vice President for Corporate Development as well as the Chairman/Chief Executive Officer and the Senior Vice President/General Counsel of Western's parent company had knowledge that a "substantial change" occurred on September 19 and 20, 1996, at the time of the subject communications. The circumstances under which Western raised this matter with the Commission are troubling. Specifically, Western did not notify the Commission about the Ford/Baumbaugh communications until August 6, 1997, five days after US WEST formally reported the incident to the Commission and 11 months after the communications occurred. According to Western, the August 6, 1997 submission was made merely "in the interest of providing the Commission with Western's view of the US WEST 1.65 submission on the  X 4subject incident."\X  {O'ԍWestern Response, supra, Question 11.\ Western's failure to promptly notify the Commission constitutes a  X 4violation of Section 1.65 of the Commission's Rules.KYZ | {O0'ԍSee Elwood Beach Broadcasting, Ltd., 8 FCC Rcd 453 (1993) (where company's principal/general partner had knowledge that company's proposed transmitter site had become unavailable, company's failure to promptly notify the Commission constituted a violation of Rule 1.65).K 38. Under Section 503(b) of the Act, a forfeiture can be imposed against any applicant or licensee that willfully or repeatedly fails to comply with any rule of the  X 4Commission.@Z  yO'ԍ 47 U.S.C.  503(b).@ For purposes of Section 503(b), the term "willful" means that the violator knew it was taking the action in question, regardless of whether there was an intent to violate  Xy4the rule.p[y.  {OX'ԍ See Southern California Broadcasting Co., 6 FCC Rcd 4387 (1991).p Pursuant to that definition, we conclude that Western willfully engaged in two violations of Section 1.2105(c) of the Commission's rules by intentionally discussing bidding strategy with a competing bidder during the auction the voice mail that Mr. Baumbaugh left for Mr. Ford and the telephone conversation between Messrs. Baumbaugh and Ford. Western also willfully violated Section 1.65 of the Commission's rules by intentionally choosing not to timely inform the Commission of the prohibited communications. 39. Violations of the anticollusion rule during an auction directly threaten the  X4integrity and competitiveness of the auctions process.6\$  {O2$'ԍ See Implementation of Section 309(j) of the Communications Act - Competitive Bidding, Second Report  {O$'and Order, 9 FCC Rcd 2348, 2386-87 (1994)(anticollusion rule adopted to preserve integrity and competitiveness of auctions process). 6 We believe that the actions of Western and US WEST are particularly egregious because they evidence a specific intent to violate the"\,))qq\" anticollusion rule. While, as noted above, a party's intent to violate the rule is not necessary to a determination of whether that party acted willfully, we find that an intent to violate a Commission rule is probative in determining the penalty to be assessed. Western and US WEST intended to violate the anticollusion rule by engaging in communications regarding bidding strategy precisely the types of communications the rule was adopted to prohibit. In light of the above, we assess against Western a forfeiture in the amount of $100,000 for each of its two willful violations of Section 1.2105(c) of the Commission's rules, for a total of $200,000. 40. In addition, Western's violation of Section 1.65 by failing to report to the Commission the communications between Messrs. Baumbaugh and Ford was not only willful but was repeated. Thus, it was a "continuing violation" under Section 503(b) of the Communications Act. Each day of a continuing violation is considered a separate violation  X 4for purposes of computing a forfeiture.u]  {ON'ԍ See Eastern Carolina Broadcasting, Inc., 6 FCC Rcd 6154, 6155 (1991).u In this case, the violation began on October 19, 1996, 30 days after the date of the first conversation, and continued until May 28, 1997, when  X 4grant of the Olympia E block license was no longer reviewable (i.e., 30 days after the April 28, 1997 grant date). We find that the appropriate forfeiture amount for each day of this continuing violation was $5,000, for a total of $1,000,000. 41. In determining the amount of the forfeiture, we have considered the relevant statutory factors enumerated in Section 503(b)(2) of the Communications Act of 1934, as amended, including the nature, circumstances, extent and gravity of the violations. Pursuant to Section 1.80 of the Commission's Rules, Western may avail itself of the opportunity to present mitigating evidence showing why a forfeiture should not be imposed or why the amount should be adjusted downward. Upon receipt of such evidence, we will consider all relevant factors, including the licensee's overall compliance history, whether the licensee voluntarily disclosed the violation to the Commission, and the circumstances under which the licensee came forward with information concerning the incident.  Xg4} IV. CONCLUSION ă 42. Accordingly, pursuant to Section 503(b) of the Communications Act of 1934, as amended, 47 U.S.C. 503(b), and Section 1.80 of the Commission's Rules, 47 C.F.R. 1.80, Western PCS BTA I Corporation, is hereby NOTIFIED of its APPARENT LIABILITY FOR  X4FORFEITURE in the amount of one million and two hundred thousand dollars ($ 1,200,000) for its willful and repeated violation of Section 1.2105(c) of the Commission's Rules, 47 C.F.R. 1.2105(c) and its willful and rep p$\N eated  p$\N violation of Section 1.65 of the Commission's Rules, 47 C.F.R.  1.65. The amount specified was determined after consideration of the factors set forth in Section 503(b)(2)(D) of the Communications Act of 1934, as amended, 47 U.S.C. 503(b)(2)(D). 43. Therefore, IT IS HEREBY ORDERED, pursuant to Section 1.80(f)(3) of the"S%Z],))qq#" Commission's Rules, 47 C.F.R. 1.80(f)(3), that within thirty (30) days of the release date of this Notice, Western PCS BTA I Corporation, SHALL PAY the full amount of the proposed forfeiture OR SHALL FILE a response showing why the proposed forfeiture should not be imposed or the amount should be reduced. 44. Payment of the forfeiture may be made by mailing a check or similar instrument, payable to the order of the Federal Communications Commission, to the Federal Communications Commission, Post Office Box 73482, Chicago, Illinois 606737482. The payment should note the File Number of the abovecaptioned proceeding. Payment of the forfeiture may be made by credit through the Commission's Billing and Collections Branch at (202) 4181995. 45. IT IS FURTHER ORDERED that a copy of this Notice SHALL BE SENT to Western PCS BTA I Corporation, by Certified Mail, Return Receipt Requested. ` ` W hhWFEDERAL COMMUNICATIONS COMMISSION ` ` W hhWMagalie Roman Salas ` ` W hhWSecretary "4],))qqD"  X4K ATTACHMENT ă  X4g BIDDING RECORD > OLYMPIA, WASHINGTON BTA (MARKET 331)  X' BLOCK E, BROADBAND PCS AUCTION ă h ddx !ddxvZZZZZZZ h     &&   X' Round 7  X' Lt.Wave 7  X' N.Coast 7  X' Omnipt. 7  X' USWEST 7  X' Western 7  X' Whidbey   q v &_&  2_ $1,000_ $11_ _ _ _ q q 7 10 _  _  _  _ $27,000 _  _ q q  11 _  _  _  _  _ $79,088 _ q q   24 _  _  _  _ $105,000 _  _ q q   40l_ l_ l_ l_ l_ l_ $150,000q q   41_ _ _ _ $176,000_ _ q q l 44N_ N_ N_ N_ N_ N_ $205,000q q  45_ _ _ _ $231,000_ _ q q N 460_ 0_ 0_ 0_ 0_ 0_ $257,000q q  48_ _ _ _ $283,000_ _ q q 0 53_ _ _ _ _ $311,000_  S)'#&a\  P6G;&P#$311,000*#Xj\  P6G;y XP#q q  54_ _ _ _ $342,000_ _ q q  56_ _ _ _ _ $376,320_ q q  83e_ e_ e_ e_ e_ e_ $414,000q q  84_ _ _ _ _ $455,001_ q q e 93G_ G_ G_ G_ G_ G_ $501,000q q  94_ _ _ _ _ $551,001_ q q G 120)!_ )!_ )!_ )!_ )!_ )!_ $579,000q    &_&  121" " " $637,000" " $637,001"   )! * high bid for round 53