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I.   a7TechnicalTechnical Document Style(@D i) . a8TechnicalTechnical Document Style(D a) . 2q/tePleadingHeader for numbered pleading paperP@n   $] X X` hp x (#%'0*,.8135@8:N?Footnote;Íčfootnote tex#<'p #FxX  Pg9CXP#header=Ax 4 <D  #FxX  Pg9CXP# reference>;#FxX  Pg9CXP#2E?~@@iAA^BBOXDitemizeX1?&V 8F ` hp xr#FxX  Pg9CXP#header2@I ` hp x`    #FxX  Pg9CXP# heading 3AF` hp x #FxX  Pg9CXP# footer!B!!#d\  PCP#2KRXEK$HKoJL 7jC:,Xj\  P6G;XP68xC;,Xx PE37XPl?xxx,2x6X@`7X@ 7nC:,!4Xn4  pG;XpDppLDd4ddC6CWxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxNHxxHjdDddddddLXX2Z}RT 7jC:,Xj\  P6G;XP68xC;,Xx PE37XPl?xxx,2x6X@`7X@ 7nC:,!4Xn4  pG;X W!@(#,h@\  P6G;hP `` 6n |V p  Courier New#Xj\  P6G;XP#$//Order, IVDS various requests, FCC 95479//$ $/95.833 Construction requirements/$  X- 0 Before the pp  xx  X-FEDERAL COMMUNICATIONS COMMISSION FCC 95479 ă Washington, D.C. 20554  X_-In the Matter of  hh@) x` `  hh@)  X1-Interactive Video and Data hh@)  X -Service (IVDS) Licenseshh@) x` `  hh@)  X -Various Requests by hh@)  X -Auction Winners hh@)h  X -; ORDER ă  Xy-xAdopted: November 30, 1995@hReleased: December 6, 1995 By the Commission:  X4-  X- V I. INTRODUCTION AND BACKGROUND ă  X-Xx1. Licensees in the Interactive Video and Data Service (IVDS)CvT Xh-ԍ The IVDS is a pointtomultipoint, multipointtopoint, shortdistance communications service in which licensees may provide information, products, or services to individual subscribers located at fixed locations in the service area, and subscribers may provide  X#-responses. See Report and Order in GEN Docket No. 912, 7 FCC Rcd 1630, 1630  2, 1637  54 (1992). A list of the petitioners, a few of which are nonlicensees, is found in the  X-Appendix to this Order. C have filed various(# auctionrelated requests, including   requests for interpretation of the Commission's Rules. These petitioners won licenses in the IVDS auction, held July 28 and 29, 1994, and were  X-granted licenses on either January 18 or February 28, 1995. By this Order, we deny these requests.  Xe- x2. The requests fall into four general groups. The first group consists of licensees requesting that the Commission transfer the bidding credit to the other winning bidder in the  X7-same service area where the original beneficiary of such bidding credit has defaulted.$7T X$-ԍ For the purpose of this Order, "default" and "defaulter" denote nonpayers and others not meeting the terms of the auction rules. The Commission will issue a list of the licenses subject to reauction at a time closer to the next IVDS auction.$ Another licensee similarly requests that the Commission allow it to switch frequency blocks where the other winning bidder in the same service area has defaulted. The second group"  0*0*0*=" involves requests to reduce the total payment amounts and revise the installment payment program. The third group concerns requests to modify the installment payment program so that payments are due in annual rather than quarterly installments. The final group consists of  X-miscellaneous requests.< X4-ԍ Some of the petitioners have also requested that the initial (one year/ten percent) "buildout" requirement in 47 C.F.R.  95.833(a) be eliminated. The Commission is  X-considering such requests in a separate proceeding. See Notice of Proposed Rule Making  X-in WT Docket No. 95131, FCC 95318, released August 14, 1995.Ħ  X- II. DISCUSSION ă  X_- x A. Transfers of Bidding Credits and Frequency Segments  X1-x3. In the Fourth Report and Order in the auctions proceeding, the Commission adopted a 25 percent "bidding credit" for companies owned by minorities and/or women, to help ensure their opportunity to participate in the auctions process and the provision of IVDS  X -offerings. 4< X-ԍ Fourth Report and Order in PP Docket No. 93253, 9 FCC Rcd 2330,  X-233739  3947 (1994) (Fourth Report and Order). Prior to the next IVDS auction, we intend to examine whether we should continue to provide bidding credits in the context of  X-IVDS, and if so, on what terms. See also paragraph 23, infra.ij The credit provides a 25 percent discount on the price an eligible winning bidder ultimately must pay for its license. The Commission limited use of this credit, however, to one license per IVDS service area; that is, a bidding credit would be available for the license  X -on frequency segment A or B, but not on both segments.B < X-ԍ Id. at 2337 n. 65.B Consequently, at the July 2829, 1994, auction, the highest bidder in each service area was permitted to take the bidding credit, if eligible, and to take first choice of the two frequency segments (A or B). With only one bidding credit available in each service area, if it happened that the two highest bidders were both eligible for the credit, the second highest bidder was immediately given the option of accepting the remaining license without the credit, or declining the remaining license. x4. Following the auction, certain winning bidders that had been awarded bidding credits defaulted on their licenses, leaving the credit unused (to date) in the affected service areas. As a result, the following petitioners (that also qualify for the credit) request that their licenses, as well as the licenses of others similarly situated, be modified to transfer the  X-bidding credit: Combined Interactive, Inc. (Combined); Harinder Kumra (Kumra); #Xj\  P6G;XP#MKS Interactive, Inc. (MKS); Pegasus IVDS, Inc. (Pegasus); and Two Way TV, Inc. (Two Way"Q 0*(("  X-TV)._< Xy-ԍ Combined, "Request for Clarification," filed November 9, 1994, at 2; Kumra, #Xj\  P6G;XP#"Petition for Declaratory Ruling Regarding Bidding Credit and Informal Request for Adjustment in Price," filed October. 19, 1994, at 3; MKS, "Petition for Special and Extraordinary Relief," filed November 1, 1994, at 1213; Pegasus, Letter to Robert McNamara, Chief, Private Wireless Division, Wireless Telecommunications Bureau, FCC (Jan. 26, 1995); Two Way TV, "Request for Clarification," filed November 10, 1994, at 3. These petitioners all claim status as minority or womenowned businesses.  Similarly, joint petitioners AG Partners, Friends of IVDS, IVDCO LLC, IVDS/RLV Partnership, Infopower International, Nanowave Technologies, New England Mobile Communications, Inc., TeleLink Communications, WCTV Partners, Washington Communications, Wayne Partners, and Zarg Corporation (Joint Petitioners) request that the subject bidding credits be available, at reauction, only to nondefaulting bidders from the  X-previous auction.< X--ԍ Joint Petitioners, "Petition For Extraordinary Relief," filed August 26, 1994, at 6. See  X-also paragraph 21, infra. Finally, Self Communications, Inc. (Self), requests that its license be  Xv-modified to change the frequency segment it was originally awarded.|v < X-ԍ Self, "Petition for IVDS System Frequency Change and Request to Hold Construction Requirements in Abeyance," filed January 24, 1995, at 3. Self requests that its license be modified to change the frequency segment from A to B. It is our experience, from the IVDS auction, that some bidders do not see the frequency segments as fungible.| x5. Petitioners note that, unlike the defaulters, they have satisfied the requisite filing and payment obligations. They argue that the defaulters' winning bids were unrealistic, and that petitioners were therefore outbid through no fault of their own. They therefore assert that fairness dictates that they now be awarded the bidding credit. Finally, Two Way TV argues that the auction rules permit the Commission to transfer a defaulted license to the next highest  X -bidder,  < X{-ԍ Two Way TV at 23; see Second Report and Order in PP Docket No. 93253,  Xd-9 FCC Rcd 2348, 238384  204 (1994) (Second Report and Order) (general auction rules and  XM-procedures), reconsideration granted in part, Second Memorandum Opinion and Order, 9 FCC Rcd 7245 (1994). and that this implies authority to transfer bidding credits as well. x x6. We deny these requests. The petitioners have been awarded precisely what they bid on, and we do not believe that fairness requires that they receive additional postauction benefits as a result of the actions of defaulting bidders. These bidders had no reasonable expectation that they would ultimately receive a bidding credit and, in fact, were afforded the opportunity to accept or decline their license after the highest bidder selected a license. We do not believe that postauction defaults by some bidders warrant providing a windfall to the other winning bidder in a market. "a 0*(("Ԍx7. In order to deter insincere bidding, the Commission requires that bidders make  X-certain financial certifications and upfront payments, and has established remedies for defaults.  X-  In addition, the Commission has, through seminars, bidder information packages and fact sheets, attempted to ensure that all bidders are provided with sufficient information to make reasonable business decisions about the value of the licenses prior to the auction. Such safeguards help ensure that bids are based on informed valuations, but they cannot guarantee that some bidders will not value the licenses differently and may bid beyond their means. Beyond the safeguards and default remedies noted above, the Commission cannot prevent bidders from making uneconomic bidding decisions. x8. Self's request raises the issue of whether a licensee may participate in the reauction of the defaulted licenses and win the other license (A or B) in its service area. Although an IVDS license holder may not hold another IVDS license, or an interest in such  X -license, in its service area,C < XN-ԍ 47 C.F.R.  95.813(b).C a licensee might wish to "switch" licenses through the auction process, if permitted. We intend to address this possibility separately, in our reconsideration  X -of the Fourth Report and Order in the auctions proceeding.   Xy- x B. Total Payment Amounts  XK-x9 . Several petitioners argue that inflated bidding by bidders who ultimately defaulted forced sincere bidders to pay too much for their licenses. Accordingly, many winning bidders argue that the Commission should reduce the amount due from winning bidders to account for  X-the inflationary effect that defaulters had on the bidding. These petitioners argue that, without such relief, the viability of IVDS as a service is threatened due to the extra financial burden  X-placed upon IVDS license winners. Petitioners suggest a variety of methods to compensate for allegedly inflated winning bids. x10. Joint Petitioners, for example, assert that the Commission should waive the interest payment requirement during the first twelve months of the license and extend the interest plus principal payment period from five years to seven years, with the principal and interest being amortized over the final four years of the installment payment program. Joint Petitioners also request that only interest be due during the second and third years of the revised installment payment program. x11. MKS proposes that the Commission give all winning bidders who have made the  X-requisite payments the option to either accept or decline the market(s) won.3 y< X$-ԍ MKS at 8.3 MKS and Kingdon R. Hughes (Hughes) suggest that the Commission permit a total payment discount for all winning bidders based on the average percentage difference, on a MHzperpop basis,  X"-between markets won by defaulters, and markets won by nondefaulting bidders ; extension of ""* 0*((!"Ԍthe payment term; reduction in the prevailing interest rate; and/or reduction in the amount of  X-principal due during the last three years of the license term.P < Xb-ԍ #Xj\  P6G;XP#MKS at 12; Hughes, "Petition For Extraordinary Relief," filed November 7, 1994, at 8. Petitioners state "first three years," but because principal payments need not commence until the third year, we have assumed they mean "last three years." P x12. Graceba Total Communications, Inc. (Graceba) claims that the Commission's IVDS auction procedures were primarily responsible for the alleged inflated bid prices, rather than the defaults of certain winning bidders, as other petitioners have suggested. Graceba argues that the system appears to be revenue driven and encourages unnecessary competition. Graceba claims, for example, that allowing only one bidding credit per market, created a bidding war between eligible bidders, thereby inflating prices. Secondly, by permitting eligible bidders to decline the second license, after having been, in part, responsible for inflating the first license price, and then allowing them to bid at the reauction of the declined  X -block, also unnecessarily inflated the bid prices.  K< X-ԍ #Xj\  P6G;XP#Graceba, "Petition for Reconsideration," filed August 26, 1994, at 34. To rectify this alleged unfairness, Graceba and Knightsbridge Business Network request a forty percent and a sixty percent reduction,  X -respectively, in total payments for all auctioned licenses. < X-ԍx#Xj\  P6G;XP#Graceba at 7; Knightsbridge, Letter to the Office of Managing Director, dated January 19, 1995, at 2. x13. IGGW Interactive, Inc. (IGGW) and Kumra request that the Commission adjust payment prices in markets where defaults occurred so that the nondefault payment price  Xy-corresponds to the reauction price of the defaulted license.y< X-ԍ Kumra at 3; IGGW, "Informal Request for Adjustment of Auction Price," filed October 19, 1994, at 7. Similarly, IVDS Enterprises Joint Venture (Enterprises) notes that the nondefaulting winning bidder should be permitted  XK-to retain its original bid, if it is lower than the reauction winning bid.K0 < X,-ԍx#Xj\  P6G;XP#Enterprises, "Request for Immediate Commission Action," filed December 19, 1994, at 6. x14. Lastly, Enterprises submits that the Commission should compare the aggregate  X-dollars bid by the defaulting bidders, i.e., $75 million, to the total dollars bid by all IVDS  X-auction winners (defaulters and nondefaulters alike), i.e., $248 million, to obtain what it calls an "insincere bid percentage" of 30.2 percent. Provided that a nondefaulting licensee, within the first three years of its license term, invests in the construction of its system the dollar equivalent of 30.2 percent of its winning bid, the Commission should, Enterprises argues," 0*((p"  X-reduce the total purchase price of the license by that amount.t< Xy-ԍx#Xj\  P6G;XP#Id. at 7 8,  10.t  X-x15. Section 309(j)(3) of the Communications Acty< X-ԍ Section 309(j)(3) of the Communications Act of 1934, as amended, 47 U.S.C.  309(j)(3). outlines the following objectives of  X-competitive bidding: (1) encouraging the rapid development of new technologies for the benefit of the public, (2) promoting economic opportunity, (3) recovering for the public a portion of the value of the spectrum, and (4) efficient and intensive use of the electromagnetic spectrum. In implementing its auction authority, the Commission sought to allow the  X_-marketplace to determine the value of auctioned licenses.f_< X# -ԍ Second Report and Order at 234950  17.f Bidders must conduct their own  XH-due diligence prior to the auction and base their bids on their own license valuations.H< X-ԍ See, e.g., Order, DA 941126, 9 FCC Rcd 6384, 6385  7 (Common Carrier Bureau  X-1994).Ĺ The  X1-Commission has imposed bid withdrawal and default remedies to deter insincere bidding, but  X -the Commission cannot prevent bidders from making uneconomic bidding decisions. ^ < X)-ԍ If fraudulent or otherwise illegal activity occurs, the Commission can investigate such  X-occurrences in the forum of enforcement proceedings. Moreover, we do not believe that the actions of some defaulting bidders justify modifying the payment terms of nondefaulting bidders. We therefore deny the petitions on this issue.  X - x C. Installment Payments x16. IVDS licensees that qualify as small businesses are eligible to pay their winning  Xy-bid amount(s) in installments over the fiveyear term of the license(s).y < X"-ԍ 47 C.F.R.  95.816(d). In addition, pursuant to the terms of the installment payment program, such licensees pay interest only for the first two years, with principal and remaining interest amortized over the last three years. Following the initial IVDS auction, the Commission granted licenses on January 18 and February 28, 1995. Subsequently, by Public Notice and by materials sent to the individual licensees, the  X4-Commission initiated a quarterly installment payment program.4{< X`#-ԍ Public Notice, Mimeo No. 53031, "Quarterly Installment Payments for IVDS Auction Licensees to Begin June 30, 1995," released March 29, 1995. The Financial Operations Division, Office of Managing Director, sent two letters and a document giving payment instructions, "Auction Installment Payment Program," directly to licensees.  X'-Subsequently, the June 30th date referenced in the Public Notice, above, was stayed. "'0*(('"Ԍ X-Order, DA 952029, released September 22, 1995 (Wireless Telecom. Bureau). Initial  Xy-installment payments are now due thirty days following release of this present Order; that is, the payments are due by January 5, 1996. Numerous licensees have"4K0*((H" requested that the Commission modify the installment program to require annual rather than quarterly payments, and to require that the first payment be due one year after the date of the  X-license grant.  K< X-ԍ See Elleron Telecommunications Corp., Letter to Robert H. McNamara, Chief, Private Wireless Division, Wireless Telecommunications Bureau, FCC (Mar. 24, 1995); Gulfnet Communications, Inc. (Gulfnet), "Petition for Rescheduling Payments," filed June 7, 1995; IVDS Equipment Coalition (Equipment Coalition), "Request for ReStructuring of Installment Payments for Interactive Video and Data Service Licenses" (Request), filed March 28, 1995, "Supplement," filed June 1, 1995; National Association of IVDS Licensees (NAIL), Letter to Andrew Fishel, Managing Director, FCC (Mar. 15, 1995); Progressive Communications, Inc., Letter to Robert H. McNamara (Mar. 24, 1995); Rose Regency, Ltd.,  X-Letter to Robert H. McNamara (Mar. 24, 1995); and joint petitioners Euphemia Banas, Bayshore IVDS Partners, Elleron Telecommunications Corp., Emerging Technologies Group, Inc., Hispania & Associates, Inc., Interactive Innovations, Inc., Mager Investment Corp., Maria Mangus, Media Ventures, MKS Interactive, Inc., P.A.W., Inc., Progressive Communications, Inc., Rose Regency, Ltd., SBM Holdings, Inc., Shaker IVDS Partners, WCI Partners, and WVI Partners, "Joint Petition to Revise Payment Schedule," filed June 16, 1995.  Others have requested that the first payment date be delayed for a period of  X-three to twentyone months._< X=-ԍ See 22nd Century Communications, Inc., Letter to Reed E. Hundt, Chairman, FCC (Mar. 14, 1995); Combined Interactive, Inc., Letter to Blair Levin, Chief of Staff, FCC (June 15, 1995); Joint Petitioners, "Petition for Extraordinary Relief," filed August 26, 1994, "Emergency Request for Stay," filed March 17, 1995, "Request for Deferment of IVDS Payment Date," filed June 22, 1995; Letter from Rita F. McCauley to Robert McNamara, Chief, Private Wireless Division, Wireless Telecommunications Bureau, FCC (Apr. 27, 1995); Women's Collateral Access Fund, Inc., Letter to Robert McNamara (Apr. 19, 1995). We deny these requests. x17. Concerning the request for annual installments, petitioners argue, first, that the auction rules and public notices failed to give them adequate notice that payments would be required quarterly, and that the Commission failed to follow Administrative Procedure Act  XH-(APA) requirements in implementing the installment payment program.H< X!-ԍ See, e.g., Equipment Coalition, Request at 2, Supplement at 1, 5; Gulfnet at 24;  X"-Interactive at 1; see generally 5 U.S.C.  553. Second, they argue that the current state of the IVDS financial and equipment markets makes it difficult to raise capital or earn revenue at this time, and that the requested relief is therefore in the public  X - GI interest.y < XF'-ԍ See, e.g., Equipment Coalition, Request at 24, Supplement at 24. y Last, they contend that annual payments are easier for the Commission to" C0*(( " administer. x18. The implementation of the IVDS installment payments program satisfied APA  X-requirements. Following "notice and comment" procedures,9< X4-ԍ See Notice of Proposed Rule Making in PP Docket No. 93253, 8 FCC Rcd 7635,  X-7645  6871 (1993); Second Report and Order in PP Docket No. 93253, 9 FCC Rcd 2348,  X-238991  231240 (1994).9 the Commission adopted Section 1.2110(d) of its auction rules, which states that "[u]pon grant of the license, the  X-Commission will notify each eligible licensee of the terms of its installment payment plan."rK< X -ԍ 47 C.F.R.  1.2110(d); see also 47 C.F.R.  95.816(d).r The rule continues, XxSuch plans will:   X1-X` hp x (#%'0*,.8135@8: