******************************************************** NOTICE ******************************************************** This document was converted from WordPerfect to ASCII Text format. Content from the original version of the document such as headers, footers, footnotes, endnotes, graphics, and page numbers will not show up in this text version. All text attributes such as bold, italic, underlining, etc. from the original document will not show up in this text version. Features of the original document layout such as columns, tables, line and letter spacing, pagination, and margins will not be preserved in the text version. If you need the complete document, download the WordPerfect version or Adobe Acrobat version, if available. ***************************************************************** Before the Federal Communications Commission Washington, D.C. 20554 In the Matter of ) ) Phillip C. Merrill ) File Nos. BMDP960510DH Logan, Utah, B258 ) BMDP960510DJ Multipoint Distribution Service ) BMDP960510DK Request for Waiver of Section 21.955(b)) ORDER Adopted: April 17, 1998 Released: April 17, 1998 By the Chief, Video Services Division: 1. By this Order, we grant a request for partial waiver of Section 21.955(b) of the Commission's rules, 47 C.F.R.  21.955(b), filed by Phillip C. Merrill (Merrill), the winning bidder in Logan, Utah, Basic Trading Area (BTA) 258, in the Multipoint Distribution Service (MDS) auction. Upon consideration of the circumstances that resulted in Merrill's failure to timely remit the required second down payment on this authorization, we conclude that Merrill is entitled to a partial waiver of the down payment rules. For the reasons set forth below, we will permit Merrill's late payment with a late fee of $2,613.75, which is five percent of the amount that was not timely paid. 2. Background. On March 28, 1996, the Commission concluded the MDS auction. Merrill was the winning bidder on six BTA authorizations. On March 29, 1996, the Commission announced by Public Notice that, pursuant to Section 21.955 of the Commission's rules, winning bidders that qualified as small businesses would be required to submit, within five business days, sufficient funds to bring their total deposits with the Commission to ten percent of the sum of their winning bids, less the applicable fifteen percent bidding credit. Consequently, pursuant to Section 21.960(b)(1), on April 5, 1996, Merrill submitted initial down payments for the six authorizations in the amount of $93,439, bringing its total amount on deposit with the Commission, including its upfront payments of $70,101, to $163,540, or ten percent of its net winning bids. 3. On July 11, 1997, the Mass Media Bureau released a Public Notice notifying certain MDS applicants that the Bureau was prepared to issue BTA authorizations, including the BTA authorization filed by Merrill for B258, Logan, Utah. In that Public Notice, applicants who qualified as small businesses were required to submit additional funds to bring their total deposits with the government to twenty percent of their net winning bids by Friday, July 18, 1997. The down payment owed by Merrill for B258 as of July 18, 1997, was $52,275. On Wednesday, July 23, 1997, three business days after the deadline, the Commission received Merrill's payment of $52,275 for B258, along with a late fee of $2,613.75, which is five percent of the amount that was paid late. On July 24, 1997, Merrill filed a request for partial waiver of this second down payment deadline. 4. Discussion. The procedures for the submission of down payments for small business MDS entities are set forth in Section 21.955(b) of the Commission's rules. Under this rule, a small business applicant must remit the required second down payment within five business days after the Commission declares by public notice that it is prepared to issue that applicant's BTA authorization. To receive a waiver of this rule requiring timely down payments, a waiver request must demonstrate either that: "(a) [t]he underlying purpose of the rule will not be served, or would be frustrated, by its application in the particular case, and that grant of the waiver is otherwise in the public interest; or (b) [t]he unique facts and circumstances of a particular case render application of the rule inequitable, unduly burdensome or otherwise contrary to the public interest." As the Commission has previously noted, the integrity and functioning of the auction process is dependent on winning bidders meeting their down payment obligations promptly. Timeliness of such payments is a necessary indication to the Commission that the winning bidder is financially able to meet its obligations on the license and intends to use the license for the provision of services to the public. In establishing the timing of down payments, the Commission noted that this requirement would also deter defaults by discouraging financially unqualified bidders who might "shop" a winning bid in order to obtain financing for a down payment. 5. In his waiver request, Merrill asserts that he did not timely remit the second down payment for B258 ". . . because he did not have on-hand sufficient net liquid assets. . . ." Merrill explains that because of a miscommunication with its engineering consultant, Merrill believed there would be a delay in the grant of the Logan applications due to unresolved technical issues. After the Mass Media Bureau released the July 11, 1997 Public Notice, Merrill submits that he took immediate steps to secure sufficient funds to make the payment ". . . by negotiating to accelerate payments otherwise due to him." According to Merrill, "[t]hese monies were promptly submitted to the Commission on July 23, 1997, the same day they were received." 6. We believe that Merrill has presented sufficient facts to justify the grant of a partial waiver of the down payment rule. Because Merrill perceived that technical problems existed with the MDS facilities proposed in the Logan applications, he did not anticipate that the applications would appear on public notice as ready to grant. Upon receiving notice that the Bureau was ready to grant the applications, Merrill promptly took steps to secure the funds necessary to make the payment. Therefore, Merrill's actions demonstrate that, but for the circumstances explained to the Commission, he would have been able to meet his payment obligations on time. Further, our records indicate that prior to the second down payment, Merrill made all previously required auction payments for the five other BTAs on time and in full. There is no indication that Merrill sought to deliberately delay payment of the amount due for this Logan BTA. We conclude that upon receiving notice, Merrill generated a concerted effort to access and remit the down payment amount, thus demonstrating a good faith endeavor to comply with the auction payment rules. 7. Based on the foregoing, we conclude that a strict application of the down payment deadline specified in Section 21.955(b) would not serve the public interest in this instance. Such a course would result in the Commission declaring Merrill in default, dismissing the applications and imposing a default penalty. Further, unlike the initial payment, an untimely remittance of the second down payment does not alter either the timing of the auction or our own review of the applicant's qualifications. Rather, the principal effect of the late payment of the second down payment, from a procedural viewpoint, is to delay the issuance of the applicant's authorization. An applicant's failure to timely submit the second down payment, while still a delinquency, is comparatively less disruptive to the auction process. Accordingly, we believe that some flexibility is appropriate in addressing a minor delinquency with respect to the second down payment. See, e.g., Carolina PCS I Limited Partnership, 12 FCC Rcd 22938 (1997) (granting partial waiver where applicant was able to prove that it had access to sufficient funds at the time payment was due); Paradise Cable, Inc., 12 FCC Rcd 9760 (1997 Mass Media Bur.) (granting partial waiver where delay in liquidating assets resulted in payment one day late); Pacific Wireless Cable, Inc., 12 FCC Rcd 9767 (1997 Mass Media Bur.) (granting partial waiver where applicant paid one day late due to administrative errors); Southern Communications Systems, Inc., 12 FCC Rcd 1532 (1997 Wireless Tel. Bur.) (granting partial waiver where applicant was unaware of the release of the public notice and submitted payment one day late); MFRI, Inc., 12 FCC Rcd 1540 (1997 Wireless Tel. Bur.) (granting partial waiver where, owing to applicant's internal administrative errors, the payment was one day late); Longstreet Communications International, Inc., 12 FCC Rcd 1549 (1997 Wireless Tel. Bur.) (granting partial waiver where applicant was unaware of the release of the public notice and submitted payment seven business days late). 8. We believe that Merrill is entitled to a partial waiver of the down payment rule. It is the applicant's responsibility to ascertain fund availability in order to comply with specified payment deadlines throughout the auction process. The fact that Merrill did not anticipate the grant of its Logan applications due to a miscommunication with its engineering consultant does not excuse its failure to make timely payment. Under the circumstances, we conclude that Merrill should be subject to a late fee of five percent of the $52,275 that was not timely paid, or $2,613.75. This amount is commercially reasonable and serves to underscore the importance of making timely auction payments. 9. Accordingly, IT IS ORDERED, that the request for partial waiver filed by Phillip C. Merrill IS HEREBY GRANTED, with a five (5) percent late fee, as herein specified. Since he has already paid the late fee of $2,613.75, the BTA authorization for B258 and the MDS conditional station licenses for File Numbers BMDP960510DH, BMDP960510DJ and BMDP960510DK ARE HEREBY GRANTED. As a small business licensee, he will receive a note and security agreement for the Logan BTA authorization, with instructions on completing, signing, and returning the documents to the United States Treasury. The Logan BTA authorization and the three conditional licenses for individual stations within the Logan BTA will be issued following receipt by the Department of Treasury of the executed note and security agreement. This action is taken under delegated authority pursuant to Section 0.283 of the Commission's rules. FEDERAL COMMUNICATIONS COMMISSION Barbara A. Kreisman Chief, Video Services Division Mass Media Bureau