Report No. DC-2591 ACTION IN DOCKET CASE April 20, 1994 FCC ADOPTS SPECTRUM AUCTION PROCEDURES FOR INTERACTIVE VIDEO AND DATA SERVICE (IVDS) (PP DOCKET 93-253) The Commission has adopted a Fourth Report and Order to implement its auction authority to award licenses in the Interactive Video and Data Service (IVDS). The IVDS is a new, short distance communications service in which licensees may provide information, products, or services to individual subscribers located at fixed locations, and these subscribers may provide responses. Service offerings that have been contemplated for the IVDS include home banking, home shopping, and television viewer interaction, in real time, to educational and pay-per-view programming. The item adopted addresses specific competitive bidding rules and procedures for mutually exclusive applications filed in the IVDS. Included in the Fourth Report and Order are the following. -- The Commission adopted two auctioning methods that appear best suited for the IVDS: oral bidding and single-round sealed bidding. In general, oral bidding will be used for licenses in the population centers (MSAs), while in the less populated areas (RSAs) the method will be either oral bidding or the second method, single-round sealed bidding, which is simpler and less expensive for both applicants and the Commission. The Commission also stated that it would auction the more populated areas first; -- Consistent with the approach taken in the Second Report and Order, the Commission will issue a Public Notice announcing each auction. The Notice will specify the filing window for applications and the filing fee, if any, the licenses to be auctioned, the auction method, and any other necessary information; (over) - 2 - -- The Commission will use the same short form application discussed in the Second Report and Order in this proceeding, and will allow applicants to correct minor deficiencies prior to the auction. Applicants will not be permitted to make major modifications such as changes in ownership, and applications that are not signed or that fail to make the required certifications will be dismissed and may not be resubmitted; -- Long-form applications (FCC Form 574) will be due from successful bidders within 10 business days after the conclusion of the auction. Once the Commission has made an initial determination that the applicant is qualified and that all monies have been paid, it will issue a Public Notice announcing the auction winners; -- The Commission will require an upfront payment from applicants to provide some degree of assurance that only serious, qualified bidders will participate. For the oral bidding, the applicant will be required to show to the Commission, immediately prior to the auction, a cashier's check for $2,500 in order to get a bidding number and secure a place in the room where the bidding will take place. Bidders will be required to have $2,500 upfront money for every five licenses they win. It will be collected immediately after the first license is won by an applicant. The Commission will announce by a Public Notice what (if any) upfront payment will be required for single round sealed bids; -- Generally, winning bidders will be required to supplement their upfront payments to bring their total deposit with the Commission up to at least 20 percent of the final payment due for the license won in that particular auction. The down payment will be due within five days of release of a Public Notice announcing the winners; -- In most cases, auction winners must make full payment of the balance of their winning bids within 5 business days of the award of their license; -- Auction winners that default or are disqualified before a license is granted or that fail to make the correct down payment or final payment within the designated time frame will be assessed a penalty. In general, when a winning bidder defaults, the Commission will re-auction the license; -- If a default or disqualification involves gross misconduct, misrepresentation or bad faith, the Commission may declare the applicant ineligible to bid in future auctions and may take any other action deemed necessary; - 3 - -- The Commission adopted preferences for certain applicants designated by Congress, increasing the applicants' opportunities to participate in the auctions and in the provision of IVDS offerings. In particular, small businesses, including those held by rural telephone companies, minorities, or women, may use installment payments to finance the cost of their bid over time. Such small businesses may also defer interest payments (paying principal only) for the first two years of the license. In addition, businesses owned by women or minorities may use "bidding credits" to lower the cost of their final bid. Licensees may also use tax certificates to attract start-up capital to their ventures and to encourage licensees to transfer licenses to businesses owned by women and minorities in the aftermarket for IVDS licenses. To prevent unjust enrichment by auction winners who have obtained licenses as a result of preferences, the Commission established license transfer and assignment requirements; -- The Commission delegated to the Chief, Private Radio Bureau, the authority to issue Public Notices containing details for specific IVDS auctions. Action by the Commission April 20, 1994, by Fourth Report and Order (FCC 94-99). Chairman Hundt, Commissioners Quello and Barrett. - FCC - News Media contact: Rosemary Kimball at (202) 632-5050. Private Radio Bureau contact: Joy Alford at (202) 632-4964 or Eric Malinen at (202) 632-6497.