June 15, 1995

Re: Licensing and Service Rules and Competitive Bidding Procedures for Multipoint Distribution Service

I fully support the new rules for MDS licensing that we adopt today. I am confident that the licensing of MDS on a regional basis through competitive bidding will enhance existing wireless cable systems and bring about the construction of new systems in unserved areas. However, I dissent from that portion of the decision concerning our treatment of pending applications.

I believe that the public interest would have been better served by applying our new rules to the pending MDS lottery applications, resulting in their dismissal, and permitting those applicants who choose to do so to bid in future MDS auctions.

I do not favor using auctions at all costs. There may be some situations where, in light of all the factors, lotteries would be in the public interest. This is not such a case.

I do not believe that the approach adopted today by the majority -- to permit pending applications to be awarded under the old lottery rules, but to enable them to benefit from the expanded protected service areas of the new rules -- serves the public interest. It does not comply with Congressional intent or Commission policy to reward speculation in this manner. It will delay, rather than enhance, the construction and growth of wireless cable services.

I would prefer that the pending MDS applicants be subject to the competitive bidding procedures adopted today for new MDS applicants. Congress gave the FCC the authority to auction licenses, rather than award them by lottery, where mutually exclusive applications have been filed. Congress concluded that auctions, rather than lotteries, would better ensure that spectrum licenses will be awarded to those who most value them.

The Omnibus Budget Reconciliation Act of 1993 ("OBRA") gives the Commission discretion to use either competitive bidding or lotteries for applications accepted for filing prior to July 26, 1993. The MDS pending applications present us with the opportunity to exercise that discretion and to determine which approach best serves the public interest.

There are over 4,000 MDS applications pending at the FCC which were submitted before July 26, 1993. A small fraction of these applications have been accepted for filing. These applications were submitted under our old, pre-OBRA rules that authorized lotteries for specific geographic sites.

The beneficial effects of using auctions are perhaps most evident in services where speculation has been rampant. MDS has just such a history. Over the last 27 months, over 1100 MDS authorizations have been cancelled or forfeited for failure to construct. Why? Because lotteries attract speculators -- individuals who have no relevant experience and no serious intention to construct and operate a wireless cable system.

The high level of speculation has meant delay in our efforts to foster the effective delivery of wireless cable service. Incumbent MDS operators have been unable to aggregate additional channels. Potential new entrants have been smothered by the backlog of pending applications.

In February 1993, the Commission took measures to stem the increasing speculation in MDS and to prevent rewarding speculators who had already applied. One measure adopted was a prohibition on partial and full settlement agreements among MDS applicants. The Commission found that few MDS applicants entering settlement agreements had any serious intention to construct; rather, most of them wished to have their applications granted solely for the purpose of later selling their authorizations to wireless cable operators in need of spectrum. In an attempt to ensure that "speculative applicants are not rewarded," the Commission applied the new prohibition on settlement agreements to both future and pending applications.

The new rules we adopt today authorizing the use of competitive bidding to award MDS authorizations will finally eliminate the problems of speculation that have plagued MDS and will ensure that licenses in the future will go to those parties who value them the most.

I recognize that lotteries could be held relatively soon for the five sites where, once our processing is complete, the Mass Media Bureau predicts there will be approximately 100 acceptable mutually exclusive pending applications. But the small number of applications at issue does not relieve us of the obligation to make a policy decision that carefully weighs all of the relevant factors.

The evidence is overwhelming that few, if any, of these applicants have a bona fide intention to construct and operate an MDS system. Indeed, the practical result of a lottery in this instance is very likely to be the precise result Congress sought to eliminate when it gave the FCC auction authority. Even in the improbable event that a bona fide applicant wins a lottery, the result will be one more site-specific license encumbering the BTA, further frustrating the new method of licensing that we today embrace as the best approach for the future.

The bona fide MDS applicants among these pending applications that the majority seeks to protect, if they exist, may or may not succeed in an auction. However, an auction at least ensures that they will compete for a license with parties who are equally serious in their commitment to build a wireless cable system, rather than with speculators lacking any intent to construct.

Moreover, the majority has failed to consider the resources required for the further processing of the pending applications required by continuing with lotteries. The public would benefit from the reduction of the administrative burden on the agency by the dismissal of over 4,000 pending applications, the majority of which will be, or have already been, dismissed for technical deficiencies.

The new BTA service areas and technical and operational rules we adopt today represent a very significant change in our licensing of MDS. I am persuaded that, under these changed circumstances, applying our new rules to the pending applications would conform with Commission precedent. The Commission's authority, and its need, to apply new rules to pending applications is not new and in fact has been invoked previously in MDS. In 1993, when the Commission adopted the prohibition on settlements among MDS applicants described above, the Commission specifically addressed the issue of applying the new rule to pending applications and its authority to do so. The Commission concluded at that time that "[i]t is well-settled that the rules applicable to previously-filed applications may be amended." Indeed, the new rules to expand the protected service areas of incumbents that we adopt today will be applied to pending MDS applications as well.

The Commission has applied new rules to pending applications in other cases as well. See, e.g., Amendment of the Commission's Rules to Allow the Selection from Among Mutually Exclusive Competing Cellular Applications Using Random Selection or Lotteries Instead of Comparative Hearings, 98 F.C.C.2d 175 (1984), recon., 101 F.C.C.2d 577 (1985); Request for Pioneer's Preference in Proceeding to Allocate Spectrum for Fixed and Mobile Satellite Services for Low-Earth Orbit Satellites, 7 FCC Rcd. 1625, 1628 n. 22 (1992)("the Commission by rule making may adopt threshold eligibility criteria that affect pending applications if it determines that such rules serve the public interest"); Amendment of Part 90 of the Commission's Rules to Provide for the Use of the 220-222 MHz Band by the Private Land Mobile Radio Services, 7 FCC Rcd. 4484, 4489 n. 66 (1992).

In this instance, application of our new rules for competitive bidding to pending lottery applications would necessarily result in the dismissal of those applications. The Commission has previously dismissed pending applications, without prejudice to the applicants' right to re-file, as a result of a change in rules. See Private Operational-Fixed Microwave Service, 48 Fed. Reg. 32,578 (1983)(citing the administrative burdens involved in resolving the changes needed as a result of rule changes, the Commission dismissed 1,400 pending applications and opened a new filing window for applicants to apply under the new rules), aff'd, Affiliated Communications Corp. v. FCC, No. 83-1686, unpublished judgment (D.C. Cir. May 8, 1985). All interested pending MDS applicants, once dismissed, would similarly be able to participate in the auctions for MDS authorizations for any BTA under our new rules.

For all these reasons, I believe that the public would be better served if the Commission had chosen to employ competitive bidding procedures for all MDS authorizations and dismissed the pending MDS lottery applications, rather than proceeding with lotteries.