FOR FCC RECORD ONLY $//MO&O, Nationwide Wireless Network Corp., FCC 94-187//$ $/300.309 Action Upon Applications/$ $/24.426 Receipt of application;applications in the narrowband PCS service/$ $/24.430 Oppositions to applications/$ FCC 94-187 Before the FEDERAL COMMUNICATIONS COMMISSION Washington, D.C. 20554 In re Application of ) ) NATIONWIDE WIRELESS NETWORK ) File No. 22888-CD-P/L-94 CORP. ) ) For a Nationwide Authorization ) in the Narrowband Personal ) Communications Service ) Memorandum Opinion and Order Adopted: July 13, 1994; Released: July 13, 1994 By the Commission: Commissioner Quello concurring and issuing a statement at a later date; Commissioner Ness issuing a statement; Commissioner Chong not participating. I. INTRODUCTION 1. On February 10, 1994, Nationwide Wireless Network Corp. (NWN Corp.) filed the above-captioned application for a 50 kHz unpaired nationwide license in the narrowband Personal Communications Service (PCS). Two petitions to deny (Petitions) were filed, one by BellSouth Corporation, BellSouth Telecommunications, Inc., BellSouth Cellular Corporation, and Mobile Communications Corporation of America (the "BellSouth Companies") and one by Paging Network, Inc. (PageNet) (jointly "Petitioners"). For the reasons set forth below, we deny the Petitions to the extent indicated here and grant NWN Corp.'s application subject to the conditions set forth here. 2. By this action, we award the first commercial license for Personal Communications Service. We expect this service to contribute to the development of the National Information Infrastructure by providing Americans with ubiquitous access to wireless data and voice services. We further expect the introduction of commercial narrowband PCS will result in the creation of new jobs, increase productivity, and provide the basis for more effective U.S. competition in the global telecommunications market. II. BACKGROUND 3. In July 1992, the Commission tentatively granted to Mtel a pioneer's preference for having developed and demonstrated the feasibility of significant innovations that will permit the delivery of existing and new advanced paging and messaging service in a spectrum-efficient manner. In June 1993, the Commission granted a final pioneer's preference to Mtel and determined that it should receive a nationwide license for a 50 kHz unpaired block. The grant was affirmed on reconsideration with the imposition of a number of conditions. Specifically, the Commission directed the licensing bureau to condition any license granted to Mtel based on its pioneer's preference upon Mtel's agreement to build a system that substantially uses the design and technologies upon which that award is based; and to hold the license for a minimum of three years or until the construction requirement applicable to the five-year build-out period has been satisfied, whichever occurs first. 4. The Commission also directed the Common Carrier Bureau (Bureau) to issue a Public Notice inviting Mtel to submit an application. In addition, the Commission directed the Bureau to consider conditioning any license granted to Mtel as a result of its pioneer's preference on Mtel's agreement to a stricter build- out requirement than the requirement generally applicable in the ten-year build-out period for licensees in the narrowband PCS service. In February 1994, the Bureau issued the Public Notice and, as directed by the Commission, stated that it would consider the possibility of imposing a stricter build-out requirement on Mtel, such as requiring the construction of base stations that serve 90 percent of the United States population within 10 years after the grant of the license. On February 10, 1994, Mtel submitted its application, which was placed on Public Notice on February 25, 1994. The two petitions to Deny were filed on March 28, 1994. Mtel's Opposition was filed on April 7, 1994, and replies to its Opposition were filed on April 19, 1994. III. DISCUSSION A. Petitions to Deny, Opposition, and Replies 5. Petitioners advance a number of arguments to support their contention that we should not grant Mtel's application. Petitioners argue that we should deny the application because Mtel does not intend to offer service using the specific technology for which it was awarded a pioneer's preference. Petitioners request that we investigate Microsoft Corporation's investment in Mtel to determine whether a de jure or de facto transfer of control of NWN Corp. to Microsoft would take place if these transactions are consummated. In addition, the BellSouth Companies and PageNet contend that the application cannot be granted because application requirements, filing rules, and procedures for narrowband PCS have not been adopted by the Commission and, because such requirements, rules, and licensing procedures are not in place, we cannot make the necessary public interest finding under Section 309 of the Communications Act of 1934, as amended, (the "Act"). 6. The BellSouth Companies also argue that we cannot grant the application without first determining the existence, identity and corporate status of the applicant. In support of their claims, the BellSouth Companies provide a number of documents from the State of Delaware which they assert show that the applicant appears to be nonexistent. 7. PageNet contends that Mtel should be required to pay for its license. Specifically, PageNet argues that the stated purpose of the pioneer's preference rules was to "assure the party granted a preference that it would receive a license to implement its innovative technology." PageNet contends that the failure to require Mtel to pay for its license would create an enormous "cost structure disparity" between Mtel and other parties who may, through our narrowband PCS competitive bidding procedures, pay millions of dollars for each of the remaining ten nationwide narrowband PCS licenses. PageNet argues that giving Mtel a free license would undermine competitive conditions in narrowband PCS "without promoting any of the purposes underlying the award of the preference to Mtel" while providing Mtel with a tremendous cost advantage over similarly situated competitors. According to PageNet, Mtel's subscriber costs should be lower because it does not have to pay for the license and it will receive an even greater competitive advantage because it does not have to obtain debt financing to pay for the license. PageNet further contends, that by allowing a preference that is equivalent to a free license in an auction environment, "the Commission is directly influencing the cost structure, the debt and equity structure, and the competitive outcome of PCS." PageNet argues that the Commission is creating barriers to entry by giving Mtel the equivalent of millions of dollars. PageNet further contends that the competitive advantage of a preference to Mtel also will affect traditional nationwide paging because Mtel could price its narrowband PCS service well above costs and still remain competitive with those whose costs include license costs in addition to construction and operating costs. 8. PageNet also argues that Section 309(a) of the Act requires the Commission to consider the competitive ramifications of granting a pioneer's preference in an auction environment in order to determine whether the grant of Mtel's application is in the public interest. PageNet asserts that there are no public interest benefits that would outweigh the competitive harm created by a free grant to Mtel. PageNet contends that, because the Commission has authority to conduct auctions and every applicant has the certainty that it may acquire licenses through those auctions, the purpose of creating pioneer's preferences has been fulfilled, that is, the Commission has reduced the delays and risks inherent in its allocation and licensing procedures. PageNet also argues that the grant of a free license to Mtel would skew the auction process by inflating the value of the remaining licenses to Mtel and deflating their value to others. Specifically, PageNet asserts that, to the extent Mtel could achieve economies of scale and scope by operating several 50 kHz channels, it could achieve, through cost averaging, a much higher level of profitability than others. PageNet contends that Mtel could use the money it saves from the free license to overbid for additional licenses. 9. PageNet further argues that we should not grant a license to Mtel because a proposed repeal of the pioneer's preference regime is currently pending with the Commission, the grant of a pioneer's preference to Mtel was illegal, the entire pioneer's preference regime is unlawful, and the grant would give Mtel an unfair and anticompetitive headstart in providing narrowband PCS services. In addition, PageNet contends that award of a license to Mtel would violate the doctrine of Ashbacker v. FCC because the Commission's public notice invited only Mtel to submit an application. PageNet alleges that it would have filed a competing application if permitted by the Commission's notice. 10. Finally, the BellSouth Companies argue that a number of conditions, in addition to those already imposed by the Commission, should be placed on Mtel's grant. Specifically, the BellSouth Companies argue that we should further condition Mtel's license on its compliance with the following requirements: (i) service should be provided to every one of the Basic Trading Area (BTA) service areas; (ii) after 10 years, 90 percent of the population of every BTA service area should be covered, with 45 percent of the population of every BTA service area covered at the 5-year mark; and (iii) transfer of the license should be forbidden unless Mtel provides service to 90 percent of the population of every BTA service area. 11. In its Opposition, Mtel counters that its application specifically acknowledges and accepts the three conditions that the Commission has adopted or proposes to adopt that would require Mtel to: (i) build a system that substantially uses the designs and technology on which the preference award was based; (ii) hold the license for three years or until the construction requirements applicable to the five-year build-out period have been met (whichever occurs first); and (iii) satisfy stricter build-out requirements than those for other 900 MHz narrowband PCS licensees. Mtel argues that the exhibits to its application demonstrate that it is legally, technically, and financially qualified to receive a narrowband PCS authorization. Mtel further contends that the more stringent build-out requirements argued for by the BellSouth Companies "are disproportionate with anything the Commission should rationally expect from any single terrestrial- based service provider." With regard to investment of Microsoft and others in NWN Corp., Mtel states that it will retain de jure and de facto control of NWN Corp. even after the consummation of the transactions and no minority investor will exercise control. With regard to questions raised by PageNet regarding Section 310(b) alien ownership restrictions, Mtel states that it has "received the results of a third-party alien ownership survey which shows compliance with all applicable alien ownership limitations." In response to the BellSouth Companies' claims regarding the applicant's identity, Mtel claims that there was a minor discrepancy in NWN Corp.'s incorporation chronology due to miscommunications with Mtel's Delaware counsel. Mtel claims that it filed its narrowband PCS application on February 10, 1994, under the name NWN Corp., on the understanding that this new wholly-owned subsidiary had been incorporated, when the incorporation was not effected until February 25, 1994. Mtel argues that this discrepancy did not affect the substance of the application or the ultimate ownership and control of the applicant by the parent corporation, Mtel. 12. Mtel also contends that Petitioners' arguments concerning the grant of a pioneer's preference to Mtel, the legality of the pioneer's preference policies, the payment of a fee for its license, grandfathering Mtel from any changes adopted in the pioneer's preference review proceeding, and the delay of a grant to Mtel to eliminate any possible headstart advantages have previously been considered and rejected by the Commission. Accordingly, Mtel asserts that these challenges should be summarily rejected. B. Discussion 1. Pioneer's Preference Issues 13. Ashbacker Doctrine. The Commission has dealt with the applicability of the Ashbacker Doctrine to pioneer's preferences at length in the pioneer's preference proceeding, where we concluded that our pioneer's preference rules are not precluded by Ashbacker. We also have previously considered and rejected PageNet's argument that grant of a pioneer's preference to Mtel is unlawful because Mtel's proposal is not innovative or spectrally efficient. PageNet's argument that we cannot grant Mtel a license because the entire pioneer's preference regime is unlawful is also without merit. The pioneer's preference rules were adopted through notice-and-comment rulemaking in accordance with our rules and the applicable requirements of the Administrative Procedure Act. PageNet does not contend that the pioneer's preference rules are not lawful as a result of a deficiency in the procedures followed in promulgating the rules. Moreover, as noted above, the Commission fully addressed the substantive legality of the pioneer's preference rules. In addition, the fact that the Commission is still considering repeal or modification of the pioneer's preference rules for future proceedings is irrelevant to this application. Accordingly, we will not revisit these particular issues here. 14. Headstart. We have also considered and rejected PageNet's arguments concerning any headstart that Mtel might receive. In the Narrowband Reconsideration, we found that Mtel is receiving no more than a de facto headstart and rejected proposals to delay processing of Mtel's application. We have recognized from the outset that pioneer's preference grantees may receive a de facto headstart because of the nature of our licensing process. We note that we have recently taken the next steps in implementing our auction authority to deploy PCS rapidly by adopting competitive bidding rules to award narrowband PCS licenses and by scheduling the auction for the remaining ten nationwide narrowband PCS licenses for later this month. PageNet's concerns over any de facto headstart Mtel may receive should be largely alleviated by these actions. 15. Payment for License. Arguments that Mtel should pay for its license have been considered in both the Pioneer's Preference Review NPRM and the Narrowband Reconsideration. In the Narrowband Reconsideration, we held that, as a matter of equity, we would not charge Mtel for the license that it may receive pursuant to its pioneer's preference award because a final order (albeit subject to pending petitions for reconsideration) addressed the preference prior to the enactment of the Omnibus Budget Reconciliation Act of 1993 that gave the Commission authority for competitive bidding. At the outset, we note, that since the adoption of the Pioneer's Preference Review NPRM in October 1993 and the Narrowband Reconsideration in February 1994, we have adopted four reports and orders in the Competitive Bidding proceeding setting forth general auction rules and specific auction rules for narrowband PCS, interactive video data services (IVDS), and broadband PCS. This has led to a greater understanding of how the competitive bidding process will work in the context of the award of spectrum for various services and, in particular, narrowband PCS. It has also resulted in concern over the effect on the marketplace that the award of a free license to one competitor will have when other competitors must bid and pay for licenses in the same service. In particular, and in light of the arguments raised by PageNet, we are concerned that the award of a free license to Mtel would create an unfair competitive advantage for Mtel at the expense of licensees who may pay significant sums for their licenses. While we have previously decided that Mtel should not have to pay for its license for equitable reasons, we are required by Section 309 of the Act to determine whether the grant of a license to Mtel would serve the public interest, convenience, and necessity. Accordingly, as a petition to deny has specifically raised an issue with regard to payment by Mtel for its license, we will consider the issue as part of our Section 309 determination here. 16. In adopting the pioneer's preference procedures, the Commission was concerned with fostering the development of new services and improving existing services by reducing the delays and risks for innovators associated with the Commission's allocation and licensing processes. In particular, the Commission was concerned that an innovator facing a lottery situation would have no assurances of receiving a license and therefore no ability to obtain a license as a reward for its efforts. We decided that a significant reward should be given to induce innovators to present proposals for new technologies and services to the Commission in a timely manner. In crafting this "reward," we did not intend to award a competitive advantage to an innovator by giving it a license for free while its competitors had to pay, but rather decided to permit an otherwise qualified pioneer's preference recipient to apply for a license without facing competing applications. Our objective in establishing a pioneer's preference is to reduce the risk and uncertainty innovating parties face in our existing rule making and licensing procedures, and therefore to encourage the development of new services and new technologies. The essence of this risk and uncertainty is that they may not be awarded a license and, therefore, may not be able to take their developmental work into full business operation. The most workable action we can take to reduce this risk is effectively to guarantee an otherwise qualified innovating party that it will be able to operate in the new service by precluding competing applications. The Commission concluded that it has the authority to award a dispositive preference. The text of the Commission's decisions makes clear that the overriding objective of the pioneer's preference rules simply is to ensure the award of a license to an otherwise-qualified pioneer's preference recipient. Nowhere did the Commission suggest it wished to give the preference recipient a competitive edge over other licenses. Indeed, in rejecting proposals to give preference recipients a formal headstart over other licensees, the Commission rejected such a goal. We have recognized from the outset that pioneer's preference recipients may receive a de facto headstart because of the nature of our licensing process, but we specifically declined to provide a headstart beyond any such de facto headstart. 17. In light of this background, the arguments of PageNet, and our further understanding of the auction process and the competitive effect of pioneer's preference recipients, particularly in narrowband PCS, receiving licenses for free, we are unable to determine that a grant of a license to Mtel without payment would serve the public interest, convenience, and necessity under Section 309 of the Act. As noted above, Mtel, if otherwise qualified, is entitled to the grant of the license under our pioneer's preference procedures. The pioneer's preference rules, however, were not intended to "reward" Mtel with an unfair competitive advantage in the provision of narrowband PCS. If Mtel were to receive a license without paying anythingwhile other narrowband PCS providers were forced to pay substantial sums for their licenses, the Commission's licensing policies might have a significant adverse impact on the competitive marketplace. 18. The Commission has issued a number of orders relating to auctions since we decided that Mtel would not have to pay for its license, and we have developed a fuller understanding of the auction process as we have resolved various issues relating to the auctions. For example, in the Competitive Bidding Second Report and Order, we concluded that where licenses to be auctioned are interdependent and their value is expected to be high, the simultaneous multiple round auctions would best achieve our goals for competitive bidding and award interdependent licenses to the bidders who value them the most. We later expressed our belief that the value of most narrowband PCS licenses will be significantly interdependent and we decided to group narrowband PCS licenses into various simultaneous auctions by aggregating together licenses exhibiting the greatest degree of interdependence and determined to auction the ten remaining nationwide narrowband PCS licenses in one group. We further stated that the licenses are complements as well as substitutes, and thus their values are highly interdependent. They are complements because license aggregation enables bidders to realize certain economies of scale.... These licenses are also substitutes because, to varying degrees, they can be used as alternatives in the provision of the same or similar services. We now have a clearer understanding of the interdependence of the nationwide narrowband PCS licenses and the potential anticompetitive effects that the free award of one of these licenses may have on the PCS market as well as the auction process. 19. As noted by PageNet, a pioneer's preference recipient who receives a free license would likely enter the competitive market with a significantly lower capital investment than the other licensees who bid and pay for their licenses. The difference would likely provide the pioneer's preference recipient with a substantial competitive advantage over its rivals, an advantage that we did not intend to confer when we adopted our pioneer's preference rules. In addition, the entire bidding process may be distorted by awarding a pioneer's preference recipient with a free license. Parties who might otherwise bid may be discouraged from bidding "top dollar" or from bidding at all because of their concerns over entering a new competitive market saddled with significantly greater capital costs that could place them at a competitive disadvantage. While we recognize that Mtel is (if otherwise qualified) entitled to a license grant under our pioneer's preference rules, we no longer can conclude that the equities weigh in favor of the grant of a free license to Mtel. In this regard, previously we overvalued such equities and undervalued the countervailing competitive concerns. Therefore, based upon the record before us in this proceeding and our increased understanding of the complex competitive issues in the narrowband PCS auction context, we cannot reach the conclusion that a grant to Mtel would serve the public interest, convenience, and necessity without requiring that Mtel pay for its license. Accordingly, we will condition Mtel's grant on a payment requirement. 20. Having concluded that Mtel must pay for its license, we turn to a determination of the amount that Mtel must pay. We note that we are imposing more stringent build-out requirements on Mtel than on the other nationwide narrowband PCS licensees. These additional build-out requirements may place Mtel at a competitive disadvantage because it will incur additional costs in meeting these requirements. We further note that the imposition of a payment requirement now, after our prior decision not to do so, may result in additional transaction costs for Mtel in seeking additional financing for or dedicating funds to the payment. Taking into account these new costs, we conclude that it is appropriate to grant Mtel a discount on its payment for the license even though we recognize the cost and competitive effect of the more-stringent build-out requirements that we are imposing and the likely transaction costs Mtel will incur. Accordingly, we will require Mtel to pay ninety (90) percent of the lowest winning bid for a nationwide narrowband PCS license or three million dollars ($3,000,000) less than the lowest winning bid for a nationwide narrowband PCS license, whichever is less. 21. Although we can not quantify the additional build-out and transaction costs or the countervailing competitive imbalance factor, we believe that, particularly in light of the inherent uncertainty involved in projecting the value of a license, a charge at these levels reasonably balances these factors. We recognize that the $3 million alternative might result in Mtel getting the license without payment or at minimal cost, depending on the value of the license as established by the auction. In the event that this scenario occurs, however, though, it would not undermine our purposes in requiring payment. Mtel would get the license without payment or at little cost (in recognition of its additional build-out and transaction costs) only if the value of the license itself were relatively small. If this scenario occurs, we believe that the relatively low auction prices will indicate that the price paid for the license at auction is not a significant portion of the total costs a narrowband PCS operator will incur, and the license granted without payment will not be an unfair competitive advantage for the preference winner. 22. We will condition the license upon Mtel making this payment within thirty (30) days after this Memorandum Opinion and Order, as well as the order granting its pioneer's preference. become final orders, that is, the orders are no longer subject to administrative reconsideration, or judicial review, appeal, or stay. 2. Authority to Require Payment 23. Our decision in this proceeding requires us to determine whether we have authority to condition Mtel's license on its payment of a charge. The question of our authority to require payment from pioneers was raised in the rulemaking notice that began our Review of Pioneer's Preference Rules; but we did not resolve the question in that proceeding because our decision at that time was not to require payment for narrowband or broadband PCS preference winners. Now that we have decided to require payment by Mtel, we must consider our authority to do so. 24. Section 309(j) of the Communications Act, the source of our authority to select licensees by auction, applies only when the Commission has accepted "mutually exclusive applications" for licenses or construction permits. Mtel, by operation of our pioneer's preference rules, is the only entity eligible to apply for the license at issue, and there can be no mutually exclusive applications for that license. Thus, we could not require Mtel to bid in an auction under Section 309(j) unless we amended our pioneer's preference rules to change the nature of the pioneer's preference award. 25. Some parties at various stages of these proceedings have contended that Section 309(j) is the only source of authority for the Commission to assess a charge (other than a generally applicable fee) for a license, and that we have no choice but to grant Mtel's license without a condition requiring payment. We disagree, and for the reasons that follow, we find such authority under Section 4(i), in conjunction with Sections 1, 303(r), 307, 309, and 214, of the Communications Act. 26. Section 4(i), which has been called the "necessary and proper clause" of the Communications Act, authorizes the Commission to perform any and all acts, make such rules and regulations, and issue such orders, not inconsistent with this Act, as may be necessary in the execution of its functions. We could not rely upon Section 4(i) to contravene an express prohibition or requirement of the Act, as the language of Section 4(i) itself makes clear. Thus, if any provision of the Act prohibited the Commission from imposing a charge on a pioneer's preference recipient, Section 4(i) would not be an independent basis for such authority. But no provision of the Act addresses this issue, either expressly or implicitly. Therefore, requiring Mtel to pay for its license in the circumstances of this case is "not inconsistent with the Act." The remaining inquiry under Section 4(i) is whether the action the Commission proposes to take "may be necessary in the execution of its functions." In application, Section 4(i) has been held to justify FCC orders that clearly were not within explicit grants of authority, where the orders reasonably could be found to be "necessary and proper" for the execution of the agency's enumerated powers. 27. In Nader v. FCC, for example, the court held that an FCC order prescribing a rate of return for AT&T "was in the public interest, necessary for the Commission to carry out its functions in an expeditious manner, and within its section 4(i) authority." This was so even though the Communications Act gave the Commission express authority, in Section 205(a), to prescribe "any charge, classification, regulation, or practice of any carrier...," but did not mention any authority to prescribe a rate of return. 28. In Lincoln Telephone & Telegraph Co. v. FCC, the court affirmed an order of the Commission requiring the telephone company, which was a "connecting carrier" within the meaning of the Act, to file tariffs with the FCC offering certain services. The order was upheld even though the only provision in the Act requiring carriers to file tariffs, Section 203(a), specifically exempted connecting carriers from that requirement. The court held: Section 203(a)'s terms do not ... in any way suggest that the section provides the exclusive authority under which the Commission can require a tariff to be filed. Thus, while Section 203(a) did not grant the Commission the requisite authority for its action, Section 154(i) did. 29. In North American Telecomm. Ass'n v. FCC, the Seventh Circuit affirmed an order requiring the Bell holding companies to file capitalization plans for subsidiary companies organized to sell telephone equipment, even though the Act conferred no authority on the FCC over holding companies and the legislative history of the Act suggested that Congress had considered granting such authority but ultimately had denied it. The court held that the Commission's authority to require the capitalization plans arose under "a separate grant of power" -- Section 4(i). The only real question, the court said, was whether the Commission could reasonably conclude that requiring the regional [holding] companies to submit plans of capitalization ... was necessary and proper to the effectuation of [the Commission's order requiring the separation of equipment sales from the companies' telephone operations]. The court answered that question in the affirmative in holding that Section 4(i) authorized this action. 30. In New England Telephone & Telegraph Co. v. FCC, the D.C. Circuit affirmed the Commission's order requiring AT&T (along with its former operating companies) to refund rates it had collected in excess of its authorized rate of return, rejecting the telephone companies' argument that the Commission's only statutory authority to require refunds, under Section 204(a)(1), did not apply to their situation. Agreeing with the telephone companies that Section 204 "does not apply to the circumstances of this case," the court held that the Commission had "properly exercised its authority under section 4(i) to remedy the violation" of its rate of return order. 31. The court found that the Commission's choice of the refund remedy, "[i]n a strictly technical sense," was "absolutely necessary" to the effectuation of its rate of return prescription. But it made clear that the Commission was not required to show that it had selected "the only conceivable remedy in order to invoke its 4(i) powers." It was enough that the action chosen by the agency "was appropriate and reasonable." 32. The rule that emerges from these cases is that Section 4(i), although "not infinitely elastic," is a "wide ranging source of authority." Section 4(i) empowers the Commission to deal with the unforeseen -- even if that means straying a little way beyond the apparent boundaries of the Act -- to the extent necessary to regulate effectively those matters already within the boundaries. If an action taken by the agency does not contravene another provision of the Act, it may be justified under Section 4(i) if the Commission "could reasonably conclude that [the action] was necessary and proper to the effectuation" of its functions. 33. Applying this rule to the circumstances of this case, we find authority under Section 4(i) to condition Mtel's license on the payment of an appropriate charge. First, requiring payment by Mtel is "necessary" if we are properly to carry out our public interest mandate in licensing PCS providers. An important aspect of the public interest is promoting competition to the extent feasible and taking appropriate regulatory steps to ensure that the competition is fair. Our development of PCS and of the pioneer's preference policies appropriately has emphasized competition at every step. Granting Mtel a license free of charge, we have found in this order, would likely give Mtel a significant competitive advantage over other licensees who would have to pay auction prices -- a result that would not serve the public interest. We conclude that we have authority under Section 4(i) to condition Mtel's license on the payment of an amount based on the auction for other licenses in this service, in the execution of our responsibility to grant a license only if a grant would serve the public interest. 34. Second, requiring a payment by Mtel is "necessary and proper" in the execution of our function under Section 309(j) to implement a rational, fair system of competitive bidding. We have found elsewhere that the values of narrowband PCS licenses will be significantly interdependent. The prices a bidder might be willing to pay -- or even the willingness to bid at all -- might be affected in various ways by the fact that one license is available free to an applicant who will be competing with the auction winners. An award to Mtel free of charge thus might distort significantly the auction of other narrowband PCS licenses and, thereby, defeat or at least undermine some or all of the purposes of having the auction. In this regard, we note that the auction statute itself does not limit our authority to require pioneer's preference recipients to pay for their licenses; it is neutral on this point. We find that Section 4(i) authorizes us to condition Mtel's license on payment in order to effectuate our responsibility under Section 309(j) to design and conduct a rational and fair auction for narrowband PCS licenses. 35. Under the applicable statutes, the Commission may not grant a license or other instrument of authorization unless it can find (and does find) that a grant will serve the public interest, convenience, and necessity. The D.C. Circuit has held that the Commission may grant a license "only when it would be in the public interest." When necessary, the Commission may attach conditions to its grants of licenses so as to ensure that the grants will serve the public interest and to enforce those conditions. 36. In this case we find that granting Mtel's license without a condition requiring payment would not be in the public interest because such a grant would create a competitive imbalance in PCS markets and because granting a free license regardless of its value would alter the competitive market and distort the statutory auction process. Where requiring payment by Mtel would track the auction procedure for awarding all other narrowband PCS licenses and would address our concerns about competition, we conclude that such a condition is "necessary and proper to the effectuation" of our functions. 37. Mtel contends in its opposition to the petitions to deny that the question of payment was decided in earlier orders and need not be reconsidered now. Mtel asserts that the Commission has no obligation to "re-litigate" issues it already has decided. Although we might not be required as a matter of law to revisit the payment issue in the context of Mtel's application, we clearly have authority to do so as part of our obligation to consider whether a grant would serve the public interest. This is particularly so when the issue of payment has been raised and argued vigorously in a petition to deny Mtel's license application. Indeed, we do not understand Mtel's argument to suggest that we lack authority to revisit the matter. 38. In any event, when we first considered the issue, Mtel had only a pioneer's preference, not a license. The pioneer's preference award, moreover, guaranteed Mtel a license only if it could show in its application that it was otherwise qualified and that grant of the license would satisfy the statutory public interest standard. Our determination in this proceeding that grant of a license to Mtel without requiring payment would not serve the public interest clearly is a proper exercise of our licensing responsibility. 39. We recognize that our decision here to require payment by Mtel for its nationwide narrowband PCS license may be appealed and that our decision granting Mtel a pioneer's preference has been challenged in the D.C. Circuit. We also recognize that the overall public interest would best be served by resolving this matter expeditiously. Therefore, we will not require Mtel either to accept the license as conditioned or to file a written request rejecting the grant, which would result in the Commission setting the application for hearing pursuant to Section 1.110 of the Commission's rules. Instead, the Commission will waive the requirements of Section 1.110 so that Mtel can seek judicial review immediately, unless Mtel indicates that it wishes to have its application set for hearing or accepts the license as granted. We reiterate that Mtel will not have to pay for its license until judicial review is completed. 3. Processing of Mtel's Application 40. We note that we have finalized the spectrum allocation and service rules for narrowband PCS, and we conclude that Mtel's proposal is consistent with those regulations. In its application, Mtel submitted a public interest showing (Exhibit 1), a real party in interest and ownership disclosure (Exhibit 2), and a financial qualifications showing (Exhibit 3) consistent with our request in the February 3, 1994 Public Notice. In short, Mtel has demonstrated that it is qualified to be a Commission licensee. Petitioners have not shown any public interest reason why grant of Mtel's application must await the adoption of additional requirements and procedures in connection with narrowband PCS auction applications. In addition, interested parties have had the full opportunity to show why, in their view, the grant is not in the public interest or raises substantial and material questions of fact under Section 309(d) of the Act. Petitioners have taken advantage of this opportunity. The record before us supplies the necessary information to determine that Mtel is legally, technically, and financially qualified and that grant of its application serves the public interest. 4. Requirement to Build Proposed System 41. Questions regarding the system that Mtel will build have already been resolved by the Commission in the Narrowband Reconsideration: ...we will direct the licensing bureau to condition any license granted Mtel based on its preference upon Mtel building a system that substantially uses the design and technologies upon which its preference award is based. This condition will apply only for the nationwide channel for which the preference is being granted and only until it has met the initial five year build- out requirement in the rules. Petitioners allege that Mtel will not use the specific technologies for which it was awarded a pioneer's preference. The BellSouth Companies argue that, while Mtel relied on two specific multi-carrier modulation (MCM) techniques in winning its preference, Mtel's application simply states that it will use MCM without any detailed description. PageNet asserts that Mtel's application demonstrates that it will not meet the requirements to build a system that substantially uses its pioneer's preference design and technology. We find that Petitioners' arguments fail to raise any substantial and material questions of fact suggesting that Mtel does not intend to comply with the substantial use requirement. Mtel has stated that it will substantially use the design and technologies upon which its preference award is based. Accordingly, we will condition Mtel's license to require it to build a system that substantially uses the design and technologies on which its pioneer's preference is based. The Commission has available to it the full range of sanctions, including, for example, forfeiture, license revocation, or non-renewal, if Mtel fails to comply with this or any other condition of its license. 5. Additional Conditions on Mtel's Grant 42. We requested comment on whether to impose additional, more stringent build-out conditions on Mtel's grant. Mtel has stated that, in the interest of expediting its grant, it agrees to accept a condition requiring Mtel to cover 90 percent of the population nationwide within 10 years after grant of its license. The BellSouth Companies, however, ask us to impose even more stringent build- out requirements on Mtel. We find that the conditions proposed by the BellSouth Companies are unnecessarily stringent and go well beyond our public interest requirements. A build-out of this nature does not appear to be necessary to ensure that Mtel will provide broad service to the public in a large number of localities and communities throughout the nation. Nor is it clear that there will be unmet demand necessitating the requirements suggested by the BellSouth Companies. Accordingly, we will condition Mtel's license on compliance with a stricter build-out requirement than that set forth in the Narrowband Reconsideration. Mtel must cover 90 percent of the population at the 10-year mark. We reiterate that we will readdress, if necessary, our narrowband PCS construction requirements in the future if we find that demand for narrowband PCS services is not being met in all areas. 6. Mtel/Microsoft, Real Party in Interest and Ownership 43. As indicated in the Narrowband Reconsideration, the Commission will condition the grant of a license to Mtel on its holding the license for a minimum of three years or until the construction requirement applicable to the five-year build- out period has been satisfied, whichever occurs first, a condition Mtel has accepted. 44. We have reviewed the filing that Mtel made with regard to the investment by Microsoft and others. While Mtel states that it has entered into agreements with prospective investors on March 23, 1994, those agreements have not been submitted to us because Mtel is not seeking to implement the agreements at this time. Accordingly, we decline, at this time, to reach the issue of whether the proposed investments in NWN Corp. will result in a transfer of control. We note that Mtel may file a petition for declaratory ruling requesting that the Commission find that prior approval is not required on the grounds that the transaction does not involve a transfer of control under Section 310(d) of the Act. Mtel, of course, is under no obligation to seek such a declaratory ruling and may proceed at its own risk. We note that, should a transfer of control take place without prior Commission approval, Mtel could be subject to a revocation of its license under Section 312 of the Act and forfeiture under Section 503(b) of the Act. 45. We are satisfied that Mtel has complied with Section 310(b) of the Act concerning alien ownership restrictions. Mtel has conducted a survey and represents that it is in compliance with the alien ownership restrictions. Petitioners have raised no substantial or material questions of fact with regard to the veracity of Mtel's compliance with the alien ownership restrictions. 46. Finally, contrary to the BellSouth Companies' assertions, we note that Mtel is the real party in interest here and has explained the discrepancy in the filing chronology and the name of the applicant. The allegation made by the BellSouth Companies in their Reply that two different subsidiaries of Mtel have been represented to the Commission as the applicant is unsupported by the facts. On March 25, 1994, Mtel properly amended its application to indicate the name change of the applicant from NWN Corporation to Nationwide Wireless Network Corporation and then further amended the application to specify that the corporation records abbreviate "Corporation" as "Corp." Mtel has satisfactorily explained this discrepancy. The BellSouth Companies' allegations do not raise a substantial or material question of fact regarding the identity of the applicant, the real party in interest, or Mtel's qualifications to be a licensee. IV. CONCLUSION 47. Having reviewed the application and the pleadings filed in this matter, we conclude that, as conditioned here, grant of the subject application for the first commercial nationwide narrowband PCS license will serve the public interest, convenience, and necessity, and that none of the petitioners raises any substantial or material question as to Mtel's qualifications to be a Commission licensee. V. ORDERING CLAUSES 48. Accordingly, IT IS ORDERED that the Petitions to Deny filed by BellSouth Corporation, BellSouth Telecommunications, Inc., BellSouth Cellular Corporation, and Mobile Communications Corporation of America IS DENIED and the Petition to Deny filed by Paging Network, Inc. IS DENIED IN PART AND GRANTED IN PART. 49. IT IS FURTHER ORDERED that the request made by Mtel that its Response filed on April 26, 1994 be accepted as part of the record of this proceeding IS GRANTED and that the Reply to Mtel "Response" filed by the BellSouth Companies on May 6, 1994 IS ACCEPTED FOR FILING. 50. IT IS FURTHER ORDERED that the application of Nationwide Wireless Network Corp. (File No. 22888-CD-P/L-94) IS GRANTED, subject to the following conditions: 1. This authorization requires that Nationwide Wireless Network Corp. (d/b/a NWN Corp.) shall construct a nationwide 50 kHz narrowband Personal Communications Services system that substantially uses the design and technology upon which the pioneer's preference award to Mobile Telecommunication Technologies Corporation was based. This condition expires upon meeting the five-year build-out requirement in 47 C.F.R. 24.103(a); 2. This authorization requires that Nationwide Wireless Network Corp. (d/b/a NWN Corp.) shall retain control of the license for at least three years from the initial license grant date or until the grantee has met the five-year build- out requirement of 47 C.F.R.  24.103(a) (construction of base stations that provide coverage to a composite area of 750,000 square kilometers or serve 37.5 percent of the U.S. population), whichever occurs first; 3. Notwithstanding the requirement of 47 C.F.R.  24.103(a), this authorization requires that Nationwide Wireless Network Corp. (d/b/a NWN Corp.) construct base stations that serve 90 percent of the U.S. population within 10 years of initial license grant date; 4. This authorization requires that Nationwide Wireless Network Corp. (d/b/a NWN Corp.) shall pay to the United States Treasury an amount equal to ninety (90) percent of the lowest winning bid for a nationwide narrowband PCS license or three million dollars ($3,000,000) less than the lowest winning bid for a nationwide narrowband PCS license, whichever is less, thirty (30) days after this Memorandum Opinion and Order and the order granting Mtel a pioneer's preference become final orders, that is, the orders are no longer subject to administrative reconsideration or judicial review, appeal, or stay. 51. IT IS FURTHER ORDERED that Section 1.110 of the Commission's rules, 47 C.F.R.  1.110, IS WAIVED, unless Mtel requests a hearing within thirty (30) days of the release of this Memorandum Opinion and Order. FEDERAL COMMUNICATIONS COMMISSION William F. Caton Acting Secretary