PUBLIC NOTICE FEDERAL COMMUNICATIONS COMMISSION 1919 M STREET, N.W. WASHINGTON, D.C. 20554 News media information (202) 418-0500. Recorded listing of releases and texts (202) 418-2222. DA 96-1026 June 26, 1996 AUCTION OF BROADBAND PERSONAL COMMUNICATIONS SERVICE (D, E AND F BLOCKS) Auction Notice and Filing Requirements for 1,479 BTA Licenses in the 2 GHz Band, Scheduled for August 26, 1996 Report No. AUC-96-11-A (Auction No. 11) 1. INTRODUCTION Licenses to Be Auctioned: 1,479 licenses to provide Personal Communications Services ("PCS") in the 2 GHz band ("broadband PCS"). Three licenses will be offered in each of 493 Basic Trading Areas ("BTAs") in the United States, each license offering service on 10 MHz of spectrum: Frequency Block D:1865-1870 MHz paired with 1945-1950 MHz Frequency Block E:1885-1890 MHz paired with 1965-1970 MHz Frequency Block F:1890-1895 MHz paired with 1970-1975 MHz A list of licenses is provided in Attachment A. Auction Date: The auction will commence at 12:00 noon Eastern Daylight Time (EDT) on Monday, August 26, 1996. The initial schedule for bidding will be announced by public notice at least one week before the start of the auction. Unless otherwise announced, bidding will be conducted on each business day until bidding has stopped on all licenses. Auction Number: This is the eleventh spectrum auction the FCC has conducted, and will be referred to as Auction No. 11. Bidding Methodology: Simultaneous multiple round bidding. Bidding will be permitted only from remote locations, either electronically (by computer) or telephonically. Pre-Auction Deadlines:  Short-Form Application (FCC Form 175). . . . . . . . . .Monday, July 29, 1996, 5:30 p.m. EDT  Auction Seminar . . . . . . .Thursday, August 8, 1996  Upfront Payments:  Wire Transfer . . . .Monday, August 12, 1996, 6:00 p.m. EDT  Cashier's Check. . . . . .Monday, August 12, 1996, 11:59 p.m. EDT  Orders for Remote Bidding Software . . . . . . . . . . .Friday, August 16, 1996, 5:30 p.m. EDT Telephone Contacts:  FCC Wireless Consumer Assistance Branch . . . . . . . .800-322-1117 (Bidder Information Packages and General Auction Information)  FCC Technical Support Hotline. . . . 202-414-1250 List of Attachments:  Attachment A: List of Licenses Offered  Attachment B: Instructions for Downloading and Installing the FCC Form 175 Application Software  Attachment C: Guidelines for Completing FCC Form 175 and Exhibits Bidder Information Package: More complete details about this auction will be contained in a Bidder Information Package. The FCC will provide one copy free of charge. Additional copies may be ordered at a cost of $16.00 each, including postage, payable by Visa or Master Card, or by check payable to "Federal Communications Commission" or "FCC." To place an order, please contact the FCC Wireless Consumer Assistance Branch at 800-322-1117. Prospective bidders who have already contacted the Branch since June 15, 1996, requesting Bidder Information Packages for this auction will receive a Package no later than July 12, 1996, and need not call again unless they wish to order additional copies. Bidders who do not receive their Packages should contact the Branch. Participation: Those wishing to participate in the auction must submit a short-form application on FCC Form 175. The FCC Form 175 must be completed and filed in accordance with the Commission's rules and the instructions provided in this public notice, and must be received at the Commission's Gettysburg office no later than 5:30 p.m. EDT on Monday, July 29, 1996. Applicants are strongly encouraged to file their FCC Form 175 electronically, although manual filing (via hard copy) will be permitted. Electronic filing enables applicants to receive interactive feedback while completing the application, and immediate acknowledgment that the FCC Form 175 has been submitted for filing. In addition, only those applicants who file applications electronically will have the option of bidding either electronically or telephonically; applicants who file their applications manually will be permitted to bid only telephonically. General filing information and detailed instructions regarding electronic filing are set forth in Attachments B and C. Applicants whose FCC Form 175s are accepted will be required to submit an upfront payment and an FCC Remittance Advice (FCC Form 159). The upfront payment must be made in U.S. dollars by wire transfer or cashier's check. Payments submitted by wire transfer must be received at Mellon Bank in Pittsburgh, Pennsylvania, no later than Monday, August 12, 1996, at 6:00 p.m. EDT. Payments made by cashier's check must be received at Mellon Bank in Pittsburgh no later than Monday, August 12, 1996, at 11:59 p.m. EDT. NOTE: No other form of payment will be accepted. Applicants should note the eligibility requirements for bidding in this auction, especially for the entrepreneurs' F block, as well as the special financial provisions offered F-block bidders. The F frequency block is designated an "entrepreneurs' block" and has an additional eligibility requirement based on the applicant's financial size, which is not applicable to the D and E blocks. These topics are summarized in Part 2 below. Prohibition of Collusion: To ensure competitiveness of the auction process, the FCC's rules prohibit applicants for the same BTA areas from communicating with each other during the auction about bids, bidding strategies or settlements. This prohibition begins with the filing of short-form applications, and ends when winning bidders submit down payments. The only exception is where applicants enter into a bidding agreement before filing their short-form applications, and disclose the existence of the agreement in the short-form application. See 47 C.F.R.  1.2105(c). Relevant Authority: Prospective bidders should familiarize themselves thoroughly with the FCC's rules relating to the Personal Communications Services, contained in Title 47, Part 24 of the Code of Federal Regulations, and relating to application and auction procedures, contained in Title 47, Part 1. Prospective bidders should also be thoroughly familiar with the procedures, terms and conditions (collectively, "Terms") contained in the Second Report and Order in PP Docket No. 93-253, 9 FCC Rcd 2348 (1994); Second Memorandum Opinion and Order in PP Docket No. 93-253, 9 FCC Rcd 7245 (1994); the Erratum to the Second Memorandum Opinion and Order in PP Docket No. 93-253 (Oct. 19, 1994); Fifth Report and Order, in PP Docket No. 93-253, 9 FCC Rcd 5532 (1994); Fifth Memorandum Opinion and Order in PP Docket 93-253, 10 FCC Rcd 403 (1994), erratum, 60 Fed. Reg. 5333 (Jan. 27, 1995); and the Report and Order in WT Docket No. 96-59, FCC 96-278 (released June 24, 1996) (DEF Report and Order) (collectively referred to as "the Relevant Orders"). The Terms contained in the FCC's rules, the Relevant Orders, this public notice, and in the Bidder Information Package are not negotiable. Prospective bidders should review these auction documents thoroughly prior to the auction to make certain that they understand all of the provisions and are willing to be bound by all of the Terms before participating in the auction. Potential bidders should also be aware that petitions for reconsideration of the FCC's actions in the DEF Report and Order may be filed, and that those of the Terms adopted therein are therefore subject to change upon reconsideration or appeal. The Commission may amend or supplement the information contained in this public notice and in the Bidder Information Package at any time. The FCC will issue public notices to convey new or supplemental information to bidders. It is the responsibility of all prospective bidders to remain current with all FCC rules and with all public notices pertaining to this auction. Copies of FCC documents, including public notices, may be obtained for a fee by calling the Commission's copy contractor, International Transcription Service, Inc., at 202-857-3800. Additionally, many documents can be retrieved from the FCC Internet node via anonymous ftp@ftp.fcc.gov or the FCC World Wide Web site at http://www.fcc.gov. Bidder Alerts: All applicants must certify under penalty of perjury on their FCC Form 175 applications that they are legally, technically, financially and otherwise qualified to hold a license. Prospective bidders are reminded that submission of a false certification to the Commission is a serious matter that may result in severe penalties, including monetary forfeitures, license revocations, exclusion from participation in future auctions, and/or criminal prosecution. As is the case with many business investment opportunities, some unscrupulous entrepreneurs may attempt to use the PCS auctions to deceive and defraud unsuspecting investors. Common warning signals of fraud include the following: The first contact is a "cold call" from a telemarketer, or is made in response to an inquiry prompted by a radio or television infomercial. The offering materials used to invest in the venture appear to be targeted at IRA funds, for example by including all documents and papers needed for the transfer of funds maintained in IRA accounts. The amount of the minimum investment is less than $25,000. The sales representative makes verbal representations that (a) the IRS, FTC, SEC, FCC, or other government agency has approved the investment; (b) the investment is not subject to state or federal securities laws; or (c) the investment will yield unrealistically high short-term profits. In addition, the offering materials often include copies of actual FCC releases, or quotes from FCC personnel, giving the appearance of FCC knowledge or approval of the solicitation. The Commission does not approve any individual investment proposal, nor does it provide a warranty with respect to any license being auctioned. Potential applicants and investors are reminded that winning a broadband PCS license in this auction is not a guarantee of success in the marketplace. Information about deceptive telemarketing investment schemes is available from the Federal Trade Commission (FTC) at 202-326-2222 and from the Securities and Exchange Commission (SEC) at 202-942-7040. Complaints about specific deceptive telemarketing investment schemes should be directed to the FTC, the SEC, or the National Fraud Information Center at 800-876-7060. Consumers who have concerns about specific PCS investment proposals may also call the FCC Wireless Consumer Assistance Branch at 800-322-1117. 2. BIDDER ELIGIBILITY AND SMALL BUSINESS PROVISIONS A. General Eligibility Criteria As described in Part 1 above, this auction offers three 10 MHz blocks of broadband PCS spectrum in each of 493 BTA and BTA-like areas. 47 C.F.R.  24.12 and 24.404 set out eligibility requirements for all three spectrum blocks. (NOTE: The F block has an additional eligibility requirement based on the applicant's financial size, which is not applicable to the D and E blocks; this F-block requirement is summarized in Part 2.B below.) Prospective bidders should note a recent change in the FCC's rules relaxing certain restrictions on the ownership of conventional cellular and PCS spectrum in the same geographic area. See paras. 86-132 of the DEF Report and Order. However, 47 C.F.R.  20.6 still limits to 45 MHz the total Commercial Mobile Radio Service spectrum (i.e., broadband PCS, cellular and Specialized Mobile Radio services) in which a party may have an attributable interest in any geographic area at any point in time. Bidders that qualify as rural telephone companies (rural telcos) under 47 C.F.R.  24.720(e) will be permitted to acquire partitioned licenses by either: (a) forming bidding consortia and then partitioning the license among consortia participants, or (b) acquiring a partitioned license through private negotiations or agreements. See 47 C.F.R.  24.714 and 24.720(e). B. Eligibility to Bid on F-Block Licenses (1) Definition of entrepreneur To bid on an F-block license, an applicant must qualify as an entrepreneur. For this purpose, 47 C.F.R.  24.709(a) defines an entrepreneur as an applicant that, including its affiliates, its owners, and its owners' affiliates, has: þ gross revenues of less than $125 million in each of the last two years, and þ total assets of less than $500 million at the time the FCC Form 175 application is filed. (2) Determination of revenues and assets . The general rule is that the gross revenues and total assets of the applicant, its affiliates, its owners and its owners' affiliates are considered for purposes of determining whether the applicant meets our financial caps. Under 47 C.F.R.  24.720(l), an individual or entity is an affiliate of an applicant or of a person holding an attributable interest in an applicant when the individual or entity: þ has the power to directly or indirectly control the applicant; or þ is directly or indirectly controlled by the applicant; or þ is directly or indirectly controlled by the applicant's attributable investors or vice versa; or þ has an "identity of interest" with the applicant. However, 47 C.F.R.  24.709 and 74.720 provide several exceptions to this general rule: (a) If an applicant is a consortium of small businesses, the gross revenues and total assets of each small business are analyzed separately, rather than being aggregated, for purposes of determining financial eligibility. (b) Where the applicant is a publicly-traded corporation with widely dispersed voting power, the gross revenues and total assets of investors in the applicant, and their affiliates, are not considered for purposes of determining whether the applicant meets the financial caps. (c) We do not consider Indian tribes or Alaska Regional or Village Corporations organized pursuant to the Alaska Native Claims Settlement Act, 25 U.S.C.  2701 et seq., to be affiliates of an applicant that is owned and controlled by such tribes, corporations or entities. However, gross revenues derived from gaming activities are included in determining financial eligibility unless the applicant shows that there are significant legal constraints on its ability to access these revenues. (d) We do not consider the gross revenues and assets of investors (together with their affiliates) that hold nonattributable equity interests in the applicant if the applicant has identified a control group that: þ owns at least 50.1 percent of the applicant's voting stock (if a corporation), or all of the applicant's general partnership interests (if a partnership); and þ is itself controlled by qualifying investors (i.e., small or entrepreneurial entities) that hold at least 50.1 percent of the voting stock and all general partnership interests within the control group; and þ conforms to one of the following two equity structures-- (1) 25 percent equity option: The members of the control group must hold at least 25 percent of the applicant's total equity. Of this, at least 15 percent must be held by qualifying investors, and the remainder may be held by qualifying investors and/or by certain noncontrolling investors identified in our rules. That portion of the applicant's equity outside the control group may be held by other noncontrolling investors, but no investor in the applicant can hold more than 25 percent of the equity and remain nonattributable. (A variation of this equity structure, available to any applicant whose sole control group member is a preexisting entity under our rules, allows qualifying investors in the control group to hold at least 10 percent of the applicant's equity and certain noncontrolling investors to hold the remainder of the control group equity.) (2) 50.1 percent equity test: The members of the control group must hold at least 50.1 percent of the applicant's total equity. Of this, at least 30 percent must be held by qualifying investors, and the remainder may be held by qualifying investors and/or by certain noncontrolling investors identified in our rules. That portion of the applicant's equity outside the control group may be held by other noncontrolling investors who are considered nonattributable. (A variation of this equity structure, available to any applicant whose sole control group member is a preexisting entity under our rules, allows qualifying investors in the control group to hold at least 20 percent of the applicant's equity and certain noncontrolling investors to hold the remainder of the control group equity.) (e) The value of C-block licenses are not included as assets for purposes of qualifying as F-block bidders. (However, the value of other licenses such as Specialized Mobile Radio, narrowband PCS, broadband PCS A and B blocks, and cellular are included in asset calculations.) NOTE: The FCC's rules contain an additional exception which in some cases permits C-block applicants to exclude the revenues and assets of affiliates that would independently qualify as entrepreneurs. The Commission recently concluded that this exception would not be available for the F block. See DEF Report and Order at paras. 28-36. C-block applicants that wish to apply for F-block licenses should ensure that they qualify under one of the tests applicable to F-block licenses, as described above, and do not rely on this inapplicable C-block exception. (3) Entrepreneurs' block license limit No applicant may be deemed the winning bidder of more than 98 of the total licenses available for PCS broadband frequency blocks C and F. See 47 C.F.R.  24.710, and Part 4.B(4) below. (4) Application showing Applicants should note that they will be required to file supporting documentation to establish that they satisfy the eligibility requirements for this auction, and are subject to audits to confirm their eligibility. See 47 C.F.R.  24.709(c) and (d). (5) Holding period To deter shams and fronts, and to prevent abuse of the special financial provisions described below, F-block licenses may not be voluntarily transferred or assigned within the first five years except to entities that qualify as an entrepreneur. See 47 C.F.R.  24.839(d). C. F-Block Financial Provisions (1) General Qualifying F-block applicants are eligible for two special financial provisions: bidding credits and installment payments. (2) Bidding credits The size of an F-block bidding credit depends on the annual gross revenues of the bidder and its affiliates, as averaged over the preceding three calendar years: þ A bidder with gross annual revenues of not more than $15 million receives a 25-percent discount on its winning bids for F-block licenses, and þ A bidder with gross annual revenues of not more than $40 million receives a 15-percent discount. The definitions required for calculating gross annual revenues are set out in 47 C.F.R.  24.720(b), (f) and (l). These bidding credits are not cumulative. (3) Installment payments Upon issuance of their F-block BTA licenses, winning bidders may elect to pay the balance of their net winning bids (actual bids less the applicable bidding credits) in quarterly installments over ten years. See 47 C.F.R.  24.716. The installment plans differ depending on the licensee's gross revenues in each of the two preceding years (calculated based on 47 C.F.R.  24.709(a)(2), 24.709(b) and 24.720(f)): þ For licensees with annual revenues of not more than $40 million Interest is based on the rate for ten-year U.S. Treasury obligations at the time the BTA license is issued; Interest-only payments may be made for the first two years after the license is issued; and Payments must amortize principal and interest over the next eight years. þ For licensees with annual revenues between $40 and $75 million Interest is based on the rate for ten-year U.S. Treasury obligations at the time the BTA license is issued, plus 2.50 percent; Interest-only payments may be made for the first year after the license is issued; and Payments must amortize principal and interest over the next nine years. þ For licensees with annual revenues of more than $75 million Interest is based on the rate for ten-year U.S. Treasury obligation at the time the BTA license is issued, plus 3.50 percent; and Payments must amortize principal and interest over ten years. (4) Unjust enrichment F-block winning bidders should note that unjust enrichment provisions apply to winning bidders that use bidding credits or installment financing and subsequently assign or transfer control of their BTA licenses to an entity not qualifying for the special financial provisions. See 47 C.F.R.  24.716(d) and 24.717(d). 3. PRE-AUCTION PROCEDURES A. Short-Form Application (FCC Form 175 ) Due Monday, July 29, 1996 In order to be eligible to bid in this auction, applicants must first submit an FCC Form 175 application to the Commission. This application must be received at the Commission's Gettysburg office by 5:30 p.m. EDT on Monday, July 29, 1996. Late applications will not be accepted. There is no application fee required when filing a FCC Form 175. However, to be eligible to bid, an applicant will have to submit an upfront payment. See Part 3.C below. (1) Filing options Auction applicants are strongly encouraged to file their applications electronically, in order to take advantage of the greater efficiencies and convenience of electronic filing, bidding and access to bidding data. For example, electronic filing enables the applicant to: (a) receive interactive feedback while completing the application, and (b) receive immediate acknowledgment that the FCC Form 175 has been submitted for filing. In addition, only those applicants that file electronically will have the option of bidding electronically. However, manual filing (via hard copy) is also permitted. Please note that manual filers will not be permitted to bid electronically. The following is a brief description of each filing method. (a) Electronic filing Applicants wishing to file electronically may generally do so on a 24-hour basis beginning at about the same time as release of the Bidder Information Package. All the information required to file FCC Form 175 electronically (i.e., software, help files and configuration samples) will be available over both the Internet and the FCC's Bulletin Board System ("BBS"). Information about electronic filing is included in Attachment B. (b) Manual filing Auction applicants will be permitted to file their FCC Form 175 applications in hard copy, with microfiche or 3.5-inch diskette attachments if applicable. Manual filers must verify that they are using FCC Form 175 marked "October 1995" in the lower right corner. Earlier versions of the form will not be accepted for filing. Copies of FCC Forms 175 and 175-S will be included in the Bidder Information Package, or can be obtained by calling 202-418-FORM. Manual applications may be submitted by hand delivery (including private "overnight" courier), or by U.S. mail (certified mail with return receipt recommended). They must be addressed to: FCC Form 175 Filing, Auction No. 11 Federal Communications Commission Office of Operations 1270 Fairfield Road Gettysburg, PA 17325-7245 NOTE: Manual applications delivered to any other location will not be accepted. (2) Completion of FCC Form 175 Applicants should carefully review 47 C.F.R.  1.2105, 24.705, 24.709(c)(1), 24.806, 24.813 and 24.820, and must complete all items on FCC Form 175 (and 175-S, if applicable). As a convenience to applicants, guidelines for completing FCC Form 175 and exhibits are included in Attachment C. (3) Records maintenance Applicants for F-block licenses must maintain at their principal place of business an updated file of the ownership, revenue and asset information used to establish their eligibility as entrepreneurs and as small businesses. Winning bidders must maintain such files for the term of the F-block license. Applicants that do not win F-block licenses must maintain these files until grant of the F-block licenses they applied for, or one year from the filing of their FCC Form 175 application, whichever is earlier. See 47 C.F.R.  24.709(c)(3). B. Application Processing and Minor Corrections After the deadline for filing FCC Form 175 applications has passed, the FCC will process all timely applications to determine which are acceptable for filing. It will then issue a public notice listing those applications accepted for filing (including FCC account numbers and the licenses applied for), those rejected, those which have minor defects that may be corrected, and announcing the deadline for filing corrected applications. As described more fully in our rules, after the July 29, 1996 short-form filing deadline applicants may make only minor corrections to their FCC Form 175 applications. Applicants will not be permitted to make major modifications to their applications (e.g., change their license selections, change the certifying official, change control of the applicant, or sign the application). See 47 C.F.R.  24.820 and 24.822. C. Upfront Payments Due Monday, August 12, 1996 In order to be eligible to bid in the auction, applicants must submit an upfront payment accompanied by an FCC Remittance Advice (FCC Form 159). All upfront payments must be received at Mellon Bank in Pittsburgh, Pennsylvania, by Monday, August 12, 1996, at the time specified below (which varies based on method of payment). Please note that: þ All payments must be made in U.S. dollars. þ All payments must be made by wire transfer (preferred method) or cashier's check, and payable to the "Federal Communications Commission" or "FCC." No personal checks, credit card payments, or other form of payment will be accepted. þ Upfront payments for Auction 11 go to a different lockbox number from the one used in previous FCC auctions, and different from the lockbox number to be used for post-auction payments. þ Failure to deliver the upfront payment by the deadline specified below will result in dismissal of the application and disqualification from participation in the auction. (1) Wire transfers The FCC strongly encourages applicants to make their upfront payments by wire transfer, which experience has shown provides the greatest reliability and efficiency. Wire transfer payments must be received by 6:00 p.m. EDT on Monday, August 12, 1996. To avoid untimely payments, applicants should discuss arrangements (including bank closing schedules) with their banker several days before they plan to make the wire transfer, and allow sufficient time for the transfer to be initiated and completed before the deadline. Applicants will need the following information: ABA Routing Number: 043000261 Receiving Bank: Mellon Pittsburgh BNF: FCC/AC--9116878 OBI Field: (Skip one space between each information item) "AUCTIONPAY" FCC ACCOUNT NO. (same as FCC Form 159, Block 1) PAYMENT TYPE CODE (same as FCC Form 159, Block 14A: "AWDU") FCC CODE (same as FCC Form 159, Block 17A: "11") PAYOR NAME (same as FCC Form 159, Block 3) LOCKBOX NO. 358400 Applicants making upfront payments by wire transfer must fax a completed FCC Form 159 to Mellon Bank at 412-236-5702 at least one hour before placing the order for the wire transfer (but on the same business day). On the cover sheet of the fax, write "Wire Transfer - Auction Payment for Auction Event #11." (2) Cashier's checks Cashier's checks must be drawn on financial institutions whose deposits are insured by the Federal Deposit Insurance Corporation, and must be received by 11:59 p.m. EDT on Monday, August 12, 1996. Each bidder should submit a single check and FCC Form 159 covering its entire upfront payment. But if payments for more than one bidder are sent together, each bidder's check and the associated FCC Form 159 must be in a separate inside envelope. For delivery by U.S. Postal Service, send cashier's check(s) and accompanying FCC Form 159(s) to: Mellon Bank Attn: Upfront Auction Payments P.O. Box 358400 Pittsburgh, PA 15251-8400 For delivery in person or by courier or messenger service, send cashier's check(s) and accompanying FCC Form 159(s) to: Mellon Bank Attn: Wholesale Lockbox Shift Supervisor 27th Floor (153-2713) 3 Mellon Bank Center 525 William Penn Way Pittsburgh, PA 15259-0001 (NOTE: Please indicate on the inside envelope "Lockbox No. 358400.") (3) FCC Form 159 Each upfront payment must be accompanied by a completed FCC Remittance Advice (FCC Form 159). Proper completion of FCC Form 159 is critical to ensuring correct credit of upfront payments. Instructions for completing FCC Form 159 will be contained in the Bidder Information Package. (4) Amount of upfront payment The amount of the upfront payment required to bid on a particular license in Auction No. 11 is $0.06 per MHz-pop. The upfront payment associated with each license offered is listed in Attachment A. However, upfront payments are not attributed to specific licenses, but instead will be translated to bidding units to define the bidder's maximum bidding eligibility. Thus, an applicant does not have to make an upfront payment to cover all licenses applied for. Rather, the total upfront payment defines the maximum amount of MHz-pops the applicant will be permitted to bid on (including standing high bids) in any single round of bidding. At a minimum, an applicant's total upfront payment must be enough to establish eligibility to bid on at least one of the licenses applied for on FCC Form 175, or else the applicant will not be eligible to participate in the auction. In calculating the upfront payment amount, an applicant should determine the maximum number of MHz-pops it may wish to bid on in any single round, and submit an upfront payment covering that number of MHz-pops. In this auction, all of the licenses are for 10 MHz of spectrum. Thus, if an applicant wants to be eligible to bid in any single bidding round on licenses in BTAs with a maximum total population of 750,000 persons, the applicant must submit an upfront payment of $450,000 (750,000 x 10 MHz x $0.06 = $450,000). NOTE: An applicant may, on its FCC Form 175, apply for every license being offered, but its actual bidding in any round will be limited by the MHz-pops reflected in its upfront payment. As explained in Parts 4.A(2) and 4.A(4) below, bidders will be required to remain active in each round of the auction on a specified percentage of the MHz-pops reflected in their upfront payments in order to retain their current eligibility. (5) Refunds Because experience with prior auctions has shown that in most cases wire transfers provide quicker and more efficient refunds than paper checks, the FCC currently intends to use wire transfers for all Auction 11 refunds. To avoid delays in processing refunds, applicants should include wire transfer instructions with any refund requests they file; they may also provide this information in advance by faxing it to the FCC Billings and Collections Branch, ATTN: Regina Dorsey or William Koch, at 202-418-2843. (Applicants should also note that implementation of the Debt Collection Improvement Act of 1996 requires the FCC to obtain a Taxpayer Identification Number before it can disburse refunds.) D. Auction Registration No later than five business days before the auction, the FCC will issue a public notice announcing all qualified bidders for the auction. Qualified bidders are those applicants whose FCC Form 175 applications have been accepted for filing and who have timely submitted upfront payments sufficient to make them eligible to bid on at least one of the licenses applied for. All qualified bidders are automatically registered for the auction. Registration materials will be distributed prior to the auction by two separate overnight mailings, each containing part of the confidential identification codes required to place bids, sent only to the contact person and applicant address listed in FCC Form 175. Applicants who do not receive both registration mailings will not be able to submit bids. Any qualified applicant who has not received both mailings three business days after release of the qualified bidders public notice should therefore contact the FCC Auctions Division at 202-418-0660. Each applicant is responsible for ensuring that all registration material has been received. E. Remote Electronic Bidding Software Qualified bidders who file or amend FCC Form 175 electronically may purchase remote electronic bidding software for $175.00, including shipping and handling. (Auction software is tailored to a specific auction, so software from prior auctions will not work for Auction 11.) Information about this software and an order form will be included in the Bidder Information Package. Bidders who order remote bidding software by the August 16 deadline will receive it with their registration mailings. F. Auction Seminar and Mock Auction All applicants whose FCC Form 175s have been accepted for filing will be eligible to attend an Auction Workshop Seminar in Washington, D.C., on August 8, 1996. This seminar will provide applicants with detailed instructions regarding the auction rules and procedures. Due to the number of applicants expected for this auction and space limitations at the seminar site, registration will be limited to two persons per applicant, first-come first-served. A seminar registration form will be included in the Bidder Information Package. A mock auction using free demonstration software will also be conducted. Details will be announced by public notice and at the auction seminar. 4. AUCTION EVENT A. Auction Structure (1) Simultaneous multiple round auction The D-, E- and F-block broadband PCS BTA licenses will be awarded through a single, simultaneous multiple round auction. (However, the FCC reserves the right to conduct two separate simultaneous multiple round auctions one for the D- and E-block licenses and one for the F-block licenses concurrently if such an approach is operationally necessary or otherwise serves the public interest. We would announce such a change by public notice.) Unless otherwise announced, bids will be accepted on all licenses in each round of the auction. (2) Activity rule As explained in Part 3.C(4) above, an applicant's upfront payment determines its maximum bidding eligibility in any single round of bidding. In order to ensure that the auction closes within a reasonable period of time, an activity rule requires bidders to bid actively, rather than waiting until the end of the auction before participating. A bidder that does not satisfy the activity rule either loses bidding eligibility or uses an activity rule waiver, as explained in Part 4.A(3) below. A bidder is considered "active" on a license in the current round if it either is the high bidder at the end of the previous round's bid withdrawal period, or submits an acceptable bid (see Part 4.B(2) below) in the current round. A bidder's activity level in a round is the sum of the bidding units associated with licenses on which the bidder is active. The minimum required activity level is expressed as a percentage of the bidder's maximum bidding eligibility and increases as the auction progresses, as described in Part 4.A(4) below. (3) Activity rule waivers Each bidder will be provided five activity rule waivers that may be used in any round during the course of the auction. Use of an activity rule waiver preserves the bidder's current bidding eligibility despite current activity below the required minimum level. An activity rule waiver applies to an entire round of bidding and not to a particular license. The FCC auction system assumes that bidders with insufficient activity would prefer to use an activity rule waiver (if available) rather than lose bidding eligibility. Therefore, unless overridden or the bidder has no activity rule waivers remaining, the system will automatically apply a waiver in any round where a bidder's activity level is below the minimum required. If a bidder with insufficient activity prefers to reduce its bidding eligibility rather than use an activity rule waiver, it must affirmatively override the automatic waiver mechanism during the bid submission period. In this case, the bidder's eligibility is permanently reduced as described in Part 4.A(4) below, and it will not be permitted to later regain its lost bidding eligibility. Finally, a bidder may proactively use an activity rule waiver in a way that is not necessarily related to the bidder's activity level. If a bidder submits a proactive waiver during a bid submission period in which no bids are submitted, the auction will remain open. (Note that an automatic waiver invoked in a round in which there are no new valid bids will not keep the auction open.) Thus in the later rounds of the auction, if a bidder does not intend to bid but wants to ensure that the auction does not close, it should enter a proactive waiver in place of a bid. (4) Auction stages The auction is composed of three stages, defined by an increasing activity rule: Stage One: In each round of the first stage of the auction, a bidder that wishes to maintain its current eligibility is required to be active on licenses encompassing at least 60 percent of its current bidding eligibility. Failure to maintain the requisite activity level will result in a reduction in the bidder's bidding eligibility in the next round of bidding (unless an activity rule waiver is used). During Stage One, reduced eligibility for the next round will be calculated by multiplying the current round activity by five-thirds (5/3). Stage Two: In each round of the second stage, a bidder that wishes to maintain its current eligibility is required to be active on 80 percent of its current bidding eligibility. During Stage Two, reduced eligibility for the next round will be calculated by multiplying the current round activity by five-fourths (5/4). Stage Three: In each round of the third stage, a bidder that wishes to maintain its current eligibility is required to be active on 98 percent of its current bidding eligibility. In this final stage, reduced eligibility for the next round will be calculated by multiplying the current round activity by fifty-fortyninths (50/49). CAUTION: Since activity requirements increase in each auction stage, bidders must carefully check their current activity during the bid submission period of the first round following a stage transition. This is especially true for bidders who have standing high bids and do not plan to submit any new bids. In past auctions, some bidders have inadvertently lost bidding eligibility or used an activity rule waiver because they did not reverify their activity status at stage transitions. Bidders may check their activity against the required minimum activity level either by using the remote bidding software's bid submission module or by calling a telephone bid assistant. (5) Stage transition: The auction will start in Stage One. Under our general guidelines it will advance to the next stage (i.e., from Stage One to Stage Two, then from Stage Two to Stage Three) when, in each of three consecutive rounds of bidding, the high bid has increased on ten percent or less of the spectrum being auctioned (as measured in MHz-pops). However, the FCC retains the discretion to speed up this auction by announcing, at any time, that the next stage will begin in the next bidding round. (6) Auction stopping rules Barring extraordinary circumstances, bidding will remain open on all licenses until bidding stops on every license. Thus the auction will close for all licenses when one round passes in which no bidder submits a new acceptable bid on any license or applies a proactive waiver. The FCC retains the discretion, however, to keep an auction open even if no new acceptable bids and no proactive waivers are submitted. If this occurs, the effect will be the same as if a bidder had submitted a proactive waiver. Thus, the activity rule will apply as usual, and a bidder with insufficient activity will either lose bidding eligibility or use an activity rule waiver (if it has any left). Further, the FCC may also declare that the auction will end after a specified number of additional rounds. If the FCC invokes this special stopping rule, it will accept bids in the final round(s) only for licenses on which the high bid increased in at least one of the preceding three rounds. The FCC does not intend to exercise this option except in extreme circumstances, such as where the auction is proceeding very slowly, there is minimal overall bidding activity, and it appears unlikely that the auction will close within a reasonable period of time. Before exercising this option, however, it likely would first attempt to increase the pace of the auction by moving the auction into the next stage (where bidders would be required to maintain a higher level of bidding activity), increasing the number of bidding rounds per day, and/or increasing the amount of the minimum bid increments for those limited number of licenses (and close substitutes) where there is still a high level of bidding activity. (7) Delay, suspension or cancellation of auction By public notice or by announcement during the auction, the FCC may delay, suspend or cancel the auction in the event of natural disaster, technical obstacle, evidence of an auction security breach, unlawful bidding activity, administrative necessity, or for any other reason that affects the fair and competitive conduct of competitive bidding. In such cases, the FCC may, in its sole discretion, resume the auction starting from the beginning of the current or some previous round, or cancel the auction in its entirety. Network interruption may cause the FCC to delay or suspend the auction. B. Bidding Procedures (1) Round structure Generally there will be one bidding round per day during the early portion of the auction. Each bidding round contains the following performance and review periods: þ Bid submission period þ Bid submission round results þ Bid withdrawal period þ Bid withdrawal round results The initial bidding schedule will be announced by public notice at least one week before the start of the auction, and will be included in the registration mailings. The FCC has discretion to change the bidding schedule in order to foster an auction pace that reasonably balances speed with bidders' need to study round results and adjust their bidding strategies. We may therefore increase or decrease the amount of time for the performance and review periods, or the number of rounds per day, depending upon the bidding activity level and other factors. (2) Minimum acceptable bids There will be no minimum opening bid and no minimum bid increment for a license until the license has received an initial bid. Once there is a standing high bid on a license, the minimum bid that will be accepted is computed as: the high bid amount plus a minimum bid increment, the total then rounded to the nearest hundred dollars if it is less than ten thousand dollars, or to the nearest thousand dollars if it is equal to or greater than ten thousand dollars. Unless otherwise announced, the minimum bid increment will be the higher of two figures (determined as described below), one a percentage of the standing high bid and the other an absolute number based on the MHz-Pops associated with each license. Minimum bid increments will generally be based on the stage of the auction and the number of new bids received on a license, under the guidelines shown in the table below. The appropriate column to use is determined as follows: þ If there was at least one new bid on a license in the most recent completed round, use Column B or Column C depending on the number in that round. þ If there were no new bids on a license in the most recent completed round, look to the previous round. Use Column A, B or Column C depending on the number of new bids placed in that round. In counting new bids to determine the minimum bid increment for F-block licenses, we will consider each BTA license separately. For the D- and E-block licenses, we will aggregate the number of new bids for the D- and E-block licenses for the same BTA. For example, if one bid was placed on market B250 block D and two bids were placed on market B250 block E, the minimum bid increment for both licenses would be based on three bids, and use Column C. Column A: No New Bids Column B: 1-2 New Bids Column C: 3+ New Bids Stage 1 % Increment: Absolute Increment: 10% $0.01 / MHz-Pop 10% $0.02 /MHz-Pop 15% $0.02 /MHz-Pop Stage 2 % Increment: Absolute Increment: 5% $0.01 /MHz-Pop 10% $0.01 /MHz-Pop 15% $0.01 /MHz-Pop Stage 3 % Increment: Absolute Increment: 5% $0.01 /MHz-Pop 10% $0.01 /MHz-Pop 15% $0.01 /MHz-Pop The Commission retains the discretion to vary the minimum bid increments in each round of the auction for individual licenses or groups of licenses by announcement prior to each round. (3) High bids Each bid will be date- and time-stamped when it is entered into the computer system. In the event of tie bids, the Commission will identify the high bidder on the basis of the order in which bids are received by the Commission, starting with the earliest bid. (4) Bid submission Each bidder may submit bids only once in each round for as many licenses as it is eligible. Eligibility in the first round of the auction is determined by (a) the licenses applied for on FCC Form 175 and (b) the upfront payment amount deposited. The bid submission screens have been tailored for each bidder to include only those licenses the bidder applied for on its FCC Form 175. F-block bidders should note that 47 C.F.R.  24.710 bars the holding of more than 98 entrepreneur block broadband PCS licenses, but does not prohibit bidding activity that may exceed the limit. Bidders who file FCC Form 175 electronically (or amend electronically by the minor correction deadline) and purchase remote electronic bidding software may place their bids and withdrawals either electronically or telephonically, as they wish or their circumstances warrant. Each electronic bidder will be required to login to the FCC auction system during the bid submission period using its FCC account number and bidder identification number, and confidential security codes provided in the registration materials. Bidders can download and print bid confirmations after they submit their bids electronically. To place a bid telephonically, a bidder must call the FCC Bidding Line during the bid submission period. This telephone number will be provided only to qualified bidders in their registration materials. The bid operator will request the bidder's FCC account number, bidder identification number, confidential security codes, and the name of the authorized bidder. The FCC will fax a hard copy bid confirmation to those who bid by telephone (5) Bid withdrawal A high bidder that wants to withdraw one or more of its standing high bids during the course of the auction may do so during any bid withdrawal period, subject to the bid withdrawal payment specified in 47 C.F.R.  24.704(a)(1) and (3). The procedure for withdrawing a high bid and receiving a withdrawal confirmation is essentially the same as the bid submission procedure just described. To prevent a bidder from strategically delaying the close of the auction, the FCC retains the discretion to limit the number of times that a bidder may re-bid on a license from which it has withdrawn a high bid. If a high bid is withdrawn, the license will be offered in the next round at the second highest bid price, which may be less than or equal to (in the case of tie bids) the amount of the withdrawn bid, without any increment. The FCC will serve as a "place holder" on the license until a new acceptable bid is submitted on that license. (6) Round results Upon the conclusion of each bid submission period, the FCC will compile reports of all bids placed, current high bids, and bidder eligibility status (bidding eligibility and activity rule waivers), and post the reports for public access. The process of compilation and verification is not instantaneous, but the reports will be available before the start of the bid withdrawal period. Following each bid withdrawal period, the FCC will compile additional reports reflecting any high bids withdrawn, post-withdrawal high bids, and minimum accepted bids for the next bid submission period. Again, bidders should allow some time for compilation and verification. Reports reflecting bidders' identities and bidder identification numbers will be available before and during the auction. Thus, bidders will know in advance of the auction the identities of the bidders against whom they are bidding. (7) Auction announcements The FCC will use auction announcements to announce such items as schedule changes and stage transitions. All FCC auction announcements will be available on the FCC remote electronic bidding system and through the Internet and the FCC Bulletin Board System. (8) Other matters As noted in Part 3.B above, after the short-form filing deadline applicants may make only minor changes to their FCC Form 175 applications. However, permissible changes include deletion and addition of authorized bidders (to a maximum of three) and revision of exhibits. Electronic filers should make these changes on-line, and submit a letter to Kathleen O'Brien Ham, Chief, Auctions Division (with a carbon copy to Mark Bollinger), briefly summarizing the changes. Manual filers must send a hard-copy amendment to the address given in Part 3.A(1)(b) above, plus fax a copy to 202-418-2082. Questions about other changes should be directed to the FCC Auctions Division at 202-418-0660. Lost confidential security codes can be replaced only in person at the FCC Auction Headquarters, located at 2 Massachusetts Avenue, N.E., Washington D.C. If replacements are necessary, either the certifying official or an authorized bidding representative (as designated on the FCC Form 175) may obtain them by presenting two forms of identification, one of which must include a photograph. 5. POST-AUCTION PROCEDURES A. Down Payments and Withdrawn Bid Payments After bidding has ended, the FCC will issue a public notice declaring the auction closed, identifying the winning bids and bidders for each license, and listing withdrawn bid payments due. Within five business days after release of this auction closing notice, each winning bidder must submit sufficient funds (in addition to its upfront payment) to bring the total amount of money on deposit with the government to either 20 percent (in the case of D- and E-block licenses) or 10 percent (F-block) of its net winning bids (actual bids less any applicable bidding credits). See 47 C.F.R.  24.706(b). In addition, by the same deadline all bidders must pay any withdrawn bid amounts due under 47 C.F.R.  24.704(a), as discussed in Part 4.B(5) above. (Upfront payments are applied first to satisfy any outstanding bid withdrawal payments before being applied toward down payments.) B. Long-Form Application (FCC Form 600) Within ten business days after release of the auction closing notice, winning bidders must submit a properly completed FCC Form 600 application and required exhibits for each broadband PCS license won through the auction. Winning F-block bidders must include an exhibit demonstrating that they are eligible entrepreneurs, and winning bidders qualifying as small or very small businesses must include an exhibit demonstrating their eligibility for the small business incentives. (Winning rural telco bidders that are partitioning their BTA service areas should note the special filing requirements in 47 C.F.R.  24.714.) A copy of FCC Form 600 will be included in the Bidder Information Package. See 47 C.F.R.  1.2107(c) and (d), 24.707, and 24.709(c)(2). The FCC Form 600 may be filed electronically. Alternatively, a hard copy plus required microfiche or 3.5" diskette copies must be sent to: FCC Form 600 Filing, Auction No. 11 Federal Communications Commission Office of Operations 1270 Fairfield Road Gettysburg, PA 17325-7245 C. Application Processing and Grant; Final Payments and Installment Payments Once a high bidder has submitted its down payment and filed an acceptable FCC Form 600 application, the FCC will release a public notice announcing acceptance of the long-form application. Release of this public notice opens a 30-day period during which interested parties must file any petition to deny raising objections against the winning bidder receiving a license. After the FCC reviews an applicant's FCC Form 600 and any petitions to deny, it will determine whether there are any reasons why the license should not be granted. If there are none it will grant the license, conditioned on timely payments for the license; otherwise it will take appropriate action. Within five days after license grant: þ Winning bidders for D- and E-block licenses must pay the 80-percent balance of their winning bids, and þ Winning F-block bidders must bring the total amount on deposit with the FCC up to 20 percent of their net winning bids. They may execute a promissory note for the balance and pay it off in quarterly installments over ten years, under the terms described in Part 2.C(3) above. D. Default and Disqualification Any high bidder that defaults or is disqualified after the close of the auction (i.e., fails to remit the required down payment within the prescribed period of time, fails to submit a timely long-form application, fails to make full payment, or is otherwise disqualified) will be subject to the penalties described in 47 C.F.R.  24.704(a)(2). In such event the FCC may in its sole discretion re-auction the license to existing or new applicants, or offer it to the other highest bidders (in descending order) at their final bids. See 47 C.F.R.  1.2109(b) and (c), and 24.704(a)(2). In addition, if a default or disqualification involves gross misconduct, misrepresentation or bad faith by an applicant, the FCC may declare the applicant and its principals ineligible to bid in future auctions, and may take any other action that it deems necessary, including institution of proceedings to revoke any existing licenses held by the applicant. See 47 C.F.R.  1.2107(d). E. Construction Requirement Licensees in the D, E and F broadband PCS blocks must provide service to at least 25 percent of the population in their BTA area (based on 1990 or 2000 Census data, at the licensee's option), or make a showing of substantial service, within five years of being licensed. Failure to meet this requirement will result in forfeiture of the license, and the licensee will be ineligible to regain it. See 47 C.F.R.  24.203(b) and (c). - FCC -