Amendment of Parts 21 and 74 of the
Commission's Rules with Regard to
Filing Procedures in the MUltipoint
Distribution Service and in the
Instructional Television Fixed Service
Implementation of Section 309(j)
Communications Act - Competitive
PP Docket No. 93-253
JAN 2 4 1995
of the )
To: The Commission
DOCKET FILE COpy ORIGINAl
ACS EDERPRISES, IRC.
&ATOll ROUGE WIaBLBSS CABLE TELEVISIOR LLC
MULTIMEDIA DEVELOPMED CORP.
RAPID CHOICE TV, ,IRC.
SHRBVBPORT WIaBLBSS CABLB TELEVISIOR
SUPERCllAlllfBLS OF LAS VEGAS, IRC.
WIRBLBSS HOLDIRaS, IRC.
XYZ MICROWAVE SYSTEMS, IRC.
Robert J. Rini
Stephen E. Coran
Steven A. Lancellotta
Rini & Coran, P.C.
Dupont Circle Building
1350 Connecticut Avenue, N.W.
Washington, D.C. 20036
January 23, 1995
No. of Copies rec'd ()d 1:
The Coalition of Wireless Cable Operators supports the
Commission's efforts to improve the processing of MDS
Prior to lifting the present application filing freeze, it
is important that the Commission revise its outdated 15-mile
protected service area rule in favor of a formula which more
accurately represents actual coverage patterns.
The Commission's proposed MSA/RSA/ADI licensing scheme is
not compatible with the architecture of MDS systems and their
design limitations and would frustrate the objectives of the
competitive bidding process. Another alternative, limiting new
applications to sites predetermined by the Commission, would
sacrifice flexibility and business judgment and add additional
burdens to Commission resources. A far superior approach would
be the adoption of a national filing window system which is
perfectly suited to MDS and has been successfully implemented
under similar circumstances in connection with the Low Power
The Operators strongly support the Commission proposal to
limit the first filing window to established wireless cable
operators. It will allow existing operators to "fill-in" their
service areas and achieve the necessary channel capacity to be
competitive in their markets in the most expeditious manner
Coupling the national window filing system with a
streamlined, short-form initial application, an electronic filing
system, and computer interference analysis technology now in use
by the Commission, would substantially expedite initial
application analysis, and greatly minimize burdens on Commission
staff and resources. The Commission can additionally improve the
application process by eliminating the requirement that MDS
applicants serve interference studies on other licensees and
applicants, and by reducing the overly-long 120-day period in
which ITFS licensees are allowed to file petitions to deny.
An open outcry auction format is appropriate for MDS.
Substantial upfront auction paYments are essential to maintaining
auction integrity. Bidding preferences for small and minority
and women-owned entities will ensure their participation. To
assure that such preferences do not frustrate the important goal
of wireless cable operators' reaching competitive "critical
mass," such preferences must be premised upon the Commission
reserving the first filing window for established operators.
TABLE OF COITEITS
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TABLE OF CONTENTS
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. . . . . . . . . .
I. THE COMMISSION SHOULD REDEFINE THE PROTECTED SERVICE
AREA .??????????? ??? ??? 3
II. THE COMMISSION SHOULD ADOPT THE PROPOSED NATIONAL
FILING WINDOW SYSTEM ? ? ? . . . ? . ? . . . . . . 5
A. The MSA/RSA/ADI Approach Is Incompatible with
MDS And Contrary To The Public Interest .... 6
Licensing Based On Commission-Identified
Vacant Sites Would Be Inefficient And Fail
To Reduce Commission Burden .
National Filing Windows Are The Best Approach
And Would Reduce Burden On FCC Resources
III. THE COMMISSION SHOULD ADOPT ITS PROPOSED FIRST WINDOW
FOR EXISTING WIRELESS OPERATORS . . . . . . . . . .. 13
ENGINEERING AND FILING MATTERS . .
AUCTION FORMAT . ? . ? . . . . .
A. Oral Bidding Is The Most Appropriate Auction
Method In the MDS Context. . . . . . . . . . 17
B. Substantial Upfront Payments will Deter Insincere
Bidders . . . . . . . . . . . . . . . . . . . .. 20
C. Bidding Preferences Similar To Those Implemented
In Connection with IVDS will Ensure Meaningful
Participation By Small Businesses And Minority-And
Women-OWned Entities . . . . . . . . . . . . 21
PBDBRAL COMMURICATIORS COMMISSIOR
Washington, D.C. 20554
Amendment of Parts 21 and 74 of the
Commission's Rules With Regard to
Filing Procedures in the Multipoint
Distribution Service and in the
Instructional Television Fixed Service
Implementation of Section 309(j)
Communications Act - Competitive
of the )
MM Docket No. 94-131
PP Docket No. 93-253
To: The Commission
ACS Enterprises, Inc., Baton Rouge Wireless Cable Television
LLC, CableMaxx, Inc., Multimedia Development Corp., Rapid Choice
TV, Inc., Shreveport Wireless Cable Television Partnership,
Superchannels of Las Vegas, Inc., Wireless Holdings, Inc. and XYZ
Microwave Systems, Inc. (together, the "Coalition of Wireless Cable
Operators" or "operators"), by their attorneys, hereby submit these
Joint Comments in response to the Commission's Notice of Proposed
Rule Making ("Notice"), FCC 94-293, released December 1, 1994 in
the above-captioned proceeding.
lThese Joint Comments are filed on this day pursuant to
Commission's Order Granting Extension of Time for Filing COmments
and Reply Comments, DA 95-18, released January 6, 1995, by which
the filing dates for comments and reply comments were extended to
January 23, 1995 and February 7, 1995, respectively.
The Operators operate and/or are in the process of developing
wireless cable systems in various markets throughout the country.
Collectively, the Operators serve more than 110,000 domestic
subscribers, representing approximately twenty percent of all
wireless cable subscribers,2 and have line-of-sight coverage to more
than 7.5 million homes.
In their efforts to operate and develop markets for wireless
cable service, each of the Operators has a need to satisfy consumer
demand for receiving a "critical mass" of channels, to compete with
existing cable operations in urban markets and to provide a sole
source of multichannel video programming to some unserved or
underserved rural markets. The Operators support the Commission's
efforts to improve the procedures by which applications for new
Multipoint Distribution Service (MDS ) facilities are filed and
processed. The Commission's goal of enhancing the competitiveness
of wireless operators in the multichannel video marketplace, as
well as the other public interest goals of the Commission, would be
served by adoption of many of the proposals presented in the
Notice. The Commission's objectives also would be substantially
furthered by other changes discussed herein, such as the adoption
of a wireless cable operators' filing window and redefining of the
2According to The Kagan Wireless Cable Databook (January,
1994), the wireless cable industry served 401,000 subscribers as of
the end of 1993. Kagan predicted that the industry would serve
582,000 subscribers by the end of 1994 and would serve more than
2,000,000 subscribers by the year 2000.
MDS protected service area to more closely match the actual
coverage characteristics of operating systems. As set forth below,
those changes should be adopted.
I. THE COMMISSIOR SHOULD REDEFIRE THE PROTECTED SERVICE AREA.
It has been documented thoroughly and often before the
Commission that the current 15-mile fixed-radius protected service
area boundary for MDS stations is now an outdated fiction that has
no current basis in reality. In the Commission's previous MDS rule
making, PR Docket 92-80, commenters (including some of those
submitting these Joint Comments) proposed that the Commission amend
Section 21.902(d) of its rules by changing the formula for
calculating the protected service area from a fixed radius to a
function of equivalent isotropic radiated power ("EIRP") and height
above average terrain (IIHAATII) -- a more sound engineering measure
of a station's true coverage area.
The commenters documented that
the current rule is archaic and overly limited in view of the
higher-quality equipment available in today's marketplace, which
permits MDS stations to receive reliable signals at greater
distances. Moreover, according to the Wireless Cable Association
International, Inc. ("WCAI"), more than half of existing wireless
3The protected service area would be calculated according to
a table showing the relationship between EIRP, HAAT and distance.
This table was included in the petition for reconsideration in Gen.
Docket Nos. 90-54 & 80-113 filed by the Wireless Cable Association
cable subscribers are located beyond the present IS-mile protection
In most cases, re-defining the protected service area as
suggested would result in an expansion of the protected service
area according to the EIRP/HAAT formula. Consequently, wireless
cable operators could provide uninterruptable service to areas that
are outside the existing protected service area. Despite the lack
of any assurances that these areas would be protected from
interference, some wireless cable operators have nonetheless
provided service on a large-scale basis notwithstanding the very
real fear that operations in a nearby market would, at some future
date, disrupt service. The greater certainty associated with
protecting service in those areas would prompt even further
expansion of service by such operators, and encourage operators
that have been understandably reluctant to venture beyond their
protected contours to also expand operations. This in turn would
stimulate investment in wireless cable and strengthen the
industry's ability to compete in the video distribution
marketplace. Moreover, as an additional benefit, the redefinition
of the protected service area would limit the available locations
for speculators to file applications intended solely to slow
channel expansion in existing markets or extract "greenmail" from
In the Commission'S Report and Order in PR Docket 92-80, 8 FCC
Red 1444, n.40 (1993), the Commission indicated that it would
"revisit. . several requests" to redefine and expand the MDS
protected service area when acting upon pending petitions for
reconsideration of the Order on Reconsideration in Gen. Docket Nos.
90-54 & 80-113, 6 FCC Rcd 6764, 6765-66 (1991). The time is right
for the Commission to take such action. The Operators strongly
urge the Commission to take immediate action to amend the rules in
accordance with that proposal, effective on or before the present
"freeze" on filing of applications is lifted.
I I ? THE COMMISSIOR SHOULD ADOPT THE PROPOSED RATIORAL FILIRG
The Operators agree with the Commission's determination that
present procedures for MDS new facility applications need
substantial overhaul prior to lifting of the Commission's present
filing freeze. The existing application filing and processing
procedures are unnecessarily burdensome for both applicants and the
Commission alike. But the Commission's laudable goal of reducing
needless burdens on the public and its staff would not be served by
adoption of a licensing scheme which is incompatible with MDS
service and contrary to the public interest. As set forth below,
the MSA/RSA/ADI licensing scheme is not viable for MDS service and
would operate at cross-purposes with the competitive bidding
process. Another alternative, licensing on the basis of
Commission-identified sites, would inject gross inefficiency into
the licensing process and fail to reduce Commission burdens.
In the Notice, the Commission indicates its inclination
towards an option permitting initial filing of short-form
applications, with the goal of reducing administrative burdens.
But the Commission wrongly jUdges that the national filing window
approach is incompatible with this goal. As set forth below, a
national filing window system can be coupled with use of a short-
form application. Together with other improvements in the
licensing process such as streamlined electronic filing and
computer engineering analysis, the national filing window system
would serve the MDS service well, while allowing a meaningful
reduction of administrative burdens on the Commission and the
A. The MIA/IlIA/API APproach II Incouatible With MDS ADd
Contrary To The Public Interelt.
Though the MSA/RSA/ADI approach may be facially attractive to
the Commission, such a licensing scheme would not comport with the
design of MDS systems in the real world. MDS stations are not
designed like cellular telephone and proposed Personal
Communications Service (PCS) systems, with many cell sites to cover
their licensed areas. MDS stations operate much like television
broadcast stations, with strategically-located transmitters serving
population centers over relatively larger areas. Given the
architecture of MDS stations and design limitations, their signals
are not, in any practical manner, capable of being confined to
limited areas or within rigid geographic boundaries.
4Confinement of an MDS signal with the geographic boundaries
of Areas of Dominant Influence (ADls) would be especially
This difficulty is particularly acute given the requirement
that such an area-wide licensee protect existing MDS and
Instructional Television Fixed Service (ITFS) facilities. Neither
MDS nor ITFS is a new service starting with newly-allocated
spectrum. Unlike the case of new services which have begun with
area-wide licensing such as cellular or PCS, MDS and ITFS
authorizations preexist in most of the population centers in the
nation. Much of the MDS landscape is thus already carved out, so
that in many MSA/RSAs or ADIs only random, oddly-shaped slivers of
area could be served by a new area-wide licensee.
of MDS transmission design and propagation stand in the way of the
ability to provide such service.
problematic. The boundaries of ADIs are based on tabulations of
broadcast television viewing levels and follow county borders.
ADIs vary greatly in size and in many cases are irregular in shape.
Although they serve as rough definitions of local television
markets, they are inappropriate for use as a service area
definition for licensing and their use would lead to anomalous
results. Just as television broadcast stations are not capable of
limiting signal propagation to ADI boundaries, it would be
generally impractical if not impossible to expect MDS stations to
SPursuant to Section 21.901(d)(5), E- and F-Group MDS
applications filed for the same MSA (or within 15 miles of the MSA
border) are treated as mutually exclusive for administrative
purposes, even if their proposed signals would not interfere.
Thus, each MSA has a maximum of one E-Group and one F-Group
licensee. In addition, in Public Notice, 3 FCC Rcd 2661 (1988),
the Commission restricted the filing of new multi-channel MDS
applications to proposed transmit sites located at least 50 miles
from existing proposals. No such restrictions apply for single
channel MDS applications (MDS-1, MDS-2 (2A), H1, H2 and H3) or ITFS,
which is also entitled to receive site protection. With the
adoption of the licensing scheme proposed herein by the Operators,
Section 21.901(d)(5) and the restrictions imposed in the Public
Notice would be abolished in favor of the re-defined protected
Because most of the nation's population centers are already
being served by existing stations, a license for the "remnants" in
each area would not in many cases form the basis of a viable
business. The rights to the remnants would have low or no economic
to anyone other than the incumbent wireless cable operator,
which might find some worth in using it to "fill in" existing gaps
in coverage. Because only one party -- an area's existing wireless
cable operator -- is apt to derive any meaningful economic value
from such a license, meaningful competition for such licenses at
auction is unlikely. Thus a key objective of competitive bidding
set forth in Section 309 (j) (3) (C) of the Communications Act --
recovery for the pUblic of value from spectrum resources -- would
Since an area-wide license may be of little or no determinable
value to the general public, licensing of such rights is likely to
draw only competing applications (if any) which are highly
speculative or filed for the purposes of "greenmailing" existing
Moreover, given the complicated nature of the existing
6In view of the daunting existing station
requirements for an area-wide license, even the
determining value may be difficult if not impossible.
7An area-wide licensing system would create great opportunity
for "greenmail" because future modifications by existing licensees
would be handcuffed by the rights of an area-wide licenseholder.
This would substantially disserve the public interest by absolutely
limiting the ability of existing licensees to substantially adapt
their facilities to future service needs, unless they divert what
could be a substantial portion of their capital to pay "ransom" to
such a licensee for its assent. This problem would be especially
acute if the Commission'S outdated MDS protection rule is carried
forward. As discussed above, the Commission should revise the
protection requirements, such licensing would create an ideal
circumstance for public fraud through investment scams, such as has
been previously uncovered in wireless cable and in other services.
An unwary public may not fathom the substantial limitations upon
the value of a license identified as, for example, a "whole-area
wireless cable license for the New York City MSA." Speculative
applications and those founded upon unsavory business practices
also do direct damage to the integrity of the Commission'S
processes in the form of defaults of post-auction paYments (such as
the Commission has recently experienced with some Interactive Video
and Data Service (IVDS) auctions) and failure to construct
facilities and initiate service.
For all of these reasons, an area-wide licensing scheme is not
appropriate for MOS.
8. LiceA.iASJ 'a.ed OR eo.i??ioA-IdeR1;ified VacaRt Si1;e.
Would Be IpefficieAt ADd 'ail To Reduce CQMli??ioA
Another alternative filing approach, the limiting of
applications to sites predetermined by the Commission, would
introduce inefficiency into the licensing process and would not
reduce the Commission's administrative burdens. A limiting of
future MDS applications to sites to be determined by the Commission
would inappropriately displace market forces and business judgment
with FCC staff determinations. Inherent in such a regime is loss
protection rule to a definition based on EIRP and HAAT prior to
lifting the application freeze.
of flexibility, both as to specific site location for a new station
and the indirect impact of the Commission's predeterminations on
potential modification of existing stations. Such a system would
further place the wireless cable industry in the position of
relying on future determinations by the FCC, and at the mercy of
the timing of those actions. Because of the already-strained
resources of the Commission, MDS licensees have long suffered from
application processing backlogs and other delays in action by
Commission staff. Wireless operators often must await Commission
action to pursue their business objectives and bring competitive
service to the public. The Commission's already-taxed resources
would suffer additional strain if given responsibility for
identifying available sites and for making them available to
applicants. The Commission should not look favorably upon adding
yet another onus -- an unnecessary one -- upon its MDS staff.
c. Rational Piling Window' Are The aest APproach ADd Would
Reduce Burden on pec ..sources.
The operators urge the Commission to adopt a national filing
window procedure for new MDS stations.
As the Commission
recognizes in the Notice, this process is presently used for
processing of applications for the Low Power Television Service
(LPTV). There is much to be learned from the Commission's success
8Existing licensees should continue to be permitted to file
applications for modification of facilities at any time, outside of
any established filing windows.
with the LPTV national filing window system. Past problems with
LPTV application processing were very similar to the problems now
faced by MDS. As now with MDS, the Commission once faced a huge
backlog of pending LPTV applications and a cumbersome processing
procedure. As now with MDS, circumstances led the Commission to
impose a freeze on new LPTV applications. As now with MDS, many
LPTV stations had already been authorized at the time of the
application freeze. As in the case of MDS, licensing is based on
interference contour analysis.
In these similar circumstances, the Commission's move to a
national filing system proved to be successful. Because the system
discourages speculative competing applications, and because (as in
the case of MDS) many service areas had already been licensed, no
unmanageable "flood" of new LPTV applications was experienced. The
operators disagree with the Commission's belief that national
filing windows for MDS "would likely result in a larger number of
mutually exclusive applications" taking "a substantial amount of
time to conduct the competitive bidding process." Notice at ! 13.
The Commission's own best measure, its past experience under
similar circumstances with LPTV, shows that it is unlikely that an
unwieldy crush of new applications awaits.
9The risk of a "flood" of applications is even lower than that
for LPTV. Mutually exclusive LPTV applications are resolved by
lottery, which does not require any paYment for the value of the
license. By contrast, determination by auction requires the winner
to pay for the value of the license, and, as urged by the operators
below, typically requires that bidders make a substantial upfront
deposit paYment towards the auction price. These factors make
licenses subject to an auction much less attractive to insincere or
Application "daisy-chains" would not present any onerous
problem. To the extent they occur, they may be resolved in the
manner as they are now with LPTV, by determining one licensee (by
auction for MDS), dismissing any applications mutually exclusive to
that license, and then repeating the process with any remaining
Contrary to the Commission's conclusion in the Notice, a
national filing window system would support use of a short-form
initial application. As a result, the Commission could
substantially reduce the processing burden on the Commission's
staff from what it is today. Through the Commission's proposed
elimination of the filing of unnecessary data, the initial
application form can be streamlined. Such a form need only contain
the information now required on FCC Form 175 and the proposed site
coordinates, antenna HAAT and polarization, and the EIRP.
Although each application would undergo an initial acceptability
review by the Commission, much or nearly all of this processing
could be accomplished electronically using Commission computer
programs similar to those now successfully used for LPTV. As
discussed below, elimination of the filing of unnecessary data and
lOAs set forth below, the open outcry auction format can
readily accommodate this process.
llAs the Commission proposes in the Notice, no interference
study is required for the initial application, as Commission
computers would perform the necessary interference analysis for
conversion to electronic filing, in a form which can be routed
directly to computer analysis, would reduce the burden of
acceptability review upon the Commission staff to a bare minimum.
After the winning applicant is determined at auction, the
applicant then would submit a long-form MDS application which
includes a complete interference analysis, as proposed by the
Commission,12 and undergo complete legal and technical review.
In adopting the national filing window procedure, the
operators suggest that the Commission establish a policy of
providing at least 60 days' advance public notice of each filing
window to ensure adequate planning and preparation time for
I I I. TIIB COMMISSIO. SHOULD ADOPT ITS PROPOSBD FIRST WI.DOW FOR
BXISTIRO WIRELBSS OPBRATORS.
The operators strongly support the Commission's proposal to
limit filing in the first window to existing wireless cable
operators. As the Commission wisely recognizes, the ability of
wireless operators to build their channel complement to a level of
market competitiveness with cable television systems is critical to
achieving the Commission's long-standing goal of meaningful
competition in multichannel video services. Wireless operators
face many challenges to realizing this so-called "critical mass" of
available channel capacity.
12See Notice at ! 9.
A procedure which permits them to
license remaining available channels in their service areas,
without the interposing of applications by outside parties, would
directly and sUbstantially aid their struggle for competitiveness.
Properly defining an "existing operator" for this purpose is
critical. The operators urge the Commission to adopt a definition
that reflects the level of development that a bona fide wireless
cable operator can reasonably be expected to have achieved. The
standard must be high enough to bar pretenders but must include
legitimate operators. When the Commission last addressed the issue
in 1991, it determined that an "operator" must demonstrate rights
to a minimum of four MDS channels before it would be deemed
eligible to apply for commercial ITFS channels.
At the present
stage of wireless cable development, legitimate operators
approaching critical mass rightfUlly should be expected to have
achieved more than that four channel base line. The operators urge
the Commission to require that an "existing operatorII applicant
certify 14 that it has rights (through ownership or lease agreements)
to four presently-authorized MDS and/or ITFS channels and, in
addition, rights (through ownership or lease agreements) to at
least eight additional MDS and/or ITFS channels which are
13This requirement is contained in Section 74.990 (c) of the
Commission's rules. .au. Al.§Q Second Report and Order in Gen.
Docket No. 90-54, 6 FCC Rcd 6792 (1991).
l~heCommission can, as necessary, perform random audits of
these certifications, and the petition to deny procedure would be
available to the public to challenge the basis of a certification.
presently-authorized or pending. 15 All twelve channels must be
collocated or propose collocation with the site specified in the
new application. The Operators believe this rule formulation would
appropriately build upon the Commission's previous minimum
expectation of wireless operators in a manner which rationally
tracks the maturation of the industry.
IV. EROIREERIRO ARD PILIRO MATTERS.
The Operators generally support the Commission'S efforts to
simplify engineering matters and streamline the Commission'S MDS
application filing protocol. The Commission should adopt its
proposed codification in its rules of the formula for "free space"
interference protection calculations.
The Commission should also
streamline its filing system by combining forms where possible,
eliminating the requirement of data which is no longer necessary
(such as the equipment parameters the Commission identifies in the
Notice), and by adopting an electronic filing system. Electronic
filing of technical information might be especially beneficial
insofar as the data can be directly transferred by the Commission
to its computers for interference analysis -- in effect creating an
almost fully automated system for application acceptance analysis.
15"Pending" for the purposes of the rule should mean a pending
new station application which has been accepted for filing or a
MThe Operators also urge the Commission to promptly initiate
an appropriate proceeding to review interference protection and
other important issues related to digital transmission.
In addition to the proposals of the Commission, the Operators
suggest the elimination of the requirement in Section 21.902(i)(3)
of the rules that an applicant serve an interference study on other
licensees and pending applicants. This substantial burden is not
required for other services such as broadcast. For those other
services the Commission's public notices are deemed sufficient
notice of a filed application. The existing burden upon applicants
carries with it an inappropriate and substantial risk that
applicants cannot directly control the possibility of a failure
of service upon one of the parties through misdelivery.
Eliminating the service requirement would end the burden and
attendant risk and foster attention by prudent licensees to the
Commission's public notices.
Also, the Commission should eliminate the provisions of
Section 21.902(i)(6)(i) granting ITFS licensees and permittees 120
days to file petitions to deny MDS applications for new and
modified facilities. This rule has served only to unnecessarily
delay the initiation or expansion of MDS service. Rather, as set
forth below, upon the filing of a post-auction long-form
application by the winning bidder, the Commission should issue a
public notice providing all interested parties -- ITFS and MDS
alike -- a thirty-day period to file petitions to deny. 17 Having a
common petition period for ITFS and MDS will offer greater
17ITFS licensees and others would, in practice, actually have
more notice than the formal thirty-day period, because they would
be made aware of applications by Commission public notice of the
auctions and of the initial short-form filings.
administrative certainty and efficiency for the Commission and the
V. AUC'.rIOR FORMA'.r
A. Oral Bidding Is '.rh. Most APpropriate Auction
Method In '.rhe MDB Context.
The Operators support open outcry auctions as the most
appropriate method of competitive bidding for vacant MDS channels.
The relatively few bidders and low values that can be expected in
the MDS competitive bidding process suggest that the Commission
should implement a simple and low-cost bidding method.
The Operators agree with the Commission' s tentative cone1usion
disfavoring simultaneous multiple round ("SMR") bidding in the MDS
context. As the Commission explained in its Fourth Report and
Order establishing procedures for IVDS auctions, a simple, low-cost
auction method is preferable "where the value of licenses
decreases, and thus the benefits of [SMR] bidding diminish relative
to the cost and complexity" of staging an SMR auction. 18 In light
of the comparatively few bidders and expected low value of the
remaining MDS channels, SMR auctions would introduce unnecessary
administrative expense and complexity to the competitive bidding
process. These added expenses would fall upon the Commission as
well as potential applicants.
18Implementation of Section 309 (j) of the Communications Act -
Competitive Bidding, PP Docket No. 93-253 (FCC 94-99), released May
10, 1994 ("Fourth Report"), ! 9. In this regard, channels for a
given area would be auctioned sequentially, with more lucrative
four-channel E- and F-Group channels auctioned immediatelybe~ore
single-channel MDS 1, MDS 2(2A), H1, H2 and H3 channels in that
Further, upon adoption of the protected service area
definition described sypra, it is anticipated that many areas would
have available channels but that only a small number of channels in
each area would be vacant. This characteristic illustrates that
the MDS channels to be auctioned would not have a high degree of
interdependence, the Commission's basis for adopting SMR bidding in
the PCS service. 19
SMR auctions will not readily eliminate "daisy-chain"
applications involve a number of
proposed facilities that, considered together, are mutually
exclusive, but whose mutually exclusive relationships could change
depending on which authorization is granted first.
whether vel non a IIdaisy-chain" situation exists requires a
thorough engineering analysis which could not feasibly be completed
during an SMR auction.
The operators believe that sealed bid auctioning also is an
inappropriate bidding procedure because open competition is
lacking. The economic value of an FCC license cannot be determined
in a vacuum. Rather, the value of a particular license to a
particular applicant depends on both the pre-existing business plan
of the particular applicant and the events occurring at an auction
19See Fifth Report and Order in PP Docket No. 93-253, 9 FCC Rcd
WThat certain applications may be linked in a "daisy chain
does not suggest that such applications in each particular area are
interdependent. To the contrary, "daisy chains" commonly are
created where only a small part of the sUbject contours overlap
and, thus, the applicants are seeking to serve different areas.
session. For instance, a successful bidder for an E-Group channel
block would be more likely to bid higher for an H-channel in an
open outcry auction because the incremental value of channels to
that bidder would increase as the auction proceeds. Consequently,
sealed bidding could lead to skewed results in which bidders spend
excessive capital to buy some licenses or are locked out of others,
with no opportunity to adjust their bid for a particular license.
In a situation where one bidder has successfully bid for most (but
not all) available channels, this would encourage a private auction
of channels as the primary aggregator is forced to pay greenmail
for access to the remaining channel(s). Sealed bid auctions also
do not maximize the potential revenues flowing to the Commission.
By contrast, sequential oral (open outcry) auctions advance
several pUblic interest objectives. First, oral auctions provide
bidders with instant information on the value of licenses so that
bidders may adjust their bids as the auctions proceed. Second, as
the IVDS auctions illustrate, oral auctions will result in
substantial revenues for the government. Third, oral auctions are
relatively inexpensive to administer, and have proven to be an
efficient and expeditious way to process applications. Finally,
because the Commission has prior experience with open outcry
auctions in the IVDS service (as further discussed infra), a new
set of rules and procedures do not need to be created, thereby
minimizing errors and adding certainty to the process.
B. Substantial yPfront PaYMents will Deter Insincere
The Operators support substantial upfront payments in order to
prevent insincere bidders from infecting the Commission's MDS
auctioning procedures. This requirement was generally successful
with the IVDS auctions. Under the IVDS procedures, each applicant
was required to show to the Commission immediately prior to the
auction a cashier's check for at least $2,500 in order to enter the
auction. Bidders were then required to make immediate payment of
$2,500 for every five licenses won. For the IVDS auctions, the
Commission established a set $2,500 fee as opposed to a IIper pOpll
formula in order to reduce the complexity of the auction process
and because of the extremely large upfront payments that such a
formula would yield in more populated areas.
The Fourth Report requires that each bidder in open outcry
auctions make upfront payments reflecting the maximum number of
licenses it desires to win. Once a bidder wins the number of
licenses reflected in its upfront payments, it is precluded from
bidding in further auctions.
Similar procedures should be adopted for MDS. A cashier's
check in the amount of $2,000 per channel should be shown to the
Commission (or the auction contractor) before the auction session
begins. An applicant cannot be the high bidder for more channels
than its deposit covers.
As the auction proceeds, an accurate
21A IIper pOpll fee would not be appropriate where applicants are
defining the discrete filing area for which they are applying.
record can be maintained to prevent bidders from exceeding their
maximum allotted number of high bids.
Establishing these base eligibility requirements will deter
insincere applicants from frustrating the ability of legitimate,
well-funded applicants from participating. Moreover, upfront
paYments will decrease the likelihood that winning bids will be
c. Bidding Preference. Stailar To Zho.e IMPleMented In
Connection with IyPS will Inlure Meaningful
Participation II SMall BUline.le. ADd Minority-and
For the national windows (i.e., those filing windows that open
after operators have filled in their markets, as described supra),
the operators believe that the bidding preferences established for
IVDS should be applied in the MDS context. These rules promote
Congress' objective of ensuring participation by small businesses
and minority- and women-owned businesses while preserving the
advantages of open and competitive bidding for licenses.
Indeed, it would be nearly impossible for such population
determinations to be made.
2~heOperators submit that a definition of "small business"
similar to that set forth in Section 1.2110(b)(1) of the
Commission's rules may be appropriate for the MDS service. That
rule defines a "small business" as "an entity, together with its
affiliates, that has no more than $6 million net worth and, after
federal income taxes (excluding any carry over losses), has no more
than $2 million in annual profits each year for the previous two
years." The definition of "affiliate" set forth in Section
24.720 (I) also would appear to prevent "large" businesses from
obtaining the "small business" benefits.
The IVDS rules provide for the following bidding preferences:
(1) Installment payments available to all small businesses
(including those owned by women and minorities);
(2) A 25% bidding credit available in each market only to
winning bidders that are minority- or women-owned; and
(3) Tax certificates available to initial investors in
minority- or women-owned businesses and to licensees which transfer
their authorizations to minority- or female-ownedbusinesses.~
The same considerations which led the Commission to implement
installment payments in the IVDS service are present in the MDS
context. As the Commission noted in the Fourth Report implementing
IVDS bidding procedures, installment payments will decrease
applicants' need to rely on private financing. Installment
payments will not appreciably increase the risk of under
capitalization because of the relatively low cost of MDS build-out.
The Operators also support MDS bidding credits of 25 percent
of the high bid for minority- and women-owned firms, regardless of
theirsize.~This substantial credit will effectively encourage
participation by minority- and women-owned firms, while requiring
enough capital to ensure that only entities that are financially
capable of constructing MDS facilities participate in the auctions.
The Operators support mechanisms for preventing unjust
enrichment similar to those implemented in connection with the IVDS
auctions. Licenses acquired through the use of bidding credits
~SeeFourth Report, ! 36.
case heard this term.
are aware that the standard under which
are given is the subject of a Supreme Court
See Adarand Constructors v. Pena, Case No.
should be subject to forfeiture requirements such that entities
that are not minority- or female-owned which are assigned or
transferred licenses purchased through a bidding credit must
reimburse the government for the amount of the bidding credit, plus
interest at the rate imposed for installment financing at the time
the license was awarded.
Finally, the Operators support the extension of the
Commission's tax certificate policies to the MDSauctions.~Tax
certificate policies such as those applied to the IVDS auctions
have the potential to increase the availability of capital to
minority- and women-owned companies seeking to enter the wireless
cable market. As the Commission noted in its Fourth Report
establishing IVDS auctioning procedures, investors in minority- and
women-owned entities will be able to defer taxes on gains when
their interests are sold. This tax certificate policy also will
encourage MDS investors to seek minority- and female-owned buyers
in post-auction sales, leading to increased diversity of ownership
in the wireless cable business.
The Operators also support the Commission's rules to prevent
unjust enrichment through its tax certificate policies. Applicants
for tax certificates should be subject to careful review and
enforcement. Further, as in the IVDS rules, a one-year holding
~TheCommission recently proposed an expansion of its tax
certificate policy.~Policies and Rules Regarding Minority and
Female OWnership of Mass Media Facilities (Notice of Proposed Rule
Making), MM Docket Nos. 94-149 and 91-140 (FCC 94-323), released
January 12, 1995. The Operators support this effort to give minority-
and women-owned entities increased access to financing.
requirement should apply to the transfer or assignment of MDS
licenses obtained through the benefit of tax certificates.
Spectrum set-asides are not appropriate in the MDS context.
Because of the numerous pre-existing licensees and permittees in
the MDS service, the total authorized spectrum available for set
asides is small and the FCC's ability to equitably determine those
licenses that should be sUbject to set-asides is impeded. Further,
as the Commission has emphasized, the aggregation of a critical
mass of channels is essential to creating a competitive wireless
cable system. Setting aside particular channels in a market will
only lead to fragmentation in a service which depends upon
aggregation for competitive viability.
The Operators believe that the Commission's reasoning in not
providing IVDS bidding preferences to rural telephone companies is
equally applicable in the MDS context. The costs of MDS build-out
are modest in comparison to the costs of telephone wire
installation; thus, preferences are unnecessary to ensure
participation of rural telephone companies in the MDS service.
Furthermore, because wireless cable service first developed in
sparsely populated areas in which it was not economically feasible
for wired cable operators to establish service, preferences to
rural telephone companies are not necessary to ensure that rural
consumers receive the benefit of MDS service.
The Coalition of Wireless Cable Operators welcomes the
Commission's further efforts to improve the efficiency of the
commission's MDS application process. The Commission's proposals,
with the exceptions and refinements discussed herein, are
improvements that should be adopted.
BATOR ROUGB WlRELBSS CABLB TBLBVISIOR LLC
MULTIMEDIA DBVBLOPMERT CORP.
RAPID CHOICB TV, IRC.
SHRBVBPORT WIRELESS CABLE TELEVISIOR
SUPBR~BLSOF LAS VEGAS, IRC.
WIRELESS HOLDIRGS, IRC.
Stephen E. Coran
Steven A. Lancellotta
Rini & Coran, P.C.
Dupont Circle Building
1350 Connecticut Avenue, N.W.
Washington, D.C. 20036
January 23, 1995