Subject: Auction for IVDS Licenses From FCC A second legal notice from the Federal Communications Commission submitted to Digest readers FYI. PAT Date: Tue, 24 May 1994 17:03:59 -0400 (EDT) From: Bob Keller Subject: Auction Notice and Filing Requirements for IVDS PRIVATE RADIO BUREAU INFORMATION NOTICE AND FILING REQUIREMENTS FOR THE FIRST AUCTION OF INTERACTIVE VIDEO DATA SERVICE LICENSES Report No. ABC-94-02, Auction No. 2 May 23, 1994 The Federal Communications Commission ("FCC") plans to hold a series of oral and sealed bid auctions for approximately 1400 Interactive Video Data Service (IVDS) licenses. The first auction, which will be an oral auction, will be for 297 IVDS markets. The auction will begin promptly at 9:00 AM each day on July 28-29, 1994, and will be held in the Regency Ballroom at the Omni Shoreham Hotel at 2500 Calvert Street, N.W. in Washington, D.C. As explained in more detail below, those wishing to participate in the first auction must submit an application in accordance with the Commission's rules and the instructions in this Public Notice on or before Monday, June 27, 1994, and must bring to the auction a cashier's check payable to "FCC" or "Federal Communications Commission" in the amount of $2500 for each five licenses that they expect to win in order to be eligible to bid. Summary of Licenses to be Auctioned The first auction will cover 297 IVDS markets: markets 5 and 11-306. Two licenses are available in each market, license A and license B. Bidders may only hold one IVDS license in each market. The Commission will not auction the licenses strictly by largest to smallest IVDS market. Rather, the licenses will first be grouped to conform as closely as possible with Areas of Dominant Influence (ADIs). The IVDS license group associated with the largest ADIs will be auctioned first. Within ADIs, the largest IVDS markets will be auctioned first, with smaller markets following. The exact order in which the markets are to be auctioned is listed as an Appendix to this Public Notice. During the auction, both license A and license B will be auctioned at the same time, with the two highest bidders generally awarded a license. The highest bidder will receive first choice between the two licenses at its bid price and the next highest bidder will receive the other license at its bid price. Procedures, Terms and Conditions The auction will be conducted by Tradewinds International, Inc. and Larry Latham Auctioneers, Inc. Prospective bidders are urged to thoroughly familiarize themselves with the Procedures, Terms and Conditions in the Bidder's Package (collectively, "Terms"), the Second Report and Order in FCC Docket No. 93-253, FCC 94-61, released April 20, 1994, and the Fourth Report and Order in Docket No. 93-253, FCC 94-99, released May 10, 1994. Copies of the Second Report and Order are available for a fee from International Transcription Services, Inc. at (202) 857-3800. The Terms and the auction documents in the Bidder's Information Package ("Bidder's Package") discussed below are not negotiable. Prospective bidders are urged to read, review and analyze the auction documents prior to bidding at the auction, to make certain that they completely understand the provisions therein, and are willing to be bound by all of the Terms before making any bid. 1. BIDDER'S INFORMATION PACKAGE The Bidder's Package (as amended and supplemented from time to time) may be obtained by a prospective bidder by contacting the Commission's contractor, Tradewinds International, Inc. at General Aviation Terminal, Suite 200, No. 7 Thomas Avenue, Washington National Airport, Washington, D.C. 20001, telephone (202) 637-FCC1 (3221) and (202) 637- FCC2 (3222). The Bidder's Package will contain the following information: (1) List of licenses to be offered in the sequence they will be offered; (2) Procedures, Terms and Conditions of the auction; (3) Application form to participate in an FCC auction ("FCC Form 175" (and 175-S) or "Short Form") including instructions on filling out the form and a sample form 175 correctly filled out; (4) High Bid Acknowledgment Form; (5) Wire transfer instructions for winning bidders wishing to use wire transfer of funds; (6) Application form for an IVDS license ("FCC Form 574 or "Long Form") to be submitted by winning bidders only; (7) Copies of the FCC decision on auction rules for IVDS (the Fourth Report and Order) and of the general auction rules established in the Second Report and Order; and (8) Other general auction information. 2. SHORT FORM (FCC FORM 175) LICENSE APPLICATION Bidding at the oral IVDS auction is open only to bidders who submit an application on FCC Form 175 to participate in an FCC auction that complies with FCC rules that is received by Tradewinds no later than 5:30 P.M. EDT Monday, June 27, 1994. If you have not submitted a Form 175 by that time, you cannot bid. Instructions for filling out the Form 175 are on the back of that form; please read them before completing the Form. We call special attention to several items on the Form 175. 1. In item 6 of Form 175, Auction No., applicants should enter "2". 2. Item 7 requires you to make up a ten digit FCC Account Number, a personal identification number that we will use to identify and track your application. You have two options to create this FCC Account Number. Option 1- you may use your taxpayer identification number (TIN) with a prefix of "0", i.e., 0123456789. Option 2-you may use your ten digit telephone number (i.e. 5552345678). You should use this same number when submitting additional information/material regarding this application, including any required fees submitted to the Commission on FCC 159, FCC Remittance Advice, (i.e. use the same number for the Form 175 and the FCC Account Number on FCC 159). Please use this number whenever you write, call, or otherwise inquire about your application. You will need that number to register for the auction on auction day. 3. Items 9 and 10 ask whether the applicant is claiming a preference in the bidding process. As discussed more fully below, certain preferential measures are available to entities listed in item 9. Please ensure that you qualify for a preference before checking "yes" in item 10; the Commission has specific rules defining a "minority" and "small business." 4. For item 11, Market No., the Market No. for each IVDS license to be auctioned is listed in the second column of the Appendix to this Public Notice under the heading "MSA"; please list the markets you are interested in bidding on in the first column under item 11 labeled "Market No." If you want to bid on more than five markets, you must continue on Form 175-S. For the Frequency Block No. in item 11, applicants should check Block No. 1 if they wish to bid on license A (218-218.5 MHz) and Block No. 2 if they wish to bid on license B (218.5-219 MHz). Applicants who wish to hold either license in a particular market should check both Block No. 1 and Block No. 2. Leave the other Frequency Block Nos. blank. 5. In item 12, applicants should list the name(s) of a person(s) they want to represent them at the auction. Only one of the individual(s) listed in item 12 will be permitted to display the bidding card. 6. Please read the "Certifications" carefully before signing. These certifications help to ensure a fair and open auction and require, among other things, the disclosure to the Commission of certain information on applicant ownership and agreements or arrangements concerning the licenses. Submission of a false certification to the Commission is a serious matter that may result in severe penalties, including monetary forfeitures, license revocation(s), being barred from future auctions, and/or criminal prosecution. A sample Form 175, properly completed, will be provided as part of the Bidder's Package. No microfiche copies of the Form 175 or 175-S are required. Where to Send the Form 175 Each individual application (Form 175 and attachments, including Form 175-S, if needed), whether mailed or hand delivered, must be in an individual sealed envelope and properly addressed. Multiple applications, properly packaged, may be delivered in one larger, properly addressed container. In order to be eligible to bid, Tradewinds must receive your Form 175 application by 5:30 P.M. EDT on Monday, June 27, 1994. Late applications will not be accepted. Whether mailed, hand delivered, or sent by private courier, they must be addressed only to: Tradewinds International, Inc. General Aviation Terminal, Suite 200 No. 7 Thomas Avenue Washington National Airport Washington, D.C. 20001 Attention: IVDS Auction (202) 637-3221 in an envelope addressed as above and marked "IVDS Auction" on the outside. The business hours of Tradewinds International are between 9 A.M. and 6 P.M. Applications taken or sent to any other location will not be accepted. We strongly recommend that you use certified mail, return receipt requested or a delivery service that obtains a receipt showing when, where, and to whom the application was delivered. Tradewinds International will time stamp file copies of applications upon request. When to submit Form 175 The completed Form 175, application to participate in an FCC auction, can be submitted only to the address above anytime after release of this Public Notice but must be received by 5:30 P.M. EDT on Monday, June 27, 1994. The Form 175 requires the bidder to supply certain information which is explained more fully in the Instructions accompanying that application. Please read the instructions thoroughly before attempting to complete the form. Certain information necessary to complete Form 175, such as the Auction No., and IVDS Market Nos., can be found either at the top of or in the Appendix to this Public Notice. Application Fee No application fee or fee form need accompany the Form 175 for the IVDS auction, but you must bring an upfront payment with you to the auction as described below in order to be able to bid. As discussed further below, winning bidders will have to submit an application on FCC Form 574 to be an IVDS licensee. Upfront Payment You must have at least one cashier's check in the amount of two thousand five hundred dollars ($2,500.00) U.S. at the auction in order to bid. One cashier's check in the amount of $2,500 entitles you to be the successful high bidder on up to five licenses. If you intend to win more than five licenses, you must bring additional $2,500.00 cashier's checks, each of which will cover up to five additional licenses. For example, if you wish to win seven IVDS licenses, bring two $2,500.00 cashier's checks. If you wish to win twelve IVDS licenses, bring three $2,500.00 cashier's checks. If you wish to win thirty two IVDS licenses, bring seven $2,500.00 cashier's checks. The cashier's check(s) must be drawn on a bank insured by the Federal Deposit Insurance Corporation (FDIC) and be made payable to "FCC" or "Federal Communications Commission". No cash will be accepted. Please calculate carefully the number of IVDS licenses you expect to bid on before the auction, as you will not be permitted to bid on additional licenses if you do not have sufficient cashier's checks. Also, if you plan to bid on more than five licenses, please do not bring a single cashier's check in an amount that is a multiple of $2,500. Bring several cashier's checks, each in the amount of $2,500.00. The Commission cannot process upfront payments in amounts other than $2,500.00 and you may not be able to bid on more than five licenses without checks of $2,500.00. Furthermore, the Commission will not refund any monies if you bring cashier's checks in amounts larger than $2,500.00. Your upfront payment(s) will be credited towards the balance due on the license(s) you win, but FCC cannot make refunds on auction day if the amount of your check(s) exceeds the value of the license(s). You will be required to show your cashier's check(s) on auction day in order to receive the bidding card enabling you to bid. If you are the successful high bidder on a license, the auctioneer will take your check from you although you will still be able to win up to four more licenses without having to submit another cashier's check. The amount of your cashier's check(s) will be credited towards the balance due the Commission on the license(s) you have won. 3. WHAT HAPPENS AFTER THE FORM 175 APPLICATIONS ARE FILED? After the period for filing applications has closed on Monday, June 27, 1994 at 5:30 P.M. EDT, the Commission will process the received applications and issue a Public Notice listing all accepted and rejected applications and also listing those which have minor defects that can be corrected. The Public Notice will also announce the time and manner for correcting these defects. As described more fully in the Commission's general auction rules, you may only make minor changes to your application such as the correction of typographical errors. You may not make major modifications such as changes in ownership to your application. Failure to sign the Form 175 cannot be corrected and will cause the application to be dismissed and the applicant ineligible to participate in the auction. See Section 1.2105 of the Commission's general auction rules. Later, the Commission will release another Public Notice announcing the names of all applicants, including applicants who have corrected their defective applications, whose applications have been accepted for filing and who are therefore eligible to participate in the auction. Bidder numbers and cards will be assigned at registration. Further information, such as directions to the auction location and auction registration procedures, will be provided in the Bidder's Package. All bidders will be required to bring two forms of identification (one form of photo identification, e.g. a valid driver's license or passport, and one additional form of identification.) 4. AUCTION DAY AND POST-AUCTION PROCEDURES Registration You must register at the auction site in order to bid either the night before the first day of the auction or on the morning of both auction days before 9:00 A.M. Details of registration will be in the Bidder's Package. You may bid on both license A and license B in a single IVDS market, but you may only win one license. The FCC will verify and inspect the number and validity of your cashier's check(s) at registration. Collection of high bid acknowledgment form and upfront payments At the end of each round of bidding, the two high bidders will be required to sign a High Bid Acknowledgment Form. The upfront payment ($2,500 cashier's check) will be collected from the successful bidder immediately after the first license is won in each group of five licenses. No interest will be paid on any funds deposited with the Commission. Payment of down payment and remaining balance due The winning bidder for each license must submit sufficient additional funds (a "down payment") to bring the amount of money on deposit with the government to 20% of their winning bid within five (5) business days after the auction. This down payment must be deposited at the Commission's lockbox bank. Winning bidders that are qualified small businesses, however, need only submit an amount sufficient to bring their monies on deposit with the government up to 10% of their winning bid within five (5) business days after close of bidding, with the remaining 10% due within five (5) business days after grant of the license. Further details are in the Commission's general auction rules and its IVDS specific auction rules and will be supplied in the Bidder's Package. Except for winners entitled to installment financing, payment of the 80% remaining balance will be due after the Commission processes the winning bidder's Form 574 (see below) and grants its license. No interest will be paid on any funds deposited with the Commission. Filing of FCC Form 574 As detailed in the IVDS and general auction rules, winning bidders must timely submit a properly completed FCC application for an IVDS license (FCC Form 574) within ten business days after being notified that they are the winning bidder(s). Send the Form 574 to: Office of the Secretary Federal Communications Commission 1919 M St., N.W., Room 222 Washington, D.C. 20554 Attention: Auction Application Processing Section The Commission has decided to waive Section 1.1102(7)(a) of its rules on its own motion so that winning bidders need not submit an application fee or Form 159. After submission of the 574, the Commission will determine whether there are any reasons why the license should not be granted; if there are none, it will grant the license. The continuing validity of the license will be conditioned upon full payment of the remaining balance of the winning bid within five business days after license grant. Default penalties Certain penalties apply if a bidder withdraws a high bid or defaults (e.g. is unable to pay the balance due) after winning the bidding. These penalties are designed to ensure that only serious, qualified bidders participate in the auction and are explained more fully in the Commission's Fourth Report and Order and in its general auction rules. 5. DESIGNATED ENTITIES Benefits for Designated Entities The Commission has provided three basic benefits, described below, for IVDS auction participants who are "minorities", "women" or "small businesses" (collectively, the "Designated Entities"). Definitions of these entities are listed in Subpart Q of Part 1 of the Commission's Rules and in the Bidder's Package. The first of these benefits is government sponsored installment financing, which is available only to small businesses. The FCC is offering to finance up to 80 percent of a small business's winning bid (high bid minus the monies on deposit with the FCC) over the 5 year term of their IVDS license. Interest will be charged at a fixed rate equal to that in effect for 5 year treasury notes on the day the license is issued. Payments will be interest only for the first two years, with principal amortized over the remaining three years of the license term. The FCC will provide coupon payment books. The second of these benefits is a bidding credit. Businesses owned by minorities or women are entitled to a 25% bidding credit to win one of the two IVDS licenses in each market. A bidding credit allows the winning bidder to pay less than the amount of its bid. For example, if the winning bid is $1,000, a business owned by a minority or a woman need actually pay only $750 for the license. A bidding credit is available for either license A or license B in each IVDS market, but not both. If the two high bidders for licenses A and B are both designated entities using bidding credits, the highest bidder will be offered the license of its choice and the second highest bidder will be given the option of accepting the license without the credit or declining the remaining license. In the latter event, the second license will be reauctioned, this time without the use of bidding credits. If a bidder is both a small business and a minority/woman owned business, it can obtain installment financing and use bidding credits. Bidding credits will not be available on the second IVDS license in a market if the other IVDS license was already won using a bidding credit, however. The third benefit is the availability of tax certificates to initial investors in minority and women-owned IVDS licensees upon divestiture of their non-controlling investment interests in an IVDS licensee. Tax certificates are also available to IVDS licensees who transfer or assign their licenses to minority or women-owned businesses who are also designated entities. Tax certificates enable initial investors or the IVDS licensee to defer the taxable gain upon sale of their interest or license. More information on tax credits is in the Fourth Report and Order. Unjust Enrichment Certain penalties apply if a designated entity obtains an IVDS license using the benefits available to designated entities and subsequently transfers or sells its license prematurely. These penalties are explained more fully in the Commission's Fourth Report and Order and in its general auction rules. For additional information on IVDS auctions, please call Tradewinds International, Inc. at (202) 637-FCC1 (3221) or FCC2 (3222) between 9 A.M. and 6:00 P.M. EDT. Messages can be left after business hours. -FCC- -------------------------- Bob Keller Robert J. Keller, P.C. Tel +1 301 229 5208 rjk@telcomlaw.com Federal Telecommunications Law Fax +1 301 229 6875 finger me for daily FCC info + see ftp.clark.net:/pub/rjk/ for other files