DA 98-378 February 26, 1998 Mr. Jack Bond Mountain SMR Group, L.L.C. 920 S.W. Stephenson Court Portland, Oregon 97219-7642 Dear Mr. Bond: This letter responds to the requests for waiver filed by Mountain SMR Group, L.L.C. ("Mountain SMR") on December 5, 1997 and December 18, 1997 ("December 5th letter" and "December 18th letter" respectively). For the reasons stated below, we deny Mountain SMR's requests. We also set forth the default payment obligations and procedures for Mountain SMR, resulting from its failure to remit the required down payment on the license for which it was the successful high bidder in the 800 MHz Specialized Mobile Radio ("SMR") auction. Pursuant to the Section 90.909(b) of the Commission's Rules, Mountain SMR is in default on its down payment obligations for license number E-172 A, and is subject to an initial default payment in the amount of $86,628. On December 8, 1997, the Federal Communications Commission ("Commission") completed its auction of 525 licenses to provide 800 MHz SMR service. During the course of the auction, Mountain SMR submitted and later withdrew the high bid for License E-172 A, the Honolulu, Hawaii A block market. On December 5, 1997, prior to the conclusion of the auction, Mountain SMR Group requested a waiver of the Commission's rules governing competitive bidding and bid withdrawal with respect to Mountain SMR's high bid for License E-172 A. Specifically, Mountain SMR requested that the Commission lower its high bid amount for License E-172 A from $521,000, the high bid submitted in Round 47 (which it withdrew in Round 144), to $431,000, the bid it submitted in Round 45, and waive the bid withdrawal payment required under Section 90.905(b) of the Commission's rules. On December 9, 1997, the Commission announced by Public Notice that the down payments and any bid withdrawal payments were due by Tuesday, December 23, 1997. As a result of its withdrawal of the high bid for License E-172 A, Mountain SMR owed a bid withdrawal payment of $30,550. Thus, to comply with the Commission's bid withdrawal and down payment requirements, Mountain SMR was obligated to supplement its $5,542 upfront payment with an additional deposit of $86,628 by December 23, 1997. On December 18, 1997, Mountain SMR submitted another letter requesting waiver of the deadline for submission of its down payment and FCC Form 601 (long-form application) until its representatives obtained the ability to file electronically. On December 23, 1997, Mountain SMR submitted the FCC Form 601 without the required down payment. In its December 5th letter, Mountain SMR requests waiver of the Commission's rules on the grounds that its representatives had never participated in an auction prior to the 800 MHz SMR auction, did not understand the ramifications of the Commission's Rules and were incited to overbid as a result of an emotional response to auction activity. In the December 18th letter, Mountain SMR requests waiver of the down payment deadline on the grounds that it was unable to file the FCC Form 601 electronically, despite its enlistment of the aid of the FCC's Technical Support group, and pending the Wireless Telecommunications Bureau's ("Bureau") action on the December 5th letter. After reviewing the facts presented, we deny Mountain SMR's requests for waiver. Under the Commission's competitive bidding procedures, the bidder submitting the highest bid during the course of the auction is designated the "high" or "winning" bidder. The Commission's bid withdrawal payment rule, Section 90.905(b), subjects a bidder that withdraws a high bid during the course of the auction to a payment equal to the difference between the amount of its high bid and the winning bid the next time the license is offered at auction by the Commission. The Commission's down payment rule, Section 90.907(b), requires that winning bidders submit a down payment in an amount sufficient to bring their total deposits up to 20 percent of their winning bids within ten (10) business days after the auction closes. Section 90.151 provides that the request for waiver of the Commission's rules must include a showing that unique circumstances are involved and that there is no reasonable alternative within the existing rules. We do not believe that Mountain SMR's requests meet the stringent requirements for waiver of the bid withdrawal payment or down payment rules. At the outset, we note that Section 309(j)(1) of the Communications Act requires the Commission to develop and use competitive bidding procedures to choose from among two or more mutually exclusive applications for initial licenses. The Commission has established a longstanding competitive bidding process that ensures that licenses are awarded to those that value them most highly as indicated by submitting the highest bid. To allow a high bidder to pay less than the amount ultimately bid, as requested by Mountain SMR, would be contrary to the underlying principles behind our competitive bidding process. Moreover, the purpose of bid withdrawal payments is to discourage insincere bidding. Insincere bidding, whether frivolous or strategic, distorts the price information generated by the auction process and reduces efficiency. Hence, the bid withdrawal payments are essential to the functioning and integrity of the auction process. A waiver of bid withdrawal payment rules would threaten the economic efficiency of the auction process and could encourage future bidders to submit "mistaken" bids intentionally in order to gain insight into a competitor's valuation of licenses. In this case, Mountain SMR deliberately bid $521,000 for the particular license. Furthermore, Mountain SMR apparently did not conclude that its bid was a mistake and request a waiver until 93 rounds had passed and it surmised that it might not be able to make its down payment. Mountain SMR has not demonstrated that there are unique circumstances involved, only a lack of strategic planning on its part, which does not warrant waiver of the Commission's rules. This scenario is distinguishable from other situations in which the Bureau has granted requests for waivers of the bid withdrawal rules as a result of the submission of bids in error. In those cases, the bids were found to be erroneous because they had exceeded the bidders' intended bids by factors of ten or more. Furthermore, to grant such a waiver request would encourage future bidders to hide behind their inexperience in order to avoid responsibility for their bids. It would also be unfair to other bidders who planned carefully and familiarized themselves with the Commission's rules prior to the start of the auction. As we noted in National Telecom PCS, such a result would not be in the public interest. Moreover, prior to the short-form filing date in the 800 MHz SMR auction, the Bureau advised all applicants to familiarize themselves with the procedures, terms and rules applicable to the 800 MHz SMR service that would govern the conduct of the auction. In that Public Notice, the Bureau explicitly admonished prospective bidders that the terms contained in the FCC's rules and the public notice would not be negotiable. Similarly, we must deny Mountain SMR's request for waiver of the down payment rules. As the Commission recently noted in the Part 1 proceeding, in which it modified the general competitive bidding rules, the Commission created the down payment requirement in order to ensure that the licensees have the financial capability to attract the capital necessary to deploy and operate their systems and to protect against default. Because it is due soon after the close of the auction, the initial down payment is a valuable indicator of an applicant's financial viability. The Commission believes that strict enforcement of payment deadlines enhances the integrity of the auction and licensing process by ensuring that applicants have the necessary financial qualifications. The ability to pay as demonstrated by a timely initial down payment is essential to a fair and efficient auction process. The Commission also has an obligation under the Debt Collection Improvement Act to enforce payment obligations owed to the federal government. Moreover, to waive the requirements on account of unfamiliarity with the Commission's electronic filing software is not in the public interest, particularly as the Commission described several alternative methods for obtaining FCC Form 601 in the December 9th Public Notice. Under the Commission's rules, a winning bidder that fails to remit its required down payment for the licenses within ten business days after the Commission declares the auction closed shall be deemed to be in default. Under such circumstances, the Commission will dismiss the bidder's application, and the defaulting bidder will be liable for default penalties. Because Mountain SMR failed to meet its down payment and bid withdrawal payment obligations, Mountain SMR is deemed to be in default on its payment obligation for License E-172 A. Mountain SMR is therefore subject to the default penalties specified under Sections 90.905 and 90.909 of the Commission's Rules. For the reasons stated above, IT IS ORDERED that Mountain SMR's request for waiver of the competitive bidding rules and the bid withdrawal rule as set forth in the Section 90.905(b) of the Commission's Rules IS HEREBY DENIED. IT IS FURTHER ORDERED that Mountain SMR is assessed an initial default payment in the amount of $86,628. IT IS FURTHER ORDERED that the payment of $86,628 of this amount is to be made in accordance with the instructions set forth in Attachment A to this Order within thirty days from the release of this Order. IT IS FURTHER ORDERED that Mountain SMR will be subject to the balance of the payment specified in Section 90.905(c) of the Commission's rules, 47 C.F.R.  90.905(c), once License E-172 A is reauctioned and the actual default payment is determined. IT IS FURTHER ORDERED that this Order shall be sent to the applicant by certified mail, return receipt requested. This action is taken under delegated authority pursuant to Section 0.331 of the Commission's Rules. Sincerely, Kathleen O'Brien Ham Chief, Auctions and Industry Analysis Division Wireless Telecommunications Bureau ATTACHMENT A The following information is being provided to assist you in making your payment. PAYMENT BY WIRE TRANSFER You must complete the FCC Remittance Advice (Form 159) when making your auction payment by wire transfer. Please fax a completed Form 159 to Mellon Bank at (412) 236-5702 at least one hour before placing the order for the wire transfer. On the cover sheet of the fax indicate "Wire Transfer - Auction Payment for Auction Event 16." Please indicate on the upper left hand corner of the Form 159 the lockbox number "358850." The purpose of the FCC Form 159 is to identify who you are, how much you are paying and what you are paying for. It allows the bank to accurately process your remittance. Failure to accurately complete your FCC Form 159 could result in a delay in processing your remittance. Before completing an FCC Form 159, read the instructions below. 1) You must complete all of the blocks in the Payor Information Section, (Blocks 1 through 10). 2) You must complete the following auction-specific information in blocks, 14(A), 15(A), 16(a) and 17(A). 14(A) - Payment Type Code, enter the letters "AW8U"; block 15(A) - Quantity, enter "1"; block 16(A) -$86,628; and block 17(A) - FCC Code 1, enter "16". When wiring funds, please give your bank 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: (Exactly as on Form 159, Block #1); PAYOR NAME: (MOUNTAIN SMR GROUP) PAYMENT TYPE CODE: AW8U (Block #14); FCC CODE: 16 PAYMENT BY CASHIER'S CHECK Each cashier's check and corresponding FCC Remittance Advice (Form 159) must be in an individual envelope and specifically addressed to: Mellon Bank, P.O. Box #358850, Pittsburgh, PA 15251-5850, Attn: Auction Payment. If delivering an auction payment in person or by courier, the check and FCC Remittance Advice (Form 159) must be delivered to Mellon Bank, Three Mellon Bank Center, 525 William Penn Way, 27th Floor, Room 153-2713, Pittsburgh, PA 15259-0001, (Attn: Wholesale Lockbox Shift Supervisor). For further information or assistance, please call Regina Dorsey, Chief, Billings and Collections Branch at (202) 418-1995.