DA 96-481
                                                    April 4, 1996

                                
    WIRELESS TELECOMMUNICATIONS BUREAU WILL STRICTLY ENFORCE
                     DEFAULT PAYMENT RULES
                                
             Bureau to Re-auction Licenses Quickly
                                
     The Wireless Telecommunications Bureau ("Bureau") has received numerous inquiries
concerning the Commission's rules on bidder defaults in the various spectrum auctions.  In
response to these inquiries, the Bureau reminds bidders that the Commission's rules
concerning default payments will be strictly enforced in all auctions.  Under 47 C.F.R.       
1.2109(b), if a winning bidder fails to submit the required down payment(s) within the time
frame designated by the applicable auction rules, the bidder will be deemed to have defaulted,
its application will be dismissed, and it will be subject to the default payment specified in 47
C.F.R.  1.2104(g)(2).  All funds, including upfront payments and down payments, will be
applied first to satisfy outstanding bid withdrawal and default payments before being applied
toward the down payment on licenses the bidder has won and seeks to acquire.  47 C.F.R. 
1.2104(g)(2).  As indicated in the Fifth Report and Order in PP Docket No. 93-253 and the
Broadband PCS C Block Supplemental Bidder Package, if the amount of the bid withdrawal or
default payment cannot be determined, the bidder will be required to make a deposit of 20
percent of the amount bid on such licenses.  

     Example:  Bidder X submitted an upfront payment of $5 to participate in an auction. 
At the close of an auction, Bidder X is the high bidder on licenses A, B and C.  Bidder X
submitted high bids of $1,000 for license A, $1,500 for license B, and $2,000 for license C. 
Within five days of the close of the auction, Bidder X must supplement its upfront payment
with down payments sufficient to bring its total deposits up to five percent of its winning bids. 
Thus, Bidder X must submit down payments totalling $220 ($225 minus its $5 upfront
payment) to be in compliance with the down payment requirements.  If Bidder X submits $120
as down payments for licenses A and B only, it will be in default on license C.  

     Under our rules, all of Bidder X's funds on deposit with the Commission will be 



applied first to satisfy the default payment on license C.  Because the amount of the default
payment cannot be determined until the license is re-auctioned, Bidder X is required to make a
deposit of 20 percent of the amount it bid on license C, or $400.  Thus, all of the $125 that
Bidder X has submitted to the Commission will be applied toward satisfying the default 
payment obligation on license C.  Because Bidder X still owes $275 to satisfy its default
payment on license C, Bidder X will be considered to be in default on licenses A and B as
well.  Bidder X will then owe the Commission $775 for its default payments (twenty percent
of the amount bid on all three licenses (or $900) minus the amount it has on deposit (or
$125)).  Bidder X can avoid defaulting on licenses A and B only if it is able to deposit
sufficient funds to cover the down payments on all three licenses ($225) or the default payment
on license C and the down payments on licenses A and B ($625). 

     Should a winning bidder fail to submit the required down payment(s), the Bureau will
either re-auction the license(s) to existing or new applicants, or offer the license(s) to the other
highest bidders (in descending order) at their final bids.  47 C.F.R.  1.2109(b).  For defaults
on licenses that occur after the down payments are due (or, in the case of small business
applicants, after the first down payment is due), the Bureau will move to re-auction these
licenses as quickly as possible.  47 C.F.R.  1.2109(c).

For further information, please contact James W. Hedlund, Wireless Telecommunications
Bureau, Auctions Division at (202) 418-0660.

Action by the Acting Chief, Wireless Telecommunications Bureau.