Rule2025-14725
Competitive Bidding Rules for Auction of AWS-3 Licenses
Primary source
Metadata and text below are from the Federal Register, a public-domain U.S. government work. Always verify the official published version before relying on it for any legal matter.
Published
August 4, 2025
Effective
September 3, 2025
Issuing agencies
Federal Communications Commission
Abstract
In this document, the Federal Communications Commission (Commission or FCC) adopts final rules that update the eligibility criteria for designated entity bidding credits in auctions for licenses in the 1695-1710 MHz, 1755-1780 MHz, and 2155-2180 MHz (AWS-3) bands. The Commission also updates its general competitive bidding rules for categorizing an entity as a small business concern.
Full Text
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[Federal Register Volume 90, Number 147 (Monday, August 4, 2025)]
[Rules and Regulations]
[Pages 36385-36396]
From the Federal Register Online via the Government Publishing Office [<a href="http://www.gpo.gov">www.gpo.gov</a>]
[FR Doc No: 2025-14725]
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FEDERAL COMMUNICATIONS COMMISSION
47 CFR Parts 1 and 27
[GN Docket Nos. 13-185, 25-70, 25-71; FCC 25-39; FR ID 306799]
Competitive Bidding Rules for Auction of AWS-3 Licenses
AGENCY: Federal Communications Commission.
ACTION: Final rule.
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SUMMARY: In this document, the Federal Communications Commission
(Commission or FCC) adopts final rules that update the eligibility
criteria for designated entity bidding credits in auctions for licenses
in the 1695-1710 MHz, 1755-1780 MHz, and 2155-2180 MHz (AWS-3) bands.
The Commission also updates its general competitive bidding rules for
categorizing an entity as a small business concern.
DATES: Effective September 3, 2025.
FOR FURTHER INFORMATION CONTACT: Erik Salovaara, Office of Economics
and Analytics, Auctions Division, <a href="/cdn-cgi/l/email-protection#6520170c0e4b3604090a1304041704250306064b020a13"><span class="__cf_email__" data-cfemail="185d6a7173364b7974776e79796a79587e7b7b367f776e">[email protected]</span></a> or 202-418-
0660, or Lyndsey Grunewald, Office of Economics and Analytics, Auctions
Division, <a href="/cdn-cgi/l/email-protection#04487d6a6077617d2a4376716a6173656860446267672a636b72"><span class="__cf_email__" data-cfemail="5a1623343e293f23741d282f343f2d3b363e1a3c3939743d352c">[email protected]</span></a> or (202) 418-0660.
SUPPLEMENTARY INFORMATION: This is a summary of the Commission's Report
and Order and Second Report and Order in GN Docket Nos. 25-70, 25-71,
and 13-185, adopted on July 24, 2025, and released on July 25, 2025
(AWS-3 Report and Order). The full text of this document is available
at <a href="https://www.fcc.gov/document/fcc-updates-bidding-rules-aws-3-inventory-auction-0">https://www.fcc.gov/document/fcc-updates-bidding-rules-aws-3-inventory-auction-0</a>.
People with Disabilities. To request materials in accessible
formats for people with disabilities (braille, large print, electronic
files, audio format), send an email to <a href="/cdn-cgi/l/email-protection#64020707515450240207074a030b12"><span class="__cf_email__" data-cfemail="eb8d8888dedbdfab8d8888c58c849d">[email protected]</span></a> or call the
Consumer and Governmental Affairs Bureau at 202-418-0530 (voice).
I. Introduction
1. Advancing U.S. leadership in wireless is good for the U.S.
economy, for U.S. national security, and for ensuring that every
American has access to affordable, high-speed service. That is why the
Commission is focused on freeing up more spectrum for consumer use.
2. With the AWS-3 Report and Order, the Commission moves to satisfy
a bipartisan congressional mandate to auction licenses for AWS-3
spectrum in the Commission's inventory. The proceeds from this auction
will fund the Commission's ongoing efforts to protect American networks
from untrustworthy and insecure foreign equipment.
3. The Commission has held spectrum auctions for roughly 30 years.
Auctions assign spectrum licenses to their highest and best use by
allowing bidders to reveal their preferences and discover a market-
clearing price. Commission auctions have proven a resounding success
largely because the Commission has updated its rules to account for the
lessons of the past. For example, in 2015, the Commission reformed its
rules to protect the integrity of their auctions from fraud, collusion,
and manipulation while promoting participation by bona fide small
businesses and rural providers.
4. The AWS-3 Report and Order advances those time-tested
objectives. First, the Commission adopts designated entity eligibility
requirements for future AWS-3 spectrum license auctions that are in
harmony with the requirements used in every 5G auction held since 2015.
Updating the AWS-3 rules to match settled practice will give small
businesses and rural service providers the predictability they need to
participate meaningfully at auction. Next, the AWS-3 Report and Order
updates the Commission's general part 1 competitive bidding rules for
categorizing an entity as a ``small business concern,'' pursuant to the
Small Business Runway Extension Act of 2018 (SBREA). In adopting these
rules, the Commission rejects arguments from the affiliates of Auction
97 defaulters (whose unwillingness to pay the full amount of their
gross winning bids led to significant AWS-3 spectrum sitting fallow in
the Commission's inventory for nearly a decade) that the Commission
conduct the next auction of AWS-3 licenses under the same rules that
enabled the very bidding behavior that led to their defaults in the
first place. Finally, the Commission declines to adopt a Tribal
priority licensing window in advance of the next AWS-3 auction.
5. Shortly after the Commission adopted the Notice of Proposed
Rulemaking in this proceeding (NPRM), 90 FR 11931 (March 13, 2025), the
Office of Economics and Analytics (OEA), jointly with the Wireless
Telecommunications Bureau (WTB), sought comment on proposed procedures
for an auction of AWS-3 licenses (Auction 113). The AWS-3 Report and
Order allows OEA and WTB to establish final procedures for Auction 113
in accordance with the adopted rules and to move forward with that
auction.
II. Background
6. In 2014, the Commission adopted service and bidding rules for
the auction of AWS-3 spectrum licenses (Auction 97) in the 1695-1710
MHz, 1755-1780 MHz, and 2155-2180 MHz frequencies. Bidding in Auction
97 began in November 2014 and ended in January 2015. Auction 97 raised
a total of $41,329,673,325 in net bids, with 31 bidders placing winning
bids for a total of 1,611 licenses. Following that auction, certain
winning bidders selectively defaulted on winning bids for 197 licenses.
In March 2025, the Commission announced that it would conduct a new
auction, Auction 113, for the AWS-3 spectrum that remained in the
agency's inventory, most of which was available primarily due to
Auction 97 defaults.
7. The Commission Provides Notice in 2014 that All AWS-3 Auctions
Would Be Subject to Generally Applicable Rule Changes. Prior to Auction
97, the Commission provided clear notice that any and all future
auctions of AWS-3 spectrum licenses would be subject to generally
applicable changes to the part 1 competitive bidding rules. In
particular, the Commission determined that any AWS-3 auction would be
conducted in accordance with the general competitive bidding rules set
forth in part 1, subpart Q of the Commission's rules except as
``otherwise provided in'' part 27.
8. The part 1 competitive bidding rules advance the agency's
statutory directive by ensuring that designated entities (DEs), which
are small businesses and rural telephone companies, have a meaningful
opportunity to access wireless spectrum in FCC auctions. DEs are
eligible for auction bidding credits, represented as percentage
discounts from their winning bids. Eligibility requirements for DEs are
set on a service-by-service basis, the
[[Page 36386]]
capital requirements and other characteristics of each particular
service establishing the appropriate threshold.
9. The Commission adopted service-specific bidding credits and DE
eligibility requirements for the AWS-3 bands prior to Auction 97. The
Commission provided a 15% small business bidding credit to entities
with average annual gross revenues not exceeding $40 million and a 25%
very small business bidding credit to entities with average annual
gross revenues not exceeding $15 million. The average gross revenues
would be calculated from the preceding three years. These thresholds
were consistent with the standardized schedule of DE bidding credits in
the Commission's rules at the time. The relevant definitions and
thresholds for particular bidding credits were codified in the part 27
AWS-3 service rules. The DE eligibility requirements were modeled after
the small business size standards and associated bidding credits that
the Commission adopted for the AWS-1 band, based on the belief that the
AWS-3 bands would be employed for purposes similar to those for the
AWS-1 band.
10. DISH's DEs Improperly Claim $3.3 Billion in FCC Bidding Credits
Intended For ``Very Small Businesses.'' Two participants in Auction 97,
Northstar Wireless, LLC (Northstar) and SNR Wireless License Co. (SNR),
made extensive use of bidding credits intended for ``very small
businesses.'' In total, Northstar and SNR improperly claimed $3.3
billion in credits under the Commission's DE rules. They ultimately
placed over $13.3 billion in gross winning bids on 702 of the 1611
licenses in Auction 97, or 43.5% of the available licenses.
11. SNR and Northstar were formed immediately before Auction 97 and
funded almost exclusively by a large DISH Network Corporation (DISH).
During the course of reviewing long-form applications following Auction
97, the Commission denied bidding credit eligibility for both Northstar
and SNR. The Commission determined that the companies were under the de
facto control of DISH and therefore were ineligible for the $3.3
billion of DE bidding credits for ``very small businesses.''
12. Because SNR and Northstar were ineligible for the DE bidding
credits they claimed, they were required to pay the full amount of
their $13.3 billion bid price for those licenses. DISH and its DEs
appealed the Commission's determination. The litigation finally came to
a close in 2023 when a federal court of appeals upheld the Commission's
determination and the Supreme Court declined to grant certiorari.
13. DISH's DEs Selectively Default on the AWS-3 Licenses They Won.
Northstar and SNR selectively defaulted on winning bids for 197 AWS-3
licenses. Pursuant to the Commission's well-established part 1 rules
governing defaults on winning bids, Northstar and SNR became liable for
the difference between their winning bids in Auction 97 and the amount
of winning bids for licenses accessing the same spectrum in subsequent
auctions. Also pursuant to those rules, SNR and Northstar became liable
for an additional payment equal to 15% of their own bids or the
applicable subsequent winning bids, whichever was less. The upcoming
auction of AWS-3 licenses may provide subsequent winning bids that
ultimately determine the size of any deficiency payment owed by
Northstar and SNR.
14. The Commission Overhauls its Competitive Bidding Rules and DE
Eligibility in Response to Auction 97 Irregularities. After the close
of Auction 97, the Commission became aware of allegations of
significant bidding irregularities on the part of SNR and Northstar.
The Commission also received numerous complaints about abuses of the DE
program beyond the DISH-controlled entities. Commenters alleged that
supposedly ``small businesses'' that claimed bidding credits were
operating at the direction and control of large, well-financed
corporations.
15. In response to these concerns, the Commission in 2015
significantly reformed its competitive bidding rules for future
spectrum auctions. The reforms adopted in the Updating Part 1 Report
and Order, 80 FR 56764 (September 18, 2015), were expressly informed by
``lessons learned'' in Auction 97. Many of the Commission's reforms
were intended to expand the range of businesses eligible for DE
benefits while simultaneously ending practices that had incentivized
larger players to manipulate the DE regime. As the Commission
explained, the changes to the part 1 rules were designed to promote
auction participation by small businesses while ensuring ``that
valuable bidding credits are available only to those Congress
intended,'' namely, small businesses and rural providers.
16. Although the 2015 reforms expanded DE eligibility by raising
the gross revenue thresholds for small business bidding credits and
establishing a new bidding credit for eligible rural service providers,
it also took several steps to protect the integrity of the DE program
by: (i) prohibiting joint bidding arrangements between applicants; (ii)
prohibiting the common control of separate auction applicants; (iii)
requiring the establishment, on an auction-by-auction basis, of a
maximum total discount of no less than $25 million that a winning
eligible DE may receive; and (iv) modifying attribution rules to
prevent the unjust enrichment of ineligible entities. These and other
reforms resulted in changes to the Commission's part 1 rules, which
apply generally to spectrum auctions. While existing service-specific
competitive bidding rules, including those for the AWS-3 bands,
specified that the part 1 competitive bidding rules would apply to
mutually exclusive applications for licenses, the specific provisions
related to designated entity eligibility in those services were never
updated to reflect the increased gross revenue thresholds and the
availability of the rural service provider bidding credit.
17. Congress Tightens the Definition of ``Small Business Concern''
for Federal Programs. In the 2018 SBREA, Congress amended provisions of
the Small Business Act for defining a ``small business concern.'' In
relevant part, the 2018 amendments required federal agencies to treat
an entity as a ``small business concern'' only if the agency considered
average gross receipts over the preceding five years.
18. In requiring a five-year lookback, Congress sought to more
accurately reflect a business's long-term size. Congress also sought to
combat fraud and abuse by making it harder for companies to manipulate
short-term revenue fluctuations to improperly qualify as ``small.''
19. The 2018 statutory amendments also responded to longstanding
criticisms, raised over the years by Congress and agencies like the
Small Business Administration (SBA) Office of Inspector General and the
Government Accounting Office (GAO), that large firms had exploited
loopholes to win preferential contracts and discounts intended for
small businesses. Although service-specific small business definitions
that the Commission has adopted for bidding credit eligibility since
2019 contain the congressionally mandated five-year lookback period,
the Commission has not previously amended any of its prior-existing
rules--including prior service-specific rules and the general part 1
rules to conform with the amended Small Business Act's standards.
20. To Fund Critical National Security Objectives, Congress
Authorizes the FCC to Auction AWS-3 Licenses that DISH's DEs
Selectively Defaulted After Auction
[[Page 36387]]
97. In the Spectrum and Secure Technology and Innovation Act of 2024,
Congress directed the Commission to initiate systems of competitive
bidding to grant licenses for spectrum in its inventory in the AWS-3
spectrum bands. Auction proceeds will support the Commission's Supply
Chain Reimbursement Program, which reimburses eligible advanced
communications service providers for their costs to remove, replace,
and dispose of untrustworthy Huawei Technologies Company or ZTE
Corporation equipment and services.
21. In February 2025, the Commission issued the NPRM as the first
step to conduct Auction 113. As the 2015 reforms to the part 1 rules
that were adopted in the immediate aftermath of Auction 97 to protect
the integrity of Commission spectrum auctions already apply to this
auction, the NPRM sought to update the part 27 requirements for DE
eligibility in AWS-3 spectrum auctions based on the intervening
developments proposing to set the average annual gross revenue
eligibility requirements for very small and small business bidding
credits at $20 million and $55 million, respectively and to incorporate
the amended Small Business Act's five-year lookback period for
calculating gross revenues. The NPRM also proposed to make the rural
service provider bidding credit adopted in 2015 available for future
auctions of AWS-3 spectrum licenses. These proposals would align DE
eligibility requirements for Auction 113 with the requirements used in
auctions for 5G-ready spectrum licenses conducted since Auction 97.
III. Competitive Bidding Rules To Be Used for Future Auctions of AWS-3
Spectrum Licenses
22. The Commission affirms that, consistent with its AWS-3 service-
specific rules, any future auctions will be conducted using the part 1
competitive bidding rules that are in effect at the time of the
auction. For Auction 113, that includes the reforms to the DE rules
adopted as part of the 2015 Updating Part 1 Report and Order and any
other changes that may be effectuated prior to the auction. For
example, the Commission is considering a proposal to require auction
applicants to make certain certifications as to whether they are owned
by, controlled by, or subject to the jurisdiction or direction of a
foreign adversary. If such a rule were to be adopted and made effective
prior to the deadline for submitting an application to participate in
Auction 113, the new requirement could apply to Auction 113 applicants.
The Commission has repeatedly found that application of its part 1
competitive bidding rules, as modified by the 2015 Updating Part 1
Report and Order, to individual services serves the public interest.
Consistent with that precedent, the Commission finds that conducting
Auction 113 using these updated rules would similarly serve the public
interest.
A. The 2015 Reforms to the Competitive Bidding Rules Will Apply to
Future Auctions of AWS-3 Spectrum Licenses
23. In 2015, the Commission modified its part 1 competitive bidding
rules to facilitate competitive entry into the wireless industry by
small businesses with capital and operational experience. The
Commission sought to ``provide meaningful opportunities to bona fide
small businesses and rural service providers to participate in auctions
and in the provision of spectrum-based services, and in providing such
opportunities, to prevent unjust enrichment.'' While the record in that
proceeding supported these changes, some commenters strongly opposed
several proposals, but their arguments initially failed to persuade the
Commission, which proceeded to modify its rules, and later failed to
persuade the U.S. Court of Appeals for the Third Circuit, which upheld
certain challenged rules. The Third Circuit found that the Commission,
in the Updating Part 1 Report and Order, ``not only set forth a policy
that is likely to allow continued participation by DEs, but also
rationally explained why it expected no significant loss of DE
participation.'' Now, in this proceeding, one of the challenging
parties seeks to revive those failed arguments. But they are no more
persuasive now than they were when the Commission first rejected them a
decade ago.
24. New data and the Commission's experience administering auctions
over the last ten years prove the success of the modernized DE rules.
Publicly available auction results demonstrate that the Commission and
Third Circuit accurately foresaw that the rules adopted in 2015 would
offer bona fide designated entities opportunities to participate in
auctions and the provision of spectrum-based services. In every
spectrum license auction since, the percentage of winning bidders that
are designated entities has remained similar to or has risen higher
than the percentage in Auction 97. In six of those eight auctions, the
percentage of applicants qualifying to bid that were designated
entities was higher than in Auction 97. This data meaningfully
demonstrate that, consistent with the Commission's statutory duty, the
part 1 rule modifications adopted in 2015 serve the public interest by
using bidding preferences to ensure that small businesses and rural
telephone companies are given the opportunity to participate in the
provision of spectrum-based services. Accordingly, the Commission
declines to conduct future auctions of AWS-3 spectrum licenses,
including Auction 113, using the outdated rules that are no longer in
effect.
25. The Commission is not persuaded by arguments that it may not
use competitive bidding rules, including DE eligibility requirements,
that differ from those used in Auction 97. Two commenters assert that
the use of the current competitive bidding rules and procedures, as
amended, for the upcoming AWS-3 auction would undermine robust
participation by DEs. This claim is rooted in their fear that the DE
eligibility rules adopted by the Commission would reduce the winning
net bids in Auction 113 and thereby increase the amount of Northstar's
and SNR's deficiency payments. The Commission finds that argument
unavailing.
26. As an initial matter, all auctions conducted since 2015 have
been conducted under the updated rules in effect at the time, including
the increased gross revenue thresholds the AWS-3 Report and Order
adopts for the AWS-3 service-specific rules. These rules have led to
robust participation by small entities and rural providers. The
Commission finds that their use in Auction 113 is likely to expand the
pool of entities that can potentially qualify for DE bidding credits
while still allowing the Commission to ``prevent the unjust enrichment
of entities that would be ineligible to receive DE benefits in their
own right.''
27. The Commission has, from time to time, updated its auction
rules to promote the efficient assignment of spectrum licenses, promote
economic opportunity and competition, ensure that innovative
technologies can be brought to market, and encourage auction
participation by small businesses and rural providers. As demonstrated
by the outcomes of auctions held since Auction 97, the reforms adopted
in 2015 have served this purpose. The Commission therefore affirms that
the updated rules will govern the conduct of Auction 113. As is the
Commission's standard practice when adopting auction rules, and as it
did in advance of Auction 97, the Commission also gives notice to
potential auction participants that future auctions will be subject to
any
[[Page 36388]]
modifications that it may adopt for its part 1 general competitive
bidding rules in the future.
B. Updating Eligibility Criteria for Small and Very Small Business
Bidding Credits for Auctions of AWS-3 Spectrum Licenses
28. The Commission adopts the proposal in the NPRM to update the
AWS-3 service specific competitive bidding rules to align the gross
revenue thresholds used to determine eligibility for small and very
small business bidding credits with the DE eligibility requirements
contained in the part 1 rules and the requirements of the SBREA. For
purposes of DE eligibility, a small business is defined as an entity
that, together with its affiliates, its controlling interests and the
affiliates of its controlling interests, has average gross revenues
that are not more than $55 million for the preceding five years, and a
very small business is an entity that, together with its affiliates,
its controlling interests and the affiliates of its controlling
interests, has average gross revenues that are not more than $20
million for the preceding five years. This change will bring the DE
eligibility requirements for AWS-3 services in line with the
Commission's standardized schedule for small business bidding credits
in part 1, subpart Q.
29. In accordance with the schedule of DE bidding credits set forth
in part 1, a qualifying small business will continue to be eligible for
a bidding credit of 15% and a qualifying very small business will be
eligible for a bidding credit of 25%, subject to the bidding credit
caps specified in 47 CFR 1.2110(f)(2)(ii).
30. The eligibility requirements that the AWS-3 Report and Order
adopts harmonize the AWS-3 DE rules with both the part 1 standardized
schedule of DE bidding credits and the amended Small Business Act's
current five-year average gross receipts benchmark. By updating the
AWS-3 DE eligibility requirements to match the requirements that have
been used for all other auctions of 5G-ready services since 2015, the
Commission provides small businesses and rural service providers with a
simple, consistent, and predictable avenue for facilitating access to
capital, thereby increasing participation and competition in an AWS-3
auction.
31. In all auctions of licenses likely to be used to provide 5G
services in a variety of bands since the part 1 schedule of bidding
credits was updated in 2015, the Commission has consistently used the
DE business size standards that it adopted. That is, the Commission has
used the two larger average gross revenue thresholds and associated
bidding credits in the part 1 schedule of bidding credits. The results
from these auctions demonstrate that using the two larger size
standards to assign bidding credits has provided a real opportunity for
bidders claiming eligibility as small businesses to win licenses to
provide spectrum-based services at auction. By adopting average annual
gross revenue thresholds that are not too high, and thus not overly
inclusive, the Commission preserves the effectiveness of DE benefits
for the small businesses that are intended to benefit from its DE
rules. This proposal received strong support in the record, with the
majority of commenters, including those representing small and rural
interests, generally supporting raising the average annual gross
revenue thresholds as proposed in the NPRM.
32. The Commission also adopts its proposals to amend the AWS-3
competitive bidding rules to reflect the five-year benchmark mandated
by the amended Small Business Act. Adopting the benchmark will bring
the AWS-3 competitive bidding rules into alignment with the Small
Business Act, as the Commission has done for all other service specific
designated entity requirements since 2019. Simultaneously, the
Commission adopts its proposal to codify this requirement in its part 1
standardized schedule of bidding credits such that eligibility for
small business bidding credits would be based on an entity's average
gross revenues for the preceding five years. The Commission finds that
this modification to the part 1 standardized schedule of bidding
credits will ensure consistency with the requirements of the Small
Business Act in spectrum bands that may be subject to competitive
bidding in the future, and it adopts the proposal.
33. One commenter asks the Commission to go beyond its proposal and
increase the eligibility threshold beyond the existing part 1 rules.
That commenter did not propose any specific thresholds or provide a
justification for why auctions of licenses for the AWS-3 spectrum in
the Commission's inventory should be treated differently from other
auctions for licenses likely to be used to provide 5G services. Based
on the Commission's prior experience with bidding credits in spectrum
auctions and the lack of service-specific justifications in the record,
the Commission is not persuaded that it should adopt small business
size standards for AWS-3 spectrum that differ from those used in
auctions for other 5G-ready services.
34. Finally, the Commission declines to increase the bidding credit
percentages for small businesses and very small businesses and declines
to include the 35% bidding credit from its part 1 standardized schedule
of bidding credits for entities with not more than $4 million in
average annual gross revenues. When determining the amount of bidding
credits and who should be eligible for them, the Commission takes care
to avoid expanding the scope of DE benefits to a level that may
incentivize gamesmanship. The Commission has consistently used only the
two largest DE business size standards and associated bidding credits
outlined in its part-1 rules when adopting service-specific rules for
competitive bidding for spectrum licenses, including in Auction 97.
This approach has facilitated the successful participation of many
eligible small businesses in Commission auctions over the last decade
and has provided uniformity and predictability for designated entities
and other bidders as well. The Commission is not persuaded by the
limited record before us that AWS-3 spectrum is different in a way that
warrants deviating from the rule frameworks that have governed previous
auctions. The Commission finds that the bidding credit percentages and
thresholds in the part-1 size standards continue to ``provide a simple,
consistent, and predictable avenue for facilitating small business
participation in auctions.''
Rural Service Provider Bidding Credits for Future Auctions of AWS-3
Spectrum Licenses
35. Consistent with the findings in the Updating Part 1 Report and
Order and the Commission's approach in other bands where the spectrum
is likely to be used to provide 5G services, the Commission adopts its
proposal to offer a 15% bidding credit to a rural service provider, as
defined in 47 CFR 1.2110(f)(4)(i) and subject to the bidding credit cap
defined in 47 CFR 1.2110(f)(4)(ii), that has not claimed a small
business bidding credit. Those commenters that addressed this proposal
generally supported extending bidding credits to rural service
providers in auctions of licenses for AWS-3 spectrum. Permitting
bidders to claim a rural service provider bidding credit in Auction
113, a bidding credit that was not available when this spectrum was
initially auctioned, will allow a diversity of service providers to
compete more effectively for spectrum licenses in rural areas. The
Commission finds that adopting this bidding credit
[[Page 36389]]
will promote robust participation in Auction 113.
36. Some commenters advocate for increasing the bidding credit
percentage for rural service providers so that it matches the
percentage provided to very small businesses, generally reasoning that
more small businesses will be eligible for the larger bidding credit
given the new thresholds that the Commission is adopting, in addition
to new entrants. As with calls to increase the bidding credit
percentages for small business designated entities, the commenters
advocating to increase the bidding credit percentage for rural service
providers fail to demonstrate that services particular to the limited
number of licenses being auctioned in the AWS-3 band would materially
benefit from a larger rural service provider bidding credit. The
Commission sees nothing in the record that disturbs its conclusion when
it adopted a rural service provider credit that ``rural service
providers generally have greater access to capital and infrastructure
than other small businesses or new entrants,'' making it appropriate
for the rural service provider credit to equal the smallest credit
amount available to a small business.
37. The Commission's past experience with the rural service
provider bidding credit indicates that the existing part 1 rural
service provider bidding credit achieves an appropriate balance of the
statutory obligations that the Commission is charged with pursuing,
while sufficiently enabling rural service providers to compete for
spectrum licenses. Thus, the Commission confirms that the part 1 rural
service provider bidding credit standard will apply for auctions of
licenses for AWS-3 spectrum as proposed in the NPRM.
IV. The Commission Is Not Required To Use the 2014 Competitive Bidding
Rules for Auction 113 in 2025
38. The Commission will conduct Auction 113 under the part 1
competitive bidding rules in effect at the time of the auction, and not
part 1 rules that were in effect during Auction 97. As the NPRM
observed, when establishing the AWS-3 service ahead of Auction 97, the
Commission ``specified that such licenses would be subject to
competitive bidding and that the competitive bidding procedures
contained in part 1 of the Commission's rules would apply, unless
otherwise specified.'' The current part 1 rules include improvements
related to DEs that were adopted in the wake of Auction 97. The
Commission's longstanding part 1 rules have led to robust participation
by small entities and rural providers. Notwithstanding the assertions
of two commenters, nothing in the language of the AWS-3 2014 Report and
Order, 79 FR 32366 (June 4, 2014), or the part 27 rules indicates that
the part 1 rules used in Auction 97 must be used to conduct any and all
future auctions of licenses for AWS-3 spectrum.
39. Under the Commission's rules, any auction involving AWS-3
licenses will be governed by the ``general competitive bidding
procedures set forth 47 CFR part 1, subpart Q.'' Neither commenter
addresses the straightforward application of the text of these rules.
Instead, they claim that Auction 113 will be a continuation of Auction
97 and therefore the Commission must continue to use the 2014 part 1
rules in future AWS-3 auctions, including Auction 113. In an attempt to
marry Auction 113 to Auction 97, a commenter interprets the words
``subsequent auction'' and ``re-auction,'' that appear in the
Commission's rules regarding the consequences of an auction default, to
require an ``inextricable link'' between the first auction and the
second.
40. In reality, these phrases mean the opposite of what the
commenter asserts. The terms ``subsequent auction'' and ``re-auction,''
on their face, refer to a new auction that will offer licenses for
spectrum that has been offered but not successfully assigned in a prior
auction. In all material respects, Auction 97 has concluded: the
Commission has completed the process of competitive bidding, issued
licenses to all winning bidders, finished the transition process, and
accomplished all other prerequisites to the provision of wireless
service for licenses that were successfully auctioned. Bidding in
Auction 97 concluded more than a decade ago. The Commission's default
rules rely on bids in two auctions of licenses for the same spectrum to
determine the consequences of a default in the first one, but this does
not suggest that the second auction is a continuation of the first. The
Commission is entitled to set the rules of each auction within its
statutory parameters. By using the updated part 1 rules, the Commission
is able to leverage experience and expertise that it did not have at
the time of Auction 97, and indeed leverage its experience in Auction
97 itself, to better promote robust competition and combat fraud in
Auction 113.
A. Applying the Current Part 1 Competitive Bidding Rules in Auction 113
Is Not a Violation of Due Process
41. Using the part 1 rules in effect at the time of future AWS-3
auctions is consistent with applicable law and the reasonable
expectations of any party involved in Auction 97. Applying current part
1 rules in future AWS-3 auctions is consistent with due process of law.
Application of the Commission's rules at the time of the auction is
neither a prohibited primary retroactive application nor secondary
retroactive application of the rules. Furthermore, one commenter's
contention that changes in rules applicable to Auction 97 and a future
AWS-3 auction effectively single out the defaulters in Auction 97 for
differential treatment ignores their own legal responsibility as
defaulters.
42. Primary retroactivity. An agency order is impermissible as
``primarily retroactive'' if it alters the past legal consequences of
past actions. An order can be primarily retroactive if it (1) increases
a party's liability for past conduct; (2) impairs rights a party
possessed when he acted; or (3) imposes new duties with respect to
transactions already completed.
43. Applying part 1 rules in effect at the time of Auction 113 will
not alter ``the past legal consequences for past actions'' taken by
Northstar and SNR. To the contrary, the ``past legal consequences of
past actions'' by Northstar and SNR were determined by the Commission's
rules governing default penalties, which were well established prior to
Action 97 and have not changed in any meaningful way since then. It is
those rules, not the DE rules, that determines a defaulter's
liabilities, rights, and duties.
44. As such, applying part 1 rules in effect when Auction 113
commences would not increase DISH's liability for past conduct by
penalizing Northstar and SNR in the form of a larger deficiency payment
owed than if the Auction 97 DE rules remained in place. The
Commission's default payment rules determine the amounts of Northstar's
and SNR's default payment obligations or, in other words, the default
payment rules establish the liabilities applicable to the defaulters.
Pursuant to the rules, a bidder's obligation to pay its entire bid
amount is set when its bid is accepted, and after default, the amount
due may be reduced based on the results of a later auction. The amount
that a defaulter will ultimately owe is determined by the delta between
its winning bid and the winning bid in a subsequent auction,
[[Page 36390]]
and if the subsequent winning bid equals or exceeds the defaulted bid,
no deficiency payment will be assessed. The bidding rules that are
applied in a subsequent auction would not increase DISH's liability for
past conduct because the maximum amount of the liability due to its
past conduct was established at the time DISH defaulted, and the
Commission's rules controlling default payments have not changed.
Accordingly, using those rules in a future AWS-3 auction would not
increase DISH's liability for past conduct.
45. Secondary Retroactivity. A commenter further claims that
conducting Auction 113 using the part 1 rules that are in effect at
that time would have secondary retroactive effect, making their use
impermissible. A change in law that does not result in primary
retroactivity nonetheless can still be impermissibly secondarily
retroactive. This sort of retroactivity is ``characteristic of a rule
having exclusively `future effect' but affects the desirability of past
transactions.'' However, simply having an effect, even if negative, on
expectations based on past rules does not make a new rule secondarily
retroactive.
46. As a preliminary matter, the commenter could not reasonably
rely on a future AWS-3 auction replicating Auction 97, with respect to
rules or outcome. At the outset of the AWS-3 service, the Commission
gave notice that future AWS-3 auctions would rely on the part 1 rules
then in effect, meaning that the participants should never have relied
upon the Auction 97 rules being applied in perpetuity. The Commission
expressly admonished bidders that any future auction of AWS-3 spectrum,
which would determine subsequent winning bid amounts for purposes of
default obligations, could be subject to updated rules. Participants in
Auction 97 were on notice of potential for changes in the Commission's
competitive bidding rules, and they reasonably should have expected the
Commission to update or modernize its rules in an auction being held
over a decade later. It would be irresponsible for the Commission to
ignore the vast changes involving spectrum-based services since Auction
97. As the D.C. Circuit has recognized, ``an agency must be allowed to
adjust its policies to changing circumstances, within the framework of
the rules it established in advance of the auction.''
47. Moreover, the benefits of applying the revised part 1 rules in
a future AWS-3 auction will outweigh the burden claimed by the
commenter. Agencies must ``balance the harmful `secondary
retroactivity' of upsetting prior expectations or existing investments
against the benefits of applying their rules to those preexisting
interests.'' In 2015, the Commission updated the part 1 rules after
finding that the rule amendments served the public interest, and
evidence in the record shows that DE participation in Commission
auctions has been enhanced by those updates. That finding was made in
part based on the experience the Commission gained from administering
Auction 97, an auction in which the defaults of Northstar and SNR
significantly affected the outcome. The actions taken by the Commission
in the AWS-3 Report and Order further align eligibility criteria for DE
bidding credits for AWS-3 spectrum licenses with the Commission's part
1 rules and with the DE eligibility requirements used in auctions for
5G-ready spectrum licenses since Auction 97. The ``amorphous injury''
to Northstar and SNR, a purely speculative decrease in winning bid
amounts in Auction 113, is outweighed by the public interest benefits
in enhancing bona fide DE participation in spectrum auctions and in
harmonizing the competitive bidding rules. In conducting Auction 113
pursuant to the reformed part 1 rules, the Commission is exercising its
discretion to balance fairness to losing bidders with the needs of the
market and the public interest. Accordingly, there is no impermissible
secondary retroactivity.
48. Disparate Treatment. In support of its argument that due
process requires that Auction 113 be conducted using Auction 97 part 1
rules, one commenter complains that Northstar and SNR would be
impermissibly ``singled out'' by the use of modified part 1 rules. This
argument is unsupported and unpersuasive. It disregards Northstar's and
SNR's own responsibility for improperly claiming bidding credits under
the Commission's DE rules in Auction 97. Northstar and SNR, and their
guarantors, will be subject to default obligations based on their
defaulted winning bids in Auction 97, bids that they won while relying
on improperly claimed bidding credits, pursuant to a rule that applied
to all other Auction 97 participants. Had any other winning bidder
defaulted in that auction, it would have had its final default payment
determined just as Northstar's and SNR's will be. The only thing that
``singles out'' Northstar and SNR is that they voluntarily defaulted on
winning bids of over $3 billion in Auction 97 after improperly claiming
billions in small business bidding credits. The commenter similarly
argues that the participants are unique in that any bidders in future
auctions outside the AWS-3 band will have fresh, revised expectations
based on application of the Commission's post-Auction 97 revisions to
its part 1 competitive bidding rules. But this claim ignores that the
Commission regularly admonishes potential auction participants that
future auctions will also be subject to any modifications that the
Commission may adopt for its part 1 general competitive bidding rules
in the future.
B. The Commission Provided the Notice and Opportunity for Comment
Required by the Administrative Procedure Act
49. The Commission finds no merit in one commenter's contention
that it failed to comply with the Administrative Procedure Act (APA).
The commenter complains that the Commission's use of a fixed comment
period from the release of the NPRM rather than from the date of its
Federal Register publication does not meet APA requirements. The APA
requires that notice of regulatory action be published in the Federal
Register and permits action only after such notice is provided. It does
not define the minimum period of notice before a deadline for comments.
Commission rules state that ``a reasonable time will be provided'' and
that such time will be ``specified in the NPRM,'' without prescribing a
specific length of time.
50. The NPRM was adopted at the Commission Open Meeting on February
27, 2025, and was released by publication on the Commission's website
on February 28, 2025. It set a deadline for comments to be filed by
March 31 and for reply comments by April 14. The Federal Register
published a summary of the NPRM, including information about the dates
for comments and replies, on March 13, or 12 business days and 18
calendar days prior to the comment deadline.
51. That notice satisfied the requirements of the APA and the
Commission's rules and gave interested parties a sufficient opportunity
to participate in the rulemaking. The commenter does not claim that the
comment period was unreasonably short or that it was prejudiced in any
way. In fact, the commenter hired outside counsel and filed 18 pages of
comments by the March 31 deadline. Eleven other parties filed comments
within this time period, and no party claimed to have been unable to
meet a filing deadline or otherwise sought additional time to address
the NPRM.
52. The Commission are likewise unpersuaded by the commenter's
claim
[[Page 36391]]
that the Commission violated the APA by ``failing to identify and seek
any comment on any issue relating to the inextricable linkage of
Auctions 97 and 113.'' The APA requires an agency to publish a notice
that identifies ``either the terms or substance of the proposed rule or
a description of the subjects and issues involved.'' That notice ``must
be sufficient to fairly apprise interested parties of the issues
involved, but it need not specify every precise proposal which the
agency may ultimately adopt as a rule.'' The Commission satisfied that
requirement when it proposed updating the DE rules for Auction 113.
C. Applying Part 1 Rules in Effect at the Time of Any Future AWS-3
Auctions Will Not Breach Any Contractual Duty of the Commission
53. Contrary to two commenters' assertions, changes to the
competitive bidding rules do not breach DISH's guaranties. One of the
commenters relied on a savings clause in the guaranties, a provision
that the guaranties may be enforced to the fullest extent permissible
under the laws and public policies in the event that and to the extent
that ``the obligations of the Guarantor under this Guaranty shall be
adjudicated to be invalid or unenforceable.'' The commenter contends
that because changing the bidding credit rules from Auction 97 violates
its due process rights, enforcing the guaranties would exceed the
savings clause provision of ``permissible'' enforcement. Changes in the
Commission's bidding credit rules do not prejudice any rights of the
commenter protected by due process and its strained reading of the
savings clause fails to prove any breach of the guaranties.
54. The commenter suggests that applying the part 1 competitive
bidding rules in effect at the time that the auction takes place is
somehow analogous to the government's actions in the Supreme Court case
of United States v. Winstar Corp. The Commission find it is not. In
that case, the Supreme Court addressed the enforcement of a regulation
that contradicted contractual assurances of specific future accounting
treatment that a banking regulator had made to induce healthier savings
and loan companies to purchase failing financial entities. In contrast,
the commenter never received any contractual assurance that future AWS-
3 auctions would be conducted under the Auction 97 rules, and the
Commission never extended any such assurance. To the contrary, the
Commission provided notice that its competitive bidding rules would be
subject to future changes.
55. Likewise, the Commission's improvement of its competitive
bidding rules does not breach any applicable covenant of good faith and
fair dealing. Notwithstanding claims by the commenters the underlying
default obligations are set by 47 CFR 1.2104(g) and those liabilities
are reflected in the guaranties. The final amount of those obligations
will be determined by the applicable subsequent winning bids, not by
any of the changes that the Commission has made to the competitive
bidding rules since Auction 97 or makes in the AWS-3 Report and Order.
Whatever the subsequent winning bid amounts, the commenter remains
liable for any deficiency regardless of the DE rules, or any other
particular rules, in a future auction.
D. Commenter's Pre-Auction Request for Post-Auction Relief Is Not Ripe
56. Finally, two commenters request that, if it does not apply the
2014 part 1 rules in Auction 113, the Commission refrain from requiring
any deficiency payments pursuant to 47 CFR 1.2104(g) and from
``enforcing the DISH guaranties.'' Obviously, the Commission has not
yet assessed a final default payment for the defaulted bids from
Auction 97. Indeed, the outcome of a future auction of AWS-3 spectrum
licenses may prove such a request to be unnecessary if the subsequent
winning bids are equal to or greater than Northstar's and SNR's prior
defaulted winning bids. Thus, the Commission declines to consider the
commenters request that it refrain from requiring any deficiency
payments pursuant to 47 CFR 1.2104(g) and from enforcing the DISH
guaranties'' if it amends the rules as proposed in the NPRM.
57. The commenters' request in this regard is similar to that of
the petitioner in Mountain Solutions in that the default liability, if
any, is not yet ripe. Indeed, the request here is even more premature.
In Mountain Solutions, there were subsequent winning bids for seven of
the ten licenses involved in the petitioner's defaults. In this case,
by contrast, there are no subsequent winning bids with respect to the
defaults by the participants. As one commenter observes, at this point,
any injury related to deficiency payments and enforcement of the
guaranties is speculative and, accordingly, any requests for related
Commission action are premature. The Commission therefore does not need
to consider any request by the commenters for relief from the
obligations of the involved parties under the rules and the guaranties
until after the Commission is able to calculate any final payment for
the defaults.
V. Tribal Licensing Window
58. In the NPRM, the Commission sought comment on the possible use
of a Tribal licensing window for Auction 113. After consideration of
the comments received in response, the Commission finds that it would
not be in the public interest to implement a Tribal licensing window
for the inventory proposed for Auction 113.
59. In seeking comment on a possible Tribal licensing window, the
Commission noted that the Spectrum and Secure Technology and Innovation
Act directs the Commission to use competitive bidding to ``grant
licenses for spectrum in the inventory of the Commission as of the date
of enactment of this Act in the bands of frequencies referred to by the
Commission as the `AWS-3 bands.' '' The Act also directs proceeds from
the auction to the general fund of the Treasury to, among other things,
reimburse funds borrowed by the Commission to carry out the
Commission's Supply Chain Reimbursement Program. The Spectrum and
Secure Technology and Innovation Act also includes a directive for the
Commission to ``initiate systems of competitive bidding under section
309(j)'' for these AWS-3 licenses within 18 months of enactment and
provision to processing applications and grant licenses notwithstanding
the lapse in the Commission's broader authority under 47 U.S.C. 309(j),
indicating congressional urgency in moving forward with Auction 113.
60. Within this context, the Commission sought comment on whether a
Tribal licensing window for any relevant portions of the limited number
of AWS-3 licenses available for auction would be permissible according
to the language of the statute. Additionally, the Commission sought
comment on the appropriate eligibility requirements to adopt should it
offer a Tribal licensing window. The Commission sought comment on the
putative benefits of a Tribal licensing window given the bandwidth
available for auction and the presence of Federal operations in the
band. Finally, the Commission sought general comment on the potential
impact of a Tribal licensing window on the process for auctioning these
licenses.
61. Numerous Tribal entities and their representatives, including
Tribal Governments, a Tribal regulatory entity, a Tribal wireless
provider, and public interest groups, filed in support of including a
Tribal licensing window in
[[Page 36392]]
Auction 113. They argued that adopting a Tribal licensing window would
serve the public interest, promote Tribal spectrum access, and support
access to communications services in rural, unserved, and underserved
areas. In addition, a number of commenters address the eligibility
criteria for a Tribal licensing window in Auction 113, referencing
previous proceedings where the Commission prioritized Tribal licensing.
By contrast, another commenter opposed including a Tribal licensing
window in Auction 113, arguing that doing so would not be consistent
with the goals of the Spectrum and Secure Technology and Innovation
Act, which include auctioning the valuable AWS-3 spectrum, which has
``already been sitting in the Commission's inventory unused for far too
long.''
62. The Commission finds that it would not be in the public
interest to implement a Tribal licensing window in the context of
Auction 113, given Congress's specific directives in the Spectrum and
Secure Technology and Innovation Act regarding the inventory to be
licensed and the timetable for doing so. Congress was clear in the
Spectrum and Secure Technology and Innovation Act that the Commission
is to auction all the unassigned AWS-3 spectrum in its inventory as of
December 2024, and that the proceeds from the auction are ultimately to
be used to reimburse the Treasury for funds deposited in the Spectrum
Auction Trust Fund to fill the funding shortfall in the Supply Chain
Reimbursement Program and support the removal of telecommunications
equipment that poses a risk to national security. What is more, the
text of the Spectrum and Secure Technology and Innovation Act reflects
the urgent public interest in moving expeditiously to secure American
networks from equipment that poses a risk to national security, and in
using proceeds from the AWS-3 spectrum auction to achieve that goal.
The Commission agrees with the one commenter that conducting a Tribal
licensing window, which would remove spectrum prior to the auction from
the congressionally specified inventory and could potentially reduce
the auction proceeds available for the Supply Chain Reimbursement
Program, would not further the public interest goals of the Spectrum
and Secure Technology and Innovation Act. Additionally, one commenter
argues that an auction of AWS-3 inventory licenses can still benefit
Tribes. However, there is disagreement about whether this is true.
Another commenter counters that it has seen too many cases where
auction winners acquire licenses covering Navajo lands but do not build
infrastructure because it is not economically lucrative to do so, or if
they do, Navajo lands are the very last areas built out. Although the
Commission does not adopt a Tribal priority window for Auction 113, it
acknowledges its trust relationship with Tribal Nations, and remains
committed to finding ways to address the connectivity challenges facing
Tribal Nations.
63. Furthermore, as the commenter suggested, conducting a Tribal
licensing window in connection with Auction 113 could further delay the
AWS-3 spectrum from being used to provide service. This spectrum has
been in inventory for a decade now amidst protracted litigation and the
subsequent lapse of the Commission's auction authority. With the
Spectrum and Secure Technology and Innovation Act, Congress provided
the authority to auction these licenses and established a clear and
swift timeline for moving forward. Consistent with the public benefits
of this well-established service and as reflected by the legislative
action, the public interest mandates prioritizing expeditious
licensing. Several commenters claim that implementing a Tribal
licensing window would not delay the auction and such a window could
even be held simultaneously with traditional bidding to expedite the
process. The Commission does not find these arguments compelling. In
the Commission's experience with the Tribal priority window in the 2.5
GHz auction, considerable time and resources were required in order to
establish and conduct a Tribal licensing window with adequate outreach
and support for potential participants. Additionally, the Commission
does not find it feasible to hold a Tribal licensing window and bidding
simultaneously as it would not allow bidders sufficient time to develop
business plans or assess market conditions as required by the
Communications Act. Finally, because the Commission declines to adopt a
Tribal licensing window, it finds it unnecessary at this time to
evaluate the various proposals in the record regarding eligibility
criteria for participation in a Tribal licensing window for Auction
113.
VI. Procedural Matters
64. Paperwork Reduction Act Analysis. The Office of Management and
Budget (OMB) has approved the collection of information in the
Application to Participate in an FCC Auction, FCC Form 175, including
collecting five years of annual revenue information from applicants for
a small business bidding credit and information from applicants for a
rural service provider bidding credit. The AWS-3 Report and Order does
not contain new or substantively modified information collection
requirements subject to the Paperwork Reduction Act of 1995 (PRA),
Public Law 104-13. Therefore, it does not contain any new or modified
information collection burden for small business concerns with fewer
than 25 employees pursuant to the Small Business Paperwork Relief Act
of 2002, Public Law 107-198.
65. Congressional Review Act. The Commission has determined, and
the Administrator of the Office of Information and Regulatory Affairs,
Office of Management and Budget, concurs that this rule is ``non-
major'' under the Congressional Review Act, 5 U.S.C. 804(2). The
Commission will send a copy of the AWS-3 Report and Order to Congress
and the Government Accountability Office pursuant to 5 U.S.C.
801(a)(1)(A).
66. Regulatory Flexibility Act. The Regulatory Flexibility Act of
1980, as amended (RFA), requires that an agency prepare a regulatory
flexibility analysis for notice-and-comment rulemakings, unless the
agency certifies that ``the rule will not, if promulgated, have a
significant economic impact on a substantial number of small
entities.'' Accordingly, the Commission has prepared a Final Regulatory
Flexibility Analysis (FRFA) concerning the possible impact of the rule
and policy changes contained in this Order on small entities.
67. As required by the Regulatory Flexibility Act of 1980, as
amended (RFA), the Commission incorporated an Initial Regulatory
Flexibility Analysis (IRFA) in the NPRM. The Commission sought written
public comment on the proposals and issues raised in the NPRM,
including comment on the IRFA. No comments were filed addressing the
IRFA.
A. Need for, and Objectives of, the Rules
68. In the AWS-3 Report and Order, the Commission updates the DE
rules for AWS-3 spectrum bands to enable the Commission to offer
licenses for spectrum within those bands that is currently in the
Commission's inventory through competitive bidding in the near future.
In addition, the AWS-3 Report and Order resolves all remaining open
issues and also addresses comments from small and other entities that
were filed in response to the NPRM. Together, the rules that the
Commission adopts will further its goal of facilitating the
[[Page 36393]]
use of presently fallow spectrum and further advancing the deployment
of fifth generation wireless (5G) services by efficiently bringing to
auction licenses covering spectrum that is likely to be used to provide
5G services. In addition, these rules will also foster competition in
wireless services by facilitating participation in an auction of
licenses for AWS-3 spectrum by entities designated by in 47 U.S.C.
309(j)(3) and (4) (the Act) to be given opportunities to participate in
spectrum-based services (designated entities or DEs).
69. Specifically, the AWS-3 Report and Order adopts rules that
provide small businesses and rural service providers with greater
opportunities to participate in the provisioning of 5G services by
aligning the Commission's outdated, service-specific eligibility
requirements for AWS-3 with its current practice. Additionally the AWS-
3 Report and Order modifies the part 1 size definitions for small
business bidding credits so that the length of time over which revenues
are averaged for determining bidding credit eligibility is five years,
in conformance with the Small Business Act, as amended.
70. Lastly, the proceeds generated from the auctions will bolster
another of the Commission's long-standing objectives: protecting U.S.
national security by supporting the Commission's Supply Chain
Reimbursement Program, which implements the Secure and Trusted
Communications Networks Act of 2019 through its reimbursement of
eligible advanced communications service providers, some of which are
small entities, for their costs incurred through the removal,
replacement, and disposal of equipment and services provided by
untrustworthy entities such as Huawei Technologies Company or ZTE
Corporation.
B. Summary of Significant Issues Raised by Public Comments in Response
to the IRFA
71. There were no comments filed that specifically addressed the
information presented in the IRFA.
C. Response to Comments by the Chief Counsel for Advocacy of the Small
Business Administration
72. Pursuant to the Small Business Jobs Act of 2010, which amended
the RFA, the Commission is required to respond to any comments filed by
the Chief Counsel for Advocacy of the Small Business Administration
(SBA), and provide a detailed statement of any change made to the
proposed rules as a result of those comments. The Chief Counsel did not
file any comments in response to the NPRM.
D. Description and Estimate of the Number of Small Entities to Which
the Rules Will Apply
73. The RFA directs agencies to provide a description of, and where
feasible, an estimate of the number of small entities that may be
affected by the rules adopted herein. The RFA generally defines the
term ``small entity'' as having the same meaning under the Small
Business Act. In addition, the term ``small business'' has the same
meaning as the term ``small-business concern'' under the Small Business
Act. A ``small-business concern'' is one which: (1) is independently
owned and operated; (2) is not dominant in its field of operation; and
(3) satisfies any additional criteria established by the SBA.
74. Small Businesses, Small Organizations, Small Governmental
Jurisdictions. The Commission actions, over time, may affect small
entities that are not easily categorized at present. The Commission
therefore describes three broad groups of small entities that could be
directly affected by our actions. First, while there are industry
specific size standards for small businesses that are used in the
regulatory flexibility analysis, in general, a small business is an
independent business having fewer than 500 employees. These types of
small businesses represent 99.9% of all businesses in the United
States, which translates to 34.75 million businesses. Next, ``small
organizations'' are not-for-profit enterprises that are independently
owned and operated and not dominant their field. While the Commission
does not have data regarding the number of non-profits that meet that
criteria, over 99 percent of nonprofits have fewer than 500 employees.
Finally, ``small governmental jurisdictions'' are defined as cities,
counties, towns, townships, villages, school districts, or special
districts with populations of less than fifty thousand. Based on the
2022 U.S. Census of Governments data, the Commission estimate that at
least 48,724 out of 90,835 local government jurisdictions have a
population of less than 50,000.
75. Licenses Assigned by Auctions. The Commission's small business
size standards with respect to licenses assigned by auction involve
eligibility for bidding credits in the auction of licenses for various
wireless frequencies. In the auction of these licenses, the Commission
may define and adopt criteria for different classes of small
businesses. The criteria for these small business classes may be
defined in the Commission's rules or may require consultation with the
U.S. Small Business Administration, Office of Size Standards. For
licenses subject to auction, the number of winning bidders that qualify
as small businesses at the close of an auction does not necessarily
represent the number of small businesses currently in service. In
addition, the Commission does not generally track subsequent business
size unless, in the context of assignments or transfers, unjust
enrichment issues are implicated.
76. Wireless Telecommunications Carriers (except Satellite). This
industry comprises establishments engaged in operating and maintaining
switching and transmission facilities to provide communications via the
airwaves. Establishments in this industry have spectrum licenses and
provide services using that spectrum, such as cellular services, paging
services, wireless internet access, and wireless video services. The
SBA size standard for this industry classifies a business as small if
it has 1,500 or fewer employees. U.S. Census Bureau data for 2017 show
that there were 2,893 firms in this industry that operated for the
entire year. Of that number, 2,837 firms employed fewer than 250
employees. Additionally, based on Commission data in the 2022 Universal
Service Monitoring Report, as of December 31, 2021, there were 594
providers that reported they were engaged in the provision of wireless
services. Of these providers, the Commission estimates that 511
providers have 1,500 or fewer employees. Consequently, using the SBA's
small business size standard, most of these providers can be considered
small entities.
77. Advanced Wireless Services (AWS)--(1710-1755 MHz and 2110-2155
MHz bands (AWS-1); 1915-1920 MHz, 1995-2000 MHz, 2020-2025 MHz and
2175-2180 MHz bands (AWS-2); 2155-2175 MHz band (AWS-3); 2000-2020 MHz
and 2180-2200 MHz (AWS-4)). Spectrum is made available and licensed in
these bands for the provision of various wireless communications
services. Wireless Telecommunications Carriers (except Satellite) is
the closest industry with a SBA small business size standard applicable
to these services. The SBA small business size standard for this
industry classifies a business as small if it has 1,500 or fewer
employees. U.S. Census Bureau data for 2017 show that there were 2,893
firms that operated in this industry for the entire year. Of this
number, 2,837 firms employed fewer than 250 employees. Thus, under the
SBA size standard, the Commission
[[Page 36394]]
estimates that a majority of licensees in this industry can be
considered small.
78. According to Commission data as of December 2021, there were
approximately 4,472 active AWS licenses. The Commission's small
business size standards with respect to AWS involve eligibility for
bidding credits in the auction of licenses for these services. For the
first auction of AWS licenses, the Commission defined a ``small
business'' as an entity with average annual gross revenues for the
preceding three years not exceeding $40 million, and a ``very small
business'' as an entity with average annual gross revenues for the
preceding three years not exceeding $15 million. Pursuant to these
definitions, 57 winning bidders claiming status as small or very small
businesses won 215 of 1,087 licenses. In the most recent auction of AWS
licenses, 15 of 37 bidders qualifying for status as small or very small
businesses won licenses.
79. In frequency bands where licenses were subject to auction, the
Commission notes that as a general matter, the number of winning
bidders that qualify as small businesses at the close of an auction
does not necessarily represent the number of small businesses currently
in service. Further, the Commission does not generally track subsequent
business size unless, in the context of assignments or transfers,
unjust enrichment issues are implicated. Additionally, since the
Commission does not collect data on the number of employees for
licensees providing these services, at this time the Commission is not
able to estimate the number of licensees with active licenses that
would qualify as small under the SBA's small business size standard.
80. Satellite Telecommunications. This industry comprises firms
``primarily engaged in providing telecommunications services to other
establishments in the telecommunications and broadcasting industries by
forwarding and receiving communications signals via a system of
satellites or reselling satellite telecommunications.'' Satellite
telecommunications service providers include satellite and earth
station operators. The SBA small business size standard for this
industry classifies a business with $44 million or less in annual
receipts as small. U.S. Census Bureau data for 2017 show that 275 firms
in this industry operated for the entire year. Of that number, 242
firms had revenue of less than $25 million. Consequently, using the
SBA's small business size standard most satellite telecommunications
service providers can be considered small entities. The Commission
notes however, that the SBA's revenue small business size standard is
applicable to a broad scope of satellite telecommunications providers
included in the U.S. Census Bureau's Satellite Telecommunications
industry definition. Additionally, the Commission neither requests nor
collects annual revenue information from satellite telecommunications
providers, and is therefore unable to more accurately estimate the
number of satellite telecommunications providers that would be
classified as a small business under the SBA size standard.
E. Description of Economic Impact and Projected Reporting,
Recordkeeping, and Other Compliance Requirements for Small Entities
81. The RFA directs agencies to describe the economic impact of
proposed rules on small entities, as well as projected reporting,
recordkeeping and other compliance requirements, including an estimate
of the classes of small entities which will be subject to the
requirement and the type of professional skills necessary for
preparation of the report or record.
82. The Commission expects that the rules adopted in the AWS-3
Report and Order will impose new and/or additional reporting or
recordkeeping and/or other compliance obligations on small entities as
well as other applicants and licensees. These obligations are discussed
in greater detail in the AWS-3 Report and Order. The Commission
believes that these rules assist the Commission in meeting its
statutory goals by facilitating the auction, and subsequent use, of
unassigned spectrum. Further, the Commission does not believe that the
costs and/or administrative burdens associated with the adopted rules
will unduly burden small entities. The Commission notes that the rules
adopted in the AWS-3 Report and Order modify requirements that were in
place prior to the last major update to the Commission's competitive
bidding rules in 2015 in order to bring them in line with the policies
and procedures that have been used in auctions of 5G-ready services
since 2015. Therefore, small entities that have participated in
Commission auctions since 2015 may already be familiar with such
policies and requirements and may have the necessary processes and
procedures in place to facilitate compliance, thereby resulting in
minimal incremental costs to comply with the modifications adopted in
the AWS-3 Report and Order.
83. Typically, the auction procedures inform prospective applicants
that they should familiarize themselves with the Commission's general
competitive bidding rules, Commission decisions regarding competitive
bidding procedures, application requirements, obligations of Commission
licensees, construction permit holders, and support recipients, and the
Commission's service rules for the frequency band available in the
auction or for construction permits or universal service support, and
that they must be thoroughly familiar with the procedures, terms, and
conditions contained in the public notice adopting procedures for the
auction. The Commission therefore do not expect that the amended
definitions adopted in the AWS-3 Report and Order will increase the
need for small entities to hire attorneys, engineers, consultants, or
other professionals because it does not increase the level of education
or due diligence beyond what was required of applicants under the
previous competitive bidding rules for the AWS-3 spectrum bands.
84. As mentioned, the AWS-3 Report and Order adopts rule changes
that will affect reporting, recordkeeping, and/or other compliance
requirements for small and other entities. The AWS-3 Report and Order
amends the Commission's rules related to designated entities eligible
for bidding credits for licenses subject to auction in the AWS-3 bands.
It adopts the same revenue thresholds that the Commission has used in
recent years to determine eligibility for small and very small business
bidding credits, which are provided for in the Commission's part 1
standardized schedule of bidding credits. It also amends the AWS-3
bidding credit eligibility criteria to align with the amended Small
Business Act's requirement that federal agencies that categorize
business concerns that provide services as a ``small business concern''
based on annual average gross receipts only do so if the agency
considers such receipts ``over a period of not less than five years.''
Specifically, the Commission adopts a requirement for an entity to have
average gross revenues for the preceding five years not exceeding $55
million to be a small business, and such an entity would be eligible
for a bidding credit of 15%. To be classified as a very small business
an entity would be required to have average gross revenues for the
preceding five years not exceeding $20 million and would be eligible
for a bidding credit of 25%. The Commission also adopts a rural service
provider bidding credit for auctions of licenses for AWS-3 spectrum
that has been offered. Lastly, the AWS-3 Report and Order modifies
[[Page 36395]]
the Commission's general part 1 competitive bidding rules to
incorporate the five-year average gross receipts benchmark for the
purpose of determining which entities qualify for small business
bidding credits for consistency with the Small Business Act.
F. Discussion of Steps Taken To Minimize the Significant Economic
Impact on Small Entities and Significant Alternatives Considered
85. The RFA requires an agency to provide, ``a description of the
steps the agency has taken to minimize the significant economic impact
on small entities including a statement of the factual, policy, and
legal reasons for selecting the alternative adopted in the final rule
and why each one of the other significant alternatives to the rule
considered by the agency which affect the impact on small entities was
rejected.''
86. The rules adopted by the Commission in the AWS-3 Report and
Order reflect its efforts to minimize significant economic impact to
small entities where practicable and its consideration of various
alternatives in reaching its conclusions. For example, the adopted
rules update the competitive bidding rules for the AWS-3 spectrum bands
to align with current practices. The Commission considered alternatives
that would apply rules that deviated from our prevailing practices.
However, by adopting rules similar to the DE rules that have been used
in recent auctions of wireless, 5G-ready spectrum, compliance burdens
on small businesses will be minimized, as many small businesses will
already be familiar with these requirements. As a result, the adopted
approach could lessen the compliance costs for small entities who have
participated in any wireless spectrum auction since 2015.
87. Competitive Bidding and Bidding Credits for Small Entities. The
Commission administers bidding credit programs to promote small
business service provider participation in auctions and in the
provision of spectrum-based services. Based on the Commission's
analysis of past auction data, the relative costs of participation are
lowered for small businesses that take full advantage of the bidding
credit programs. The current DE rules for auctions of licenses in AWS-3
spectrum bands were adopted prior to the last major update to the part
1 competitive bidding rules in 2015. Thus, as mentioned in the prior
section, the Commission has modified these DE rules so that they
conform with the DE rules set forth in part 1, subpart Q, of the
Commission's rules and are consistent with recent auctions.
Specifically, the Commission modifies the DE rules for AWS-3 to apply
the current part 1 definition of a qualifying ``small business'' and a
``very small business'' and apply the bidding credits for these two
categories, and for rural service providers. The Commission also
modifies the part 1 size definitions for small business bidding credits
so that the amount of time over which revenues are averaged for
determining bidding credit eligibility is five years, in conformance
with the Small Business Act. The Commission considered comments
suggesting it implement larger bidding credits for small businesses.
The Commission concludes, however, that the bidding credit percentages
adopted in the AWS-3 Report and Order will sufficiently enable small
businesses seeking to participate in auctions to gain access to
capital, thereby fostering their increased participating and
competitive in auctions, without incentivizing gamesmanship.
88. In addition, to reduce costs to small and other entities, the
Commission provides resources and educational materials to assist all
auction participants, including small entities, with understanding the
requirements of auction participation, including applying for bidding
credits. Small entities and other auction participants may seek
clarification of, or guidance regarding, auction procedures, the
competitive bidding rules, and any requirements related to the
authorizations or support to be made available through the auction from
Commission staff prior to each auction's application window. Further,
an FCC Auctions Hotline provides small entities one-on-one access to
Commission staff for information about the auction process and
procedures. Lastly, through the FCC Auctions Technical Support Hotline,
the Commission provides a technical assistance resource to small
entities and other applicants, on issues such as access to or
navigation within the electronic short-form application (FCC Form 175)
and use of the bidding system.
G. Report to Congress
89. The Commission will send a copy of the AWS-3 Report and Order,
including the FRFA, in a report to Congress pursuant to the
Congressional Review Act. In addition, the Commission will send a copy
of the AWS-3 Report and Order, including the Final Regulatory
Flexibility Analysis, to the Chief Counsel for Advocacy of the SBA.
VII. Ordering Clauses
90. It is ordered, pursuant to the authority found in sections 1,
2, 4(i), 303, and 309(j) of the Communications Act of 1934, as amended,
47 U.S.C. 151, 152, 154(i), 303, and 309(j); the Servicemember Quality
of Life Improvement and National Defense Authorization Act for Fiscal
Year 2025, H.R. 5009, 118th Cong. Div. D, Title LIV, section 5403, that
the Report and Order and Second Report and Order is adopted.
91. It is further ordered that the rules and requirements as
adopted in the Report and Order and Second Report and Order will become
effective thirty (30) days after publication in the Federal Register.
92. It is further ordered that the Office of the Managing Director,
Performance Program Management, shall send a copy of the Report and
Order and Second Report and Order in a report to be sent to Congress
and the Government Accountability Office pursuant to the Congressional
Review Act, 5 U.S.C. 801(a)(1)(A).
93. It is further ordered that the Commission's Office of the
Secretary, shall send a copy of the Report and Order and Second Report
and Order, including the Final Regulatory Flexibility Analysis, to the
Chief Counsel for Advocacy of the Small Business Administration.
List of Subjects
47 CFR Part 1
Administrative practice and procedure; Communications common
carriers; reporting and recordkeeping requirements; telecommunications.
47 CFR Part 27
Administrative practice and procedure; Communications common
carriers; telecommunications.
Federal Communications Commission.
Marlene Dortch,
Secretary.
Final Rules
For the reasons discussed in the preamble, the Federal
Communications Commission amends 47 CFR parts 1 and 27 to read as
follows:
PART 1--PRACTICE AND PROCEDURE
0
1. The authority citation for part 1 continues to read as follows:
Authority: 47 U.S.C. chs. 2, 5, 9, 13; 28 U.S.C. 2461 note; 47
U.S.C. 1754, unless otherwise noted.
[[Page 36396]]
0
2. Amend Sec. 1.2110 by revising paragraphs (b)(1)(i) and (f)(2)(i) to
read as follows:
Sec. 1.2110 Designated entities.
* * * * *
(b) * * *
(1) * * *
(i) The gross revenues of the applicant (or licensee), its
affiliates, its controlling interests, and the affiliates of its
controlling interests shall be attributed to the applicant (or
licensee) and considered on a cumulative basis and aggregated for
purposes of determining whether the applicant (or licensee) is eligible
for status as a small business, very small business, or entrepreneur,
as those terms are defined in the service-specific rules. An applicant
seeking status as a small business, very small business, or
entrepreneur, as those terms are defined in the service-specific rules,
must disclose on its short- and long-form applications, separately and
in the aggregate, the gross revenues for each of the previous five
years of the applicant (or licensee), its affiliates, its controlling
interests, and the affiliates of its controlling interests.
* * * * *
(f) * * *
(2) * * *
(i) Size of bidding credits. A winning bidder that qualifies as a
small business, and has not claimed a rural service provider bidding
credit pursuant to paragraph (f)(4) of this section, may use the
following bidding credits corresponding to its respective average gross
revenues for the preceding 5 years:
(A) Businesses with average gross revenues for the preceding 5
years not exceeding $4 million are eligible for bidding credits of 35
percent;
(B) Businesses with average gross revenues for the preceding 5
years not exceeding $20 million are eligible for bidding credits of 25
percent; and
(C) Businesses with average gross revenues for the preceding 5
years not exceeding $55 million are eligible for bidding credits of 15
percent.
* * * * *
PART 27--Miscellaneous Wireless Communications Services
0
3. The authority citation for part 27 continues to read as follows:
Authority: 47 U.S.C. 154, 301, 302a, 303, 307, 309, 332, 336,
337, 1403, 1404, 1451, and 1452, unless otherwise noted.
0
4. Revise Sec. 27.1106 to read as follows:
Sec. 27.1106 Designated Entities in the 1695-1710 MHz, 1755-1780 MHz,
and 2155-2180 MHz bands.
(a) Small business. (1) A small business is an entity that,
together with its affiliates, its controlling interests, and the
affiliates of its controlling interests, has average gross revenues not
exceeding $55 million for the preceding five (5) years.
(2) A very small business is an entity that, together with its
affiliates, its controlling interests, and the affiliates of its
controlling interests, has average gross revenues not exceeding $20
million for the preceding five (5) years.
(b) Bidding credits. A winning bidder that qualifies as a small
business as defined in this section or a consortium of small businesses
may use the bidding credit specified in Sec. 1.2110(f)(2)(i)(C) of
this chapter, subject to the cap specified in Sec. 1.2110(f)(2)(ii) of
this chapter. A winning bidder that qualifies as a very small business
as defined in this section or a consortium of very small businesses may
use the bidding credit specified in Sec. 1.2110(f)(2)(i)(B), subject
to the cap specified in Sec. 1.2110(f)(2)(ii) of this chapter.
(c) Rural service provider bidding credit. A rural service
provider, as defined in Sec. 1.2110(f)(4) of this chapter, which has
not claimed a small business bidding credit may use a bidding credit of
15 percent as specified in Sec. 1.2110(f)(4)(i), subject to the cap
specified in Sec. 1.2110(f)(4)(ii) of this chapter.
[FR Doc. 2025-14725 Filed 8-1-25; 8:45 am]
BILLING CODE 6712-01-P
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