WASHINGTON-The Federal Communications Commission, in its role as banker, is providing guidance on the newly established rules for installment payments for spectrum licenses. The guidance explains the differences between the old and new rules that became effective March 16. Additionally, the FCC, in its regulatory function, has issued a “letter ruling” on foreign ownership caps on C-block licensee DigiPH Communications.
The FCC has allowed the following groups to pay off their bids for licenses in installment payments: auction bidders for the interactive video and data service, the regional narrowband personal communications services, 900 MHz specialized mobile radio service, the multipoint distribution service and the broadband PCS F-block; the broadband PCS A-block pioneers’ preference licensees; and the embattled PCS C-block. Following the C-block debacle, where many licensees were unable to make payments due to the lack of available financing, the FCC stopped the practice of installment payments.
Only 8 percent of the C-block licensees still are making installment payments. The other 92 percent either have turned back their licenses-these are scheduled to be re-auctioned in March-or have entered bankruptcy litigation.
The guidance explains the former rules for late payments and how that now has changed.
The old rules permitted a licensee to make a payment up to 90 days late without being assessed a late-payment charge and without being considered in default. If a licensee required additional time to pay, it could submit a formal request for a grace period for up to six months. The licensee would not be considered in default during a grace period, nor would the licensee be declared in default while the FCC’s Wireless Telecommunications Bureau evaluated the request.
In evaluating grace period requests, the Wireless Bureau would evaluate a licensee’s payment history and financial condition when the request was made, whether the licensee had met the buildout requirements and whether the licensees was hoping to sell the license.
The new rules automatically grant a 90-day grace period but assess a 5-percent late fee that was not previously assessed. An additional 90 days are granted but the late fee is increased to 10 percent. Licensees no longer are required to apply for the grace period request under the new rules. Those who applied for the grace period before March 16 will not be considered in default until the WTB issues decisions on the grace period requests, the FCC said in a footnote in its Public Notice released on Sept. 18.
Under the revised rules, a licensee must pay in one full payment before the expiration of the grace period: the missed installment payment, the late fee, and any lender advances the licensee may be obligated to pay-including filing fees and attorney fees for debt collection. Payments made will be applied in the following order of priorities: lender advances, late fees, interest payments and principal owed. Additionally, the new delinquency schedule could mean that two payments are due at the same time.
Any licensee that becomes more than 180 days delinquent on an installment payment shall be in default, and the license shall automatically cancel without further FCC action. The debt then is transferred to the Department of the Treasury for collection subject to the Debt Collection Improvement Act of 1996.
One day prior to issuing the guidance, the FCC sent a letter to DigiPH allowing them to restructure their financing arrangements to allow an investor to go above the foreign ownership limitations. The letter said the FCC was interpreting its existing rules to allow for the restructuring.
While some in the industry said that the letter ruling could be seen as a precedent, Amy J. Zoslov, chief of the auctions and industry analysis division of the WTB, said that the “facts would have to be so similar that they couldn’t be distinguished” for the letter to be used as a precedent. Otherwise, all requests similar to DigiPH would have to be evaluated individually.
