WASHINGTON-The Federal Communications Commission continues to mull the fate of the Phoenix license won by CH PCS Inc. during last month’s re-auction of 18 C-block personal communications services licenses; the bidder defaulted on the downpayment due July 24.
No decisions have been made concerning a re-re-auction of the property, when such action would take place, if the market would be offered to the next-highest bidder and what will happen to CH PCS next.
Under current auction rules, a defaulting bidder is eligible for penalties that could include bid-withdrawal fees plus 3 percent and payment of any make-up funds should the license sell for less than what was committed originally. CH PCS submitted upfront fees of $1.38 million, and its final net bid for Phoenix was $213.8 million.
CH PCS was a successful C-block bidder, winning seven markets in California, Arizona and Hawaii.
The FCC’s Wireless Telecommunications Bureau’s auction division denied an emergency request for a deadline waiver filed by the company Aug. 9. According to the document, investor Daewoo Corp. pulled its support of CH PCS the day before the re-auction concluded; the bidder contended that Daewoo’s action on such short notice made CH PCS’s dilemma different than that of another defaulter, BDPCS Inc., whose defaulted licenses were part of the C-block re-auction. In explaining its position, the commission cited an order issued at the time the A- and B-block PCS auctions were activated: that a “third party’s failure to perform its contractual obligation did not constitute a special circumstance justifying a waiver of the deadline date.”
The division also gave no credence to CH PCS’s assertion that it had acted responsibly by not placing any new auction bids once it learned Daewoo’s money would not be forthcoming. “Indeed, CH PCS failed to act responsibly by withdrawing its high bid from the Phoenix market once it knew that the company had insufficient funds to meet its downpayment obligation,” it wrote. Calls to CH PCS President Kenneth Hobbs and to Daewoo were not returned.
This incident has caused some question regarding stringent new PCS auction rules recently adopted for the upcoming D-, E-and F-block auctions scheduled to begin Aug. 26, in that no amount of rulemaking will preclude a default.
“We were operating under existing C-block rules at the time of the re-auction,” explained Kathleen O’Brien Ham, Auctions Division chief. “The rules only tightened up for the D-, E- and F-block auctions. You can’t draw any great conclusions from this. Small businesses fail all the time. You can’t do anything to stop it.”
