June 4, 1998

The Honorable William E. Kennard
Chairman
Federal Communications Commission
1919 M Street, N.W.
Washington, D.C. 20554

Dear Chairman Kennard:

Your letter of June 3, 1998 is wholly unresponsive to the issues raised in my letter of May 29, 1998. Moreover, your answers provided no additional clarity sufficient to allow the C-Block licensees to make an informed election on June 8.

One particular aspect of your letter stands out. It is disingenuous to suggest that, with respect to the attribution and control group matters, you "did not intend to indicate ... these issues are critical to making [a C-Block election]." The Committee leadership posed questions to you in a letter on March 25, 1998 regarding your plans to resolve these issues. You responded on March 30, 1998 saying it was your intent to have the ownership rules decided in May 1998 to insure "adoption of the rules well in advance of the election date and ... therefore allow C-Block licensees to make business decisions with full knowledge of the governing rules." This statement speaks for itself.

The simple fact that you are contemplating changes to ownership rules that may affect C- Block licensees in a subsequent reauction is highly relevant to the elections made by these businesses on June 8. Absent resolution of this issue by the election date, licensees must make decisions based on their best guess as to whether and how these ownership rules ultimately will be modified. The ownership issue is pertinent to each option available under the Commission's restructuring order: status quo, buy out, disaggregation, and amnesty.

Your response illustrates the Commission's serious and troubling failure to handle C- Block matters consistent with the policy objectives Congress enacted in Section 309(j) of the Communications Act. These objectives are to enhance competition and promote small business participation in wireless markets. Unfortunately, the Commission has acted in ways that specifically contravene those objectives:

• The Commission failed to complete the C-Block licensing process until a year after the auction ended. Despite this prolonged delay, no C-Block licensee defaulted on any payment obligation during this time period. The licensees fulfilled their end of the bargain. The Commission did not.

• While the Commission dawdled through the licensing process, the market for spectrum financing declined precipitously. In fact, a Federal bankruptcy court recently determined that in one case the loss in license value totaled 84%. The Commission's delay made it nearly impossible for C-Block businesses to finance their grossly devalued licenses. Incredibly, it appears the Commission has sought to blame the licensees rather than accept responsibility for its own failures.

It is inconceivable to me that the Commission's handling of this matter will result in any outcome other than to drive additional C-Block licensees to seek refuge in bankruptcy court. As I and other Members of this Committee informed you on March 25 of this year, "[p]iecemeal solutions in bankruptcy proceedings serve to undermine the statute and contravene important policy objectives." Following that path will generate a "quagmire of litigation" and "only serve to frustrate the will of Congress and be at odds with the Commission's public interest mandate." You would be well advised to choose another path quickly.

Sincerely,

JOHN D. DINGELL
RANKING MEMBER

cc: The Honorable Tom Bliley
The Honorable W.J. "Billy" Tauzin
The Honorable Edward J. Markey
Commissioner Susan Ness
Commissioner Harold Furchtgott-Roth
Commissioner Michael Powell
Commissioner Gloria Tristani

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