New Personal Communications Services

SUMMARY: By this Memorandum Opinion and Order (MO&O) the Commission

amends certain aspects of its rules governing broadband personal

communications services (PCS). The MO&O modifies these rules to

consolidate broadband PCS into the 1850-1990 MHz band from the 1850-

1970, 2130-2150, and 2180-2200 MHz bands originally allocated. This

action will result in lower costs for the broadband PCS industry and

lower prices for consumers. This action facilitates implementation of a

broad range of new wireless services and participation in the broadband

PCS industry by small businesses, rural telephone companies, and

businesses owned by women and minorities.

EFFECTIVE DATE: July 25, 1994, except that Secs. 15.311 and

24.204(f)(1), (2), (3)(i), and (3)(ii) are effective September 22,

1994.

FOR FURTHER INFORMATION CONTACT:

Robert Pepper or Donald Gips, Office of Plans and Policy, (202) 418-

2030.

SUPPLEMENTARY INFORMATION: This is a summary of the Commission's

Memorandum Opinion and Order, adopted June 9, 1994, and released June

13, 1994. The full text of this Commission decision is available for

inspection and copying during regular business hours in the FCC

Reference Center (Room 239), 1919 M Street NW., Washington, DC. The

complete text of this decision also may be purchased from the

Commission's duplication contractor, International Transcription

Service, Inc., (202) 857-3800, 2100 M Street, NW., Suite 140,

Washington, DC 20037. The following collection of information is being

submitted to the Office of Management and Budget for review under

Section 3504(h) of the Paperwork Reduction Act (44 U.S.C. 3504(h)).

Persons wishing to comment on this collection of information should

direct their comments to the Office of Information and Regulatory

Affairs, Office of Management and Budget, Attention: Desk Officer for

Federal Communications Commission. A copy of any comments filed with

the Office of Management and Budget should also be sent to the

following address at the Commission: Federal Communications Commission,

Office of Managing Director, Paperwork Reduction Project, Washington,

DC 20554. For further information contact Judy Boley, 632-7513.

OMB Number: None.

Title: Part 24, Amendment of the Commission's Rules to Establish

New Personal Communications Services (GEN Docket No. 90-314).

Respondents: Businesses or other for profit.

Estimated annual burden and frequency of response: Five hundred and

ninety-five 30 Mhz broadband PCS licensees will need to spend

approximately 7,000 hours total at the two construction benchmarks, and

1,972 10 MHz broadband PCS licensees will need to spend approximately

2,000 hours at a single construction benchmark to verify to the

Commission that the construction requirements have been met. Total

burden-hours on all licensees will therefore be approximately 9,000.

Needs and Uses: Information received by the Commission will be used

to verify that each broadband PCS licensee has met its construction

requirements. Without this information, such verification would be

impossible.

Summary of Memorandum Opinion and Order

Introduction and Executive Summary

1. By this action, the Commission amends certain aspects of its

rules governing broadband personal communications services (PCS). It

takes this action in response to 67 petitions for reconsideration or

clarification of the rules and policies adopted in the Second Report

and Order\1\ in this proceeding.

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\1\See Second Report and Order, GEN Docket No. 90-314, 58 FR

59174 (November 8, 1993).

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2. PCS encompasses a broad range of new radio communications

services that will free individuals from the limitations of the

wireline public switched telephone network and will enable individuals

to communicate when they are away from their home or office telephones.

Broadband PCS devices are likely to be portable and have their own

unique telephone numbers. A basic feature of PCS is expected to be the

ability to communicate person-to-person, rather than station-to-

station.

3. The Commission takes this action to foster rapid creation of a

competitive market to deliver these new mobile digital voice and data

services to the American public. Personal communications needs are

changing rapidly as our society becomes more mobile and people demand

rapid communications no matter where they are or what time it is. A

competitive market is the best way to introduce broadband PCS to help

meet these demands. The Commission expects that PCS will provide a

variety of mobile services competitive with existing cellular, paging

and other land mobile services as well as new services offering

communications capabilities not currently available. These services

will be provided on an entire family of new communications devices that

will include small, lightweight multi-function portable phones,

portable facsimile and other imaging devices, new types of multi-

channel cordless phones, and advanced paging devices with two-way data

capabilities. The Commission expects that these new services and

devices will affect the future development and configuration of all

telecommunications networks by significantly improving their

flexibility and increasing the number of functions they can perform.

4. The Commission is amending the broadband PCS spectrum allocation

and regulatory structure to better achieve what have been and continue

to be its four primary goals in this proceeding: competitive delivery,

a diverse array of services, rapid deployment, and wide-area coverage.

Furthermore, the PCS rules as modified will partner with the

Commission's competitive bidding procedures to meet Congressional

objectives that include promoting economic growth and competition,

enhancing widespread access to telecommunications service offerings,

and ensuring that PCS licenses are disseminated to a wide variety of

applicants.

5. The actions the Commission is taking are designed to enable PCS

providers to compete effectively with each other and with other

wireless providers so that the American public can enjoy the greatest

benefit from the delivery of these new services. To promote competitive

delivery, the Commission has modified its band plan to ensure there is

an opportunity for a sufficient number of competitors to offer PCS

services. Further, providers will have the flexibility to determine the

amount of spectrum needed for their particular service or services.

However, the Commission has also set limits on the total amount of

spectrum that can be acquired by new entrants and by incumbent cellular

providers. This ensures that there will be a significant number of

competitors in each area.

6. The Commission purposely adopted a broad definition of PCS to

encourage a variety of firms with their own visions of PCS to bid for

various combinations of licenses and to provide a diverse array of new

services. Firms will compete not only on price, but also on quality and

the types of new products and services they offer. The Commission has

allocated spectrum both in different sized blocks and in different

sized service areas because it wants to encourage businesses to be able

to acquire the spectrum and service areas that best suit their business

plans. This additional flexibility will result in a greater diversity

of products and services for consumers.

7. Rapid deployment is important so that consumers do not have to

wait for the benefits of the new services. To ensure rapid deployment,

the Commission has allocated two different sized spectrum blocks, which

can be aggregated to form other block sizes. It has also altered the

allocation of some of the PCS spectrum to reduce the cost of moving

microwave incumbents that must be relocated. Both of these decisions

will allow more rapid introduction of service because of the reduced

costs of microwave relocation.

8. The revised bank plan also will reduce the cost of service and

equipment to consumers. In addition, the Commission has increased the

power level available for PCS service. Together with the decisions to

license some Basic Trading Areas (BTAs) and 10 MHz blocks, these

changes will make PCS service more viable in rural areas, help ensure

wide-area coverage and increase access for all Americans.

9. Many of the actions taken are directed toward ensuring that a

wide variety of applicants have an opportunity to acquire PCS licenses.

In addition to providing for different and spectrum blocks and

geographic areas, the Commission is modifying its ownership rules to

encourage participation in PCS by rural telephone companies, small

businesses and businesses owned by minorities and women.

10. The most significant of the changes involves modification of

the band plan that was adopted in the Second Report and Order. In that

Order, the Commission allocated 120 MHz of spectrum to PCS, some of

which was in the lower portion of the 2 GHz band allocated for emerging

technologies and some of which was in the upper portion of that band.

Under the revised plan, all of the 120 MHz of spectrum allocated to PCS

is located in the lower band. The previous band plan would have

required those who wished to operate in both the upper and lower bands

to utilize more expensive dual mode handsets capable of operating on

both bands. Providing PCS licenses in only the 1850-1990 MHz band will

lower costs to consumers by permitting use of a single-band handset.

Reducing the costs of equipment to customers should also increase

consumer demand and strengthen the economic viability of the PCS

providers. Placing all the licensed and unlicensed spectrum in a single

contiguous band also will decrease the cost of handsets that can

operate in both licensed and unlicensed blocks. In addition, these

changes will preserve spectrum in the upper band that is allocated

internationally for the emerging Mobile Satellite Services (MSS)

industry to provide worldwide service. Taken together, these changes

will increase the competitiveness of PCS service providers in urban,

suburban, and rural areas which should lower prices and stimulate

demand, thereby increasing investment and economic growth. Lower prices

will also enhance consumer access to PCS services.

11. Having all blocks in a single contiguous band also will

increase the value of the 10 MHz blocks. These blocks would have been

less desirable in the upper band because upper band equipment is

expected to be available from manufacturers twelve or more months after

lower bank equipment. In addition, the upper band contains a higher

concentration of microwave facilities that would have had to share

spectrum with broadband PCS licensees or be relocated from the

broadband PCS spectrum to avoid interference. This action avoids the

expense and potential delay associated with relocating the numerous

microwave links currently operating in the upper band. The change made

to the band plan also makes it more feasible to aggregate a 10 MHz

block with a 30 MHz block for a total of 40 MHz. Taken together, these

factors will reduce the time and the cost of PCS providers offering

their services to the American public. The overall allocation of 120

MHz for broadband PCS remains unchanged.

12. In the Second Report and Order, the Commission divided 120 MHz

of spectrum into seven blocks: two 30 MHz blocks, one 20 MHz block, and

four 10 MHz blocks. In this Order, the Commission is amending its band

plan to provide six blocks: three 30 MHz blocks and three 10 MHz

blocks. The Commission changed the 20 MHz block to a 30 MHz block and

eliminated one 10 MHz block primarily because it was persuaded that a

single 20 MHz block would not provide enough spectrum to support a

viable competitor to the 30 MHz PCS MTA licensees, or to the two

existing cellular licensees currently serving most areas. As a primary

goal of the proceeding was to promote competitive delivery of PCS

services, the Commission believes that it is essential to make

available an additional 30 MHz block. The Commission anticipates that

the three 10 MHz blocks will be used in a variety of ways that may

include ``niche services'' and other functions, or as an enhancement

for PCS or cellular providers that choose to purchase a 10 MHz block to

complement a 30 MHz or 25 MHz block, respectively. Thus, the revised

band plan provides for an additional competitor to cellular service and

to the other PCS providers, while also providing three 10 MHz blocks

for multiple uses.

13. In addition to modifying the band plan, the Commission also

makes significant amendments to the rules relating to participation in

PCS by holders of cellular interests. In the Second Report and Order,

the Commission recognized that unfettered participation in PCS by

cellular operators could lessen the potential competition that could

develop between PCS and cellular systems. At the same time, it

recognized that cellular licensees could foster rapid development of

PCS for a variety of reasons, including their expertise with commercial

mobile radio services. Promoting competition and providing for rapid

deployment of PCS are both among the objectives that Congress

instructed the Commission to promote in Section 309(j) of the

Communications Act, as amended by the Reconciliation Act. The

Commission has balanced those competing interests by allowing entities

with a 20 or more percent investment interest in a cellular license to

acquire a 10 MHz PCS license in the same area. The Commission adheres

to that decision. However, it has decided that as of January 1, 2000,

it will afford cellular operators the same overall 40 MHz spectrum cap

as other PCS operators, and allow them to acquire an additional 5 MHz

for a total of 15 MHz of PCS spectrum in the same service areas as

their cellular interests. Each cellular operator currently holds 25 MHz

of spectrum.

14. In Section 309(j), Congress also directed the Commission to

promote economic opportunity by disseminating licenses to a wide

variety of applicants, including small businesses, rural telephone

companies, and businesses owned by members of minority groups and women

(``designated entities''). The Commission is modifying its PCS cellular

eligibility rules to promote that goal as well. Specifically, it is

relaxing its cellular ownership attribution rules to allow designated

entities with up to a 40 percent non-controlling interest in a cellular

license to obtain a PCS license in the same area. One effect of this

change will be to allow some rural telephone companies with non-

controlling cellular interests, to provide PCS service in areas that

might otherwise not be served in a timely manner.

15. The Commission also is relaxing its cellular attribution rules

to allow any entity with up to a 40 percent non-controlling ownership

interest in a cellular license covering 10 percent or more of the

population in a PCS service area to also attain a non-controlling

investment interest in a PCS license held by a business owned by

minorities or women. While there is some risk that relaxing the

cellular eligibility rule will limit the vigor of competition in some

markets, the Commission thinks that risk is sufficiently limited where

the party holding interests in two licenses holds a minority interest

in the cellular license and the PCS license is controlled by another

entity. The Commission has concluded that it should take that risk in

order to advance the goal of promoting economic opportunity for these

groups.

16. The Commission's cellular eligibility rules balance the goals

that Congress has established--promoting competition, ensuring rapid

deployment of PCS, and providing economic opportunity for designated

entities. It has decided that limited participation by cellular

providers will serve the public interest by promoting rapid deployment

of PCS, participation by designated entities, and overall competition.

17. The Commission has made a number of minor modifications to its

rules. With these changes, it intends to proceed expeditiously toward

licensing providers of broadband personal communications services. The

following is a summary of all of the specific actions taken to promote

the goals outlined above:

a. Adopting a band plan that provides for three 30 MHz licenses

(Blocks A, B, and C) and three 10 MHz licenses (Blocks D, E, and F),

all of which are within the 1850-1990 MHz band;

b. Providing that the A and B Blocks be licensed within 51 service

areas based on the Major Trading Areas (MTAs) and that the C, D, E, and

F Blocks be licensed within 493 smaller service areas based on the

Basic Trading Areas (BTAs) set forth in the Rand McNally Commercial

Atlas & Marketing Guide (123rd ed. 1992);\2\

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\2\The current rules provide 492 service areas based upon BTAs.

In response to a request the Commission is dividing the Puerto Rico

service area into two areas.

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c. Maintaining the allocation of spectrum at 1910-1930 MHz for

unlicensed PCS devices, and committing to initiate a proceeding in the

near future to examine allocation of additional spectrum for unlicensed

PCS operations. Within this band, the Commission has adopted a 1.25 MHz

channelization scheme for isochronous (voice) devices and eliminated

channelization requirements for asynchronous (data) devices;

d. Continuing to permit all eligible entities to acquire broadband

PCS spectrum up to a cap of 40 MHz;

e. Retaining the five percent equity attribution threshold for PCS

licenses so that the same entity may not own more than five percent of

PCS licenses constituting more than 40 MHz within the same area;

f. Retaining the cellular attribution threshold of 20 percent

equity ownership of a cellular licensee and the service area overlap

test of 10 percent of the population of the relevant PCS market, so

that the same entity generally may not own more than 20 percent of the

cellular license and more than 5 percent of PCS license(s) that would

place the entity above the spectrum limit in an overlapping service

area;

g. Relaxing the eligibility rules to permit entities with

attributable interests in cellular companies whose combined cellular

geographic service areas overlap between 10 and 20 percent of the PCS

service area population to submit bids for more than 10 MHz of PCS

spectrum provided that, prior to the auction, they commit to divest

themselves of sufficient cellular interests to come into compliance

with the eligibility rules within 90 days of license grant;

h. Providing that voting stock, general partnership interests,

interlocking directorates and certain other controlling interests and

relationships will be considered in determining attributable interests

under the spectrum caps;

i. Raising from a 20 percent to a 40 percent non-controlling

interest the threshold for determining attributable cellular equity

ownership for rural telephone companies, small businesses and

businesses owned by minorities and women that are collectively termed

``designated entities'' under 47 U.S.C. 309(j);

j. Increasing from a 20 percent to a 40 percent non-controlling

interest the threshold for determining attributable cellular equity

ownership to allow non-designated entities to make non-controlling

investments in PCS licenses owned and controlled by minority- and

women-owned businesses;

k. Permitting entities with attributable cellular interests

covering 10 or more percent of the population in a PCS service area to

acquire 10 MHz of PCS spectrum within the PCS service area and, after

January 1, 2000, to acquire an additional 5 MHz for a total of 15 MHz

of PCS spectrum in their cellular service areas;

l. Relaxing construction requirements to provide that (a) 30 MHz

broadband PCS licensees must provide coverage to one-third of their

service area population within five years of initial licensing and two-

thirds within ten years and (b) 10 MHz licensees must provide coverage

to twenty five percent of their service area population within five

years of initial licensing or, submit a showing of equivalent or

substantial service;

m. Increasing the maximum power level permitted for broadband PCS

base stations to 1640 watts equivalent isotropically radiated power

(e.i.r.p.), which is equivalent to 1000 watts effective radiated power

(e.r.p.);

n. Retaining with minor amendment rules ensuring compliance with

minimum standards for exposure to radio frequency (RF) energy emitted

by PCS devices;

o. Committing to initiate a proceeding in the near future to

allocate additional spectrum for mobile satellite services (MSS) and to

work toward having additional spectrum allocated to MSS at the World

Radio Conference to be held in 1995 (WRC-95); and

p. Pledging to examine management contracts and spectrum leases in

the CMRS docket for the purpose of determining whether other interests

in PCS licenses should be limited in order to foster vigorous

competition.

18. The Commission began its investigation of broadband PCS in

1989.\3\ Since then the Commission has addressed broadband PCS in this

docket by issuing a Notice of Inquiry, holding an En Banc meeting, and

adopting a Policy Statement and Order, a Notice of Proposed Rule Making

and Tentative Decision, and a Second Report and Order;\4\ and held a

Public Forum on broadband PCS.\5\ It has also allocated 220 MHz of

spectrum between 1850 and 2200 MHz for emerging technologies that

include PCS;\6\ provided for band sharing or negotiated relocation of

microwave facilities occupying 2 GHz PCS spectrum;\7\ provided spectrum

to accommodate the existing 2 GHz facilities that relocated;\8\ and

adopted technical, licensing and auction rules for narrowband PCS.\9\

It also considered 50 pioneer's preference requests related to

broadband PCS.\10\ Finally, the Commission made recommendations and

participated in an international allocation conference at which

decisions were made that recognize and permit use of 2 GHz spectrum for

PCS.\11\ Numerous telecommunications companies and associations have

actively participated in the PCS proceedings, and over 100 companies

have applied for and received more than 220 experimental licenses to

develop and test PCS services and technologies.

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\3\Petitions for Rule Making requesting establishment of PCS

were filed by Cellular 21, Inc., in September 1989, RM-7140; and PCN

America, Inc. (PCN America), in November 1989, RM-7175.

Subsequently, in February 1991, Apple, RM-7618, proposed that 40 MHz

from the 1850-1990 MHz band be allocated for unlicensed high-speed

local-area data communications services connecting personal

computers.

\4\See GEN Docket No. 90-314; Notice of Inquiry, 5 FCC Rcd 3995

(1990); Policy Statement and Order, 56 FR 56937 (November 7, 1991);

Notice of Proposed Rule Making and Tentative Decision, 57 FR 11458

(April 3, 1992); and Second Report and Order, 58 FR 59174 (November

8, 1993).

\5\See FCC, Transcripts of PCS Public Forum, April 11-12, 1994

(Transcripts of the PCS Public Forum). The transcripts are available

for public viewing at both the FCC Reference Center and the Library,

1919 M Street, NW., Washington, DC. The transcripts also may be

purchased from the Commission's duplication contractor.

\6\See First Report and Order and Third Notice of Proposed Rule

Making, ET Docket No. 92-9, 57 FR 49020 (October 29, 1992).

\7\See ET Docket No. 92-9; First Report and Order and Third

Notice of Proposed Rule Making, 57 FR 49020 (October 29, 1992);

Second Report and Order, 58 FR 49220 (September 22, 1993); Third

Report and Order and Memorandum Opinion and Order, 58 FR 46547

(September 2, 1993); Memorandum Opinion and Order, 59 FR 19642

(April 25, 1994), petition for further recon. pending.

\8\See Second Report and Order, ET Docket No. 92-9, 58 FR 49220

(September 22, 1993).

\9\See First Report and Order, GEN Docket No. 90-314 and ET

Docket No. 92-100, 58 FR 42681 (August 11, 1993) (initial narrowband

rules); Memorandum Opinion and Order, GEN Docket No. 90-314 and ET

Docket No. 92-100, 59 FR 14115 (March 25, 1994) (adopting certain

narrowband PCS rule amendments on reconsideration); Third Report and

Order, PP Docket No. 93-253, FCC 93-98, released May 10, 1994

(design of narrowband auctions).

\10\See Third Report and Order, GEN Docket No. 90-314, 59 FR

9419 (February 28, 1994), recon. pending, appeal pending sub nom.

Pacific Bell v. FCC, No. 94-1148 (D.C. Cir., filed March 1, 1994).

The Commission intends to address shortly the petitions for

reconsideration of its pioneer's preference decisions.

\11\A worldwide allocation for PCS was discussed at the 1992

International Telecommunication Union (ITU) World Administrative

Radio Conference (WARC-92) in Torremolinos, Spain. The conference

decided to maintain primary fixed and mobile allocations at 2 GHz in

Region II (which includes the United States), and to make additional

primary mobile-satellite service allocations in the 1930-2010 and

2120-2200 MHz bands. It added a footnote stating that future public

land mobile telecommunications systems, similar in concept to PCS,

are expected to use the 1885-2025 MHz and 2110-2200 MHz bands on a

worldwide basis. See Report, GEN Docket No. 89-554, 56 FR 31095

(July 9, 1991); ITU, Final Acts of the World Administrative Radio

Conference for Dealing with Frequency Allocations in Certain Parts

of the Spectrum (Malaga-Torremolinos, 1992).

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19. On August 10, 1993, the President signed the Omnibus Budget

Reconciliation Act of 1993 (Reconciliation Act),\12\ which amended

Sections 3(n), 309(j) and 332 of the Communications Act of 1934, as

amended (Communications Act). Section 309(j) for the first time

authorized the Commission to select licensees by competitive bidding

and establishes objectives for the bidding process, including rapid

deployment of new technologies, promotion of economic opportunity,

competition and public access, wide dissemination of licenses, and

efficient use of the spectrum. The Reconciliation Act also amended

Sections 3(n) and 332 to provide that PCS is a mobile service and to

establish a new framework for regulatory treatment of mobile services.

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\12\Omnibus Budget Reconciliation Act of 1993, Pub. L. No. 103-

66, Title VI, Secs. 6002(b)(2) (A), (B), 107 Stat. 312, 392 (1993).

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20. On September 23, 1993, shortly after the Reconciliation Act was

enacted, the Commission adopted the Second Report and Order

establishing regulations and policies for broadband PCS that are under

review here. In the Second Report and Order, the Commission enumerated

goals of competitive delivery, diversity of services, speed of

deployment, and wide-area service. The Commission took a number of

actions to help meet these goals.

Specifically, the Commission:

a. Defined PCS as ``radio communications that encompass mobile and

ancillary fixed communication that provide services to individuals and

businesses and can be integrated with a variety of competing

networks'';

b. Allocated spectrum at 2 GHz for PCS, including 120 MHz of

spectrum for licensed broadband PCS and 40 MHz for unlicensed PCS

devices;

c. Provided for two 30 MHz licenses and one 20 MHz license in the

``lower'' band of the emerging technologies spectrum, and four 10 MHz

licenses in the ``upper'' band, in each geographic area;

d. Provided that the two 30 MHz licenses would be authorized within

51 service areas based on the Rand McNally Major Trading Areas (MTAs)

and that the 20 MHz and 10 MHz licenses would be authorized within 492

service areas based on the Rand McNally Basic Trading Areas (BTAs);

e. Established eligibility requirements that limit entities with

certain cellular interests to 10 MHz of PCS spectrum where there is

significant overlap between a PCS service area and the cellular service

area (i.e., 10 percent or more of the PCS service area population);

f. Limited broadband PCS licensees to 40 MHz of spectrum, and

established certain licensing and renewal mechanisms;

g. Established a maximum power level of 100 watts e.i.r.p. for PCS

base stations, and adopted technical specifications to avoid harmful

interference to other operations while leaving maximum technical

flexibility to permit development of new technologies;

h. Adopted rules to minimize radio frequency (RF) exposure risk;

and

i. Noted an intent to continue participating in international

efforts to provide standards and consistent spectrum allocations for

international deployment of worldwide terrestrial mobile and global

satellite services.

21. In related proceedings, the Commission provided a transition

plan to govern PCS licensees sharing their authorized spectrum with

existing 2 GHz fixed microwave facilities or relocating those

facilities to other spectrum;\13\ determined that broadband PCS

presumptively will be classified as a commercial mobile radio service

(CMRS) under Section 332 of the Communications Act as amended by the

Reconciliation Act;\14\ and found that broadband PCS is within the

Commission's competitive bidding authority, when it adopted generic

competitive bidding rules and procedures.\15\ With regard to

competitive bidding for broadband PCS licenses, the Commission proposed

to set aside two blocks of spectrum--the 20 MHz block (Block C) and a

10 MHz block (Block D)--that would be reserved for bidding purposes to

``designated entities'', (small businesses, rural telephone companies

and businesses owned by members of minority groups and women), and

proposed other measures to ensure economic opportunity for designated

entities.\16\ These proposals remain pending. The proposed set-aside

and other outstanding issues concerning broadband PCS auctions will be

decided in a forthcoming Order (in PP Docket No. 93-253) addressing

competitive bidding rules.

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\13\See First Report and Order and Third Notice of Proposed Rule

Making, ET Docket No. 92-9, 57 FR 49020 (October 29, 1992).

\14\See Second Report and Order, GN Docket No. 93-252, 59 FR

18493 (April 19, 1994) (CMRS Second Report and Order), recon.

pending.

\15\See Second Report and Order, PP Docket No. 93-253, FCC 94-

61, released April 20, 1994.

\16\See PP Docket No. 93-253; Notice of Proposed Rule Making, 58

FR 53489 (October 15, 1993); Second Report and Order, FCC 94-61,

released April 20, 1994.

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22. In response to the Second Report and Order, 67 parties filed

petitions requesting reconsideration or clarification. Of the 67

petitions, 58 primarily addressed issues relating to licensed PCS

services and 9 primarily addressed issues relating to unlicensed PCS

operations. The petitioners collectively request reconsideration of the

spectrum allocation and frequency block plan, eligibility and

attribution matters, construction requirements, technical standards,

microwave interference criteria, power limits, radio frequency (RF)

hazard requirements, and matters related to unlicensed PCS devices. The

Commission received comments addressing the petitions for

reconsideration from 44 parties and replies from 54 parties.

23. On March 17, 1994, the Commission established an intra-agency

task force to coordinate the reconsideration of PCS policies and rules.

On April 11 and 12, 1994, the task force conducted a series of public

panel discussions on PCS issues. The panelists included potential PCS

service providers, technical experts, members of the financial

community, economists and representatives of designated entities. The

presentations of the panelists and transcripts of the panel discussions

were placed in the record of this proceeding, and 30 interested parties

filed statements in the record responding to the panel discussions.

Spectrum Issues and Service Areas

24. Allocation, Block Plan, and Service Areas. In the Second Report

and Order, the Commission allocated 120 MHz for licensed PCS and 40 MHz

for unlicensed PCS from the 220 MHz of emerging technologies spectrum.

Specifically, (lower band) 1850-1890 MHz and 1930-1970 MHz, and the

(upper band 2130-2150 MHz and 2180-2200 MHz, were allocated for

licensed PCS; and the 1890-1930 MHz band was allocated for unlicensed

PCS devices. In addition, 60 MHz remained in reserve for future

allocations to emerging technologies such as MSS or other applications.

The frequency plan for licensed PCS included two 30 MHz frequency

blocks, one 20 MHz block, and four 10 MHz blocks. Service areas were

defined based on Rand McNally's ``Major Trading Areas'' (MTAs) and

``Basic Trading Areas'' (BTAs). The two 30 MHz blocks were in the lower

band and licensed on an MTA basis; the 20 MHz block also was in the

lower band, but licensed on a BTA basis; and the four 10 MHz blocks

were in the upper band and licensed on a BTA basis.

25. Twenty-eight parties argued for reconsideration of various

aspects of the allocation and frequency block plan adopted in the

Second Report and Order. In general, the petitioners address: (1)

alternatives for the PCS frequency block plan, including the number of

PCS providers, PCS service areas, and issues relating to the

aggregation or subdivision of PCS spectrum; (2) whether spectrum should

be designated for private PCS use; and (3) the impact of the PCS

allocation on the international allocations for mobile satellite

service (MSS).

26. In response to these filings, the Commission is revising the

band plan to move the 10 MHz blocks from the upper band to the lower

band, increase the size of 20 MHz block to 30 MHz, and reduce the

number of 10 MHz blocks from four to three. The revised band plan is

depicted in Appendix D, ``Broadband PCS Band Plan,'' and detailed in

the following table.

----------------------------------------------------------------------------------------------------------------

Frequency block Amount of spectrum Geographic scope Frequency range

----------------------------------------------------------------------------------------------------------------

A....................... 30 MHz................. MTA.................... 1850-1865/1930-1945 MHz

B....................... 30 MHz................. MTA.................... 1870-1885/1950-1965 MHz

C....................... 30 MHz................. BTA.................... 1895-1910/1975-1990 MHz

D....................... 10 MHz................. BTA.................... 1865-1870/1945-1950 MHz

E....................... 10 MHz................. BTA.................... 1885-1890/1965-1970 MHz

F....................... 10 MHz................. BTA.................... 1890-1895/1970-1975 MHz

Unlicensed.............. 20 MHz................. Nationwide............. 1910-1930 MHz

----------------------------------------------------------------------------------------------------------------

27. This plan provides for three large blocks and three small ones.

This will allow potential licensees to aggregate varying amounts of

spectrum in different geographic areas depending on their individual

business plans. The three large 30 MHz blocks ensure that these

licensees have sufficient spectrum to begin service rapidly. The three

small 10 MHz licenses will allow the provision of services that might

not require a full 30 MHz, or for aggregation with a 30 MHz PCS license

or an existing cellular license. As noted above, moving the 10 MHz

blocks from the upper band to the lower band provides a number of

important procompetitive benefits: consumer equipment costs will be

significantly lower, costs of relocating incumbent fixed microwave

links will be significantly reduced for new PCS entrants, the ability

to aggregate spectrum will be increased, and valuable spectrum will be

preserved that can be used to provide mobile satellite service on a

worldwide basis. This revised plan reduces the amount of spectrum for

unlicensed devices, but will increase the ability of new consumer

equipment to work on both a licensed and unlicensed basis, increasing

the utility of the devices for consumers. The improvement in this band

plan will increase competition, lower equipment costs and provide other

benefits. As a result, consumers will receive lower-cost and higher-

quality service.

28. The Commission initially authorized 10 MHz blocks in the upper

PCS band. Many parties, however, argue that the upper band blocks would

be of little value in the near term because equipment would not be

developed for this spectrum for a year or more. In addition, handsets

that can bridge the upper and lower bands are predicted to cost about

25 percent more and to be bulkier than handsets operating only on the

lower frequencies. In addition, dual mode handsets would be heavier and

have shorter battery life. Several parties argued that dual band

handsets were essential to the success of upper band service because

PCS operators would be likely to aggregate upper and lower band

spectrum and consumers would want to be able to receive service on both

bands, both to permit roaming across geographic areas and to facilitate

changing service providers. These parties contended that the higher

costs, delay, and other limitations associated with the upper band

presented serious impediments to achieving the goals of fostering a

competitive market, rapid deployment, opportunities for designated

entities, and fostering a wide diversity of services. Upon

reconsideration, the Commission concludes that MSS and PCS services can

both be accommodated by using only lower band spectrum for licensed and

unlicensed PCS services.

29. Moving licensed PCS from the upper band to the lower band

provides a number of procompetitive benefits. First, the cost of

interoperability between licensed and unlicensed PCS will be reduced.

As noted above, equipment costs to consumers are predicted to be

reduced by 25 percent. Moreover, under the revised plan, manufacturers

will concentrate on a single band with uniform frequency spacing, which

should result in greater economies of scale in manufacturing that

reduce consumer equipment prices. This additional cost for

interoperability between bands was not evident to the Commission when

it made its earlier decision. Increased interoperability has the

additional benefit of reducing lock-in costs for consumers, giving them

greater ability to switch providers, and thereby resulting in a more

competitive market. Because of the less expensive handsets and the

ability to combine adjacent blocks, aggregation is much more desirable.

This will benefit all new providers, including designated entities,

because they will be able to reduce costs and compete more effectively.

Furthermore, there appear to be a number of different potential uses

for the 10 MHz blocks: innovative niche services that are unlikely to

be provided initially on the 30 MHz blocks, aggregation with the 30 MHz

blocks, aggregation with other 10 MHz blocks, service extensions for

incumbent cellular providers, and opportunities for designated entities

to provide service with lower capital cost. Moving the 10 MHz blocks

from the upper band to the lower band will enhance the value of some,

if not all, of these uses and allow licensees to decide the most

valuable use for the spectrum.

30. Second, the cost and time required to relocate incumbent fixed

microwave links should be significantly less in the lower band because

the number of microwave links in the upper band is higher than the

number in the lower band. While the bandwidth used by the upper band

microwave incumbents is much less, making it easier to find some clear

spectrum immediately, the ultimate requirement to clear the spectrum

would result in significantly higher costs for PCS licensees.

31. Third, equipment should be available for the lower band at an

earlier date. Manufacturers have spent significant time and resources

developing lower band equipment but the record indicates that they have

not done much work on developing equipment for the upper band. As a

result, some parties assert that the availability of upper band

equipment trails the availability of lower band equipment by about one

year. Time to market is a critical factor in the rollout of PCS

services that will compete against existing cellular and enhanced

specialized mobile radio (ESMR) entities. Thus, earlier equipment

availability is a significant factor in developing a competitive PCS

service.

32. Fourth, many cellular companies have expressed a desire to

operate PCS systems both outside and inside their current cellular

service areas. By moving the PCS spectrum to the lower band, PCS and

cellular providers will have the ability to provide service over a

large geographic area even though they desire (or are required) to have

different amounts of PCS spectrum in different areas. This capability

could lower costs to the benefit of consumers because cellular

companies will be able to compete using PCS spectrum inside and outside

of their service areas.

33. Finally, moving all the PCS spectrum to the lower band will

better meet the needs of the emerging MSS industry. The Commission

believes that this action will increase the value of the unlicensed

spectrum because interoperability with licensed PCS will increase.

34. Accordingly, the Commission finds that moving all of the PCS

spectrum to the lower band will increase competition, reduce both

consumer equipment and system costs, and increase equipment

functionality. This new band plan has significant industry support, as

evidenced by numerous recent filings submitted in the record by a

variety of interests supporting the proposal to move all of the PCS

spectrum to the lower band.

35. In developing the original plan, the Commission concluded that

10 MHz blocks could support viable and competitive PCS services through

the use of advanced digital techniques, such as Code Division Multiple

Access (CDMA) and Time Division Multiple Access (TDMA), and

microcellular technology. It also stated that some types of PCS

operations would require more than 10 MHz of spectrum. In addition, the

Commission recognized that initially PCS is required to share spectrum

with fixed microwave operations and therefore the full amount of

spectrum will not be available initially in many locations. The

Commission also stated that some types of PCS operations would require

more than 10 MHz of spectrum. In addition, the Commission recognized

that initially PCS is required to share spectrum with fixed microwave

operations and therefore the full amount of spectrum will not be

available initially in many locations. The Commission concluded that 20

and 30 MHz frequency blocks were needed to support the rapid

development and implementation of the fullest range of PCS services and

also permitted most licensees to aggregate up to 40 MHz of broadband

PCS spectrum in each service area, except that cellular licensees were

limited to 10 MHz where their cellular geographic service area (CGSA)

overlapped with the PCS service area. For these reasons, the Commission

concluded that the combination of 10, 20, and 30 MHz licenses would

allow users to acquire the amount of spectrum appropriate for their

applications.

36. In the Second Report and Order, the Commission allocated two 30

MHz blocks, one 20 MHz block and four 10 MHz blocks. Its intent was to

encourage participation of as many viable new PCS entrants as possible

while maintaining sufficient spectrum to ensure the viability of both

MSS and unlicensed devices. Based on the reasoning presented below, and

on information provided by the petitioners and other responding

parties, including presentations made by industry experts as its panel

discussions, the Commission finds that its goals will be better served

by two modifications to the band plan: (a) An increase in the size of

the 20 MHz block to 30 MHz; and (b) a reduction in the number of 10 MHz

blocks from four to three. Overall, the total amount of spectrum

allocated for licensed PCS remains unchanged.

37. One of the goals in this proceeding is to stimulate competition

in the wireless and wireline industries, thus reducing costs and

improving quality for consumers. In so doing, the Commission must

balance two objectives. First, the Commission wants to maximize the

number of opportunities for new viable competitors to emerge. It also

wants to allow market forces to guide how many competitors survive. The

Commission has endeavored to provide as many opportunities as possible

to aggregate blocks into viable service offerings to ensure that

several strong competitors emerge to provide service. Its desire to

maximize competition must be tempered, however, because (1) spectrum is

limited and (2) for new entrants to be viable sufficient spectrum must

be provided to begin service quickly with reasonable upfront capital

costs. The Commission believes that the combination of microwave

incumbents occupying part of this spectrum and economies of scale lead

to the conclusion that the set of three 30 MHz blocks will support the

rapid introduction of competitive PCS services whereas 20 MHz blocks

could lead to PCS service start-up delays or a reduction in the number

of viable competitors.

38. The Commission believes that its new band plan is superior to

uniform 20 MHz blocks, as advocated by several petitioners. The

combination of three 30 MHz blocks and three 10 MHz blocks allows the

aggregation of a variety of license sizes that could not occur with

uniform 20 MHz blocks.\17\ As a result, the Commission finds that the

allocation of six 20 MHz blocks would not provide as many benefits as

either the allocation adopted in the Second Report and Order on the

modified plan it adopts in this order and it might lead to fewer new

service providers with sufficient spectrum to provide service quickly.

It also rejects the plan of twelve 10 MHz blocks, because such an

arrangement might seriously delay the implementation of PCS, since the

process of aggregating so many spectrum blocks could be time consuming

and costly. It also could dramatically increase complexity and

transaction costs at and after the auction. Finally, the Commission

believes that dividing the spectrum into 40 MHz blocks would be

inefficient for many applications and would foreclose innovative niche

services.

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\17\It also believes that fewer new viable PCS competitors might

emerge under the six blocks of 20 MHz plan, given a spectrum

aggregation limit of 40 MHz and the head start of cellular

incumbents.

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39. The record indicates significant concern that a 20 MHz block

may not provide sufficient spectrum to enable a PCS provider to compete

effectively with other PCS licensees operating on 30 MHz spectrum

blocks or with other commercial mobile radio service providers. Some

parties argue that 20 MHz will provide sufficient capacity in the long

run, while others feel that with only 20 MHz, there could be a

significantly larger portion of each service area where the licensee

has no usable spectrum due to the presence of microwave incumbents. The

presence of fixed microwave links requires that, on the average, a

licensee with 20 MHz initially will have to relocate more microwave

links than a 30 MHz license before PCS service can begin, which could

significantly delay the commencement of service and increase the

upfront cost of initiating service. In addition, certain parties state

that the ability of a microwave incumbent to delay or extract a premium

for relocating its link because its microwave path fully blocks service

diminishes significantly with a 30 MHz spectrum block. While incumbent

microwave links are 20 MHz wide, the Commission feels that the

advantages of being able to work around specific links with a 30 MHz

block outweigh the additional transaction costs which result from not

matching the incumbent fixed microwave assignments identically.

40. Other parties support the notion that a 30 MHz block will help

new PCS entrants compete more effectively with existing wireless and

wireline providers. The Commission also believes that limiting one

licensee to 20 MHz could be a disadvantage for future competition. The

ability to provide a complete package of mobile voice and data services

could become a significant competitive advantage in the future. Such a

package of wireless services, however, may require more than 20 MHz of

spectrum. Other services may require less spectrum and are better

suited to the 10 MHz blocks.

41. Due in large part to these concerns, the investment community

has stated that financing would be much more difficult to obtain for

the licensees on the 20 MHz block than on the other blocks. These

handicaps are of particular concern to us because the 20 MHz block was

proposed to be reserved for designated entities.\18\ The competitive

handicaps of a 20 MHz block relative to 30 MHz blocks would not have

served the goal of providing a viable competitive opportunity for

designated entities.

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\18\In the Notice of Proposed Rule Making in the competitive

bidding proceeding, PP Docket No. 93-253, the Commission indicated

that it would consider setting aside Blocks C and D for small

businesses, rural telephone companies, and businesses owned by

minorities or women. Reconciliation Act Sec. 6002(a), 107 Stat. at

389. See H.R. Rep. No. 103-213, 103d Cong., 1st Sess. at 482-484

(1993) (Conference Report); H.R. Rep. No. 103-111, 103d Cong., 1st

Sess. at 255 (1993).

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42. Increasing the third license from a 20 MHz block to a 30 MHz

block appears to eliminate any competitive disadvantages stemming from

the band plan. The A, B and C blocks each will have a roughly

equivalent portion of its service area completely blocked by incumbent

microwave users in any geographic area. As a result, the costs and

delay due to incumbent relocation should be similar on each of the

blocks. This change should also reduce the difficulty faced by the C

block licensee in obtaining financing. The Commission concludes,

therefore, that three equal sized 30 MHz blocks will facilitate

competition and the rapid development and implementation of the fullest

range of PCS services and ensure that PCS is more fully competitive

with other mobile radio services. Accordingly, the Commission is

changing the single 20 MHz license to a 30 MHz license. Providing a

combination of 30 MHz and 10 licenses MHz provides the benefits of 40

MHz licenses, without restricting the options of firms nor affecting

competition.

43. Consistent with its decision to formulate a flexible definition

of PCS, the Commission allocated four 10 MHz blocks in the Second

Report and Order that could serve a variety of needs. The Commission

continues to believe that 10 MHz blocks, both on their own and in

combination with the 30 MHz blocks or with each other, are useful to

support a variety of PCS services. Throughout this proceeding, several

parties have indicated that 10 MHz blocks would be suitable for

providing services ranging from specialized or ``niche'' applications

to services comparable to those now provided by cellular systems. In

addition, the 10 MHz blocks will be beneficial both for cellular

licensees, who have limited eligibility for PCS participation in

region, and possibly also for augmenting SMR. Finally, commenters

discussed the desire to aggregate the 10 MHz blocks with the larger

blocks in order to increase capacity for PCS services in heavy demand

areas.

44. For these reasons, the Commission believes that public interest

is best served by continuing the allocation of licenses on 10 MHz

channel blocks in addition to the 30 MHz licenses. The number of 10 MHz

blocks must be limited to three for any given area, however, because of

the need to reserve spectrum for other uses such as MSS. Allowing the

flexibility to aggregate spectrum blocks of different sizes will help

ensure that efficient providers succeed. The Commission believes that

120 MHz will provide sufficient spectrum to promote competition rapidly

and that flexibility in the provision of service will provide

incentives for efficient use of the spectrum.

45. In sum, the Commission believes that a band plan that provides

for three 30 MHz licenses and three 10 MHz licenses, all in the lower

band, compared to the earlier plan, will better ensure that PCS

services are available promptly and competitively to the American

public.

46. A number of petitioners request clarification of, or changes

to, the policies regarding the aggregation or subdivision of PCS

spectrum and PCS service areas. In the Second Report and Order, the

Commission limited any party's ability to aggregate PCs spectrum to an

attributable interest in 40 MHz. Companies that were deemed to hold

attributable interests in cellular license(s) covering 10 percent or

more of the population in a PCS service area were limited to holding a

single 10 MHz PCS license in that area. The Commission did not address

the issue of whether it would allow disaggregation of spectrum.

47. The Commission believes that the 40 MHz limit for PCS spectrum

is appropriate. No new information has been presented to indicate that

each licensee in a market would require more than 40 MHz to provide

broadband PCS service. Although at least one party argued that this

limit should be amended to allow greater aggregation in rural areas,

the Commission does not believe that greater aggregation is needed. In

particular, the demand in rural areas is expected to be sufficiently

low that there should be no need for more than 40 MHz by any one

provider. If demand in rural areas is not sufficient to meet than 40

MHz of spectrum to one entity, it would be preferable to have

additional competitors serve these customers rather than to license

more than 40 MHz of spectrum to one entity.

48. One of the goals in this proceeding is to promote competitive

delivery of wireless services. As a result, the Commission feels that

not only is an overall cap on PCS spectrum important to prohibit

excessive spectrum aggregation, but that a comparable separate limit

should be placed on cellular providers since they already hold 25 MHz

of clear spectrum and already have a large number of existing wireless

customers. To ensure competitive parity, cellular carriers will be

subject to an overall spectrum cap of 35 MHz for their combined PCS and

cellular spectrum. The Commission is persuaded by the argument, raised

by a number of parties, that because of cellular's ``headstart'' in the

wireless telephone market, existing infrastructure and large base of

customers, cellular carriers might be able to dominate the wireless

market if they receive more than 10 MHz of PCS spectrum. It also

recognizes that new entrants face a possibly lengthy process to

relocate existing microwave users so they can use all of their

spectrum. Cellular carriers already have 25 MHz of clear spectrum in

operation whereas new entrants may have to relocate microwave users to

gain access to that much spectrum, even if they acquire 40 MHz at the

auction. In addition, the Commission is concerned that additional

spectrum acquired by cellular entities may reduce the amount of

spectrum available to new entrants and increase the costs to new

entrants. To promote the ability of new entrants to acquire spectrum

and rapidly begin service as strong competitors to in-region cellular

carriers, the Commission has decided to continue to permit cellular

carriers to acquire and hold only a single 10 MHz license in any PCS

service area where they are considered in-region. However, because the

market advantages enjoyed by cellular carriers should decrease as

competitive PCS offerings are implemented, cellular carriers will be

allowed to acquire an additional 5 MHz after January 1, 2000. This will

allow cellular carriers to acquire the same total amount of spectrum

(40 MHz) as other entities. Limiting in-region cellular carriers to 10

MHz of PCS spectrum for five years will not disadvantage them relative

to the new entrants who must contend with microwave relocation over

their entire spectrum block(s) and do not necessarily have an

established customer base or comparable infrastructure advantages.\19\

---------------------------------------------------------------------------

\19\Because the Commission is prohibiting spectrum

disaggregation until the year 2000, cellular entities will have an

opportunity to acquire 5 MHz of additional spectrum at that time.

---------------------------------------------------------------------------

49. The Commission rejects the contention that the aggregation

limit be raised to 45 MHz to permit cellular entities to acquire an

additional 20 MHz. If such aggregation to 45 MHz through the

disaggregation of 30 MHz blocks were allowed, the number of full

service competitors could be reduced to the detriment of realizing the

goals defined for PCS. If the Commission were to allow aggregation to

45 MHz through the aggregation of 10 MHz blocks, there would not be

enough blocks to assure both full cellular participation and the

participation of other parties who desire 10 MHz licenses. The

Commission concludes that 40 MHz remains an appropriate limit on PCS

spectrum because it protects the competitive structure, provides

sufficient spectrum for efficient provision of wireless services, and

encourages a wide diversity of firms to participate in the industry.

Furthermore, the Commission is seeking comment in another proceeding as

to whether and how the aggregation limit may be applied uniformly to

all mobile communications providers. Extending the PCS spectrum

aggregation limit to include other mobile services, such as SMR and

wide-area SMR services, is beyond the scope of this proceeding. The

Commission therefore intends to address issues relating to spectrum

aggregation across other commercial mobile radio services in a separate

proceeding.\20\

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\20\See Further Notice of Proposed Rule Making, GN Docket No.

93-252, FCC 94-100, released May 20, 1994.

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50. Although, as stated above, the Commission believes that

spectrum disaggregation should be permitted, there is concern that

there may initially be anticompetitive incentives to disaggregate

spectrum. Two or three entities might purchase a viable 30 MHz license

and disaggregate it to reduce the number of new entrants. Thus,

disaggregation of spectrum by any licensee will be permitted only after

that licensee meets the five year construction requirement. The five

year point will allow the PCS market to take shape. Entities desiring

to use small amounts of spectrum before the prohibition on

disaggregation ends can either purchase the 10 MHz blocks of spectrum

if they wish to provide service using less than 30 MHz or enter into

joint ventures or resale arrangements to facilitate their access to

spectrum. The Commission expects to conduct a further proceeding to

specify the rules for spectrum disaggregation, which will also explore

the possibility of permitting disaggregation for other commercial

mobile radio services.

51. The Commission agrees with the suggestions of the petitioners

and responding parties that PCS entities should eventually be permitted

to disaggregate spectrum. It feels that, in the future, disaggregation

will complement the three 30 MHz and three 10 MHz channel plan by

allowing subdivision of spectrum blocks where service providers find

that economic or other conditions warrant it. Allowing spectrum

disaggregation, even if it is prohibited until the first construction

benchmark, will provide appropriate incentives for service providers to

conserve their use of spectrum and to invest in spectrum conserving

technologies. Because PCS licensees have paid for the use of the

spectrum and have the ability to sell it in the future, they should be

especially sensitive to the value of the resource they are using and

will be motivated to ensure that it is used in the most valuable way.

52. In determining the appropriate placement of the 10 MHz blocks

within the lower band, the Commission seeks to promote the development

of an efficient market structure and to ensure that no subset of

license has any inherent competitive disadvantage due to placement of

licenses in the band plan. In particular, the benefits of aggregating

the 30 MHz blocks with the 10 MHz blocks must be compared to the

benefits of aggregating the 10 MHz blocks themselves. Interspersing the

10 MHz blocks between each 30 MHz block facilitates aggregation to 40

MHz by allowing combination of each contiguous 30 MHz and 10 MHz

license pair. This also facilitates relocations of the existing fixed

microwave operations by matching fixed microwave channels with PCS

channels. This will keep to a minimum the number of parties responsible

for each relocation which will reduce relocation negotiation, timing

and costs. On the other hand, keeping all 10 MHz licenses contiguous

would allow more efficient aggregation of these licenses as a

substitute strategy for obtaining one of the three 30 MHz blocks. The

Commission concludes that interspersing the 10 MHz licenses between the

30 MHz licenses to permit efficient aggregation up to 40 MHz should the

market favor that outcome is the best approach. Recognizing that

aggregation of the 10 MHz licenses may be attractive to some parties,

however, the Commission is also making two of the 10 MHz licenses

contiguous so as to permit this aggregation to 20 MHz, should some

parties favor 20 MHz over 30 MHz.

53. In the Second Report and Order, the Commission specified that

the two 30 MHz blocks would be licensed on an MTA basis and that the 20

MHz block and four 10 MHz blocks would be licensed on a BTA basis. It

adopted this plan to promote the rapid deployment and ubiquitous

coverage of PCS and felt that these areas would follow the natural flow

of commerce.

54. The Commission has decided to retain the geographic license

areas definitions for PCS licenses adopted in the Second Report and

Order. It rejects the arguments that all licenses should have the same

geographic scope and rejects any attempt at re-drawing the boundaries

along cellular MSA/RSA lines.

55. The Commission rejects the use of cellular MSA/RSA boundaries

for a number of reasons. The ten-year history of the cellular industry

provides evidence generally that these service areas have been too

small for the efficient provision of regional or nationwide mobile

service. The large transaction costs to aggregate MSAs and RSAs that

have been incurred over the past ten years in the cellular industry

have frequently been directed towards geographic aggregation to provide

wider service areas for consumers and to lower costs of providing

service. Rather than forcing replication of this costly and time-

consuming process, the Commission is beginning with larger service

areas, which it expects to minimize the need for costly post-auction

transactions. The Commission also hopes to spur market competition from

new PCS providers by starting with larger initial geographic service

areas to alleviate the cellular headstart advantage. It realizes that

the MTA and BTA license boundaries do not coincide with existing

cellular license boundaries, but feels that the costs imposed by these

different license boundaries will be outweighed by the benefits of

larger initial service areas. The Commission is cognizant of problems

created by overlaps between the PCS and cellular service areas, and

intends to provide some relief from these problems.

56. The Commission also rejects the suggestion that all licenses

should have the same geographic scope whether MTAs, BTAs, or Department

of Commerce Economic Areas. While identical geographic areas may impose

more initial competitive parity, the Commission does not believe that

this will maximize competitiveness and participation in the provision

of PCS services. Licensing all blocks on an MTA basis might increase

competitiveness with cellular, but it would limit the ability of

cellular companies and designated entities to participate in the

provision of PCS. Cellular companies could be restricted because of

overlaps with MTAs that might not occur with BTAs. Designated entities

are likely to be better able to finance the construction of PCS across

a BTA than an MTA. Thus, by licensing some blocks on a BTA basis, the

Commission complies with Congress' directive that it prescribe area

designations that promote economic opportunity for a wide variety of

applicants, including small businesses, rural telephone companies, and

businesses owned by members of minority groups and women.

57. The Commission therefore continues to feel that a combination

of MTA and BTA licenses will give licensees the opportunity to select

and combine service areas and promote broad participation in the

provision of PCS services by firms of various sizes. Licensing two of

the 30 MHz blocks on an MTA basis will permit these licensees to

operate in large service areas which will facilitate interoperability

and roaming across wide geographic areas. Licensing the third 30 MHz

block on a BTA basis will not preclude such efficiencies because of the

ability to aggregate licenses geographically. In addition, in much the

same way as the variety of spectrum block sizes allows various

strategies, the variety of geographic sizes will allow firms to

determine the optimal geographic strategy they wish to pursue. This

will also help to meet the statutory objectives of disseminating

licenses to a wide variety of licensees. In addition, allocating four

of the six licenses on a BTA basis addresses the concern the rural

buildout would not occur with MTA licenses.

58. Finally, with regard to the Puerto Rico service area, the

Commission will provide two separate BTA service areas in Puerto Rico,

one for Mayaguez/Aguadilla-Ponce and the other for San Juan. This

action recognizes the difficulties created by the mountain range

separating these two areas. No parties opposed this request, and the

Commission finds this adjustment to be in the public interest.

59. The Commission agrees with the parties which oppose permitting

geographic partitioning at this time, since there is a significant risk

that partitioning can be used to circumvent construction requirements.

While there may be efficiency enhancing geographic partitions, much of

the benefit can be obtained through other arrangements that do not

raise the same concerns about circumvention of the construction rules.

On balance, the Commission concludes that it should not adopt a policy

allowing general geographic partitioning, but should rather recognize

that the balance may be different for particular groups of service

providers, such as rural telephone companies or to create PCS ownership

opportunities for companies owned by minorities or women. Therefore,

the Commission will consider the issue of geographic partitioning for

rural telephone companies and other designated entities in its

forthcoming Order, to adopt specific competitive bidding rules for

broadband PCS in PP Docket No. 93-253. There the Commission will

address other designated entity preferences and will rely on the record

in both proceedings in making final determinations on this matter.

Also, the Commission will address whether it should recover the

unserved PCS areas at the end of the ten-year construction period, in a

later proceeding after it has had an opportunity to assess the scope of

system build-outs.

60. In developing a band plan for PCS, the Commission has had to

weigh the spectrum requirements of licensed PCS with the amount of

spectrum allocated for unlicensed PCS. For reasons described above, the

new band plan moves all of licensed PCS to the lower band. As a result

of this change, the amount of spectrum available for the operation of

unlicensed PCS devices has been reduced from 40 to 20 MHz. This is the

amount of spectrum originally proposed for unlicensed devices. Despite

having less spectrum available for unlicensed PCS devices in the near

term, the Commission believes that the new band plan will have an

overall positive effect for consumers in terms of the diversity and

utility of unlicensed devices available on the market, as well as the

rapid deployment of competitive licensed PCS Services.

61. One reason the Commission reaches this conclusion is that even

without this change it is unlikely that the 20 MHz reallocated to

licensed from unlicensed would have been used in the near term for

unlicensed. The spectrum at 1890 to 1910 MHz was regarded as less

desirable than the 20 MHz retained for unlicensed PCS at 1910-1930 MHz

because it contains significantly more microwave incumbents. The

Commission's expectation was that unlicensed devices first would

operate on the 1910-1930 MHz spectrum because the cost of clearing this

spectrum is significantly less. Licensed PCS providers, by contrast,

provide ample evidence in the record that they are ready to begin the

relocation of microwave incumbents in the lower band and provide

service in the near term and can use the spectrum from 1890-1910 MHz

rapidly. Thus, consumers are more likely to obtain immediate benefits

if the Commission allocates this spectrum to licensed PCS rather than

for unlicensed PCS devices.

62. Another benefit of the new band plan is that the licensed and

unlicensed PCS spectrum will be located in close proximity on the lower

band. Consumers will have more choices for equipment that operates on

both unlicensed and licensed PCS bands, and will not have to buy

higher-priced equipment that operates on both the lower and upper PCS

bands to have available the full array of service options with a single

piece of equipment. Finally, the Commission intends that the initial 20

MHz allocation for unlicensed PCS devices meet the near term spectrum

requirements for unlicensed devices. To consider the long-term spectrum

requirements of unlicensed PCS devices, the Commission intends to issue

a Notice of Proposed Rule Making in the near future to identify

additional spectrum for unlicensed PCS devices.

63. For the reasons set forth above, therefore, the Commission

concludes that consumers and manufacturers of equipment intended for

use on the unlicensed band will benefit from the new band plan. This

does not diminish the concern that there be sufficient spectrum

allocated for unlicensed PCS devices to accommodate expected demand,

and therefore as noted above, the Commission is committed to

instituting a further rule making for this purpose to meet the long

term requirements for unlicensed PCS devices, including those potential

unlicensed uses that may not be accommodated readily in the initial 20

MHz allocation.

64. Private Use. The Commission agrees with the parties who argue

that both commercial PCS service and unlicensed PCS devices will be

able to meet many of the communications requirements of private

entities. The PCS licensees will be permitted to tailor specific

service applications to the particular needs of individual

organizational customers. Any such service applications, of course,

must be consistent with policies established for the regulation of

commercial mobile radio services under Title II of the Communications

Act.\21\ Such applications could include the use of dedicated capacity.

Where such arrangements might not be satisfactory, entities desiring

spectrum solely for internal private use could, of course, bid for

licensed PCS spectrum individually or as a group intending to share the

licensed facilities. Companies that value private use of the spectrum

highly could win a license at auction; otherwise they could contract

with a licensee to provide the services they need, or procure such

services from resellers. Moreover, as many commenters argue, the

Commission believes that setting aside spectrum for private interests

would not help to achieve the goals set forth for PCS, and at the same

time, could detrimentally affect competitive service provision and the

efficient allocation of scarce spectrum resources. Also, the extent to

which additional spectrum is required for private and public safety use

is being considered in a separate proceeding that addresses allocation

of spectrum below 5 GHz transferred from Federal government use.\22\

Accordingly, the Commission will not set aside a portion of the

spectrum allocated to PCS exclusively for private PCS operations.

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\21\See CMRS Second Report and Order, 9 FCC Rcd at 1439 n.130:

The terms and conditions for different classes of customers may,

of course, vary. Whether such differences are lawful would be a

question of whether there is unreasonable discrimination under

Section 202(a) of the [Communications] Act. In the case of

individualized or customized service offerings made by CMRS

providers to individual customers, the Commission intends to

classify and regulate such offerings as CMRS, regardless of whether

such offerings would be treated as common carriage under existing

case law, if the service falls within the definition of CMRS.

\22\See Notice of Inquiry, ET Docket No. 94-32, 59 FR 25589 (May

17, 1994). This proceeding addresses, inter alia, a Petition for

Rule Making filed by the Coalition of Private Users of Emerging

Multimedia Technologies (COPE) for the development of an ``Advanced

Private Communications Service,'' using 75 of the 200 MHz to be

transferred to the Commission's jurisdiction from Federal government

spectrum in compliance with the terms of the Omnibus Budget

Reconciliation Act of 1993.

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65. Mobile Satellite Services (MSS) Issues. The Commission

recognizes the potential value of MSS as a service provider to rural

areas that may not be economically served by PCS. It has thus given the

petitions of MSS interests, including the various alternatives they

suggest, careful consideration. Having been instrumental in obtaining

the international MSS allocations at WARC-92, the Commission would not

wish unnecessarily to reduce its flexibility to implement those

allocations in the U.S. On the other hand, the large potential value of

PCS, which is a matter of record in this proceeding, must be

recognized. It should be noted that these MSS bands are also allocated

internationally to fixed and mobile services. PCS, as it has been

broadly defined, within the international definition of fixed and

mobile services and is thus consistent with international agreements on

the use of this spectrum. Because spectrum is a limited resource, the

Commission finds that to satisfy the goal of allocating sufficient

spectrum for a competitive PCS service, it must allocate to PCS a

portion of the spectrum internationally designated for MSS. The

Commission believes that the new plan it is adopting today strikes an

appropriate balance between these two services and will provide maximum

benefits to U.S. consumers.

66. The Commission disagrees with the assertion of several parties

that they were provided insufficient notice and opportunity for comment

on the possibility that the Commission might allocate a portion of the

internationally designated MSS spectrum to PCS. The PCS Notice sought

comment on a wide range of allocation options for licensed PCS ranging

from three to five spectrum blocks of from 20 to 40 MHz each. Several

of the possible combinations of block size and number of blocks would

require the use of spectrum in the bands designated internationally for

MSS, and at least one option (i.e., five blocks of 40 MHz each) would

require virtually all of that spectrum. The Commission specifically

called attention to the fact that some of these options would

necessarily require the use of spectrum in other emerging technologies

bands, and it did not exclude emerging technologies bands that had been

designated internationally for worldwide or Region II MSS. Thus,

contrary to petitioners' contentions, the Commission believes that

parties were given adequate notice of the possibility that the final

PCS allocation could include some or even all of the internationally

allocated MSS spectrum in these bands.

67. Under the new band plan, the entire allocation to broadband PCS

is located in the 1850-1990 MHz band. The 2180-2200 MHz band, which was

allocated to PCS in the Second Report and Order has been returned to

reserve status for future allocation potentially to MSS, as requested

by the MSS interests. The new band plan, however, removes an equal

amount of spectrum from potential consideration for MSS in the band

1970-1990 MHz band, 10 MHz of which can be used for Region II MSS

service. The Commission believes that its new band plan accommodates

the future potential of MSS more fully than its original plan and

therefore addresses the concerns of a majority of the MSS industry.

68. By shifting the PCS allocation out of the 2180-2200 MHz band

the Commission has preserved the option of allocating some or all of

that spectrum to MSS in the future. This preserves 50 MHZ of the 60 MHz

allocated worldwide and thus fits more closely with the international

agreements. Twenty MHz of this worldwide MSS spectrum is paired with

spectrum inside the current broadcast auxiliary band. In the future,

this spectrum could potentially be reallocated for MSS use on a shared

basis, if feasible, or exclusively, if suitable replacement spectrum

could be found for broadcast auxiliary service. The commission intends

to initiate a proceeding to investigate these additional allocation

possibilities in the near future, with the purpose of accommodating MSS

operations within the remaining internationally designated bands, while

at the same time maintaining sufficient spectrum for broadcast

auxiliary use. It also intends to pursue additional international

allocations for MSS at WRC-95.\23\

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\23\See Preparation for International Telecommunication Union

World Radio Communication Conferences, IC Docket No. 94-31, FCC 94-

96, released May 5, 1994.

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Ownership Rules and Cellular Eligibility

69. In the Second Report and Order, the Commission recognized that

permitting cellular licenses to participate in PCS could foster rapid

development of PCS by taking advantage of cellular providers'

expertise, economies of scope between PCS and cellular service, and

existing infrastructures. The Commission also recognized that new

entrants would foster competition and expressed concern about potential

anticompetitive conduct by parties with cellular and PCS interests in

the same geographic area. To balance these competing interests,

cellular licensees were permitted to obtain PCS licenses outside of

their cellular service areas, but restricted them each to one 10 MHz

PCS license within their respective cellular service areas.

70. For the purposes of its PCS rules, the Commission defined an

attributable cellular interest as ownership of 20 or more percent of a

cellular license. If an entity has attributable cellular interests in a

license or licenses individually or jointly covering 10 or more percent

of the population in a PCS service area, then that entity would be

restricted to one 10 MHz PCS license in that area. If an entity holds

interest of less than 20 percent in a cellular license, these interests

are not considered attributable and the population covered by that

cellular license area is not counted towards the 10 percent population

threshold. If an entity holds attributable cellular interests, i.e.,

interests of 20 percent or more, in licenses that individually or

jointly cover less than 10 percent of the population in a PCS service

area, that entity may hold licenses for up to 40 MHz of PCS spectrum in

that PCS service area. Entities that have attributable interests that

put them over the 10 percent population overlap threshold in a PCS

service area are deemed ``in market'' cellular entities and as such may

only hold 10 MHz of PCS spectrum in that PCS service area.

71. The 20 percent attribution rule applies on a cumulative basis

to all parties with ownership interests in cellular operations. Thus,

for example, if four participants in a PCS venture each have an

ownership interest of 5 percent in the same cellular licensee serving

more than 10 percent of the population of a BTA, the PCS venture in

which they all have an interest is deemed to have a 20 percent cellular

ownership interest and is restricted to one 10 MHz frequency block in

that BTA. However, if the four parties to a PCS application each own 5

percent interests in four different cellular licensees, each of which

serves 10 or more percent of the BTA, together they are not restricted

to one MHz block because they do not exceed the 20 percent attribution

threshold as to any single cellular license. Therefore, in the latter

instance, the parties are permitted to purchase a full 40 MHz PCS

spectrum block.

72. Twenty-four parties petitioned for reconsideration of various

aspects of the cellular eligibility rules and general attribution

standard used for invoking the PCS ownership limits. The petitioners

addressed: (1) eligibility of cellular licensees; (2) the 20 percent

attribution standard; (3) the 10 percent population standard; (4) post-

auction compliance by cellular licensees with the ownership

restrictions; (5) exemptions from the eligibility restrictions for

certain cellular providers; and (6) the interests that should be deemed

attributable for purposes of calculating ownership and control of a PCS

or cellular license.

73. Eligibility of Cellular Licensees for PCS Licenses. Six parties

advocate eliminating all eligibility restrictions on cellular

providers. Fourteen parties agree with the concept that there should be

some restrictions on cellular participation in PCS. These latter

parties' positions range from agreeing with the standards of the Second

Report and Order to arguing for different measures of both coverage and

ownership to favoring different standards entirely, but these parties

all accept the idea that there should be limitations on cellular

entities holding PCS licenses.

74. The Commission has decided to retain restrictions on cellular

participation in PCS. In making this decision, the Commission is aware

of the benefits that the cellular industry has to offer PCS, including

capital, economies of scope, and experience and expertise in the

provision of mobile communications services. For this reason, the

Commission will continue to allow cellular participation in PCS. In

addition, the Commission will make some changes in the specific

standards of the Second Report and Order, but it remains convinced that

restrictions on in-market cellular providers are necessary to achieve

its goal of maximizing the number of new viable and vigorous

competitors. In reaching this conclusion the Commission does not assume

that in-market cellular providers will engage in illegal

anticompetitive behavior; the goal in crafting these rules should not

be to prevent anticompetitive behavior which may or may not

materialize, but rather, to promote competition. The Commission

concludes that the public interest would be best served by maximizing

the number of viable new entrants in a given market.

75. Finally, while some petitioners point out that SMR and MSS

providers are not subject to the same eligibility restrictions as

cellular providers, only one affirmatively requests that the

eligibility restrictions of the Second Report and Order be extended to

wide-area SMR services. The Commission feels that imposing eligibility

restrictions is beyond the scope of this proceeding. It is, therefore,

addressing in another proceeding the eligibility of wide-area SMRs and

other commercial radio services to participate in PCS.

76. Attribution Rules. In the Notice of Proposed Rule Making in

this proceeding, the Commission noted its expectation that PCS and

cellular licensees serving the same area will compete on price and

quality of service. If therefore stated that competitive benefits might

be reduced if cellular licensees are permitted to acquire PCS licenses

within their service areas and proposed an outright prohibition on

cross-ownership of PCS licenses by entities with cellular interests,

except that ownership interests of less than one percent (or less than

five percent for publicly traded companies) would not be considered. In

the Second Report and Order, the Commission found this approach too

restrictive. Although the Commission still sought to avoid the

potential for undue market power by entities with significant existing

market share, it balanced that goal against recognition of the

expertise that cellular licensees would bring the PCS markets. It also

noted that many entities possess non-controlling interests in cellular

licensees exceeding 5 percent but, due to the non-controlling nature of

their equity interests, create little potential four anti-competitive

behavior.

77. The Commission therefore adopted a simple, bright-line 20

percent cross-ownership attribution standard, pursuant to which

entities with 20 percent or greater ownership of a cellular operator

were limited to one 10 MHz BTA license for broadband PCS in the same

region as their attributable cellular interests. It did not distinguish

between different types of ownership such as voting and non-voting

stock and general and limited partnership interests. The Commission

noted, however, that while a clear 20 percent ownership threshold may

be more administratively efficient, a concern remained that some

parties with cellular ownership interests will use the rules as an

opportunity to control local cellular licensees while retaining less

than 20 percent ownership. Since such occurrences would undermine the

intent to limit cellular ownership in PCS, the Commission said that it

would review carefully this decision, and it explicitly put parties on

notice that it would reconsider this limit if its intent to ensure

competition between cellular and PCS would be undermined under the

ownership rules adopted in the Second Report and Order.

78. With respect to ownership interests in multiple PCS licensees

in a single market, the Commission adopted a 5 percent attribution

threshold for purposes of the 40 MHz PCS spectrum limit and for

purposes of determining cellular ownership in a PCS licensee. It stated

that PCS ownership interests of 5 percent or more will be attributed to

the holder of the interest. In adopting this standard, the Commission

cited similar market-based concerns, noting its desire to ``ensure that

[no entity] is able to exert undue market power through partial

ownership in multiple PCS licensees in a single service area.'' The 5

percent threshold is consistent with the ownership thresholds applied

to cellular and broadcast licensees. The Commission did not find any

potential advantages possessed by any existing PCS licensees inasmuch

as there are no such licensees. Similarly, it did not discuss the need

to accommodate settlements among PCS licensees resulting in non-

controlling interests of between 5 and 20 percent because there are no

such settlements in the PCS context. The Commission therefore adopted

this 5 percent limit for application to PCS multiple ownership, whereas

it appeared too restrictive in the cellular-PCS cross-ownership context

given the realities of existing historical cellular settlements.

79. Twelve parties petitioned for reconsideration of the cellular

ownership attribution standard. The petitioners recommend the following

alternatives: (1) raising the 20 percent level of permissible ownership

in cellular licensees; (2) attribution based on control rather than

ownership; (3) applying an affiliation standard like that in the

Commission's telco-cable cross-ownership rules; (4) applying an

attribution standard based on the rules used to enforce the alien

ownership restrictions under Section 310 of the Communications Act; and

(5) applying the same attribution rules to PCS as those applied to

broadcast interests.

80. The Commission continues to believe that the PCS and cellular

ownership attribution decisions adopted in the Second Report and Order,

with certain modifications, are appropriate and strike a reasonable

balance between promoting vigorous competition and the advantages of

allowing experienced mobile communications operators such as cellular

licensees to participate as PCS licensees. The Commission disagrees

with those parties which suggest the same 20 percent attribution limits

should apply to cellular/PCS cross-ownership and to PCS multiple

ownership. Generally, the 5 percent standard for all cross-ownership

situations would be preferable, to maximize competition. The Commission

is adopting an attribution threshold of 5 percent for multiple PCS

ownership purposes to prevent any party from exerting market power

through substantial partial ownership in multiple PCS licensees in the

same service area. There is no countervailing reason to risk reducing

competition by raising this 5 percent limit for PCS multiple ownership

limits. Moreover, the 5 percent threshold is consistent with ownership

thresholds applied to cellular and broadcasting.

81. Such a strict rule for PCS/cellular cross-ownership, however,

would not recognize the history of cellular licensing. The 20 percent

ownership attribution standard for cellular operators was adopted, in

part, because settlements during the initial phase of cellular

licensing resulted in partial and often non-controlling interests in

those licensees. In light of this history, it would be unfair and

unduly restrictive to place the same 5 percent limit on cellular/PCS

cross-ownership. For this reason, the Commission decided to allow a 20

percent cellular ownership interest. Further, the Commission believes

that given the nature of these settlement agreements, permitting this

level of ownership will not decrease the incentives for competition.

Therefore, divestiture to a lower level of ownership will not be

required. The 20 percent standard permits many entities with partial,

non-controlling cellular interests to participate in PCS. In adopting

the 20 percent standard, the Commission recognized that participation

by cellular operators in PCS would offer benefits that include

promoting early development of PCS by taking advantage of cellular

providers' expertise and permitting attainment of economies of scope

between PCS and cellular service and existing infrastructure. The

Commission is therefore making an exception to its usual treatment of

cross-ownership for purposes of cellular-PCS cross-ownership.

82. The Commission disagrees with those entities that argue for a

higher cellular ownership attribution threshold such as 35 percent and

believes that 20 percent is the proper standard. A higher attribution

threshold (i.e., above 20 percent) for all incumbent cellular entities

would tend to suppress competition, because the licensee would have

economic incentives not to compete vigorously against competitors in

which it holds a substantial equity interest. These standards, with

exceptions discussed below related to certain designated entities,

remain appropriate, and accordingly the Commission affirms them.

83. The Commission's goals here include ensuring that the holder of

the PCS license has strong incentives to compete against the cellular

licensees in the same geographic market. A PCS licensee that has a

large equity stake (i.e., more than 20 percent) in a cellular license

in the same area has less incentive to compete vigorously against its

own equity interest in a cellular provider, even though it may not

exercise legal control over the cellular licensee. The attribution

rules provide the right balance between maximizing competition and

allowing cellular entities to bring their expertise to PCS. The

Commission therefore will not adopt a rule that would require finding

that a party had a ``controlling interest'' in a cellular licensee

before it would be prohibited from investing in a PCS licensee in the

same area. Such a rule could substantially delay the licensing of PCS

and would not serve the goal of promoting vigorous competition between

PCS and cellular licensees in the same area. The Commission believes

that the bright-line rules being adopted will result in a faster, less

burdensome licensing process.

84. The Commission also rejects the suggestion that it prohibit all

``affiliations'' between cellular and PCS licensees in the same market,

along the lines of its telco-cable cross-ownership rules. These rules,

which are even more restrictive than the broadcast attribution rules,

would not provide the flexibility to recognize the history of

settlement agreements in cellular licensing and would not allow us to

draw on the experience and expertise provided by cellular providers who

have low equity stakes. They also might have the effect of restricting

contracts between PCS licensees and companies financing their equipment

and the build-out of their PCS systems, which could seriously impair

rapid investment in and deployment of PCS systems.

85. The Commission also disagrees that the alien ownership rules

provide a clearer guide than the present attribution standards. Because

the alien ownership restrictions set forth in section 310(b) of the

Communications Act were created specifically to avoid an undue

concentration of foreign influence in the direction of entities

involved in communications, the attribution thresholds defined in that

section are more complicated than the 5 percent/20 percent bright-line

thresholds adopted here. Further, unlike the rules in the broadcast

context, the Commission will not allow use of a ``multiplier'' in the

case of multi-tiered entities; the interest of the subsidiary is

attributed in full to the parent. The Commission agrees, however, that

both voting and non-voting stock should be included in determining

percentage of ownership of PCS and cellular entities.

86. In determining attributable interests for the purposes of both

the 20 percent cellular/PCS cross-ownership rule and the 5 percent PCS/

PCS multiple ownership rule, the Commission agrees with some of the

commenting parties that some clarifications and modifications to the

attribution rules are warranted. The attribution rules must be simple

for applicants to understand because they are essential to enforcement

of the PCS spectrum cap and the PCS/cellular cross-ownership rules. In

the Second Report and Order, the Commission stated that it would

consider all equity ownership, including voting and non-voting stock

and limited partnership interests, in calculating the percentages of

attributable ownership interest in a PCS or cellular licensee. It

explained that it would count these interests even if they did not

confer on the holder meaningful participation, because the public

interest would best be served by a ``bright-line'' test. The Commission

continues to believe that the ownership rules should be clear and easy

to administer, and, to that end, it will provide further clarification

about which of the ownership rules from the broadcast regime will be

applied to PCS. The Commission declines to adopt the full panoply of

attribution rules that it applies in the broadcast and in the telco/

cable contexts because it believes that the restrictions being adopted

will be sufficient to prevent undue influence and preserve competition.

87. The Commission clarifies that, for purposes of these ownership

rules, controlling interests per se are attributable. As in other

contexts, ``control'' means not only majority equity ownership, but

includes any general partnership interest, or any means of actual

working control over the operation of the licensee, in whatever manner

exercised. The Commission will rely on existing case law for making

control determinations where such issues arise.

88. The Commission also clarifies that PCS equity investments of 5

percent or more, and cellular equity investments of 20 percent or more,

also are attributable. These equity interests are attributable because

they support the goals of developing a competitive PCS service and

reducing the incentive for any entity to retard the capability of the

new PCS licensee to compete with the cellular or any other PCS licensee

in which the entity has an attributable interest. Specifically, the

following equity investments will be counted: voting stock, non-voting

stock, and limited partnership interests.\24\ The percentage of

ownership interest in a limited partnership will be based on the

partner's economic interest in the partnership. Therefore, the

Commission will assess the percentage of the partner's capital

contribution as well as the percentage of profits and losses allocated

to the partner. As noted above, general partnership interests are

deemed attributable regardless of equity percentage because of the

control conferred on general partners by the nature of their interest.

The following investments are not attributable for multiple or cross-

ownership purposes: debt interests, including loans secured by the

equipment used in the licensed system, and equity interests below the

20 percent and 5 percent thresholds. These interests are of less

consequence to or independent of the entity's performance and therefore

provide little incentive to delay or dilute the participation of the

new PCS license in the market. In addition, consistent with other

multiple- and cross-ownership attribution standard, convertible debt

instruments or options with rights of conversion to equity interests

shall not be attributed unless and until conversion is effected.

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\24\Thus, in a stock company, PCS and cellular interests of 5 or

20 percent, respectively, of the total outstanding stock as well as

interests of 5 or 20 percent, respectively, of the outstanding

voting stock will be attributable.

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89. The Commission also clarifies that the interests of a cellular

or PCS licensee, or entity in control of a licensee, are attributed to

the officers and directors of that entity. The Commission remains

concerned about the ability of such individuals to exert influence over

companies in which they have significant managerial responsibility.

Therefore, if an officer of a company wishes to invest in a PCS market,

he or she may only do so if this company itself could make the same

investment in compliance with its rules.

90. The Commission also will not allow an exemption for minority

investors in companies controlled by a single majority shareholder.

Although these rules are used in the broadcast area to exempt from

attribution entities not believed to be able to exercise control over a

licensee, in the context of PCS not allowing use of a ``multiplier''

serves the goal of maximizing competition. These rules will help ensure

against undue influence, short of control, by minority stockholders and

distant stockholders in parent or intermediate corporations.

91. Through an ongoing proceeding concerning multiple ownership of

CMRS licensees, the Commission will address whether it should change

its rules to restrict or attributable resale, management agreements or

other ownership arrangements that could confer possible anticompetitive

incentives on parties with multiple CMRS interests. This proceeding

will examine whether and to what extent such arrangements could be used

to exert control over more spectrum than is permitted under the PCS

spectrum cap (40 MHz) or the proposed CMRS spectrum cap.

92. Attribution Rules for Certain Designated Entities. The

Commission agrees that relaxing the cellular eligibility restrictions

is appropriate for designated entities. It recognizes that many

designated entities are merely passive investors in cellular operators

and, because of their size, are unlikely to influence pricing

decisions. In addition, the Commission seeks to address Congress' goal

of encouraging the participation of designated entities in the auction

process and in the provision of spectrum-based services. The Commission

believes that designated entities which have some interests in cellular

operations may be especially effective PCS competitors because of their

cellular experience. This will help ensure that service is brought

quickly to underserved areas and that designated entities become viable

competitors. In particular, it believes that rural telephone companies

and some small cellular companies, due to their existing

infrastructure, are uniquely positioned rapidly to introduce PCS

services into their service areas or adjacent areas. However,

designated entities are not entirely exempted from the cellular

eligibility rules, because such an exemption could foreclose

competition from a new PCS entrant. To the extent that designated

entities are involved in the control of cellular services, there is

potential for some of these parties to compete less vigorously in the

nascent PCS industry. In balancing these interests, the Commission

concludes that increasing the cellular attribution threshold for

designated entities from 20 percent to 40 percent, if non-controlling,

would be appropriate and would further the Congressional mandate noted

above. Accordingly, the Commission will permit a designated entity to

hold a non-controlling equity interest of up to 40 percent in a

cellular licensee without being subject to the cellular PCS eligibility

restrictions.

93. The Commission has decided to increase the cellular attribution

threshold from 20 percent to 40 percent for any entity proposing to

invest in businesses controlled by members of minority groups and/or

women. An entity may hold up to a 40 percent interest in cellular

licensees before its cellular interest will be deemed attributable, but

must limit its participation in a PCS licensee controlled by women or

minority group members to a non-controlling interest. This action will

encourage entities with attributable cellular interests to make non-

controlling investments in businesses owned by minorities and/or women,

furthering Congress' objective of ensuring the participation of these

entities in the competitive bidding process by encouraging an

alternative source of financing. The record indicates that the main

challenge that minorities and women face when seeking to participate in

telecommunications licensing is ready access to capital. Investments by

cellular providers in these designated entities should increase the

entities changes for success in the actions and later in service

competition by providing access to capital and valuable industry

experience.

94. The Commission is not granting a blanket exemption to in-region

cellular parties with 40 percent or greater equity or control to

participate in consortia that include designated entities. Such an

exemption would allow a cellular entity to control a cellular license

and create the potential for the entity to influence the PCS licensee

to compete less vigorously. The potential for a cellular entity to

exercise undue influence over the PCS licensee, especially absent

limits on the control exercised by the cellular carrier over the

designated entity and its own cellular license, is too great, given the

superior knowledge and experience of cellular providers. Therefore, the

Commission has relaxed the cellular attribution standard to permit

entities that hold up to 40 percent non-controlling equity in cellular

licensees in the same service area to make non-controlling investments

in PCS licensees controlled by woman- or minority-owned businesses.

Because their investment will be non-controlling in both the PCS and

cellular license, the threat to competition is diminished. This relaxed

standard encourages availability of capital to PCS businesses owned by

women and minorities, yet guards against the dominance of these

designated entities by entities which also control a cellular license

in the same service area.

95. The Commission will not exempt non-wireline cellular carriers

from the PCS attribution rules, since this action, which was considered

in the Second Report and Order, could impair successful achievement of

the goal of creating the maximum number of new competitors.

96. These important modifications will increase the efficacy of our

cellular eligibility rules by guarding against the improper exercise of

market power by cellular providers through controlling interest in PCS

systems overlapping their cellular coverage areas. These changes will

better address concerns regarding reduced competition without

unnecessarily restricting the ability of cellular providers to

participate in PCS, and will provide further incentives for investment

in and participation by designated entities in PCS.

97. Population Standard. When the Commission adopted regulations

restricting the eligibility of certain cellular licensees to hold PCS

licenses within their cellular service areas, it noted assertions that

cellular operators might have unfair competitive advantages over PCS

licensees. On the other hand, it also noted the valuable contributions

that the expertise of cellular providers could provide to the PCS

industry. Finally, the Commission noted that, because of different

geographic licensing boundaries for cellular and PCS, there was a

potential for excluding cellular providers from PCS markets even though

the degree of overlap was minimal. The Commission decided that such an

exclusion was neither fair nor desirable for maximizing competition. In

resolving these conflicting interests, the Commission adopted the 20

percent ownership attribution rule to define cellular ownership for

purposes of the PCS rules. For entities at or exceeding 20 percent

ownership, it applied a 10 percent population coverage overlap test to

determine whether the cellular licensee would be restricted to a single

10 MHz PCS license.

98. The Commission has decided to retain the 10 percent population

overlap threshold adopted in the Second Report and Order. The goal is

to provide for entry into the PCS market for the maximum number of

viable competitors. The Commission remains concerned about the

potential for cellular operators to exercise market power and to reduce

the number of viable competitors in the PCS market. The Commission

believes that the 10 percent population overlap figure is justified and

should foster robust competition and prevent competitive abuse.

Balancing the potential benefits of the participation in PCS of

cellular providers and the potential harms of reduced competition, the

Commission is convinced that the 10 percent coverage threshold is

appropriate. This limit ensures the opportunity for the emergence of

the maximum number of competitors that the market will support for 90

percent of the population. Increasing this limit beyond 10 percent

would create greater risk that consumers would be denied the benefit of

vigorously competing service providers. This threshold is also an

important means of encouraging new entrants in each area, thereby

enhancing competition. On balance, the Commission concludes that the 10

percent population coverage threshold promotes competition among

licensees serving a significant percentage of the population, while

providing some recognition of the overlaps that will result from the

different licensing areas for PCS and cellular. In addition, as

discussed below, divestiture will be allowed for those entities with

CGSA/PCS service area population overlaps between 10 and 20 percent. In

reaffirming the 10 percent threshold, the Commission rejects proposals

to adopt a national population measure or to use a multiplier formula.

99. The Commission does not believe that a national population test

would achieve the goal of providing the maximum number of new

competitors in each market. PCS is being licensed on a local and

regional, not national basis. A cellular entity which operates in one

city but has no presence in another city would be a new competitor in

the latter city. The Commission seeks to encourage that entity's PCS

participation in the second city, because of the likelihood that the

experience and economics it brings from its cellular business will

stimulate PCS development in the market and promote vigorous

competition to other PCS licensees.

100. The Commission does not believe that this ``effective POP''

attribution rule, based on a figure reached by multiplying the

percentage overlap of the population in the PCS and cellular service

areas by the percentage ownership in the cellular provider, would

achieve the goal of maximizing the number of new competitors. Under

this rule, an entity could have a majority equity interest in cellular

licenses covering 40 percent of the population in that service area and

remain eligible for 40 MHz of PCS spectrum. This would result in fewer

competitive choices for 40 percent of the consumers in that market.

This would not achieve the goal of maximizing competitive choices for

as many consumers as possible.

101. Post-Auction Divestiture. The Commission concludes that it

would be reasonable to permit incumbent cellular operators, in certain

defined circumstances, to divest their cellular interests in order to

become PCS licensees. These operators could become eligible for 40 MHz

of PCS spectrum by either reducing population overlap or ownership

levels to below the standards discussed above. Either could be

accomplished before the auction, but that would involve selling the

cellular interests on an assumption that the operator would be the

successful bidder for a 30 MHz license.

102. Further, the Commission believes that allowing unlimited

divestiture of the cellular interest after the auction raises concerns

that abuses could occur during or after the bidding process. If

afforded an unlimited opportunity to divest, cellular operators with

significant areas of overlap could have incentives to use the bidding

process to forestall licensing of new competitors in the market,

because the cellular operator would be in control of both a cellular

system and one of the three or four possible 30 MHz broadband PCS

licenses. There are instances, however, in which such abuses are

unlikely to occur. A cellular operator with less than 20 percent

population coverage in the PCS service areas would have little

incentive to risk incurring penalties for abusing the bidding process

when PCS offers greater potential to serve the entire MTA or BTA. These

cellular operators have more to gain by broadening their customer base

by offering competitive PCS services in place of their overlapping

cellular interests in excess of 10 percent than they do by abusing the

bidding process to forestall competition. Operators with population

overlaps in excess of 20 percent have increasingly greater incentives

not to start competitive PCS businesses.

103. It is appropriate to allow cellular operators to divest

themselves of attributable cellular interests that do not comply with

the cellular/PCS cross ownership restriction after winning more than 10

MHz of PCS spectrum in the PCS auctions, provided that the divestiture

occurs within the short time frame set forth below. However, because a

cellular operator with significant overlaps may have incentives to

delay the rapid introduction of PCS service, the Commission will permit

cellular divestiture only for cellular operators that serve less than

20 percent of the PCS service area. If the overlap consists of several

cellular licenses, the incumbent may sell some of the licenses and keep

others if the result is in compliance with the attribution and

population overlap thresholds. This will help achieve the goals of

rapid introduction of PCS service and competitive delivery because

those entities with cellular operations near a PCS service area may be

able to combine the operation into a single efficient operation that

would benefit consumers.

104. The Commission has decided to allow the post-auction partial

sale of attributable cellular interests so that entities may come into

compliance with the cellular eligibility rules. Procedurally, it will

require that a PCS applicant that meets the criteria for post-auction

divestiture submit with the PCS license application (short-form) a

statement that, if successful in obtaining more than 10 MHz of

spectrum, it will come into complete compliance with the cellular/PCS

cross-ownership restriction within 90 days of the PCS license grant. If

more than 10 MHz is obtained, the long-form application for PCS

licensing must be accompanied by a signed statement from the applicant

that the cellular property causing the applicant to be in excess of the

10 percent population overlap, or enough equity to bring the entity

into compliance with the attribution threshold, will be divested within

90 days of the PCS license grant to bring ownership interest below the

permitted attributable ownership limits. If the PCS applicant is

otherwise qualified, the PCS application will be granted subject to a

condition that the PCS licensee come into compliance with the PCS/

cellular cross-ownership rule within 90 days of grant.

105. As a condition of its PCS license, within 90 days of PCS

license grant the PCS licensee must certify to the Commission that the

applicant and all parties to the application have come into compliance

with the PCS-cellular cross-ownership rules. If the PCS licensee fails

to submit this certification within 90 days, the Commission will invoke

the condition on the PCS license, cancelling it immediately and

retaining all monies tendered. In addition, the Commission may

investigate whether the certifications on divestiture are evidence of

misrepresentations that call into question the party's qualification to

hold its cellular license. The PCS licensee may divest the prohibited

interest to an interim independent trustee if a buyer has not been

secured in the required time frame as long as the applicant has no

interest in or control of the trustee, and the trustee may dispose of

the license as it sees fit.

Construction Requirements

106. In the Second Report and Order, the Commission stated its

expectations that broadband PCS would be a highly competitive industry

and that licensees would have the incentive to construct facilities to

meet the demand for service in their licensed areas. The Commission

concluded that specific channel loading requirements are unnecessary;

however, it required licensees to meet specified construction

benchmarks to ensure efficient spectrum utilization and service to the

public. Specifically, it required licensees to offer service to one-

third of the population in their service area within five years of

licensing, two-thirds of the population in their service area within

seven years, and 90 percent of the population within ten years. The

Commission stated that failure to meet these requirements would result

in forfeiture of the license and the licensee would be ineligible to

regain it.

107. The Commission believes that PCS will be a highly competitive

service and that licensees will have incentives to construct facilities

to meet the service demands in their licensed service areas. Further,

it believes that the use of competitive bidding for PCS licensing and

the restrictions on the amount of spectrum that a licensee may control

in a geographic area will limit the likelihood that spectrum will be

warehoused. Nevertheless, the Commission continues to believe that

minimum construction requirements are necessary to ensure that PCS

service is made available to as many communities as possible and that

the spectrum is used effectively. The Reconciliation Act amendments

require the Commission to impose performance requirements, but the

Commission believes that relaxation of the requirements is desirable to

ensure an economical deployment of the service to promote opportunities

for PCS ``niche'' services, and to facilitate a competitive market.

108. Accordingly, the construction requirements are amended as

follows. All 30 MHz broadband PCS licensees will be required to

construct facilities that provide coverage to one-third of the

population of their service area within five years of initial license

grant and to two-thirds of the population of their service area within

ten years. The 10 MHz licensees will be required to meet a single

construction requirement of providing coverage to one-fourth of the

population of their service area within five years; or alternatively,

they may submit an acceptable showing to the Commission demonstrating

that they are providing substantial service. The Commission recognizes

that these requirements are less than the requirement for narrowband

PCS licensees, but it believes that this difference is appropriate

given the higher expected construction costs involved for broadband

PCS. Moreover, since licensees must purchase their licenses, they will

have added economic incentives to construct their systems as rapidly as

possible and introduce service to a significant percentage of the

population. In this regard, the Commission also believes that these

relaxed construction requirements may increase the viability and value

of some broadband licenses, especially those in less densely populated

service areas. Finally, since most areas are already served by cellular

and SMR providers, it is unnecessary to require PCS licensees to

provide identical or similar services to areas where it is uneconomic

to do so. With regard to the 10 MHz licensees, the reduced construction

requirement will make these licenses more attractive to applicants

intending to provide residential, cutting-edge niche services or

services to business and educational campuses where the population may

be small except during business or school hours.

109. At the five-year benchmark the Commission will require all

licensees, and again at the 10-year benchmark for 30 MHz licensees, to

file a map and other supporting documentation showing compliance with

the construction requirements. Licensees failing to meet the population

coverage requirements described above will be subject to the license

forfeiture penalties adopted in the Second Report and Order. Even with

these requirements, factors such as incumbent microwave operation or

sparse population density in some instances could make compliance

difficult. In instances where the circumstances are unique and the

public interest would be served, the Commission will consider waiving

the requirements on a case-by-case basis. These revised construction

requirements will ensure efficient spectrum utilization and promote

significant nationwide coverage without imposing substantial cost

penalties on licensees that serve less densely populated areas. In this

regard, the Commission believes that these changes generally address

the concerns of those parties that suggested lowering the construction

requirements for designated entities or for BTA service areas.

110. The Commission also recognizes the desirability of encouraging

more than one provider to serve a diverse geographic area, and notes

that resale of a licensee's geographic area to other entities, subject

to the licensee's control, is not prohibited by its rules. Accordingly,

it recognizes that licensees may resell spectrum, and believes that

this will facilitate the deployment of PCS. Whether or not the licensee

enters into resale arrangements, it will be responsible for insuring

that the coverage requirement and all the other requirements of the

rules are met. The reseller will not be a separate licensee, but

rather, will operate subject to the control of the licensee. Resale

will encourage service provision, particularly to rural areas, and

allow smaller, predominantly rural companies to participate in PCS. The

Commission intends to examine in another proceeding whether resale

arrangements confer attributable interests on the reseller.

111. In summary, these relaxed construction requirements will

foster provision of PCS services and will promote diversity in their

provision. Permitting licensees to resell service subareas, subject to

the licensee's control, will permit smaller, rural companies to provide

PCS without participating in the competitive bidding process. Finally,

the development of PCS in rural and other under-served areas will be

closely monitored, and, if necessary, these construction requirements

will be readdressed to ensure that the Commission's goals for wide area

service are met.

Technical Standards

112. Roaming and Interoperability Standards. In the Second Report

and Order, the Commission provided maximum flexibility in technical

standards to allow PCS to develop in the most rapid, economically

feasible and diverse manner. Specific technical standards were

prescribed only to the extent necessary to avoid harmful interference.

The Commission recognized that several industry technical and standards

groups were addressing matters related to PCS technical standards. It

encouraged those groups to consider ways of ensuring that PCS users,

service providers, and equipment manufacturers could incorporate

roaming, interoperability and other important features in the most

efficient and least costly manner, noting that PCS will be more useful

to the extent that users are not limited by geography or by their

ability to use their equipment with different systems.

113. The Commission continues to believe that a flexible approach,

applying only those standards necessary to prevent interference, is

appropriate. As indicated in the Second Report and Order, this will

allow PCS to develop in the most rapid, economically feasible and

diverse manner. Interoperability for PCS is an important and beneficial

goal; however, acceptable interoperability is likely to emerge between

PCS licenses in a timely manner without the Commission's intervention.

The Commission's decisions to provide for large regional MTA licenses,

to move all PCS licenses to the lower band, and to permit further

aggregation of spectrum blocks across geographic regions all foster

wide-area roaming and interoperability. In addition, competitive

bidding for PCS licenses will facilitate the development of regional or

nationwide systems.

114. The Commission is also aware that the industry is now working

aggressively to complete several voluntary interoperability standards

for PCS in a timely manner. It strongly supports these efforts and

continues to encourage the industry's work in this area. The

availability of interoperability standards will deliver important

benefits to consumers and help achieve the objectives of universality,

competitive delivery of PCS, that includes the ability of consumers to

switch between PCS systems at low cost, and competitive markets for PCS

equipment.

115. Interoperability, not only nationwide on one block but also

between PCS spectrum blocks, should be in the business interest of all

PCS providers. Such broad interoperability will increase the economies

of scale in manufacturing PCS equipment such as handsets, will made

more likely to subscribe to PCS because they can easily move from

carrier to carrier without having to purchase new handsets, and will

make it easier for PCS licensees to aggregate blocks of PCS spectrum up

to 40 MHz and to create wide-area or national PCS systems. For these

reasons, the Commission believes that it is in the public interest for

the industry eventually to achieve compatible interoperability

standards for all PCS spectrum blocks. Nevertheless, it understands

that the industry is not yet ready to arrive at any standard. In

addition, the Commission does not want to discourage innovation in

designing PCS services. Therefore, at this time the Commission is not

mandating that the industry arrive at a single interoperability

standard across all PCS spectrum blocks.

116. The Commission intends to monitor the industry's progress in

developing and implementing PCS technical standards in the particular

hope that some of the standards proposed for PCS will be adopted or

near completion at the time of the broadband PCS auction. If the

development of PCS technology is not proceeding in a manner that will

accommodate roaming and interoperability, the Commission may revisit

this issue and consider what actions the Commission may take to

facilitate the more rapid development of appropriate standards.

Finally, to facilitate international acceptance of U.S. PCS technology,

the Commission will be receptive to requests seeking its endorsement of

completed ANSI standards, provided that such endorsement does not limit

the flexibility of PCS licensees to select standards and technologies

best suited to their needs.

117. PCS Power Limits. In the Second Report and Order, the

Commission established a maximum e.i.r.p. of 100 watts and a maximum

antenna height above average terrain (HAAT) of 300 meters for PCS base

stations. The Commission recognized that most PCS experimental systems

operated at a maximum power of 10 watts e.i.r.p., but adopted a limit

of 100 watts e.i.r.p. for base stations to permit additional

flexibility in the design of PCS systems. It also specified a maximum

power limit of 2 watts e.i.r.p. for mobile units.

118. The Commission believes that increasing the maximum base

station power limit to 1640 watts e.i.r.p. will improve PCS licensees'

ability to configure their systems to best serve the needs of their

customers and to compete with other mobile services such as cellular

and wide-area SMR. Higher power will allow individual PCS base stations

to serve larger geographic areas more effectively. The ability to serve

larger geographic areas will also promote the goal of service to less

populated areas. The flexibility to use higher power will provide PCS

system operators greater flexibility in determining system

architecture, i.e., the number of base stations deployed to serve a

given area, based on service demands rather than adequate coverage

considerations. This change will also facilitate the use of new

technologies, such as high-gain, directional antennas, as well as

potential improvements to the design of subscriber products. Further,

there is no reason to restrict licensed PCS operations to afford

additional protection to unlicensed devices. Such a limit would be

detrimental to licensed PCS services and unfairly disadvantage blocks A

and C that are adjacent to the unlicensed spectrum. In addition,

unlicensed operations will be relatively short range and therefore can

be designed to resist adjacent channel interference. Accordingly, the

Commission is amending the rules to allow PCS base stations to operate

with up to 1640 watts e.i.r.p. It is also amending PCS power/HAAT

coordination distance requirements to reflect this increased maximum

power level.

119. While the Commission believes that the power limit for base

stations should be increased to 1640 watts e.i.r.p., this increase in

power should not be used in such a manner that the resulting PCS system

becomes unbalanced so that mobile units are unable to communicate with

the base station. To ensure balanced base-to-mobile and mobile-to-base

communications, the Commission is also limiting the transmitter output

power of the base station to 100 watts. By limiting the transmitter

output power as well as e.i.r.p., it intends to promote the use of the

high gain, directional antennas to achieve the larger coverage areas

sought by the petitioners.

120. The Commission disagrees with those parties requesting higher

power for certain mobile and portable units. A lower power output limit

minimizes exposure to radio frequency energy, see infra Section VIII.

Further, increasing the power output limit for subscriber units would

necessitate unreasonably stringent and unenforceable coordination

requirements. Unless the location of such higher power mobile units

could be strictly controlled, interference could result to fixed

microwave operations and/or to other PCS systems in adjacent service

areas. For these reasons, the maximum power limit for mobile and

portable PCS transmitters will not be increased.

121. Protection of Fixed Microwave Operations. In the Second Report

and Order, the Commission stated that a principal concern in the

authorization of PCS in the 2 GHz band is that existing fixed microwave

operations be protected. It adopted the following approach for

providing such protection: 1) required PCS licensees to provide the

same level of protection to microwave operations that they currently

provide under Part 94 of the Commission's Rules and through the use of

EIA/TIA Bulletin TSB10-E criteria and methodology; 2) specified antenna

height and power limits for PCS; 3) adopted requirements for PCS

licensees to coordinate with fixed microwave operators; and, 4)

provided methods for calculating interference from PCS to incumbent

microwave operations.

122. Specifically, in the Second Report and Order, the Commission

adopted carrier-to-interference criteria for protection of short and

medium length microwave links of 25 km (about 15 miles) or less. For

path lengths longer than 25 km, where reliability is more dependent on

the relative noise threshold and faded signal level, it limited the

level of an interfering signal to that which would cause a 1 decibel

(dB) degradation in the signal-to-noise ratio for analog systems or

which would cause an increase in bit-error-rate (BER) from 10-6 to

10-5 for digital systems. Finally, the Commission endorsed

procedures for calculating interference to microwave operations.

123. In the Second Report and Order, the Commission stated that

with certain modifications, the level of protection provided under Part

94 of its rules and through application of TSB10-E criteria and

methodology is appropriate and will provide adequate protection to

microwave users from PCS operations. It also stated that it would

accept the new TSB10-F procedures, when adopted by EIA/TIA, for use in

demonstrating compliance with the technical standards for PCS to fixed

microwave interference. Although many parties request that operators be

required to use TSB10-F exclusively instead of that set out at Appendix

D of the Second Report and Order, the Commission cannot adopt this

standard as the only acceptable method for determining interference to

microwave operations from PCS operations until it has had a chance to

evaluate its merits and provide it to the public for comment.

Therefore, the Commission will maintain the procedures adopted in the

Second Report and Order with some modifications.

124. A prior coordination procedure is necessary to ensure that

potential issues of interference are resolved before deployment of PCS

systems. The Part 21 coordination requirements are appropriate for

coordination of PCS and microwave facilities. These coordination

procedures are generally familiar to the parties involved and are

sufficient to address potential interference problems. Accordingly, the

Commission will amend the PCS rules to include coordination procedures

similar to those contained in Part 21. Coordination under Part 21 does

not require written notification, and there is no reason to require

that the PCS-to-microwave coordination be treated differently.

125. Further, the Commission believes that permitting PCS entities

to pay for and upgrade incumbent microwave operation, such as providing

better antennas or filters that would prevent interference, would

facilitate the implementation of PCS. Specifically it would provide

more choices and opportunity for sharing between the two services.

However, mandating such upgrades of the incumbents' facilities would be

difficult to regulate. Therefore, the Commission will allow for such

upgrades when all parties agree but will not mandate them.

126. The Commission is concerned that excess fade margins in

incumbent systems will inhibit the ability of PCS entities and

microwave operations to share spectrum. However, it also recognizes

that microwave systems vary in size, complexity and degree of

reliability needed. Therefore, there is no way of adopting general

rules mandating an acceptable fade margin that would apply fairly in

all cases. Accordingly the Commission will not set limits on the amount

of allowable fade margin in a microwave system, but it suggests, that

incumbent licensees limit the fade margin in their systems to only that

necessary for reliable service so as to help facilitate the

implementation of PCS.

127. Further, the Commission notes that its Rules contain out-of-

band radiation limits that must be met by PCS entities and that under

the revised allocation PCS is only allocated spectrum in the 1850-1990

MHz band, so there is 120 MHz of separation between PCS and PPMRS

operations. In addition, the current PCS rules provide for strict out-

of-band emission limits, which are sufficient to protect microwave

operations in adjacent bands, and, therefore, the Commission will not

adopt any additional coordination or protection requirements for PCS

operations.

128. The Commission does not believe that PCS licensees should be

required to submit separate applications and obtain separate

authorizations for each transmitter in their system. The information

that would be submitted on their applications is unnecessary to the

Commission, and its filing would be overly burdensome for PCS

licensees.

129. Finally, the Commission believes automatic penalties on PCS

operations that interfere with fixed microwave users are unnecessary

and inappropriate. As the Commission stated in the Second Report and

Order, a principal concern in the authorization of PCS in the 2 GHz

band is that existing fixed microwave operations be protected. If

interference were to occur, the PCS licensee would be expected to take

appropriate action to resolve that interference. In cases where the PCS

licensee did not take appropriate action, the Commission's current

remedies, either forfeitures or revocation of licenses, are sufficient.

130. PCS-to PCS Interference Standards. In the Second Report and

Order, the Commission established a limit for spurious emissions

appearing outside of the spectrum allocated to PCS. No limit was

specified for spurious emissions appearing within the PCS spectrum. The

Commission also adopted minimal standards for PCS transmitter frequency

stability, stating only that the stability must be sufficient to ensure

that the fundamental emission remains within the authorized frequency

block.

131. The Commission believes that limits on spurious emissions

outside of the frequency block employed by a PCS licensee are needed to

reduce the potential for harmful interference to other PCS operations

as well as other radio services operating on spectrum outside of the

PCS bands. Accordingly, it is amending the rules to indicate that the

spurous emissions limits apply to emissions appearing on all

frequencies outside of the frequency block employed by a licensee. It

also clarifies that, when testing to show compliance with the spurious

emission limits, the fundamental emission from the transmitter must be

located as close the edge of the adjacent band as the transmitter is

designed to operate. This will ensure that the emission limits are met

under all normal operating conditions.

132. The Commission does not agree that the limits for spurious

emissions should be further restricted when those emissions fall within

the frequency bands allocated for unlicensed PCS devices but does feel

that the standards for measuring spurious emissions need to be

clarified. The measured levels of spurious emissions are dependent, to

an extent, on the bandwidth of the measuring instrument. Specifying a

minimum resolution bandwidth will eliminate confusion within the rules

and provide repeatable measurement results. However, the Commission

does not accept the proposed bandwidth of 1.0 percent of the emission

bandwidth. Limits are placed on spurious emissions in order to reduce

the potential for causing harmful interference. Ideally, the resolution

bandwidth of the measuring instrument should be adjusted as close as

possible to the bandwidth of the receiver for which interference

protection is being provided. Near the frequency bands employed for

PCS, typical receiver bandwidths can range from tens of kilohertz to

several megahertz. Since the resolution bandwidth on most measuring

instruments does not go above 1 MHz, this is typically the bandwidth

employed by the Commission when measuring spurious emissions above 1000

MHz. The Commission believes that the use of a resolution bandwidth of

1 MHz is also appropriate for PCS equipment and is amending the rules

to add this specification.

133. The Commission also clarifies that these limits apply to both

the transmitter, as tested during type acceptance, and the operating

system, as installed by the licensee. The level of the spurious

emissions can be affected by the type of antenna employed by a

licensee. It is for this reason, among others, that the Commission also

may require a licensee to provide additional attenuation to spurious

emissions, even beyond those limits stated in the regulations, when

these emissions cause harmful interference to other users of the RF

spectrum. The Commission is further clarifying the rules to note that

additional attenuation can be required under such circumstances.

134. The measurement procedures for testing frequency stability are

already specified in the regulations. As the frequency stability

standard requires only that the fundamental emission stay within the

authorized frequency block, the transmitter must be tested with the

fundamental emission located as close to the edge of the authorized

frequency block as the transmitter is designed to operate in order to

demonstrate compliance under all normal operating conditions.

135. Enhanced 911 Standards. In the Second Report and Order, the

Commission indicated that it would address matters relating to enhanced

911 (E-911) capability in PCS, cellular, and other mobile services in a

future rule making proceeding. The development of an E-911 standard

will necessitate consideration of issues affecting matters beyond PCS

and therefore is more appropriately addressed in a separate proceeding.

The Commission expects to begin this proceeding shortly and will

address the issue of a single E-911 standard at that time.

Unlicensed PCS

136. Spectrum Allocation. In the Second Report and Order, the

Commission allocated 40 MHz of spectrum for unlicensed PCS devices. The

1900-1920 MHz band was designated for asynchronous (primarily data)

devices, and the 1890-1910 MHz and 1920-1930 MHz band was designated

for isochronous (primarily voice) devices. The Commission concluded

that this 40 MHz of spectrum would be sufficient to meet the demands of

both nomadic and non-nomadic data and voice applications. Further, it

noted that this band plan provides both asynchronous and isochronous

operations an equal share of the 1910-1930 MHz band, which has fewer

incumbent fixed microwave facilities that must be relocated before full

use of the band can be made for unlicensed PCS.

137. As noted above, the Commission has amended the allocation and

frequency plan for licensed PCS. Under this reallocation the amount of

spectrum provided for unlicensed PCS devices is reduced from 40 to 20

MHz. Specifically, the 20 MHz of unlicensed PCS spectrum at 1890-1910

MHz is being reallocated to licensed PCS operations. The decision to

reallocate this spectrum preserves the 1910-1930 MHz band for

unlicensed devices. The Commission notes that this band is the most

lightly loaded portion of the PCS spectrum and is the spectrum where

most unlicensed equipment was expected to operate initially. Further,

since unlicensed operations are restricted to very low power, they

should be able to share or ``reuse'' the available spectrum very

efficiently. Accordingly, the Commission believes that this reduction

will not have a major effect in the near term on devices that will be

able to operate on the unlicensed PCS bands. As noted above, in the

near future the Commission will initiate a proceeding to consider

allocation of additional spectrum to meet long term spectrum

requirements for unlicensed PCS devices.

138. Taking into account this reduction in the total amount of

spectrum available for unlicensed operations, the Commission finds that

the interests of all concerned parties would be best served by

retaining the plan to provide 10 MHz at 1910-1920 MHz for asynchronous

or data devices, and 10 MHz at 1920-1930 MHz for isochronous or voice

devices. This approach is balanced and treats both voice and data

proponents fairly and equitably. Further, this approach will encourage

the clearing of all existing microwave users from the entire 1910-1930

MHz band, thereby permitting the rapid introduction of nomadic voice

and data devices. Accordingly, the Commission is amending its spectrum

plan for unlicensed devices, as indicated above.

139. Coordination. In the Second Report and Order, the Commission

designated UTAM as the coordinating body to manage the transition of

spectrum from fixed microwave to unlicensed PCS. The Commission

conditioned this designation on UTAM's submission and the Commission's

acceptance of: (1) a funding plan that is equitable to all prospective

manufacturers of unlicensed devices, and (2) a plan for band clearing

that will permit the implementation of nomadic devices, in particular,

nomadic data PCS devices, as promptly as possible. It stated that UTAM

would be responsible for administering the transition, including

negotiating costs of relocation, ensuring that comparable facilities

are provided, and resolving disputes of interference to fixed microwave

from unlicensed PCS operations. Further, it required that any

unlicensed PCS device or system be coordinated through UTAM before

being initially deployed or subsequently relocated. The Commission also

required that all applicants for FCC equipment authorization of

unlicensed PCS devices be participants in UTAM.

140. The Commission continues to believe that its basic approach

for regulation of unlicensed PCS devices is appropriate. Based on the

record, UTAM is the most suitable entity to act as the coordinator for

unlicensed PCS devices. The Commission believes that UTAM is making

good faith efforts to be open and to include the participation of all

interested parties, including representatives of the data community.

Neither additional guidance nor requirements are needed for UTAM at

this time; there is no merit in eliminating UTAM's designation in the

rules at this time. There will be ample opportunity to review UTAM's

designation as the coordinator for unlicensed devices during the

Commission's review of its funding and band-clearing plans. If UTAM is

found unacceptable as a result of the review process, the Commission

can amend its rules at that time to designate another entity.

141. The Commission intends to consider conditional equipment

approvals for nomadic devices at the appropriate future time. When

spectrum is available, or soon will be available, for the operation of

nomadic devices, it will issue a Public Notice announcing that it will

begin accepting and processing applications for certification of

nomadic devices. If the Commission accepts such applications before the

spectrum is fully cleared for use by nomadic devices, the applications

will be processed, but the actual grants withheld until an announcement

is made that coordination is no longer required. At that time, the

grants, if justified, will be immediately issued. This approach

addresses any concerns that manufacturers will be able quickly to

introduce new nomadic equipment.

142. The Commission believes that the labels for coordinatable

unlicensed PCS equipment should also indicate that any relocation of

the device must also be coordinated through, and approved by, UTAM and

should include a toll-free number to assist users in contacting UTAM.

This additional information will not impose additional burden on

equipment manufacturers and will improve compliance with the

coordination requirements for unlicensed PCS devices. It does not

believe, however, that a more rigorous definition of a ``coordinatable

PCS device'' is needed. The current definition is adequate to protect

existing microwave operations from interference and also provides

equipment manufacturers flexibility in designing their equipment to

avoid such interference.

143. The Commission understands that the determination of whether

and to what degree an unlicensed PCS device is coordinatable may place

UTAM in a position of potential conflict of interest with its own

members. Nevertheless, UTAM, as the coordinator for unlicensed device

use, is responsible for ensuring that such devices do not cause

interference to existing microwave operations. Accordingly, the

Commission believes that it is entirely reasonable and prudent to

require that UTAM make a finding with regard to the degree to which an

unlicensed device can be coordinated and deployed. It intends that UTAM

make such determinations in concert with the requirements of Section

15.307(b) of the rules. In this regard, the Commission also feels that

a broad interpretation of the rules for preventing interference by

unlicensed devices, such as the requirement for verification that an

unlicensed device is being used at an authorized location, is

appropriate. This will afford UTAM latitude to develop its own policies

and interpretations for the wide range of unlicensed devices that are

expected to be developed. UTAM will therefore be allowed broad

flexibility in establishing the means it uses to fulfill its

responsibility for ensuring that unlicensed devices do not interfere

with existing microwave operations. Such means could include, where

appropriate, the use of authorized installers to ensure that unlicensed

devices do not cause interference.

144. Further, as part of its equipment authorization process, the

Commission will review closely the technical aspects of each unlicensed

device. This review will include all technical matters related to the

device's ability to be coordinated, as well as other measures that may

be imposed by UTAM on the operation of the device. This review will

provide oversight to ensure that such measures developed by UTAM are

sufficient to protect existing microwave from harmful interference.

145. The Commission believes that some modification of the rules is

appropriate to clarify the showings necessary to demonstrate compliance

with the activation and disabling requirements of Section 15.307.

Accordingly, it is amending the rules to indicate that each application

for certification must contain an explanation of all measures for

ensuring that the device cannot be activated until installation at its

authorized location as verified by UTAM and for automatically disabling

the device in the event that it is relocated outside the coordinated

geographic area. Such showings shall include all procedural safeguards,

such as the mandatory use of licensed technicians to install and

relocate the equipment, and a complete description of all technical

features controlling activation and disabling of the device. These

showings, in addition with the findings required by UTAM, will be

adequate to demonstrate that a device is coordinatable and can be used

in a manner that will not cause interference.

146. The Commission concludes that the current test and measurement

procedures are adequate and will allow authorization of equipment to

commence without delay. The ANSI C63 Committee has already begun work,

in cooperation with WINForum, to develop specific procedures for

unlicensed PCS equipment. The Commission will address specific test and

measurement procedures developed by recognized national standards

bodies, such as ANSI C63, when they are completed.

147. Spectrum Etiquette. In the Second Report and Order, the

Commission adopted technical operating requirements for unlicensed PCS

devices. These requirements were based largely on a spectrum

``etiquette'' developed on a consensus basis by an association of

manufacturers and other interested parties known as the WINForum. The

Commission made some minor modifications to the WINForum etiquette to

take into account the allocation of additional spectrum for unlicensed

PCS, to improve spectrum efficiency and to address specific comments

and concerns. In particular, it divided the 40 MHz of spectrum for

unlicensed devices into two equal 20 MHz allocations; one for

isochronous transmissions at 1890-1900 MHz and 1920-1930 MHz and one

for asychronous transmissions at 1900-1920 MHz. The Commission adopted

WINForum's 1.25 MHz channelization for the 1920-1930 MHz band, but

provided for up to 5 MHz channels in the 1890-1900 MHz band. The

asynchronous spectrum at 1900-1920 MHz was divided into two 10 MHz

channels. Separate technical requirements were specified for each

transmission method.

148. The Commission's initial decision provided spectrum for both

wideband and narrowband isochronous applications, but it is now

reducing the spectrum available for isochronous devices from 20 MHz to

10 MHz. With this reduction, it is important that the remaining

spectrum be used as efficiently as possible. In this regard, the

Commission believes that a 1.25 MHz channelization plan will foster

more efficient spectrum utilization. As indicated by those parties,

such a plan will more readily prevent a single user or system from

monopolizing the spectrum at a given location. A plan that provides

wider channels or no channelization at all could result in inefficient

use of the spectrum and preclude other parties from using the spectrum.

Further, a spectrum occupancy limit, as suggested by some parties,

would be practical or enforceable. A 1.25 MHz channel plan will

simplify equipment design and permit better management of spectrum use.

Accordingly, the Commission is adopting such a channelization plan for

the 10 MHz of isochronous spectrum. If in the future information is

presented that shows that wider channels can be accommodated without

compromising spectrum efficiency or monopolizing the spectrum (i.e.,

through use of reduced power levels for wideband systems, or

establishing a spectrum efficiency standard, etc.), this matter may be

revisited.

149. With regard to the asynchronous band, channelization is not as

critical for such transmissions, since asynchronous transmissions will

be of very short duration and not occupy the spectrum continuously.

Accordingly, the Commission is eliminating the channelization

requirements for the asynchronous spectrum.

150. The Commission does not believe that the power specification

should be based on mean rather than peak power. Given that a wide

variety of modulation methods will be permitted, measurement of mean

power could become complex and subject to differing interpretations.

This could lead to equipment design uncertainties and potential delays

and complications in equipment authorization. Measurement of peak power

is straightforward and will not unduly penalize any technology. The

Commission is therefore not altering the method specified in the rules

for measuring the output power of unlicensed PCS devices. Further, it

believes that a longer frame period could potentially reduce spectrum

efficiency and remains unconvinced that an increase in the frame period

would improve the likelihood of compatibility with future technical

standards for licensed PCS equipment. Therefore the rules in this

regard are not being modified.

151. With regard to the channel search requirements, the Commission

is amending the rules to permit a device to begin its search for an

unused channel at any point within a range of frequencies from a band

edge, as requested by the several petitioners. This will permit

manufacturers greater flexibility to use guard bands, if needed, while

retaining most of the spectrum efficiency advantages gained by orderly

selection of channels. The channel search rule does not significantly

increase the potential for two devices attempting to seize the same

channel at the same instant in time, nor does this requirement impede

the use of coordinated multi-cell systems. The existing requirement for

accuracy in monitoring signal levels should be deleted, since the

existing monitoring threshold requirements are sufficient to ensure

that unlicensed devices do not interfere with another.

152. The Commission believes that a requirement of periodic

acknowledgement of transmissions is necessary to ensure that a device

does not monopolize the spectrum. Therefore, it is modifying the

etiquette to require a transmitter to receive an acknowledgement of

transmissions from a system participant every 30 seconds and to cease

transmission if such acknowledgement is not received. It will also

permit control and signaling information to be transmitted for 30

seconds without acknowledgement, as requested by several parties.

153. With regard to duplex operation, some changes are appropriate.

While it recognizes that performing the listen-before-talk operation at

only one transmitter location may increase the potential for

interference, the Commission believes that this increase is low and is

outweighed by the benefits of simpler, most cost effective equipment

design. Therefore, provisions for paired duplex channel operation are

being incorporated into the rules. Further, the Commission feels that

an exception to the listen-before-talk provisions is appropriate for

systems that employ multicarrier shared antennas. Monitoring the

receive channel rather than the transmit channel should not

significantly increase the risk of causing interference to other

unlicensed PCS spectrum users and the rules are amended to allow this

approach.

154. The frequency stability requirements for unlicensed PCS

devices should be relaxed. The Commission believes that unlicensed PCS

devices will generally operate under the same range of temperature and

voltage conditions specified for other Part 15 devices. Accordingly,

the Commission is requiring that the operating frequency of unlicensed

PCS devices be maintained within 10 ppm over a temperature

range of -20 deg. C to +50 deg. C at normal supply voltage and for

variation in the primary voltage of 15 percent at 20 deg.

C. While the stability requirement 10 ppm is more strict

than for other Part 15 devices, this is necessary to ensure the proper

function of the etiquette. It is also relaxing from 40 dB to 30 dB the

limit for suppression of spurious emissions in the first adjacent

channels as requested by Ericsson and WINForum. This will reduce

equipment costs while still providing adequate interference protection

between unlicensed PCS systems.

Radio Frequency Exposure Limits

155. In the Second Report and Order, the Commission required PCS

licensees and equipment to comply with the standards set forth in ANSI/

IEEE C95.1-1992, ``Safety Levels with Respect to Human Exposure to

Radio Frequency Electromagnetic Fields, 3 kHz to 300 GHz'' (ANSI/IEEE

guidelines).\25\ The Commission stated that for purposes of determining

compliance with these standards, all handheld PCS equipment will be

considered to operate in an ``uncontrolled'' environment. It also noted

that the exclusions for low power devices contained in the ANSI/IEEE

guidelines only apply to transmitters operating at 1500 MHz and below.

Therefore, the Commission indicated that, pending an interpretation

from the IEEE, PCS equipment must demonstrate compliance with the ANSI/

IEEE guidelines for maximum specific absorption rates (SAR).\26\

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\25\The Commission stated that these standards will apply to PCS

operations pending completion of its complete review of standards

for RF exposure. See Notice of Proposed Rule Making, ET Docket No.

93-62, 58 FR 19393 (April 14, 1993). The Commission further

indicated that any RF exposure standards adopted in the instant

proceeding that do not conform with the final rules adopted later in

ET Docket No. 93-62 will be modified as appropriate.

\26\The Commission also indicated that it had requested a formal

interpretation from the IEEE as to whether the formula for

determining the power threshold for the exclusion from the standards

can be extrapolated up to 2200 MHz. See Letter from Thomas P.

Stanley to Andrew G. Salem, IEEE Standards Board (June 2, 1993).This

provision exempts a device from the SAR testing requirements, if the

device operates with power output below a certain threshold level.

Extrapolating the formula for this threshold up to 2200 MHz would

allow PCS transmitters to operate with about 330 milliwatts of

power.

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156. The Commission feels that the guidelines for RF exposure from

PCS base stations should apply according to the type of environment in

which the exposure takes place. Further, there is no need to employ the

uncontrolled exposure limits in those areas in the vicinity of a PCS

base station where there is restricted access by the general public and

exposure to the RF field is unlikely. Accordingly, the Commission is

amending the rules to include both the uncontrolled and controlled

limits for PCS base stations. The definitions of ``controlled'' and

``uncontrolled'' environments specified in ANSI/IEEE C95.1-1992 will

govern which limits will apply.

157. As noted above, the Commission requested a formal

interpretation from the IEEE as to whether the formula for determining

the threshold level for the exclusion from the RF exposure standards

can be extrapolated to the 2 GHz range. The IEEE radiated power

exclusion applies when a 2.5 cm separation distance is maintained

between the body and the radiating structure. In its response to this

request, IEEE stated that, while it cannot predict whether such an

extension of the standard would be incorporated into the next revision

of C95.1, extrapolation of the current formula to frequencies up to 2.2

GHz would be conservative.\27\ The Commissio

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