# Filing Procedures in the Multipoint Distribution Service and in the Instructional Television Fixed Service, Including Electronic Filing and Competitive Bidding

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## Record

- **Collection:** Federal Register
- **Document type:** Rule
- **Published:** July 17, 1995
- **Citation:** 60 FR 36524

## Text

SUMMARY: This Report and Order adopts a licensing plan under which we
will allot Multipoint Distribution Service (MDS) authorizations by
geographic areas, through a simultaneous multiple round bidding
process. The Report and Order also adopts a variety of measures to
streamline the application and implementation processes. It authorizes
the voluntary use of electronic filing for new MDS applications, as
well as electronic fee payments. It institutes computerized
interference studies utilizing new data elements to be included in a
revised MDS application form. It also makes clear that interference
disputes are to be resolved, in the first instance, through private
negotiations, with the FCC to serve only as a last resort. These
procedures are designed to expedite processing and facilitate
development of wireless cable, an industry that delivers video
programming to subscribers using MDS and Instructional Television Fixed
Service (ITFS) channels. This proceeding is intended to expedite more
service to the public and enhance opportunities for wireless cable to
reach its potential as a competitor to wired cable.

EFFECTIVE DATE: September 15, 1995.

FOR FURTHER INFORMATION CONTACT: Sharon Bertelsen at (202) 416-0892 or
Jerianne Timmerman at (202) 416-0881, Video Services Division, Mass
Media Bureau.

SUPPLEMENTARY INFORMATION:

Paperwork Reduction Act

The following collection of information has been submitted to the
Office of Management and Budget for review under Section 3504(h) of the
Paperwork Reduction Act. Copies of the submission may be purchased from
the Commission's copy contractor, International Transcription Service,
2100 M Street, N.W., Suite 140, Washington, D.C. 20037, (202) 857-3800.
Persons wishing to comment on this information collection should direct
their comments to Timothy Fain, (202) 395-3561, Office of Management
and Budget, Room 10102 NEOB, Washington, D.C. 20503. A copy of any
comments should also be sent to the Federal Communications Commission,
Office of Managing Director, Washington, D.C. 20554. For further
information contact Judy Boley, Federal Communications Commission,
(202) 418-0210.
OMB Numbers: None. This Report and Order adopts a new application
form, FCC Form 304, to be used for new MDS facilities, and several new
rules and amended rules. There is also a new FCC Form 304-A and FCC
Form 175-M.
Titles: Form 304: Application for a Multipoint Distribution Service
Authorization. Form 304-A: Certification of Completion of Construction
for a Multipoint Distribution Service. Form 175-M: Application to
Participate in an FCC MDS Auction. 47 CFR 21.930 (Five-year Build-out
Requirements), 21.931 (Partitioning of BTAs), 21.934 (Assignment or
Transfer of Control of BTA Authorizations), 21.937 (Negotiated
Interference Protections), 21.956 (Filing of Long-form Applications or
Statements of Intention) and 21.960 (Designated Entity Provisions for
MDS).
Action: New Collections.
Respondents: Businesses or other for-profit, small businesses or
organizations.
Frequency of Response: On occasion reporting requirements.
Estimated Annual Response: Form 304: 300 responses, 55 hours per
response; Form 304-A: 100 responses, .5 hours per response; Form 175-M:
1600 responses, .48 hours per response; Section 21.930: These filings
will not occur until FY 2001, 750 responses, 1 hour per response;
Section 21.931: 150 responses, 6 hours per response; Section 21.934:
200 responses, 1 hour per response; Section 21.937: 75 responses, 30
hours per response; Section 21.956: 200 responses, 3 hours per
response; Section 21.960: 550 responses, 2 hours per response.
Needs and Uses: FCC Form 304 will be used to ensure that the
respondent is qualified to become a Commission licensee. FCC Form 304-A
will be used to certify that the facilities as authorized have been
completed and that the station is ready to provide service to the
public. FCC Form 175-M will be used to determine whether the applicant
is legally, technically and otherwise qualified to participate in an
MDS auction. Section 21.930 will be used to determine whether the BTA
holder has met its construction requirements and to ensure that service
is promptly delivered to the public. Sections 21.931 and 21.937 will
ensure that the interference protection rules are complied with.
Section 21.934 is used to determine whether there has been unjust
enrichment to the party selling the station. Section 21.956 will be
used by the staff to determine whether to grant a BTA authorization.
Section 21.960 will prevent abuse of the special measures offered to
MDS auction winners claiming designated entity status.
A summary of the Report and Order follows. The complete text is
available for inspection and copying during normal business hours in
the MDS public reference room, Room 207, at the Federal Communications
Commission, 2033 M Street, N.W., Washington, D.C., and it may be
purchased from the Commission's copy contractor, International
Transcription Service, Inc., 2100 M Street, N.W., Suite 140,
Washington, D.C. 20037, (202) 857-3800. (Action by the Commission:
Chairman Hundt dissenting in part and issuing a statement;
Commissioners Quello and Barrett issuing separate statements; and
Commission Ness dissenting in part and issuing a statement.)
1. By this action, we adopt rules to facilitate the development and
rapid deployment of wireless cable services.\1\ As a result of our
actions in prior proceedings, wireless cable operators that use
spectrum in the Multipoint Distribution Service (MDS), often
supplemented with leased channels from the Instructional Television
Fixed Service (ITFS), have begun to provide a competitive alternative
to wired cable and other multichannel video programming
distributors.\2\ The rules we now adopt will accelerate that process by
setting streamlined measures to distribute unused MDS spectrum through
competitive bidding and by establishing a protected service area for
MDS stations that is large enough to allow operators flexibility they
need to design viable and competitive wireless cable systems. Adoption
of these rules will enable the Commission to lift the

[[Page 36525]]
current freeze on filing new MDS applications.\3\

\1\ Wireless cable programming to subscribers resembles cable
television, but instead of coaxial cable, wireless cable uses
microwave channels. Our use of the term ``wireless cable'' does not
imply that it constitutes cable television for statutory or
regulatory purposes.
\2\ Unless otherwise indicated, ``MDS'' includes single channel
Multipoint Distribution Service (MDS) and Multichannel Multipoint
Distribution Service (MMDS) applications and authorizations
collectively.
\3\ The Commission imposed a freeze on the filing of
applications for new MDS stations in Notice of Proposed Rulemaking
in PR Docket No. 92-80, 7 FCC Rcd 3266 (1992), 57 Fed. Reg. 24,006
(June 5, 1992).
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2. Specifically, we adopt in this order a licensing plan under
which we will allot, through a simultaneous multiple round bidding
process, one MDS authorization for each of the 487 Basic Trading Areas
(BTAs) and six additional BTA-like geographic areas.\4\ A BTA
authorization holder will be able to construct facilities to provide
wireless cable service over any usable MDS channels within the BTA, and
will have preferred rights to the available ITFS frequencies and ITFS
lease agreements within the BTA. A channel is usable if the proposed
station design is in compliance with the Commission's interference
standards.

\4\ Rand McNally defined 487 BTAs in the 1992 Commercial Atlas &
Marketing Guide. Since Rand McNally did not include a few areas, we
will add them to the list as BTA-like geographic areas, bringing the
total to 493 authorizations to be auctioned. See infra at para. 26.
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3. Under the new rules, the signals of a BTA authorization holder
cannot interfere with those of any other BTA authorization holder.
Recognizing, however, that BTA lines do not always track desired
service areas, the rules permit BTA authorization holders to negotiate
interference protection rights. In addition, the rules we adopt require
BTA authorization holders to honor the protected service areas of
incumbent MDS operators within their BTAs. In a companion order, also
adopted today, the Commission expanded the protected service areas of
existing MDS stations.\5\ These various licensees and applicants that
are authorized or proposed on or before the effective date of this
Report and Order, including those stations that are subsequently
modified, renewed or reinstated, are referred to throughout this Report
and Order as ``authorized or previously proposed facilities'' or
``incumbents.'' In order to facilitate the development of successful
wireless cable systems, the rules permit BTA authorization holders to
assign or transfer their entire BTAs, or partitioned portions of it, to
incumbents or other parties. (Unserved areas may be included as long as
the assignment or transfer takes place within the five-year build-out
period that the rules impose.) Because the BTA authorization holder may
be an incumbent, the rules permit the aggregation of existing and new
MDS and ITFS channels within a BTA.

\5\ Second Order on Reconsideration in Gen. Docket Nos. 90-54
and 80-113, FCC 95-231 (released June 21, 1995) (Secord Order on
Reconsideration).
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4. The Report and Order also adopts a variety of measures to
streamline the application and implementation processes. It authorizes,
for example, the voluntary use of electronic filing for new MDS
applications, as well as electronic fee payments. It institutes
computerized interference studies utilizing new data elements to be
included in a revised MDS application form. It also makes clear that
interference disputes are to be resolved, in the first instance,
through private negotiations, with the Commission to serve only as a
last resort.
5. We understand that the wireless cable industry has made
tremendous progress toward the transition to digital transmission.\6\
The rules we adopt today will facilitate that transition.

\6\ See, e.g., The Wireless Cable Association International,
Selected Papers from the First Annual Wireless Cable Technical
Symposium (February 4-6, 1995).
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6. Background. In 1983, to satisfy a growing demand for the
delivery of video entertainment programming to subscribers and to
provide competition to wired cable systems, the Commission reallocated
eight of the then twenty-eight ITFS channels for MDS use, and
authorized ITFS licensees to lease the excess capacity on their systems
to wireless cable operators.\7\ That action created wireless cable as a
multichannel video distribution medium, and in 1991, the Commission
made more channels available for wireless cable services.\8\ Today,
there are a maximum of thirty-three microwave channels used for
wireless cable in each market. These include thirteen MDS channels
(Channels 1, 2 or 2A, E1-E4, F1-F4 and H1-H3) and the excess capacity
on up to twenty ITFS channels (Channels A1-A4, B1-B4, C1-C4, D1-D4 and
G1-G4).\9\

\7\ Report and Order in Gen. Docket No. 80-112 and CC Docket No.
80-116, 94 FCC 2d 1203 (1983), 48 Fed. Reg. 33,873 (July 26, 1983).
Therein, the Commission also grandfathered interference protection
to existing ITFS applicants, permittees or licensees on these eight
E and F channels, resulting in twenty-eight ITFS channels in some
locales.
\8\ The Commission reallocated the H group channels from the
Operational Fixed Service to MDS and made MDS operators eligible for
authorization on vacant ITFS channels with specified restrictions.
Second Report and Order in Gen. Docket No. 90-54, 6 FCC Rcd 6792,
6793-94, 6801-06 (1991), 56 Fed. Reg. 57,808 (Nov. 14, 1991), recon.
denied, 7 FCC Rcd 5648 (1992). Last year, the Commission
consolidated processing of MDS and ITFS applications into one
organization. Amendment of Parts 0 and 1 of the Communication's
Rules to Reflect a Reorganization of Multipoint and Multichannel
Multipoint Distribution Services, 9 FCC Rcd 3661 (1994), 59 Fed.
Reg. 38,374 (July 28, 1994).
\9\ MDS channel 2A is only 4 MHz wide and lacks sufficient
bandwidth to transmit a standard television signal. Grandfathered
ITFS stations on the eight E and F channels also lease excess
capacity to wireless cable operators.
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7. Wireless cable is now similar to wired cable television in the
type of programming it provides, but differs from cable in how the
programming is transmitted to subscribers. Generally, a wireless cable
system may be described as a microwave station transmitting on a
combination of MDS and ITFS channels to numerous receivers with
antennas, such as single family residences, apartment complexes,
hotels, educational institutions, business entities and governmental
offices. The range of the transmission depends upon the transmitter
power, the type of receiving antenna and the existence of a line-of-
sight path between the transmitter or signal booster and the receiving
antenna.
8. Over the past few years, the wireless cable industry has
experienced substantial growth and has emerged as an effective
competitor to wired cable in many locations.\10\ This rapid growth is
due, in part, to program access provisions and changes in other
regulations that have increased access to financing. MDS is a heavily
encumbered service. Most of the thirteen MDS channels have already been
authorized in the largest metropolitan areas, especially for locations
in the eastern half of the country. Thus far, MDS has developed almost
entirely in large and medium-sized cities, though MDS systems also
serve many smaller communities in the western states. In addition to
the approximately 170 operating wireless cable systems, many
conditional licenses have been issued to entities that, presumably, are
in various stages of constructing their systems. Finally, the MDS
landscape includes MDS systems proposed in applications now being
processed at the Commission.

\10\ See Annual Assessment of the Status of Competition in the
Market for the Delivery of Video Programming, 9 FCC Rcd 7442, 7482-
88 (1994), 59 Fed. Reg. 64,657 (Dec. 15, 1994). The Commission is
required to file such reports pursuant to the Cable Television
Consumer Protection and Competition Act of 1992, Pub. L. No. 102-
385, Sec. 628(g), 106 Stat. 1460 (amending the Communications Act of
1934), codified at 47 U.S.C. Sec. 548(g). The Commission recently
adopted a Notice of Inquiry to obtain information needed to prepare
the annual assessment that will be released in 1995, FCC 95-186
(released May 24, 1995), 60 Fed. Reg. 29,533 (June 5, 1995).
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A. Filing Procedures and Service Rules

9. Proposals. On December 1, 1994, the Commission released a Notice
of Proposed Rulemaking in this proceeding which solicited comment on
proposals that would modify our MDS filing procedures and use
competitive bidding to select from among mutually exclusive

[[Page 36526]]
applicants.\11\ In the Notice, the Commission proposed that applicants
file short-form applications for established geographic service areas
to identify mutually exclusive applicants for competitive bidding
purposes and that the successful bidders file long-form applications.
Notice at 7669-71. The Notice suggested the use of predetermined
geographic areas, such as Metropolitan Statistical Areas (MSA) and
Rural Service Areas (RSA) or Areas of Dominant Influence (ADI).\12\
This proposal envisioned that we would release a public notice
announcing auctions by geographic area, specifying the filing period
for short-form applications (FCC Form 175) \13\ and the applicable
bidding procedures. Mutually exclusive applicants would bid for all
usable MDS channels in that area as a package and the auction winner
would be permitted to file long-form applications for conditional
licenses to operate stations anywhere throughout the service area
provided the specific engineering design of their MSD stations meets
the Commission's interference protection standards with respect to all
authorized or previously proposed MDS and ITFS facilities. Long-form
applications accepted for filing would be proposed for grant by a
Commission public notice, announcing that the applications are accepted
for filing and opening a thirty-day period for filing petitions to
deny. See 47 U.S.C. Sec. 309(b); 47 CFR 21.30. The Notice observed that
these filing procedures would enable operators to amass MDS channels,
would avoid the lengthy delay associated with licensing stations site-
by-site and therefore would allow operators to enhance their services
more rapidly. The Notice asked commenters to determine which type of
geographic areas would be most suitable for MDS and to address the
definition of protected service area. In particular, we requested
comment on whether the current definition of an MDS station's protected
service area would be appropriate,\14\ or whether the boundary of the
geographic area designed for auction purposes should become the
protected service area. We also asked commenters to discuss the
interference standards for service to the areas adjacent to the
boundaries between geographic areas. Although the Notice identified
this approach of licensing MDS channels as the preferred approach, we
also invited comment on alternative licensing procedures.

\11\ Notice of Proposed Rulemaking in MM Docket No. 94-131 and
PP Docket No. 93-253, 9 FCC Rcd 7665 (1994), 59 Fed. Reg. 63,743
(Dec. 9, 1994) (Notice). The only aspect of the Notice which applied
to ITFS was the electronic filing proposal. In a separate
proceeding, the Commission recently adopted improvements to the ITFS
licensing process, including a window filing procedure. Report and
Order, Amendment of Part 74 of the Commission's Rules With Regard to
the Instructional Television Fixed Service, MM Docket No. 93-24, 10
FCC Rcd 2907 (1995), 60 Fed. Reg. 20,241 (Apr. 25, 1995).
\12\ MSAs and RSAs are standard geographic areas used by the
Commission for administrative convenience in licensing cellular
radio systems. The Commission has also used MSAs since 1983 for
making mutually exclusive determinations for MDS applications filed
for the E or F channels under 47 C.F.R. Sec. 21.901(d)(5). ADIs are
standard geographic areas that were developed by Arbitron Ratings
Company. Each county in the United States is placed within one of
209 ADIs, the lowest numbered ADI having the highest population.
\13\ FCC Form 175 contains the applicant's name, the markets in
which the applicant wishes to bid, the persons authorized to make or
withdraw a bid, whether the applicant is qualified as a designated
entity under 47 C.F.R. Sec. 1.2110, certifications that the
applicant is legally, technically, financially and otherwise
qualified, and identification of all parties involved in agreements,
or certification that no agreements exist, relating to the
authorizations being auctioned or the bidding process.
\14\ 47 C.F.R. Sec. 21.902. In another order, also adopted
today, the Commission amends 47 C.F.R. Sec. 21.902, to expand the
protected service area for authorized or previously proposed MDS
facilities. Second Order on Reconsideration at Paras. 2-31.
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10. The Notice suggested an alternative approach that would limit
applications to predetermined sites where there are vacant E, F or H
channels. Notice at 7671-72. Under this approach, the Commission would
identify such sites based upon the location of an already authorized E,
F or H channel. The Commission would issue multiple public notices
specifying the filing period and applicants would file a short-form
application to identify mutually exclusive situations for purposes of
competitive bidding. The auction winner would be required to file a
long-form application containing a complete engineering proposal and
specifying a compatible station design with the Commission's
interference protection standards to all previously proposed or
authorized MDS and ITFS facilities.
11. Under another alternative presented in the Notice, the
Commission would periodically open national filing windows, with no
geographic restrictions on filing for available MDS channels. Notice at
7672-73. Pursuant to this proposal, we would release a public notice
announcing the filing window for available channels. This proposal
would initially require a long-form application, containing the
applicant's complete technical proposal, to determine mutual
exclusivity before competitive bidding procedures are implemented. The
Notice pointed out that this approach would likely result in a larger
number of mutually exclusive applications and increase the possibility
of ``daisy-chains'' (interlinking application proposals at different
locations), which would require a more complicated and time consuming
competitive bidding process, including subsequent rounds of auctions to
resolve all mutual exclusivities in a daisy-chain. We invited
commenters favoring a national window approach to recommend ways to
resolve the daisy-chains that might arise under this proposal.
12. As an option to the national filing window approach, the Notice
discussed limiting eligibility to file in the first window to existing
licensees and system operators who, at the time the application is
filed, are operating with a certain minimum number of channels. Notice
at 7673. In many situations the acquisition of a small number of
additional channels may be essential for launching a whole new wireless
cable system in a given area. This approach would allow existing
wireless cable operators to accumulate the critical mass of channels
necessary to operate competitive wireless cable systems. We asked
commenters favoring this option to suggest eligibility requirements to
govern the filing of applications in this first window.
13. Resolution. After careful consideration of the merits of the
various proposals we raised in the Notice, we continue to prefer a
filing approach where applicants file short-form applications and
auction winners file long-form applications. We have decided that BTAs
are the most appropriate geographic area for MDS. The boundaries of
each geographic area, with the exceptions of channels obtained through
leases with ITFS licensees, will become the protected service area for
the auction winner. The auction winners will be issued authorizations
for specific geographic areas and will be permitted to operate one or
more MDS transmitting stations and signal boosters anywhere inside the
service area, provided the specific engineering design meets the
Commission's interference protection standards to all authorized or
previously proposed MDS and ITFS facilities, and complies with the
limits we establish for signal strength along the perimeter of the
geographic area. See infra at Paras. 38-41. Following the auction,
there would be a five year build-out period in which an authorization
holder can expand service or initiate new service within their area
without competing applications. The authorization holder will also be
permitted to partition its area along established geopolitical
boundaries and enter into contracts with eligible parties, allowing
such parties to

[[Page 36527]]
file long-form applications for usable MDS channels within that
partitioned area. See infra Paras. 34-35. This will permit broad
participation from entities of all sizes. This framework provides the
most efficient system of disseminating MDS licenses because service
areas are easily identified and authorizations are promptly granted
with minimal administrative or judicial delays. This approach will also
provide operators sufficient flexibility to design systems that satisfy
consumer demand.
14. We emphasize that there is no perfect or simple filing approach
to adopt at this time for new MDS authorizations given the history of
the service, the characteristics of the technologies involved, the
implementation of competitive bidding procedures, and our goal to
rapidly enhance wireless cable systems as viable competitors in the
multichannel video marketplace. We also reiterate that MDS is a heavily
encumbered service. Although conditional licenses in some markets for
one or more channels have been forfeited for failure to comply with
express conditions or to timely construct, in a majority of the markets
only small portions are unserved and few channels are available. Of the
thirteen MDS channels, it is possible that no channel remains available
for prospective bidders for as many as 59 of the cities of the top 100
ranked television markets. There are possibly two or less channel
available in as many as 90 percent of these market cities. Moreover,
the fixed 35-mile protected service areas of MDS incumbents, adopted
today in a separate proceeding, will occupy substantial portions of
most BTAs and typically cross BTA boundaries, especially in the eastern
half of the country where BTAs are relatively geographically smaller.
By enabling incumbents to continue providing interference-free service
to subscribers within the expanded 35-mile areas, it is likely that in
a substantial number of BTAs, it may be difficult, if not impossible,
for an auction winner to locate a station anywhere in the BTA to
provide both interference-free service and the necessary interference
protection to protected areas of incumbents; unless either the auction
winner is the incumbent, negotiates an interference agreement with the
incumbent or would acquire the authorization of the incumbent.\15\ We
emphasize that prospective bidders must carefully ascertain the extent
of incumbent operations and authorized but unconstructed facilities in
any BTAs prior to bidding. Further, where there remains outstanding at
the time of auction a pending application, petition for
reconsideration, reinstatement request or application for review
affecting any BTA, winning bidders would acquire any authorization
conditioned upon the outcome of Commission actions on such applications
or pleadings. Prospective bidders must consider the total impact of
incumbents in their valuation of the auction areas for competitive
bidding purposes.

\15\ In assessing MDS channel availability, we assumed that each
authorized or previously proposed MDS station has a protected
service area of 35 miles, i.e., the expanded service area adopted
today in a related order. Second Order on Reconsideration.
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15. With regard to the definition of the service area to be
authorized for MDS, we conclude that issuing authorizations by Basic
Trading Areas (BTA) reflects the best balance of competing
considerations. We considered several service area options including
Metropolitan Statistical Areas (MSA) and Rural Service Areas (RSA),\16\
the television Areas of Dominant Influence (ADI) and the analytically
similar Designated Market Areas (DMA),\17\ Basic Trading Areas (BTA)
and a combination of service areas that vary in size. The record
reflects that because many MSAs are much smaller than actual service
areas existing today, wireless cable stations licensed to different
entities in adjacent MSAs would have great difficulty providing service
to their MSA without causing harmful interference to systems in
adjacent areas. In some cases, operators who designed their systems to
maximize population, are serving subscribers located beyond the MSA in
which the transmission facilities are located. Furthermore, the record
indicates that the use of MSAs and RSAs would result in unnecessary
fragmentation of natural markets and in order to protect the boundaries
of adjacent MSAs and RSAs, in many cases, stations would have to
operate at extremely low levels of power. While simultaneous multiple
round bidding would permit the consolidation of interdependent MSAs and
RSAs, and licensees could acquire additional markets after auctions
through the assignment and transfer process, we believe that these
options may result in unproductive regulatory and transaction costs for
the Commission and applicants. We believe that the use of larger
service areas would alleviate these problems and would reduce the need
for and cost of interference coordination between neighboring
licensees.

\16\ MSAs and RSAs are used by the Commission in licensing
cellular radio systems. All of the 306 MSAs and 428 RSAs and the
counties they comprise are listed in Public Notice, Report No. CL-
92-40, ``Common Carrier Public Mobile Services Information, Cellular
MSA/RSA Markets and Counties,'' 7 FCC Rcd 742 (1992). See also 47
CFR 22.909.
\17\ DMAs are standard geographic areas developed by A.C.
Neilsen Company in which each county in the continental United
States is placed within one of the 211 DMAs, the lowest numbered DMA
having the highest population.
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16. ADIs and DMAs, on the other hand, tend to be much larger than
the area in which reliable MDS service is available using today's
technology. One commenter indicates that ADIs tend to be over seven
times the size of actual wireless cable protected service areas (of 710
square miles) and therefore concludes that ADIs are the least
appropriate service area for MDS. It explains that ADIs are designed
for television advertising measurement purposes and unlike wireless
cable, the signal of television stations and hence the size of ADIs are
attributed to cable carriage of television signals. Furthermore, the
cost of acquiring an ADI authorization through competitive bidding,
building systems and marketing services in the larger ADIs may
unnecessarily restrict entry to a small number of applicants. BTAs
offer a compromise in size that may best approximate MDS service areas.
Although varying in geographic shape and size, BTAs are bigger than
MSAs generally since they often include the MSA and surrounding
counties, thus mitigating harmful interference among adjacent areas.
BTAs offer sufficiently large service areas to allow applicants
flexibility in designing a system to maximize population coverage and
take advantage of economies of scale necessary to support a successful
operation. Yet BTAs are generally smaller than ADIs, making the initial
cost of acquiring the authorization through competitive bidding lower,
and therefore providing greater opportunity for participation by small
businesses, female and minority entrepreneurs and rural telephone
companies. The use of BTAs combined with geographic partitioning will
encourage further participation by a wide variety of applicants. See 47
U.S.C. 307(j)(4)(C). Finally, BTAs provide a manageable number of
discrete filing areas for competitive bidding purposes.
17. We recognize that the majority of the commenting parties
express support for the national filing window approach. We believe,
however, that using national filing windows would most likely result in
more of the very substantial processing and administrative delays that
have long plagued the development of the wireless

[[Page 36528]]
cable service. Given the history of the service, we believe such delays
are inherent in site-specific licensing, which would require analysis
of long-form applications containing the applicant's complete
engineering proposal before the competitive bidding process begins.
Since the national filing window approach would likely result in a
larger number of mutually exclusive applications and daisy-chains,
implementation would likely require significant Commission resources
and a substantial amount of time to conduct the multi-part auctions (to
resolve the daisy-chains) recommended by some commenters or otherwise
complete the competitive bidding process. We acknowledge the concerns
of some commenters that the licensing approach should afford MDS
licensees flexibility to locate systems wherever necessary to maximize
coverage. The record reflects that the success of the wireless cable
industry thus far has been based upon negotiated agreements with
neighboring system operators and strong partnerships with ITFS
licensees. The filing system and procedures we adopt herein are
expected to facilitate such negotiations and afford wireless cable
operators the flexibility to improve existing systems, introduce new
systems and implement digital technologies.
18. Indeed, the record indicates that geographic licensing may be
the most efficient method to these ends in a digital environment,
toward which the wireless cable industry is moving. The nature of
digital transmissions will allow more flexibility to tailor signal
coverage to geographic boundaries using multiple transmitting
facilities. We believe that our rules will facilitate the transition to
digital transmissions. If modification of our rules become necessary,
we will act promptly to ensure that our rules in no way impede the
digital future.
19. In response to the concern about the protected service areas
for MDS (BTAs) and ITFS being different, we must emphasize that the two
services have differing purposes and authorization procedures. One is
intended primarily to provide educational and cultural development to
students enrolled in accredited schools and the authorization is issued
to the best qualified applicant, while the other is commercial in
nature and is subject to competitive bidding. Furthermore, unlike MDS
stations, the protection afforded to ITFS operators is based upon
receive sites and protected service area is defined in 47 CFR 74.903.
Pursuant to this rule, the protected service area associated with the
lease of excess channel capacity will also expand to a circle, 35 miles
in radius, centered about the transmitter site of the ITFS stations. We
note, however, that in a recent proceeding we adopted a 35-mile
protection distance for ITFS receivers, a protection distance that is
compatible with many BTAs,\18\ and with the 35-mile protected service
area for MDS stations which are authorized or previously proposed that
we have separately adopted today. Second Order on Reconsideration.

\18\ Report and Order in MM Docket No. 93-24, 10 FCC Rcd 2907,
2917, 60 Fed. Reg. 20,241 (Apr. 25, 1995).
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20. For the reasons stated above, we believe that licensing by
geographic areas is the best approach for issuing MDS authorizations.
We decide not to adopt the approach presented in the Notice limiting
applications to predetermined sites identified by the Commission based
upon the locations of already authorized E, F or H channels where there
are usable channels. We agree with the commenters that this approach is
inflexible. An approach in which the Commission identifies the specific
site sacrifices the business judgment of the operators when they are in
the best position to consider market forces. Further, where there is
more than one site, the Commission would have to establish criteria for
choosing among the available locations. In addition, where identified
sites are unavailable to the highest bidders, the Commission would have
to process modification applications, which would actually decrease
overall processing efficiency and would delay service to the public.
21. We decline to adopt a preference for existing licensees and
system operators because we believe that, rather than place
restrictions on eligibility to participate based upon an applicant
having access to a minimum number of channels, it is in the public
interest to encourage participation from a wide variety of applicants.
Indeed, a new entrant into the wireless cable industry may place a
higher value on the spectrum than an incumbent licensee or system
operator in a given area. While we recognize that in some areas, the
existing licensee or operator may be in the best position to
immediately introduce competition to wired cable, we further believe
that a new entrant with sufficient resources will be able to accumulate
a sufficient critical mass of channels to launch a system in a market
through the competitive bidding process and through the assignment or
transfer of previously authorized channels. Thus, market forces will
lead to the accumulation of channels into one operating system.

1. Service Areas

22. We therefore will award MDS authorizations for entire BTA
service areas under competitive bidding procedures. BTAs were designed
by Rand McNally to represent the natural flow of commerce, comprising
areas within which consumers have a community of interest. Like the
other types of predetermined geographical areas, BTAs vary in size and
shape. Typically, a BTA includes a population center(s) (city or large
town) and the surrounding rural area. BTA boundaries are based on
country lines because most statistical information relevant to
marketing is published in terms of counties. The specific boundaries
were drawn after a study of several factors, such as physiography,
population distribution, economic activities, newspaper distribution
and transportation facilities.\19\

\19\ See Rand McNally 1992 Commercial Atlas & Marketing Guide at
39.
---------------------------------------------------------------------------

23. We note that Rand McNally & Company is the copyright owner of
the Basic Trading Area and Major Trading Area Listings, which list the
counties contained in each BTA, as embodied in Rand McNally's Trading
Area System Diskette and geographically represented in the map
contained in Rand McNally's Commercial Atlas & Marketing Guide. Rand
McNally has licensed the use of its copyrighted MTA/BTA listings and
maps for certain services such as Personal Communications Services
(PCS), 800 MHz Specialized Mobile Radio Services (SMR) and Local
Multipoint Distribution Services (LMDS). Rand McNally had also reached
an agreement in principle with the American Mobile Telecommunications
Association (AMTA) for a blanket copyright license for the conditional
use of the copyrighted material in the 900 MHz SMR service. These
agreements authorize the conditional use of Rand McNally's copyrighted
material in connection with these particular services, require
interested persons using the material to include a legend on
reproductions (as specified in the license agreement) indicating Rand
McNally's ownership, and provide for a payment of a license fee to Rand
McNally.
24. Currently, MDS is not covered by any blanket copyright license
agreement. While current and prospective MDS licensees and other
parties interested in using the copyrighted materials may negotiate

[[Page 36529]]
their own licensing arrangement with Rand McNally, as in other
services, we encourage interested parties and Rand McNally to explore
the possibility of entering into blanket license agreements similar to
those noted above to cover MDS. In any event, we note further that an
MDS BTA authorization grantee who does not obtain a copyright license
(either through a blanket license agreement or some other arrangement)
from Rand McNally for use of the copyrighted material may not rely on
grant of a BTA-based authorization from the Commission as a defense to
any claim of copyright infringement brought by Rand McNally against
such grantee. The MTA/BTA Listings, the MTA/BTA Map and the license
agreements noted above are available for public inspection at the MDS
public reference room, Room 207, 2033 M Street, N.W., Washington, D.C.
25. The Commission will consider awarding the 487 BTA
authorizations in the United States, with the following additions to be
authorized as BTA-like areas: American Samoa, Guam, Northern Mariana
Islands, San Juan, Puerto Rico, Mayaguez/Aguadilla-Ponce, Puerto Rico,
and the United States Virgin Islands. Thus, a total of 493
authorizations will encompass all land areas within the United States
and related territory. We reiterate that, based on its geographic size,
and the extent of encumbrances, it may not be possible in a particular
BTA to design and select a station site for any MDS station without
negotiating an agreement with one or more affected, previously
authorized or proposed, cochannel or adjacent channel MDS or ITFS
stations. However, we are going to hold auctions initially for all BTAs
for which mutually exclusive, short-form applications are filed. The
Commission will announce the time and place of the auction and the
applicable bidding procedures by a future public notice. Applicants
wishing to participate in the auction process will file a short-form
application indicating each BTA service area for which they desire to
bid. To determine eligibility to apply for a BTA service area, we will
apply the same general eligibility requirements for an MDS
authorization.\20\ There is no restriction on the number of BTA service
areas for which any entity may apply or on the number of BTA
authorizations awarded to one entity. Incumbent MDS licensees,
conditional licensees and applicants and new entrants will be eligible.
Accordingly, prospective bidders will be able to aggregate adjacent
BTAs to utilize economies of scale that currently benefit wired cable
competitors. Selection from among the mutually exclusive applicants
will be determined through a simultaneous multiple round bidding
process. The auction winner for each BTA service area, if qualified,
will be awarded a BTA authorization. The protected service area lies
within the geographic boundary of that BTA, except as excluded by any
35-mile circle protected service areas of previously authorized or
proposed MDS stations and except for channels related to ITFS lease
agreements.

\20\ See 47 CFR 21.4, 21.17, 21.900, 21.912. Because we are
amending our rules to implement competitive bidding, our rules
regarding random selection and comparative consideration would not
apply to applications for new stations filed after the lifting of
the freeze. See 47 CFR 21.31, 21.914.
---------------------------------------------------------------------------

2. Rights and Responsibilities of BTA Authorization Holder

26. The following paragraphs describe the service rules regarding
the rights and responsibilities of the holder of a BTA authorization,
the duration of those rights and how an event will alter the boundaries
of a protected MDS service area. For purposes of clarity, the
chronology of the events would occur as follows: (1) the 35-mile
protected service areas of incumbents will become fixed in place upon
the effective date of the Second Order on Reconsideration; (2) issuance
of public notices announcing auctions by geographic area, and
specifying the filing periods for short-form applications and upfront
payments; (3) issuance of a public notice identifying all applicants
determined to be qualified to bid (i.e., submitted acceptable short-
form applications and sufficient upfront payments); (4) competitive
bidding rounds; (5) after bidding has ended, the Commission would
declare bidding closed and would notify the auction winners, who would
then have five business days to make down payments and thirty business
days to file at least one long-form application; \21\ (6) following
review of the long-form applications, the Commission would issue a
public notice identifying those accepted and opening a thirty-day
period for filing petitions to deny; and (7) if no petitions to deny
are filed or if they are dismissed or denied, the Commission would
issue a public notice stating that the BTA authorization and the MDS
station license are ready to be issued Assuming that the auction winner
made full payment of its winning bid within five business days of this
public notice, the Commission would grant one or more conditional
station licenses for individual stations within the auction winner's
BTA service area and issue the BTA authorization for the entire BTA
service area.

\21\ If the BTA is so heavily encumbered that the winning bidder
is unable to file a long-form application for a station within the
BTA while protecting incumbents from harmful interference, the
winning bidder must file a statement of intention of use of the BTA,
accompanied by a current License Qualification Report (FCC Form
430), before the Commission issues the BTA authorization. See infra
at Paras. 118-120.
---------------------------------------------------------------------------

27. Description of Authorization. The holder of a BTA authorization
may file one or more long-form applications seeking authority to
construct stations anywhere inside their BTA on usable MDS channels,
provided the specific engineering design meets the Commission's
interference protection standards to all authorized or previously
proposed MDS and ITFS facilities, and complies with the prescribed
signal strength limits at the BTA boundary, i.e., at all points along
the perimeter of the BTA. A separate conditional station license will
be awarded for each single channel or channel group at each site
location.\22\ For example, separate licenses will be issued for the E
Group, F Group and each of the three H Channels. In this Report and
Order, the initial license for the BTA service area will be referred to
as a ``BTA authorization'' and individual channels will be separately
licensed. Thus, we will distinguish between three different types of
authorizations for MDS facilities: (1) a ``BTA authorization'' awarded
to an auction winner of a particular BTA following the requisite long-
form application or statement of intention and requisite payment, (2) a
``station license for each individual station within the BTA'' service
area held by an auction winner, and (3) a ``station license'' for an
MDS facility authorized or previously proposed under the rules
predating the effective date of this Report and Order. Accordingly,
under the Commission's rules, as amended herein, the holder of a BTA
authorization would file a long-form application for each usable single
channel or channel group at each transmitter site within the auction
winner's BTA service area, and will have a later opportunity to file
amendments to correct any defects in the application. The construction
period specified in each conditional station license granted for the
individual

[[Page 36530]]
stations within the auction winner's BTA service area will be the five
year build-out date which runs from the grant date of the first
conditional license within the auction winner's BTA (granted the same
date as the BTA authorization). When the portion of the system
represented by a particular long-form application is constructed and
ready to begin operation, the holder of the BTA authorization will file
a corresponding certification of completion of construction. The
license term for those stations will be the same ten-year term as MDS
stations licensed prior to the adoption of this Report and Order. See
47 CFR 21.45. The ten-year term for the new licenses will commence on
the date the Commission declares bidding in the MDS auction to be
closed. The holder of a BTA authorization has a protected service area
that is coterminous with the boundaries of their BTA service area,
subject to exclusion of the protected service areas and/or locations of
authorized or previously proposed MDS and ITFS facilities, as further
discussed infra in para. 42. Individual station licenses that are a
part of a BTA service area will not have a uniquely associated
protected service area. The common protected service area of all
individual stations within the BTA authorization will be the boundary
of that BTA.

\22\ This in no way should be interpreted to reflect on other
services where we are eliminating site licensing. See Further Notice
of Proposed Rule Making in PR Docket No. 93-144 and PP Docket No.
93-253, FCC 94-271 (released Nov. 4, 1994), 59 FR 60111 (Nov. 22,
1994); Second Report and Order and Second Further Notice of Proposed
Rule Making in PR Docket No. 89-553, PP Docket No. 93-253, and GN
Docket No. 93-252, FCC 95-159 (released April 17, 1995), 60 FR 21987
(May 4, 1995).
---------------------------------------------------------------------------

28. We emphasize that the actual service areas can be tailored
through voluntary agreements among the affected parties. Although our
rules indicate that the holders of BTA authorizations must locate all
transmitter sites within the boundaries of the BTA and may not cause
interference in adjacent BTAs, the interference rights may be modified
through negotiation and written agreements. The MDS station facilities
within the auction winner's BTA may be expanded or modified throughout
the BTA service area so long as the system continues to be in
compliance with our technical rules and protects incumbent MDS and ITFS
facilities. The facilities may be expanded beyond the BTA or into the
protected service area of an incumbent with an agreement from the
entity that controls the adjacent BTA or the incumbent protected 35-
mile circular area.
29. Consistent with our goal of establishing filing procedures and
policies that will encourage the accumulation of a full complement of
channels necessary for a viable MDS system, only the BTA authorization
holder will be qualified to submit any new application for MDS use of
available ITFS frequencies within the BTA in accordance with 47 CFR
74.990(a), and the ITFS application procedures of Sec. 74.991. ITFS
station licensees and prospective ITFS applicants that seek to
construct and operate new ITFS facilities located within a BTA and that
choose to lease excess channel capacity will be free to negotiate with
any potential lessee, including the holder of the BTA. In furtherance
of our goal of accumulating a full complement of channels, however, the
holder of the BTA will be afforded the right to match the final offer
of any proposed lessee. Should the holder of the BTA decline to
exercise such right, then the ITFS applicant can enter into a lease
arrangement with any operator it so chooses. This is not intended to
interfere with present contractual rights that are in effect or renewal
of those rights. In the case where a BTA authorization holder is the
licensee of ITFS channels, the associated protected service area will
be the entire BTA, and interference protection will be governed in the
manner for protecting BTA service on MDS channels. However, in the case
where a BTA authorization holder leases excess channel capacity from an
ITFS licensee, the protected area will be a 35-mile circle centered
around the particular ITFS station in the BTA that leases the channels.
We will afford this area the same protection generally afforded under
our ITFS rules. BTA authorization holders in adjacent BTAs must protect
points on the 35-mile circle using cochannel and adjacent channel
desired-to-undesired signal strength rations of 45 dB and 0 dB,
respectively. A special case will occur whenever BTA authorization
holders in adjacent BTAs both lease the same ITFS channel group, such
that the 35-mile protected circle of each extends into the BTA of the
other. In this regard, we will expect the respective ITFS entities and
BTA holders to reach an agreement concerning interference protection
near their common boundary. Moreover, a BTA authorization holder will
not be required to protect that portion of the 35-mile circle
associated with the other authorization holder that falls on his or her
side of the boundary. We believe that this approach will promote our
policy objectives for this service and will similarly have only a
positive effect on the continued successful development of ITFS with
the ever expanding financial support for that service provided by
wireless cable operators.
30. The available MDS spectrum within a BTA authorization will
increase if the unconstructed facilities or unused channels held by an
MDS incumbent with transmitter site locations within a particular BTA
are forfeited or if previously proposed conditional licenses or
modifications are not granted. The holders of the BTA authorizations
obtain contingent rights to this spectrum when they receive their
authorizations, so that the forfeited channels will revert and become
part of the BTA authorization up to the boundary of the BTA. The holder
of the BTA authorization may subsequently file long-form applications
for the forfeited channels, provided the specific station design meets
the Commission's interference protection standards. Such a policy
provides an incentive for the holders of BTA authorizations to find and
document such warehousing violations, resulting in efficient use of
fallow spectrum. In addition, authorization rights may be revoked or
terminated because of gross misconduct, misrepresentation or bad faith
by an applicant. Other events may also change the protected service
area, such as the end of the five year build-out period, an assignment
or transfer or partitioning of the BTA. These events are discussed in
detail below.
31. Five Year Build-out Period. The build-out period in which the
holder of a BTA authorization is permitted to expand service or
initiate new service within their BTA service area will be five years.
Specifically, we will provide the BTA authorization holder five years
from the grant date of the initial BTA authorization to construct and
operate the system. The purpose of this requirement is to ensure that
service is promptly delivered to the public. See 47 U.S.C.
309(j)(4)(B). This five year build-out period is not extended by the
grant of subsequent authorizations, such as the grant of a long-form or
modification application for an individual station within the BTA
service area. We will require the holder of a BTA authorization to
submit a showing to the Commission five years after the BTA
authorization was issued demonstrating that it is providing a signal
level sufficient to provide adequate service to approximately two-
thirds of the population of the area within its control in the licensed
BTA. The holder of the BTA authorization must submit maps and other
supporting documents showing compliance with this construction
requirement. The Commission, in evaluating the showing, may consider
line-of-sight obstructions and the ability to provide service without
causing harmful interference to other MDS or ITFS facilities. If the
holder of the BTA fails to cover any of the BTA, it will forfeit the
authorization

[[Page 36531]]
and it will be ineligible to regain it. If the Commission determines
that there are usable channels in an unserved or underserved area of
the BTA, the Commission would partition the area along geopolitical
boundaries and issue a public notice establishing the reauction of the
partitioned area. This public notice would announce the auction or
auctions by geographic area, specifying the filing period for short-
form applications and the applicable bidding procedures. The holder of
the BTA will forfeit the partitioned service area and will be
ineligible to bid on it. We believe that this coverage policy is
reasonable and will result in the channels being made available to
applicants who will provide service to the public. We further believe
that this will deter the warehousing of channels and ensure that the
spectrum is being effectively utilized for MDS.
32. Assignment or Transfer of Control. The holders of BTA
authorizations and MDS incumbents may negotiate mergers, buyouts,
channel swaps, channel splits or make similar arrangements on a
voluntary basis, pursuant to the general assignment and transfer
provisions of 47 CFR 21.38. Both parties are generally permitted to buy
from and sell authorizations to each other and to third parties, with
few limitations.
33. Additional spectrum may be acquired by the holder of a BTA
authorization through buyouts of incumbent licensees within their
authorized BTA service area. As is the case with ITFS licensees,
wireless cable operators may also acquire spectrum through leasing
agreements with incumbents. In this case, the protected service area of
the acquired station will extend to the BTA boundary or the existing
35-mile protected circular area (from the incumbent), whichever is
larger. The holder of the BTA authorization may assign or transfer
control of its entire BTA, which will include all authorized stations,
subject to the unjust enrichment provisions for designated entities.
See infra at Paras. 147.152. Such an assignment or transfer of an
entire BTA may also include unserved areas so long as the five year
build-out period has not expired. If a BTA authorization is assigned or
transferred, the new holder of the BTA authorization is held to the
original build-out period. The holder of the BTA authorization may also
partition portions of the BTA along geopolitical boundaries under our
partitioning rules, discussed below, and contract with eligible
parties, allowing such parties to file long-form applications for the
usable MDS channels within that area. We believe that allowing the
partitioning of portions of the BTA service area will encourage
provision of service to rural areas, which will promote the most
efficient use of the spectrum. See 47 U.S.C. 309(j)(3)(A) (instructing
the Commission to promote the development and rapid deployment of new
technologies, products, and services for the benefit of the public,
including those residing in rural areas).
34. Partitioning. During the five year build-out period, we will
permit the holder of a BTA authorization to partition portions of its
BTA authorization and enter into contracts with eligible parties, allow
such parties to file long-form applications for the usable MDS channels
within that partitioned area. The BTA may be partitioned along
geopolitical boundaries, and the Commission may grant such
applications, provided they are in compliance with the rules. Also, a
holder of a BTA authorization will be permitted to add to its service
area by acquiring a partitioned service area from the holder of an
adjacent BTA. Following grant of such an application, the authorization
will be referred to as ``partitioned service area.'' The holder of a
partitioned service area would, in effect, then hold something similar
to a BTA authorization for the partitioned area. The protected service
area will become or expand to the boundaries partitioned along the
designated geopolitical boundaries and the same technical rules will
apply, including the limiting signal strength at the boundaries of the
partitioned area. Accordingly, the construction period for the
partitioned service area will be the remaining portion of the five year
build-out and at the end of this five year period, the holder of the
partitioned service area must demonstrate that it is providing
substantial service to the partitioned area. Once construction is
complete, the license term will run ten years from the date the
Commission declared bidding in the MDS auction to be closed.
35. We believe that allowing holders of the BTA authorizations to
partition will facilitate the provision of service to small markets and
rural areas, some of which currently have no source of multichannel
video programming. Partitioning will also promote the most efficient
use of the spectrum and encourage participation by a wide variety of
entities, including small businesses, rural telephone companies, and
businesses owned by members of minority groups and women. See 47 U.S.C.
309(j) (3)(B), (3)(D) and (4)(C).
36. Technical Rights and Responsibilities. In determining
interference protection standards and other technical provisions under
this new approach to MDS authorization of service, our objectives are
two-fold: (1) to provide maximum flexibility to allow both new BTA
authorization holders and current MDS licensees, conditional licensees,
and applicants to develop and expand service in the most rapid and
economically feasible manner, and (2) to assure that the introduction
of new MDS service will not result in objectionable interference to the
services of incumbent stations and will minimize insofar as possible
the extent of potential interference within BTA service areas. These
objectives and the provisions herein take into account the extent to
which the current service has been built around successful negotiations
among neighboring operators and/or licensees, as well as prospective
operators and licensees. We fully expect this spirit of cooperation and
accommodation to continue and, while we will adopt interference
protection provisions for BTA and incumbent service, we will allow and
indeed encourage the holders of BTA authorizations and incumbents to
work out mutually agreeable interference concerns with other
potentially affected parties whenever possible.
37. As a result of this Report and Order and a separate MDS order
we are adopting today, protected service areas for BTA authorization
holders and MDS incumbents will be defined differently. Second Order on
Reconsideration at Paras. 2-31. We believe this approach will best
facilitate the full development of incumbent wireless cable systems,
many of which already have secured the desired transmitting site, and
serve subscribers within a metropolitan area from a single site. In
addition, this approach may allow the rapid expansion of new MDS
service into other unserved portions of BTAs. We adopt an idea
contemplated in the Notice, that the perimeter of a predetermined
geographic area (BTA) generally defines its protected area. The holders
of BTA authorizations will not be permitted to cause interference
within the boundaries of an adjacent BTA, without the consent of the
affected authorization holder. When such interference occurs, an
offending party will be expected to act promptly to eliminate any
unwanted interference in another operator's BTA.
38. Interference among adjacent BTA operators will be partially
controlled by establishing an allowable limit for a station's predicted
signal strength at all points along a BTA boundary. The same

[[Page 36532]]
limiting signal strength will apply at the boundaries of every BTA,
regardless of its size or shape. An exception to this limit would be
justified where a single entity obtains authorization for adjacent
BTAs. While we recognize that several commenting parties are concerned
that an MDS signal simply does not stop at the area boundary, we
believe the level of limiting signal strength given below, together
with the multitude of available interferences abatement techniques,
will facilitate control of interference between BTA authorization
holders in adjoining BTAs. Interference levels to BTA holders from MDS
incumbent stations will be partially governed by establishing the same
maximum allowable signal strength along the boundary of incumbents' 35-
mile circular areas, the expanded area provided in the Second Order on
Reconsideration.
39. At first glance, it would appear that the approach to
interference control between adjacent BTAs would be ineffective, given
that the levels of desired (D) and undesired (U) could be the same at
the common boundary between BTAs. The resulting desired-to-undesired
signal strength ratio (D/U) of 0 dB falls well below the 45 dB standard
now governing interference between MDS stations operating on the same
channel. However, taking the signal suppressing effects of receiving
antennas into account and further assuming that the desired and
undesired signals are coming from opposite sides of the BTA boundary,
the D/U ratio improves to as much as 25 dB. If we further expect that,
in most cases, stations on opposite sides of the boundary would operate
with different antenna polarizations, then the D/U ratio further
improves to 45 dB. These numbers are based on the characteristics of
the standard MDS receiving antenna found in 47 CFR 21.902(f).
Alternatively, station operators on opposite sides of a BTA boundary
may design their facilities with agreements between affected parties to
operate on a frequency offset basis, with a less restrictive D/U ratio
of 28 dB necessary to prevent cochannel interference in this situation.
Indeed, a host of interference abatement techniques could be employed
to prevent interference near BTA boundaries. Admittedly, this approach
relies more on operator interference agreements and the honoring of
another's interference rights than it does on applying rigid
interference standards in the processing of applications. However, if
we were to mandate strict compliance with the 45 dB cochannel and 0 dB
adjacent channel D/U signal strength ratios (the current MDS
interference standards) to protect BTA service at the BTA boundary, we
believe there would be populated areas within a substantial number of
BTAs that may never be served due to the irregular sizes and shapes of
BTAs. Moreover, as we have indicated, given the nature and history of
the service, as well as the likelihood that auction participants will
be experienced in conducting negotiations, we believe that we can
prevent unwanted interference by relying primarily on negotiated
agreements and voluntary compliance with our interference right-of-
ways, which we will enforce as necessary. Thus, we consider our
limitation of signal strength at the BTA boundaries and incumbent
service areas as a secondary means of interference protection.
40. Inasmuch as incumbent stations lie within BTAs and authorized
BTA stations will not have their own protected service areas,
interference from incumbent stations can only be governed by agreements
between affected parties, and indirectly, by placing a limiting value
on the strength of the signal at the boundary of incumbent MDS
stations. A signal strength, regardless of its numerical value, will
not by itself eliminate the potential for interference from incumbent
stations. Terrain shielding and other abatement techniques will also be
helpful in this regard; however, the most effective means of
controlling interference will be the agreements between BTA
authorization holders and incumbent MDS licensees, which, for example,
may stipulate that an incumbent utilize a directional antenna pointed
away from the affected BTA.
41. We have selected as the limiting signal strength a power flux
density value of -73 dBw/m2. This value corresponds to a received
power level of approximately -83 dBw (decibels above 1 watt) or -53 dBm
(decibels above 1 milliwatt), given a receiver antenna with a maximum
gain of 20 dBi. A power flux density value is used because ``free
space'' propagation is the model long used in the MDS service. This
variable depends only on the level of power radiated from a
transmitting antenna and the distance between the transmitting and
receiving locations. The value of -73 dBw/m2 was selected because
it is the ``free space'' value of power flux density achieved with an
equivalent isotropically radiated power (EIRP) of 2,000 watts (the
maximum allowable EIRP in the MDS service where omni-directional
antennas are used) at a distance separation of 35 miles. This numerical
value is stronger than the power flux density achieved under standards
used in the MDS service for many years, i.e., a value of -75.6 dBw/
m2 is achieved with 200 watts of EIRP at a distance of 15 miles.
Moreover, based on the record in the Second Order on Reconsideration,
it is clear that many wireless cable systems serve a substantial
subscriber base at distances of 35 miles or even greater. Thus, we
conclude that the selection of this value of limiting signal strength
will generally enable service over unobstructed signal propagation
paths at the 35-mile boundary of an incumbent's transmitting
facilities. The ability to achieve this signal level at a BTA boundary
will vary considerably, depending on the size of the BTA and the
placement of a transmitting facility. Clearly, because of their large
size, service of many BTAs will require multiple transmitting
facilities.
42. In the Notice we stated our intention not to change the
interference protection standards applied ``at points along the service
contours of protected facilities.'' Notice at 7674. Accordingly, BTA
authorization holders will be required to design their transmitting
facilities to protect points along the 35-mile circles and points
within the protected service areas of incumbents' licensed stations,
conditionally licensed stations, or previously proposed applications.
Specifically, stations proposed in BTA long-form applications must meet
the 45 dB and 0 dB cochannel and adjacent channel desired-to-undesired
signal strength ratios at the boundary of each protected 35-mile
circle. We will also continue to use these stricter protection
standards within incumbents' protected service areas. Unlike BTA
service, which does not yet exist, incumbent stations have an
established subscriber base in many cities and rural areas throughout
the country. Wireless cable systems were carefully crafted, both
through engineering design, site location and negotiation among
affected parties, and in partial reliance on the Commission's
protection standards. To a considerable extent, these systems provide
interference-free reception to subscribers, many out to distances
beyond 35 miles. Because many wireless cable systems have been serving
subscribers well beyond their current 710 square mile protected service
area, we do not wish to disrupt existing service patterns which compete
with wired cable systems.
43. The holders of BTA authorizations within 80 kilometers (50
miles) of the Canadian or Mexican borders, may only operate on MDS
channels pursuant to the restrictions in international

[[Page 36533]]
agreements. Thus, applicants considering authorizations for these BTAs
should consider the impact of the additional border requirements in
their valuation of the service areas for competitive bidding purposes.

3. Treatment of Incumbents

44. As we have stated, a principal objective in this proceeding is
to allow incumbents to continue existing operations without
objectionable interference from new MDS operations and to allow them
sufficient flexibility to modify their facilities to respond to market
forces. Expansion of the protected service boundary to 35 miles will
increase an incumbents' service area from 710 square miles to 3848
square miles, which will allow for the future orderly development of
wireless cable systems, particularly as digital technology is
introduced. Second Order on Reconsideration at Paras. 2-31.
45. Incumbents, unless they also control the adjacent BTA territory
(either as BTA authorization holders or through interference
agreements) will not be free to expand further their service area into
the adjacent BTA. The manner we choose to prevent such occurrences is
to define a limiting power flux density of -73 dBw/m2, which may
not be exceeded at points along the 35-mile protected service area.
Subject only to this limitation, incumbents will be free to file long-
form applications at any time to modify their facilities or add
facilities such as signal boosters. In a small number of cases
involving directional antennas, an incumbent's power flux density may
already exceed -73 dBw/m2, for signal paths in some directions at
a distance of 35 miles. In such cases, we would not force the incumbent
to reduce the signal strength to the allowable limit, nor would we
allow the signal level to increase. Incumbents who propose to modify
their stations must continue to seek prior Commission approval pursuant
to 47 C.F.R. Secs. 21.40 through 21.42, and include any agreements with
the holder(s) of a BTA authorization(s). All other current rules
continue to apply to MDS incumbents unless specifically amended.
46. Finally, since the incumbents' 35-mile protected circles will
be embedded within one or more BTAs, to prevent additional encroachment
into a BTA we must at some point fix the 35-mile circles around a
permanent reference point, absent an interference agreement with a BTA
authorization holder. Accordingly, on the effective date of the rules
adopted in the Second Order on Reconsideration, we will permanently fix
the location of the protected 35-mile circles in the following manner.
For incumbent licensees with no conditional licenses or pending
applications, the ``protected reference coordinates'' will be those of
the current site. Subsequent changes in site location would be
permitted; however, the 35-mile circle would remain centered about the
previous site coordinates. For incumbents having only a conditional
license or a new station application pending before the effective date,
the site coordinates specified for the conditional license or pending
application will become the reference coordinates. In cases where an
incumbent has two or more authorizations and/or pending applications on
the effective date, the reference coordinates in each authorization
and/or application will be provisionally treated as the permanent
reference coordinates of the protected circle. Eventually, pending
applications will be disposed of and conditional licenses will either
become licenses or be forfeited for failure to construct.

4. Alternative Uses of MDS Frequencies

47. The principal use of MDS frequencies is wireless cable service.
Under Section 21.903(a) of the Commission's rules, 47 C.F.R.
Sec. 21.903(a), MDS stations are ``generally intended to provide one-
way radio transmission (usually in an omnidirectional pattern) from a
stationary transmitter to multiple receiving facilities located at
fixed points.'' At the same time, our rules permit use of MDS
frequencies for other kinds of services. Section 21.903(b), 47 C.F.R.
Sec. 21.903(b), states that ``[u]nless otherwise directed or
conditioned in the applicable instrument of authorization, Multipoint
Distribution Service stations may render any kind of communications
service consistent with the Commission's rules on a common carrier or
on a non-common carrier basis * * *.'' We wish to emphasize that
nothing in this Report and Order precludes either new licensees or
incumbents from using MDS frequencies for other kinds of services
pursuant to 47 C.F.R. Sec. 21.903(b). We note, however, that such
applicants may need to apply for waivers of certain MDS technical
rules, such as 47 C.F.R. Secs. 21.903(a) and 21.906.
B. Interference Criteria and Data Elements

48. Proposals. As a complement to the filing proposals and
electronic procedures, the Notice proposed to adopt a technical
equation as the basis for the ``free space'' interference protection
calculations. The Commission's MDS engineers currently utilize this
formula and it is recognized by engineering consulting firms in the
wireless cable industry:
The received signal power level (RSL)dBW at the output of the
FCC reference receiving antenna is obtained from the following:\23\

\23\ Leon W. Couch II, Digital and Analog Communication Systems,
p. 384 (3rd ed. 1990).
---------------------------------------------------------------------------

(RSL)dBW=(EIRP)dBW-(LFS)dB+(GAR)dB
where the free space loss (LFS)dB is (LFS)dB=20 log
(4d/) dB

In these equations, (RSL)dBW is received power in decibels
referenced to one watt, (EIRP)dBW is equivalent isotropically
radiated power in decibels above one watt, d is the distance of the
signal path in meters, is the wavelength of the signal in
meters, and GAR is the gain of the reference receiving antenna, as
obtained in 47 C.F.R. Sec. 21.902(f)(3), Figure 1. The Notice proposed
to formalize the above equations by adopting them as a rule provision
as part of a plan to implement computerized interference studies.
Additionally, the Notice stated that we will require proposed
facilities to meet the 45 dB and 0 dB cochannel and adjacent channel
desired-to-undesired signal strength ratios at points along the service
contours of protected facilities which were authorized under the
current interference standards. With regard to long-form applications,
we proposed to retain the requirement in 47 C.F.R. Sec. 21.902, that an
applicant perform analyses of the potential for harmful interference
and serve such interference studies upon the authorized or previously
proposed station applicants, conditional licensees or licensees
required to be studied, but we would not require the submission of a
list of those served at the time the long-form application was filed.
We explained that, on the revised long-form application form, the
applicant would supply certain crucial data elements describing the
station parameters, such as antenna polarization and the station EIRP,
while the Commission staff would perform interference analyses using a
computer program. The Notice stated that, although the submission of
interference or other engineering analyses would not be required with
the long-form application, we would require the applicant to make the
records available for Commission inspection upon request. We also
questioned in the Notice whether we should eliminate signal contour
maps as a required part of the interference studies.
49. Pursuant to our streamlining effort, the Notice proposed to
improve the current application form used for

[[Page 36534]]
new MDS stations, FCC Form 494,\24\ by excluding certain data elements
which have yielded information that is no longer necessary or of only
marginal utility. Specifically, we proposed to eliminate queries
regarding the antenna vertical sketch and the narrative description of
why grant of the application would be in the public interest. We
further proposed to exclude the following parameters of the
transmission system: transmitter manufacturer and model number,
transmitter output power, transmitting antenna gain and the
specification of transmission line and other transmission losses. We
observed that with regard to transmitters, we are only concerned that
MDS licensees operate transmitters that are ``type-accepted'' by the
Commission for use in this service. Accordingly, we proposed to
eliminate the requirement that the applicant identify the transmitter
make and model, and simply require that the conditional licensee
certify that its transmitter is ``type-accepted'' in its certification
of completion of construction, currently FCC Form 494A. The MDS rules
now provide for a maximum EIRP, rather than a maximum value for
transmitter output power. See 47 CFR 21.904. Thus, the Notice stated,
so long as the EIRP remains within the limits of Section 21.904, it is
not necessary to require applicants to specify the equipment parameters
used to calculate EIRP. The Notice also proposed to allow changes to
these transmission parameters without notification to the Commission,
provided the resulting EIRP would not change. The station power to be
specified on the application form would be the maximum EIRP in the
horizontal plane, i.e., the EIRP at an angle of zero degrees in the
vertical plane. We proposed to permit electrical beam tilting of
antennas; however, in all cases, applicants would be required to
specify the EIRP in the zero degree vertical (horizontal) plane. Where
beam tilting is employed, the EIRP at the zero degree vertical angle
will be less than the maximum EIRP at the tilt angle, due to the
vertical suppression characteristic of the transmitting antenna. In
most instances, this value of EIRP closely approximates the power
radiated to the radio horizon which is most relevant to interference
analysis. By proceeding in this manner, we would not need to collect
data on antenna vertical radiation patterns.

\24\ Since Form 494 is a multi-purpose form that is used for
other services, to the extent that we are proposing changes, we
intend to create a different form to be used for MDS.
---------------------------------------------------------------------------

50. The Notice proposed to further modify the long-form application
in an effort to make the form compatible with an electronic filing
system. At the present time, we propose to use a new long-form
application together with the current FCC Form 430, the Licensee
Qualification Report. An appendix to the Notice listed data elements
and other informational items for our proposed new electronic
application form, including general, engineering and legal elements.
For example, we proposed to retain engineering data elements necessary
for analysis of interference or possible air safety hazards, such as
transmitting antenna site coordinates, EIRP, antenna polarization, site
elevation and antenna structure height above ground. Other data would
be used to verify an applicant's compliance with a particular
Commission rule, such as when antenna beam width is used to calculate
the maximum allowable EIRP of a station using a directional
transmitting antenna. We also proposed to retain applicant responses
which demonstrate compliance with a particular statutory requirement,
such as an environmental assessment.
51. In reference to applicants locating stations in areas where
notification or coordination with Canada or Mexico is required by
international agreement, the Notice indicated that these applicants
would be required to submit the following additional technical data,
which were not proposed as standard data elements in the electronic
long-form application: transmitter output power, transmitting antenna
gain and transmission line loss. In addition to the EIRP at a vertical
angle of zero degrees, applicants in the border areas will be required
to specify the maximum EIRP at the vertical angle corresponding to the
beam tilt. The Notice explained that the additional data requirements
could be submitted in a textual exhibit to the electronic application
or a paper supplement.
52. Resolution. With some additional clarification, we will adopt
the proposals raised in the Notice, including the free space equation
and the proposed data elements for the long-form application. A draft
long-form application, FCC Form 304, is attached to the Report and
Order.\25\ We will develop computer programs that will help to
streamline the processing of the long-form and modification
applications of MDS incumbents and BTA authorization holders. A program
is being designed that will perform cochannel and adjacent channel
interference analysis at one degree intervals along the protected 35-
mile circle of incumbents' authorized stations or protected station
proposals. This program, as envisioned, will use the Commission's
three-second terrain data base to check for unobstructed signal paths
between the site of the station being studied and points along the
incumbent's protected contour. For those radials on which line-of-sight
conditions do not exist, either due to a terrain obstruction or the
earth's curvature, the program will conclude that interference would
not occur at that point. We note, following long-standing Commission
practice, that all line-of-sight determinations will assume a receiver
height of 30 feet and a standard 4/3 earth radius for determining the
electrical horizon. Where line-of-sight conditions exist, the program
would first determine the proposed station's EIRP in the pertinent
direction, based on the EIRP and horizontal relative field strength
tabulation given in the application. The received signal power level of
the proposed station, the ``undesired signal'' (U), will then be
calculated using the free space equation. The value of the receiver
antenna gain in this calculation will depend on the angular
relationship between the radial azimuth and the orientation of the
receiving antenna. We will assume that the latter is pointed toward the
station being received. The gain will also depend on whether the
proposed station is cross polarized or co-polarized with respect to the
protected station. The receiving antenna gain will be that of the
reference receiving antenna found in Section 21.902(f)(3), Figure 1 of
the Commission's rules. We here establish a fixed value for the
``desired signal'' level at the 35-mile boundary. Assuming a receiver
antenna gain of 20 dB above an isotropic antenna, an EIRP of 2000 watts
(33 dBw) and a frequency of 2638 MHz, the midpoint frequency between
channels E1 and H3, the free space propagation equation gives a value
of -82.9 dBw. Our computer program will therefore use a received power
level (``D'') of -83 dBw as the value of the desired signal strength.
Finally, the program will compute the value of the desired-to-undesired
signal strength ratio (``D/U''), which is logarithmic units is
expressed as D - U. This value will be tested against the minimum
standard of 45 dB.

\25\ The Office of Management and Budget has not yet approved
the FCC Form 304 pursuant to the Paperwork Reduction Act. A public
notice will be issued when the new form has been approved and is
available for use.

[[Page 36535]]

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53. Another program is being designed that will analyze the impact
of incumbents' modification applications. This program will analyze 360
radials spaced by one degree, first checking for unobstructed line-of-
sight paths to the 35-mile boundary and, for clear paths, calculating
the free space signal strength that would result from the modification
and comparing it to the maximum allowable limit; that is, a power flux
density value of -73 dBw/m \2\. To the extent that we are not
constrained by licensing agreements with third parties and to the
extent resources are available, we will make our computer programs
available to the public. This will be announced in a subsequent public
notice.
54. We emphasize that we will use computer models as application
processing tools. Similar processing tools have been successfully used
for Low Power Television Service with very few reported cases of
interference to television reception, none of which occurred inside of
a station's protected contour. The MDS interference standards should
not be confused with the processing methods, which can only approximate
the standard. For example, under the interference standards, incuments'
35-mile areas are to be protected not only at points along the
boundary, but also within the boundary.
55. Although, as applicable, we will require MDS applicants to
prepare interference analyses or notification of application filings,
and serve these on potentially affected parties, we will generally not
require that such studies or a list of the parties served be included
with applications. However, since electronic filing will be implemented
in this service on a voluntary basis, we will allow applicants to
submit interference studies with their applications on a voluntary
basis. Applicants may also submit negotiated agreements of tailored
interference protection or operation on the basis of frequency offset.
Applicants may submit terrain shielding studies based on methods of
their own choosing, including shadow maps. There are no universally
accepted methods for terrain shielding studies given the widely varying
characteristics of terrain features. Therefore, we believe it is
appropriate to afford applicants the flexibility to select a terrain
model suitable to the terrain being analyzed. Additionally, we are
persuaded by the comments that interference studies should no longer be
required to include contour maps. As Marshall points out, contour lines
can be used in several ways and are most useful when drawn on a terrain
shadow map, which is not a required element in the application process.
Applicants may continue to prepare interference studies with D/U
contour lines at their discretion. Given the structure and processing
tools associated with our new licensing approach for the MDS service,
we will not prescribe how applicants' interference studies are to be
conducted. Further, potentially affected parties who are served a study
and disagree with its conclusions may file a petition to deny an
application.
56. As contemplated in our Notice, we intended to streamline our
application forms in accordance with our actions herein. We are,
therefore, directing the staff to incorporate as appropriate those data
elements previously listed in the Notice into a revised and reformatted
long-form application for use in the future by MDS applicants seeking
to construct new stations or to make changes in their authorized
facilities.
C. Electronic Filing and Electronic Fee Payments

57. Proposals. In the Notice we invited comment on the feasibility
of utilizing mandatory electronic filing for new MDS applications, on
whether ITFS applicants should be required to file applications for new
stations electronically on a combined application form,\26\ and on
whether there should be a paper exception for those educators that are
not financially supported by a wireless cable operator. Notice at 7676-
77. The Notice suggested that communication links could be used to
exchange application date between applicants and the Commission, thus
minimizing the filing of paper with the Commission and allowing the
Commission to process MDS and ITFS applications more efficiently.
Pursuant to the proposal, an electronic form would be designed for
personal computers using a Windows based environment, and consisting of
a series of computer screens. One possible approach identified in the
Notice involves the use of electronic mailboxes such as that of a Value
Added Network (VAN). Applicants would transmit relevant data from their
personal computer to a VAN electronic mailbox. The VAN would, in turn,
convert the data into a format compatible with Commission files and
download the information to an electronic mailbox at the Commission. In
the Notice, we recognized the possible limitations of this approach
with respect to maps and other graphic representations. We envisioned
that the public would have on-line viewing access to our data bases,
perhaps through a third-party vendor in addition to access at the
Commission's public reference room.

\1\ In 1992, Congress amended the Communications Act of 1934 to
permit the electronic filing of license and construction permit
applications. See Telecommunications Authorization Act of 1992, Pub.
L. No. 102-538, Sec. 204, 106 Stat. 3533, 3543, codified at 47
U.S.C. Secs. 308(b) and 319(a). Such applications may be signed ``in
any manner or form, including by electronic means, as the Commission
may prescribed by regulation.'' Id.
---------------------------------------------------------------------------

58. In the Notice, we also proposed expanding the acceptable
methods of payment for application fee to include electronic payment
under 47 C.F.R. Sec. 1.1109.\27\ We stated our intention of announcing
the procedures for the electronic payment of fees in a public notice,
pursuant to Section 1.1109(a)(1). We sought comment regarding a fee
system where applicants use a unique fee payor number together with an
appropriate service code and a suffix in cases where applicants file
multiple applications, in order to link the fee payment with the
electronically filed application.

\27\ The Commission recently amended 47 C.F.R. Secs. 1.1108 and
1.1109 to permit the electronic filing of fee payments, initially on
an experimental basis. Implementation of Section 9 of the
Communications Act, Report and Order in MD Docket No. 94-19, FCC No.
94-140 (released June 8, 1994). 59 Fed. Reg. 30,984 (June 16, 1994)
at Paras. 50-51.
---------------------------------------------------------------------------

59. Resolution. We will authorize voluntary electronic filing for
new MDS applications. Use of an electronic filing system is not as
essential under the filing approach we adopt today because we
anticipate that fewer long-form applications will be filed. We also
considered the burden on educators and determined that applications for
new ITFS stations will not be included at this time. We appreciate the
concerns expressed by commenters, including the cost to applicants of
implementing and using electronic filing, data security and system
reliability issues. We will take these concerns into account in
deciding upon the software which will be used and the access method for
electronic filing. We agree with commenters who encourage the
Commission to evaluate carefully alternative electronic filing
approaches and who suggest a transition period from paper filing to
electronic filing. At the present time, we decline to accept the
proposal put forth by Pepper regarding the establishment of a committee
to recommend Commission-wide standards and procedures for all services,
noting that the merits associated with the formation of such a
committee would be outweighed by factors such as delayed decision
making and implementation of electronic filing. Through subsequent
public notices we will provide specific details concerning

[[Page 36536]]
the method for electronically filing MDS applications. We will also
authorize electronic fee payment for MDS applications. Current methods
of payment available under 47 CFR 1.1109 will continue to be accepted.
As our resources permit, we will work toward improved viewing access to
the data bases.

D. Competitive Bidding Procedures

1. Competitive Bidding Background

60. On August 10, 1993, the Omnibus Budget Reconciliation Act of
1993 (Budget Act) added a new section 309(j) to the Communications Act
of 1934, as amended, 47 U.S.C. 151-611 (Communications Act). This
amendment to the Communications Act gave the Commission express
authority to employ competitive bidding procedures to choose from among
mutually exclusive applications for certain initial licenses. The
Commission adopted a Notice of Proposed Rule Making in the competitive
bidding proceeding on September 23, 1993.\28\ In it March 8, 1994
Second Report and Order,\29\ the Commission established general rules
and procedures and a broad menu of competitive bidding methods to be
used for all auctionable services, including MDS. We indicated in the
Second Report and Order that in subsequent Reports and Orders we would
set forth specific competitive bidding rules that would be applicable
to individual services. To date, the Commission has established
competitive bidding rules specifically applicable to, and has conducted
auctions for, narrowband Personal Communications Services (PCS),\30\
the Interactive Video and Data Service (IVDS),\31\ and broadband
PCS.\32\ This Report and Order establishes competitive bidding rules
and procedures for MDS.

\28\ Notice of Proposed Rule Making in PP Docket No. 93-253, 8
FCC Rcd 7635 (1993), 58 Fed. Reg. 5389 (Oct. 15, 1993) (Competitive
Bidding Notice).
\29\ Second Report and Order in PP Docket No. 93-253, 9 FCC Rcd
2348 (1944), 59 Fed. Reg. 22980 (May 4, 1994) (Second Report and
Order), recon. granted in part, Second Memorandum Opinion and Order,
9 FCC Rcd 7245 (1994), 59 Fed. Reg. 44272 (Aug. 26, 1994) (Second
Memorandum Opinion and Order).
\30\ Third Report and Order in PP Docket No. 93-253, 9 FCC Rcd
2941 (1994), 59 Fed. Reg. 26741 (May 24, 1994) (Third Report and
Order), recon. granted in part, Third Memorandum Opinion and Order
and Further Notice of Proposed Rule Making, 10 FCC Rcd 175 (1995),
59 Fed. Reg. 44059 (Aug. 26, 1994) (Third Memorandum Opinion and
Order).
\31\ Fourth Report and Order in PP Docket No. 93-253, 9 FCC Rcd
2330 (1994), 59 Fed. Reg. 24947 (May 13, 1994) (Fourth Report and
Order), petition for recon. pending.
\32\ Fifth Report and Order in PP Docket No. 93-253, 9 FCC Rcd
5532 (1994), 59 Fed. Reg. 37566 (July 22, 1994) (Fifth Report and
Order), recon. granted in part, Fifth Memorandum Opinion and Order,
10 FCC Rcd 403 (1995), 59 Fed. Reg. 63210 (Dec. 7, 1994) (Fifth
Memorandum Opinion and Order).
---------------------------------------------------------------------------

61. Given the interdependencies we believe exist between
authorizations for certain BTA service areas and the declining cost of
conducting simultaneous multiple round bidding, we choose this auction
method for use in MDS. We also adapt the general procedures set forth
in the Second Report and Order so as to be compatible with the
application procedures established for MDS in this Report and Order.
Finally, we set forth rules to deter possible abuses of the bidding and
application procedures, and establish special provisions for small
businesses, including those owned by minorities and women, to encourage
their participation in the competitive bidding process and in the
provision of MDS system offerings.

2. Auction Eligibility

62. The Commission has in the past employed a random selection
process (i.e., a lottery) to select from among mutually exclusive MDS
initial applications. See 47 CFR 1.824. However, Section 309(j) of the
Communications Act, as amended, permits auctions were (1) mutually
exclusive applications for initial licenses or construction permits are
accepted for filing by the Commission; (2) the principal use of the
spectrum will involve or is reasonably likely to involve the receipt by
the licensee of compensation from subscribers in return for enabling
those subscribers to receive or transmit communications signals; and
(3) the objectives set forth in Section 309(j) would be promoted. In
the Second Report and Order, we concluded that single and multichannel
MDS as classes of services would satisfy the Section 309(j) criteria
for auction ability, and, thus, new initial applications in MDS would
be eligible for competitive bidding. Id. at 2359. The Second Report and
Order did not, however, expressly resolve the question of the auction
ability of mutually exclusive MDS station applications filed prior to
July 26, 1993, the date specified in the Commission's auction authority
in the 1993 Budget Act. Id. For the reasons set forth in Section 3
below, we now determine to lottery these previously filed MDS
applications.
3. Disposition of Previously Filed MDS Applications

63. Before the Commission conducts competitive bidding for the BTA
service areas applied for under the revised procedures set forth
herein, we must first process the remaining acceptable, mutually
exclusive applications for MDS station licenses that were filed prior
to July 26, 1993.\33\ Under the procedures in effect prior to the
enactment of competitive bidding authority in the 1993 Budget Act,
these mutually exclusive MDS applications were to have been lotteried.
In September 1993, the Commission tentatively concluded to lottery
rather than auction pre-July 26, 1993 MDS applications. See Competitive
Bidding Notice at 7661. In reaching this decision, the Commission first
noted that these applications has already incurred substantial delays.
The Commission then tentatively decided to eschew auctions in favor of
lotteries for pending MDS applications to avoid ``further delay'' in
granting MDS station licenses and providing service to the public
during the time it would take for the Commission to promulgate
competitive bidding rules. Id. Subsequently, in the Second Report and
Order, the Commission concluded that new initial applications in MDS
would be eligible for competitive bidding, but did not resolve the
question of whether to employ lotteries or auctions to dispose of the
previously filed MDS applications. Second Report and Order at 2359.
Thus, due to processing delays and further delays resulting from the
consideration of issues raised in the Budget Act regarding competitive
bidding, this group of previously filed MDS applications, through no
fault of the applicants themselves, has never been lotteried.

\33\ Once we complete our processing, we expect that this group
of previously filed, acceptable MDS station applications will likely
be quite small, consisting of approximately 100 mutually exclusive
applications for five rural locations. The applications for these
five locations have been pending since 1991.
---------------------------------------------------------------------------

64. The 1993 Budget Act empowers the Commission to either auction
or lottery these previously filed MDS applications.\34\ Consistent with
the statute, our tentative conclusion in the Competitive Bidding
Notice, and Commission precedent,\35\ we now exercise our discretion to
lottery this group of remaining previously filed, mutually exclusive
MDS applications. By employing lotteries for pre-July 26, 1993 MDS
applications, and by holding auctions for initial applications accepted
for filing after that date, we adopt a straightforward approach that is

[[Page 36537]]
easy to apply, fair to the applicants and serves the public interest.

\34\ See 47 U.S.C. Secs. 309 (i) & (j); Budget Act, Pub. L. No.
103-66, Sec. 6002(e) (Special Rule), 107 Stat. 312, 397 (1993).
\35\ See Memorandum Opinion and Order in PP Docket No. 93-253, 9
FCC Rcd 7387 (1994), 59 FR. 37 163 (July 21, 1994) (Cellular
Unserved Order) (determining to lottery previously filed
applications for cellular unserved areas).
---------------------------------------------------------------------------

4. Competitive Bidding Design

65. In this Report and Order, we have attempted to design auction
rules and procedures that are compatible with the unique
characteristics of MDS and that meet the congressional objectives set
forth in the Communications Act. See 47 U.S.C. 309(j)(3). We believe
that these objectives are embodied in two basic Commission policy
goals: promoting economic growth and enhancing access to
telecommunications service offerings for consumers, producers and new
entrants. Second Report and Order at 2349-2350. In the paragraphs
below, we implement competitive bidding for MDS, pursuant to Section
309(j) of the Communication Act and based on the record in this
proceeding. The methodology and procedures we will utilize in
conducting MDS auctions are identified below, and additional details
about specific competitive bidding procedures will be provided by
public notice prior to the MDS auction.
66. General Competitive Bidding Designs. The Second Report and
Order established the criteria to be considered in selecting the
auction methodology for each auctionable service. We generally
concluded that awarding licenses to those parties that value them most
highly will best advance congressional policy goals. Id. at 2360. We
also indicated that, because a bidder's ability to introduce valuable
new services and to deploy them rapidly, intensively and efficiently
increases the value of the license to that bidder, an auction design
that awards licenses to those bidders who are willing to pay the
highest bid tends to promote the development and deployment of new
services and the efficient and intensive use of the spectrum. Id. at
2349-2350.
67. With regard to auction methodologies specifically, the
Commission previously determined that: (1) licenses with strong
interdependencies should be auctioned simultaneously; \36\ (2) multiple
round auctions, by providing bidders with information regarding other
bidders' valuations of licenses, generally will yield more efficient
allocations of licenses and higher revenues, especially where there is
substantial uncertainly as to value; and (3) because they are
relatively expensive to implement and time-consuming, simultaneous and/
or multiple round auctions become less cost-effective as the value of
licenses decreases. Second Report and Order at 2360. We also found that
simultaneous multiple round bidding facilitates the efficient
aggregation of licenses across spectrum bands and geographic areas, and
because of the superior information and flexibility this bidding
methodology provides, is likely to yield greater revenues than other
auction designs. Thus, we concluded in the Second Report and Order that
the use of simultaneous multiple round bidding would generally be
preferred. Id. at 2366.

\36\ Licenses are interdependent when the value of a license to
the bidder depends on the other licenses that the bidder acquires.
Second Report and Order at 2361. Licenses may be interdependent
because they are substitutes or because they are complements. Id. at
2364.
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68. We also recognized in the Second Report and Order that
simultaneous multiple round bidding may appear more complex to bidders
and could be more difficult and expensive to implement than other
auction methods. Id. at 2364. We have, however, in the past year gained
considerable experience in conducting simultaneous multiple round
bidding. This competitive bidding method has been utilized in several
narrowband and broadband PCS auctions,\37\ and has proved to be an
efficient and effective way to conduct spectrum auctions. In addition,
the cost to the Commission of conducting simultaneous multiple round
bidding has decreased considerably since the initial simultaneous
auctions because the computer software used in these auctions has now
been developed. We have also recently initiated procedures permitting
remote bidding from personal computers throughout the country.
Consequently, bidders may now participate in simultaneous multiple
round auctions in a variety of ways--on site, by personal computer
using remote bidding software, or via telephone.

\37\ The Commission has also recently proposed to utilize
simultaneous multiple round bidding for both the 800 and 900 MHz
Specialized Mobile Radio services. Further Notice of Proposed Rule
Making in PR Docket No. 93-144 and PP Docket No. 93-253, FCC 94-271
(released Nov. 4, 1994), 59 FR. 60111 (Nov. 22, 1994); Second Report
and Order and Second Further Notice of Proposed Rulemaking in PR
Docket No. 89-553, PP Docket No. 93-253, and GN Docket No. 93-252,
FCC 95-159 (released April 17, 1995), 60 FR. 21987 (May 4, 1995).
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69. MDS Competitive Bidding Design. Given our growing and
successful experience with this auction design, we conclude that the
generally favored method of simultaneous multiple round bidding is
appropriate for MDS. We accordingly adopt this method to auction the
BTA service areas.
70. In the Notice, we had tentatively concluded that simultaneous
multiple round bidding was less appropriate for MDS than other auction
methods primarily because the ``value of and interdependence between''
the geographic service areas might not be ``sufficiently high to
justify the use'' of the generally preferred auction method. Notice at
7678. After further consideration, and based upon our continuing
successful experience with simultaneous multiple round bidding, we now
conclude that simultaneous multiple round bidding is in fact
appropriate for MDS.
71. With regard to the expected value of the BTA service areas at
auction, we realize that some areas--particularly those with sparse
populations--may be auctioned for relatively modest amounts. The value
of any BTA service area at auction will, however, vary, depending in
large part upon the population of and the amount of usable spectrum in
that area. Heavily populated BTA service areas may therefore attract
more substantial sums, depending on the availability of spectrum within
such areas. Given the substantially decreased costs associated with
implementing simultaneous multiple round bidding, we believe that BTA
service area values are sufficient to justify the use of this auction
method.
72. With regard to the question of interdependence, we believe that
the BTA service area authorizations to be auctioned possess a degree of
interdependence. As explained in the Notice, ``[t]here appears to be
some geographic interdependence due to coordination of interference at
the borders.'' Id. at 7678. Indeed, because we have selected a filing
approach based on predetermined geographic areas, rather than a
national filing window, we emphasize that authorizations for adjacent
BTA service areas will be interdependent, as common ownership of such
areas will reduce problems of controlling interference at the borders
of the BTAs. See Second Report and Order at 2364. Interdependence
between the BTA authorization may also arise from economies of scale
achieved by wireless cable operators spreading of fixed costs over more
units of output. See Second Report and Order at 2364. We accordingly
conclude that there is some degree of interdependence between BTA
authorizations and that this interdependence may be significant for
geographically contiguous BTAs. Thus, the adoption of simultaneous
multiple round bidding should result in the most efficient award of
these BTA authorizations. See Second Report and Order at 2363. In
particular, we believe that potential bidders that operate (or are
planning to operate) MDS systems in

[[Page 36538]]
geographically adjacent BTAs and/or in several regions of the country
will be able to make more informed bidding decisions in a simultaneous
auction where all BTA service areas may be bid upon at the same time.
73. In addition to issues of cost and interdependence, other
considerations support the use of simultaneous multiple round bidding
for MDS. Compared with other bidding mechanisms, including open outcry
and sealed bidding, simultaneous multiple round bidding will generate
the most information about the value of BTA service areas during the
course of the auction. Thus, it is the most likely auction method to
award BTA authorizations to the bidders who value them most highly. We
also note that an auction method awarding BTA authorizations to the
parties who value them most highly should result in the award of
authorizations to bona fide wireless cable operators, rather than to
speculators, because bona fide operators will likely value
authorizations more highly than, and will therefore outbid,
speculators, who may be reluctant to pay up front the amounts necessary
to obtain authorizations through competitive bidding.\38\ Moreover,
given the uncertainty as to the value of the MDS spectrum, the
information generated by simultaneous multiple round bidding should
prove particularly valuable by giving bidders more flexibility to
pursue back-up strategies. Because of the superior information and
flexibility it provides, this auction method should also yield more
revenue for the MDS spectrum than other auction designs, including open
outcry.\39\ Although the raising of revenue is not our dominant
concern, we note that Congress directed the Commission, in designing
auction methodologies, to promote ``recovery for the public of a
portion of the value of the public spectrum resource.'' 47 U.S.C.
309(j)(3)(C). Finally, the employment of simultaneous multiple round
bidding for MDS, rather than open outcry, will eliminate the need for
the Commission to select the order in which the BTA service areas will
be auctioned. See Second Report and Order at 2360, 2363, 2366.

\38\ Sealed bidding is not supported by the Commission for MDS,
because this bidding method will generate no information about the
value of the BTA service areas during the course of an auction, and
thus may not award BTA authorizations to the parties who value them
the most. See Second Report and Order at 2362.
\39\ A simultaneous auction for MDS will tend to raise more
revenue than a sequential oral auction for two reasons. First, it
will increase the value of the BTA service areas by facilitating
efficient aggregation. Second, because it will provide more
information about the value of the BTA service areas, it will reduce
the propensity of sophisticated bidders to bid cautiously to avoid
the ``winner's curse''--the tendency for the winner to be the bidder
who most overestimates the value of the item up for bid.
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74. The simultaneous multiple round auction design adopted herein
also includes several features that should reduce the possible burdens
on bidders. We expect, for example, to have bidding rounds of shorter
duration than in other simultaneous multiple round auctions, such as
broadband PCS. This measure should shorten the MDS auction
substantially so that the length of the auction should not prove
burdensome to bidders. In addition, the burden on bidders will be
reduced by the variety of methods through which they may participate in
the MDS simultaneous multiple round auction. Bidders will be able to
submit bids on site, via personal computers using remote bidding
software, or via telephone; \40\ however, given the space limitations
for on site bidding and the uncertainty as to the exact number of
prospective bidders, the Commission reserves the right to have only
remote bidding--by personal computer and by telephone--for the MDS
auction. Thus, the expense to the bidders of participating in a
simultaneous multiple round auction should be less than in an open
outcry auction, where bidders (and/or their representative(s)) would
need to travel to and remain in Washington, DC for the duration of the
auction. Finally, the Commission will hold a seminar for prospective
bidders to acquaint them with this bidding design and all alternative
bid submission methods.

\40\ Telephonic bidding should, in particular, be a simple and
inexpensive method for bidders to submit bids. If submitting bids by
telephone, bidders may utilize the Internet to learn of the round-
by-round results of the auction; on-line services such as Compuserve
provide Internet access at low cost. Bidders may also, at negligible
cost, utilize a bulletin board service, accessible by long distance
telephone, from which auction results can be downloaded to a
personal computer.
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75. Given the numerous advantages of the generally preferred
auction method of simultaneous multiple round bidding, we believe that
this methodology will best serve for conducting MDS auctions. We note,
however, that the presence of incumbents in the BTA service areas could
affect the relative desirability and value of BTA authorizations in
ways we do not anticipate. In the event that the filings of short-form
applications indicate that the BTA authorizations have relatively
little interdependence and lower than expected value, we delegate
authority to the Mass Media Bureau and the Wireless Telecommunications
Bureau to reconsider the issue of whether another auction design would
be more appropriate.
76. MDS Bidding Procedures. There will be one authorization offered
in each BTA and the BTA authorizations will be awarded by simultaneous
multiple round bidding. All BTA service areas will be auctioned at the
same time. Bids will be accepted at the same time on all BTA service
areas in each round of the auction. High bid amounts will be posted
after the end of the bid submission period in each round of bidding.
With modifications to take account of the unique characteristics of MDS
and to reduce length, MDS auctions will follow the general bidding
procedures we have used to date to conduct the narrowband and broadband
PCS auctions.
77. In using simultaneous multiple round bidding to award the BTA
authorizations, it is important to specify minimum bid increments. The
bid increment is the amount or percentage by which the bid must be
raised above the previous round's high bid in order to be accepted as a
valid bid in the current bidding round. The application of a minimum
bid increment speeds the progress of the auction and, along with
activity and stopping rules, helps to ensure that the auction comes to
closure within a reasonable period of time. Establishing an appropriate
minimum bid increment is especially important in a simultaneous auction
with a simultaneous stopping rule. In that case, all markets will
remain open until there is no bidding on any market, and a delay in
closing the bidding on one market will delay the closing of all
markets. Second Report and Order at 2369.
78. Because we plan to use simultaneous multiple round bidding with
a simultaneous stopping rule to award BTA authorizations, we believe
that it is necessary to impose a minimum bid increment to ensure that
the MDS auction conclude within a reasonable period of time. As we
recognized in the Second Report and Order, it is important to establish
the amount of the minimum bid increment as the greater of a percentage
and fixed dollar amount. This will ensure a timely completion of the
auction even if bidding begins at a very low dollar amount. Id. at
2369. Accordingly, we will impose a minimum bid increment of some
percentage of the high bid from the previous round or a fixed dollar
amount, whichever is greater, in MDS auctions where simultaneous
multiple round bidding is used. We will announce by public notice prior
to the

[[Page 36539]]
MDS auction the specific bid increment that generally will be utilized.
79. The Commission will also retain the flexibility to vary the
minimum bid increment during the course of the MDS auction by
announcement. We may, for example, begin the MDS auction with a sizable
minimum bid increment and reduce the bid increment as the auction
progresses. Starting with a sizable minimum bid increment will move the
auction quickly at the beginning, when prices have limited
informational content and there is little benefit to either bidders or
the Commission of refined price movements, while allowing bidders to
express small differences in valuation as the auction nears a close,
increasing both efficiency and auction revenues. Small bid increments
also reduce the chances of ties. Where a tie occurs, the high bidder
will be determined by the order in which the bids were received by the
Commission. See Second Report and Order at 2369. Adjustments in the bid
increment may be based in part on the level of bidding activity.
80. To gain the full benefit of the information generated by a
simultaneous multiple round auction, bidders will need some time
between bidding rounds to evaluate back-up strategies and consult with
their principals. Prior to the MDS auction, we will announce by public
notice the duration of bidding rounds for the auction. We also reserve
the discretion during the course of the auction to vary, by public
notice or announcement, the duration of bidding rounds or the interval
at which bids are accepted. We expect to allow more time for the
initial rounds in the MDS auction, while bidders familiarize themselves
with the bidding process, and then increase the frequency of rounds as
the auction progresses. Thus, we should be able to move the auction
toward closure in a reasonable period of time.\41\

\41\ Given our estimates of the value of the BTA service areas
and the likely number of bidders, we expect to hold more frequent
bidding rounds in the MDS auction than we have in certain other
simultaneous multiple round actions, particularly broadband PCS. See
Second Report and Order at 2368.
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81. To ensure that a simultaneous MDS auction with a simultaneous
stopping rule closes within a reasonable period of time and to increase
the information conveyed by bid prices during the auction, we believe
that it is necessary to impose an activity rule to prevent bidders from
waiting until the end of the auction before participating. Because
simultaneous stopping rules generally keep all markets open for bidding
as long as anyone wishes to bid, they also create an incentive for
bidders to hold back until prices approach equilibrium before making a
bid. As noted in the Second Report and Order, this could lead to very
long auctions. See id. at 2371. Delaying serious bidding until late in
an auction also reduces the information content of prices during the
course of the auction. Without an activity rule, bidders cannot know
whether a low level of bidding

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Source: Frix Law Library, https://www.frixlaw.com/law-library/documents/fr%3A95-17237. Public record. Not legal advice.