Future Development of Paging Systems and Implementation of Section 309(j) of the Communications Act; Competitive Bidding

FEDERAL COMMUNICATIONS COMMISSION

47 CFR Parts 22 and 90

[WT Docket No. 96-18; PP Docket No. 93-253; FCC 96-183]

Future Development of Paging Systems and Implementation of

Section 309(j) of the Communications Act; Competitive Bidding

AGENCY: Federal Communications Commission.

ACTION: Interim measure; modification.

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SUMMARY: In this First Report and Order in WT Docket No. 96-18 and PP

Docket No. 93-253, the Commission modifies the interim measures imposed

in the Notice of Proposed Rulemaking (NPRM) in this docket. In the

NPRM, the Commission addressed how paging applications should be

treated during the pendency of this rulemaking, and imposed an across-

the-board freeze on new applications for paging licenses with an

exception for Common Carrier Paging (CCP) and Private Carrier Paging

(PCP) licensees with nationwide exclusivity. The Commission is

modifying the interim freeze imposed in the NPRM by allowing all

incumbent paging licensees subject to the interim freeze to apply for

additional transmission sites on the same channel, on a primary basis,

within 65 kilometers (40 miles) of an operating transmission site. An

application must be accompanied by a certification that the applicant

is an incumbent paging licensee, and the proposed site is within 65

kilometers (40 miles) of an authorized transmission site that was

licensed to the same applicant on the same channel on or before

February 8, 1996 and which is operational as of the date the

application for the additional transmitter site is filed. All

applications filed by CCP incumbent licensees and 929 MHz PCP incumbent

licensees on exclusive channels will be put on Public Notice to allow

for competing applications to be filed.

The Commission resumes processing all pending non-mutually

exclusive applications that were filed by incumbents with the

Commission on or before February 8, 1996. The February 8, 1996 freeze

interrupted the 30 or 60 day filing window in some cases. Therefore,

the Wireless Telecommunications Bureau will release a Public Notice

with attached copies of the prior Public Notices containing the pending

paging applications. All pending applications filed by incumbents on or

before February 8, 1996 that were not on Public Notice for the required

30 or 60 days, will be deemed to continue to be on Public Notice for

the remaining amount of time until the required 30 or 60 day window for

filing competing applications expires.

The Commission's objective in modifying the interim freeze is to

allow the incumbent paging licensees the flexibility needed to expand

paging systems to continue to serve their customers and convert to

flexible wide-area synchronous protocol technology during the interim

period, while preventing an increase in telecommunications investment

fraud.

EFFECTIVE DATE: May 10, 1996.

FOR FURTHER INFORMATION CONTACT: Mika Savir, Commercial Wireless

Division, Wireless Telecommunications Bureau, at (202) 418-0620.

SUPPLEMENTARY INFORMATION: This First Report and Order in WT Docket No.

96-18 and PP Docket No. 93-253, adopted April 22, 1996, and released

April 23, 1996, is available for inspection and copying during normal

business hours in the FCC Reference Center, Room 230, 1919 M Street

N.W., Washington D.C. The complete text 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)). Synopsis of First Report and Order:

I. Background

1. In this docket, the Commission is examining the paging

regulations in light of the statutory objective of regulatory symmetry

for all Commercial Mobile Radio Services (CMRS) established in the

Omnibus Budget Reconciliation Act of 1993, Pub. L. No.

[[Page 21381]]

103-66 (1993 Budget Act). The 1993 Budget Act amended the

Communications Act to divide all mobile services into two categories,

CMRS and private mobile radio service (PMRS), and mandated that

substantially similar mobile services receive comparable regulatory

treatment. In the CMRS Third Report and Order, Implementation of

Sections 3(n) and 332 of the Communications Act, GN Docket No. 93-252,

Third Report and Order, 59 FR 59945 (November 21, 1994) (CMRS Third

Report and Order), the Commission concluded that CCP and PCP are

substantially similar services and should be subject to comparable

regulation. Under Section 6002(c)(2)(B) of the 1993 Budget Act,

reclassified PCP licensees retain their PMRS status on a grandfathered

basis until three years after the date of enactment of the legislation

which occurred on August 10, 1993. PMRS paging services, as well as

CMRS paging services, are subject to the interim and final measures in

this proceeding.

2. In the NPRM, Revision of Part 22 and Part 90 of the Commission's

Rules to Facilitate Future Development of Paging Systems and

Implementation of Section 309(j) of the Communications Act--Competitive

Bidding, WT Docket No. 96-18, Notice of Proposed Rulemaking, 61 FR

06199 (February 16, 1996) (NPRM), the Commission proposed a transition

to geographic market area licensing for all paging services. In the

NPRM, the Commission also proposed to adopt competitive bidding rules

for mutually exclusive paging applications. Additionally, the

Commission suspended acceptance of new applications for paging

channels, as of February 8, 1996. The Commission allowed incumbents to

make minor modifications to their existing systems, so long as the

modifications did not increase their composite interference contour.

The Commission also allowed all licensees with nationwide exclusivity

to continue to add sites without restrictions.

3. The Commission received comments and reply comments on the

interim proposals. Based on the arguments raised by the commenters, the

Commission concludes that partially lifting the interim freeze for

incumbent licensees would be in the public interest.

II. First Report and Order

A. Interim Freeze

4. In the NPRM, the Commission requested comment on an expedited

basis on whether, during the pendency of this proceeding, incumbents

should be allowed to file new applications to expand or modify their

existing systems in a way that would expand their existing interference

contours, with such modifications receiving only secondary site

authorization. The Commission also requested comment from interested

parties on other alternatives for allowing expansion or modification of

existing sites during the interim period. Commenters offered numerous

suggestions for partially lifting the freeze. The Commission concurs

with the commenters that partially lifting the interim freeze is

necessary to allow incumbents flexibility in serving their customers

and upgrading their equipment, and that these additions or

modifications should be given primary, not secondary, status.

5. Commenters all generally oppose the interim freeze, particularly

for incumbent licensees. Most of the commenters also oppose secondary

site licensing, on the grounds that it would discourage investment,

encourage speculation, and could result in future loss of service to

the public. Several commenters propose that as an interim measure

incumbent licensees be permitted to add sites to within 40 miles of an

operating site. Commenters also offer other suggestions such as that

incumbents be allowed to add sites if the service area of the new site

overlaps with existing authorized sites by a minimum of 50 percent, or

that they be allowed to expand their systems as long as the expansions

do not interfere with other current adjacent licensees.

6. Commenters also argue that the freeze gives undue advantage to

nationwide carriers, while decreasing the ability of the remainder of

the industry to compete. One commenter noted that the paging freeze

gives a competitive edge to Personal Communications Services (PCS).

Several commenters observed that the paging industry is converting to a

flexible wide-area synchronous protocol which requires additional

sites.

7. A group of paging carriers and paging equipment manufacturers,

the Coalition for a Competitive Paging Industry (Coalition), filed an

Emergency Petition for immediate lifting of the freeze. The Commission

incorporates the Petition into the record of this proceeding. The

Coalition also filed reply comments on the interim licensing issue,

which make many of the same arguments set forth in the Petition. To the

extent that the Commission grants limited relief from the freeze for

incumbent licensees, the Petition is granted. In all other respects,

the Commission denies the Petition. The Coalition argues that the

freeze is unlawful, arbitrary and capricious, and an abuse of

discretion on the grounds that: (1) There is insufficient spectrum

available on currently allocated paging channels to accommodate

additional systems; (2) paging carriers who are upgrading their

technology are prevented by the freeze from filing the modification

applications required to implement their networks; and (3) the

Commission has discriminated against carriers serving local and

regional markets by exempting nationwide carriers from the freeze. The

Coalition also filed an ex parte letter proposing that: (1) The

Commission accept applications filed by incumbents to expand or modify

existing systems; (2) applications would be subject to Public Notice

and competing applications if required under the rules in effect as of

February 7, 1996; (3) requests for exclusivity on 929 MHz channels

would be granted in appropriate cases under the rules in effect on

February 7, 1996; and (4) mutually exclusive applications would not be

processed until the conclusion of the rulemaking unless the parties

could agree to eliminate mutual exclusivity through agreement.

8. The Federal Trade Commission (FTC) filed comments to, inter

alia, explain the extent of the telecommunications investment fraud

associated with paging licenses. According to the FTC, the investment

fraud is of two basic types: (1) License ``application mills'' that

sell application preparation services for acquisition of wireless

licenses for a fee of several thousand dollars per license; and (2)

``build-out'' schemes, in which investors are sold interests in limited

liability companies or partnerships that claim they will acquire

licenses and build and operate telecommunications systems. Both of

these schemes are carried out by telemarketers calling unsophisticated

consumers and deceiving them about the profitability of the licenses,

and the consumers generally lose their entire investment. In January

1996, the FTC filed six actions as part of ``Project Roadblock''

against the telemarketers who sold application preparation and

acquisition services for paging licenses. The FTC observes that in the

Commission's database of pending 931 MHz applications, over 72 percent

of the applicants are individuals, rather than businesses. The FTC also

notes that 92 percent of license holders on 929 MHz channels are

individuals. According to the FTC, the high percentage of individual

applicants strongly suggests that many of these individuals are victims

of the

[[Page 21382]]

application mills. The FTC observes that telemarketing fraud has caused

the Commission to process thousands of license applications for

consumers who will never provide telecommunications services to the

public, and contributes substantially to the backlog of pending

applications and the quantity of mutually exclusive applications.

According to the FTC, the freeze against accepting new applications has

a strong deterrent effect on application mill fraud.

9. The Commission explains that it rejects the arguments of the

Coalition and other commenters that the freeze is unlawful because it

was not based on prior notice and comment. The Commission notes that

the suspension of acceptance of applications is a procedural action

that does not require notice and comment under the Administrative

Procedure Act (APA). Additionally, the Commission notes that it has

imposed similar freezes without prior notice and comment in other

rulemaking proceedings when there was a proposal to make the transition

to geographic area licensing and auction rules.

10. The Commission also rejects the arguments of commenters that

imposing a freeze was arbitrary or an abuse of the Commission's

discretion. The freeze remains essential to ensure that the goals of

the rulemaking are not compromised. The primary argument raised by

commenters against the freeze is that there is limited ``white space''

to be auctioned; however this contention is undermined by the

commenters' argument that the freeze is causing severe economic harm.

If there were in fact little or no white space left to be licensed,

maintaining the freeze would have minimal impact. The Commission notes

that while paging channels are heavily encumbered, there is some

available spectrum that is of considerable value to applicants.

11. The Commission also states that the freeze is necessary to

combat telemarketing schemes involving paging application fraud. The

FTC estimates that fraudulent investment schemes centered on acquiring

FCC licenses for wireless technologies have been the most prevalent

telemarketing investment scams of the 1990s, costing consumers hundreds

of millions of dollars. If the freeze were to be lifted, it could

inadvertently encourage a resumption of fraudulent activity by

application mills seeking to induce unsophisticated investors into

filing applications. The Commission also stated a concern that the

proposal to use auctions in this service may stimulate speculative

activity by parties seeking to warehouse free spectrum.

12. The Commission notes that the commenters have raised valid

reasons to support partially lifting the freeze for the remainder of

the interim period: the paging industry needs flexibility to make

modifications and additions to systems to continue to serve their

customers; licensees are in the process of converting to flexible wide-

area synchronous protocol technology to increase data delivery speeds

and therefore require additional base stations to maintain the existing

service area; and the nationwide carriers may have a competitive

advantage over the non-nationwide incumbent licensees in the local and

regional markets. The Commission concludes that the interim freeze

should be partially lifted for incumbent paging licensees.

13. As of May 10, 1996, the Commission is modifying the interim

freeze imposed in the NPRM, by allowing all incumbent paging licensees

subject to the interim freeze to apply for additional transmission

sites on the same channel, on a primary basis, within 65 kilometers (40

miles) of an operating transmission site. An application will be

accepted only if it is accompanied by a certification that (1) the

applicant is an incumbent paging licensee, and (2) the proposed site is

within 65 kilometers (40 miles) of an authorized transmission site that

was licensed to the same applicant on the same channel on or before

February 8, 1996 and which is operational as of the date the

application for the additional transmitter site is filed. The

applications from incumbent paging licensees on a non-nationwide CCP

channel and incumbent paging licensees on an exclusive PCP channel will

be placed on public notice and subject to competing applications within

the applicable filing window.

14. The Commission states that while it will accept initial

applications as described above only from incumbents, but it will not

limit eligibility to file competing applications once the incumbent's

initial application is filed. If no competing application is filed, the

incumbent's initial application can be granted. If a competing

application is filed, both applications will be treated as mutually

exclusive and will be held in abeyance until the conclusion of this

proceeding.

B. Interference Contour

15. In the NPRM, the Commission stated that incumbent licensees on

all bands except the nationwide channels could add sites to existing

systems, or modify existing sites during the pendency of this

rulemaking proceeding, if the addition or modification does not expand

the interference contour of the incumbent's existing system. The

Commission stated in a footnote that for such purposes, the

interference contour would be based on a median field strength of 21

dBV/m, and referenced the proposed mathematical formulas for

calculating the service and interfering contours for paging systems.

16. The Commission's reference to the proposed formula to calculate

the interference contour during the interim period caused some

confusion among the commenters. The commenters object to the proposed

formula to calculate the interference contour during the interim period

because it would shrink their current interference contour. The

commenters also contend that this proposal was unlawful because it was

retroactive and was not subject to the required notice and comment

procedures.

17. The Commission clarifies that it is not applying the proposed

interference contour formula on a retroactive basis to any current

sites. For purposes of interim licensing, incumbents may use the

interference contour defined under the current rules to determine

whether internal sites may be added or modified. The Commission notes

that this will allow 939 MHz licensees to make internal system changes

so long as they do not expand the composite circular interference

contour of their existing stations as defined in Section 22.537(f) of

the rules. The Commission also clarifies that the tables in Section

22.537(f) may be used on an interim basis by licensees on 929 MHz

exclusive channels to determine where stations may be added.

C. Exempt Services

18. Commenters have asked the Commission to clarify that the freeze

does not apply to Basic Exchange Telecommunications Radio Systems

(BETRS), Special Emergency Radio Service (SERS), and two-way mobile

telephone service on the two-way channels listed in Section 22.561 and

these rural telephone channels should be exempt from the freeze. The

Commission observes that this proceeding was initiated to examine the

paging regulations in light of the statutory objective of regulatory

symmetry for all CMRS established in the 1993 Budget Act. BETRS are

licensed under the Rural Radiotelephone Service, which is a fixed

service, not a mobile service, and by definition is not CMRS.

Implementation of Sections 3(n) and

[[Page 21383]]

332 of the Communications Act, GN Docket No. 93-252, Second Report and

Order, 59 FR 18493 (April 19, 1994) (CMRS Second Report and Order).

Therefore, BETRS are not subject to the interim paging freeze.

Similarly, conventional Rural Radiotelephone Service provided on the

channels listed in Sections 22.561 and 22.563 is not a mobile service,

and is not subject to the interim freeze in this proceeding. The

Commission is also exempting SERS from the interim freeze.

D. Processing of Pending Applications

19. In this First Report and Order, the Commission establishes

consistent procedures for processing applications filed on or before

February 8, 1996. Pursuant to Sections 22.120(d) and 22.127,

applications for 150 MHz and 450 MHz channels are placed on Public

Notice for 30 days, and applications for 931 MHz channels are on Public

Notice for 60 days to allow other applicants to file competing

applications. All applications that were filed with the Commission on

or before February 8, 1996 have been on Public Notice; however, the

February 8, 1996 interim freeze interrupted the 30 or 60 day filing

window in some cases. After the release of this First Report and Order,

the Wireless Telecommunications Bureau will release a Public Notice

with attached copies of the prior Public Notices containing the pending

paging applications. Once the Public Notice is released, all pending

applications filed by incumbents that were not on Public Notice for the

required 30 or 60 days will be deemed to be on Public Notice for the

remaining amount of time until the required 30 or 60 day period for

filing competing applications expires. The Commission will not issue an

additional Public Notice for these pending CCP applications. Upon

expiration of the remaining filing period for these pending CCP

applications filed by incumbents, the applications that are not

mutually exclusive will be processed.

20. All 929 MHz PCP exclusive applications filed by incumbents

which were processed through the frequency coordinator, and filed with

the Commission on or before February 8, 1996, and are not mutually

exclusive, will be processed. Applications for PCP channels submitted

by incumbents to the frequency coordinator but not filed with the

Commission prior to February 8, 1996, may be resubmitted to the

frequency coordinator, and then may be filed with the Commission,

provided that the applicant certifies that the applicant is an

incumbent licensee with an operating system.

E. Canadian and Mexican Coordination During the Interim Period

The Commission states that in cases where coordination must be

obtained in Canadian or Mexican border areas, licensees must continue

to file applications with the Commission to allow for such coordination

under the interim licensing procedures.

III. Conclusion

22. The Commission concludes that the revisions to the interim

measures adopted in this First Report and Order will enable paging

licensees to continue expansion of their systems and enhance the

quality of service to the public while this proceeding is pending. At

the same time, the limitations on new applications during the interim

period will prevent spectrum warehousing and deter application fraud.

The Commission emphasizes that the measures set forth in this First

Report and Order are interim measures only, and that the long-term

proposals for geographic licensing of paging channels will be

determined in the future.

IV. Procedural Matters and Ordering Clauses

A. Regulatory Flexibility Analysis

As required by Section 604 of the Regulatory Flexibility Act, the

Commission has prepared a Final Regulatory Flexibility Analysis for the

Interim Measures in the First Report and Order of the expected impact

on small entities of the modification of the interim measures.

Statement of the Need for and Objectives of Measures: In the First

Report and Order, the Commission is modifying the interim measures,

specifically, the interim freeze on new paging applications imposed in

the Notice of Proposed Rulemaking, to permit incumbent paging licensees

to apply for additional licenses to add transmission sites to existing

paging systems on the same channel as the existing systems, provided

that the additional transmission site is within 65 kilometers (40

miles) from an operating transmission site in the applicant's system.

This modification of the interim measure will allow paging companies

additional flexibility to expand their systems during the interim

period.

Summary of Significant Issues Raised by Comments to the Initial

Regulatory Flexibility Analysis (IRFA): There were no comments to the

IRFA regarding the interim measures.

All significant alternatives are discussed in the First Report and

Order.

B. Paperwork Reduction Act

This First Report and Order contains a new information collection.

The Commission, as part of its continuing effort to reduce paperwork

burdens, has submitted this to Office of Management and Budget (OMB)

for emergency approval under the Paperwork Reduction Act of 1995,

Public Law 104-13. The Commission has requested OMB approval by April

29, 1996.

Further Information: For additional information concerning the

information collections contained in this First Report and Order,

contact Dorothy Conway at (202) 418-0217 or via the Internet at

[email protected].

Supplementary Information:

Title: Revision of Part 22 and Part 90 of the Commission's Rules to

Facilitate Future Development of Paging Systems and Implementation of

Section 309(j) of the Communications Act--Competitive Bidding.

Type of Review: New Collection.

Respondents: Common Carrier Paging licensees and Private Carrier

Paging licensees filing applications for additional transmission sites.

Number of Respondents: Approximately 2000.

Estimated Time Per Response: Approximately 0.08 hours for each

respondent to read and sign the certification.

Total Annual Burden: A burden of approximately 160 hours.

Needs and Uses: On February 8, 1996, the Commission adopted a

Notice of Proposed Rule Making (NPRM) that examines ways to establish a

comprehensive and consistent regulatory scheme that will simplify and

streamline licensing procedures and provide a flexible operating

environment for both common carrier and private paging services. The

NPRM imposed an interim across-the-board freeze on new paging

applications.

On April 22, 1996, the Commission adopted the First Report and

Order that modified the interim freeze imposed in the NPRM to allow the

incumbents in the paging industry the flexibility needed to serve the

public, and upgrade to more spectrally efficient equipment. The First

Report and Order allows incumbent common carrier paging and private

carrier paging licensees to expand their current paging systems by

applying for additional transmission sites on the same channel within

65 kilometers (40 miles) from their existing operating transmission

sites. This modification of the interim measures is limited to

incumbent licensees. Paging applicants must certify in writing that:

(1) The applicant is an incumbent

[[Page 21384]]

paging licensee, and (2) the proposed site is within 65 kilometers (40

miles) of an authorized transmission site that was licensed to the same

applicant on the same channel on or before February 8, 1996 and which

is operational as of the date the application for the additional

transmitter site is filed. This modification of the interim measures is

effective May 10, 1996.

C. Ex Parte Rules--Non-Restricted Proceeding

Ex parte presentations are permitted except during the Sunshine

Agenda period, provided they are disclosed as provided in the

Commission's rules, 47 CFR 1.1202, 1.1203, 1.1206(a).

D. Authority

The above action is authorized under the Communications Act,

Secs. 4(i), 303(r), 309(c), 309(j), and 332, 47 U.S.C. 154(i), 303(r),

309(c), 309(j), and 332, as amended.

E. Ordering Clauses

It is Ordered that, pursuant to the authority of sections 4(i),

303(r), 309(c), 309(j), and 332 of the Communications Act of 1934, as

amended, 47 U.S.C. 154(i), 303(r), 309(c), 309(j), and 332, this First

Report and Order is adopted and the interim freeze set forth in the

Notice of Proposed Rulemaking in this docket is modified, effective May

10, 1996 as set forth herein.

It is further ordered that the Emergency Petition for Immediate

Withdrawal of Freeze filed by the Coalition for a Competitive Paging

Industry on February 28, 1996, is granted to the extent discussed

herein, and denied in all other respects.

List of Subjects

47 CFR Part 22

Communication common carriers, Reporting and recordkeeping

requirements.

47 CFR Part 90

Common carriers, Reporting and recordkeeping requirements.

Federal Communications Commission.

William F. Caton,

Acting Secretary.

[FR Doc. 96-11643 Filed 5-9-96; 8:45 am]

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