Geographic Partitioning and Spectrum Disaggregation by Commercial Mobile Radio Services Licensees; and Implementation of Section 257 of the Communications ActElimination of Market Entry Barriers

FEDERAL COMMUNICATIONS COMMISSION

47 CFR Part 24

[WT Docket No. 96-148; GN Docket No. 96-113; FCC 96-287]

Geographic Partitioning and Spectrum Disaggregation by Commercial

Mobile Radio Services Licensees; and Implementation of Section 257 of

the Communications Act--Elimination of Market Entry Barriers

AGENCY: Federal Communications Commission.

ACTION: Notice of Proposed Rulemaking.

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SUMMARY: In this Notice of Proposed Rulemaking in WT Docket No. 96-148

and GN Docket No. 96-113, the Commission proposes modifications to the

broadband personal communications services (PCS) rules to expand

geographic partitioning and spectrum disaggregation provisions. The

Commission also solicits comment on certain issues relating to these

rules. The Commission's objective in expanding the partitioning and

disaggregation rules is to enable a wide variety of applicants,

including small businesses, to overcome barriers to entry in the

broadband PCS market, to increase competition, and to expedite the

provision of broadband PCS to areas that may not otherwise receive

wireless services.

DATES: Comments must be filed on or before August 15, 1996. Reply

comments are to be filed on or before August 30, 1996.

ADDRESSES: Federal Communications Commission, 1919 M Street, N.W.,

Washington D.C. 20554.

FOR FURTHER INFORMATION CONTACT: David Nall or Mika Savir, Commercial

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

0620.

SUPPLEMENTARY INFORMATION: This Notice of Proposed Rulemaking in WT

Docket No. 96-148 and GN Docket No. 96-113, adopted on June 28, 1996,

and released on July 15, 1996, is available for inspection and copying

during normal business hours in the FCC Reference Center, Room 575,

2000 M Street N.W., Washington D.C. The complete text may also 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 Notice of Proposed Rulemaking:

I. Background

1. In the Broadband PCS Memorandum Opinion and Order, Amendment of

the Commission's Rules to Establish New Personal Communications

Services, GN Docket No. 90-314, Memorandum Opinion and Order, 59 FR

32830 (June 24, 1994) (Broadband PCS Memorandum Opinion and Order), the

Commission declined to allow general geographic partitioning, noting

that licensees might use partitioning as a means of circumventing

construction requirements. The Commission observed, however, that a

limited partitioning scheme might facilitate participation by certain

groups, including rural telephone companies and other designated

entities, in the provision of broadband PCS. The Commission stated that

it would consider the issue of geographic partitioning in a future

proceeding to establish competitive bidding rules for broadband PCS.

2. The Commission established geographic partitioning provisions

for rural telephone companies in the Competitive Bidding Fifth Report

and Order, Implementation of Section 309(j) of the Communications Act--

Competitive Bidding, PP Docket No. 93-253, 59 FR 37566 (July 22, 1995)

(Competitive Bidding Fifth Report and Order). The Commission determined

that partitioning would satisfy the Congressional mandate to provide an

opportunity for rural telephone companies to participate at auction and

in the provision of broadband PCS. The Commission decided that rural

telephone companies could acquire a partitioned license (1) by forming

an auction bidding consortium comprised entirely of rural telephone

companies, and partitioning the license(s) won among consortium

members; or (2) through private negotiation, either before or after an

auction. The Commission required that partitioned areas conform to

established

[[Page 38694]]

geopolitical boundaries (such as county lines) and that each area

include all portions of the rural telephone company's wireline service

area within the PCS service area.

3. In the Competitive Bidding Further Notice of Proposed

Rulemaking, Implementation of Section 309(j) of the Communications

Act--Competitive Bidding, PP Docket No. 93-253, Further Notice of

Proposed Rulemaking, 59 FR 41426 (August 12, 1994) (Competitive Bidding

Further Notice of Proposed Rulemaking), the Commission requested

comment on whether to extend post-auction partitioning of broadband PCS

licenses to women- and minority-owned businesses. The Commission

observed that allowing these entities to acquire partitioned licenses

may, like rural telephone companies, facilitate their ability to

participate in the provision of broadband PCS.

4. In the Broadband PCS Memorandum Opinion and Order, the

Commission held that broadband PCS licensees may disaggregate licensed

broadband PCS spectrum under the current rules after January 1, 2000 if

they have met the five-year construction requirement. The Commission

reasoned that this limit on spectrum disaggregation for broadband PCS

would allow the PCS market to take shape and prevent anti-competitive

practices with regard to disaggregation. The Commission indicated,

however, that it would initiate a proceeding at a later date to specify

rules for allowing spectrum disaggregation.

II. Notice of Proposed Rulemaking

A. Partitioning

1. License Eligibility

The Commission proposes to relax the broadband PCS geographic

partitioning rules for the A, B, D, and E spectrum blocks to allow any

party to acquire a license for a partitioned geographic service area

that meets the eligibility requirements to be a broadband PCS licensee.

The Commission tentatively concludes that this would allow spectrum to

be used more efficiently, speed service to underserved areas, and

increase competition. The Commission invites comment on this proposal.

The Commission solicits comment on whether this proposal to liberalize

the geographic partitioning rules would hinder a rural telephone

company's ability to participate in the provision of broadband PCS.

2. Available License Area, Timing, and Financial Obligations

The Commission proposes that any partitioning of broadband PCS

licenses be along county lines in the same manner that rural telephone

companies must partition along county lines under the current rules.

The Commission tentatively concludes that this would reduce the

administrative burden and minimize interference coordination concerns.

Commenters are invited to address the merits of the Commission's

proposal.

7. Non-entrepreneur block licensees. The Commission believes that

there may be significant advantages in broadening the partitioning

rules to permit A, B, D, and E block broadband PCS licensees to

partition a portion of their license area to any qualifying entity at

any time after receiving a license. The Commission proposes that all

licensees in the A, B, D, and E blocks be permitted to partition their

license area along county lines, at any time. Commenters are invited to

discuss whether the Commission should impose any limitations on the

size of geographic area that a licensee would be allowed to partition

in the non-entrepreneurs' blocks.

8. Licensees with competitive bidding benefits. The Commission

observes that small businesses face certain barriers to entry into the

broadband PCS market that changes in the partitioning rules may

address. The Commission proposes that an entrepreneurs' block (C and F

block) licensee be permitted to partition at any time to other parties

that would be eligible for a license in those blocks. The Commission

seeks comment on this tentative conclusion.

9. The Commission seeks comment on the treatment of installment

plans for winning auction bids owned by partitioning licensees. The

Commission seeks comment on whether an entrepreneur block licensee who

partitions to another entrepreneur should be required to repay, on an

accelerated basis, a portion of the outstanding principle balance owed

under an installment payment plan. The Commission seeks comment on

whether the partitionee should be required to guarantee payment of a

portion of the partitioner's obligation.

10. The Commission tentatively concludes that some form of the

unjust enrichment requirements should apply to a partitioning licensee

that has received bidding credits or is paying the winning bid through

installment payments when the partitionee qualifies as an entrepreneur,

but would receive less favorable installment plan payments. The

Commission seeks comment on whether such unjust enrichment requirements

in this case should be on a proportional basis, and how the payments

should be calculated.

11. The Commission proposes to apply the current five-year

restriction against complete license transfers to prohibit partitioning

and/or disaggregation by an entrepreneur block licensee to a non-

entrepreneur during the first five years of the license period. The

Commission states that applying this holding period to partitioning and

disaggregation will ensure the objective that entrepreneurs and small

businesses continue to participate as PCS licensees for substantial

periods of time, and through that participation obtain experience and

profits that will enable their long-term participation in

communications industries. The Commission tentatively concludes that

after the five-year holding period, unjust enrichment requirements

should apply as a condition for approval of an application for a

partitioning transfer of an entrepreneur block license to a non-

entrepreneur. The unjust enrichment provisions would include

accelerated payment of bidding credits, unpaid principal, and accrued

unpaid interest, and would be applied on a proportional basis. The

Commission seeks comment on how such unjust enrichment amounts should

be calculated. The Commission seeks comment on whether the price paid

by the partitionee should be considered in determining the percentage

of the outstanding principle balance to be repaid.

12. The Commission seeks comment on what the respective obligations

of the participants in a partitioning transfer should be, and whether

each party should be required to guarantee all or a portion of the

partitionee's original auctions-related obligation in the event of

default or bankruptcy by any of the parties to the partitioning

transfer. The Commission seeks comment on whether the partitioner (the

original licensee) should have a continuing obligation with respect to

the entire initial geographic area. The Commission seeks comment on

whether partitioning parties should be able to determine which party

has a continuing obligation with respect to the original licensed area.

13. The Commission tentatively concludes that the proposals to

permit partitioning in the manner described above would allow broadband

PCS spectrum to be used most efficiently, speed service to unserved or

underserved areas, and facilitate competition. The Commission

tentatively concludes that the proposal to permit partitioning by

entrepreneur block licensees to similarly qualified parties would

ensure that these entities retain a significant presence in the market.

Additionally, this proposal may

[[Page 38695]]

help small business licensees compete more effectively in the areas

they retain and assist in the elimination of entry barriers to the PCS

market. The Commission solicits comment on this analysis of the

intended effects of these proposals.

3. License Term

14. The Commission proposes that a partitionee be authorized to

hold its license for the remainder of the partitioner's original ten-

year license term. The Commission tentatively concludes that this

approach is appropriate because a licensee, through partitioning,

should not be able to confer greater rights than it was awarded under

the terms of its license grant. The Commission solicits comment on this

tentative conclusion.

15. The Commission also proposes that a partitionee be afforded the

same renewal expectancy as a market area licensee. Specifically, a

partitionee would be granted a preference at a comparative renewal

proceeding if it can demonstrate that it has provided ``substantial''

service during its past license term and has substantially complied

with applicable Commission rules, policies and the Communications Act

of 1934, as amended. The Commission invites comment on this proposal.

4. Construction Requirements

16. In the Broadband PCS Memorandum Opinion and Order, the

Commission found that broadband PCS would likely be a highly

competitive service and that licensees would have incentives to

construct facilities to meet the service demands in their licensed

areas. Nevertheless, the Commission imposed minimum construction

requirements to expedite service to the public and promote efficient

use of the spectrum. Specifically, the Commission required 30 MHz

broadband PCS licensees to construct facilities that provide coverage

to one-third of the population of their service area within five years

of the license grant and two-thirds of the population within ten years.

Ten MHz licensees are required to provide coverage to one-fourth of the

service area's population within five years or, alternatively, they may

submit a showing to the Commission demonstrating that they are

providing substantial service.

17. The Commission tentatively concludes that both the partitioner

and partitionee should be subject to coverage requirements that ensure

that both portions of a partitioned licensing area will receive

service. This proposal would facilitate partitioning by offering a

choice between two different build-out options, which could be

negotiated between the partitioner and partitionee. Applicants would

then select in their assignment and transfer applications the

construction option they would be obligated to meet.

18. Under the first option, a partitionee would be obligated to

satisfy the same construction requirements as the original licensee

within its partitioned area, regardless of when it acquired the

partitioned license. The Commission invites comment on this option.

19. As a second option, the Commission proposes more modest build-

out requirements for a partitioned area where the original licensee has

met its five-year build-out requirements and certifies that it will

meet the ten-year coverage requirements for its entire license area.

Specifically, the Commission proposes that partitionees must only

satisfy the substantial service requirement for renewal expectancy for

its partitioned area by the end of the original ten-year license term.

For example: an A Block licensee who meets its five-year build-out

requirements within three years after receiving its license, may, in

its partitioning application, certify that it will meet the ten-year

coverage requirement for its original license. In this scenario, the

partitionee would only be required to meet the substantial service

requirement for its partitioned area at the end of the A Block

licensee's original ten-year license term.

20. The Commission tentatively concludes that establishing flexible

build-out requirements would encourage partitioning to entities that

have a sincere interest in providing broadband PCS and would thereby

expedite the provision of service to areas that otherwise may not

receive it as quickly. The Commission also observes that this option

may facilitate partitioning agreements, especially in the latter

portion of a license term, by acknowledging licensees' efforts to bring

broadband PCS service to their licensed areas. The Commission solicits

comment on these build-out proposals.

B. Disaggregation

1. Timing of Disaggregation

21. Currently, a broadband PCS licensee who has met the five-year

construction requirement may assign portions of its licensed PCS

spectrum after January 1, 2000. In the Broadband PCS Memorandum Opinion

and Order, the Commission stated that allowing immediate disaggregation

of spectrum before that time may impede competition in the provision of

broadband PCS.

22. The Commission tentatively concludes that the prohibitions on

disaggregation may no longer be warranted. The Commission tentatively

concludes that the current prohibitions on disaggregation may

constitute a barrier to market entry for small businesses and other

entrepreneurs which may lack the resources to participate successfully

in auctions for 30 MHz and 10 MHz broadband PCS spectrum blocks. The

Commission proposes to eliminate such market entry barriers by making

changes in the disaggregation rules. The Commission seeks comment on

these tentative conclusions.

23. The Commission proposes to allow spectrum disaggregation prior

to January 1, 2000, and to eliminate the condition that the licensee

must satisfy the five-year build-out requirements before

disaggregating. The Commission invites comment on whether to retain the

five-year build-out requirement before allowing disaggregation.

Commenters should discuss whether the goals of elimination of market

entry barriers, efficient spectrum use, expedited access to broadband

PCS service, and competition would be better served by eliminating this

restriction. Specifically, the Commission proposes to allow non-

entrepreneurs to disaggregate to other qualified entities at any time,

and to allow entrepreneurs to disaggregate to other qualified

entrepreneurs at any time, but entrepreneurs would be restricted from

disaggregating spectrum to non-entrepreneurs until after the five-year

holding period. Commenters should discuss whether any alternate

restrictions on allowing disaggregation may be appropriate.

2. Amount of Spectrum to Disaggregate

24. In the Broadband PCS Memorandum Opinion and Order, the

Commission established six frequency blocks of spectrum for licensed

broadband PCS. Three of the blocks (A, B, and C) each have 30 MHz of

spectrum, while the remaining blocks (D, E, and F) have 10 MHz of

spectrum each. The Commission determined that this broadband PCS

spectrum allocation plan would facilitate the rapid deployment of

broadband PCS and enable broadband PCS licensees to compete fully with

other commercial mobile radio services. The Commission determined that

30 MHz blocks of spectrum would facilitate competition and the rapid

development and implementation of the fullest range of PCS services and

ensure that PCS is

[[Page 38696]]

more fully competitive with other mobile radio services. The Commission

observed that 10 MHz licensees may be able to provide services ranging

from specialized applications to services comparable to those now

provided by cellular systems, through the use of advanced digital

techniques, such as Code Division Multiple Access (CDMA) and Time

Division Multiple Access (TDMA), and micro-cellular technology.

25. The Commission seeks comment and proposals for the amount of

spectrum that a licensee should be required to retain if disaggregation

is allowed on a more expedited basis. The Commission seeks comment

generally concerning whether some restriction or limit should be placed

on the amount of spectrum a licensee may disaggregate or the timing of

such disaggregation.

26. The Commission proposes that licensees disaggregate frequencies

in accordance with the pairings specified in our rules. The Commission

tentatively concludes that for these purposes, disaggregation for

broadband PCS in blocks smaller than a 1 MHz block of paired

frequencies will not be permitted. The Commission seeks comment on this

tentative conclusion. The Commission requests that commenters

suggesting alternative approaches provide technical justifications and

other relevant support in responding to this issue.

27. The Commission seeks comment on whether broadband PCS licensees

should be required to retain or acquire spectrum above the

administrative minimum of 1 MHz. The Commission also seeks comment on

the minimum amount of spectrum a disaggregatee could utilize for the

provision of broadband type services. The Commission seeks comment

generally on the relevance of the distinction between broadband and

narrowband for purposes of disaggregation rules.

28. The Commission tentatively concludes that elimination of the

current prohibitions on broadband PCS disaggregation would be

consistent with the recent elimination of the cellular/PCS cross-

ownership rule and the 40 MHz PCS spectrum cap, and the retention of

the 45 MHz CMRS spectrum cap, because such actions facilitate market

transfers of spectrum among cellular and PCS licensees while

maintaining a provision to ensure a diversity of service providers. The

Commission requests comment on this tentative conclusion, and generally

on the impact of the present 45 MHz spectrum cap on these proposals.

3. Matters Relating to Entrepreneur Block Licensees

29. The Commission proposes to allow all entrepreneur block

licensees to disaggregate to similarly qualifying parties at any time

without restriction, and to parties not eligible for entrepreneur block

licenses after a five-year holding period. The Commission tentatively

concludes that if an entrepreneur block licensee is permitted to

disaggregate to a non-entrepreneur entity after the five-year holding

period, the disaggregating entrepreneur block licensee will be required

to repay the unjust enrichment provisions on a proportional basis.

These unjust enrichment provisions would include accelerated payment of

bidding credits, unpaid principal, and accrued unpaid interest, and

would be applied on a proportional basis. The Commission seeks comment

on how such unjust enrichment amounts should be calculated. The

Commission seeks comment on whether the price paid by the

disaggregating party should be considered in determining the percentage

of the outstanding principle balance to be repaid.

30. The Commission seeks comment on what the respective obligations

of the participants in a disaggregation transfer should be, and whether

each party should be required to guarantee all or a portion of the

disaggregatee's original auctions-related obligation in the event of

default or bankruptcy by any of the parties to the disaggregation

transfer. The Commission seeks comment on whether the disaggregator

(the original licensee) should have a continuing obligation with

respect to the entire initial license. The Commission seeks comment on

whether the parties should have available a choice of options, ranging,

for example, from an accelerated payment based on purchase price to a

guarantee for a larger payment by one party in the event another party

defaults. Parties are also invited to comment on whether the

disaggregating parties should be able to determine which party has a

continuing obligation with respect to the original licensed area.

31. The Commission tentatively concludes that if an entrepreneur

block licensee is permitted to disaggregate to an entrepreneur that

would not qualify for the same level of benefits as the disaggregating

licensee, the disaggregating entrepreneur block licensee will be

required to repay a portion of the unjust enrichment provisions as they

apply to a full assignment of a license. The Commission seeks comment

on whether this should be a proportional amount of its bidding credits,

unpaid principal, and accrued unpaid interest to the U.S. Treasury, and

how the amounts should be calculated. The Commission seeks comment on

what provisions, if any, should be adopted to address the situation of

an entrepreneur block licensee's disaggregation followed by default in

payment of a winning bid at auction.

32. The Commission seeks comment on whether there should be

different requirements for entrepreneur block licensees and for non-

entrepreneur block licensees regarding the amounts of spectrum which a

licensee must retain or may disaggregate.

4. Construction Requirements

33. The Commission's rules currently require 30 MHz broadband PCS

licensees to construct facilities that provide coverage to one-third of

the population of their service area within five years of the initial

license grant and two-thirds of the population within ten years. Ten

MHz licensees are required to construct facilities that provide

coverage to one-fourth of the service area's population within five

years or, alternatively, they may submit a showing to the Commission

demonstrating that they are providing substantial service.

34. To address the concerns raised in the Broadband PCS Memorandum

Opinion and Order about anti-competitive incentives to disaggregate and

engage in spectrum warehousing, the Commission proposes two

construction build-out options to apply to entities receiving

disaggregated spectrum that do not already possess a broadband PCS

license in the same geographic service area. Such applicants seeking to

receive disaggregated spectrum would select the construction option for

which they would be obligated to meet in their assignment and transfer

applications. The Commission tentatively concludes that this proposal

would prevent licensees from warehousing spectrum and would enable new

entrants to provide service.

35. Under the first option, a disaggregatee entering the geographic

market would be obligated to satisfy the same construction requirements

as the licensee, regardless of when it acquired the disaggregated

spectrum. For example, an entity that acquires spectrum from a 30 MHz

broadband PCS licensee (an A, B, or C block licensee) would be

obligated to provide service to at least one-third of the population in

the license area within five years of the underlying license term and

two-thirds of the population in the

[[Page 38697]]

license area by the end of the ten-year license term. An entity that

acquires spectrum from a 10 MHz broadband PCS licensee (a D, E, or F

block licensee) would have to provide adequate service to at least one-

quarter of the population in the license area or make a showing of

substantial service at the five-year benchmark. The Commission

tentatively concludes that this approach would prevent spectrum

warehousing and ensure expedited access to broadband PCS services.

Commenters are invited to discuss the merits of this option.

36. As a second option, the Commission proposes a modified build-

out requirement after the disaggregating licensee has met its five-year

build-out requirement and certifies that it will meet the ten-year

construction requirement by the end of its license term. Specifically,

a disaggregatee must only satisfy the five-year build-out requirements

for the license area by the end of the original ten-year license term.

The Commission tentatively concludes that this build-out option will

facilitate the rapid introduction of broadband PCS service and increase

spectrum efficiency. The Commission seeks comment on this approach.

Commenters are also invited to address whether these build-out

requirements should apply where a licensee disaggregates a portion of

its spectrum after the initial ten-year license term has expired.

37. The Commission proposes to require, as a pre-condition for

approving a proposed disaggregation, certifications from both the

disaggregator and the disaggregatee that the time remaining before the

ten-year construction benchmarks is sufficient for the disaggregator

and disaggregatee to meet the pertinent construction benchmark for

their respective licenses. This proposal would ensure against delay in

the build-out of PCS, and place all parties on notice that the

construction requirements must be considered during the negotiations.

In addition, disaggregatees must file maps and other supporting

documents showing compliance with the construction requirements within

the appropriate five-year and ten-year bench marks of the date of their

initial licenses.

38. The Commission proposes that if a licensee fails to meet the

construction requirements, the license of the disaggregator or

disaggregatee would revert back to the Commission. In light of the fact

that the disaggregator and disaggregatee are each licensees, their

prospective construction requirements are independent from each other

and failure to satisfy one construction requirement will not affect the

renewal of the other.

39. The Commission proposes no new construction requirements for

disaggregatees already possessing a broadband PCS license in a

geographic service area, on the premise that these licensees are

already subject to coverage requirements under their existing licenses.

The Commission seeks comment on this proposal. The Commission seeks

comment on the construction requirements, if any, that should apply to

other CMRS licensees receiving disaggregated broadband PCS spectrum.

5. License Term

40. The Commission proposes a similar license term for

disaggregation as for partitioning, i.e., that a disaggregatee would be

authorized to hold its license for the disaggregated spectrum for the

remainder of the disaggregator's original ten-year license term. The

Commission believes this approach is appropriate because a licensee,

through disaggregation, should not be able to bestow greater rights

than it was awarded under the terms of its license grant. The

Commission seeks comment on whether administrative efficiency and

convenience for licensees support a limited exception to this general

rule. The Commission proposes that a disaggregatee be afforded the same

renewal rights as a market area licensee. A disaggregatee would be

granted a preference at a comparative renewal proceeding if it can

demonstrate that it has provided ``substantial'' service during its

past license term and has substantially complied with applicable

Commission rules, policies, and the Communications Act. The Commission

invites comment on this proposal.

C. Related Matters

1. Combination of Partitioning and Disaggregation

41. The Commission tentatively concludes that combinations of

partitioning and disaggregation should be permitted. The Commission

seeks comment on whether the benefits of allowing licensees to combine

disaggregation and partitioning at any time outweigh factors supporting

restrictions on such a combination. In those situations where the

combination of partitioning and disaggregation is allowed under the

proposed rules, the Commission proposes to implement the rules proposed

for partitioning in the event there is a conflict in the application of

the rules. The Commission seeks comment on where such conflicts

conceivably could arise and on the overall approach to the combination

of partitioning and disaggregation addressed herein.

2. Licensing

42. The Commission proposes to follow existing partial assignment

procedures for broadband PCS licenses in reviewing requests for

geographic partitioning, disaggregation, or a combination of both.

Thus, the licensee must file an FCC Form 490 that is signed by both the

licensee and qualifying entity. The qualifying entity would also file

an FCC Form 430 unless a current FCC Form 430 is already on file with

the Commission. An FCC Form 600 would be filed by the qualifying entity

to receive authorization to operate in the market area which is being

partitioned or to modify an existing station of the qualifying entity

to include the new or additional market area being partitioned. The

Commission seeks comment on these proposed licensing rules.

43. The Commission proposes that any requests for a partitioned

license or disaggregated spectrum would contain the FCC Forms 490, 430,

and 600 and be filed as one package under cover of the FCC Form 490.

Parties are invited to comment on whether any additional procedures

should be required. A broadband PCS disaggregatee must file FCC Form

430 qualifying it as a common carrier unless a current FCC Form 430 is

already on file with the Commission. An FCC Form 600 should be filed by

the disaggregatee to receive authorization to operate in the market

area which is covered by the disaggregated spectrum or to modify an

existing station of the disaggregatee to include the new or additional

spectrum being disaggregated. Parties are invited to comment whether

any additional procedures should be required.

3. Technical and Microwave Relocation Rules

44. In the Broadband PCS Second Report and Order, Amendment of the

Commission's Rules to Establish New Personal Communications Services,

GN Docket No. 90-314, Second Report and Order, 58 FR 59174 (November 8,

1993) (Broadband PCS Second Report and Order) the Commission adopted

minimal technical standards to allow PCS to develop in the most rapid,

economically feasible and diverse manner. The Commission tentatively

concludes that the current technical rules with respect to service area

boundary limits and protections, which provide for coordination and

negotiation among licensees, should be maintained and applied to

partitioned license areas. The Commission seeks

[[Page 38698]]

comment on this tentative conclusion. The Commission seeks comment on

whether any modifications to the technical rules are needed to

accommodate these partitioning and disaggregation proposals.

45. The Commission tentatively concludes that a new entrant PCS

licensee who gains its license through partitioning or disaggregation

should be treated as any other subsequent PCS licensee for purposes of

the microwave relocation cost-sharing plan, including eligibility for

installment plan payments if the transferee would be eligible for an

installment plan equivalent to that enjoyed by the transferring

licensee, unless the reimbursement obligations to which they would be

subject have already been paid by the transferring licensee. The

Commission seeks comment on this approach.

4. Clearinghouse for Spectrum.

46. The Commission seeks comment on whether establishing an

electronic database to make more readily accessible the information

about licensed PCS spectrum would lower market entry barriers,

consistent with the mandate of Section 257 of the Telecommunications

Act of 1996, or otherwise be in the public interest. The Commission

requests comment on how to encourage the creation of private

information clearinghouses on available spectrum and what procedures

could be utilized to assist small businesses in obtaining available

licenses or spectrum from licensees to meet very limited or defined

telecommunications needs. The Commission also seeks comment on how to

promote information clearinghouses or other market solutions so that

the public can be informed about spectrum availability in particular

geographic areas or excess or available spectrum that could be

disaggregated in minimum amounts.

III. Conclusion

47. The Commission believes that these partitioning and

disaggregation proposals are consistent with a pro-competitive

deregulatory national policy framework and will promote the rapid

creation of a competitive market to deliver broadband PCS to the

largest number of consumers. These proposals are designed to meet the

Congressional objectives of opening telecommunications markets to

competition, providing advanced technologies and services efficiently

and quickly, and identifying and eliminating market entry barriers for

entrepreneurs and other small businesses in the provision and ownership

of telecommunications services.

IV. Procedural Matters and Ordering Clauses

A. Regulatory Flexibility Act

Summary: As required by Section 603 of the Regulatory Flexibility

Act, the Commission has prepared an Initial Regulatory Flexibility

Analysis (IRFA) of the expected impact on small entities of the

policies and rules proposed in this Notice of Proposed Rulemaking.

Reason for Action: This rulemaking proceeding was initiated to

secure comment on proposals to modify our broadband PCS rules to permit

partitioning and disaggregation for all Part 24 licensees. The

proposals advanced in the Notice of Proposed Rulemaking are also

designed to implement Congress' goal of giving small businesses the

opportunity to participate in the provision of spectrum-based services.

Objectives: The Commission proposes changes to its rules for

broadband PCS that are intended to facilitate the efficient use of

broadband PCS spectrum, increase competition, and expedite the

provision of broadband PCS service to areas that may not otherwise

receive broadband PCS or other wireless services in the near term.

These proposals seek to increase the level of small business

participation in the provision of broadband PCS. The Commission

proposes to allow broadband PCS licensees in the non-entrepreneurs'

blocks to partition any portion of their geographic license area to

entities that are eligible to be broadband PCS licensees. The

Commission further proposes to allow entrepreneurs' block licensees to

partition any portion of their licensed geographic area to entities

that qualify as entrepreneurs and are otherwise eligible to be

broadband PCS licensees. Additionally, the Commission proposes to

eliminate the January 1, 2000 benchmark for disaggregation, and allow

disaggregation any time after the broadband PCS licensee meets the

five-year build-out requirement. Specifically, the Commission proposes

to allow broadband PCS licensees in the non-entrepreneurs' blocks to

disaggregate spectrum to entities that are eligible to be broadband PCS

licensees. The Commission proposes to allow entrepreneurs' block

licensees to disaggregate to another entrepreneur, otherwise qualified

to be a broadband PCS licensee. Additionally, the Commission proposes

to establish license terms that permit partitionees to hold partitioned

licenses and disaggregatees to hold disaggregated spectrum for the

remaining duration of the original ten-year license term. The

Commission also proposes to establish construction requirements to

ensure expedient access to broadband PCS service in partitioned areas

to ensure coverage and increase spectrum efficiency. Finally, the

Commission proposes to allow licensees to combine partitioning and

disaggregation under limited circumstances.

Legal Basis: The proposed action is authorized under Sections 4(i),

257, 303(r) and 309(j) of the Communications Act of 1934, as amended,

47 U.S.C. Secs. 154(i), 257, 303(r) and 309(j), as amended.

Reporting, Recordkeeping, and Other Compliance Requirements: The

proposals under consideration in this Notice of Proposed Rulemaking

include the possibility of imposing reporting and recordkeeping

requirements for small businesses seeking licenses through the proposed

partitioning and disaggregation rules. The information requirements

would be used to determine if the licensee is a qualifying entity to

obtain a partitioned license or disaggregated spectrum. This

information will be a one-time filing by any applicant requesting such

a license. The information will be submitted on the FCC Forms 490 (or

430 and/or 600 filed as one package under cover of the Form 490) which

are currently in use and have already received OMB clearance. We

estimate that the average burden on the applicant is three hours for

the information necessary to complete these forms. We estimate that 75

percent of the respondents (which may include small businesses) will

contract out the burden of responding. We estimate that it will take

approximately 30 minutes to coordinate information with those

contractors. The remaining 25 percent of respondents (which may include

small businesses) are estimated to employ in-house staff to provide the

information. Applicants (including small businesses) filing the package

under cover of FCC Form 490 electronically will incur a $2.30 per

minute on-line charge. On-line time would amount to no more than 30

minutes. We estimate that 75 percent of the applicants may file

electronically. We estimate that applicants contracting out the

information would use an attorney or engineer (average of $200 per

hour) to prepare the information.

Federal Rules Which Overlap, Duplicate or Conflict With These

Rules: None.

Description, Potential Impact, and Number of Small Entities

Involved: The rule changes proposed in this proceeding will affect all

small businesses which avail themselves of these rule changes,

including small

[[Page 38699]]

businesses currently holding broadband PCS licenses who choose to

partition and/or disaggregate, and small businesses who may acquire

licenses through partitioning and/or disaggregation. The Commission is

required to estimate in its Final Regulatory Flexibility Analysis the

number of small entities to which a rule will apply, provide a

description of such entities, and assess the impact of the rule on such

entities. To assist the Commission in this analysis, commenters are

requested to provide information regarding how many total broadband PCS

entities, existing and potential, would be affected by the proposed

rules in the Notice of Proposed Rulemaking. In particular, the

Commission seeks estimates of how many broadband PCS entities, existing

and potential, will be considered small businesses. ``Small business''

is defined as a firm that has revenues of less than $40 million in each

of the last three calendar years. This definition was used in the PCS C

block auction and approved by the Small Business Administration. The

Commission seeks comment as to whether this definition is appropriate

in this context. Additionally, the Commission requests each commenter

to identify whether it is a small business under this definition. If

the commenter is a subsidiary of another entity, this information

should be provided for both the subsidiary and the parent corporation

or entity.

The broadband PCS spectrum is divided into six frequency blocks

designated A through F. The Commission has auctioned broadband PCS

licenses in blocks A, B, and C. The Commission does not have sufficient

information to determine whether any small businesses within the SBA-

approved definition bid successfully for licenses A or B block

auctions. There were 89 winning bidders that qualified as small

businesses in the C block PCS auctions. Based on this information, the

Commission concludes that the number of broadband PCS licensees

affected by the rules proposed in this Notice of Proposed Rulemaking

includes the 89 winning bidders that qualified as small entities in the

C block broadband PCS auction.

The Commission estimates that up to 10,370 PCS licensees or

potential licensees could take the opportunity to partition and/or

disaggregate a license or obtain a license through partitioning and/or

disaggregation. This estimate is based on the total number broadband

PCS licenses auctioned and subject to auction, 2,074, and the estimate

that each license would probably not be partitioned and/or

disaggregated to more than five parties. The Commission notes that the

A and B blocks each consist of 51 licenses (a total of 102 licenses)

and the C, D, E, and F blocks each consist of 493 licenses (a total of

1,972 licenses). Currently the C and F block licensees and potential

licensees (holding a total of 986 licenses) must be small businesses or

entrepreneurs with average gross revenues over the past three years of

less than $125 million. Under the proposed rules they will be permitted

to partition and/or disaggregate to other qualified entrepreneurs. The

A, B, D, and E block licensees and potential licensees (holding a total

of 1,088 licenses) will also be permitted under the proposed rules to

partition and/or disaggregate to small businesses.

At present, there have been no auctions held for the D, E, and F

blocks of broadband PCS spectrum. The Commission anticipates a total of

1,479 licenses will be awarded in the D, E, and F block PCS auctions,

which are scheduled to begin on August 26, 1996. Eligibility for the F

block licenses is limited to entrepreneurs with average gross revenues

of less than $125 million. However, there is no basis upon which to

estimate the number of licenses that will be awarded to small

businesses, nor is there a basis for an estimate as to how many small

businesses will win D or E block licenses. Given the fact that nearly

all radiotelephone companies have fewer than 1,000 employees, and that

no reliable estimate of the number of D, E, and F block licensees can

be made, the Commission assumes, for purposes of this IRFA that all of

the licenses will be awarded to small businesses. The Commission

believes that it is possible that a significant number of the up to

10,370 PCS licensees or potential licensees who could take the

opportunity to partition and/or disaggregate a license or who could

obtain a license through partitioning and/or disaggregation will be

small businesses.

Any Significant Alternatives Minimizing the Impact on Small

Entities Consistent with the Stated Objectives: The proposals advanced

in the Notice of Proposed Rulemaking are designed to implement

Congress' goal of giving small businesses, as well as other entities,

the opportunity to participate in the provision of spectrum-based

services. The impact on small entities in the proposals in the Notice

of Proposed Rulemaking is the opportunity to enter the broadband PCS

market through the partitioning and disaggregation proposals herein.

The rule changes proposed in the Notice of Proposed Rulemaking by

the Commission are consistent with the mandate under the Communications

Act of 1934, as amended, to identify and eliminate market entry

barriers for entrepreneurs and small businesses in the provision and

ownership of telecommunications services, and the mandate under Section

309(j) of the Communications Act of 1934, as amended, to utilize

auctions to ensure that small, minority and women-owned businesses and

rural telephone companies have an opportunity to participate in the

provision of spectrum-based services. The Commission's proposals in

this Notice of Proposed Rulemaking, if implemented, will facilitate

market entry by parties who may lack the financial resources for

participation in PCS auctions, including small businesses. These

proposals, if implemented, will promote technological advancement and

participation by diverse entities, as well as facilitate the efficient

use of broadband PCS spectrum. The alternative to the Commission's

proposal to allow geographic partitioning would be to maintain the

status quo and only permit rural telephone companies to utilize

partitioning through forming an auction bidding consortium comprised

entirely of rural telephone companies or through private negotiation

post-auction. Limiting geographic partitioning to rural telephone

companies would not permit other small businesses to obtain partitioned

licenses or to partition to other parties, and thus would not promote

the participation of small businesses in the provision of PCS. The

Commission also noted that the proposed partitioning policy would allow

spectrum to be used more efficiently, speed service to underserved

areas, and increase competition.

In this Notice of Proposed Rulemaking, the Commission observed that

initially general partitioning by broadband PCS licensees was not

permitted because of the concern that licensees might use partitioning

as a means to circumvent construction requirements. The Commission

tentatively concludes that both the partitioner and partitionee should

be subject to coverage requirements that ensure that both portions of a

partitioned licensing area will receive service. The Commission

proposes facilitating partitioning by offering a choice between two

different build-out options, which could be negotiated between the

partitioner and partitionee. The first option proposed by the

Commission would require a partitionee to satisfy the same construction

[[Page 38700]]

requirements as the original licensee within its partitioned area,

regardless of when it acquired the partitioned license. This approach

is consistent with the present construction requirements for rural

telephone companies. The second option proposed by the Commission would

apply where the original licensee has met its five-year build-out

requirements and certifies that it will meet the ten-year coverage

requirements for its entire license area. Specifically, the Commission

proposes that partitionees must only satisfy the substantial service

requirement for renewal expectancy for its partitioned area by the end

of the original ten-year license term. The Commission tentatively

concludes that these proposed flexible build-out requirements, if

adopted, will encourage partitioning to entities that have a sincere

interest in providing broadband PCS and will thereby expedite the

provision of service to areas that otherwise may not receive it as

quickly.

The Commission considered the fact that many broadband PCS

licensees may meet their five-year build-out construction obligation

early, and therefore proposes revisiting the current prohibition on

disaggregation. The Commission considered the alternative, requiring

PCS licensees to wait until January 1, 2000 before disaggregating, and

noted that this would not permit small businesses to disaggregate or

obtain disaggregated spectrum and therefore, would not promote an

efficient use of spectrum.

The Commission is proposing to allow partitioning and/or

disaggregation by entrepreneurs only to other qualified entrepreneurs

for five years, to ensure the objective that entrepreneurs and small

businesses continue to participate as PCS licensees for substantial

periods of time, and through that participation obtain experience and

profits that will enable their long term participation in

communications industries. The Commission is proposing to apply

proportional unjust enrichment provisions for partitioning and

disaggregation by entrepreneurs to non-entrepreneurs after the five-

year period. The alternative to this proposal, would be to either

prohibit partitioning by entrepreneurs or to allow entrepreneurs who

have benefitted from special bidding provisions to become unjustly

enriched by immediately partitioning a portion of their license area to

parties that do not qualify for such benefits. The Commission also

noted that allowing partitioning and/or disaggregation by entrepreneurs

only to other qualified entrepreneurs for five years is consistent with

the Commission's rule allowing license transfers by entrepreneurs only

to other entrepreneurs in the first five years of the license period.

The Commission believes that allowing entrepreneurs and small

businesses to partition and/or disaggregate their licenses to other

qualified entrepreneurs and small businesses, and allowing all non-

entrepreneurs to partition and/or disaggregate to any qualified party

(including small businesses) will help attain the Congressional

objective of ensuring that small businesses have an opportunity to

participate in the provision of broadband PCS. These proposals will

enable a wide variety of applicants, including small businesses, to

overcome entry barriers in the provision and ownership of

telecommunications services.

This Notice of Proposed Rulemaking solicits comment on a variety of

alternatives discussed herein. Any significant alternatives presented

in the comments will be considered.

IRFA Comments: The Commission requests public comment on the

foregoing IRFA. Comments must have a separate and distinct heading

designating them as responses to the IRFA and must be filed by the

comment deadlines set forth in the Notice of Proposed Rulemaking.

B. Paperwork Reduction Act

This Notice of Proposed Rulemaking contains either a proposed or

modified information collection. The Commission, as part of its

continuing effort to reduce paperwork burdens, invites the general

public and the Office of Management and Budget (OMB) to comment on the

information collections contained in this Notice of Proposed

Rulemaking, as required by the Paperwork Reduction Act of 1995, Public

Law No. 104-13. Public and agency comments are due at the same time as

other comments on this Notice of Proposed Rulemaking; OMB notification

of action is due September 23, 1996. Comments should address: (a)

Whether the proposed collection of information is necessary for the

proper performance of the functions of the Commission, including

whether the information shall have practical utility; (b) the accuracy

of the Commission's burden estimates; (c) ways to enhance the quality,

utility, and clarity of the information collected; and (d) ways to

minimize the burden of the collection of information on the

respondents, including the use of automated collection techniques or

other forms of information technology.

Dates: Written comments by the public on the proposed and/or modified

information collections are due August 15, 1996. Written comments must

be submitted by the Office of Management and Budget (OMB) on the

proposed and/or modified information collections on or before September

23, 1996.

Addresses: In addition to filing comments with the Secretary, a copy of

any comments on the information collections contained herein should be

submitted to Dorothy Conway, Federal Communications Commission, Room

234, 1919 M Street, N.W., Washington D.C. 20554, or via the Internet to

[email protected], and to Timothy Fain, OMB Desk Officer, 10236 NEOB,

725-17th Street, N.W., Washington D.C. 20503 or via the Internet to

[email protected].

For Further Information Contact: For additional information concerning

the information collections contained in this Notice of Proposed

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

Internet at [email protected].

Supplementary Information:

Title: Geographic Partitioning and Spectrum Disaggregation by

Commercial Mobile Radio Services Licensees and Implementation of

Section 257 of the Communications Act-Elimination of Market Entry

Barriers.

Type of Review: New Collection.

Respondents: Number of Respondents: We estimate up to 10,370 PCS

licensees or potential licensees could take the opportunity to

partition and/or disaggregate a license or obtain a license through

partitioning and/or disaggregation.

Estimated Time Per Response: The average burden on the applicant is

3 hours for the information necessary to complete FCC Forms 490, 430 or

600 and be filed as one package under cover of the FCC Form 490. We

estimate 75% of respondents will contract out the burden of responding.

We estimate that it will take approximately 30 minutes to coordinate

information with those contractors. The remaining 25% of respondents

are estimated to employ in house staff to provide the information.

7,778 applications (contracting out) x .5 hour = 3,889 hours. 2,592

applications (in house) x 3 hours = 7,776 hours.

Total burden = 3,889 + 7,776 = 11,665 hours.

Estimated Cost to the Respondent: Total capital and start-up costs:

Applicants wishing to file the package under cover of the FCC Form 490

electronically will incur a $2.30 per minute on-line charge. On-line

time

[[Page 38701]]

would amount to no more than 30 minutes. Seventy-five percent of the

respondents are expected to file electronically. 7,778 applications

x $2.30 x = $536,682. All other respondents would be expected to file

manually and would incur the following costs: 2,592 applications

x $1.15 = $2,981. Total capital and start-up costs = $536,682+$2,981 =

$539,663.

We assume that the respondents contracting out the information

would use an attorney or engineer (average of $200 per hour) to prepare

the information. 7,778 applications x $200 per hour x 3 hours =

$4,666,800. Total Respondent Costs: $539,663 + $4,666,800 = $5,203,463.

Cost to the Federal Government: The government review time for this

submission is estimated at 15 minutes per response with the review

being done by personnel at the GS-6 level. 10,370 applications x $3.39

= $35,154.

C. Ex Parte Rules--Non-Restricted Proceeding

This is a non-restricted notice and comment rulemaking 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 Secs. 1.1202, 1.1203, 1.1206(a).

D. Comment Period

Pursuant to applicable procedures set forth in Sections 1.415 and

1.419 of the Commission's rules, interested parties may file comments

on or before August 15, 1996. Reply comments are to be filed on or

before August 30, 1996. To file formally in this proceeding, you must

file an original and four copies of all comments, reply comments, and

supporting comments. If you want each Commissioner to receive a

personal copy of your comments, you must file an original plus nine

copies. You should send comments and reply comments to Office of the

Secretary, Federal Communications Commission, Washington D.C. 20554. A

copy of all comments should also be filed with the Commission's copy

contractor, ITS, Inc., 2100 M Street, N.W., Suite 140, (202) 857-3800.

E. 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. Secs. 154(i),

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

F. Ordering Clauses:

It is ordered that, pursuant to Sections 4(i), 303(r), 309(c),

309(j), and 332 of the Communications Act of 1934, as amended, 47

U.S.C. Secs. 154(i), 303(r), 309(c), 309(j), and 332, a NOTICE OF

PROPOSED RULEMAKING is hereby ADOPTED.

It is further ordered, that comments in WT Docket No. 96-148 will

be due August 15, 1996 and reply comments will be due August 30, 1996.

List of Subjects in 47 CFR Part 24

Communications common carriers, Federal Communications Commission,

Reporting and recordkeeping requirements.

Federal Communications Commission.

William F. Caton,

Acting Secretary.

[FR Doc. 96-18847 Filed 7-24-96; 8:45 am]

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