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

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URL: https://www.frixlaw.com/law-library/documents/fr%3A96-18847

## Record

- **Collection:** Federal Register
- **Document type:** Proposed Rule
- **Published:** July 25, 1996
- **Citation:** 61 FR 38693

## Text

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]
BILLING CODE 6712-01-P

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Source: Frix Law Library, https://www.frixlaw.com/law-library/documents/fr%3A96-18847. Public record. Not legal advice.