Future Development of SMR Systems in the 800 MHz Frequency Band

FEDERAL COMMUNICATIONS COMMISSION

47 CFR Part 90

[PR Docket No. 93-144; PP Docket No. 93-253; FCC 95-501]

Future Development of SMR Systems in the 800 MHz Frequency Band

AGENCY: Federal Communications Commission.

ACTION: Proposed rule.

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SUMMARY: In this Second Further Notice of Proposed Rule Making (Second

Further Notice) in PR Docket No. 93-144, the Commission seeks comment

on disaggregation of channel blocks and partitioning on the upper 200

channels of 800 MHz Specialized Mobile Radio (SMR) spectrum, certain

aspects of mandatory relocation as adopted in the First Report and

Order (First R&O) in PR Docket No. 93-144, and eligibility of Basic

Exchange Telecommunications Radio Service (BETRS) operators for certain

upper 200 channels. In addition, we propose to adopt service and

competitive bidding rules for the lower 80 SMR channels and the General

Category channels in the 800 MHz band. Further, we have redesignated

the General Category channels for exclusive SMR use. The intended

effect of this action is to facilitate future development of SMR

systems in the 800 MHz band through implementation of streamlined

licensing procedures and the use of competitive bidding.

DATES: Comments are to be filed on or before February 15, 1996, and

Reply Comments are to be filed on or before March 1, 1996.

ADDRESSES: Federal Communications Commission, 1919 M Street NW.,

Washington, DC 20554.

FOR FURTHER INFORMATION CONTACT: David Furth, or David Kirschner at

(202) 418-0620.

SUPPLEMENTARY INFORMATION: This Second Further Notice, adopted December

15, 1995, and released December 15, 1995, is available for inspection

and copying during normal business hours in the FCC Dockets Branch,

Room 230, 1919 M Street N.W., Washington, D.C. 20037 (telephone: (202)

857-3800).

I. Disaggregation of Channel Blocks on the Upper 200 Channels of 800

MHz SMR Spectrum

1. Background. In the Further Notice of Proposed Rule Making in PR

Docket No. 93-144, 59 FR 60111 (November 22, 1994) (Further Notice), we

asked commenters to address whether licensees should be allowed to

sublicense portions of larger blocks instead of aggregating smaller

blocks.

2. Comments. Total Com, AMTA, AMI and Motorola contend that

licensees with service areas based on Economic Areas (EAs) established

by the United States Department of Commerce, Bureau of Economic

Analysis should be permitted to sublicense portions of their spectrum

blocks. Motorola argues that allowing sublicensing on a spectrum basis

would allow excess spectrum capacity to be made available for

alternative uses and provide small SMR licensees with the opportunity

to participate in the provision of wide-area service at levels

commensurate with their business and customer interests and their

financial resources. AMTA argues that such sublicensing should be

permitted as long as construction and coverage requirements are

satisfied, because such an approach would encourage development of

bidding consortia of smaller operators, which otherwise might be

incapable of participating in the competitive bidding process.

Parkinson, et al. express concern that, by allowing sublicensing, an

incumbent's operations unfairly and unreasonably would be restricted by

the EA licensee.

3. Discussion. Given the extensive incumbent presence in the upper

10 MHz block of the 800 MHz SMR spectrum, we tentatively conclude that

EA licensees should be permitted to disaggregate their spectrum blocks.

We believe that this additional tool will enable EA licensees to manage

their spectrum blocks more effectively and efficiently. We further

believe that disaggregation not only will facilitate the coexistence of

EA licensees and incumbents in the upper 200 channels, but also will

result in the most efficient use of the 800 MHz SMR spectrum. We seek

comment on this tentative conclusion.

4. As a general matter, we believe that any disaggregation

agreements must comply with the Commission's pro-competitive policies.

We propose that spectrum covered by an EA license may be sublicensed in

either of two ways: (1) a group of licensees or entities may form

bidding consortia to participate in auctions, and then disaggregate or

partition the EA license(s) won among consortia participants; and (2)

an EA licensee, through private negotiation and agreement before or

after the auction, may elect to disaggregate or partition its spectrum

block. We seek comment on this proposal.

5. Although we are interested in affording EA licensees optimal

flexibility for spectrum management, we nonetheless do not want to

undermine our goal to facilitate an effective and efficient wide-area

licensing scheme. We ask commenters to discuss the conditions under

which EA licensees should be permitted to disaggregate their spectrum

blocks. Should EA licensees be required to retain a specified portion

of their spectrum block, and if so, what is an appropriate amount? In

addition, should there be a minimum amount of spectrum that EA

licensees must disaggregate in order to utilize this spectrum

management tool? Should geographic area licensees be permitted to

disaggregate only after they have satisfied applicable construction and

coverage requirements? We also ask commenters to discuss any other type

of considerations applicable to disaggregation.

II. Partitioning on the Upper 200 Channels of 800 MHz SMR Spectrum

6. Background. In the Eighth Report and Order (Competitive Bidding

Eighth R&O) in PP Docket No. 93-253 we adopted a partitioning option

for rural telephone companies.

7. Comments. Nextel contends that smaller, local operators wishing

to participate in wide-area service could become involved through

arrangements with the EA licensee to partition its service area.

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8. Proposal. We tentatively conclude that partitioning should be an

option not only for rural telephone companies but also for incumbents

and eligible SMR licensees generally. We tentatively conclude that

extending the partitioning option will further the goal of Section

309(j) in the dissemination of licenses to a variety of licensees

because small businesses will have additional flexibility and

opportunities to serve areas in which they already provide service,

while the remainder of the service area could be served by other

providers.

9. We propose that SMR licensees be permitted to acquire

partitioned EA licenses in either of two ways: (1) they may form

bidding consortia to participate in auctions, and then partition the

licenses won among consortia participants; or (2) they may acquire

partitioned 800 MHz SMR licenses from other licensees through private

negotiation and agreement either before or after the auction. Each

member of a consortium would be required to file a long-form

application, following the auction, for its respective mutually agreed-

upon geographic area. We propose that partitioned areas be required to

conform to established geo-political boundaries (such as county lines).

We further propose that these entities be subject to the same interim

coverage and channel use requirements as EA licensees with respect to

the geographic areas covered by their partitioned authorizations. We

seek comment on our proposals and tentative conclusions and any

alternatives.

10. As a general matter, we believe that any partitioning agreement

must comply with the Commission's pro-competitive policies. We ask

commenters to discuss the conditions under which EA licensees should be

permitted to partition their service areas to other SMR licensees.

Should EA licensees be required to retain a specified portion of their

service area, and if so, what is an appropriate amount? Should

geographic area licensees be permitted to partition only after they

have satisfied applicable construction and coverage requirements? We

also ask commenters to discuss any other type of considerations

applicable to partitioning.

III. Mandatory Relocation in the Upper 200 Channels

A. Distributing Relocation Costs Among EA Licensees

11. In the First R&O, we determined that EA licensees must notify

incumbents operating on the upper 200 channels of their intention to

relocate such incumbents within 90 days of the release of the Public

Notice commencing the voluntary negotiation period. We also determined

that any incumbent licensee who has been so notified may require all EA

licensees in whose spectrum blocks it operates to negotiate

collectively with the incumbent. Because an incumbent licensee can

compel simultaneous negotiations with all affected EA licensees, we

tentatively conclude that the elaborate cost-sharing plan proposed for

broadband PCS is unnecessary for the 800 MHz SMR service. Therefore, we

propose to require EA licensees to share the relocation costs on a pro

rata basis (based on the actual number of the incumbent's channels

located in the EA licensees' respective spectrum blocks), unless all

such licensees agree to a different cost-sharing arrangement. We

believe that this approach would enhance significantly the speed of

relocation given that incumbent licensees most likely will elect to

negotiate with EA licensees collectively rather than individually to

accommodate system-wide relocation agreements. This would in turn

result in faster delivery of wide-area SMR service to the public. We

seek comment on our tentative conclusions and on the advantages and

disadvantages of our cost-sharing proposal.

B. Relocation Costs

12. Compensable Costs. When relocation will benefit multiple

licensees, the issue arises as to what relocation costs should be

shared by the benefitting licensees. Relocation costs can be divided

roughly into two categories: (1) the actual cost of relocating an

incumbent licensee to comparable facilities, and (2) payments above the

cost of providing comparable facilities, also referred to as ``premium

payments.''

13. Comments. Louisville believes that relocation costs should

include expenses for: engineering, equipment, labor, construction,

testing, FCC application fees, local fees, additional recurring

operating costs, pay for lost time, cost analysis, frequency

coordination, and any other expenses incurred by the incumbent as long

as the expenses were caused by the new facilities not being comparable

with the old facilities and they occurred within one year after the

incumbent took control of the new facilities. Clarus argues that

expenses paid by the EA licensee should include administrative costs

and any loss of goodwill that the incumbent might suffer. Nextel

believes that all out-of-pocket costs associated with retuning should

be borne by the auction winner, such costs include those covered by the

Commission's Emerging Technologies relocation plan.

14. Proposal. We tentatively conclude that premium payments should

not be reimbursable, because such payments are likely to be paid by EA

licensees to accelerate relocation so that they can be the first

licensee in the market area to implement wide-area SMR service. Because

other EA licensees have not received the corresponding advantage of

being first to market and did not actively participate in the

relocation negotiations, we do not believe that such licensees should

be required to contribute to premium payments. We therefore propose to

limit the calculation of reimbursable costs for the 800 MHz SMR service

to actual relocation costs, unless the EA licensees involved mutually

and expressly agree to share any premium payments. We tentatively

conclude that ``actual relocation costs'' would include, but not be

limited to: SMR equipment; towers and/or modifications; back-up power

equipment; engineering costs; installation; system testing; FCC filing

costs; site acquisition and civil works; zoning costs; training;

disposal of old equipment; test equipment; spare equipment; project

management; and site lease negotiation. We request comment on this

proposal. We also ask commenters to address any additional costs they

believe should be reimbursable and a supporting rationale for such

treatment.

15. Creation of Reimbursement Rights. We tentatively conclude that

an EA licensee who negotiates a relocation agreement that benefits one

or more other EA licensees should obtain a right to reimbursement of a

share of the relocation costs. We seek comment on how such rights

should be created procedurally. We believe that some form of

reimbursement rights should be conferred on EA licensees so that it

will be possible to enforce the right to reimbursement and collect

reimbursement from other EA licensees. We seek comment on these

tentative conclusions and any alternatives.

16. Payment. We seek comment on when reimbursement payments should

be due. Specifically, we ask commenters to address whether such

payments should be due when the benefitting EA licensee begins to use

the particular frequency or when the EA licensee commences testing of

its wide-area system in the EA.

17. Dispute Resolution Issues. Comments. PCIA, AMI, and Motorola

all argue that the Commission should establish a mediation mechanism to

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resolve disputes. PCIA believes that the EA winner should pay for the

mediation unless the mediator finds that the incumbent is not acting in

good faith. If mediation is not successful, Motorola and PCIA believe

that the Commission should resolve the dispute.

18. Proposal. We tentatively conclude that incumbents and EA

licensees should attempt to resolve disputes arising over the amount of

reimbursement required, in the first instance, amongst themselves. We

encourage parties to use expedited alternative dispute resolution

(``ADR'') procedures, such as binding arbitration or mediation. We seek

comment on this proposal and on any other mechanisms that would

expedite resolution of these disputes should they arise.

19. Similarly, to the extent that disputes arise between incumbents

and EA licensees over relocation negotiations (including disputes over

the comparability of facilities and the requirement to negotiate in

good faith), we also encourage parties to use alternative dispute

resolution techniques. We believe such techniques are an appropriate

first step during both the voluntary and mandatory negotiation periods.

We emphasize again that resolution of such disputes entirely by our

adjudication processes would be time consuming and costly to all

parties.

20. We also seek comment on whether either the industry trade

associations or the FCC's Compliance and Information Bureau should be

designated as arbiters for such disputes. We ask commenters to discuss

the advantages and disadvantages of such designations as well as

suggested dispute resolution procedures in the event that they were so

designated. In addition, we seek comment on whether failure to comply

with the relocation obligations or requirements should be taken into

consideration by the Commission when deciding on renewal or transfer of

control or assignment applications.

C. Comparable Facilities

21. Background. Under the mandatory relocation scheme we adopt in

the First R&O, we require EA licensees to provide incumbents with

``comparable facilities'' as a condition for involuntary relocation. In

the broadband PCS context, we also adopted a mandatory relocation

scheme in which PCS licensees are required to provide microwave

incumbents with comparable facilities as a condition for involuntary

relocation. Although we have not adopted a definition of comparable

facilities in the broadband PCS context, we have indicated that we

generally require that comparable facilities be equal to or superior to

existing facilities. We also indicated that we would consider, inter

alia, system reliability, speed, bandwidth, throughput, overall

efficiency, bands authorized for such services, and interference

protection in making a determination regarding comparability. In the

Further Notice, we asked commenters to discuss the meaning of

comparable facilities in the 800 MHz SMR context.

22. Comments. Some commenters suggest, as a general matter, that a

comparable system is one that is as good as or superior to the

incumbent's existing system. The majority of commenters attempt to

define comparable facilities by specifying what would need to be

provided to the incumbent being relocated. These commenters argue that

comparable facilities would include: (1) the same number of channels as

are currently held by the incumbent; (2) the retuned frequencies being

compatible in a multi-channel system at the incumbent's current

location; (3) the retuned frequencies not having any co-channel

licensees within the EA; (4) incumbents having 70-mile co-channel

interference protection; (5) base station equipment being modified to

operate on the retuned frequencies; (6) all user units and user control

units being reprogrammed or recrystallized to the retuned frequencies

(or, if modification of the incumbent's equipment is not possible, the

EA licensee would be required to provide new equipment); (7) the

incumbent's ``retuned'' system providing the same, if not superior,

performance as the incumbent's existing system operating at the same

antenna height, and with the same power and interference protection;

and, (8) the same channel separation for the retuned frequencies.

23. Some commenters define ``comparable facilities'' on the basis

of operational characteristics. For example, commenters contend that

comparable facilities mean that the incumbent's retuned system should

have the same or superior coverage as its existing system. Nextel

argues that comparable facilities means having the same 40 dBu contour

as the incumbent's current system. Several commenters argue that only

other 800 MHz SMR channels could constitute comparable frequencies. In

this connection, Spectrum believes that incumbents should be relocated

elsewhere on the 800 MHz spectrum or to the 900 MHz spectrum, or the

auction winner should buy-out the incumbent's system.

24. PCIA, supported by other commenters, proposes that retuned

incumbents receive the following rights and privileges associated with

mandatory relocation: (1) The ability to obtain geographic area

licenses on retuned channels; (2) protection against being relocated

more than once; (3) the right to demand one unified retuning plan from

all EA license holders in whose spectrum blocks their frequencies are

located; (4) a requirement of ``seamless'' transition, such that the EA

holder would complete retuning before the incumbent moves; (5) no

obligation to cease operations on the original channels unless

alternative frequencies are identified and accepted; and, (6) the right

to timely notification by the EA licensee that incumbents will be

moved. PCIA also suggests that EA licensees be given one year in which

to complete retuning, so that incumbents can make future business

plans. Several commenters argue that there should be no selective

retuning of incumbent channels; rather, all of an incumbent's channels

within an EA spectrum block should be retuned. Moreover, several

commenters argue that in terms of an EA licensee's relocation

obligations, an incumbent system should be defined as all licenses

issued to an entity or multiple entities participating in an integrated

network. Nextel, on the other hand, contends that selective retuning

should be allowed, so long as the channels are ``comparable.''

25. Proposal. Although we wish to provide parties with sufficient

flexibility to negotiate mutually agreeable terms for determining

comparability, based on our experience in the broadband PCS context, we

tentatively conclude that comparable facilities, at a minimum, should

provide the same level of service as the incumbents' existing

facilities. We propose that by ``comparable facilities,'' a relocated

incumbent would: (a) Receive the same number of channels with the same

bandwidth; (b) have its entire system relocated, not just those

frequencies desired by a particular EA licensee; and, (c) once

relocated, have a 40 dBu service contour that encompasses all of the

territory covered by the 40 dBu contour of its original system. We

believe that this definition will ensure that incumbents' operations

will not be adversely affected. We further believe that such definition

would not preclude incumbents and EA licensees from negotiating to

trade-off any of these system parameters for premium payments or other

operational rights which are consistent with our rules. We believe that

this flexibility in

[[Page 6215]]

designing replacement facilities will expedite relocation, given the

many variables involved with the system design of each individual

system. We seek comment on our proposed definition of and tentative

conclusions regarding ``comparable facilities.'' We ask commenters to

discuss whether the ``comparable facilities'' definition should include

additional operational characteristics, if so, what characteristics

should be specified.

26. With respect to old and new SMR equipment, we tentatively

conclude that an EA licensee's relocation obligations to an incumbent

will not require the EA licensee to replace existing analog equipment

with digital equipment when there is an acceptable analog alternative

that satisfies the comparable facilities definition. In the event that

an incumbent still wishes to obtain digital equipment under these

circumstances, we believe that the incumbent should be required to bear

the additional costs associated with such an upgrade of its system.

Consequently, we propose that under these circumstances, the cost

obligation of the EA licensee would be the minimum cost the incumbent

would incur if it sought to replace, but not upgrade, its system.

However, if an analog alternative fails to meet any of the criteria

included in the comparable facilities definition, the incumbent would

not be required to accept such an alternative. In those instances in

which an incumbent licensee is operating with digital equipment prior

to relocation, we tentatively conclude that the incumbent's new system

also must be digital, unless the EA licensee and incumbent mutually

agree to different terms. We believe that the proposed definition of

comparability would facilitate negotiations between incumbents and EA

licensees during the voluntary period, because both parties would be

better informed about the EA licensees' minimum obligation under our

rules. We seek comment on our proposals and tentative conclusions and

any alternatives.

D. Relocation Guidelines--Good Faith Requirement During Mandatory

Negotiations

27. In the First R&O, we establish a mandatory relocation mechanism

for the upper 10 MHz block. Under this mechanism, incumbents and EA

licensees have a one-year voluntary negotiation period during which EA

licensees are free to offer incumbents a variety of incentives to

expedite relocation. If a relocation agreement is not reached during

this period, the EA licensee may initiate a mandatory negotiation

period during which the parties are required to negotiate in ``good

faith.''

28. We believe that additional clarification of the term ``good

faith'' will facilitate negotiations and help reduce the number of

disputes that may arise over varying interpretations of what

constitutes good faith. We tentatively conclude that, for purposes of

the mandatory negotiation period, an offer by an EA licensee to replace

an incumbent's system with comparable facilities constitutes a good

faith offer. Likewise, an incumbent that accepts such an offer

presumably would be acting in good faith; whereas, failure to accept an

offer of comparable facilities would create a rebuttable presumption

that the incumbent is not acting in good faith. Comparable facilities

would be limited to actual costs associated with providing a

replacement system and would exclude any expenses incurred by the

incumbent without securing the approval, in advance, of the EA

licensee. We believe that the time for expansive negotiation is during

the voluntary negotiation period and that, by the time the parties have

reached the mandatory negotiation period, only the bare essentials of

comparability should be required. We seek comment on our proposal. We

also seek comment on the appropriate penalty to impose on a licensee

that fails to act in good faith.

IV. BETRS Eligibility on the Upper 200 Channels of 800 MHz SMR Spectrum

29. Background. Under Section 90.621(h) of the Commission's rules,

Channel Numbers 401-410, 441-450, 481-490, 521-530, and 561-570 are

available on co-primary basis to stations in Basic Exchange

Telecommunications Radio Service (BETRS) as described in Part 22 of the

Commission's rules.

30. Proposal. According to our licensing records, there are few

BETRS facilities currently licensed on these frequencies. Based on the

limited BETRS licensing on these frequencies and the goals of the wide-

area licensing plan adopted in the First R&O (in which these channels

are included), we propose that BETRS stations no longer be authorized

on these frequencies. In addition, as of the adoption of this Second

Further Notice, we will no longer accept applications for BETRS

facilities on these channels.

V. Licensing of Lower 80 and General Category Channels

A. Geographic Area Licensing

31. Background. Under our current rules the lower 80 and General

Category channels are licensed on a site-specific basis. In the Further

Notice, we sought comment on whether to continue site-specific

licensing or to adopt a form of geographic area licensing on these

channels.

32. Comments. Several commenters advocate that we continue

licensing channels designated for local SMR use based on the geographic

separation and channelization criteria in our current SMR rules. These

commenters argue that continued site-specific licensing would: (1)

Allow local operators to define their own markets; (2) permit

construction of niche systems designed to meet unique and customized

needs; and, (3) minimize disruption to operations of existing

licensees.

33. Other commenters advocate discontinuing site-specific licensing

of the lower 80 and General Category channels and instead offering

licenses for individual channels or small channel blocks covering

defined geographic areas. Cumulous argues that market-area licensing

would allow local SMR operators to grow and develop into geographic

area licensees in the future. Dru Jenkinson, et al. contend that

market-area licensing would permit more efficient service area coverage

than site-specific authorizations. Total Com believes that market-area

licensing will be advantageous to market development, with minimal

regulation.

Some commenters expressly oppose market-area licensing on the basis

that: (1) There is no reason to license these channels on a market-

defined area basis given the scarcity of vacant channels; and, (2) it

could create an artificial shortage of local channels simply because a

licensee secures an authorization covering a particular geographic

area. Pittencrief contends that such an approach, if adopted, should be

used only in those areas where the spectrum currently is not being

used.

35. Although AMTA does not expressly support this licensing

approach, it notes that there are certain advantages associated with

geographic area licensing, including facilitation of future integration

of local systems into wide-area operations should additional spectrum

be desired. Pittencrief contends that even if site-specific licensing

is retained, geographic area licensing would not necessarily be

foreclosed in the future. In this regard, Pittencrief recommends that

in order to secure a market-based license, a local licensee would be

required to demonstrate either that: (a) No other co-channel systems

serve the geographic area; or, (b) it has secured the consent of all

affected co-channel licensees. In either case, Pittencrief suggests

that the local licensee should be required to

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serve a certain percentage of the Commission-defined service area or

face loss of the wide-area authorization.

36. Proposal. We tentatively conclude that the lower 80 and General

Category channels should be converted to geographic area licensing. We

believe that this new licensing approach will afford smaller SMR

operators the flexibility to provide service to a defined geographic

area on the same basis as licensees in the upper 10 MHz block. We

further believe that geographic licensing would simplify system

expansion and substantially reduce the administrative burden on both

lower 80 and General Category licensees and the Commission. In fact, we

expect that in many instances, existing licensees will seek to obtain

market-area licenses for those areas in which they already operate,

which would enable them to consolidate and expand their operations

under a more flexible regulatory regime. We seek comment on our

tentative conclusion.

B. Service Areas

37. Background. In the Further Notice, we indicated our belief that

the Basic Trading Areas (BTAs), established by Rand McNally, could be

an appropriate service area for geographic area licensing on the lower

80 channels. In the First R&O, we adopt EAs as the service area for

licenses in the upper 10 MHz block.

38. Comments. AMTA recommends using EAs rather than BTAs, partly

because EAs appear to approximate more closely the coverage range of

existing systems. Pittencrief also supports use of EAs. DCL Associates

and Telecellular support use of BTA service areas, because they believe

that such licensing would permit substantially more operational

flexibility than the traditional 35-mile radius licensing areas. E.F.

Johnson believes use of BTAs is contrary to the public interest because

it potentially would require operators to construct facilities where

they did not anticipate providing service; and, it would limit the

possibility that a co-channel licensee legitimately could reuse those

channels to serve an adjacent area. CellCall favors licensing the lower

80 channels based on Rand McNally's Major Trading Areas (MTAs). Dru

Jenkinson, et al. believe that uniformity and efficiency of

administration suggest that the lower 80 channels be licensed on the

same geographic area as the upper 200 channels. Similarly, AMTA

contends that such uniformity will preserve the value of lower 80

channels.

39. Proposal. We tentatively conclude that EAs would be the most

appropriate service areas for a geographic area licensing approach on

the lower 80 and General Category channels. As discussed in the First

R&O, EAs are based on urban, suburban, and rural traffic patterns that

accurately reflect the coverage provided by most 800 MHz SMR operators

other than the largest wide-area systems. We therefore believe that

this is an appropriate service area definition for the smaller systems

that we anticipate will occupy the lower 80 and General Category

channels. We also believe that using the same service area definition

for licenses on these channels as for licenses on the upper 200

channels will result in greater administrative efficiency. We seek

comment on this tentative conclusion and on alternative area

definitions.

C. Channel Assignments

40. Background. In the Further Notice, we indicated that by

continuing to license the lower channels in five-channel blocks, as we

do currently, we would enable existing licensees to expand local

systems on the same channels they are using presently. We also

indicated that licensing fewer channels in each block might be an

option that would give SMR operators more flexibility in channel

configuration.

41. Comments. CellCall, Telecellular, AMI, Dru Jenkinson, et al.,

and Palmer support licensing the lower 80 channels in five-channel

blocks. Palmer believes that such an approach would limit spectrum

warehousing severely because channels would not be sitting idle while

reserved for future service areas within a larger defined geographic

region. Dru Jenkinson, et al. believes that a five-channel block is an

appropriate grouping which would permit limited service application on

a local basis, yet provide flexibility for system modification within

the designated area.

42. Proposal. The five-channel blocks, which proved to be

administratively convenient under a site-by-site licensing scheme, may

also continue to be feasible under a geographic area licensing approach

since incumbent licensees have established their systems based on such

channelization. We anticipate that licensees operating on the lower 80

channels increasingly may become more interested in expanding the

geographic areas served by their systems and preoccupied less with the

number of frequencies utilized by such systems. We tentatively conclude

that the lower 80 channels should be licensed in the same five-channel

blocks under a geographic licensing approach in order to allow SMR

operators to build upon the systems they have already established.

Thus, we propose to license the lower 80 channels in five-channel

blocks. We seek comment on this tentative conclusion and any

alternatives.

43. For the General Category channels, we are not convinced that

five-channel blocks would be the best licensing alternative. Unlike the

lower 80 channels, the General Category channels are contiguous. As a

result, licensees may be interested in establishing multiple-channel

system networks. In addition, we are concerned that the competitive

bidding process for these frequencies may be administratively

unmanageable if they are licensed on a channel-by-channel basis, given

the large number of channels involved. Thus, we tentatively conclude

that the General Category channels should be licensed in channel

blocks. We seek comment on our tentative conclusion. We also ask

commenters to discuss what specific channel block size would be

appropriate. One alternative is to license channel blocks of different

sizes, e.g., a 120-channel block, a 20-channel block, and a 10-channel

block. Another alternative is to license channel blocks of the same

size, e.g., 25-channel or 10-channel blocks. We seek comment on these,

as well as other, alternatives.

D. Operational and Eligibility Restrictions

Background. In the Further Notice, we proposed to allow licensees

to use the lower 80 channels for any purpose that is technically

consistent with our rules. We also did not propose to restrict the

ability of licensees on the lower 80 channels to aggregate channels or

integrate local systems to provide service over a larger area.

45. Comments. The majority of commenters addressing this issue

endorse the Commission's proposal to allow licensees to use the lower

80 channels for any purpose that is technically consistent with our

rules. Cumulous believes that the Commission should pursue licensing

policies that allow the same use to be made of both the upper 10 MHz

block of 800 MHz SMR spectrum and the lower 80 channels. OneComm

believes that such a regime would make local channels more fungible in

relocation negotiations and preserve the value of the lower 80

channels.

46. Some commenters, on the other hand, oppose allowing EA

licensees to be able to obtain lower 80 channels. Ericsson believes

that such channels should be reserved as a safe haven for any local

licensees who currently operate in the upper 10 MHz block and

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do not obtain the EA license if a mandatory relocation plan is adopted.

UTC believes that, in order to ensure the benefits of competition

within all geographic markets, an entity should be restricted from

holding EA licenses and authorizations for the lower 80 channels in the

same geographic area. Fisher urges the Commission to clarify that if an

EA licensee also holds licenses for systems made up of frequencies from

the lower 80 channels, it would be allowed to incorporate such

frequencies into its wide-area system. Fisher believes that such use

would further the Commission's goal of efficient and full utilization

of spectrum.

47. Proposal. We tentatively conclude that lower 80 and General

Category SMR licensees should be permitted to use these channels for

any purpose which is technically consistent with our rules. In light of

our designation of 10 MHz of 800 MHz spectrum for wide-area licensing,

however, we wish to ensure that our rules do not inadvertently allow

licensees in the upper 10 MHz to acquire large numbers of additional

SMR channels primarily intended for other use. As discussed infra, 2we

propose to adopt size restrictions on eligibility for the lower 80 and

General Category channels by designating these channels as an

entrepreneurs' block. As a result of the economic size limitations

associated with such designation, the largest licensees in the upper 10

MHz block would likely be ineligible for the lower 80 and General

Category channels. Aside from this proposed restriction, however, we

tentatively conclude that limiting the potential uses of lower 80 and

General Category licenses would not serve the public interest. We

believe that operational restrictions ultimately may restrict the

ability of smaller SMR operators to expand their service area and

service offerings by such means as integrating their frequencies into a

wide-area system or establishing a multiple-channel network. Thus, we

do not propose any additional restrictions for these channels.

E. Channel Aggregation Limit

48. Background. In the Further Notice, we tentatively concluded

that a limit should be placed on the number of lower 80 channels that

an applicant may obtain at one time in an area without constructing and

commencing operations on previously licensed channels in the same area.

We proposed to limit grants of the lower 80 channels to no more than

five channels at one time, which is the applicable limit under our

current rules.

49. Comments. All commenters addressing this issue agree that a

limit should be placed on the number of lower 80 channels that an

applicant may obtain at one time in an area without constructing and

commencing operations on previously licensed channels in the same area.

CellCall proposes a five-channel limit in a particular area for the

lower 80 frequencies. Russ Miller believes, however, that a five-

channel limit is too restrictive over a geographic area as large as a

BTA service area. It proposes a five-channel limit, per location, not

per area, for requested frequencies not licensed to the applicant

within its existing footprint. Russ Miller suggests that the limit

apply to any of the 800 MHz frequencies, not just SMR channels.

Telecellular believes that lower 80 licensees should be permitted to

apply for additional channels only after construction has been

completed for any frequencies covered by previously issued

authorizations in a given area, with ``area'' defined as any location

within 40 miles of the unbuilt site. Total Com suggests that any

licensee must have 90 percent of its channels constructed in each

market before additional channels are authorized.

50. Proposal. We propose not to limit the number of frequencies a

single applicant can request at one time. Under our site-specific 800

MHz SMR licensing rules, we generally have restricted the number of

channels for which an entity could apply in a particular area at one

time, to deter spectrum warehousing. We believe that the risk of

channel warehousing would be limited because these licenses will be

subject to competitive bidding and we anticipate that licensees will

not bid for more channels than they actually need or can use. We also

believe that lower 80 and General Category licensees should have the

flexibility to pursue plans to establish wide-area systems by

aggregating the lower 80 and General Category frequencies. We note,

however, that Commercial Mobile Radio Services (CMRS) spectrum holdings

by these licensees still would be subject to the CMRS spectrum

aggregation limit provided in Section 20.6 of our Rules. We seek

comment on these proposals and any alternatives.

F. Construction Requirements

1. Construction Period

51. Background. In the Third Report and Order in GN Docket No. 93-

252, 59 FR 59945 (November 21, 1994) (CMRS Third R&O), we established a

uniform 12-month period for constructing a standard base station in all

CMRS services that are licensed on a site specific basis. In the

Further Notice, we indicated that licensees of SMR systems

presumptively are subject to this 12-month construction period. In the

CMRS Third R&O, we also indicated that CMRS providers would be required

to commence service to subscribers by the end of their construction

period, with ``service to subscribers'' defined to mean the provision

of service to at least one party not affiliated with, controlled by, or

related to the CMRS provider.

52. Comments. All commenters addressing this issue endorse the

Commission's proposal of a 12-month construction period, coupled with a

commencement of service to subscribers requirement.

53. Proposal. Consistent with our conclusions in the CMRS Third

R&O, we propose that lower 80 and General Category licensees be subject

to a 12-month construction period. We further propose that these

licensees be required to construct their facilities and commence

``service to subscribers'' within twelve months from the grant of their

licenses. We seek comment on this proposal and any alternatives.

2. Coverage Requirements

54. We seek comment on whether geographic area SMR licensees

operating on the lower 80 and General Category frequencies should be

subject to minimum coverage requirements as a condition of licensing.

In the First R&O, we require EA licensees operating in the upper 200

channels to provide coverage to one-third of the population within

their EA within three years of initial license grant and to two-thirds

of the population by the end of their five-year construction period. We

propose to apply these same requirements to lower 80 and General

Category geographic area licensees. We believe that these coverage

requirements serve the public interest by deterring spectrum

warehousing and ensuring the speedy delivery of SMR service to the

public. We also propose that lower 80 and General Category licensees be

able to satisfy their coverage requirements by meeting a ``substantial

service'' standard, like that adopted in the broadband PCS 10 MHz

blocks and 900 MHz SMR services. We ask commenters to address the

advantages and disadvantages of imposing coverage requirements on lower

80 and General Category licensees, the specific coverage criteria

proposed, and any alternative criteria that could be used.

55. We also tentatively conclude that the geographic area lower 80

and General Category licensees should be

[[Page 6218]]

responsible for meeting their coverage requirements, regardless of the

extent to which their service areas are occupied by co-channel

incumbents. We believe that incumbents that already provide substantial

coverage in certain areas will have sufficient incentive to seek

geographic area licenses for these areas. Thus, we propose to require

the geographic area licensees for the lower 80 and General Category

channels to satisfy their coverage requirements directly. This proposal

is consistent with our approach for EA licensees on the upper 200

channels. We seek comment on these proposals and any alternatives,

including the impact, if any, on the construction period for the lower

80 and General Category channels. Assuming a twelve-month construction

period, we ask commenters to address whether the coverage requirements

should be imposed earlier in the license term. If so, we ask commenters

to discuss what would be the appropriate time frame.

56. If we adopt coverage requirements, we also must determine what

penalty should be imposed if the geographic area licensee fails to

comply with such requirements. We tentatively conclude that a

geographic area licensee's failure to meet the coverage requirements

should result in forfeiture of the market-area license. We also

tentatively conclude that in the event that a licensee loses its

geographic area license for failure to comply with coverage

requirements, any authorizations that such licensee held in that area

prior to the auction for facilities that are constructed and operating

would be reinstated. This approach is consistent with the sanctions

provided for in our rules for the upper 10 MHz block of 800 MHz SMR

spectrum, 900 MHz SMR, and broadband PCS. We seek comment on our

proposal and any alternatives.

G. Treatment of Incumbents

57. Given the extensive licensing of the 800 MHz SMR service, we

remain concerned about the ramifications of implementing a market-area

licensing approach where systems have been licensed already on a site-

specific basis. In the First R&O, we adopt a mandatory relocation

mechanism for the upper 10 MHz block. With respect to the lower 80 and

General Category channels, however, we believe that there are no

equitable means of relocating incumbents to alternative channels, and

that there are no identifiable alternative channels to accommodate all

such incumbents. We also believe that incumbent licensees relocated

from the upper 200 channels should not be subject to relocation a

second time. We therefore tentatively conclude that there should be no

mandatory relocation mechanism for SMR operators operating on the lower

80 and General Category channels. We propose that incumbent SMR

licensees on these frequencies be allowed to continue to operate under

their existing site-specific authorizations, and geographic area

licensees would be required to provide protection to all co-channel

systems that are constructed and operating within their service areas.

We further propose that no incumbent SMR licensee be allowed to expand

beyond its existing service area (as discussed in further detail,

infra) and into the geographic area licensee's territory without

obtaining the prior consent of the geographic area licensee (unless, of

course, the incumbent in question is itself the market-area licensee

for the relevant channel). We seek comment on this proposal. In

addition, we ask commenters to address how non-SMR licensees operating

on the lower 80 and General Category channels should be treated. Should

these licensees be relocated to non-SMR channels, and if so, under what

circumstances and pursuant to what type of relocation plan?

58. Because incumbent licensees' ability to expand their service

areas would be restricted as a result of our proposal, we believe that

it is imperative that they be given the optimum amount of operational

flexibility possible, without encroaching upon market-area licensees'

operations. Consistent with our approach on the upper 200 channels, we

propose that incumbent licensees on lower 80 and General Category

channels be able to modify or add transmitters in their existing

service area without prior notification to the Commission, so long as

their 22 dBu interference contour is not expanded. As we note in the

First R&O, we believe that by using the 22 dBu interference contour as

the benchmark for defining an incumbent's service area, incumbents will

be afforded significant operational flexibility without detracting from

the market-area licensee' operational capabilities. We seek comment on

this proposal. We ask commenters to address whether our proposal

strikes the appropriate balance between the competing interests of

market-area and incumbent licensees. We also ask commenters to discuss

whether a basis other than the 22 dBu interference contour should be

used to determine an incumbent's service area.

59. In addition, similar to our approach in the upper 200 channels

and the 900 MHz SMR service, we propose to allow SMR incumbents

operating on the lower 80 and General Category channels to have their

licenses reissued if they are not the successful bidder for the

geographic area license which includes the area in which they are

currently operating. Under this procedure, which will be granted post-

auction upon the request of the incumbent, an incumbent may convert its

current multiple site licenses to a single license, authorizing

operations throughout the contiguous and overlapping 22 dBu contours of

the incumbent's previously authorized sites. We propose that incumbents

seeking such reissued licenses be required to make a one-time filing

identifying each of their external base station sites to assist the

staff in updating the Commission's database after the close of the

auction for the lower 80 and General Category channels. We also propose

to require evidence that such facilities are constructed and placed in

operation and that, by operation of our rules, no other licensee would

be able to use these channels within this geographic area. We believe

that facilities added or modified within the 22 dBu contour without

prior approval or subsequent notification under this procedure will not

receive interference, because they will be protected by the presence of

surrounding stations of the same licensee on the same channel or

channel block. We seek comment on this proposal.

H. Co-Channel Interference Protection

60. Under our market-area licensing proposal for the lower 80 and

General Category channels, market-area licensees will be required to

provide interference protection both to incumbent co-channel facilities

and to co-channel licensees in neighboring market areas. With respect

to incumbent co-channel facilities, we propose to retain the level of

protection afforded under our existing rules. Thus, a market-area

licensee would be required either to locate its stations at least 113

km (70 mi) from the facilities of any incumbent or to comply with the

co-channel separation standards set forth in our short-spacing rule if

it seeks to operate stations located less than 113 km (70 mi) from an

incumbent licensee's facilities. With respect to adjacent market-area

licensees, we propose that market-area licensees provide interference

protection either by reducing the signal level at their service area

boundary, or negotiating some other mutually acceptable agreement with

all potentially affected adjacent licensees. We seek comment on these

[[Page 6219]]

proposals and we invite commenters to provide alternatives.

I. Licensing in Mexican and Canadian Border Areas

61. We recognize that a limited number of lower 80 channels are

available for SMR licensing in the Mexican and Canadian border areas.

In the First R&O, we have decided not to distinguish between border

areas and non-border areas for licensing purposes. We propose the same

approach for the lower 80 channels in the border areas, i.e., all

market areas should be licensed on a uniform basis without

distinguishing border from non-border areas, even if some spectrum is

unusable. We believe that lower 80 and General Category applicants,

like those in the upper 10 MHz block and other services, will be able

to assess the impact of more limited spectrum availability when valuing

those market areas for competitive bidding purposes. Moreover, we

believe that altering the size of particular market areas because they

are located near an international border is likely to be

administratively unworkable. Thus, we propose that market-area

licensees be entitled to use any available border-area channels,

subject to the relevant rules regarding international assignment and

coordination of such channels. We seek comment on this proposal.

VI. Regulatory Classification of Lower 80 and General Category Channels

62. Background. In the CMRS Third R&O, we determined that SMR

licensees would be classified as CMRS if they offered interconnected

service and as Private Mobile Radio Service (PMRS) if they did not

offer such service. In the Further Notice, we sought comment on whether

the presumption of CMRS status should apply to licensees authorized for

the lower 80 channels.

63. Comments. All of the commenters addressing this issue believe

that there should not be a CMRS presumption for the lower 80 channels

or any other channels designated primarily for local service. E.F.

Johnson and Genesee opine that there is a significant difference

between the type of services provided by local SMR systems and wide-

area systems. AMTA opines that it is not persuaded that Congress

intended to adopt a definition of CMRS so sweeping as to encompass even

the smallest, most rural SMR system, irrespective of its practical

ability to provide a service substantially similar to cellular or other

CMRS systems.

64. Proposal. Based on our geographic area licensing proposal for

the lower 80 and General Category channels, we believe that it is not

evident that the operations of the licensees on these frequencies will

be local in nature. In fact, some licensees may desire to establish

regional networks on these frequencies. Furthermore, contrary to the

suggestion by some commenters, the CMRS definition provided in the

Communications Act does not distinguish mobile service providers based

on their economic size. Instead, a service provider's regulatory

classification is determined based on factors associated with the

nature of its operations. In this connection, we believe that the

operational opportunities for the lower 80 and General Category

channels are not significantly different. Thus, we tentatively conclude

that most if not all geographic area licensees on these channels will

be classified as CMRS, because they are likely to provide

interconnected service as part of their service offering. We therefore

propose to classify all geographic area licensees on the lower 80 and

General Category channels presumptively as CMRS. We also propose that

market-area applicants or licensees who do not intend to provide CMRS

service may overcome this presumption by demonstrating that their

service does not fall within the CMRS definition. We also propose not

to apply this presumption prior to August 10, 1996 in the case of any

geographic area licensee who previously was licensed in the SMR service

as of August 10, 1993. We seek comment on our tentative conclusion and

proposals.

VII. Competitive Bidding Issues for Lower 80 and General Category

Channels

A. Auctionability of Lower 80 and General Category Channels

65. In the Competitive Bidding Eighth R&O, we affirmed our previous

determination that the 800 MHz SMR service is auctionable. In addition,

we concluded that use of competitive bidding in the upper 200 channels

of 800 MHz SMR spectrum is fully consistent with Section 309(j) of the

Communications Act. Because the lower 80 frequencies are SMR channels,

and thus a subset of the 800 MHz SMR service, we believe that they also

are auctionable. Consistent with our approach regarding the upper 200

channels, we propose to employ competitive bidding as a licensing tool

to select among mutually exclusive applicants on the lower 80 channels.

We seek comment on this proposal.

66. We also seek comment on whether to adopt equivalent auction

procedures for competing applications for General Category channels. In

the Competitive Bidding Eighth R&O, we determine that in the future the

General Category Channels will be licensed exclusively for SMR use.

Consistent with our approach for other 800 MHz SMR spectrum, we

tentatively conclude that if two or more entities file mutually

exclusive initial applications, we intend to use competitive bidding to

select from among competing applications.

67. We anticipate that a large number of applicants will file

mutually exclusive geographic area applications for SMR operations on

General Category frequencies. Competitive bidding will ensure that the

qualified applicants who place the highest value on the available

spectrum, and who will provide valuable services rapidly to the public,

will prevail in the selection process. Thus, we tentatively conclude

that all potential conflicts among General Category applicants will not

be eliminated by our proposed geographic area licensing scheme.

Competitive bidding procedures will be necessary to select from among

competing applicants for these channels. We seek comment on this

tentative conclusion.

B. Competitive Bidding Design

1. Bidding Methodology

68. Background. In the Second Report and Order in PP Docket No. 93-

253, 59 FR 22980 (May 4, 1994) (Competitive Bidding Second R&O) we

established criteria to be used in selecting which auction design to

use for particular auctionable services. Generally, we concluded that

awarding licenses to parties who value them most highly will foster

Congress's policy objectives of stimulating economic growth and

enhancing access to telecommunications services. We further noted that,

because a bidder's ability to introduce valuable new services and to

deploy them quickly, intensively, and efficiently increases the value

of a license to that bidder, an auction design that awards licenses to

those bidders with the highest willingness to pay tends to promote the

development and rapid deployment of new services and the efficient and

intensive use of the spectrum. In determining how best to promote this

objective, we identified several auction design elements which, in

combination, produce many different auction types. The two most

important design elements are: (1) the number of auction rounds (single

or multiple), and (2) the order in which licenses are auctioned

(sequentially or simultaneously). These two elements can be combined to

create four basic auction designs: sequential

[[Page 6220]]

single round, simultaneous single round, sequential multiple round, and

simultaneous multiple round.

69. In the Further Notice, we noted that because of the non-

contiguous nature of the lower 80 channels, there did not appear to be

a high degree of interdependency among them. We further noted that the

limited geographic scope of the licenses is likely to make them less

valuable than the licenses for the spectrum blocks for the upper 200

channels.

70. Comments. SBA supports use of single round sealed bidding.

Genesee disagrees that one single round of auctions in sealed bidding

would be fair, and suggests that at least two rounds be done with 30

day intervals. AMTA does not dispute the Commission's tentative

conclusion regarding the appropriate competitive bidding methodology

for local licenses. AMTA notes that it is reluctant to suggest an

approach that might further complicate what would be an unjustifiably

costly and complex process for those entities. AMTA contends that some

grouping of frequency blocks and geographic areas might be necessary

for this purpose, if the Commission determines to issue local licenses

on a geographic, rather than site-specific basis. Morris proposes the

use of multiple round auctions for local area licenses, limited to five

rounds. Nextel proposes that after relocation is completed, the lower

80 channels and any other spectrum reallocated to exclusive SMR use, be

auctioned on a single channel basis.

71. Proposal. We seek comment on which of the above auction

methodologies should be used for the auction of the lower 80 and

General Category licenses. In the Competitive Bidding Second R&O, we

stated that simultaneous multiple round auctions would be the preferred

method where licenses have strong value interdependencies. Accordingly,

we have used this method in broadband and narrowband PCS services and

the 900 MHz SMR service, and we will use the same methodology for the

upper 200 channels in the 800 MHz SMR service.

72. Given our successful experience in conducting simultaneous

multiple round auctions, we propose to use this competitive bidding

methodology for the lower 80 and General Category channels as well. We

seek comment on this proposal. We also note, however, that there is

less interdependency between licenses for the lower 80 and General

Category channels, both because channel aggregation is not required to

provide SMR service and because channel selection may be largely

dictated by which channels currently are licensed to incumbents in each

license area. We therefore seek comment on alternatives to simultaneous

multiple round bidding for these channels. One alternative would be to

use the oral outcry method, i.e., sequential multiple round bidding.

This method may allow us to conduct auctions expeditiously and in a

manner that is not burdensome to applicants.

2. License Grouping

73. Background. Depending upon the auction methodology chosen,

several alternatives exist for grouping the lower 80 and General

Category licenses. For example, the Commission determined in the

Competitive Bidding Second R&O that in a multiple round auction, highly

interdependent licenses should be grouped together and put up for bid

at the same time, because such grouping provides bidders with the most

information about the prices of complementary and substitutable

licenses during the course of an auction. We also determined that the

greater the degree of interdependence among the licenses, the greater

the benefit of auctioning a group of licenses together in a

simultaneous multiple round auction.

74. Proposal. We seek comment on how lower 80 and General Category

licenses should be grouped for competitive bidding purposes. As noted

above, it does not appear that licenses on these channels are likely to

be highly interdependent. We therefore propose that lower 80 licenses

be grouped in 16 five-channel blocks for each license area. We seek

comment on this proposal. We also ask commenters to indicate if there

are instances in which licenses on multiple channels should be grouped

together for competitive bidding purposes.

75. Assuming that we group lower 80 licenses by 16 five-channel

blocks, the issue remains whether all geographic area licenses for

specific channel blocks should be grouped together for competitive

bidding purposes. Given the large number of licenses, we believe that

it would be administratively feasible to employ an additional means of

grouping the five-channel blocks. We believe that some licensees may

elect to pursue regional service plans. Thus, we propose to group the

five-channel blocks on a regional basis. We seek comment on this

proposal. We recognize that there are other sets of interdependencies

which could form a basis for license grouping. In a simultaneous

multiple round auction, for example, we could auction all of the market

areas for a five-channel block simultaneously. Alternatively, we could

begin with the largest (i.e., most populated) markets and then move to

smaller markets. We seek comment on these alternatives as well.

Assuming that we group, the licenses on a regional basis, we ask

commenters to discuss how the regions should be defined. For example,

should the regions be defined by sequential groupings of EAs or some

other basis? We also ask commenters to address whether there is a

particular order in which the regions should be auctioned.

76. With respect to the General Category channels, which we propose

to license in a 120-channel block, 20-channel block and 10-channel

block, we believe that these licenses will be significantly

interdependent, primarily due to their contiguity. Thus, we propose to

auction the General Category geographic area licenses simultaneously.

We seek comment on this proposal and any alternatives.

3. Bidding Procedures

77. Background. In the Competitive Bidding Second R&O, the

Commission established general procedures for simultaneous multiple

round auctions, including bid increments, duration of bidding rounds,

stopping rules, and activity rules. We further noted that these

procedures could be modified on a service-specific basis. We seek

comment on the bidding procedures that should be used for licensing of

the lower 80 and General Category channels.

78. Bid Increments. If we use a multiple round auction, we propose

to establish minimum bid increments for bidding in each round of the

auction, based on the same considerations in the Competitive Bidding

Eighth R&O. The bid increment is the amount or percentage by which the

bid must be raised above the previous round's high bid in order to be

accepted as a valid bid in the current bidding round. The application

of a minimum bid increment speeds the progress of the auction and,

along with activity and stopping rules, helps to ensure that the

auction closes within a reasonable period of time. Establishing an

appropriate minimum bid increment is especially important in a

simultaneous auction with a simultaneous closing rule, because all

markets remain open until there is no bidding on any license and a

delay in closing one market will delay the closing of all markets. We

seek comment on the appropriate minimum bid increments for the lower 80

and General Category channels.

79. For example, if simultaneous multiple round auctions are

employed

[[Page 6221]]

for the lower 80 and General Category licenses, we believe that we

should start such auctions with relatively large bid increments, and

reduce the increments as the number of active bidders declines. We also

propose to adopt a minimum bid increment of five percent of the high

bid in the previous round or $0.01 per activity unit, whichever is

greater. We believe that applying a $0.01 per activity unit minimum bid

increment in addition to the percentage calculation is appropriate to

provide flexibility for a wide range of different license values, and

to ensure timely closure of auctions. In addition, we propose to retain

the discretion to vary the minimum bid increments for individual

licenses or groups of licenses at any time before or during the course

of the auction, based on the number of bidders, bidding activity, and

the aggregate high bid amounts. We also propose to retain the

discretion to keep an auction open if there is a round in which no bids

or proactive waivers are submitted. We seek comment on these proposals.

80. Stopping Rules. If multiple round auctions are used, a stopping

rule must be established for determining when the auction is over.

Three types of stopping rules exist that could be employed in

simultaneous multiple round auctions: markets may close individually,

simultaneously, or a hybrid approach may be used. We believe a market-

by-market stopping rule is most appropriate for the lower 80 channels

given the lack of strong interdependencies among these licenses. We

also believe that a market-by-market stopping rule would be the least

complex approach from an administrative perspective. Under a market-by-

market approach, bidding closes on each license after three rounds pass

in which no new acceptable bids are submitted for that particular

license. We tentatively conclude that a simultaneous stopping rule is

not appropriate for these licenses, because market-by-market closure

will provide bidders with sufficient flexibility to bid on the license

of their choice. In addition, the complexity of implementation and the

vulnerability to strategic delay by bidders seeking to impede closure

of the auction outweigh the benefits of a simultaneous stopping rule

given the nature of these SMR licenses. With a simultaneous stopping

rule, bidding remains open on all licenses until there is no bidding on

any license. Under this approach, all markets will close if three

rounds pass in which no new acceptable bids are submitted for any

license. We seek comment on our tentative conclusions. We also ask

commenters to address the advantages and disadvantages of using a

hybrid stopping rule. Under a hybrid approach, a simultaneous stopping

rule, coupled with an activity rule designed to bring the markets to

close within a reasonable period of time, could be used to close

auctions with high value licenses. For lower value licenses, the

simpler market-by-market closing could be employed. For the General

Category licenses, we tentatively conclude that a simultaneous stopping

rule is most appropriate, given the significant interdependencies

between these licenses. We seek comment on this tentative conclusion.

Regardless of which stopping rule we ultimately apply, we further

propose to retain the discretion to declare when the auction will end,

whether it be after one additional round or some other specified number

of rounds. This proposal will ensure ultimate Commission control over

the duration of the auction. We seek comment on this proposal.

81. Activity Rules. Based on our proposal to employ a market-by-

market stopping rule for the lower 80 licenses, we tentatively conclude

that it is unnecessary to implement an activity rule. We believe that

an activity rule is less important when markets close one-by-one,

because failure to participate in any given round may result in losing

the opportunity to bid at all, if that round turns out to be the last.

We seek comment on this tentative conclusion. We also ask commenters to

address what activity rules, if any, would be appropriate if an

alternative stopping rule is adopted. For example, in order to ensure

that simultaneous auctions with simultaneous stopping rules close

within a reasonable period, we believe that it may be necessary to

impose an activity rule to prevent bidders from waiting until the end

of the auction before participating. Because simultaneous stopping

rules generally keep all markets open as long as anyone wishes to bid,

they also create incentives for bidders to hold back, until prices

approach equilibrium, before making a bid and risking payment of a

monetary assessment for withdrawing. We believe that this could lead to

very long auctions.

82. Thus, in the Competitive Bidding Second R&O, we adopted the

Milgrom-Wilson activity rule as our preferred activity rule where a

simultaneous stopping rule is used. We subsequently have adopted or

proposed the Milgrom-Wilson rule in each of our simultaneous multiple

round auctions. The Milgrom-Wilson approach encourages bidders to

participate in early rounds by limiting their maximum participation to

some multiple of their minimum participation level. Bidders are

required to declare their maximum eligibility in terms of activity

units, and make the required upfront payment. That is, bidders will be

limited to bidding on licenses encompassing no more than the number of

activity units covered by their upfront payment. Licenses on which a

bidder is the high bidder from the previous round, as well as licenses

on which a new valid bid is placed, count toward this activity unit

limit. Under this approach, bidders have the flexibility to shift their

bids among any licenses for which they have applied, so long as the

total activity units encompassed by those licenses does not exceed the

number for which they made an upfront payment. Moreover, bidders have

the freedom to participate at whatever level they deem appropriate by

making a sufficient upfront payment. To preserve their maximum

eligibility, however, bidders are required to maintain some minimum

activity level during each round of the auction. Accordingly, we

propose to employ the Milgrom-Wilson activity rule for the General

Category licenses. We seek comment on this proposal and any

alternatives.

83. Under the Milgrom-Wilson approach, the minimum activity level,

measured as a fraction of the self-declared maximum eligibility, will

increase during the course of the auction. For this purpose, Milgrom

and Wilson divide the auction into three stages. During the first stage

of the auction, a bidder is required to be active on licenses

encompassing one-third of the activity units for which it is eligible.

The penalty for falling below that activity level is a reduction in

eligibility. At this stage, bidder would lose three activity units in

maximum eligibility for each activity unit below the minimum required

activity level. In other words, each bidder would retain eligibility

for three times the activity units for which it is an active bidder, up

to the activity units covered by the bidder's upfront payment. In the

second stage, bidders are required to be active on two-thirds of the

activity units for which they are eligible. The penalty for falling

below that activity level would be a loss of 1.5 activity units in

eligibility for each activity unit below the minimum required activity

level. In the third stage, bidders are required to be active on

licenses encompassing all of the activity units for which they are

eligible. The penalty for falling below that activity level is a loss

of one activity unit in eligibility for each

[[Page 6222]]

activity unit below the minimum required activity. Each bidder thus

retains eligibility equal to its current activity level (1 times the

activity units for which it is an active bidder). We seek comment on

this alternative.

84. Duration of Bidding Rounds. We propose to retain the discretion

to vary the duration of bidding rounds or the interval at which bids

are accepted (e.g., run two or more rounds per day rather than one), in

order to close the auction more quickly. If this mechanism is used, we

most likely would shorten the duration and/or intervals between bidding

rounds where there are relatively few licenses to be auctioned, where

the value of the licenses is relatively low, or in early rounds to

speed the auction process. Where license values are expected to be high

or where large numbers of licenses are being auctioned, we propose to

increase the duration and/or intervals between bidding rounds. We would

announce by Public Notice, and may vary by announcement during an

auction, the duration and intervals between bidding rounds. We also

propose to announce by Public Notice, before each auction, the stopping

rule we adopt. We seek comment on these proposals.

4. Rules Prohibiting Collusion

85. Background. In the Competitive Bidding Second R&O, as modified

on reconsideration, we adopted special rules prohibiting collusive

conduct in the context of competitive bidding. In the Further Notice,

we proposed to apply these rules prohibiting collusion to the 800 MHz

SMR service. We want to prevent parties, especially large entities,

from agreeing in advance to bidding strategies that divide the market

according to their strategic interests and/or disadvantage other

bidders. Bidders will be required to (i) reveal all parties with whom

they have entered into any agreement that relates to the competitive

bidding process, and (ii) certify they have not entered into any

explicit or implicit agreements, arrangements, or understandings with

any parties, other than those identified, regarding the amount of their

bid, bidding strategies, particular properties on which they will or

will not bid or any similar agreement.

86. Proposals. We tentatively conclude that we should subject the

lower 80 and General Category licenses to the reporting requirements

and rules prohibiting collusion embodied in Sections 1.2105 and 1.2107

of the Commission's rules. Specifically, we propose to implement

Section 1.2105(a) to require bidders to identify on their short-form

applications all parties with whom they have entered into any

consortium arrangements, joint ventures, partnerships or other

agreements or understandings which relate to the competitive bidding

process. We propose to apply Section 1.2105(c) of our rules, which

prohibits bidders from communicating with one another (if they have

applied for any of the same markets) regarding the substance of their

bids or bidding strategies after short-form applications (FCC Form 175)

have been filed. Section 1.2105(c) also prohibits bidders from entering

into consortium arrangements or joint bidding agreements after the

deadline for short-form applications has passed. Prohibited

communications between such bidders cannot take place directly or

indirectly.

87. Further, in the Fourth Memorandum Opinion and Order in PP

Docket No. 93-253, 59 FR 53364 (October 24, 1994), we noted that

communications among bidders concerning matters unrelated to the

license auction would be permitted. In making this proposal, it is not

our intent to discourage potential applicants from entering into

consortia, joint ventures, or similar joint bidding arrangements for

geographic area licenses prior to the short form filing deadline. To

the contrary, we intend to provide parties with time to negotiate such

arrangements before the start of the application process. To avoid

compromising the auction process, however, such negotiations must end

at the point that short forms are filed. As in other services, we also

propose to require winning bidders to submit with their long-form

application a detailed explanation of the terms, conditions and parties

involved in any auction-related consortium, joint venture, partnership,

or other agreement entered into prior to the close of bidding. We seek

comment on these proposals.

C. Procedural and Payment Issues

1. Pre-Auction Application Procedures

88. Background. In the Competitive Bidding Second R&O, the

Commission established general competitive bidding rules and

procedures, which we noted may be modified on a service-specific basis.

We also determined that we should require only a short-form application

(FCC Form 175) prior to auction, and that only winning bidders should

be required to submit a long-form license application (FCC Form 600)

after the auction. In this connection, we determined that such a

procedure would fulfill the statutory requirements and objectives and

adequately protect the public interest.

89. As discussed below, we propose to follow generally the

processing and procedural rules established in the Competitive Bidding

Second R&O, with certain modifications designed to address the

particular characteristics of the lower 80 and General Category

licenses. These proposed rules are structured to ensure that bidders

and licensees are qualified and will be able to construct systems

quickly and offer service to the public. By ensuring that bidders and

license winners are serious, qualified applicants, these proposed rules

will minimize the need to re-auction licenses and prevent delays in the

provision of SMR services to the public.

90. Section 309(j)(5) of the Communications Act provides that no

party may participate in an auction ``unless such bidder submits such

information and assurances as the Commission may require to demonstrate

that such bidder's application is acceptable for filing.'' Moreover,

``[n]o license shall be granted to an applicant selected pursuant to

this subsection unless the Commission determines that the applicant is

qualified pursuant to Section 309(a) and Section 308(b) and 310'' of

the Communications Act. As the legislative history of Section 309(j)

makes clear, the Commission may require that bidders' applications

contain all information and documentation sufficient to demonstrate

that the application is not in violation of Commission rules, and we

propose to dismiss applications not meeting those requirements prior to

the competitive bidding.

91. Under this proposal, before the auction for the lower 80 and

General Category channels, the Bureau would release an initial Public

Notice announcing the auction. The initial Public Notice would specify

the licenses to be auctioned and the time and place of the auction in

the event that mutually exclusive applications are filed. The Public

Notice would specify the method of competitive bidding to be used,

applicable bid submission procedures, stopping rules, activity rules,

and the deadline by which short-form applications must be filed and the

amounts and deadlines for submitting the upfront payment. We would not

accept applications filed before or after the dates specified in the

Public Notice. Applications submitted before the release of the Public

Notice would be returned as premature. Likewise, applications submitted

after the deadline specified by the Public Notice would be dismissed,

with prejudice, as untimely. We seek comment on these proposals.

[[Page 6223]]

92. Soon after the release of the initial Public Notice, a Bidder's

Information Package will be made available to prospective bidders. The

Bidder's Information Package will contain information on the incumbents

occupying blocks on which bidding will be available. Incumbents will be

expected to update information on file with the Commission, such as

current address and phone number, so that such information will be of

use to prospective bidders.

93. Under this proposal, all bidders would be required to submit

short-form applications on FCC Form 175 (and FCC Form 175-S, if

applicable), by the date specified in the initial Public Notice.

Applicants would be encouraged to file Form 175 electronically.

Detailed instructions regarding electronic filing would be contained in

the Bidder Information Package. Those applicants filing manually would

be required to submit one paper original and one microfiche original of

their application, as well as two microfiche copies. The short form

applications would require applicants to provide the information

required by Section 1.2105(a)(2) of the Commission's rules.

Specifically, each applicant would be required to specify on its Form

175 application certain identifying information, including its status

as a designated entity (if applicable), its classification (i.e.,

individual, corporation, partnership, trust, or other), the license

areas and frequency blocks for which it is applying, and assuming that

the licenses will be auctioned, the names of persons authorized to

place or withdraw a bid on its behalf.

94. As we indicated in the Competitive Bidding Second R&O, if we

receive only one application that is acceptable for filing for a

particular license, and thus there is no mutual exclusivity, we propose

to issue a Public Notice cancelling the auction for this license and

establishing a date for the filing of a long-form application, the

acceptance of which would trigger the procedures permitting petitions

to deny. If no petitions to deny are filed, the application would be

grantable after 30 days. We seek comment on the proposals discussed

above.

2. Amendments and Modifications

95. Background. To encourage maximum bidder participation, we

proposed in the Competitive Bidding Second R&O to provide applicants

with an opportunity to correct minor defects in their short-form

applications prior to the auction. We stated that applicants whose

short-form applications are substantially complete, but contain minor

errors or defects, would be provided an opportunity to correct their

applications prior to the auction. In the broadband PCS context, we

modified our rules to permit ownership changes that result when

consortium investors drop out of bidding consortia, even if control of

the consortium changes due to this restructuring. In the CMRS Third

R&O, we decided to adopt the same or similar definitions for initial

applications and major and minor amendments and modifications for all

CMRS in Part 22 and Part 90, in order to facilitate similar system

proposals and modifications for equal treatment of substantially

similar services.

96. On the date set for submission of corrected applications,

applicants that discover minor errors in their own applications (e.g.,

typographical errors, incorrect license designations, etc.) also would

be permitted to file corrected applications. Recently, the Commission

waived the ex parte rules as they applied to the submission of amended

short-form applications for the A and B blocks of the broadband PCS

auctions, to maximize applicants' opportunities to seek Commission

staff advice on making such amendments. We propose to apply the same

principles to the SMR auctions. Under this proposal, applicants would

not be permitted to make any major modifications to their applications,

including changes in license areas and changes in control of the

applicant, or additions of other bidders into the bidding consortia,

until after the auction. Applicants could modify their short-form

applications to reflect formation of consortia or changes in ownership

at any time before or during an auction, provided such changes would

not result in a change in control of the applicant, and provided that

the parties forming consortia or entering into ownership agreements

have not applied for licenses in any of the same geographic license

areas. In addition, applications that are not signed would be dismissed

as unacceptable.

97. Upon our review of the short-form applications, we propose to

issue a Public Notice listing all defective applications, and

applicants with minor defects would be given an opportunity to cure

errors and resubmit a corrected version. After reviewing the corrected

applications, the Commission would release a second Public Notice

announcing the names of all applicants whose applications have been

accepted for filing. These applicants would be required to submit an

upfront payment to the Commission, as discussed below, to the

Commission's lock-box by the date specified in the Public Notice, which

generally would be no later than 14 days before the scheduled auction.

After the Commission receives from its lock-box bank the names of all

applicants who have submitted timely upfront payments, the Commission

would issue a third Public Notice announcing the names of all

applicants that are determined qualified to bid. An applicant who fails

to submit a sufficient upfront payment to qualify it to bid on any

license being auctioned would not be identified on this Public Notice

as a qualified bidder. Each applicant listed on this Public Notice

would be issued a bidder identification number and further information

and instructions regarding auction procedures. We seek comment on the

proposals discussed above.

3. Upfront Payments

98. Background. In the Competitive Bidding Second R&O, we

established a minimum upfront payment of $2,500 and stated that this

amount could be modified on a service-specific basis. In the Further

Notice, we proposed to require 800 MHz SMR auction participants to

tender in advance to the Commission a substantial upfront payment,

$0.02 per activity unit for the largest combination of activity units a

bidder anticipates bidding on in any round, as a condition of bidding

in order to ensure that only serious, qualified bidders participate in

auctions and to ensure payment of the penalty (discussed infra) in the

event of bid withdrawal or default. We also sought comment on the

upfront payment formula and minimum upfront payment most appropriate

for the 800 MHz SMR service.

99. Proposals. As in the case of other auctionable services, we

propose to require participants for the lower 80 and General Category

auction to tender in advance to the Commission a substantial upfront

payment as a condition of bidding, in order to ensure that only

serious, qualified bidders participate in auctions and to ensure

payment of the additional monetary assessments in the event of bid

withdrawal or default. For services that are licensed by simultaneous

multiple round auction, we have established a standard upfront payment

formula of $0.02 per activity unit for the largest combination of

activity units a bidder anticipates bidding on in any single round of

bidding. We tentatively conclude that a minimum $2,500 upfront payment

should be required, regardless of the bidding methodology we employ. We

seek comment on our proposal regarding the appropriate minimum upfront

payment for

[[Page 6224]]

applications for the lower 80 or General Category channels. In

particular, we seek comment on whether a minimum upfront payment of

$2,500 is sufficient to discourage frivolous or speculative bidders in

the auction process.

100. We tentatively conclude that upfront payments should be due no

later than 14 days before a scheduled auction. This period should be

sufficient to allow the Commission to process upfront payment data and

release a Public Notice listing all qualified bidders. The specific

procedures to be followed in the tendering and processing of upfront

payments are set forth in Section 1.2106 of the Commission's rules.

4. Down Payment and Full Payment

101. Background. In the Competitive Bidding Second R&O, we

generally required successful bidders to tender a 20 percent down

payment on their bids to discourage default between the auction and

licensing and to ensure payment of the penalty if such default occurs.

We concluded that this requirement was appropriate to ensure that

auction winners have the necessary financial capabilities to complete

payment for the license and to pay for the costs of constructing a

system, while not being so onerous as to hinder growth or diminish

access. In the Further Notice, we proposed to require the winning

bidders for 800 MHz SMR licenses to supplement their upfront payments

with down payments sufficient to bring their total deposits up to 20

percent of their winning bid(s).

102. Proposals. We propose to apply the 20 percent down payment

requirement to winning bidders for lower 80 and General Category

licenses. Such a down payment would be due within five business days

following the Public Notice announcing the winning bidders. We further

propose that auction winners be required to pay the full balance of

their winning bids within five business days following Public Notice

that the Commission is prepared to award the license. We seek comment

on this proposal.

103. To the extent that an auction winner is eligible to make

payments through an installment plan (small businesses, as proposed

infra), we propose to apply different down payment requirements. Such

an entity would be required to bring its deposit with the Commission up

to five percent of its winning bid after the bidding closes (this

amount would include the upfront payment), and would have to pay an

additional five percent of its winning bid to the Commission within

five business days following Public Notice that the Commission is

prepared to award the license. We seek comment on this proposal.

5. Bid Withdrawal, Default, and Disqualification

104. Background. In the Further Notice, we proposed to adopt bid

withdrawal, default, and disqualification rules for the 800 MHz SMR

service based on the procedures established in our general competitive

bidding rules. In the Competitive Bidding Second R&O, we noted that it

is critically important to the success of our competitive bidding

process that potential bidders understand that there will be a

substantial penalty assessed if they withdraw a high bid, are found not

to be qualified to hold licenses, or default on payment of a balance

due. If a bidder withdraws a high bid before the Commission closes

bidding or defaults by failing to timely remit the required down

payment, it would be required to reimburse the Commission for any

differences between its high bid and the amount of the winning bid, if

the winning bid is lower. A defaulting auction winner also would be

assessed three percent of either the subsequent winning bid or the

amount of the defaulting bid, whichever is less.

105. Proposal. We propose to adopt bid withdrawal, default, and

disqualification rules for the lower 80 and General Category licenses

based on the procedures in our general competitive bidding rules. Under

these procedures, any bidder who withdraws a high bid during an auction

before the Commission declares bidding closed, or defaults by failing

to remit the required down payment within the prescribed time, would be

required to reimburse the Commission. The bidder would be required to

pay the difference between its high bid and the amount of the winning

bid the next time the license is offered by the Commission, if the

subsequent winning bid is lower. A defaulting auction winner would be

assessed an additional payment of three percent of the subsequent

winning bid or three percent of the amount of the defaulting bid,

whichever is less. The monetary assessment would be offset by the

upfront payment. In the event that an auction winner defaults or is

otherwise disqualified, we propose to re-auction the license either to

existing or new applicants. The Commission would retain discretion,

however, to offer the license to the next highest bidder at its final

bid level if the default occurs within five business days of the close

of bidding. We seek comment on these proposed procedures.

6. Long-Form Applications

106. Background. In the Competitive Bidding Second R&O, we

established rules that require a winning bidder to submit a long-form

application. The long-form application is required to be filed by a

specific date, generally within ten business days after the close of

the auction. We stated that after we received the high bidder's down

payment and the long-form application, we would review the long-form

application to determine if it is acceptable for filing. Once the long-

form application is accepted for filing, we stated that we would

release a Public Notice announcing this fact, triggering the filing

window for petitions to deny. We also stated that if, pursuant to

Section 309(d), we deny or dismiss all petitions to deny, if any are

filed, and we otherwise are satisfied that the applicant is qualified,

we would grant the license(s) to the auction winner. In the Further

Notice, we proposed to use application procedures similar to those used

for licensing PCS. Consistent with our approach in PCS, we proposed to

require only the winning bidder to file a long-form application (FCC

Form 600).

107. Proposal. If the winning bidder makes the down payment in a

timely manner, we propose the following procedures: A long-form

application filed on FCC Form 600 must be filed by a date specified by

Public Notice, generally within ten (10) business days after the close

of bidding. After the Commission receives the winning bidder's down

payment and long-form application, we will review the long-form

application to determine if it is acceptable for filing. In addition to

the information required in the Form 600, designated entities will be

required to submit evidence to support their claim to any special

provision available for designated entities described in this Order.

This information may be included in an exhibit to FCC Form 600. This

information will enable the Commission, and other interested parties,

to ensure the validity of the applicant's certification of eligibility

for bidding credits, installment payment options, and other special

provisions. Upon acceptance for filing of the long-form application,

the Commission will issue a Public Notice announcing this fact,

triggering the filing window for petitions to deny. If the Commission

denies all petitions to deny, and is otherwise satisfied that the

applicant is qualified, the license(s) will be granted to the auction

winner. We seek comment on this proposal.

[[Page 6225]]

7. Petitions to Deny and Limitations on Settlements

108. Background. We determined in the Competitive Bidding Second

R&O that the procedures concerning petitions to deny found in Section

309(j)(2) of the Communications Act, should apply to competitive

bidding. We determined that we would adopt expedited procedures to

resolve substantial and material issues of fact concerning

qualifications. We stated that we would entertain petitions to deny the

application of the auction winner if the petitions to deny otherwise

are provided for under the Communications Act or our rules. We then

determined that we would not conduct a hearing before denial if we

determined that an applicant is not qualified and no substantial and

material issue of fact exists concerning that determination. We also

stated that if we identified substantial and material issues of fact in

need of resolution, Sections 309(j)(5) and 309(j)(2) of the

Communications Act permit submission of all or part of evidence in

written form, and also allow employees other than administrative law

judges to preside at the taking of written evidence. Additionally, we

previously have stated that our anti-collusion and settlement

procedures were designed to avoid the problem of entities filing

applications solely for the purpose of demanding payment from other

bidders in exchange for settlement or withdrawal.

109. As we have determined, the petition to deny procedures in

Section 90.163 of the Commission's rules, adopted in the CMRS Third

R&O, will apply to the processing of applications for the 800 MHz SMR

service. Thus, a party filing a petition to deny against an application

for the lower 80 and General Category channels will be required to

demonstrate standing and meet all other applicable filing requirements.

We also have adopted restrictions in Section 90.162 to prevent the

filing of applications and pleading (or threats of the same) designed

to extract money from SMR applicants. Thus, we will limit the

consideration that an applicant or petitioner is permitted to receive

for agreeing to withdraw an application or a petition to deny to the

legitimate and prudent expenses of the withdrawing applicant or

petitioner.

110. With respect to petitions to deny, the Commission need not

conduct a hearing before denying an application, if it determines that

an applicant is not qualified and no substantial issue of fact exists

concerning that determination. In the event the Commission identifies

substantial and material issues of fact, Section 309(i)(2) of the

Communications Act permits the submission of all or part of evidence in

written form in any hearing and allows employees other than

administrative law judges to preside over the taking of written

evidence. We seek comment on these proposals.

8. Transfer Disclosure Requirements

111. In Section 309(j) of the Communications Act, Congress directed

the Commission to ``require such transfer disclosures and anti-

trafficking restrictions and payment schedules as may be necessary to

prevent unjust enrichment as a result of the methods employed to issue

licenses and permits.'' In the Competitive Bidding Second R&O, the

Commission adopted safeguards designed to ensure that the requirements

of Section 309(j)(4)(E) are satisfied. We decided that it was important

to monitor transfers of licenses awarded by competitive bidding to

accumulate the necessary data to evaluate our auction designs and to

judge whether ``licenses [have been] issued for bids that fall short of

the true market value of the license.'' Therefore, we imposed a

transfer disclosure requirement on licenses obtained through the

competitive bidding process, whether by a designated entity or not.

112. We tentatively conclude that the transfer disclosure

requirements of Section 1.2111(a) should apply to all lower 80 and

General Category licenses obtained through the competitive bidding

process. Generally, licensees transferring their licenses within three

years after the initial license grant would be required to file,

together with their transfer applications, the associated contracts for

sale, option agreements, management agreements, and all other documents

disclosing the total consideration received in return for the transfer

of their license. As we indicated in the Competitive Bidding Second

R&O, we would give particular scrutiny to auction winners who have not

yet begun commercial service and who seek approval for a transfer of

control or assignment of their licenses within three years after the

initial license grant, so that we may determine if any unforeseen

problems relating to unjust enrichment have arisen outside the

designated entity context. We seek comment on these proposals.

9. Performance Requirements

113. Section 309(j)(4)(B) of the Communications Act requires the

Commission to establish rules for auctionable services that ``include

performance requirements, such as appropriate deadlines and penalties

for performance failures, to ensure prompt delivery of service to rural

areas, to prevent stockpiling or warehousing of spectrum by licensees

or permittees, and to promote investment in and rapid deployment of new

technologies and services.'' In the Competitive Bidding Second R&O, we

decided that in most auctionable services, existing construction and

coverage requirements provided in our service rules would be sufficient

to meet this standard, and that it was unnecessary to impose additional

performance requirements. We have proposed service rules for SMR that

would require market-area licensees to meet minimum population coverage

requirements in their licensing areas. We tentatively conclude that

these proposed coverage requirements are sufficient to meet the

requirements of Section 309(j)(4)(B). As discussed supra, we propose

that failure to meet these requirements would result in automatic

license cancellation. Accordingly, we do not propose to adopt

additional performance requirements for the lower 80 and General

Category licenses. We seek comment on this proposal.

D. Treatment of Designated Entities

1. Overview and Objectives

114. Section 309(j)(3)(B) of the Communications Act provides that

in establishing auction eligibility criteria and bidding methodologies,

the Commission shall ``promot[e] economic opportunity and competition

and ensur[e] that new and innovative technologies are readily

accessible to the American people by avoiding excessive concentration

of licenses and by disseminating licenses among a wide variety of

applicants, including small businesses, rural telephone companies, and

businesses owned by members of minority groups and women.'' Section

309(j)(4)(A) provides that to promote the statute's objectives the

Commission shall ``consider alternative payment schedules and methods

of calculation, including lump sums or guaranteed installment payments,

with or without royalty payments, or other schedules or methods * * *

and combinations of such schedules and methods.''

115. In the Competitive Bidding Second R&O, we established

eligibility criteria and general rules regarding special measures for

small businesses, rural telephone companies, and businesses owned by

women and minorities (sometimes referred to collectively as

``designated entities''). We also identified several measures,

including installment payments, spectrum set-asides, and bidding

[[Page 6226]]

credits, from which we could choose when establishing rules for

auctionable services. We stated that we would decide whether and how to

use these special provisions, or others, when we developed specific

competitive bidding rules for particular services. In addition, we set

forth rules designed to prevent unjust enrichment by designated

entities who transfer ownership in licenses obtained through the use of

these special measures or who otherwise lose their designated entity

status.

116. When deciding which provisions to adopt to encourage

designated entity participation in particular services, we have closely

examined the specific characteristics of the service and determined

whether any particular barriers to accessing capital have stood in the

way of designated entity opportunities. In accordance with our

statutory directive, we have adopted measures designed both to enhance

the ability of designated entities to acquire licenses and to increase

the likelihood that designated entity licensees will become strong

competitors in the provision of wireless services. In narrowband PCS,

for instance, we provided installment payments for small businesses and

bidding credits for minority-owned and women-owned businesses. In

broadband PCS, we designated certain spectrum blocks as entrepreneurs'

blocks, allowed entrepreneurs' block licensees to make installment

payments, and provided bidding credits for designated entities. In 900

MHz SMR, we adopted bidding credits and installment payments for small

businesses. In the 800 MHz SMR service, we did not adopt special

provisions for designated entities, with respect to the upper 200

channels. We nonetheless indicated that such approach would meet the

statutory objectives of promoting economic opportunity and competition,

avoiding excessive concentration of licenses, and ensuring access to

new and innovative technologies by designated entities. As discussed in

greater detail below, we seek comment on the type of designated entity

provisions that should be incorporated into our competitive bidding

procedures for the lower 80 and General Category channels.

2. Eligibility for Designated Entity Provisions

a. Small Businesses. i. Special Provisions. 117. Proposal. We

tentatively conclude that it is appropriate to establish special

provisions for small businesses in our competitive bidding rules for

the lower 80 and General Category channels. We note that Congress

specifically cited the needs of small businesses in enacting auction

legislation. The House Report states that the statutory provisions

related to installment payments were enacted to ``ensure that all small

businesses will be covered by the Commission's regulations, including

those owned by members of minority groups and women.'' It also states

that the provisions in Section 309(j)(4)(A) relating to installment

payments were intended to promote economic opportunity by ensuring that

competitive bidding inadvertently does not favor incumbents with ``deep

pockets'' over new companies or start-ups.

118. In addition, Congress made specific findings with regard to

access to capital in the Small Business Credit and Business Opportunity

Enhancement Act of 1992: that ``small business concerns, which

represent higher degrees of risk in financial markets than do large

businesses, are experiencing increased difficulties in obtaining

credit.'' As a result of these difficulties, Congress resolved to

consider carefully legislation and regulations ``to ensure that small

business concerns are not negatively impacted'' and to give priority to

passage of ``legislation and regulations that enhance the viability of

small business concerns.'' For these reasons, and as discussed in

greater detail below, we tentatively conclude that small businesses

applying for these licenses should be entitled to some form of bidding

credit and should be allowed to pay their bids in installments. This is

consistent with our approach in the 900 MHz SMR service. We seek

comment on this tentative conclusion.

ii. Definition. 119. Comments. DCL Associates and Dru Jenkinson, et

al. suggest that we adopt the SBA definition of small business

initially adopted in the Competitive Bidding Second Report and Order.

Under that definition, a ``small business'' is one which has a net

worth not in excess of $6 million with average net income for the two

preceding years not in excess of $2 million. Morris recommends using

the small business definition utilized by the Internal Revenue Service.

The SBA opines that a revenue test remains the best and least

problematic guideline for determining whether a business is small. AMTA

suggests that the better approach for the 800 MHz SMR service would be

to incorporate preferential provisions for existing operators.

120. Several commenters offer other small business definitions. AMI

suggests that small businesses be defined to have 30 channels licensed

or managed and/or less than $540,000 in current system revenues.

Genesee suggests using the U.S. Chamber of Commerce standard for

retail/service companies of less than $5.5 million annually. Genesee

and the SBA believe that the PCS small business definition, with a $40

million maximum would be inappropriate for the 800 MHz SMR service. The

SBA believes that a smaller revenue figure, such as $15 million, would

be more appropriate.

121. Proposal. We seek comment on the appropriate definition of

``small business'' to be applied for purposes of the bidding credits

proposed above. We have stated previously that we would define

eligibility requirements for small businesses on a service-specific

basis, taking into account the capital requirements and other

characteristics of each particular service in establishing the

appropriate threshold. In broadband PCS and regional narrowband PCS, we

defined small businesses based on a $40 million annual revenue

threshold. In the 220 MHz service, we have proposed two small business

definitions: (1) for purposes of bidding on a nationwide or regional

license, small businesses would be defined as entities with $15 million

in average gross revenues for the preceding three years; and (2) for

purposes of bidding on EA licenses, small businesses be would be

defined as entities with $6 million in average gross revenues for the

preceding three years. After considering the record in the 900 MHz

proceeding, we concluded that both $15 million and $3 million small

business definitions were warranted, which would entitle applicants for

MTA licenses to 10 percent and 15 percent bidding credits respectively.

122. In conjunction with our proposal to provide two levels of

bidding credits, we propose to establish two small business

definitions: to obtain the 10 percent bidding credit, an applicant

would be limited to $15 million in average gross revenues for the

previous three years; to obtain the 15 percent credit, the applicant

would be limited to $3 million in gross revenues for the previous three

years. In both cases, we would require the applicant to aggregate the

gross and revenues of its affiliates and investors for the preceding

three years for purposes of determining eligibility. These proposed

thresholds are comparable to what we have adopted in 900 MHz SMR, and

they reflect our tentative view of the capital requirements and

potential barriers to entry in the 800 MHz SMR service. We seek comment

on whether these thresholds, and the proposed bidding credit amounts

associated with them, are sufficient for the lower 80 and General

Category Channels in light of the build-out costs associated with

[[Page 6227]]

constructing an SMR system throughout a market area, or whether

alternative definitions would be more suitable. We also seek comment on

whether our proposed small business definitions are sufficiently

restrictive to protect against businesses receiving bidding credits

which in fact do not need them.

b. Minority- and Women-Owned Businesses. 123. Background. Prior to

the Supreme Court's decision in Adarand Constructors, Inc. v. Pena, we

concluded that in the licensing of broadband and narrowband PCS,

minority and women-owned businesses might have difficulty accessing

sufficient capital to be viable auction participants or service

providers, in the absence of special provisions in our auction rules.

We therefore adopted special provisions for minorities and women in

these services. We further determined that such provisions were

constitutional under the ``intermediate scrutiny'' standard used in

Metro Broadcasting, Inc. v. FCC.

124. In Adarand, however, the Supreme Court ruled that racial

classifications imposed by the federal government are subject to strict

scrutiny. This holding will apply to any proposal to incorporate race-

based measures into our rules; thus, it introduces an additional level

of complexity to implementing Congress' mandate to ensure that

businesses owned by minorities and women are provided ``the opportunity

to participate in the provisions of spectrum-based services.'' We

emphasize that we have not concluded that race or gender-based measures

are unconstitutional or otherwise inappropriate for spectrum auctions

we will hold in the future. At a minimum, however, we believe that

Adarand requires us to build a thorough factual record concerning the

participation of minorities and women in spectrum-based services to

support race- and gender-based measures.

125. Comments. DCL Associates and Dru Jenkinson, et al., the only

commenters addressing this specific issue, propose that the PCS

definitions of minority- and/or female-controlled firms should be

utilized in the 800 MHz SMR service. Dru Jenkinson, et al. further

suggest that there should be no difference in eligibility requirements

for the wide-area and local licenses.

126. Proposal. We propose to adopt special provisions in the lower

80 and General Category competitive bidding rules for small businesses.

We believe that such provisions can be structured in a way that would

increase the likelihood of participation by women- and minority-owned

businesses. In adopting designated entity measures for PCS, for

example, we noted that such targeted provisions might not be necessary

in services that are less capital intensive. We consider 800 MHz SMR to

be significantly less capital-intensive than PCS and some other

wireless services. In addition, we anticipate that our proposal to

license each channel separately on an EA basis will mean lower entry

costs for applicants. We also expect that the vast majority of minority

and women-owned businesses will be able to qualify as small businesses

under any definition we adopt. For example, U.S. Census Data shows that

approximately 99 percent of all women-owned businesses and 99 percent

of all minority-owned businesses generated net receipts of $1 million

or less. Finally, in light of the statute's instruction to ``design and

test multiple alternative methodologies'' we believe that it would be

suitable to use more uniform measures for the lower 80 and General

Category channels, because capital entry requirements are expected to

be comparatively lower than other CMRS services. We seek comment on

this proposal.

127. We also request comment on the possibility that in addition to

small business provisions, separate provisions for women- and minority-

owned entities should be adopted for the lower 80 and General Category

channels. To comply with the Supreme Court's ruling in Adarand, any

race-based classification must be a narrowly tailored measure that

furthers a compelling governmental interest. We also believe that

gender-based provisions, although not addressed in Adarand, should be

subject to the broadest possible comment. We therefore ask that

commenters discuss whether the capital requirements of the 800 MHz SMR

service pose a barrier to entry by minorities and women, and whether

assisting women and minorities to overcome such a barrier, if it

exists, would constitute a compelling government interest. In

particular, we seek comment on the actual costs associated with

acquisition, construction, and operation of an 800 MHz SMR system with

a service area based on a pre-defined geographic area and the

proportion of existing 800 MHz SMR businesses that are owned by women

and minorities. We also seek comment on the analytical framework for

establishing a history of past discrimination in the 800 MHz SMR

industry and urge parties to submit evidence (statistical, documentary,

anecdotal or otherwise) about patterns or actual cases of

discrimination in this and related communications services. Assuming

that a compelling government interest is established, we seek comment

on whether separate provisions for women and minorities are necessary

to further this interest, and whether such provisions can be narrowly

tailored to satisfy the strict scrutiny standard.

c. Reduced Down Payment. 128. Background. In the Competitive

Bidding Second R&O, we noted that reduced upfront payments particularly

may be appropriate for auctions of spectrum specifically set aside for

designated entities as a means of encouraging participation in the

auction, particularly by all eligible designated entities. For

broadband PCS, we reduced the upfront payment requirement for

designated entities in the entrepreneurs--blocks, observing that

requiring full compliance with the upfront payment could discourage

auction participation by designated entities.

129. Comments. Several commenters support offering a reduced

upfront payment option to designated entities. DCL Associates strongly

supports availability of reduced upfront payments for minority- and/or

women-owned businesses. Dru Jenkinson, Inc., et al., on the other hand,

support offering the reduced upfront payment option to all designated

entities. To encourage the participation of designated entities in an

auction for a geographic area licenses, Pittencrief does not oppose a

reduced upfront payment. Southern opines, however, that if the

Commission imposes a higher than usual upfront payment, as other

commenters suggest, then a reduced upfront payment option will not do

much to facilitate participation by designated entities in the auctions

for wide-area licenses.

130. Proposal. We propose to adopt reduced upfront payments for

small businesses for geographic licenses on the lower 80 and General

Category channels. We believe that this special provision will

encourage participation in the auction by eligible designated entities.

We seek comment on this proposal and tentative conclusion.

3. Bidding Credits

131. Background. Bidding credits allow eligible designated entities

to receive a payment discount (or credit) for their winning bid in an

auction. In the Competitive Bidding Second R&O, we determined that

competitive bidding rules applicable to individual services would

specify the entities eligible for bidding credits and the bidding

credit amounts for each particular service. As a result, we have

adopted a variety of bidding credit provisions for small businesses and

other designated entities

[[Page 6228]]

in auctionable services. In the nationwide narrowband PCS auction, for

example, we established a 25 percent bidding credit for minority and

women-controlled businesses, while a 40 percent credit was used in the

regional narrowband PCS auction. In broadband PCS, our pre-Adarand

entrepreneurs' block rules included a 10 percent bidding credit for

small businesses, a 15 percent credit for businesses owned by

minorities or women, and an aggregated 25 percent credit for small

businesses owned by women and/or minorities. In the Multipoint

Distribution Service (MDS), we allowed small businesses a 15 percent

bidding credit. In the 900 MHz SMR service, we adopted a 15 percent

bidding credit for small businesses with gross revenues that are not

more than $3 million for the preceding three years and a 10 percent

bidding credit for small businesses with gross revenues that are more

than $3 million but not more than $15 million for the preceding three

years. Finally, in the 220 MHz service, we proposed a 40 percent small

business bidding credit for nationwide and regional licenses and a 10

percent bidding credit for smaller EA licenses.

132. Comments. Few commenters addressed whether special provisions

should be provided for businesses owned by minorities and/or women in

the 800 MHz SMR auctions. With respect to bidding credits, Morris,

Pittencrief, DCL Associates, Dru Jenkinson, et al. and the SBA support

the Commission's proposal to provide bidding credits for such entities.

DCL Associates, Dru Jenkinson, et al., and the SBA support a forty

percent bidding credit for minority-and women-owned entities for wide-

area licenses. The SBA further supports affording minority- and women-

owned entities a twenty-five percent bidding credit for local SMR

licenses. Other commenters, however, oppose giving such entities any

type of bidding credit. AMI opines that a bidding credit would be

inappropriate, based on the uncertainty of the value of wide-area

licenses at auction. Dial Call opposes bidding credits, contending the

questionable constitutionality of such provisions only would serve to

delay the ultimate resolution of the proceeding.

133. Proposal. We seek comment on the appropriate level of bidding

credit for the lower 80 and General Category channels, in comparison to

the services discussed above. We also seek comment on the possibility

of offering ``tiered'' bidding credits for different classes of small

businesses. We note that small businesses may vary in their ability to

raise capital, depending on their size and gross revenues. By offering

levels of bidding credits which depend on the size of the small

business, we could increase the likelihood that the full range of small

businesses would be able to participate in an auction and potentially

provide service. We therefore propose to establish two levels of

bidding credits: a 10 percent bidding credit for all small businesses,

and a 15 percent credit for small businesses that meet a more

restrictive gross revenue threshold. We believe that tiered bidding

credits can help achieve our statutory objective under Section

309(j)(3)(B), by providing varying sizes of small businesses with a

meaningful opportunity to obtain SMR licenses. We seek comment on this

proposal.

134. We also seek comment on the degree to which the revenues of

affiliates and major investors should be considered in determining

small business eligibility. For example, in determining whether a PCS

applicant qualifies as a small business, we include the gross revenues

of the applicant's affiliates and investors with ownership interests of

twenty-five percent or more in the applicant, but we do not attribute

the gross revenues of investors who hold less than a twenty-five

percent interest in the applicant unless they are members of the

applicant's control group. We seek comment on what attribution standard

should be applied to 800 MHz SMR applicants seeking to qualify as small

businesses. Would a smaller attribution standard be more appropriate?

135. We propose to make the small business bidding credit available

on all lower 80 and General Category Channels that are licensed on a

market-area basis. We recognize that this would be a departure from our

900 MHz SMR rules, in which we offered bidding credits to small

businesses on any available channel block. Our proposal is consistent,

however, with our PCS rules in which bidding credits are available only

on designated channels. We seek comment on this proposal. We also seek

comment on whether there is a reasonable basis for providing credits on

some channels and not others.

4. Installment Payments

136. Background. We previously have indicated that in the future we

would not necessarily limit the availability of installment payments to

small businesses, but would consider offering the installment option

(with varying rates and payment schedules) to other classes of

designated entities.

137. Comments. AMI, CellCall, DCL Associates, Genesee, Pittencrief,

and the SBA support the proposal that small businesses be eligible for

installment payments. AMI opines that the availability of installment

payments may prove useful in facilitating the participation of small

operators in the 800 MHz SMR auctions. In addition, CellCall, DCL

Associates, and Morris advocate that the Commission afford small

businesses reduced upfront payments. Telecellular believes that the

Commission should maximize the opportunities for small businesses by

granting them bidding credits. Telecellular suggests adoption of the

bidding credits provided under the Commission's broadband PCS

designated entity provisions.

138. DCL Associates strongly supports the availability of

installment payments for minority and/or women-owned businesses.

Pittencrief does not object to offering installment payments as a means

to encourage participation of designated entities in the auctions for

wide-area licenses.

139. Proposal. We propose to adopt an installment payment option

for small businesses that successfully bid for lower 80 and General

Category licenses. As we noted in the Competitive Bidding Second R&O,

allowing installment payments reduces the amount of private financing

needed by prospective small business licensees and therefore mitigates

the effect of limited access to capital by small businesses. Under this

proposal, licensees who qualify for installment payments would be

entitled to pay their winning bid amount in quarterly installments over

the ten-year license term, with interest charges to be fixed at the

time of licensing at a rate equal to the rate for ten-year U.S.

Treasury obligations plus 2.5 percent. In addition, we propose to

tailor installment payments to reflect the needs of different size

entities. Under our proposal, small businesses with $3 million or less

in gross revenues would make interest-only payments for the first five

years of the license term, while small businesses with $15 million or

less in gross revenues would make interest-only payments during the

first two years. We believe that this installment payment structure,

which is consistent with our approach in 900 MHz SMR and the upper 200

channels, will enable entities with less immediate access to capital to

increase their chances of obtaining licenses. Timely payment of all

installments would be a condition of the license grant and failure to

make timely payment would be grounds for revocation of the license. We

seek comment on this proposal.

[[Page 6229]]

5. Set-Aside Spectrum

140. Background. In the Competitive Bidding Eighth R&O, we

determined that designation of an entrepreneur's block for the upper

200 channels was not feasible. In the Further Notice, we indicated that

an entrepreneurs' block could be feasible for the lower 80 channels

which we contemplated would be used primarily by smaller SMR operators.

141. Proposal. We tentatively conclude that the lower 80 and the

General Category Channels should be designated as an entrepreneurs'

block. Such a designation would ensure that smaller SMR operators would

have opportunities to maintain competitive and viable systems and also

to pursue wide-area licensing strategies should they desire to do so.

In our broadband PCS rules where we have authorized entrepreneurs'

block licenses, we have required entrepreneurs to comply with financial

caps based on gross revenues and total assets over a certain period of

time. Because the 800 MHz SMR service is less capital-intensive than

PCS, we believe that the entrepreneurs' block financial caps in the 800

MHz SMR service should be set at a lower level than those in broadband

PCS. We seek comment on the feasibility of designating the lower 80 and

General Category channels as an entrepreneurs' block. We also ask

commenters to discuss what would be appropriate financial caps for such

entrepreneurs' block.

6. Unjust Enrichment Provisions

142. Background. In the Competitive Bidding Second R&O, we

indicated that licensees that received bidding credits and installment

payments and also chose to transfer their licenses to entities not

eligible for these benefit, were required to repay the amount of the

bidding credit on a graduated basis. No repayment would be required six

years after the license grant. In addition, the ineligible transferee

would not have the benefit of installment payments, and principal and

accrued interest would come due. For the 900 MHz SMR service, we

adopted unjust enrichment provisions which required reimbursement of

the benefit received by a small business through bidding credits and

installment payments in the event that such small business transferred

its license to an entity not qualifying as a small business. We

previously adopted restrictions on the transfer or assignment of

broadband PCS entrepreneurs' block licenses to ensure that designated

entities do not take advantage of special provisions by immediately

assigning or transferring control of their licenses.

143. Proposal. Permitting an immediate transfer of a discounted

license to an entity that is not a small business could undermine our

basis for offering special provisions to small businesses, but we note

that in services with no entrepreneurs' block, we have limited unjust

enrichment to repayment of bidding credits or installment payments. We

therefore seek comment on whether we should use an approach similar to

that adopted for the 900 MHz SMR service or that adopted for broadband

PCS entrepreneurs' block licenses.

7. Partitioning

144. The Communications Act directs the Commission to ensure that

rural telephone companies have the opportunity to participate in the

provision of spectrum-based services. Rural areas, because of their

more dispersed populations, tend to be less profitable to serve than

more densely populated urban areas. Rural telephone companies, however,

are well positioned because of their existing infrastructure to serve

these areas. In other services, such as broadband PCS and 900 MHz SMR,

we have acknowledged this fact by allowing rural telephone companies to

partition their licenses on a geographic basis, thereby increasing the

likelihood of rapid introduction of service into rural areas. We also

afforded rural telephone companies this opportunity under our rules for

the upper 200 channels of 800 MHz SMR spectrum. We seek comment on

whether we should incorporate similar provisions into our rules for the

lower 80 and General Category channels.

145. If we adopt geographic partitioning for rural telephone

companies, geographic partitioning should be made available to them on

the same basis as in PCS and the upper 200 channels. Such a

partitioning scheme would provide rural telephone companies with the

flexibility to serve areas in which they already provide service, while

the remainder of the service area could be served by other providers.

Under this proposal, rural telephone companies would be permitted to

acquire partitioned SMR licenses in one of two ways: (1) By forming

bidding consortia consisting entirely of rural telephone companies to

participate in auctions, and then partitioning the licenses won among

consortia participants, or (2) by acquiring partitioned paging licenses

from other licensees through private negotiation and agreement either

before or after the auction. We also would require that partitioned

areas conform to established geo-political boundaries, include all

portions of the wireline service area of the rural telephone company

applicant, and be reasonably related to the rural telephone company's

wireline service area. We also propose to use the definition for rural

telephone companies implemented in broadband PCS. Rural telephone

companies would be defined as local exchange carriers having 100,000 or

fewer access lines, including all affiliates. We seek comment on this

proposal. We also seek comment on whether we should extend partitioning

options to entities other than rural telephone companies, as we did in

MDS and as we proposed for the upper 200 channels in this service.

VIII. Procedural Matters

A. Regulatory Flexibility Analysis

With respect to this Second Further Notice, pursuant to the

Regulatory Flexibility Act of 1980, an Initial Regulatory Flexibility

Analysis (IRFA) was incorporated in the Further Notice of Proposed Rule

Making in PR Docket No. 93-144. Written comments on the IRFA were

requested. The Commission's final analysis is as follows

147. Need for and purpose of the action. The rule making proceeding

has implemented Sections 332 and 3(n), respectively, of the

Communications Act of 1934, as amended. The rules adopted herein will

carry out Congress's intent to establish a consistent framework for all

commercial mobile radio services (CMRS).

148. Issues raised in response to the IRFA. No comments were

submitted in response to the IRFA.

149. Significant alternatives considered and rejected. All

significant alternatives have been addressed in the First Report and

Order in PR Docket No 93-144, the Third Report and Order in GN Docket

No. 93-252, and the Eighth Report and Order in PP Docket No. 93-253.

B. Paperwork Reduction Act

150. Summary: The Federal Communications Commission, as part of its

continuing effort to reduce paperwork burden, invites the general

public and other Federal agencies to take this opportunity to comment

on the following proposed and/or continuing information collections, as

required by the Paperwork Reduction Act of 1995, Public Law 104-13.

Comments are requested concerning (a) Whether the proposed collection

of information is necessary for the proper performance of the functions

of the Commission,

[[Page 6230]]

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 should be submitted on or before April 16,

1996. If you anticipate that you will be submitting comments but find

it difficult to do so within the period of time allowed by this notice,

you should advise the contact listed below as soon as possible.

ADDRESSES: Direct all comments to Dorothy Conway, Federal

Communications Commission, Room 234, 1919 M St., NW., Washington, DC

20554, or via Internet to [email protected]; and Timothy Fain, OMB Desk

Officer, 10236 NEOB, 725 17th St., NW., Washington, DC 20503, or via

Internet to [email protected].

FOR FURTHER INFORMATION CONTACT: Dorothy Conway, (202) 418-0217, or via

Internet at [email protected].

SUPPLEMENTARY INFORMATION:

Title: Amendment to the Commission's Rules to Facilitate Future

Development of SMR Systems in the 800 MHz Frequency Band.

Type of Review: Revised collection.

Respondents: Individuals or households; Business or other for-

profit; Not-for-profit institutions; State, Local or Tribal Government.

Number of Respondents: 12,195.

Estimated Time Per Response: Approximately 1 to 5 hours.

Total Annual Burden: Approximately 17,254 hours.

Total Annual Cost: $6,468,260 this includes the costs for filing

the information electronically or mailing submissions and hiring

consultants that may be necessary to respond the requests.

Needs and Uses: The information will be used by the Commission for

the following purposes: (a) To determine if the grant or retention of

an extended implementation schedule is warranted; (b) to update the

Commission's licensing database and thereby facilitate the successful

coexistence of EA licensees and incumbents in the upper 10 MHz block of

800 MHz SMR spectrum; (c) to ensure that incumbents are timely notified

of possible relocation thus allowing relocation to occur in an orderly,

efficient, and expedient manner; and (d) to determine whether an

applicant is eligible for special provisions for small businesses

provided for applicants in the 800 MHz SMR service.

C. Ex Parte Rules--Non-Restricted Proceeding.

151. 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. Authority.

152. The legal authority for this proposed information collection

includes 47 U.S.C. Sections 154(i), 303(c), 303(f), 303(g), 303(r),

309(j), and 332, as amended. The information collection would not

affect any FCC forms. The proposed collection would increase minimally

the burden on 800 MHz SMR service applicants.

List of Subjects in 47 CFR Part 90

Radio.

Federal Communications Commission.

William F. Caton,

Acting Secretary.

[FR Doc. 96-3511 Filed 2-13-96; 5:07 pm]

BILLING CODE 6712-01-P