Modification of the ``Build-Out'' Construction Requirements for the Interactive Video and Data Service (IVDS)

FEDERAL COMMUNICATIONS COMMISSION

47 CFR Part 95

[FCC 95-506]

Modification of the ``Build-Out'' Construction Requirements for

the Interactive Video and Data Service (IVDS)

AGENCY: Federal Communications Commission.

ACTION: Final rule.

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SUMMARY: The Commission has adopted a Report and Order to eliminate the

one-year ``build-out'' requirement for the IVDS, while retaining the

three-year and five-year build-out requirements. This action will allow

the IVDS industry additional time to develop and deploy new and

innovative applications.

EFFECTIVE DATE: January 19, 1996.

FOR FURTHER INFORMATION CONTACT:

Donna Kanin, (202) 418-0680, Wireless Telecommunications Bureau.

SUPPLEMENTARY INFORMATION: This is the final version of the

Commission's Report and Order, FCC 95-506, adopted December 14, 1995,

and released January 16, 1996. The full text of this Report and Order

is available for inspection and copying during normal business hours in

the FCC Reference Center, Room 230, 1919 M Street, NW., Washington, DC.

The complete text may be purchased from the Commission's copy

contractor, International Transcription Service, Inc., 2100 M Street,

NW., Suite 140, Washington, DC 20037, telephone (202) 857-3800.

I. Introduction

1. On July 31, 1995, the Commission adopted a Notice of Proposed

Rule Making (Notice), 60 FR 43105, August 18, 1995, proposing to

eliminate the one-year construction ``build-out'' requirement for

Interactive Video and Data Service (IVDS)\1\ licensees.\2\ No change

was proposed concerning the three-year and five-year construction

requirements. We initiated the Notice in response to requests by

several IVDS licensees \3\ that won their licenses in the IVDS auction

held July 28-29, 1994. This Report and Order amends Section 95.833(a)

of the Commission's Rules \4\ to eliminate the one-year build-out

requirement as proposed. This action will allow the IVDS industry

additional time to develop and deploy new and innovative applications,

such as commercial data distribution services and inventory monitoring

services.

\1\ IVDS is a point-to-multipoint, multipoint-to-point, short

distance communications service in which licensees may provide

information, products, or services to individual subscribers at

fixed locations within a service area, and subscribers may provide

responses.

\2\ Notice of Proposed Rule Making, (Notice), WT Docket No. 95-

131, 10 FCC Rcd 8700 (1995).

\3\ Id. at footnote 5.

\4\ 47 CFR Sec. 95.833(a).

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II. Background

2. Section 95.833(a) of the Commission's Rules specifies that each

IVDS licensee must make service available to at least ten percent of

the population or geographic area within the licensee's service area

within one year of the grant of the license, thirty percent within

three years, and fifty percent within five years. As indicated in the

Notice,\5\ Section 95.833(a) was crafted in 1992 when it was

anticipated that licenses would be awarded by lottery.\6\ These build-

out requirements were intended ``to reduce the filing of speculative

applications by entities that have no real intention of implementing

[IVDS] systems and to avoid the potential for warehousing of IVDS

spectrum.'' \7\ We stated in the Notice that the use of auctions to

award licenses reduces the incentives for speculation, and therefore,

tentatively concluded that the one-year benchmark is unnecessary.\8\

The Commission received six comments and two reply comments in response

to the Notice.\9\

\5\ Notice at para. 3.

\6\ The eighteen IVDS licensees that received their licenses as

a result of a lottery held September 15, 1993, have already passed

their one year build-out deadline. We waived the one year deadline

for 17 of the 18 licenses. These 17 licenses are required to meet

the three year/30 percent construction deadline in March, 1997.

\7\ See Report and Order in GEN Docket No. 91-2, 7 FCC Rcd 1630,

1640 para. 73 (1992), 57 FR 8272, March 9, 1992; see also Memorandum

Opinion and Order in GEN Docket No. 91-2, 7 FCC Rcd 4923, 4925 para.

13 (1992), 57 FR 36372, August 13, 1992.

\8\ Notice at para. 3.

\9\ A list of the commenting parties is provided in Appendix A

of the Report and Order.

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III. Discussion

3. Comments. Generally, the commenters favor the elimination of the

one-year construction requirement. Erwin Aguayo, Jr. (Aguayo), the

Coalition of IVDS Licensees \10\ (Coalition) and EON Corporation (EON)

agree that the auction rules preclude the need for the one-year build-

out

[[Page 1287]]

requirement.\11\ Aguayo states that by amending the rules as proposed,

the Commission will provide IVDS licensees with the necessary

opportunity for flexibility in establishing their IVDS services.\12\

EON states that the introduction of auctions to assign IVDS licenses

has created significant short-term incentives for licensees to begin

service as quickly as possible, and has reduced the risk of speculation

in the IVDS license application process.\13\ Moreover, the Coalition of

IVDS Licensees (Coalition) asserts that not only is the one-year

benchmark unnecessary, but it will also impede the viability and

evolutionary development of the IVDS spectrum. By requiring IVDS

licensees to construct facilities prior to the full development of

commercially viable services, the Coalition believes that the

construction requirement will impede the development of new and

innovative services.\14\ ITV, Inc. (ITV) and IVDS Affiliates, LLC

(IALC) support eliminating the one-year deadline, but at the same time,

recommend that the Commission establish a two-year, ten percent

deadline for lottery and auction winners.\15\ They argue that two years

would be sufficient for lottery winners to demonstrate the function of

their respective IVDS systems and competing technologies, but not halt

IVDS development. Secondly, ITV and IALC assert that such an amendment

will permit auction winners to initiate service in a timely

fashion.\16\

\10\ Coalition members are listed in Appendix A of the Report

and Order.

\11\ Aguayo comments at 1-2; Coalition comments at 3; EON

comments at 1-2.

\12\ Aguayo comment at 2.

\13\ EON comments at 1-2.

\14\ Coalition comments at 2-4.

\15\ ITV and IALC reply comments at 2-3.

\16\ Id.

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4. While supporting the proposal, EON, ITV and IALC assert that

lack of equipment should not be the rationale for the proposed rule

change. EON claims that its equipment will be commercially available

before the one-year construction benchmark,\17\ but emphasize that IVDS

licensees' equipment choices and short-term deployment schedules should

be based on market conditions, rather than arbitrary regulatory

constraints.\18\ Similarly, ITV and IALC state that they have developed

a product line of IVDS equipment for data distribution, which they are

marketing to licensees.\19\ Radio Telecom and Technology, Inc. (RTT), a

manufacturer of IVDS equipment, is the only commenter that takes no

position as to the elimination of the one-year build-out

requirement.\20\

\17\ EON comments at 2.

\18\ Id.

\19\ ITV and IALC comments at 3.

\20\ RTT's comments at 1-2.

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5. Additionally, the Notice proposed to retain the three-year and

five-year construction benchmarks. EON, the Coalition, ITV and IALC

agree.\21\ The Coalition believes that eliminating the one-year

benchmark and retaining the other benchmark strikes an appropriate

balance between the licensees' ability to manage intelligently their

investments, and the public's interest in receiving interactive service

on a timely basis.\22\ EON concurs that the three-year and five-year

benchmarks are appropriate means for the Commission to meet its

Congressional mandate to promote investment in and rapid deployment of

new technologies and services.\23\ ITV and IALC further emphasize that

the IVDS equipment market cannot develop without strictly enforced

three and five-year construction deadlines.\24\ Alternatively, Richard

L. Vega (Vega) argues that the three-year benchmark should also be

eliminated.\25\ According to Vega, it too has become an outdated,

unnecessary, and unduly burdensome requirement for license holders.

Vega states that the public, as well as the fledgling IVDS industry,

would benefit from a one-time, five-year, build-out requirement,

allowing licensees an opportunity to focus completely on the technology

selection process.

\21\ Coalition comments at 3-4; EON comments at 2-3, ITV and

IALC comments at 5-6.

\22\ Coalition comments at 3-4.

\23\ EON comments at 3.

\24\ ITV and IALC comments at 4-6.

\25\ Vega comments at 2-4.

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6. Decision. We are adopting the proposal to eliminate the one-

year, ten percent construction requirement. As the Coalition states,

the one-year construction requirement impedes the viability and

evolutionary development of the IVDS spectrum. Aguayo also points out

that amending the rules, as proposed, will provide IVDS licensees with

the necessary opportunity for flexibility in establishing their IVDS

services. EON further emphasizes that IVDS licensees' equipment choices

and short-term deployment schedules should be based on market

conditions, rather than arbitrary regulatory constraints. We conclude

that eliminating the one-year construction requirement will provide

licensees with greater flexibility in selecting service options,

obtaining financing, selecting equipment, and other considerations

relating to construction of their systems. Such action will, in turn,

promote the development of the IVDS industry. Moreover, we believe the

one-year construction benchmark is unnecessary to prevent spectrum

warehousing. The use of auctions, rather than lotteries, to award

licenses reduces the potential for spectrum warehousing and, as EON

indicates, the introduction of auctions to assign IVDS licenses creates

significant short-term incentives for licenses to begin service as

quickly as possible. Finally, all of the commenters support this action

except RTT, who takes no position regarding the one-year build-out.

7. Further, as proposed, we will retain the three-year and five-

year build-out benchmarks. These benchmarks are consistent with the

statutory requirement for performance benchmarks for licenses obtained

through competitive bidding,\26\ and will ensure the timely delivery of

service to the public. At the same time, we decline to adopt the

suggestions offered by Vega, ITV and IALC. We believe that Vega's

request to eliminate the three-year benchmark would not promote rapid

delivery of new technologies and services to the public. Additionally,

we believe ITV's and IALC's suggestion to create a two-year, ten

percent benchmark in lieu of the one-year, ten percent benchmark, while

retaining the three-year benchmark, is unnecessary. Imposing the first

benchmark at two years, rather than three years, would give auction

winners less time and flexibility to make the critical business

decisions described above. Further, a two-year, ten percent build-out

requirement, in light of our auction framework and the three-year and

five-year requirements, is unnecessary to prevent speculation and

warehousing.

\26\ Section 309(j)(4)(B) of the Communications Act of 1934, as

amended, 47 U.S.C. Sec. 309(j)(4)(B).

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IV. Procedural Matters

8. Pursuant to the Regulatory Flexibility Act (Pub. L. No. 96-354,

94 Stat. 1165.5 U.S.C. 603, et seq. (1981), the Commission attached an

Initial Regulatory Flexibility Analysis (IRFA) as Appendix A to the

Notice of Proposed Rule Making in WT Docket No. 95-131. Written

comments on the IRA were requested. The Commission's Final Regulatory

Flexibility Analysis is as follows:

A. Need and Purpose of the Action. Our objective is to allow IVDS

licensees greater flexibility in equipment and construction decisions,

while meeting the Congressional mandate for specific performance

standards in auctionable services.

B. Issues Raised in Response to the Initial Analysis. There were no

[[Page 1288]]

comments submitted in response to the Initial Regulatory Flexibility

Analysis.

C. Significant Alternatives Considered and Rejected. All

significant alternatives have been addressed in this Report and Order.

D. Description, Potential Impact, and Number of Small Entities

Involved. These adopted rule changes will allow greater business

opportunities and greater flexibility in the business decisions of IVDS

licensees, many of which are small businesses.

V. Ordering Clauses

9. Accordingly, it is ordered that Part 95 of the Commission's

Rules and Regulations is amended as specified below. This action is

taken pursuant to Section 4(i), 303(r), and 309(j) of the

Communications Act of 1934, as amended, 47 U.S.C. Secs. 154(i), 303(r),

and 309(j).

10. It is further ordered that these amendments are effective

January 19, 1996. These rule changes relieve a restriction and,

therefore, are not subject to the 30-day effective date provision of

the Administrative Procedure Act. See 5 U.S.C. 553(d)(1).

11. It is further ordered that this proceeding is terminated.

12. For further information, contact Donna L. Kanin, Federal

Communications Commission, Wireless Telecommunications Bureau, Private

Wireless Division, 2025 M Street, N.W., Room 8010, Mail Stop 2000-F,

Washington, D.C. 20554; (202) 418-0680.

Federal Communications Commission.

William F. Caton,

Acting Secretary.

Final Rules

Part 95 of Chapter 1 of Title 47 of the Code of Federal Regulations

is amended as follows:

PART 95--PERSONAL RADIO SERVICES

1. The authority citation for Part 95 continues to read as follows:

Authority: Secs. 4, 303, 48 Stat. 1066, 1082, as amended; 47

U.S.C. 154, 303.

2. Section 95.831 is revised to read as follows:

Sec. 95.831 Service requirements.

Subject to the initial construction requirements of Section 95.833,

each IVDS system licensee must make the service available to at least

50 percent of the population or land area located within the service

area.

2. Section 95.833 is revised to read as follows:

Sec. 95.833 Construction requirements.

(a) Each IVDS system licensee must make the service available to at

least 30 percent of the population or land area within the service area

within three years of grant of the IVDS system license, and 50 percent

of the population or land area within five years of grant of the IVDS

system license. Failure to do so will cancel the IVDS system license

automatically. For the purposes of this section, a CTS is not

considered as providing service unless that CTS and two associated RTUs

are placed in operation.

(b) Each IVDS system licensee must file a progress report at the

conclusion of each of the two benchmark periods to inform the

Commission of the construction status of the system. The report must be

addressed to: Federal Communications Commission. Wireless

Telecommunications Bureau, Special Services Branch, 1270 Fairfield

Road, Gettysburg, PA 17325-7245. The report must include:

(1) A showing of how the system meets the benchmark; and

(2) A list, including addresses, of all component CTSs constructed.

[FR Doc. 96-579 Filed 1-18-96; 8:45 am]

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