Amendment of Part 22 of the Commission's Rules To Provide for Filing and Processing of Applications for Unserved Areas in the Cellular Service and To Modify Other Cellular Rules

FEDERAL COMMUNICATIONS COMMISSION

47 CFR Part 22

[CC Docket No. 90-6; FCC 96-56]

Amendment of Part 22 of the Commission's Rules To Provide for

Filing and Processing of Applications for Unserved Areas in the

Cellular Service and To Modify Other Cellular Rules

AGENCY: Federal Communications Commission.

ACTION: Further memorandum opinion and order on reconsideration.

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SUMMARY: In this Memorandum Opinion and Order on Reconsideration, the

Commission denies the petitions for reconsideration and petitions for

partial reconsideration of the Commission's Third Report and Order and

Memorandum Opinion and Order on Reconsideration 57 FR 53446, November

10, 1992 in this Docket.

FOR FURTHER INFORMATION CONTACT: Ramona Melson, Commercial Wireless

Division, Wireless Telecommunications Bureau, (202) 418-7240.

SUPPLEMENTARY INFORMATION: This Further Memorandum Opinion and Order on

Reconsideration in CC Docket No. 90-6, adopted on February 13, 1996 and

released on January 31, 1997, is available for inspection and copying

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

2000 M Street N.W, Washington, D.C. The complete text may also be

purchased from the Commission's copy contractor, International

Transcription Service, Inc. 2100 M Street, N.W., Suite 140, Washington,

D.C. 20037, (202) 857-3800. Synopsis of Further Memorandum Opinion and

Order on Reconsideration

I. Introduction

1. By these actions, we respond to petitions for reconsideration

and partial reconsideration of the Third Report and Order on

Reconsideration and Memorandum Opinion and Order on Reconsideration 58

FR 27213, May 7, 1993 in this docket. Applicants Against Lottery Abuses

(AALA) and the Committee for Effective Cellular Rules (CECR) have filed

petitions for reconsideration of the Third Report and Order, 58 FR

27213, May 7, 1993 and Cellular Information Systems, Inc., Debtor in

Possession (CIS), has filed a petition for partial reconsideration (CIS

Petition) of the Third Report and Order 58 FR 27213, May 7, 1993. In

addition, we have before us five petitions for reconsideration and

three petitions for partial reconsideration of our Memorandum Opinion

and Order on Reconsideration 58 FR 11799, March 1, 1993. We also

received a request by PetroCom and Coastel for expedited action on the

CIS petition (PetroCom/Coastel Request). For the reasons stated below,

we deny the requests for reconsideration and partial reconsideration of

the Third Report and Order and the Memorandum Opinion and Order 58 FR

27213, May 7, 1993. We dismiss the request for expedited action as

moot.

2. As a related matter, we note that PetroCom and Coastel

(collectively, ``petitioners'') filed petitions for review with the

United States Court of Appeals for the District of Columbia Circuit

challenging Sections 22.903(a) and 22.903(d)(1) of the Commission's

rules. Petitioners contend, inter alia, that the Commission promulgated

a consent requirement for de minimis extensions under Section

22.903(d)(1) without providing proper notice and opportunity for

comment as required under the Administrative Procedure Act (APA), 5

U.S.C. Sec. 553. On May 13, 1994, the court denied the petition with

respect to petitioners' claim that proper notice and comment was not

provided because another party, CIS, had already filed a petition for

reconsideration with the Commission alleging similar violations and the

petition had not yet been resolved. This Further Memorandum Opinion and

Order addresses the notice and comment issues raised by the CIS

petition and the comments filed by petitioners in support of the CIS

petition. Other issues raised by petitioners and the court will be

addressed in separate orders.

II. Background

3. The first licensee of a cellular radio system authorized on a

channel block in

[[Page 9104]]

each cellular market is afforded a five-year ``build-out'' period

during which it has the exclusive right to construct and operate

cellular facilities on its channel block within the market. We

initiated this proceeding to adopt rules for the acceptance, processing

and selection of applications for new cellular systems proposing

service to unserved areas. In our First Report and Order and Memorandum

Opinion and Order on Reconsideration 56 FR 58503, November 20, 1991 in

this docket, we established rules and procedures for processing and

granting applications to operate cellular systems in areas as yet

unserved upon expiration of the five-year ``build-out'' period. On the

same day that we adopted the First Report and Order 56 FR 58503,

November 20, 1991, we also adopted a Further Notice of Proposed Rule

Making 56 FR 58529, November 20, 1991 in this docket which proposed

changes to various cellular rules and requested additional comments on

a number of issues, as a result of earlier comments filed in this

docket and not resolved by the First Report and Order 56 FR 58503,

November 20, 1991. On April 9, 1992, we released our Second Report and

Order 57 FR 13646, April 17, 1992 in this docket, in which we adopted

rules to determine the boundaries of Cellular Geographic Service Areas

(CGSAs) by the use of a mathematical formula, with the objective of

creating boundaries that would more closely approximate actual service

to the public. The Second Report and Order 57 FR 13646, April 17, 1992

also modified the authorizations of existing cellular systems to

redefine the boundaries of their CGSAs in accordance with the new

standard. Our Third Report and Order and Memorandum Opinion and Order

on Reconsideration 58 FR 27213, May 7, 1993 in this docket dealt with a

variety of issues governing our licensing of cellular radio facilities,

specifically those issues set forth in the Further Notice 56 FR 58529,

November 20, 1991 not previously addressed in the Second Report and

Order 57 FR 13646, April 17, 1992. The Third Report and Order 58 FR

27213, May 7, 1993 also disposed of ten petitions for reconsideration

of our First Report and Order 56 FR 58503, November 20, 1991. Petitions

for reconsideration of the Second Report and Order 57 FR 13646, April

17, 1992 were addressed in the 1993 Memorandum Opinion and Order on

Reconsideration 58 FR 11799, March 1, 1993 in this docket.

III. Discussion

A. Petitions for Reconsideration of the Third Report and Order Lottery

Rules

4. In the Third Report and Order 58 FR 27213, May 7, 1993, we

adopted Sections 22.927 and 22.928 of our rules. Under these rules, an

applicant or a petitioner may receive only the legitimate and prudent

expenses incurred in prosecuting its application or pleading in

exchange for agreeing to withdraw a mutually exclusive cellular

application or a pleading. AALA argues that with a rule limiting the

settlement amount that can be paid to petitioners seeking denial or

dismissal of applications, the Commission should at a minimum reinstate

the procedure used in the Metropolitan Statistical Area cellular

licensing process for the selection and ranking of multiple selectees

in cellular lotteries. AALA contends that the settlement limitations

will remove all incentive for private parties to assist in checking

lottery abuse. As a result, according to AALA, the rules adopted ``will

deter not just frivolous petitions, but those meritorious petitions

that have proven helpful to the Commission in its enforcement

functions.'' AALA argues that ranking multiple selectees is the only

alternative which provides the necessary incentive for private parties,

through the petition to deny process, to assist the Commission in

policing lottery abuses. McCaw urges the Commission to reject AALA's

proposal, because history has shown that ranking lottery winners will

lead to the filing of frivolous applications ``submitted by entities

that figure they have nothing to lose.'' AALA responds to McCaw,

contending that the settlement cap imposed on a would-be filer of a

frivolous petition would ensure that the petitioner would have nothing

to gain because ``the very best such a petitioner could hope for is to

break even.''

5. Section 309(d) of the Communications Act provides that any party

in interest may file with the Commission a petition to deny challenging

the grant of an application. The petition must contain specific

allegations of fact sufficient to show that the petitioner is a party

in interest and that a grant of the application would be prima facie

inconsistent with the public interest, convenience and necessity. 47

U.S.C. Sec. 309(d). Our obligation under the Communications Act is to

provide the forum and mechanism for the filing of those petitions by

parties with standing. By establishing limitations on settlements, we

did not intend to encourage or discourage the filing of petitions to

deny. Notwithstanding limitations on settlements, we have no basis for

concluding that meritorious petitions will not continue to be filed by

those parties desiring corrective or appropriate action on defective or

otherwise non-grantable applications. Further, our experience with

lotteries has taught us that ranking applicants for initial cellular

systems encourages the filing of frivolous petitions to deny. Moreover,

in the future we intend to use competitive bidding to select from among

mutually exclusive cellular unserved area applications filed on or

after July 26, 1993, as well as most other applications for Part 22

licenses. Thus, we do not plan to make much use of lottery procedures

in the future. In light of the foregoing, we deny AALA's petition.

Standards for De Minimis Extensions

6. Section 22.903(d)(1), as adopted in the Second Report and Order

57 FR 13646, April 17, 1992, allowed an applicant to propose Service

Area Boundary (SAB) extensions into adjacent Metropolitan Statistical

Areas (MSAs) or Rural Service Areas (RSAs), if such extensions were:

(1) de minimis; and (2) demonstrably unavoidable for technical reasons

of sound engineering design. The Third Report and Order 58 FR 27213,

May 7, 1993 modified Section 22.903(d)(1) to allow only those

extensions that meet the two foregoing requirements and that do not

extend into the CGSA of any other licensee's cellular system on the

same channel block (unless the other licensee consents to the

extension), or into any adjacent MSA or RSA on a channel block for

which the five year fill-in period has expired (i.e., into areas that

are unserved and may be applied for only pursuant to the licensing

process described in Section 22.949 of the Commission's rules).

7. CIS argues that the circumstances under which de minimis

extensions are permitted under Section 22.903(d)(1) will not serve the

public interest. CIS argues that the rule will make it more difficult

for carriers to cover their markets and create the seamless cellular

coverage the Commission has long encouraged. CIS claims that under the

former version of the rule section, there was little incentive for a

neighboring carrier to challenge a de minimis extension, unless that

carrier had ``specific concerns'' or the extension significantly

affected the market. CIS asserts that the new rule adds a layer of

negotiation, and perhaps litigation, to most de minimis applications.

Thus, CIS argues, if a licensee wants to propose a de minimis

extension, it first must determine whether that extension

[[Page 9105]]

overlaps with the adjacent carrier's CGSA and if it does, negotiate for

consent to that extension. CIS contends that if consent is not

forthcoming, it is possible that the carrier requesting consent will be

unable to build facilities with de minimis extensions in that area.

According to CIS, the new rule essentially treats extensions as

mutually exclusive with existing or proposed CGSAs. CIS believes our

adoption of Section 22.903(d)(1) is not needed if the principles

underlying our mutual exclusivity rules and original de minimis

extension rules were followed. The net result of the new rule, CIS

alleges, is to favor the earlier-licensed market over the later-

licensed market and to favor well-financed carriers over less

financially secure carriers, because the well-financed carriers are

more likely to win the ``race to the border'' created by the new rule.

CIS also maintains that, prior to the rule revision, extensions that

overlapped a neighbor's CGSA did not require consent during the first

ten years of cellular licensing, whereas such consent now is required.

CIS contends that requiring such consent will cause some licensees to

be treated differently than others have been treated in the past, even

though there has been no change in the justification underlying the

Commission's published rules and policies concerning de minimis

extensions.

8. We find that CIS's arguments are not persuasive. The cellular

radio industry has matured to the point where many licensees have CGSAs

that have reached the borders of their respective MSAs or RSAs. In such

an environment, ``border wars'' may become more common. Nevertheless,

our rules do not favor either earlier-licensed carriers or better-

financed carriers. Rather, any licensee, regardless of when it was

licensed or how well it is financed, is entitled to protection within

its CGSA, and conversely, must not cause interference by extensions

into the CGSAs of other licensees, unless the parties agree to accept

the intrusion. It is in the interest of cellular licensees to find

mutually beneficial ways to accommodate their respective needs in

providing service within their respective CGSAs.

9. Our current rule requiring consent for any SAB extensions into a

licensee's CGSA is consistent with our previous policies protecting a

licensee's reliable service area. Prior to the adoption of our Second

Report and Order 57 FR 13646, April 17, 1992, de minimis contour

extensions overlapping a neighbor's CGSA did not require prior consent

from the neighbor. At that time, the CGSA was the area within an MSA or

RSA that an applicant for an initial cellular system intended to serve,

so it was possible for contours to extend into a neighbor's CGSA

without causing interference to the neighbor's reliable service area.

Furthermore, (as discussed infra at para. 14), all such contour

extensions were subject to a standard authorization condition that

required a licensee to change frequencies or ``pull back'' its service

area boundary, if a current or future adjacent licensee encountered

interference caused by any such extension. Pursuant to the Second

Report and Order 57 FR 13646, April 17, 1992, the CGSA now represents

the actual service area. Since the CGSA now is the current, rather than

planned, service area, any extension into an adjacent CGSA would amount

to an incursion into that licensee's actual service area. Thus, before

and after the adoption of the Second Report and Order 57 FR 13646,

April 17, 1992, a cellular licensee's reliable service area has been

protected from overlap with the reliable service areas of neighboring

cellular licensees by the standard pull back condition. The changes we

made in the Third Report and Order 58 FR 27213, May 7, 1993 allow the

parties to agree to have overlapping contours without imposing the pull

back requirement.

10. Therefore, we conclude that the standards set forth in Section

22.903(d)(1) of the rules concerning de minimis SAB extensions into

adjacent MSAs and RSAs serve the public interest and are consistent

with our previous policies protecting a licensee's reliable service

area.

Alleged Due Process Violations and Lack of Notice Under APA

11. In its petition, CIS argues that the Commission provided no

notice that Section 22.903(d)(1) would be amended by the Third Report

and Order 58 FR 27213, May 7, 1993, and thus violated the notice and

comment requirements of the Administrative Procedures Act (APA).

Similarly, PetroCom and Coastel argue that the Initial NPRM 55 FR 4882,

February 12, 1990 and the First Report and Order 56 FR 58503, November

20, 1991 in this proceeding stated that the Commission was adopting no

new requirements affecting the extension applications of existing

cellular licensees. PetroCom and Coastel claim that no reasonable

reader of the Commission's Initial NPRM 55 FR 4882, February 12, 1990

could have inferred that the Commission would change the ``de minimis

extension regulation as it applied to existing cellular licensees.''

12. In addition, CIS, PetroCom, and Coastel contend that the only

reference to contour extensions applicable to licensees seeking to

expand their existing system boundaries is the proposal to codify a

standard authorization condition that requires a licensee to change

frequencies or ``pull back'' its service area boundary, if a current or

future adjacent licensee encounters interference caused by a de minimis

extension. The three petitioners conclude that the Commission provided

no notice that it planned to change existing policy by requiring a

licensee seeking to extend its contour into a neighboring licensee's

CGSA to obtain the neighboring licensee's consent to that extension.

CIS also argues that the Commission did not provide a reasoned

explanation for the obligations adopted in the rules. CIS alleges that,

by not providing sufficient notice or a reasonable basis for the new

rule, we have violated due process.

13. As CIS acknowledges, proposed rules do not have to be identical

to the final adopted rules, but important changes must be a ``logical

outgrowth'' of the proceeding. Thus, courts have taken the view that

changes from the original proposals in a rule making do not require an

additional round of notice and comments where the final rules represent

a ``logical outgrowth'' of the proposals. We believe that the rule

changes implemented in the Third Report and Order 58 FR 27213, May 7,

1993 are well grounded in our previous rules and policies, and that

these changes were an outgrowth of the issues raised at the initiation

of this proceeding to modify the CGSAs of existing and new cellular

systems.

14. A cellular licensee's service area has been protected from the

contour extensions of other licensees by a standard license condition

utilized prior to the adoption of the First Report and Order 56 FR

58503, November 20, 1991 in this proceeding. The condition was

implemented as part of the Commission's longstanding policy of

protecting a cellular licensee's actual service area. Prior to the

adoption of the First Report and Order 56 FR 58503, November 20, 1991,

carriers granted a de minimis extension into an adjacent MSA or RSA had

been subject to a standard condition requiring that the extension be

``pulled back,'' if it caused interference to the protected service

area of the adjacent MSA or RSA. The Initial NPRM 55 FR 4882, February

12, 1990 in this proceeding proposed to codify this standard condition

and the First Report and Order 56 FR 58503, November 20, 1991 adopted

this condition as Section 22.902(d)(4) of the rules. Thus, both

[[Page 9106]]

prior to and after the adoption of the Second Report and Order 57 FR

13646, April 17, 1992, a cellular licensee's reliable service area was

protected by the standard pull back condition. A reasonable reader of

the Further Notice 56 FR 58529, November 20, 1991 which proposed to

establish the CGSA in the manner ultimately adopted in the Second

Report and Order 57 FR 13646, April 17, 1992, could have anticipated

that the Commission would continue to protect a licensee's service area

from interference by other licensees.

15. We believe that the changes to Section 22.903(d)(1) reflect a

logical and necessary step in redetermining the CGSA of each cellular

licensee. In the Second Report and Order 57 FR 13646, April 17, 1992,

we revised Section 22.903(a) to determine the CGSA based on a

licensee's authorized service area, because the method proposed in the

Initial NPRM 55 FR 4882, February 12, 1990 underestimated the service

area boundaries. Both the Initial NPRM 55 FR 4882, February 12, 1990

and the Further Notice 56 FR 58529, November 20, 1991 in this

proceeding explained that a central purpose of this proceeding was to

make a licensee's CGSA more closely approximate its authorized service

area.

16. The modification of a licensee's CGSA to more closely

approximate its service area under Section 22.903(a) means that any

non-consensual extension into a licensee's CGSA on the same channel

block would constitute interference from which the licensee and its

customers have a right to be protected, pursuant to Section 22.911 of

our rules. Our modification of the text of Section 22.903(d)(1)

regarding SAB extensions encroaching upon the CGSA of another licensee

was necessitated by the change in methodology to determine the CGSA and

our existing interference protection rule under Section 22.911. Thus,

we modified Section 22.903(d)(1) to prohibit de minimis extensions into

the CGSA of a carrier on the same channel block in an adjacent market

without the consent of the neighboring licensee. Such changes do not

violate due process, nor were the changes without notice, as CIS,

Petrocom and Coastel allege.

17. CIS, PetroCom, and Coastel also assert that the Third Report

and Order 58 FR 27213, May 7, 1993 mislabeled the Commission's

modification of Section 22.903(d)(1) of its Rules as a

``clarification.'' They claim that the modification of the referenced

rule was more than a clarification, noting that the term

``clarification'' implies that no substantive change to the rule is

being made.

18. We do not dispute that our modification of Section 22.903(d)(1)

involved a revision of that rule, and we did not intend, by the

language we used in the Third Report and Order 58 FR 27213, May 7,

1993, to suggest otherwise. The revision of Section 22.903(d)(1) simply

reinforced a concept which already was stated in the introductory

paragraph of Section 22.903, as revised by the Second Report and Order

57 FR 13646, April 17, 1992, namely, that because the method of

determining the CGSA is changed to reflect a licensee's authorized

service area, the CGSA is protected from interference caused by all

other licensees, just as cellular licensees' service areas had been

protected from interference in the past by the standard pull back

condition. Once we modified the CGSA to be a licensee's authorized

protected service area, no incursions into the CGSA could be allowed

under our standard policy against interference, unless the carrier

causing the SAB extension received consent from the affected licensee.

19. We also had to modify Section 22.903(d)(1) to prohibit

extensions into an adjacent MSA or RSA for which the five-year build-

out period had expired, to be consistent with our unserved area rules.

Sections 22.903(d)(3)(i) through 22.903(d)(3)(iii) provided that, with

respect to cellular systems proposed for unserved areas, the service

area boundaries (SABs) of the proposed cells must not extend into the

CGSA of any other licensee's cellular system on the same channel block,

except for permissible contract extensions, or into any adjacent MSA or

RSA where the five-year build-out period had expired. The same concern

about interference created by SAB extensions into adjacent CGSAs that

applies to unserved area applicants also applies to proposed extensions

into CGSAs by existing licensees. The rights of unserved area

applicants would be compromised if we allowed a licensee in an adjacent

MSA or RSA to extend its service contour into the unserved area of an

MSA or RSA for which the build-out period had expired without complying

with the unserved area licensing procedures.

20. Therefore, we conclude that the Commission gave adequate notice

for the changes the Third Report and Order 58 FR 27213, May 7, 1993

made in Section 22.903(d)(1) of the rules, that those changes were well

grounded in our previous rules and policies, and that the changes were

a logical outgrowth of the issues raised in this proceeding.

Contour Extensions During Phase I Processing

21. In the Third Report and Order 58 FR 27213, May 7, 1993, we

modified our policies for allowing applicants for unserved areas to

propose SAB extensions during Phase I of our application processing

procedures for all markets in which the five-year build-out period has

expired. Specifically, we determined that initial applications filed in

Phase I would not be allowed to propose any extensions into adjacent

MSAs or RSAs, even if those extensions were de minimis or contract

extensions. In prohibiting contour extensions in these circumstances,

we explained that this restriction would simplify and expedite our

licensing process and would remove a possible source of litigation as

to whether such extensions were permissible. We stated that

applications proposing such extensions would be dismissed as defective.

We added language to effectuate our policy change to Section

22.902(b)(4)(i) of the rules and appropriately revised the language of

Sections 22.903(d)(3)(ii) through Sections 22.903(d)(3)(iv).

22. CECR asserts that the Commission erred in making the foregoing

rule changes. CECR argues that the First Report and Order 56 FR 58503,

November 20, 1991 clearly delineated the circumstances under which

contract extensions are permissible: where a contract exists,

extensions are valid, and if no contract exists, the extension

application is deemed defective. Thus, claims CECR, permitting contract

extensions cannot serve as a possible source of litigation. CECR also

argues that former Section 22.903(d)(3)(ii) of the rules explicitly

explained the situations in which unserved area applications can

propose de minimis extensions, and served to eliminate any confusion

over the validity of proposed extensions, thus greatly reducing the

possibility for litigation.

23. We shall not revise our rules concerning SAB extensions by

Phase I applicants for unserved areas. As we stated earlier, our

purpose in not permitting Phase I requests for extensions was to

provide a simple and expeditious means of licensing unserved area

applicants in Phase I. In addition, we believe that our Phase I

licensing rules should be consistently applied across all markets.

Phase I of the unserved area licensing process has ended for most of

the MSAs and many of the RSAs. By the end of calendar year 1995, the

five-year build-out period for most RSAs will have ended. The revisions

suggested by CECR only would confuse the unserved area

[[Page 9107]]

licensing process by changing the rules after many of the markets have

been subject to restricted SAB extension rules in the Phase I unserved

licensing process.

24. We note that the prohibition against having SAB extensions

beyond the borders of a particular MSA or RSA only applies to initial

Phase I applications. Once a Phase I initial unserved area application

has been granted, the licensee can file one Phase I major modification

application and that application may propose de minimis or contract

extensions. The application is not subject to competing applications.

In addition, Phase II applications may propose a CGSA covering more

than one cellular market, which includes de minimis and contract

extensions. Thus, the prohibition against SAB extensions beyond the

borders of a particular MSA or RSA is narrowly defined to include only

initial Phase I unserved area applications.

System Information Update Maps

25. CECR asserts that the Commission erred by neglecting to

recognize that System Information Update (SIU) maps are more than

informational filings, because they define the rights of third parties,

i.e., potential unserved area applicants. CECR argues, as it did in its

petition for reconsideration of the First Report and Order 56 FR 58503,

November 20, 1991, that the Commission should establish procedures by

which interested parties may challenge SIU maps prior to the filing of

unserved area applications. McCaw argues that CECR already has argued

this issue unsuccessfully and has shown no reason why its argument

warrants further Commission consideration. McCaw argues that this

portion of CECR's petition should be dismissed as repetitive. CECR also

observes that the Third Report and Order 58 FR 27213, May 7, 1993

provided that parties aggrieved by the licensee's depiction of its CGSA

informally may request the Commission to correct the maps under Section

1.41 of the Commission's Rules. CECR contends that this procedure is

illusory because the Commission has no obligation or timetable to

resolve an informal challenge, and therefore can continue to license

unserved areas within the challenged market during the pendency of the

informal challenge. CECR also challenges on due process grounds the

procedures established for challenging SIU maps, stating that they

force unserved area applicants ``to place their own applications at

risk in order to challenge a licensee's improper SIU map.'' Further,

CECR claims that licensees should not be allowed to base their SIU maps

on cell sites that violate state law.

26. We find that CECR's arguments are not sufficiently compelling

to warrant revision to our rules. Section 22.947(c) of our rules, 47

CFR Sec. 22.947(c), requires a licensee of a cellular system to file

with the Commission 60 days before the end of its five-year build out

period a system information update (SIU) consisting of a full size map,

a reduced map, and an exhibit showing technical data relevant to

determining the system's CGSA. These materials must accurately depict

the cell locations and coverage of the system at the end of the five-

year build-out period. Although SIU materials, especially the maps, are

required so that potential applicants may know which areas within a

particular market already are served, it is important to note, as we

did in the Third Report and Order 58 FR 27213, May 7, 1993, that the

SIU maps are more in the nature of pictorial aids for potential

unserved area applicants. The SIUs are not a declaration of the

cellular service rights of licensees. As set forth in the Second Report

and Order 57 FR 13646, April 17, 1992, the position of the CGSA

boundaries officially will be determined by the geographical

coordinates of cell sites and the authorized facilities for the

relevant cells which are contained in the Commission's station license

files. Further, as we stated in the Third Report and Order, these maps

will not require any Commission action, since they are not submitted

for approval. The manner in which the SIU maps are drawn is determined

by the new mathematical formula for determining service areas set forth

in Section 22.911(a) of our rules. We expect that licensees will

accurately depict their CGSAs using the prescribed formula, and that

errors will be the exception and not the rule.

27. It is not necessary to delay the filing, processing, and

granting of unserved area applications in order to afford potential

litigants the opportunity to challenge SIUs. Applicants who believe

that reported adjacent CGSAs are in error or have been misdepicted may

file applications, pursuant to the requirements of the unserved area

rules, for areas they believe constitute at least 130 square kilometers

(50 square miles), and state in their applications why they disagree

with the depictions or representations of adjacent CGSAs. Once such an

applicant has become a tentative selectee, if it has made a prima facie

case that an adjacent licensee has misdepicted its CGSA, that licensee

will have the burden of responding to any allegations concerning the

depiction of its CGSA, and the Commission will resolve the dispute.

Further, we have noted that interested parties may file informal

requests for Commission action to correct SIU maps pursuant to Section

1.41 of the Rules. As to the state law concerns raised by CECR, if a

licensee has constructed cellular facilities that violate relevant

state law, any member of the public can notify the appropriate state

authority, which then can impose appropriate sanctions.

Phase I Processing Procedures

28. In the Third Report and Order 58 FR 27213, May 7, 1993, we

explained that, during Phase I of our processing procedures for

unserved area applications, an existing licensee may file an

application to expand its existing CGSA in any manner or, in the

alternative, apply for a new non-contiguous CGSA in an unserved portion

of its market. Either of the applications would be considered to be a

single unserved area application. CECR requests that we clarify that

the Third Report and Order 58 FR 27213, May 7, 1993 allows an existing

licensee to file either an initial Phase I unserved area application to

expand its existing CGSA, or an application specifying a new non-

contiguous CGSA within its market, but not both. CECR's request has

been rendered moot by the changes to Section 22.949(a)(1)(ii) of the

rules, which became effective after the release of the Third Report and

Order 58 FR 27213, May 7, 1993. The rule section now expressly

prohibits applicants from filing more than one Phase I initial

application for any cellular market.

B. Petitions for Reconsideration of the Memorandum Opinion and Order

Alleged Lack of Notice Under APA

29. The Memorandum Opinion and Order 58 FR 11799, March 1, 1993 in

this proceeding established that interference occurs when subscriber

traffic is captured in a home market by an adjacent market system, due

to contour extensions into the home market's CGSA, and that cellular

licensees are entitled to protection from this type of interference. A

cellular licensee may continue to operate existing facilities that

produce a service area boundary extension into a subsequently-

authorized portion of the CGSA of another cellular system on the same

channel block until the licensee of that system requests that the SAB

extension be removed from its CGSA. When such a request is received,

the adjacent market system operator is obligated to pull back the SAB

[[Page 9108]]

extensions by reducing the transmitting power or antenna height (or

both) at the offending cell site locations, or obtain written consent

from the other licensee to permit the SAB extension.

30. Five petitions for reconsideration and three petitions for

partial reconsideration of the Memorandum Opinion and Order 58 FR

11799, March 1, 1993 were filed. These petitions allege, inter alia,

that our adoption of Section 22.903(f) of the rules, 47 CFR 22.903(f),

violated the notice and comment requirements for rule making

proceedings under Section 553 of the APA, 5 U.S.C. Sec. 553, and the

notice and hearing provisions of Sections 309 and 316 of the

Communications Act of 1934, 47 U.S.C. Secs. 309 and 316, and former

Section 22.100(b)(4) of the Commission's rules.

31. New Par, CIS and the Joint Petitioners claim that the

Commission gave no public notice it was contemplating the rule changes

incorporated in new Section 22.903(f), and therefore the Commission did

not comply with Section 553 of the APA, 5 U.S.C. Sec. 553, which

requires an agency to give adequate written notice and opportunity to

comment on proposals in rule making proceedings. New Par claims that

the Commission provided no notice that it even was considering a change

to the standard by which interference and SAB extensions would be

evaluated. CIS also argues that there is no mention of the new

substantive obligations imposed by Section 22.903(f) on licensees

either in the Further Notice 56 FR 58529, the First Report and Order 56

FR 58503, November 20, 1991, or the Second Report and Order 57 FR

13646, April 17, 1992 in this proceeding.

32. New Par and the Joint Petitioners assert that prior to the

adoption of Section 22.903(f), the Commission's rules concerning

interference between cellular licensees provided that remedial action

was required only where actual, as opposed to theoretical, electrical

interference occurred. New Par argues that former Section 22.100(b)(ii)

stated that the Commission ``will only consider complaints of

interference which significantly interrupt or degrade a radio

service,'' and former Section 22.902(a) provided that, in the event

``harmful interference'' occurs that two or more cellular licensees

cannot resolve themselves, the Commission may require a licensee to

make system changes ``necessary to avoid such interference.'' In

contrast, New Par argues, Section 22.903(f) assumes that interference

exists where licensee SABs overlap and requires the entire removal of

SAB extensions without regard to whether the complaining party's

service in fact has experienced a significant degradation and without

regard to whether the removal of such extensions might result in

harmful effects on service to the public in either licensee's market.

33. We reject petitioners' argument that our adoption of Section

22.903(f) did not comport with the notice and comment requirements of

the APA. We have reasonably and consistently placed the public on

notice of our intention to change the standards for measuring cellular

service areas in our continuing efforts to provide seamless cellular

service with the least amount of interference to licensed carriers. The

matters at issue in this docket encompassed the manner in which service

area contours were to be calculated and the implications for existing

systems if the defined contours changed. Section 22.903(f) reflects a

logical outgrowth of this debate.

34. As previously discussed (supra at para. 14), the Initial NPRM

55 FR 4882, February 12, 1990 and Further Notice 56 FR 58529, November

20, 1991 in this proceeding made clear that we intended to change the

method by which a CGSA is determined. Ultimately, the Second Report and

Order 57 FR 13646, April 17, 1992 established that the CGSA is the

geographic area the Commission considers served by a cellular system

and the area within which a cellular system is entitled to protection.

A companion issue raised in evaluating the boundaries of the CGSA was

the potential for interference caused by the extension of newly-

redefined SABs outside a licensee's MSA or RSA into the CGSA of a

neighboring cellular system on the same channel block. Based upon the

comments we received, we concluded that capture of subscriber traffic

is a form of interference. Thus, we were compelled to amend our rules

to provide protection to cellular licensees against such interference.

Alleged Notice and Hearing Rights Under the Communications Act and the

Commission's Rules

35. The Joint Petitioners and New Par contend that the Commission

cannot order (or allow an adjacent licensee to require) licensees to

pull back authorized contour extensions (including new SABs created by

the new formula adopted in the Second Report and Order 57 FR 13646,

April 17, 1992) without complying with the notice and hearing

requirements of Sections 309 and 316 of the Communications Act and

Section 22.100(b)(4) of the Commission's rules.

36. New Par argues that each SAB extension authorized by the

Commission is conditioned upon the licensee not causing interference to

adjacent licensees and that any action requiring a licensee to withdraw

its SAB from areas where its RF signals in fact do not significantly

degrade or disrupt other radio service is a modification of that

licensee's authorization. According to New Par, Sections 309 and 316 of

the Communications Act require the Commission to conduct a hearing to

determine whether and to what extent interference exists each time it

wishes to order an authorized contour extension to be ``pulled back.''

New Par also contends that Section 22.100(b)(4) of the rules codifies

the foregoing theory by providing that the Commission may order

cellular system modifications to eliminate alleged interference only

after notice and opportunity for hearing.

37. We reject the petitioners' argument that the Commission must

comply with the notice and hearing requirements of Sections 309 and 316

of the Communications Act each time a licensee is directed to pull back

authorized contour extensions. Those provisions provide for a hearing

process before Commission modification of a particular license. The

sections do not deprive the Commission of its authority to establish

rules of general applicability to an industry through its rule making

authority.

38. It is well established that licenses may be modified through

rule making proceedings without affording parties an adjudicatory

hearing, if the generic rules otherwise are procedurally and

substantively valid. In WBEN Inc. v. United States, 396 F.2d 601 (2d

Cir. 1968), cert. denied, 393 U.S. 914 (1968), the Court held that the

Commission need not engage in evidentiary hearings required for

modification of a particular license, explaining that,

[W]hen, as here, a new policy is based upon the general

characteristics of an industry, rational decision is not furthered

by requiring an agency to lose itself in an excursion into detail

that too often obscures fundamental issues rather than clarifies

them.

Once a rule has been adopted, there is no need to hold a hearing each

time that rule is applied. Our Memorandum Opinion and Order 58 FR

11799, March 1, 1993 makes clear that Section 22.903(f)(2)(i) allows

the Commission (or an adjacent licensee) to require a licensee to

``pull back'' an authorized SAB extension into the adjacent licensee's

CGSA. Thus, there is no need for a hearing each time Section

22.903(f)(2)(i) or its replacement, Section 22.911(d), is enforced.

[[Page 9109]]

39. We find that the hearing procedure under Section 22.100(b)(4)

of our rules is inapplicable to rule changes made through our rule

making authority. Section 22.100(b)(4) requires that interference

between base stations that have been properly authorized shall be

``resolved'' by the licensees. The rule section also states that if the

licensees cannot resolve the interference, the Commission, ``after

notice and opportunity for hearing,'' may order whatever changes in

equipment or operation it deems necessary. Hearings under Section

22.100(b)(4) would be involved only if the carriers could not comply

with the directive of the rule section to resolve interference

problems. Such hearings would not be required between cellular

licensees because cellular licensees have always been licensed on the

condition that licensees must ``pull back'' any contour that interferes

with a neighboring cellular system and Section 22.911(d) provides a

specific remedy for resolving the interference problem at hand. We also

observe that the Commission has been given the power recently to make

changes in the frequencies, authorized power, and the times of

operation of any station without conducting a hearing.

Standards for Determining Permissible SAB Extensions

40. The Joint Petitioners, New Par, Sussex, and CIS argue that the

adoption of Section 22.903(f)(1) of the rules regarding capture is

inconsistent with the Commission's goal of achieving nationwide

seamless cellular service. New Par, Sussex, and CIS note that the

Memorandum Opinion and Order 58 FR 11799, March 1, 1993 states that

overlapping SAB contours actually promote a seamless environment and

that SAB extension ``pullbacks'' should be used only as a last resort.

CIS and Sussex argue that the new rule is contrary to basic principles

of cellular system design and will restrict the ability of licensees to

provide adequate coverage within their markets, thus undermining the

original purpose of the Commission's de minimis extension policy. CIS

claims that the rule will discourage the development of seamless

cellular coverage at the borders between markets.

41. Joint Petitioners argue that Section 22.903(f) undermines the

Commission's stated goals of creating a ``level playing field'' for all

cellular licensees and devising rules and policies to encourage

informal agreements between licensees to resolve boundary disputes. New

Par, McCaw, and the Joint Petitioners claim that Section 22.903(f)

neither requires good faith negotiations among adjacent licensees nor

enables an extending licensee to rebut the presumption of interference

in the form of capture of subscriber traffic. McCaw and New Par assert

that the rule appears to conflict with the Memorandum Opinion and

Order, 58 FR 11799, March 1, 1993 which states that progress toward

achieving the Commission's goal of establishing ``rules and policies

that will lead to the efficient provision of nationwide seamless

cellular service to the public'' will depend in large part upon the

success of informal negotiations between cellular licensees on

``mutually agreeable arrangements of facilities that provide an

efficient juncture between adjacent systems.'' New Par argues that

later-licensed carriers will have the ability and incentive to force

neighboring licensees to consent to otherwise unwarranted extensions,

because of the earlier-licensed carrier's inability to suffer the loss

of service that would result from an SAB pull-back. Joint Petitioners

similarly conclude that existing operators may be forced to curtail

service from previously authorized facilities ``largely at the whim''

of subsequent licensees.

42. New Par argues that the institution of the presumption that

subscriber capture occurs in every case where an SAB overlaps with a

CGSA is arbitrary and capricious and results in removing from the

Commission its statutory obligation to resolve service issues

consistent with the public interest. McCaw opposes the rule because it

has the practical effect of precluding SAB extensions where no

subscriber traffic capture actually occurs. Sussex argues that an

administrative agency cannot create a presumption which operates to

deny a fair opportunity to rebut it without violating the due process

clauses of the Fifth and Fourteenth Amendments. Consequently, Sussex

argues that the U.S. Constitution will not allow the Commission to

impose an automatic requirement to remove SAB overlap without first

granting the encroaching carrier the opportunity to show: (1) that

there is no subscriber capture, or (2) that the capture does not result

from SAB overlap.

43. McCaw and New Par recommend modifications to Section 22.903(f)

as follows: (1) require licensees protesting SAB extensions to

demonstrate that these extensions cause actual interference, prior to

mandating system modification; and (2) continue to promote good faith

negotiations of such boundary disputes on an informal basis prior to

having to ``pull back'' authorized SAB extensions. Sprint agrees with

McCaw and New Par that boundary questions should be settled with good

faith negotiations on an informal basis. The Joint Petitioners also

urge that Section 22.903(f)(2)(i) be modified to make rebuttable the

presumption of subscriber capture, where an SAB extension has been

authorized into an adjacent licensee's CGSA during the latter

licensee's five-year fill-in period.

44. CIS also recommends that former Section 22.903(d)(1) of the

rules, setting forth de minimis extension criteria, be modified to

allow a contour extension when the extension is necessary to compensate

for an existing extension from another cellular system. Sussex

recommends that the Commission allow carriers to install cells with

contour overlaps into adjacent carriers' CGSAs so long as the overlaps

are de minimis and are necessary to provide service within the

overlapping carrier's market area, regardless of whether the carrier

consents to the extension. Further, Sussex argues that any conflicts

arising from such overlaps be resolved through the frequency

coordination process and the requirement of inter-carrier cooperation.

In essence, Sussex asks that the Commission return to the means of

handling contour overlap which existed before the adoption of Section

22.903(f). Radiofone opposes Sussex's solution, fearing that

elimination of protection of CGSAs against intrusions from neighboring

carriers would lead to ``rampant interference, endless litigation and

disservice to the public.''

45. Before addressing the petitioners' arguments, we emphasize that

a cellular licensee has an obligation to serve the public wherever

demand exists within its market, and that cellular licensees therefore

have a duty to negotiate with each other in good faith regarding

agreements for SAB overlaps. Successful negotiations of such contracts

or agreements could be offered as evidence of performance in the public

interest when cellular licenses are considered for renewal, pursuant to

new Section 22.940 of our Rules. Conversely, failure to serve the

public due to failure to negotiate reasonable solutions to SAB overlap

problems with adjoining carriers could reflect negatively on a licensee

seeking renewal.

46. The language of former Section 22.903(f)(2)(i) was somewhat

ambiguous, because the first sentence stated that it is ``presumed''

that subscriber traffic is captured if a service area boundary (SAB) of

one cellular system extends into the CGSA of another operating cellular

system. Nevertheless, New Par and Sussex's arguments concerning the

creation of a

[[Page 9110]]

rebuttable presumption have been rendered moot by the removal of the

presumption language in rule Section 22.903(f). The Part 22 Rewrite

Order 59 FR 59502, November 17, 1992 transferred most of the language

of former Section 22.903(f) to current rule Section 22.911(d) and

changed some of the introductory language in the new rule. Section

22.911(d)(2)(i) expressly prohibits non-consensual contour extensions

from one cellular system into the CGSA of another cellular system. The

first sentence of Section 22.911(d)(2)(i) states: ``Subscriber traffic

is captured if an SAB of one cellular system overlaps the CGSA of

another operating cellular system''--(emphasis added). The new rule

removes any suggestion of a presumption created by the prior rule.

47. We observe that current Section 22.911(d)(2)(i) of our rules is

based upon predicted service areas as defined by an expert agency and

is designed to avoid litigation over the exact location of actual

interference. The idea of ``interference free'' service areas is a

constant in Part 22 of our rules. See, e.g., Sections 22.351, 22.537,

22.567, and 22.912(a) of our rules. 47 CFR 22.351, 22.537, 22.567 and

22.912(a). In order to ensure uniformity and simplicity in

administering our rules, and to prevent potentially endless litigation,

we must rely on objective, rather than subjective standards for the

protection of services. Section 22.911(d)(2)(i) provides a simple,

objective standard to determine when capture occurs, and encourages

parties to reach agreement on the resulting effects of SAB overlap.

48. We also reject CIS's request that Section 22.903(d)(1) [now

22.912(a)] of the rules be modified to allow a cellular licensee to

extend service contour into an adjoining market to compensate for the

adjoining licensee's extension into the licensee's market. Absent

agreement between the affected parties, licensees are entitled to

operate in their service areas free from co-channel and first adjacent

channel interference and from capture of subscriber traffic by adjacent

systems on the same channel block. 47 CFR 22.911(d) (formerly

22.903(f)).

49. Our goal is to provide nationwide seamless cellular service to

the public. As we indicated in the Memorandum Opinion and Order, 58 FR

11799, March 1, 1993 rather than require the total elimination of SAB

extensions, or mandate reciprocal SAB extensions as suggested by CIS, a

better result in most cases is some degree of SAB overlap between

systems with the location of balanced signal strengths negotiated

informally between the adjacent licensees on the same channel block. We

believe informal negotiations between parties in determining mutually

agreeable arrangements between adjacent systems will achieve the most

expeditious and effective resolution of service boundary issues. Thus,

promoting negotiation between parties eliminates possible protracted

administrative and court proceedings, and provides incentives for

cellular providers to come to agreement on boundary issues arising from

the convergence of expanding systems. In sum, permitting market forces

to drive resolution of these issues will effectuate seamless cellular

service nationwide more quickly than the proposals offered by

petitioners.

IV. Ordering Clause

50. Accordingly, pursuant to Sections 4(i), 303(r) and 405(a) of

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

and 405(a), It is ordered that the petitions for reconsideration and

partial reconsideration of the Third Report and Order and Memorandum

Opinion and Order on Reconsideration 58 FR 27213, May 7, 1993 in this

docket, and the Memorandum Opinion and Order on Reconsideration, 58 FR

11799, March 1, 1993 Are denied, and the ``Request to Expedite Action

and Comments in Support of Cellular Information Systems, Inc.'' Is

dismissed as moot.

List of Subjects in 47 CFR Part 22

Communications common carriers, Radio.

Federal Communications Commission.

William F. Caton,

Acting Secretary.

[FR Doc. 97-4870 Filed 2-27-97; 8:45 am]

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