Facilitate Future Development of Paging Systems and Implementation of Section 309(j) of the Communications Act; Competitive Bidding

SUMMARY: In this Second Report and Order the Commission adopts rules

governing geographic area licensing of Common Carrier Paging (CCP) and

exclusive 929 MHz Private Carrier Paging (PCP), and competitive bidding

procedures for auctioning mutually exclusive applications for these

licenses. This action is necessary to promote efficient licensing and

competition in paging services. The Commission's objectives in this

proceeding are to ensure that the paging service rules are consistent

with the rules for competing services, so that competitive success is

dictated by the marketplace, rather than by regulatory distinctions,

and to ensure that the licensing process promotes the goals of

competition and efficient use of spectrum.

EFFECTIVE DATE: May 12, 1997.

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

Washington, DC 20554

FOR FURTHER INFORMATION CONTACT: Mika Savir, Commercial Wireless

Division, Wireless Telecommunications Bureau, at (202) 418-0620, or

Frank Stilwell, Auctions Division, Wireless Telecommunications Bureau,

at (202) 418-0660.

SUPPLEMENTARY INFORMATION: This Second Report and Order in WT Docket

96-18 and PP Docket No. 93-252, adopted on February 19, 1997, and

released on February 24, 1997, is available for inspection and copying

during normal business hours in the FCC Reference Center, Room 239,

1919 M Street NW., Washington, DC 20554. The complete text may also be

purchased from the Commission's copy contractor, International

Transcription Service, Inc., 2100 M Street, NW., Suite 140, Washington,

DC 20037 (202) 857-3800.

Paperwork Reduction Act: The collection of information requirements

have been approved by the Office of Management and Budget and assigned

OMB control number 3060-0697. The FCC Form 175 is assigned OMB control

number 3060-0600. The FCC Form 600 is assigned OMB control number 3060-

0623.

Summary of Action

I. Background

1. In the NPRM, Revision of part 22 and part 90 of the Commission's

rules to Facilitate Future Development of Paging Systems, WT Docket No.

96-18, Notice of Proposed Rulemaking, 61 FR 6199 (February 16, 1996)

(NPRM), the Commission proposed a transition to geographic area

licensing for CCP and PCP channels pursuant to the statutory objective

of regulatory symmetry for all Commercial Mobile Radio Services (CMRS)

set forth in the Omnibus Budget Reconciliation Act of 1993, Pub. L.

103-66, Title VI section 6002(b)(2) (A), (B), 107 Stat. 312 (largely

codified at 47 U.S.C. 332 et seq.) (1993 Budget Act). The 1993 Budget

Act mandated that substantially similar mobile services receive

comparable regulatory treatment. In the NPRM, the Commission also

proposed competitive bidding procedures for resolving mutually

exclusive applications for these licenses pursuant to its statutory

authority under the 1993 Budget Act, section 6002 (codified at 47

U.S.C. 309(j)).

2. In the NPRM, the Commission proposed a transition from site-by-

site licensing to geographic area licensing for all exclusive, non-

nationwide paging services. The Commission also proposed to adopt

competitive bidding rules for the geographic area licenses. Due to the

fundamental changes proposed in the NPRM, the Commission suspended

acceptance of new applications for paging licenses as of February 8,

1996. The Commission observed that continuing to accept new

applications after releasing the NPRM with the proposed rule changes

would impair the objectives of the rulemaking proceeding. The

Commission partially lifted the paging freeze for incumbent licensees

by allowing incumbents to file applications for additional sites within

65 kilometers (40 miles) of operating sites in the First Report and

Order, Revision of part 22 and part 90 of the Commission's rules to

Facilitate Future Development of Paging Systems, WT Docket No. 96-18,

First Report and Order, 61 FR 21380 (May 10, 1996); reconsideration in

Order on Reconsideration of First Report and Order, 61 FR 34375 (July

2, 1996). Additionally, the First Report and Order exempted Basic

Exchange Telecommunications Radio Service (BETRS), Rural Radiotelephone

Service, and Special Emergency Radio Service (SERS) from the interim

freeze.

3. In this Second Report and Order, the Commission adopts final

rules governing geographic area licensing for channels in the 35-36

MHz, 43-44 MHz, 152-159 MHz, 454-460 MHz, 929-930 MHz, and 931-932 MHz

bands allocated for paging; competitive bidding rules for granting

geographic area non-nationwide licenses; and a standard methodology for

providing protection to incumbent licensees from co-channel

interference for the 929-930 MHz and 931-932 MHz paging bands. All

pending mutually exclusive paging applications will be dismissed,

including those filed under the interim rules. As of the adoption date

of this Second Report and Order, February 19, 1997, no further

applications for site-by-site licenses, other than for shared channels

will be accepted (with the exception of applications filed pursuant to

47 CFR 22.369, 90.177, 1.1301 et seq., and applications filed for

coordination with Mexico and Canada).

II. Second Report and Order

A. Geographic Area Licensing for Non-Nationwide Paging Channels

1. Geographic Area Licensing for Exclusive 929 MHz and 931 MHz Bands

4. The Commission observes that geographic area licensing provides

flexibility for licensees and ease of administration, facilitates

further build-out of wide-area systems, and enables paging operators to

act quickly to meet the needs of their customers. The Commission finds,

therefore, that converting the 931 MHz channels and the exclusive 929

MHz channels to geographic area licensing will further the goal of

giving carriers offering substantially similar services more

flexibility to compete, and will enhance regulatory symmetry between

paging and narrowband personal communications services (PCS). The

Commission states that exclusive 929 MHz and 931 MHz licensees will be

extended the same flexibility as narrowband PCS licensees in terms of

the location, design, construction, and modification of their

facilities throughout their geographic areas.

5. The Commission is implementing geographic area licensing in lieu

of the current site-by-site licensing, with Major Trading Areas (MTAs)

as the geographic area for the 931 MHz and exclusive 929 MHz channels.

The Commission is licensing these channels using 51 MTA geographic

areas. In addition to the 47 Rand McNally MTAs, the Commission is

adding three MTAs for the U.S. territories of (1) Guam and the Northern

[[Page 11617]]

Mariana Islands, (2) Puerto Rico and the U.S. Virgin Islands, and (3)

American Samoa. The Commission is also licensing Alaska as a single

area separate from the Seattle MTA.

6. Geographic area licensees will have the flexibility to construct

transmitters at any place within their license area, subject to the co-

channel interference rules and will not be required to file

applications for additional sites or modifications with the Commission.

Geographic area licensees may add or modify sites consistent with this

Second Report and Order. Applications must be filed with the Commission

for coordination with Mexico or Canada and where required by

Secs. 22.369, 90.177, or 1.1301 et seq. Geographic area licensees will

be able to act quickly to add sites or make modifications of existing

sites to meet the needs of their customers. Due to the prevalence of

wide-area paging systems on these channels and the flexibility

geographic area licensing will afford paging licensees, the Commission

believes that geographic area licensing for exclusive 929 MHz and 931

MHz channels, with MTAs as the geographic area, is consistent with the

public interest, convenience and necessity, and the purposes of the

Communications Act of 1934, as amended (Communications Act), and

fulfills the objectives of section 309(j)(4)(c).

7. Spectrum recovered by the Commission within a geographic area

will revert automatically to the geographic area licensee. The

Commission will consider transfers and assignments between a geographic

area licensee and an incumbent to be presumptively in the public

interest. The Commission is also eliminating finders' preferences

immediately for paging services, and will no longer accept finders'

preferences requests following adoption of the Second Report and Order.

8. Mutually exclusive applications for geographic area licenses

will be processed pursuant to the competitive bidding rules adopted in

this Second Report and Order. All incumbent licensees will continue to

operate under the existing authorizations with full protection from co-

channel interference, and will not be required to file applications for

additional internal sites.

2. Geographic Area Licensing for Common Carrier Paging Services in the

35-36 MHz, 43-44 MHz, 152-159 MHz, and 454-460 MHz Bands

a. Common Carrier Paging Services

9. The Commission believes that the advantages of geographic

licensing--flexibility, enhanced regulatory symmetry with other CMRS,

and eliminating the inefficiencies in the licensing process--are

applicable to these channels, particularly for regional and wide-area

paging services. One of the Commission's goals in this proceeding is to

revise the paging rules so that substantially similar mobile services

receive comparable regulatory treatment, to the extent feasible, in a

manner consistent with the public interest, convenience, necessity, and

the purposes of the Communications Act. The Commission notes that

paging providers on these CCP channels generally have smaller paging

systems than the 931 MHz band paging services, and therefore smaller

market areas would be more appropriate than MTAs for these bands. The

Commission finds that Economic Areas (EAs) would be an appropriate size

for geographic licensing on these bands. The Bureau of Economic

Analysis of the Department of Commerce has divided the United States

into 172 EAs. See Final Redefinition of the BEA Economic Areas,

Department of Commerce, Docket No. 950-3020-64-5064-01, 60 FR 13114

(March 10, 1995). The Commission adopts EAs as the geographic area for

paging licenses. Geographic area licensees will have the flexibility to

construct transmitters at any place within their EA, subject to the co-

channel interference rules; however, geographic area licensees must

file applications with the Commission if such filing is necessary for

coordination with Canada or Mexico, or is required by Sec. 22.369,

90.177, or 1.1301 et seq. The EA geographic area licenses will be

assigned pursuant to the competitive bidding rules.

b. Other Services in the 152-159 MHz and 454-460 MHz Bands

10. The Commission concludes that Rural Radiotelephone Service

licensees, including BETRS licensees, can participate in the geographic

area licensing framework adopted for paging. Additionally, these

licensees may obtain site licenses and operate facilities on a

secondary basis. If any geographic area licensee subsequently notifies

the Rural Radiotelephone or BETRS licensee that a secondary site must

be shut down because it may cause interference to the paging licensee's

existing or planned facilities, the Rural Radiotelephone or BETRS

licensee must discontinue use of the particular channel at that site no

later than six months after such notice. Additionally, mobile two-way

telephone service on the paging channels will also be subject to

geographic area licensing and competitive bidding.

3. Shared Channels

11. The shared channels consist of five 929 MHz channels and

thirteen Business Radio Service channels. The Commission concludes that

the existing shared paging channels should continue to be licensed on a

shared basis. The Commission is concerned about the consumer fraud and

license application speculation issues and is seeking comment in a

Further Notice of Proposed Rulemaking on changes in the license

application and frequency coordination procedures. The Commission is

eliminating the interim 40-mile rule for additional sites. Pending

resolution of the fraud and speculation issues, the Commission is

limiting applications for shared channels to (1) licensees expanding

their commercial mobile radio systems; (2) applicants, including new

applicants, for private, internal-use systems; and (3) Special

Emergency Radio Services (SERS) providers on the shared channels.

4. Exempting Certain Incumbents From Competitive Bidding

12. The Commission believes that the market, not regulation, should

determine participation in competitive bidding for geographic area

licenses. Therefore, the Commission is adopting open eligibility for

paging licenses. The Commission believes that this will be pro-

competitive and potentially will result in further wide-area coverage

of paging services.

B. Geographic Area Licensing for Nationwide Channels

13. Three 931 MHz channels, 931.8875 MHz, 931.9125 MHz, and

931.9375 MHz, were allocated for nationwide paging, and have been

assigned to licensees on a nationwide basis. The Commission is granting

nationwide geographic area licenses, without competitive bidding, to

these three licensees. Additionally, 23 licensees have met requirements

for nationwide exclusivity on 929 MHz channels under Sec. 90.495 of the

Commission's rules. The Commission is granting nationwide geographic

area licenses, without competitive bidding, to those 929 MHz licensees

who had constructed sufficient transmitters to obtain nationwide

exclusivity under the

[[Page 11618]]

prior rules, and to those licensees who had sufficient authorizations

as of February 8, 1996 and have since constructed sufficient

transmitters to earn nationwide exclusivity. The Commission notes that

these nationwide licensees have built out their paging systems to serve

consumers, and the public interest would not be served in eliminating

the nationwide authorizations that were previously granted by the

Commission. Therefore, the Commission concludes that licensees on these

channels will not be subject to competitive bidding for nationwide

geographic area licenses.

14. The Commission declines to extend automatic nationwide

geographic area licensing to MTel's 931.4375 MHz channel. The

Commission notes that MTel has been extensively licensed on 931.4375

MHz; however, this channel has not been reallocated as a nationwide

channel thus MTel has not built-out this channel in reliance on a grant

of a nationwide license or nationwide exclusivity. The Commission notes

that many paging carriers, including MTel, have extensive systems on

channels that are not specifically designated as nationwide channels.

Paging is a competitive industry, and to the extent that nationwide

licensees not only compete with each other, but also with the paging

carriers who provide local and regional service, the Commission does

not believe it would be pro-competitive to automatically grant

nationwide geographic area licenses to any additional licensees.

C. Protection for Incumbents

15. The Commission believes that the public interest would be

served by allowing incumbent (non-geographic) paging licensees to

continue to operate under their existing authorizations with full

protection from co-channel interference, and similarly protecting the

geographic area licensees from co-channel interference from the

incumbent licensees. Therefore, consistent with the rules for 900 MHz

Specialized Mobile Radio (SMR), the Commission will not allow incumbent

(non-geographic) licensees to expand beyond their composite

interference contour unless the incumbents and the geographic licensee

have reached agreement on such modifications.

D. Coverage Requirements

16. The Commission notes that coverage requirements satisfy the

mandate for performance requirements under section 309(j)(4)(B) of the

Communications Act. The Commission is imposing the following coverage

requirements: for each MTA or EA, the geographic licensee must provide

coverage to one-third of the population within three years of the

geographic area license grant and to two-thirds of the population

within five years of the geographic area license grant. In the

alternative, the MTA or EA licensee may provide substantial service to

the geographic license area within five years of license grant.

Substantial service is defined as service that is sound, favorable, and

substantially above a level of mediocre service which would barely

warrant renewal. The failure to meet these coverage requirements will

result in automatic cancellation of the geographic license. The

Commission will reinstate any licenses held prior to auction for sites

that were authorized, constructed, and operating at the time of the

cancellation of the geographic area license.

E. Co-Channel Interference Protection

1. Co-Channel Interference Protection--Incumbent Licensees

17. The Commission is persuaded that the advantages of adopting the

formulas proposed in the NPRM are outweighed by the disadvantages noted

by the commenters. As the commenters observed, changing from Tables E-1

and E-2 to the proposed formulas would, in most cases, reduce the

service area and composite interference contour that incumbent

licensees have relied on in developing their systems to date.

Additionally, the proposed formulas may underestimate the actual

reliable coverage of the paging systems. Using the fixed distances in

Tables E-1 and E-2 in Sec. 22.537 for the 929 MHz and 931 MHz channels

would maintain the status quo for 931 MHz channels and conform 929 MHz

channels to the current procedure for 931 MHz. Therefore, the

Commission is adopting the fixed distances in Tables E-1 and E-2 in

Sec. 22.537 for the exclusive 929 MHz and 931 MHz channels. Geographic

area licensees must provide co-channel protection to all incumbent

licensees, including incumbents in other geographic areas. The

Commission will allow geographic and incumbent licensees to use short-

spaced locations pursuant to mutual written consent. The Commission

will continue to use the current formulas for the CCP channels below

931 MHz.

2. Co-Channel Interference Protection--Adjacent Geographic Licensees

18. Geographic licensees generally are not required to file

applications with the Commission, therefore it is possible that a

geographic licensee with a transmitter at or close to the border of the

MTA or EA could unknowingly cause interference to a neighboring

geographic licensee. It is in the interest of the geographic licensees

to find mutually beneficial ways to accommodate their needs in

providing service within their respective MTAs and EAs. Instead of

specifying a minimum distance a geographic licensee's transmission site

must be from the geographic border, which may result in unserved areas,

the Commission is allowing geographic licensees to negotiate mutually

acceptable agreements with all adjacent geographic area licensees if

the interfering contour of one geographic area licensee will extend

into the adjacent geographic area or areas. Adjacent geographic area

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

regarding co-channel interference protection. The Commission believes

that informal negotiations between parties in determining mutually

agreeable arrangements between adjacent MTAs and EAs will achieve the

most expeditious and effective resolution of co-channel interference.

The lack of adequate service to the public due to failure to negotiate

reasonable solutions to co-channel interference problems with adjacent

geographic area licensees could reflect negatively on licensees seeking

renewal.

3. Maximum Power and Height-Power Limit

19. The Commission believes that the 931 MHz and 929 MHz bands

should operate under the same power and height-power rules. Conforming

these rules will allow paging operators to design their systems in the

most economical manner. Most of the commenters addressing this issue

contend that the Commission should eliminate the disparity between the

931 and 929 MHz channels, and conform the maximum effective radiated

power (ERP) limit and the height-power limit in these bands. The

Commission is eliminating the height-power limit for 929 MHz systems,

to conform them to the 931 MHz systems. The Commission is also

increasing the permitted maximum ERP for all 929 MHz systems to 3500

Watts, to conform these systems with the nationwide 929 MHz systems and

the 931 MHz systems. With respect to the CCP bands below 931 MHz, the

Commission is maintaining the current power and height-power limits for

these channels.

[[Page 11619]]

F. Licensing in Mexican and Canadian Border Areas

20. The Commission notes that commenters agree with the proposal

that border areas should be treated like any other area for licensing

purposes and carriers can determine whether spectrum is usable in

border areas under applicable treaties and protocols. Therefore, the

Commission will not distinguish between border and non-border areas in

geographic licensing. Geographic licensees will be responsible for

advising the Commission of any transmitter site changes or additions if

site-by-site coordination is required by Canada or Mexico.

G. Eligibility to Participate in Competitive Bidding

21. The Commission believes that it is important to allow all

parties to participate in the competitive bidding process for

geographic area licenses, and accordingly, apart from foreign ownership

limitations, eligibility will not be restricted. The Commission

believes that non-incumbents should be allowed to bid for available

spectrum, or to enter into joint ventures with incumbents for purposes

of bidding in a geographic area. The competitive bidding process itself

should deter speculation by those not genuinely interested in providing

service to the public. In addition, the Commission believes that the

open eligibility for the geographic area licenses will be pro-

competitive and potentially will result in a diverse group of entities

providing paging services to the public.

H. Channel Aggregation Limit

22. The Commission has imposed a spectrum aggregation cap of 45 MHz

as the total amount of combined PCS, cellular, and SMR spectrum

classified as CMRS in which an entity may have an attributable interest

in any geographic area at any point in time. Narrowband radio services,

including paging, are not included in the spectrum cap because it is

highly unlikely that one entity could ever accumulate as much as 5 MHz

in any given geographic market. The Commission now concludes that a

channel aggregation limit is unnecessary for paging services. The

paging market is highly competitive and diversified, making it unlikely

that any one licensee could accumulate sufficient spectrum to dominate

the paging market, much less the CMRS market as a whole. The Commission

does not find any evidence that excessive channel aggregation has

occurred in the paging industry; to the contrary, paging channel use is

highly dispersed among numerous competing licensees. Additionally, the

Commission anticipates that many applicants for geographic area paging

licenses will be incumbents seeking to obtain geographic area licenses

where their existing facilities reside. Thus, the Commission does not

believe that geographic area licensing is likely to increase market

concentration in the paging industry. Finally, the Commission believes

that a cap could arbitrarily limit a carrier's capacity to provide

services that may require multiple channels. Therefore, the Commission

is not imposing a spectrum or channel aggregation cap on paging

licenses at this time.

I. Competitive Bidding

1. Competitive Bidding Design

a. Bidding Methodology

23. Based on the record in this proceeding and its successful

experience conducting simultaneous multiple round auctions for other

services, the Commission believes this type of auction is most

appropriate for paging licenses. The Commission believes that, for

certain bidders, these licenses will be significantly interdependent

because of the desirability of aggregation across spectrum blocks and

geographic areas and because some licenses are likely to be

substitutes. Given such interdependence, simultaneous multiple round

bidding generates more information about license values during the

course of the auction and provides bidders with more flexibility to

pursue back-up strategies than if the licenses were auctioned

separately or through sealed bidding. The Commission also expects the

value of paging licenses to be sufficiently high to warrant

simultaneous multiple round bidding. The Commission retains the

discretion, however, to use a different methodology if that proves to

be more efficient administratively. Prior to the auction, information

will be provided about the bidding design to be used.

b. License Grouping

24. Although it may be desirable to hold a single simultaneous

multiple round auction for all paging licenses, such an auction is not

currently feasible from an operational standpoint because there will be

more than 15,000 paging licenses available for auction. The Commission

finds that there is significant interdependence among licenses in the

929 MHz and 931 MHz services, and similar interdependency among the

licenses of the lower band paging services. The Commission also

believes that grouping interdependent licenses and putting them up for

bid at the same time promotes awarding licenses to bidders who value

them most highly. The Commission therefore will award the paging

licenses in a series of simultaneous multiple round auctions, grouping

them based on interdependency and operational feasibility. The

Commission reserves the discretion to decide on specific license

groupings as administrative circumstances dictate.

c. Bidding Procedures

25. Bid increments and tie bids. The Commission will announce, by

Public Notice prior to the auction, general guidelines for minimum bid

increments. Minimum bid increments for individual paging licenses or

groups of licenses may vary over the course of the auction and will be

announced before or during the auction. In the case of a tie bid, the

high bidder will be determined by the order in which the bids are

received by the Commission.

26. Stopping rules. With more than ten times the largest number of

licenses the Commission has ever auctioned simultaneously, there is an

increased risk of an excessively prolonged auction if a significant

proportion of the licenses are auctioned simultaneously using a

simultaneous stopping rule. To reduce this risk and to promote

expeditious service to the public, while at the same time preserving

most of the efficiency benefits of a simultaneous stopping rule, the

Commission adopts a hybrid simultaneous/license-by-license stopping

rule. The hybrid rule has three phases. During Phase I, which lasts one

month, or 100 rounds, whichever comes later, the Commission will employ

its standard simultaneous stopping rule whereby bidding will remain

open on all licenses until bidding stops on every license. The auction

will close after one round passes in which no new valid bids or

proactive activity rule waivers are submitted. This provides bidders

some protection against the risk that bidding on a license will be

closed before they have sufficient information to start bidding on it

as a back up strategy. In Phase II, the Wireless Telecommunications

Bureau will assess the extent to which bidders are pursuing back up

strategies and implement a license-by-license stopping rule if the

Bureau determines that the use of back up strategies is minimal. Under

the license-by-license stopping rule, bidding on a license will close

whenever 10 consecutive rounds pass with no new valid bids for that

license. The remaining licenses will close according to the standard

simultaneous stopping rule--when a round passes

[[Page 11620]]

with no new valid bids on any license. Phase III begins after two

months and 100 rounds have passed. If the auction has not closed by

then, the Commission intends to implement the license-by-license

stopping rule that is discretionary in the second phase. This approach

balances concerns about the time to complete the paging auction and the

benefits of preserving back up strategies which give bidders the

flexibility to acquire licenses that are consistent with their business

plans. The Commission reserves the discretion not to employ this hybrid

stopping rule in future paging auctions based on its experience in this

auction and depending on the circumstances in future auctions with

respect to factors such as the number of licenses and degree that

licenses are encumbered.

27. The Commission further retains the discretion, in Phase III, to

declare after 200 rounds that the auction will end after some specified

number of additional rounds. If this method is employed, bids will be

accepted only on licenses where the high bid has increased in the last

three rounds. This will provide the Commission with a mechanism to end

the auction in the unlikely event that a small number of bidders are

continuing to bid on a few low value licenses solely to delay the

closing of the auction. The Commission will declare the imminent end of

the auction only in the case of extremely dilatory bidding.

28. Revealing bidders' identities. In the Competitive Bidding

Second Memorandum Opinion and Order, 59 FR 44272 (August 26, 1994),

because of the advantages of providing more information to bidders, and

the difficulties involved in ensuring that bidder identities remain

confidential, the Commission determined that it generally would release

the identities of bidders before each auction. However, the Commission

reserved the option to withhold bidder identities on an auction-by-

auction basis if further experience showed that it would be feasible

and desirable to do so.

29. In the case of the upcoming paging auctions, the Commission

believes that shielding certain information from the bidders will help

to speed the bidding since there will be less of an opportunity for

strategic gaming practices to occur. The Commission will announce by

Public Notice prior to the auction the precise information that will be

revealed to bidders during the auction. This information may be limited

to the high bids (no identities of bidders) and may also include the

total number of bids on each license. The loss of efficiency from

denying bidders the identities of likely winners of adjacent licenses

should be minimal because, in contrast to broadband personal

communications services, paging does not provide for roaming and there

is little uncertainty about technologies (i.e., GSM versus CDMA

technology).

30. Activity Rule. The Commission will employ the Milgrom-Wilson

activity rules for the paging auctions. These rules discourage delay by

bidders and expedite simultaneous multiple round auctions in which a

simultaneous stopping rule is used. Under the Milgrom-Wilson rules, the

auction is divided into three stages and the minimum required activity

level, measured as a fraction of the bidder's eligibility in the

current round, will increase during the course of the auction.

31. In each round of Stage One, a bidder that wishes to maintain

its current eligibility is required to be active on licenses

encompassing at least 60 percent of the activity units for which it is

currently eligible. The number of activity units for a given license is

calculated by multiplying the amount of spectrum (in MHz) by the

population of the market. A bidder's eligibility is determined by

multiplying the activity units by a specified monetary figure. Failure

to maintain the requisite activity level will result in a reduction in

the amount of activity units upon which a bidder will be eligible to

bid in the next round of bidding (unless an activity rule waiver is

used). During Stage One, if bidding activity is below the required

minimum level, eligibility in the next round will be calculated by

multiplying the current round activity by five-thirds (5/3).

Eligibility for each applicant at the start of the auction is

determined by the amount of the upfront payment received and the

licenses identified in its auction application.

32. In each round of Stage Two, a bidder that wishes to maintain

its current eligibility is required to be active on at least 80 percent

of the activity units for which it is eligible in the current round.

During Stage Two, if activity is below the required minimum level,

eligibility in the next round will be calculated by multiplying the

current round activity by five-fourths (5/4).

33. In each round of Stage Three, a bidder that wishes to maintain

its current eligibility must be active on licenses encompassing at

least 98 percent of the activity units for which it is eligible in the

current round. In Stage Three, if activity in the current round is

below 98 percent of current eligibility, eligibility in the next round

will be calculated by multiplying the current round activity by fifty

forty-ninths (50/49).

34. The Commission reserves the discretion to set and, by

announcement before or during the auction, vary the requisite minimum

activity levels (and associated eligibility calculations) for each

auction stage. Retaining this flexibility will improve the Commission's

ability to control the pace of the auction and help ensure that the

auction is completed within a reasonable period of time.

35. For paging auctions, the Commission will use the following

general transition guidelines. The auction will start in Stage One and

typically will move to Stage Two when the auction activity level is

below ten percent for three consecutive rounds in Stage One. In

general, the auction will move from Stage Two to Stage Three when the

auction activity level is below ten percent for three consecutive

rounds in Stage Two. In no case can the auction revert to an earlier

stage. The Commission retains the discretion to determine and announce

during the course of an auction when, and if, to move from one auction

stage to the next. These determinations will be based on a variety of

measures of bidder activity including, but not limited to, the auction

activity level defined above, the percentage of licenses (measured in

terms of activity units) on which there are new bids, the number of new

bids, and the percentage increase in revenue.

36. To avoid the consequences of clerical errors and to compensate

for unusual circumstances that might delay a bidder's bid preparation

or submission in a particular round, bidders will be provided with five

activity rule waivers that may be used in any round during the course

of the auction. If a bidder's activity level is below the required

activity level, a waiver automatically will be applied. A waiver will

preserve current eligibility in the next round, but cannot be used to

correct an error in the amount bid. An activity rule waiver applies to

an entire round of bidding and not to a particular service area.

37. Bidders will be afforded an opportunity to override the

automatic waiver mechanism when they place a bid, if they wish to

reduce their bidding eligibility and do not want to use a waiver to

retain their eligibility at its current level. If a bidder overrides

the automatic waiver mechanism, its eligibility permanently will be

reduced (according to the formulas specified above), and it will not be

permitted to regain its bidding eligibility from a previous round. An

automatic waiver invoked in a round in which there are no valid bids

will not keep the auction

[[Page 11621]]

open. Bidders will have the option to proactively enter an activity

rule waiver during the bid submission period. If a bidder submits a

proactive waiver in a round in which no other bidding activity occurs,

the auction will remain open.

38. The Commission retains the discretion to issue additional

waivers during the course of an auction for circumstances beyond a

bidder's control. The Commission also retains the flexibility to

adjust, by Public Notice prior to an auction, the number of waivers

permitted, or to institute a rule that allows one waiver during a

specified number of bidding rounds or during specified stages of the

auction.

39. Duration of bidding rounds. The Commission retains the

discretion to vary the duration of the bidding rounds or the interval

at which bids are accepted in order to move the auction to closure more

quickly. The duration of and intervals between bidding rounds will be

announced either by Public Notice prior to the auction or by

announcement during the auction.

2. Procedural and Payment Issues

a. Pre-auction Application Procedures

40. The Commission will use the pre-auction application procedures

established in the Competitive Bidding Second Report and Order, 59 FR

22980 (May 4, 1994), for the paging services. A Public Notice

announcing the auction will 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 will also specify, inter

alia, the short-form filing deadline.

41. The Commission adopts the same general bidding procedures used

for the PCS, 900 MHz SMR, and Multipoint Distribution Service (MDS)

auctions. Under these procedures, bidders will be able to submit bids

remotely, either electronically or by telephone. The Commission has

established a schedule of fees that participants in the competitive

bidding process will be assessed for certain on-line computer services,

bidding software, and Bidder Information Packages. Bidders will be

permitted to bid electronically only if they have filed a short-form

application electronically. Bidders who file their short-form

applications manually may bid only telephonically.

b. Short-form Applications

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

person 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 sections 308(b) and 310'' of

the Communications Act. 47 U.S.C. 309(j)(5). The Commission will,

therefore, dismiss applications not meeting the requirements of its

rules prior to the auction.

43. The Commission disagrees with commenters who state that it

should not permit bidders to apply for all market areas by checking the

``all'' markets box on their FCC Form 175. The Commission believes

bidders should have the flexibility to pursue back-up strategies if

they are unable to obtain their first choice of licenses. Moreover, any

potential problems associated with so-called blanket bidding will be

cured through the Commission's eligibility rules and the submission of

a corresponding upfront payment. Finally, because the Commission has

permitted incumbents to expand their systems pending the commencement

of the auction, it believes that current application rules will have no

impact on planned expansions by incumbents. The Commission sees no

reason to change its current application procedures at this time.

44. If only one application that is acceptable for filing is

received for a particular market, and thus there is no mutual

exclusivity, the Commission will issue a Public Notice cancelling the

auction for that license and establish a date for the filing of a long-

form application, the acceptance of which will trigger the procedures

permitting petitions to deny.

c. Amendments and Modifications

45. Applicants for paging auctions will be provided with an

opportunity to correct minor defects in their short-form applications

prior to the auction. After review of the short-form applications, a

Public Notice will be issued listing all defective applications.

Applicants with minor defects in their applications will be given an

opportunity to cure them and resubmit a corrected version.

d. Upfront Payments

46. The Commission believes that a specific upfront payment amount

should be established for each license upon which bids are to be made.

It is important, as commenters point out, to deter speculation and

ensure, to the greatest extent practicable, that only sincere bidders

participate in the auction. The Commission delegates to the Wireless

Telecommunications Bureau the authority and discretion to determine an

appropriate upfront payment for each license being auctioned, taking

into account such factors as the population and the approximate amount

of unencumbered spectrum in each geographic license area. The

Commission expects that the Bureau will follow the guidelines laid out

in the Competitive Bidding Second Report and Order, and establish

upfront payments equal to approximately five percent of the expected

amounts of winning bids for the various licenses. In no event will the

upfront payment for any license be less than $2,500, the minimum

suggested in the Competitive Bidding Second Report and Order, and the

Bureau will retain the flexibility to modify this minimum if experience

demonstrates that a higher amount would better deter speculative

filings.

47. Prior to a paging license auction, the Bureau will issue a

Public Notice listing the upfront payment amounts corresponding to the

licenses to be auctioned. The number of activity units determines the

amount of the upfront payment for a license. A prospective bidder must

submit an upfront payment equal to the largest combination of activity

units on which the bidder anticipates being active in any single round.

Although a bidder may file applications for every license being

auctioned, the total upfront payment submitted by each applicant will

determine the combinations on which the applicant will actually be

permitted to be active in any single round of bidding. Upfront payments

will be due by a date specified by Public Notice, but generally no

later than 14 days before the scheduled auction.

e. Down Payments

48. The Commission concludes that winning bidders (including

winners that are small businesses, as discussed below) must supplement

their upfront payments with a down payment sufficient to bring their

total deposits up to 20 percent of their winning bid(s). If the upfront

payment amount on deposit is greater than 20 percent of the winning bid

amount after deducting any bid withdrawal and default payments due, the

additional monies will be refunded. If a bidder has withdrawn a bid or

defaulted, but the amount of the withdrawal or default payment cannot

yet be determined, the bidder will be required to make a deposit of up

to 20 percent of the amount bid. When it becomes possible to calculate

and assess the payment, any excess deposit will be refunded. Monies on

account will be applied to bid withdrawal and default

[[Page 11622]]

payments due before being applied toward the bidder's down payment on

licenses the bidder has won and seeks to acquire.

49. Winning bidders, except small businesses, must submit the

required down payment by cashier's check or by wire transfer to the

Commission's lock-box bank within 10 business days following release of

a Public Notice announcing the close of bidding. All auction winners,

except those that qualify for installment payments, will be required to

make full payment of the balance of their winning bids within 10

business days following Public Notice that licenses are ready for

grant.

f. Bid Withdrawal, Default, and Disqualification

50. The Commission will apply its general bid withdrawal, default,

and disqualification rules in paging license auctions. If a license is

re-offered by auction, the ``winning bid'' refers to the high bid in

the auction in which the license is re-offered. If a license is re-

offered in the same auction, the ``winning bid'' refers to the high bid

amount made subsequent to the withdrawal in that auction. If a license

which is the subject of withdrawal or default is offered to the highest

losing bidders in the initial auction, as opposed to being re-

auctioned, the ``winning bid'' refers to the bid of the highest bidder

who accepts the offer. In the unlikely event that there is more than

one bid withdrawal on the same license, the Commission will hold each

withdrawing bidder responsible for the difference between its withdrawn

bid and the amount of the winning bid the next time the licenses are

offered for auction. If a license winner defaults or is otherwise

disqualified after an auction is closed, the Commission will exercise

its discretion to hold a new auction or offer the license to the second

highest bidder.

51. If a default or disqualification involves gross misconduct,

misrepresentation or bad faith by an applicant, the Commission may

declare the applicant and its principals ineligible to bid in future

auctions, and may take any other action that it deems necessary,

including institution of proceedings to revoke any existing licenses

held by the applicant.

52. The Wireless Telecommunications Bureau has recently instituted

an additional procedure that warns bidders of the possibility of a

mistaken bid, and this procedure will be utilized in the paging license

auctions. The Commission also recently addressed the issue of how its

bid withdrawal payment provisions apply to bids that are mistakenly

placed and withdrawn. See Atlanta Trunking Associates, Inc. and MAP

Wireless L.L.C. Request to Waive Bid Withdrawal Payment Provisions, 61

FR 25807 (May 23, 1996), recon. pending.

g. Long-form Applications

53. In the Competitive Bidding Second Report and Order, the

Commission established rules requiring winning bidders to submit a

long-form application. These procedures, which are set forth in

Sec. 1.2107 of the Commission's rules, 47 CFR 1.2107, will be followed

if the winning bidder makes the down payment in a timely manner.

h. Petitions to Deny and Limitations on Settlements

54. The petition to deny procedures in Secs. 22.130 and 90.163 of

the Commission's rules, 47 CFR 22.130 and 90.163, will apply to the

paging services. A party filing a petition to deny against a paging

license application will be required to demonstrate standing and meet

all other applicable filing requirements. Sections 90.162 and 22.129 of

the Commission's rules, 47 CFR 90.162 and 22.129, prevent the filing of

speculative applications and pleadings for purposes of extracting money

from applicants. Thus, the Commission will limit the consideration that

an individual or entity is permitted to receive for agreeing to

withdraw an application or petition to deny to the legitimate and

prudent expenses of the withdrawing applicant or petitioner. To the

extent Secs. 22.129 and 90.162 conflict with Sec. 1.2105 of the

Commission's rules, 47 CFR 1.2105, these provisions should not apply to

paging licenses awarded through competitive bidding. Therefore, the

Commission will amend these provisions to prohibit agreements to

withdraw mutually exclusive applications, or pleadings filed by one

applicant against another applicant for a license in the same

geographic area, after the deadline for filing short-form applications.

3. Regulatory Safeguards

a. Anti-Collusion Rules

55. The Commission will require paging licensees to comply with the

reporting requirements and rules prohibiting collusion embodied in

Secs. 1.2105 and 1.2107 of the Commission's rules, 47 CFR 1.2105 and

1.2107. Thus, after the FCC Form 175 filing deadline, applicants may

not discuss the substance of their bids or bidding strategies with

other applicants, other than those identified on their short-form

applications, that are bidding in the same license areas, even if they

are not bidding for the same spectrum blocks.

56. Where specific instances of collusion in the competitive

bidding process are alleged during the petition to deny process, the

Commission may conduct an investigation or refer such complaints to the

United States Department of Justice for investigation. Bidders who are

found to have violated the antitrust laws, in addition to any penalties

they incur under the antitrust laws, or who are found to have violated

the Commission's rules in connection with their participation in the

auction process, may be subject to a variety of sanctions, including

forfeiture of their down payment or their full bid amount, revocation

of their license(s), and possible prohibition from participating in

future auctions.

b. Transfer Disclosure Requirements

57. Section 1.2111(a), 47 CFR 1.2111(a), will apply to all paging

licenses obtained through the competitive bidding process. The

Commission sees nothing disruptive in requiring the disclosure of this

information, and believes these disclosure requirements are necessary

to the enforcement of its unjust enrichment provisions. The Commission

also agrees with the Federal Trade Commission that speculation in

connection with the acquisition of paging licenses is a major concern.

By enabling the Commission to monitor license transfers, the disclosure

requirements of Secs. 1.2111(a), which implements section 309(j)(4)(E)

of the Communications Act, (47 U.S.C. 309(j)(4)(E)), will assist in

eliminating the problem of speculation while providing safeguards to

those who might otherwise fall victim to deceptive practices used to

induce them to invest in paging licenses.

4. Treatment of Designated Entities

a. Small Businesses

58. Congress specifically cited the needs of small businesses in

enacting Sec. 309(j) of the Communications Act, 47 U.S.C. 309(j),

directing the Commission to promote economic opportunities for small

businesses. While a number of small businesses are successfully

participating in the paging industry, the Commission concludes that it

is appropriate to establish special provisions in its paging rules for

competitive bidding by small businesses.

[[Page 11623]]

b. Minority- and Women-Owned Businesses

59. In the paging service, as in other auctionable services, the

Commission is committed to meeting the statutory objectives of

promoting economic opportunity and competition, of avoiding excessive

concentration of licenses, and of ensuring access to new and innovative

technologies by disseminating licenses among a wide variety of

applicants, including businesses owned by members of minority groups

and women. Commenters failed to provide record evidence sufficient to

support special provisions for minorities under the strict scrutiny

standard of judicial review, which applies to federal race-based

programs. The Commission is also concerned that the record would not

support gender-based provisions under intermediate scrutiny, which is

the standard of judicial review that applies to such provisions.

Balancing its obligation to provide opportunities for women- and

minority-owned businesses to participate in spectrum-based services

against its statutory duties to facilitate the rapid delivery of new

services to the American consumer and promote efficient use of the

spectrum, the Commission concludes that it should not delay the paging

service auctions for the amount of time it would take to adduce

sufficient evidence to support race- and gender-based provisions.

Moreover, the Commission believes that most minority- and women-owned

businesses will be able to take advantage of the specific provisions

adopted for small businesses.

c. Bidding Credits

60. While bidding credits do not guarantee the success of small

businesses, the Commission believes that they at least provide such

bidders with an opportunity to successfully compete against larger,

well-financed bidders. The Commission also concludes that it is

appropriate to adopt tiered bidding credits for paging auction

participants based on the size of the small business. Such an approach

will further the Commission's mandate under section 309(j) of the

Communications Act to disseminate licenses to a variety of applicants.

61. The Commission therefore will define a small business as either

(1) an entity that, together with its affiliates and controlling

principals, has average gross revenues for the three preceding years of

not more than $3 million, or (2) an entity that, together with

affiliates and controlling principals, has average gross revenues for

the three preceding years of not more than $15 million. The Commission

will give small businesses that, together with affiliates and

controlling principals, have average gross revenues for the three

preceding years of not more than $3 million, a 15 percent bidding

credit. The Commission will give small businesses that, together with

affiliates and controlling principals, have average gross revenues for

the three preceding years of not more than $15 million, a bidding

credit of 10 percent. These bidding credits take into account the

difficulties smaller businesses have in accessing capital. Bidding

credits at these levels also achieve a reasonable compromise between

the arguments of commenters advocating greater credits and those of

commenters advocating no credits.

62. For purposes of the definitions adopted here, the Commission

will consider the gross revenues of the applicant, all controlling

principals in the applicant, and affiliates of the applicant. The

Commission chooses not to impose specific equity requirements on

controlling principals but will require that, in order for an applicant

to qualify as a small business, qualifying small business principals

must maintain both de jure and de facto control of the applicant. For

this purpose, the Commission will borrow from certain Small Business

Administration (SBA) rules that are used to determine when a firm

should be deemed an affiliate of a small business. Typically, de jure

control is evidenced by ownership of 50.1 percent of an entity's voting

stock. De facto control is determined on a case-by-case basis. An

entity must demonstrate at least the following indicia of control to

establish that it retains de facto control of the applicant: (1) The

entity constitutes or appoints more than 50 percent of the board of

directors or partnership management committee; (2) the entity has

authority to appoint, promote, demote and fire senior executives that

control the day-to-day activities of the licensee; and (3) the entity

plays an integral role in all major management decisions. The

Commission cautions that while it is not imposing specific equity

requirements on small business principals, the absence of significant

equity could raise questions about whether the applicant qualifies as a

bona fide small business.

63. Eligible small businesses will be permitted to form consortia

and not aggregate their gross revenues. Additionally, a small

corporation that has dispersed voting stock ownership and no

controlling affiliates will not be required to aggregate with its own

revenues the revenues of each shareholder for purposes of small

business status. Thus, the Commission clarifies that such an applicant

may qualify--even in the absence of identifiable control being held by

particular investors.

d. Installment Payments and Down Payments

64. The Commission adopts installment payments for small business

winners in the paging license auctions. The Commission recognizes that

small businesses, including those owned by women and minorities, face

capital access difficulties not encountered by other firms. Thus, they

require special measures to ensure their participation in the paging

service. Licensees who qualify as small businesses in paging license

auctions will be entitled to pay their winning bid amount in quarterly

installments over the term of the license, 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. The rate for ten-year U.S.

Treasury obligations will be determined by taking the coupon rate of

interest on the ten-year U.S. Treasury notes most recently auctioned by

the Treasury Department before licenses are conditionally granted.

These licensees will be able to make interest-only payments for the

first two years of the license term. Timely payment of all installments

will be a condition of the license grant, and failure to make such

timely payments will be grounds for revocation of the license.

65. The Commission declines to adopt a second installment payment

plan with a longer interest-only period for small businesses with

average gross revenues of not more than $3 million. The Commission

believes that the two-year interest-only period in the single plan it

adopts will provide small businesses with the appropriate level of

financing to overcome difficulties in attracting capital. Given that it

is making additional financial assistance available to very small

businesses in the form of a 15 percent bidding credit, the Commission

does not think a longer interest-only period is justified.

66. The Commission also concludes that it should provide for late

payment fees in connection with its installment payment plan for paging

licensees. Therefore, when licensees are more than fifteen days late in

their scheduled installment payments, a late payment fee equal to 5

percent of the amount of the past due payment will be charged. For

example, if a $50,000 payment is due on June 1, then on June 16 $2,500

is due in addition to the payment. Without such a fee licensees may not

have adequate financial incentives to

[[Page 11624]]

make installment payments on time and may attempt to maximize their

cash flow at the government's expense by paying late. The 5 percent

payment adopted is an approximation of late payment fees applied in

typical commercial lending transactions. Payments will be applied in

the following order: late charges, interest charges, principal

payments.

67. The Commission believes that small businesses should be

required to pay a down payment of 20 percent. Such a requirement is

consistent with ensuring that winning bidders have the financial

capability of building out their systems and will provide the

Commission with stronger assurance against default than a 10 percent

down payment. Increasing the amount of the bidder's funds at risk in

the event of default discourages insincere bidding and therefore

increases the likelihood that licenses are awarded to parties who are

best able to serve the public. A 20 percent down payment should also

cover the required payments in the unlikely event of default. Thus,

small business licensees will be required to bring their deposit up to

ten percent of the winning bid within ten business days of the close of

the auction. Prior to licensing, they will be required to pay an

additional ten percent. Specific procedures for payment will be

provided in a Public Notice issued by the Wireless Telecommunications

Bureau. The Commission declines to adopt reduced upfront payment rules

for small businesses participating in paging license auctions. The

Commission believes a uniform upfront payment provision for all bidders

in the auction is necessary in order to deter speculation and to ensure

that only sincere bidders participate in the auction.

e. Partitioning

68. Based on the strong support expressed by commenters for

granting broad partitioning rights to paging licensees, the Commission

will permit all MTA and EA paging licensees to partition to any party

eligible to be a paging licensee. The Commission takes this action with

respect to partitioning because of its conclusion that allowing holders

of paging licenses to partition their geographic service areas will

facilitate the provision of services in small markets and rural areas.

Partitioning will also furnish providers of paging service with

operational flexibility that will serve to promote the most efficient

use of the spectrum and encourage participation by a wide variety of

service providers. The Commission will permit partitioning of paging

licenses awarded through competitive bidding based on any license area

defined by the parties.

69. Due to the paucity of comments on the subject, and uncertainty

as to whether it is technically feasible, the Commission will not, at

this time, authorize spectrum disaggregation for the paging services.

Instead, the Commission seeks information regarding the technical

feasibility and appropriateness of spectrum disaggregation for the

paging services in a Further Notice of Proposed Rulemaking.

70. Providers of paging service will be permitted to acquire

partitioned licenses in either of two ways: (1) By forming bidding

consortia to participate in auctions, and then partitioning the

licenses won among consortium members; or (2) by acquiring partitioned

licenses from other licensees through private negotiation and agreement

either before or after the auction. Each member of a consortium will be

required to file a long-form application, following the auction, for

its respective mutually agreed-upon geographic area. With regard to

partitioning by small businesses, the Commission seeks comment in the

Further Notice of Proposed Rulemaking regarding the treatment of

bidding credits and installment payments. In the event the Commission

receives applications requesting FCC consent to partitioning transfers

from small businesses to non-small businesses or to small businesses

that qualify for less favorable bidding credits, action on such

applications will be deferred until the adoption of rules governing the

treatment of bidding credits and installment payments.

f. Unjust Enrichment Provisions for Full Transfers

71. The Commission adopts unjust enrichment rules for paging. These

rules provide that, during the initial license term, licensees

utilizing bidding credits and seeking to assign or transfer control of

a license to an entity that does not meet the eligibility criteria for

bidding credits will be required to reimburse the government for the

value of the benefit conferred by the government, that is, the amount

of the bidding credit, plus interest at the rate imposed for

installment financing at the time the license was awarded, before the

assignment or transfer will be approved by the Commission. Licensees

utilizing a bidding credit and seeking to assign or transfer control of

a license to a small business that meets the eligibility standards for

a lower bidding credit will be required to reimburse the U.S.

government for the difference between the amount of the bidding credit

obtained by the original licensee and the bidding credit for which the

assignee, transferee or new licensee is eligible, plus interest at the

rate imposed for installment financing at the time the license was

awarded as a condition of Commission approval of such assignment or

transfer. If a licensee that utilizes bidding credits seeks to make any

change in ownership structure that would render the licensee ineligible

for bidding credits, or eligible only for a lower bidding credit, the

licensee must first seek Commission approval and reimburse the

government for the amount of the bidding credit, or the difference

between its original bidding credit and the bidding credit for which it

is eligible after the ownership change, plus interest at the rate

imposed for installment financing at the time the license was awarded.

The amount of this payment will be reduced over time as follows: (1) A

transfer in the first two years of the license term will result in a

forfeiture of 100 percent of the value of the bidding credit (or the

difference between the bidding credit obtained by the original licensee

and the bidding credit for which the new licensee is eligible); (2) in

year three of the license term the payment will be 75 percent; (3) in

year four the payment will be 50 percent, and (4) in year five the

payment will be 25 percent, after which there will be no required

payment. These payments will have to be paid to the U.S. Treasury as a

condition of approval of the assignment, transfer, or ownership change.

72. In addition, if a licensee that qualifies for installment

payments seeks to assign or transfer control of its license during its

term to an entity that does not meet the small business definition, the

Commission will require payment of the remaining principal and any

interest accrued through the date of assignment as a condition of the

license assignment or transfer. Also, if an investor subsequently

purchases an interest in the business and, as a result, the gross

revenues of the business exceed the applicable financial caps, these

unjust enrichment provisions will apply. The Commission will apply

these payment requirements for the entire license term to ensure that

small businesses look first to other small businesses when deciding to

transfer their licenses. However, the Commission will not impose a

holding period or other transfer restrictions on these licensees.

g. Spectrum Set-aside

73. The Commission will not adopt an entrepreneurs' block for

paging licenses. The large number of licenses of different

[[Page 11625]]

sizes that will be available in the paging auctions should allow for

extensive participation of small businesses without an entrepreneurs'

block. Moreover, the special provisions for small businesses that the

Commission adopts, including installment payments and tiered bidding

credits, will give small businesses a significant opportunity to

acquire paging licenses through the auctions.

III. Conclusion

74. The Commission concludes that the paging rules and geographic

area licensing adopted in this Second Report and Order will facilitate

future development of paging systems and foster competition between

paging and other CMRS in general.

IV. Procedural Matters and Ordering Clauses

A. Regulatory Flexibility Analysis

75. As required by section 603 of the Regulatory Flexibility Act, 5

U.S.C. 603 (RFA), an Initial Regulatory Flexibility Analysis (IRFA) was

incorporated in the Notice of Proposed Rulemaking (NPRM) in WT Docket

No. 96-18. The Commission sought written public comment on the

proposals in the NPRM, including the IRFA. The Commission's Final

Regulatory Flexibility Analysis in this Second Report and Order

conforms to the RFA, as amended by the Contract With America

Advancement Act of 1996, Pub. L. 104-121, 110 Stat. 847 (1996). (CWAA,

Subtitle II of the Small Business Regulatory Enforcement Fairness Act

of 1996 (SBREFA) codified at 5 U.S.C. 601 et seq.)

Need for and Purpose of This Action

76. In the Second Report and Order, in WT Docket No. 96-18, the

Commission adopts rules to establish geographic area licensing and

competitive bidding for Common Carrier Paging (CCP) and exclusive 929

MHz Private Carrier Paging (PCP) services. These rules are adopted to

establish a flexible regulatory scheme for paging services, which will

promote efficient licensing and competition in the Commercial Mobile

Radio Services (CMRS) marketplace. The competitive bidding rules

adopted in the Second Report and Order are pursuant to section 309(j)

of the Communications Act of 1934, as amended (Communications Act),

which grants authority to the Commission to use auctions to select

among mutually exclusive applications for initial licenses for

subscriber-based services.

Summary of Issues Raised in Response to the Initial Regulatory

Flexibility Analysis

77. Several commenters submitted comments in response to the IRFA.

These commenters contend that the Commission did not assess how the

proposals for market area licensing and competitive bidding will impact

small businesses; that market area licensing will alleviate some

administrative burdens but the savings will mainly be seen by the

largest paging operators; and that market area licensing will impose

administrative burdens and additional costs on small businesses. In

addition to the comments specifically submitted in response to the

IRFA, several commenters raised issues in their comments to the NPRM

regarding the effects of the proposals in the NPRM on small businesses.

These commenters do not support geographic area licensing for the

exclusive 929 MHz and 931 MHz paging channels. These commenters contend

that geographic area licensing would be disruptive to existing

licensees, as well as to the public, without providing any overriding

benefit. The Commission addresses these issues in the Second Report and

Order, and concludes that geographic area licensing using Major Trading

Areas (MTAs) as the geographic area for these bands, is in the public

interest. The Commission also observes that small businesses will be

able to use bidding credits and installment payments in order to

compete with larger entities in the auction process.

78. Additionally, several commenters are opposed to geographic area

licensing for the 35-36 MHz, 43-44 MHz, 152-159 MHz, and 454-460 MHz

bands and claim that geographic area licensing would prevent the

continued growth of small paging businesses. Several commenters are

also opposed to geographic area licensing for other services, such as

Basic Exchange Telecommunications Radio Service (BETRS). Commenters

argue that it is not in the public interest to use competitive bidding

to select between applications for BETRS and paging, as this may leave

some rural areas without any local exchange service. Commenters contend

that requiring local exchange carriers to bid for BETRS spectrum would

defy the requirements in the Communications Act for universal service

and would jeopardize the Commission's goal to increase subscriber

penetration. The Commission addresses these issues in the Second Report

and Order, and concludes that geographic area licensing, using Economic

Areas (EAs) as the geographic area for these bands, is in the public

interest. The Commission notes that EAs, which are smaller than MTAs,

will provide more opportunities for small paging businesses. The

Commission also observes that small businesses will be able to use

bidding credits and installment payments in order to compete with

larger entities in the auction process. The Commission concludes that

rural areas will not be deprived of service because existing BETRS

systems will remain in place and the new partitioning rules adopted in

the Second Report and Order will allow BETRS operators to enter into

partitioning agreements with the geographic area paging licensees.

Additionally, the Commission notes that BETRS operators will be able to

obtain additional sites on a secondary basis.

79. Commenters are also opposed to geographic licensing for the

shared channels and request that the Commission maintain the present

system of site-by-site licensing for these channels. The commenters

observe that these channels are predominantly used by small businesses.

The Commission finds that the concerns raised by these commenters

regarding the shared channels are well-founded and therefore declines

to impose geographic area licensing for the shared channels.

Description and Number of Small Entities Involved

80. The rules adopted in this Second Report and Order will apply to

current paging operators and new entrants into the paging market. Under

these rules, exclusive 929 MHz paging licenses and licenses for all CCP

channels will be granted on a market area basis, instead of site-by-

site, and mutually exclusive applications will be resolved through

competitive bidding procedures. In order to ensure the more meaningful

participation of small business entities in the auction for mutually

exclusive geographic area paging licenses the Commission has adopted a

two-tier definition of small businesses. A small business will be

defined for these purposes as either (1) an entity that, together with

its affiliates and controlling principals, has average gross revenues

for the three preceding years of not more than $3 million, or (2) an

entity that, together with affiliates and controlling principals, has

average gross revenues for the three preceding years of not more than

$15 million. The Small Business Administration (SBA) has not yet

approved this definition for paging services. The Commission will

utilize the SBA's definition applicable to radiotelephone companies,

i.e., an entity employing less than 1,500

[[Page 11626]]

persons. See 13 CFR 121.201, Standard Industrial Classification Code

4812.

81. The Commission anticipates that a total of 16,630 non-

nationwide geographic area licenses will be auctioned. The geographic

area licenses subject to auction will consist of 2,550 MTA licenses and

14,080 EA licenses. In addition to the 47 Rand McNally MTAs, the

Commission is adding three MTAs for the U.S. territories of (1) Guam

and the Northern Mariana Islands, (2) Puerto Rico and the U.S. Virgin

Islands, and (3) American Samoa. The Commission is also licensing

Alaska as a single MTA separate from the Seattle MTA. There will be a

total of 51 MTA licenses auctioned for each non-nationwide 931 MHz and

exclusive 929 MHz channel. Auctions of paging licenses have not yet

been held, and there is no basis to determine the number of licenses

that will be awarded to small entities. Given the fact that nearly all

radiotelephone companies have fewer than 1,000 employees, and that no

reliable estimate of the number of prospective paging licensees can be

made, the Commission assumes, for purposes of the evaluations and

conclusions in this Final Regulatory Flexibility Analysis, that all the

auctioned 16,630 geographic area paging licenses will be awarded to

small entities, as that term is defined by the SBA. See U.S. Bureau of

the Census, U.S. Department of Commerce, 1992 Census of Transportation,

Communications, and Utilities, UC 92-S-1, Subject Series, Establishment

and Firm Size, Table 5, Employment Size of Firms: 1992, SIC Code 4812

(issued May 1995).

Summary of Projected Reporting, Recordkeeping and Other Compliance

Requirements

82. Geographic area paging licensees may be required to report

information concerning the location of their transmission sites under

some circumstances, although generally they will not be required to

file applications on a site-by-site basis. Additionally, geographic

area license applicants will be subject to reporting and recordkeeping

requirements to comply with the competitive bidding rules.

Specifically, applicants will apply for paging license auctions by

filing a short-form application (FCC Form 175). Winning bidders will

file a long-form application (FCC Form 600) at the conclusion of the

auction. Additionally, entities seeking treatment as small businesses

will need to submit information pertaining to the gross revenues of the

small business applicant and its affiliates and controlling principals.

Such entities will also need to maintain supporting documentation at

their principal place of business.

83. Section 309(j)(4)(E) of the Communications Act directs 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.'' 47 U.S.C. 309(j)(4)(E). The Commission adopted

safeguards designed to ensure that the requirements of this section are

satisfied, including a transfer disclosure requirement for paging

licenses obtained through the competitive bidding process. An applicant

seeking approval for a transfer of control or assignment of a license

within three years of receiving a new license through a competitive

bidding procedure must, together with its application for transfer of

control or assignment, file with the Commission a statement indicating

that its license was obtained through competitive bidding. Such

applicant must also file with the Commission the associated contracts

for sale, option agreements, management agreements, or other documents

disclosing the total consideration that the applicant would receive in

return for the transfer or assignment of its license.

84. With respect to small businesses, the Commission has adopted

unjust enrichment provisions to deter speculation and participation in

the licensing process by those who do not intend to offer service to

the public, or who intend to use the competitive bidding process to

obtain a license at a lower cost than they would otherwise have to pay

and to later sell it at a profit, and to ensure that large businesses

do not become the unintended beneficiaries of measures meant to help

small firms. Small business licensees seeking to transfer their

licenses to entities which do not qualify as small businesses (or which

qualify for a lower bidding credit), as a condition of approval of the

transfer, must remit to the government a payment equal to a portion of

the value of the benefit conferred by the government.

85. Finally, applicants and licensees claiming eligibility for

competitive bidding as a small business are subject to audits by the

Commission. Selection for audit may be random, on information, or on

the basis of other factors. Consent to such audit is part of the

certification included in the short-form application (FCC Form 175).

Steps Taken to Minimize Burdens on Small Entities

86. Section 309(j)(3)(B) of the Communications Act, 47 U.S.C.

309(j)(3)(B), provides that in establishing eligibility criteria and

bidding methodologies the Commission shall, inter alia, promote

economic opportunity and competition and ensure that new and innovative

technologies are readily accessible 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) of the Communications Act, 47 U.S.C. 309(j)(4)(A),

provides that in order to promote such 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. In awarding geographic

area paging licenses the Commission is committed to meeting the

statutory objectives of promoting economic opportunity and competition,

of avoiding excessive concentration of licenses, and of ensuring access

to new and innovative technologies 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. The Commission finds that it is appropriate to establish special

provisions in the paging rules for competitive bidding by small

businesses. The Commission believes that small businesses applying for

paging licenses should be entitled to bidding credits and should be

permitted to pay their bids in installments.

87. In order to ensure the more meaningful participation of small

business entities in paging auctions, the Commission has adopted a two-

tiered definition of small businesses. This approach will give

qualifying small businesses bidding flexibility. A small business will

be defined as either (1) an entity that, together with its affiliates

and controlling principals, has average gross revenues for the three

preceding years of not more than $3 million, or (2) an entity that,

together with affiliates and controlling principals, has average gross

revenues for the three preceding years of not more than $15 million.

The Commission will require that in order for an applicant to qualify

as a small business, qualifying small business principals must maintain

control of the applicant. The Commission has established bidding

credits consistent

[[Page 11627]]

with the two-tiered definition of a small business. Small businesses

that, together with affiliates and controlling principals, have average

gross revenues for the three preceding years of not more than $3

million will receive a 15 percent bidding credit. Small businesses

that, together with affiliates and controlling principals, have average

gross revenues for the three preceding years of not more than $15

million will receive a bidding credit of 10 percent.

88. Additionally, licensees who qualify as small businesses in the

geographic area paging license auction will be entitled to pay their

winning bid amount in quarterly installments over the term of the

license, 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. Licensees who qualify for this installment payment plan

will be permitted to make interest-only payments for the first two

years of the license term. Timely payment of all installments will be a

condition of the license grant, and failure to make such timely

payments will be grounds for revocation of the license.

89. The Commission is also extending geographic partitioning of MTA

and EA license areas to all entities eligible to be paging licensees.

The Commission believes that this provision will allow paging licensees

to tailor their business strategies and allow them to use the spectrum

more efficiently, will allow more entities to participate in the

provision of paging services, and will facilitate market entry by small

entities that have the ability to provide service only to a limited

population. Additionally, the Commission is maintaining the current

site-by-site licensing procedure for the shared channels.

Significant Alternatives Considered and Rejected

90. The Commission considered and rejected a proposal for

geographic area licensing using MTAs for all licenses. Commenters

opposed this proposal, contending that MTAs were too large for the

smaller paging systems. The Commission believes that the advantages of

geographic area licensing--flexibility, enhanced regulatory symmetry

with other CMRS, and eliminating the inefficiencies in the licensing

process--are applicable to the UHF and VHF channels, particularly for

regional paging services offered on these bands. Based on the record in

this proceeding, the Commission concludes that EAs would be more

appropriate than MTAs for the paging channels below 931 MHz. The

Commission agrees with the commenters that the geographical definition

used should correspond as much as possible to the geographic area that

the paging licensees seek to serve, and concludes that EAs, which are

smaller than MTAs, would facilitate the ability of paging operators of

smaller systems to participate in geographic area licensing.

91. Additionally, the Commission considered and rejected converting

all or some of the shared channels to exclusive use and implementing

geographic area licensing. The Commission also considered and rejected

limiting the number of licensees on the shared channels. In the NPRM,

the Commission asked for comment on whether to (1) convert the shared

channels to exclusive use and implement geographic licensing; (2) limit

the number of licenses per shared channel and use competitive bidding

to choose among applications once the limit is reached; or (3) retain

the status quo. Most commenters opposed geographic area licensing for

the shared channels, because paging systems on these channels are

smaller paging systems, not wide-area systems. The Commission observed

that smaller paging systems have been able to utilize these channels

effectively on a shared basis. Most of the commenters requested that

the Commission maintain the present system of site-by-site licensing.

The Commission noted that attempting to superimpose a geographic

licensing scheme on channels that have historically been shared could

cause significant disruption to existing operations. Additionally, the

Commission declined to adopt a cap on licensing shared channels, or to

convert certain shared channels to exclusive licensing. The difficulty

with a licensing cap, as noted by several commenters, is that it is the

amount of time a paging channel is used and the transmission equipment

and protocol used, not the number of licensees, that determines the

capacity limits of a channel. The Commission was also concerned that

picking certain shared channels to be designated as exclusive would

only cause greater pressure on the remaining shared channels and

therefore could limit opportunities for entry by smaller systems. The

Commission concluded that the shared channels should not be converted

to exclusive use, and the number of licensees should not be limited in

order to provide continued opportunities for paging operators,

particularly small businesses.

92. With respect to competitive bidding rules, the Commission

considered using a market-by-market stopping rule, which many

commenters favored in order to facilitate bringing an earlier end to

the auction and permitting the earlier close of uncontested markets.

The Commission adopted instead a hybrid simultaneous/license-by-license

stopping rule, which combines the advantages of a simultaneous stopping

rule and a license-by-license stopping rule. This approach will prevent

the auction from being unreasonably long while also preserving bidders'

flexibility to pursue back up strategies and acquire licenses that are

consistent with their business plans.

93. The Commission also considered allowing small businesses that

are winning bidders to pay a lower down payment than non-small

businesses. The Commission concluded, however, that all winning bidders

should pay a down payment of 20 percent of their winning bids. The

Commission believes that a substantial down payment is necessary to

ensure that winning bidders have the financial capability of building

out their systems, and will provide stronger assurance against defaults

than a reduced down payment. Increasing the amount of the bidder's

funds at risk in the event of default discourages insincere bidding and

therefore increases the likelihood that licenses are awarded to parties

who are best able to serve the public. The Commission also believes

that a 20 percent down payment should cover the required payments in

the unlikely event of default.

94. The Commission requested comment on whether, in addition to

small business provisions, separate provisions should be adopted for

minority-and women-owned entities. Few comments were received on this

issue, and commenters failed to provide record evidence of

discrimination sufficient to support race-based provisions under the

strict scrutiny standard of judicial review. The Commission is also

concerned that the record would not support gender-based provisions

under intermediate scrutiny. Balancing its obligation to provide

opportunities for women- and minority-owned businesses to participate

in spectrum-based services against its statutory duties to facilitate

the rapid delivery of new services to the American consumer and promote

efficient use of the spectrum, the Commission concluded that it should

not delay paging service auctions for the amount of time it would take

to adduce sufficient evidence to support race- and gender-based

provisions. The Commission believes that most minority-and women-owned

businesses will be able to take advantage of the

[[Page 11628]]

specific provisions that it has adopted for small businesses.

95. The Commission proposed, with respect to installment payments,

that small businesses with not more than $3 million in average gross

revenues for the preceding three years be permitted to make interest-

only payments for the first five years of the license term, while small

businesses with not more than $15 million in average gross revenues for

the preceding three years be permitted to make interest-only payments

during the first two years. The Commission concluded, however, that all

licensees qualifying for installment payments should be allowed to make

interest-only payments only for the first two years of the license

term. The Commission declined to adopt a longer interest-only period

for small businesses with average gross revenues of not more than $3

million. The Commission believes that the two-year interest-only period

provides small businesses with the appropriate level of financing to

overcome difficulties in attracting capital. Given that additional

financial assistance is being made available to very small businesses

in the form of a 15 percent bidding credit, the Commission does not

think a longer interest-only period is needed.

96. The Commission sought comment on the need, if any, for a

reduced upfront payment for entities qualifying as a small business.

The Commission did not, however, adopt reduced upfront payment rules

for small businesses participating in the paging license auction

because it believes that a uniform upfront payment provision for all

bidders in the auction is necessary in order to deter speculation and

to ensure that only sincere bidders participate in the auction.

97. Finally, the Commission considered but elected not to adopt a

spectrum set-aside for entrepreneurs. In the NPRM, the Commission

tentatively concluded that it was not necessary to adopt an

entrepreneurs' block for paging license auctions, and most commenters

opposed the creation of an entrepreneurs' block or other form of

spectrum set-aside for paging license auctions. The Commission believes

that the large number of licenses of different sizes that will be

available in the paging auctions should allow for extensive

participation of small businesses without an entrepreneurs' block.

Moreover, the Commission believes that the special provisions for small

businesses that it has adopted, including installment payments and

tiered bidding credits, will give small businesses a significant

opportunity to acquire paging licenses through auctions.

Report to Congress

98. The Commission shall send a copy of this Final Regulatory

Flexibility Analysis, along with this Second Report and Order, in a

report to Congress pursuant to the Small Business Regulatory

Enforcement Fairness Act of 1996, 5 U.S.C. 801(a)(1)(A).

B. Paperwork Reduction Act

99. This collection of information requirements have been approved

by the Office of Management and Budget and assigned OMB control number

3060-0697. The FCC Form 175 is assigned OMB control number 3060-0600.

The FCC Form 600 is assigned OMB control number 3060-0623.

C. Authority

100. The above action is authorized under the Communications Act,

sections 4(i), 303(r), 309(c), 309(j), and 332, 47 U.S.C. 154(i),

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

D. Ordering Clauses

101. Accordingly, it is ordered that, pursuant to the authority of

sections 4(i), 303(g), 303(r), and 332(a) of the Communications Act of

1934, as amended, 47 U.S.C. 154(i), 303(g), 303(r), and 332(a), part 22

of the Commission's rules, 47 CFR part 22, is amended as set forth

below.

102. It is further ordered that, pursuant to the authority of

sections 4(i), 303(g), 303(r), and 332(a) of the Communications Act of

1934, as amended, 47 U.S.C. 154(i), 303(g), 303(r), and 332(a), part 90

of the Commission's rules, 47 CFR part 90, is amended as set forth in

below.

103. It is further ordered that the rules adopted in this Second

Report and Order and Further Notice of Proposed Rulemaking will be

effective May 12, 1997.

104. It is further ordered that, pursuant to 47 U.S.C. 155(c), the

Chief, Wireless Telecommunications Bureau, is granted delegated

authority to implement and modify auction procedures in the part 22 and

part 90 paging services, including the general design and timing of an

auction, the number and grouping of authorizations to be offered in any

particular auction, the manner of submitting bids, the amount of

minimum opening bids and bid increments, activity and stopping rules,

and application and payment requirements, including the amount of

upfront payments, and to announce such procedures by Public Notice.

105. It is further ordered that, pursuant to 47 U.S.C. 155(c), the

Chief, Wireless Telecommunications Bureau, is granted delegated

authority to dismiss all mutually exclusive paging applications filed

as of the adoption date of this Second Report and Order and grant or

dismiss all non-mutually exclusive paging applications filed as of the

adoption date of this Second Report and Order.

List of Subjects

47 CFR Part 22

Communication common carriers, Reporting and recordkeeping

requirements.

47 CFR Part 90

Common carriers, Reporting and recordkeeping requirements.

Federal Communications Commission.

William F. Caton,

Acting Secretary.

Rules Changes

1. Part 22 of Chapter I of Title 47 of the Code of Federal

Regulations is amended as follows:

Part 22--PUBLIC MOBILE SERVICES

The authority citation for Part 22 continues to read as follows:

Authority: Secs. 4, 303, 309, and 332, 48 Stat. 1066, 1082, as

amended, 47 U.S.C 154, 303, 309, and 332, unless otherwise noted.

Section 22.99 is revised by adding the following definitions (in

alphabetical order), and revising the definition for the term

``unserved areas'', to read as follows:

Sec. 22.99 Definitions.

* * * * *

Paging geographic area authorization. An authorization conveying

the exclusive right to establish and expand one or more stations

throughout a paging geographic area or, in the case of a partitioned

geographic area, throughout a specified portion of a paging geographic

area, on a specified channel allocated for assignment in the Paging and

Radiotelephone Service. These are subject to the conditions that no

interference may be caused to existing co-channel stations operated by

other licensees within the paging geographic area and that no

interference may be caused to existing or proposed co-channel stations

of other licensees in adjoining paging geographic areas.

Paging geographic areas. Standard geographic areas used by the FCC

for administrative convenience in the licensing of stations to operate

on channels allocated for assignment in the

[[Page 11629]]

Paging and Radiotelephone Service. See Sec. 22.503(b).

* * * * *

Unserved areas. With regard to a channel block allocated for

assignment in the Cellular Radiotelephone Service: Geographic area in

the District of Columbia, or any State, Territory or possession of the

United States of America that is not within the CGSA of any cellular

system authorized to transmit on that channel block. With regard to a

channel allocated for assignment in the Paging and Radiotelephone

Service: Geographic area within the District of Columbia, or any State,

Territory or possession of the United States of America that is not

within the service contour of any base transmitter in any station

authorized to transmit on that channel.

* * * * *

The heading of Subpart B is revised to read as follows:

Subpart B--Licensing Requirements and Procedures

4. A new center heading preceding Sec. 22.101 is added to read as

follows:

Applications and Notifications

5. Section 22.115 is amended by revising the introductory text of

paragraph (a) to read as follows:

Sec. 22.115 Content of applications.

* * * * *

(a) Site-specific requirements. The following requirements apply to

all Public Mobile Service applications that involve specific

transmitting antenna sites.

* * * * *

6. Section 22.123 is amended by revising paragraphs (e)(1) and

(e)(2), to read as follows:

Sec. 22.123 Classification of filings as major or minor.

* * * * *

(e) * * *

(1) Request that a paging geographic area authorization be issued

to the filer on a requested channel;

(2) Request an authorization that would establish for the filer a

new fixed transmission path or service area (a new station) on a

requested channel, unless the new service area would be totally within

a paging geographic area for which the filer holds the paging

geographic area authorization for the requested channel;

* * * * *

7. Section 22.129 is amended by adding paragraph (e) to read as

follows:

Sec. 22.129 Agreements to dismiss applications, amendments, and

pleadings.

* * * * *

(e) Notwithstanding the provisions of this section, any payments

made or received in exchange for withdrawing a short-form application

for an FCC authorization awarded through competitive bidding shall be

subject to the restrictions set forth in Sec. 1.2105(c) of this

chapter.

8. Section 22.131 is amended by revising paragraphs (c)(4)(ii)(A)

and (c)(4)(ii)(B), and by adding a new paragraph (d)(2)(v), to read as

follows:

Sec. 22.131 Procedures for mutually exclusive applications.

* * * * *

(c) * * *

(4) * * *

(ii) * * *

(A) If all of the mutually exclusive applications in a 30-day

notice and cut-off filing group are applications for initial

authorization, the FCC administers competitive bidding procedures in

accordance with Sec. 22.201 through Sec. 22.227 and subpart Q of part 1

of this chapter, as applicable. After such procedures, the application

of the successful bidder may be granted and the other applications may

be dismissed without prejudice.

(B) If any of the mutually exclusive applications in a 30-day

notice and cut-off filing group is an application for modification, the

Commission may attempt to resolve the mutual exclusivity by

facilitating a settlement between the applicants. If a settlement is

not reached within a reasonable time, the FCC may designate all

applications in the filing group for comparative consideration in a

hearing. In this event, the result of the hearing disposes all of the

applications in the filing group.

* * * * *

(d) * * *

(2) * * *

(v) Any ``short-form'' application (filed on FCC Form 175)

requesting a new paging geographic area authorization.

* * * * *

9. Section 22.165 is amended by revising paragraph (d)(1) to read

as follows:

Sec. 22.165 Additional transmitters for existing systems.

* * * * *

(d) * * *

(1) The interfering contours of the additional transmitter(s) must

be totally encompassed by the composite interfering contour of the

existing station (or stations under common control of the applicant) on

the same channel, except that this limitation does not apply to

nationwide network paging stations or in-building radiation systems.

* * * * *

10. A new center heading consisting of Secs. 22.201 through 22.227

is added to read as follows:

Competitive Bidding Procedures

Sec.

22.201 Scope of competitive bidding rules.

22.203 Competitive bidding design for paging licensing.

22.205 Competitive bidding mechanisms.

22.207 Withdrawal, default, and disqualification payments.

22.209 Bidding applications (FCC Form 175 and 175-S short-form).

22.211 Submission of upfront payments and down payments.

22.213 Long-form applications (FCC Form 600).

22.215 Authorization grant, denial, default, and disqualification.

22.217 Bidding credits for small businesses.

22.219 Installment payments for licenses won by small businesses.

22.221 Eligibility for partitioned licenses.

22.223 Definitions concerning competitive bidding process.

22.225 Certifications, discolsures, records maintenance and audits.

22.227 Petitions to deny and limitation on settlements.

Competitive Bidding Procedures

Sec. 22.201 Scope of competitive bidding rules.

Sections 22.201 through 22.227, inclusive (and, unless otherwise

specified in this part, the procedures set forth in part 1, subpart Q,

of this chapter), apply only to competitive bidding (``auction'')

procedures for authorizations as follows:

(a) Paging geographic area authorizations issued pursuant to this

part or to part 90 of this chapter.

(b) [Reserved].

Sec. 22.203 Competitive bidding design for paging licensing.

A simultaneous multiple round auction will be used to choose from

among mutually exclusive initial applications for paging geographic

area authorizations, unless the FCC specifies otherwise by Public

Notice prior to the competitive bidding procedure.

Sec. 22.205 Competitive bidding mechanisms.

(a) Sequencing. The FCC will establish and may vary the sequence in

which paging geographic area authorizations are auctioned.

(b) Grouping. The FCC will determine which licenses will be

auctioned simultaneously or in combination based on interdependency and

administrative circumstances.

[[Page 11630]]

(c) Minimum Bid Increments. The FCC may, by public announcement

before or during an auction, require minimum bid increments in dollar

or percentage terms.

(d) Stopping Rules. The FCC may establish stopping rules before or

during an auction in order to terminate the auction within a reasonable

time.

(e) Activity Rules. The FCC may establish activity rules which

require a minimum amount of bidding activity. In the event that the FCC

establishes an activity rule in connection with a simultaneous multiple

round auction, each bidder may request waivers of such rule during the

auction. The FCC may, by public announcement either before or during an

auction, specify or vary the number of waivers available to each

bidder.

Sec. 22.207 Withdrawal, default, and disqualification payments.

The FCC will impose payments on bidders who withdraw high bids

during the course of an auction, who default on payments due after an

auction terminates, or who are disqualified. When the FCC conducts a

simultaneous multiple round auction, payments will be calculated as set

forth in Secs. 1.2104(g) and 1.2109 of this chapter. When the amount of

such a payment cannot be determined, a deposit of up to 20 percent of

the amount bid on the license will be required.

Sec. 22.209 Bidding applications (FCC Form 175 and 175-S Short-form).

Each applicant to participate in competitive bidding for paging

geographic area authorizations must submit an application (FCC Forms

175 and 175-S) pursuant to the provisions of Sec. 1.2105 of this

chapter.

Sec. 22.211 Submission of upfront payments and down payments.

(a) The FCC will require applicants to submit an upfront payment

prior to the start of a paging auction. The amount of the upfront

payment for each geographic area license auctioned and the procedures

for submitting it will be set forth by the Wireless Telecommunications

Bureau in a Public Notice in accordance with Sec. 1.2106 of this

chapter.

(b) Each winning bidder in a paging auction must submit a down

payment to the FCC in an amount sufficient to bring its total deposits

up to 20 percent of its winning bid. All winning bidders except small

businesses will be required to make such payment within ten business

days following the release of a Public Notice announcing the close of

bidding. Small businesses must bring their deposits up to 10 percent of

their winning bids within ten business days following the release of a

Public Notice announcing the close of bidding, and must pay an

additional 10 percent prior to licensing, by a date and time to be

specified by Public Notice.

Sec. 22.213 Long-form applications (FCC Form 600).

Each successful bidder for a paging geographic area authorization

must submit a ``long-form'' application (FCC Form 600) within ten

business days after being notified by Public Notice that it is the

winning bidder. Applications for paging geographic area authorizations

on FCC Form 600 must be submitted in accordance with Sec. 1.2107 of

this chapter, all applicable procedures set forth in the rules in this

part, and any applicable Public Notices that the FCC may issue in

connection with an auction. After an auction, the FCC will not accept

long-form applications for paging geographic area authorizations from

anyone other than the auction winners and parties seeking partitioned

licenses pursuant to agreements with auction winners under Sec. 22.221.

Sec. 22.215 Authorization grant, denial, default, and

disqualification.

(a) Each winning bidder, except those eligible for installment

payments, will be required to pay the full balance of its winning bid

within ten business days following Public Notice that the FCC is

prepared to award the authorization.

(b) A bidder that withdraws its bid subsequent to the close of

bidding, defaults on a payment due, or is disqualified, is subject to

the payments specified in Sec. 22.207, Sec. 1.2104(g), or Sec. 1.2109

of this chapter, as applicable.

Sec. 22.217 Bidding credits for small businesses.

(a) A winning bidder that qualifies as a small business or a

consortium of small businesses as defined in Sec. 22.223(b)(1)(i) may

use a bidding credit of 15 percent to lower the cost of its winning

bid. A winning bidder that qualifies as a small business or a

consortium of small businesses as defined in Sec. 22.223(b)(1)(ii) may

use a bidding credit of ten percent to lower the cost of its winning

bid.

(b) Unjust Enrichment:

(1) If a small business that utilizes a bidding credit under this

section seeks to transfer control or assign an authorization to an

entity that is not a small business under Sec. 22.223(b)(1), or seeks

to make any other change in ownership that would result in the licensee

losing eligibility as a small business, the small business must seek

FCC approval and reimburse the U.S. government for the amount of the

bidding credit (plus interest at the rate imposed for installment

financing at the time the license was awarded), as a condition of

approval of such assignment, transfer, or other ownership change.

(2) If a small business that utilizes a bidding credit under this

section seeks to transfer control or assign an authorization to a small

business meeting the eligibility standards for a lower bidding credit,

or seeks to make any other change in ownership that would result in the

licensee qualifying for a lower bidding credit under this section, the

licensee must seek FCC approval and reimburse the U.S. government for

the difference between the amount of the bidding credit obtained by the

licensee and the bidding credit for which the assignee, transferee, or

licensee is eligible under this section (plus interest at the rate

imposed for installment financing at the time the license was awarded),

as a condition of the approval of such assignment, transfer, or other

ownership change.

(3) The amount of payments made pursuant to paragraphs (b)(1) and

(b)(2) of this section will be reduced over time as follows: A transfer

in the first two years of the license term will result in a forfeiture

of 100 percent of the value of the bidding credit (or the difference

between the bidding credit obtained by the original licensee and the

bidding credit for which the post-transfer licensee is eligible); in

year 3 of the license term the payment will be 75 percent; in year 4

the payment will be 50 percent; and in year 5 the payment will be 25

percent, after which there will be no assessment.

Sec. 22.219 Installment payments for licenses won by small businesses.

(a) Each licensee that qualifies as a small business under

Sec. 22.223(b)(1) may pay the remaining 80 percent of the net auction

price for the license in installment payments over the term of the

authorization. Interest charges shall 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. An eligible licensee may make interest-only payments for

two years. Payments of interest and principal shall be amortized over

the remaining eight years of the license term.

(b) Late Installment Payment.

(1) Any licensee that submits a scheduled installment payment more

than 15 days late will be charged a late payment fee equal to 5 percent

of the amount of the past due payment.

[[Page 11631]]

(2) Payments will be applied in the following order: late charges,

interest charges, principal payments.

(c) Unjust Enrichment:

(1) If a licensee that utilizes installment financing under this

section seeks to assign or transfer control of its license to an entity

not meeting the eligibility standards for installment financing, the

licensee must seek FCC approval and make full payment of the remaining

unpaid principal and unpaid interest accrued through the date of

assignment or transfer as a condition of FCC approval.

(2) If a licensee that utilizes installment financing under this

section seeks to make any change in ownership structure that would

result in the licensee losing eligibility for installment payments, the

licensee shall first seek FCC approval before making such a change in

ownership structure and must make full payment of the remaining unpaid

principal and unpaid interest accrued through the date of such change

in ownership structure as a condition of FCC approval.

Sec. 22.221 Eligibility for partitioned licenses.

If partitioned licenses are being applied for in conjunction with a

license(s) to be awarded through competitive bidding procedures--

(a) The applicable procedures for filing short-form applications

and for submitting upfront payments and down payments contained in this

chapter shall be followed by the applicant, who must disclose as part

of its short-form application all parties to agreement(s) with or among

other entities to partition the license pursuant to this section, if

won at auction (see 47 CFR 1.2105(a)(2)(viii));

(b) Each party to an agreement to partition the license must file a

long-form application (FCC Form 600) for its respective, mutually

agreed-upon geographic area together with the application for the

remainder of the MTA or EA filed by the auction winner.

(c) If the partitioned license is being applied for as a partial

assignment of the MTA or EA license following grant of the initial

license, request for authorization for partial assignment of a license

shall be made pursuant to Sec. 22.137.

Sec. 22.223 Definitions concerning competitive bidding process.

(a) Scope. The definitions in this section apply to Secs. 22.201

through 22.227, unless otherwise specified in those sections.

(b) Small business; consortium of small businesses. (1) A small

business is an entity that either:

(i) Together with its affiliates and controlling principals has

average gross revenues that are not more than $3 million for the

preceding three years; or

(ii) Together with its affiliates and controlling principals has

average gross revenues that are not more than $15 million for the

preceding three years.

(2) For purposes of determining whether an entity meets either the

$3 million or $15 million average annual gross revenues size standard

set forth in paragraph (b)(1) of this section, the gross revenues of

the entity, its affiliates, and controlling principals shall be

considered on a cumulative basis and aggregated.

(3) A consortium of small businesses is a conglomerate organization

formed as a joint venture between or among mutually independent

business firms, each of which individually satisfies the definition of

a small business in paragraph (b)(1) of this section. Each individual

member must establish its eligibility as a small business, as defined

in this section. Where an applicant (or licensee) is a consortium of

small businesses, the gross revenues of each small business shall not

be aggregated.

(c) Gross Revenues. Gross revenues shall mean all income received

by an entity, whether earned or passive, before any deductions are made

for costs of doing business (e.g., cost of goods sold). Gross revenues

are evidenced by audited financial statements for the relevant number

of calendar or fiscal years preceding the filing of the applicant's

short-form application. If an entity was not in existence for all or

part of the relevant period, gross revenues shall be evidenced by the

audited financial statements of the entity's predecessor-in-interest

or, if there is no identifiable predecessor-in-interest, unaudited

financial statements certified by the applicant as accurate. When an

applicant does not otherwise use audited financial statements, its

gross revenues may be certified by its chief financial officer or its

equivalent.

(d) Affiliate.--(1) Basis for Affiliation. An individual or entity

is an affiliate of an applicant if such individual or entity:

(i) Directly or indirectly controls or has the power to control the

applicant, or

(ii) Is directly or indirectly controlled by the applicant, or

(iii) Is directly or indirectly controlled by a third party or

parties who also control or have the power to control the applicant, or

(iv) Has an ``identity of interest'' with the applicant.

(2) Nature of control in determining affiliation. (i) Every

business concern is considered to have one or more parties who directly

or indirectly control or have the power to control it. Control may be

affirmative or negative and it is immaterial whether it is exercised so

long as the power to control exists.

Example for paragraph (d)(2)(i). An applicant owning 50 percent

of the voting stock of another concern would have negative power to

control such concern since such party can block any action of the

other stockholders. Also, the bylaws of a corporation may permit a

stockholder with less than 50 percent of the voting stock to block

any actions taken by the other stockholders in the other entity.

Affiliation exists when the applicant has the power to control a

concern while at the same time another person, or persons, are in

control of the concern at the will of the party or parties with the

power of control.

(ii) Control can arise through stock ownership; occupancy of

director, officer or key employee positions; contractual or other

business relations; or combinations of these and other factors. A key

employee is an employee who, because of his/her position in the

concern, has a critical influence in or substantive control over the

operations or management of the concern.

(iii) Control can arise through management positions if the voting

stock is so widely distributed that no effective control can be

established.

Example for paragraph (d)(2)(iii). In a corporation where the

officers and directors own various size blocks of stock totaling 40

percent of the corporation's voting stock, but no officer or

director has a block sufficient to give him/her control or the power

to control and the remaining 60 percent is widely distributed with

no individual stockholder having a stock interest greater than 10

percent, management has the power to control. If persons with such

management control of the other entity are controlling principals of

the applicant, the other entity will be deemed an affiliate of the

applicant.

(3) Identity of interest between and among persons. Affiliation can

arise between or among two or more persons with an identity of

interest, such as members of the same family or persons with common

investments. In determining if the applicant controls or is controlled

by a concern, persons with an identity of interest will be treated as

though they were one person.

(i) Spousal affiliation. Both spouses are deemed to own or control

or have the power to control interests owned or controlled by either of

them, unless they are subject to a legal separation recognized by a

court of competent jurisdiction in the United States.

(ii) Kinship affiliation. Immediate family members will be presumed

to own or control or have the power to control interests owned or

controlled by

[[Page 11632]]

other immediate family members. In this context ``immediate family

member'' means father, mother, husband, wife, son, daughter, brother,

sister, father- or mother-in-law, son- or daughter-in-law, brother- or

sister-in-law, step-father, or -mother, step-brother, or -sister, step-

son, or -daughter, half-brother or -sister. This presumption may be

rebutted by showing that:

(A) The family members are estranged,

(B) The family ties are remote, or

(C) The family members are not closely involved with each other in

business matters.

Example for paragraph (d)(3)(ii). A owns a controlling interest

in Corporation X. A's sister-in-law, B, has a controlling interest

in a paging geographic area authorization application. Because A and

B have a presumptive kinship affiliation, A's interest in

Corporation X is attributable to B, and thus to the applicant,

unless B rebuts the presumption with the necessary showing.

(4) Affiliation through stock ownership. (i) An applicant is

presumed to control or have the power to control a concern if he/she

owns or controls or has the power to control 50 percent or more of its

voting stock.

(ii) An applicant is presumed to control or have the power to

control a concern even though he/she owns, controls, or has the power

to control less than 50 percent of the concern's voting stock, if the

block of stock he/she owns, controls, or has the power to control is

large as compared with any other outstanding block of stock.

(iii) If two or more persons each owns, controls or has the power

to control less than 50 percent of the voting stock of a concern, such

minority holdings are equal or approximately equal in size, and the

aggregate of these minority holdings is large as compared with any

other stock holding, the presumption arises that each one of these

persons individually controls or has the power to control the concern;

however, such presumption may be rebutted by a showing that such

control or power to control, in fact, does not exist.

(5) Affiliation arising under stock options, convertible

debentures, and agreements to merge. Stock options, convertible

debentures, and agreements to merge (including agreements in principle)

are generally considered to have a present effect on the power to

control the concern. Therefore, in making a size determination, such

options, debentures, and agreements will generally be treated as though

the rights held thereunder had been exercised. However, neither an

affiliate nor an applicant can use such options and debentures to

appear to terminate its control over another concern before it actually

does so.

Example 1 for paragraph (d)(5). If company B holds an option to

purchase a controlling interest in company A, who holds a

controlling interest in a paging geographic area authorization

application, the situation is treated as though company B had

exercised its rights and had become owner of a controlling interest

in company A. The gross revenues of company B must be taken into

account in determining the size of the applicant.

Example 2 for paragraph (d)(5). If a large company, BigCo, holds

70% (70 of 100 outstanding shares) of the voting stock of company A,

who holds a controlling interest in a paging geographic area

authorization application, and gives a third party, SmallCo, an

option to purchase 50 of the 70 shares owned by BigCo, BigCo will be

deemed to be an affiliate of company A, and thus the applicant,

until SmallCo actually exercises its options to purchase such

shares. In order to prevent BigCo from circumventing the intent of

the rule which requires such options to be considered on a fully

diluted basis, the option is not considered to have present effect

in this case.

Example 3 for paragraph (d)(5). If company A has entered into an

agreement to merge with company B in the future, the situation is

treated as though the merger has taken place.

(6) Affiliation under voting trusts. (i) Stock interests held in

trust shall be deemed controlled by any person who holds or shares the

power to vote such stock, to any person who has the sole power to sell

such stock, and to any person who has the right to revoke the trust at

will or to replace the trustee at will.

(ii) If a trustee has a familial, personal or extra-trust business

relationship to the grantor or the beneficiary, the stock interests

held in trust will be deemed controlled by the grantor or beneficiary,

as appropriate.

(iii) If the primary purpose of a voting trust, or similar

agreement, is to separate voting power from beneficial ownership of

voting stock for the purpose of shifting control of or the power to

control a concern in order that such concern or another concern may

meet the Commission's size standards, such voting trust shall not be

considered valid for this purpose regardless of whether it is or is not

recognized within the appropriate jurisdiction.

(7) Affiliation through common management. Affiliation generally

arises where officers, directors, or key employees serve as the

majority or otherwise as the controlling element of the board of

directors and/or the management of another entity.

(8) Affiliation through common facilities. Affiliation generally

arises where one concern shares office space and/or employees and/or

other facilities with another concern, particularly where such concerns

are in the same or related industry or field of operations, or where

such concerns were formerly affiliated, and through these sharing

arrangements one concern has control, or potential control, of the

other concern.

(9) Affiliation through contractual relationships. Affiliation

generally arises where one concern is dependent upon another concern

for contracts and business to such a degree that one concern has

control, or potential control, of the other concern.

(10) Affiliation under joint venture arrangements. (i) A joint

venture for size determination purposes is an association of concerns

and/or individuals, with interests in any degree or proportion, formed

by contract, express or implied, to engage in and carry out a single,

specific business venture for joint profit for which purpose they

combine their efforts, property, money, skill and knowledge, but not on

a continuing or permanent basis for conducting business generally. The

determination whether an entity is a joint venture is based upon the

facts of the business operation, regardless of how the business

operation may be designated by the parties involved. An agreement to

share profits/losses proportionate to each party's contribution to the

business operation is a significant factor in determining whether the

business operation is a joint venture.

(ii) The parties to a joint venture are considered to be affiliated

with each other.

Sec. 22.225 Certifications, disclosures, records maintenance and

audits.

(a) Short-form applications: certifications and disclosure. In

addition to certifications and disclosures required by part 1, subpart

Q, of this chapter, each applicant for a paging license which qualifies

as a small business or consortium of small businesses shall append the

following information as an exhibit to its FCC Form 175:

(1) The identity of the applicant's controlling principals and

affiliates, and, if a consortium of small businesses, the members in

the joint venture; and

(2) The applicant's gross revenues, computed in accordance with

Sec. 22.223.

(b) Long form applications: certifications and disclosure. Each

applicant submitting a long-form application for a paging geographic

area authorization and qualifying as a small

[[Page 11633]]

business shall, in an exhibit to its long-form application:

(1) Disclose separately and in the aggregate the gross revenues,

computed in accordance with Sec. 22.223, for each of the following: the

applicant, the applicant's affiliates, the applicant's controlling

principals, and, if a consortium of small businesses, the members of

the joint venture;

(2) List and summarize all agreements or other instruments (with

appropriate references to specific provisions in the text of such

agreements and instruments) that support the applicant's eligibility as

a small business under Secs. 22.217 through 22.223, including the

establishment of de facto and de jure control; such agreements and

instruments include, but are not limited to, articles of incorporation

and bylaws, shareholder agreements, voting or other trust agreements,

franchise agreements, and any other relevant agreements, including

letters of intent, oral or written; and

(3) List and summarize any investor protection agreements,

including rights of first refusal, supermajority clauses, options, veto

rights, and rights to hire and fire employees and to appoint members to

boards of directors or management committees.

(c) Records maintenance. All winning bidders qualifying as small

businesses shall maintain at their principal place of business an

updated file of ownership, revenue, and asset information, including

any documents necessary to establish eligibility as a small business

and/or consortium of small businesses under Sec. 22.223. Licensees (and

their successors-in-interest) shall maintain such files for the term of

the license. Applicants that do not obtain the license(s) for which

they applied shall maintain such files until the grant of such

license(s) is final, or one year from the date of the filing of their

short-form application (FCC Form 175), whichever is earlier.

(d) Audits. (1) Applicants and licensees claiming eligibility as a

small business or consortium of small businesses under Secs. 22.217

through 22.223 shall be subject to audits by the Commission. Selection

for audit may be random, on information, or on the basis of other

factors.

(2) Consent to such audits is part of the certification included in

the short-form application (FCC Form 175). Such consent shall include

consent to the audit of the applicant's or licensee's books, documents

and other material (including accounting procedures and practices)

regardless of form or type, sufficient to confirm that such applicant's

or licensee's representations are, and remain, accurate. Such consent

shall include inspection at all reasonable times of the facilities, or

parts thereof, engaged in providing and transacting business, or

keeping records regarding licensed paging service and shall also

include consent to the interview of principals, employees, customers

and suppliers of the applicant or licensee.

(e) Definitions. The terms affiliate, small business, consortium of

small businesses, and gross revenues, used in this section are defined

in Sec. 22.223.

Sec. 22.227 Petitions to deny and limitations on settlements.

(a) Procedures regarding petitions to deny long-form applications

in the paging service will be governed by Secs. 1.2108(b) through

1.2108(d) of this chapter, Sec. 22.130, and Sec. 90.163.

(b) The consideration that an individual or an entity will be

permitted to receive for agreeing to withdraw an application or a

petition to deny will be limited by the provisions set forth in

Sec. 22.129, Sec. 90.162, and Sec. 1.2105(c) of this chapter.

11. Section 22.313 is amended by revising paragraphs (a)(4), (a)(5)

and adding new paragraph (a)(6) to read as follows:

Sec. 22.313 Station identification.

* * * * *

(a) * * *

(4) Stations using Basic Exchange Telephone Radio Systems in the

Rural Radiotelephone Service;

(5) Nationwide network paging stations operating on 931 MHz

channels; or,

(6) Stations operating pursuant to paging geographic area

authorizations.

* * * * *

12. Section 22.352 is amended by revising the introductory

paragraph to read as follows:

Sec. 22.352 Protection from interference.

Public Mobile Service stations operating in accordance with FCC

rules that provide technical channel assignment criteria for the radio

service and channels involved, all other applicable FCC rules, and the

terms and conditions of their authorizations are normally considered to

be non-interfering. If the FCC determines, however, that interference

that significantly interrupts or degrades a radio service is being

caused, it may, in accordance with the provisions of sections 303(f)

and 316 of the Communications Act of 1934, as amended, (47 U.S.C.

303(f), 316), require modifications to any Public Mobile station as

necessary to eliminate such interference.

* * * * *

13. A new Sec. 22.503 is added, to read as follows:

Sec. 22.503 Paging geographic area authorizations.

The FCC considers applications for and issues paging geographic

area authorizations in the Paging and Radiotelephone Service in

accordance with the rules in this section. Each paging geographic area

authorization contains conditions requiring compliance with paragraphs

(h) and (i) of this section.

(a) Channels. The FCC may issue a paging geographic area

authorization for any channel listed in Sec. 22.531 of this part or for

any channel pair listed in Sec. 22.561 of this part.

(b) Paging geographic areas. The paging geographic areas are as

follows:

(1) The Nationwide paging geographic area comprises the District of

Columbia and all States, Territories and possessions of the United

States of America.

(2) The Major Trading Areas (MTAs) as defined in the Rand McNally

1992 Commercial Atlas & Marketing Guide, 123rd Edition, at pages 38-39,

with the following changes and additions:

(i) The Seattle paging geographic area does not include Alaska.

(ii) Alaska is a paging geographic area.

(iii) Guam and the Northern Mariana Islands (combined) are a paging

geographic area.

(iv) Puerto Rico and the United States Virgin Islands (combined)

are a paging geographic area.

(v) American Samoa is a paging geographic area.

(3) The Economic Areas (EAs), as defined by the Department of

Commerce, Bureau of Economic Analysis.

(c) Availability. The FCC may determine whether to issue a paging

geographic area authorization for any specific channel or channel pair

in any specific paging geographic area. The FCC may replace existing

site specific authorizations for facilities on a channel or channel

pair located in a paging geographic area with a paging geographic area

authorization for that channel or channel pair, if in its sole

discretion, the FCC determines that the public interest would be served

by such replacement.

(d) Filing windows. The FCC accepts applications for paging

geographic area authorizations only during filing windows. The FCC

issues Public Notices announcing in advance the dates of the filing

windows, and the

[[Page 11634]]

specific paging geographic areas and channels for which applications

may be accepted.

(e) One grant per geographic area. The FCC may grant one and only

one application for a paging geographic area authorization for any

specific channel or channel pair in any specific paging geographic area

defined in paragraph (b) of this section. Selection from among mutually

exclusive applications for a paging geographic area authorization will

be made in accordance with the procedures in Secs. 22.131 and 22.200

through 22.299. If after the selection process but prior to filing a

``long form'' application, a successful bidder decides to partition the

paging geographic area, the FCC may require and accept multiple ``long

form'' applications from the consortium members.

(f) Exclusive right to expand. During the term of a paging

geographic area authorization, the FCC does not accept, from anyone

other than the paging geographic area licensee, any major application

for authorization to operate a facility that would serve unserved area

within the paging geographic area specified in that paging geographic

area authorization, on the channel specified in that paging geographic

area authorization, unless any extension of the interfering contour of

the proposed facility falls:

(1) Within the composite interfering contour of another licensee;

or,

(2) Into unserved area and the paging geographic area licensee

consents to such extension.

(g) Subsequent applications not accepted. During the term of a

paging geographic area authorization, the FCC does not accept any

application for authorization relating to a facility that is or would

be located within the paging geographic area specified in that paging

geographic area authorization, on the channel specified in that paging

geographic area authorization, except in the following situations:

(1) FCC grant of an application authorizing the construction of the

facility could have a significant environmental effect as defined by

Sec. 1.1307 of this chapter. See Sec. 22.115(a)(5).

(2) Specific international coordination procedures are required,

prior to assignment of a channel to the facility, pursuant to a treaty

or other agreement between the United States government and the

government of Canada or Mexico. See Sec. 22.169.

(3) The paging geographic area licensee or another licensee of a

system within the paging geographic area applies to assign its

authorization or for FCC consent to a transfer of control.

(h) Adjacent geographic area coordination required. Before

constructing a facility for which the interfering contour (as defined

in Sec. 22.537 or Sec. 22.567, as appropriate for the channel involved)

would extend into another paging geographic area, a paging geographic

area licensee must obtain the consent of the relevant co-channel paging

geographic area licensee, if any, into whose area the interfering

contour would extend. In the event that there is no co-channel paging

geographic area licensee from whom to obtain consent in the area into

which the interfering contour would extend, the facility may be

constructed and operated subject to the condition that, at such time as

the FCC issues a paging geographic area license for that adjacent

geographic area, either consent must be obtained or the facility

modified or eliminated such that the interfering contour no longer

extends into the adjacent geographic area.

(i) Protection of existing service. All facilities constructed and

operated pursuant to a paging geographic area authorization must

provide co-channel interference protection in accordance with

Sec. 22.537 or Sec. 22.567, as appropriate for the channel involved, to

all co-channel facilities of other licensees within the paging

geographic area that were authorized on May 12, 1997 and have remained

authorized continuously since that date.

(j) Site location restriction. The transmitting antenna of each

facility constructed and operated pursuant to a paging geographic area

authorization must be located within the paging geographic area

specified in the authorization.

(k) Coverage requirements. Failure by a paging geographic area

licensee to meet either of the coverage requirements in paragraphs

(k)(1) and (k)(2) of this section, or alternatively, the substantial

service requirement in paragraph (k)(3) of this section, may result in

automatic termination or non-renewal of a paging geographic area

license. For the purpose of this paragraph, to ``cover'' area means to

include geographic area within the composite of the service contour(s)

determined by the methods of Secs. 22.537 or 22.567, as appropriate for

the particular channel involved. Licensees may determine the population

of geographic areas included within their service contours using either

the 1990 census or the 2000 census, but not both.

(1) No later than three years after the initial grant of a paging

geographic area authorization, the licensee must construct or otherwise

acquire and operate sufficient facilities to cover one third of the

population in the paging geographic area. The licensee must notify the

FCC (FCC Form 489), no later than 15 days after the end of the three

year period, either that it has satisfied this requirement or that it

plans to satisfy the alternative requirement to provide substantial

service in accordance with paragraph (k)(3) of this section.

(2) No later than five years after the initial grant of a paging

geographic area authorization, the licensee must construct or otherwise

acquire and operate sufficient facilities to cover two thirds of the

population in the paging geographic area. The licensee must notify the

FCC (FCC Form 489), no later than 15 days after the end of the five

year period, either that it has satisfied this requirement or that it

has satisfied the alternative requirement to provide substantial

service in accordance with paragraph (k)(3) of this section.

(3) As an alternative to the coverage requirements of paragraphs

(k)(1) and (k)(2) of this section, the paging geographic area licensee

may demonstrate that, no later than five years after the initial grant

of its paging geographic area authorization, it provides substantial

service to the paging geographic area. ``Substantial service'' means

service that is sound, favorable, and substantially above a level of

mediocre service that would barely warrant renewal.

14. Section 22.507 is revised to read as follows:

Sec. 22.507 Number of transmitters per station.

This section concerns the number of transmitters licensed under

each station authorization in the Paging and Radiotelephone Service,

other than paging geographic area authorizations.

(a) Operationally related transmitters. Each station must have at

least one transmitter. There is no limit to the number of transmitters

that a station may comprise. However, transmitters within a station

should be operationally related and/or should serve the same general

geographical area. Operationally related transmitters are those that

operate together as a system (e.g., trunked systems, simulcast

systems), rather than independently.

(b) Split of large systems. The FCC may split wide-area systems

into two or more stations for administrative convenience. Except for

nationwide paging and other operationally related transmitters,

transmitters that are widely separated geographically are not licensed

under a single authorization.

(c) Consolidation of separate stations. The FCC may consolidate

separately authorized stations upon request (FCC

[[Page 11635]]

Form 600) of the licensee, if appropriate under paragraph (a) of this

section.

(d) Replacement of site-by-site authorizations with single

authorization. After a paging geographic area authorization for a

channel has been issued, the FCC may, on its own motion, replace the

authorization(s) of any other licensee (for facilities located within

that paging geographic area on that channel) with a single replacement

authorization.

15. Section 22.529 is revised to read as follows:

Sec. 22.529 Application requirements for the Paging and Radiotelephone

Service.

In addition to information required by Subparts B and D of this

part, applications for authorization in the Paging and Radiotelephone

Service must contain the applicable information and data described in

this section.

(a) Administrative information. The following information,

associated with Form FCC 600, Schedule A, is required as indicated.

Each application of any type, including applications for paging

geographic area authorizations, must contain one and only one Schedule

A.

(1) The purpose of the filing is required for each application of

any type.

(2) The geographic area designator, channel and geographic area

name are required only for each application for a paging geographic

area authorization.

(3) The FCC control point number, if any, the location (street

address, city or town, state), the telephone number and an indication

of the desired database action are required only for each application

proposing to add or delete a control point.

(4) The FCC location number, file number and location (street

address, city or town, state) of authorized facilities that have not

been constructed are required only for each application requesting an

extension of time to construct those facilities.

(b) Technical data. The following data, associated with FCC Form

600, Schedule B, are required as indicated for each application that is

not an application for a paging geographic area authorization.

Applications for a paging geographic area authorization must not

contain Schedule B. Other type of applications may contain as many

Schedule Bs as are necessary for the intended purpose.

(1) For each transmitting antenna site to be added, deleted or

modified, the following are required: An indication of the desired

database action, the FCC location number, if any, the street address or

other description of the transmitting antenna site, the city, county

and state, the geographical coordinates (latitude and longitude),

correct to 1 second, of the transmitting antenna site (NAD

27 required, NAD 83 optional), and in the case of a proposed relocation

of a transmitting antenna, the FCC location number and geographical

coordinates, correct to 1 second, of the current

transmitting antenna site, and an indication of the datum (NAD 27 or

NAD 83) to which the geographical coordinates of the current location

are referenced.

(2) For each transmitting antenna site to be added, deleted or

modified, the following supplementary information is required: An

indication as to whether or not the transmitting antenna site is within

200 kilometers (124 miles) of the U.S.-Mexico border, and an indication

as to whether or not the transmitting antenna site is North of Line A

or East of Line C. Line A and Line C are defined in Sec. 2.1 of this

chapter. For each adjacent geographic area within 200 kilometers (124

miles) of each transmitting antenna site to be added, deleted or

modified, the geographic area designator and name, and the shortest

distance (in kilometers) to the boundary of that geographic area.

(3) For each antenna to be added, deleted or modified, the

following is required: An indication of the desired database action, an

indication of whether the antenna already exists or is merely proposed,

the FCC antenna number, if any, the type of antenna (e.g., collinear,

Yagi, half-wave, corner reflector, panel, etc.), the name of the

antenna manufacturer and the model number of the antenna, the height

(in meters) above average terrain of the center of radiation of the

antenna, the beamwidth of the main lobe of the horizontal radiation

pattern of the electric field of the antenna, the height (in meters) to

the tip of the antenna above ground level, a polar plot of the

horizontal gain pattern of the antenna, the antenna gain in the maximum

lobe and the electric field polarization of the wave emitted by the

antenna when installed as proposed.

(i) For each transmitter to be added, deleted or modified, the

following is required: the FCC transmitter number, if any, an

indication of the desired database action, the center frequency of the

requested channel, the transmitter classification (e.g. base, fixed

mobile), the designator for any non-standard emission type to be used,

including bandwidth and modulation type, and the maximum effective

radiated power.

(ii) For each of the eight cardinal radials, the antenna height

above the average elevation along the radial, and the effective

radiated power of each transmitter in the direction of the radial.

(iii) For each transmitter proposed to transmit on a channel

reserved for point-to-multipoint operation involving transmission to

four or more points of communications (i.e. base transmitters), the

following is required for each point of communication: an indication of

the desired database action, the FCC transmitter number or other key

indicator (e.g., I, II, III, IV), the location (city or town, state),

and the geographical coordinates (latitude and longitude, NAD 27).

16. Section 22.531 is amended by revising the preceding centered

heading, the section heading and introductory text, and adding a new

paragraph (f), to read as follows:

Paging Operation

Sec. 22.531 Channels for paging operation.

The following channels are allocated for assignment to base

transmitters that provide paging service, either individually or

collectively under a paging geographic area authorization. Unless

otherwise indicated, all channels have a bandwidth of 20 kHz and are

designated by their center frequencies in MegaHertz.

* * * * *

(f) For the purpose of issuing paging geographic area

authorizations, the paging geographic areas used for the UHF channels

are the MTAs (see Sec. 22.503(b)(2)), and the paging geographic areas

used for the low and high VHF channels are the EAs (see

Sec. 22.503(b)(3)).

17. Section 22.539 is amended by revising paragraph (e) to read as

follows:

Sec. 22.539 Additional channel policies.

* * * * *

(e) Additional transmitters on same channel. Notwithstanding other

provisions of this section, the following applications are not

considered to be requests for an additional paging channel:

(1) Applications for transmitters to be located in the same

geographic area as an authorized station controlled by the applicant,

and to operate on the same paging channel;

(2) Applications for transmitters to be located within a paging

geographic area for which the applicant holds the paging geographic

area authorization for the requested channel; and,

(3) Applications for paging geographic area authorizations.

* * * * *

Section 22.551 is revised to read as follows:

[[Page 11636]]

Sec. 22.551 Nationwide network paging service.

The rules in this section govern the application for and provision

of nationwide network paging service on the channels reserved

specifically for such service in Sec. 22.531(b).

(a) Nationwide network providers; organizers. If and when a

nationwide network paging channel becomes available for assignment, the

FCC will issue a Public Notice inviting applications from eligibles

seeking to provide or organize a nationwide network paging service. The

Public Notice will provide complete details regarding application

requirements and procedures.

(b) Licensing. The FCC may issue a paging geographic area

authorization to the nationwide network provider or organizer. All

transmissions of nationwide network messages on the channels reserved

for such service in Sec. 22.531(b) are authorized solely under the

authorization(s) of the nationwide network provider or organizer,

notwithstanding whether or not the messages pass through facilities

owned, operated or licensed to affiliated local carriers.

Section 22.559 is amended by revising the heading and introductory

text to read as follows:

Sec. 22.559 Paging application requirements.

In addition to information required by Subparts B and D and

Sec. 22.529, applications for authorization to operate a paging

transmitter on the channels listed in Sec. 22.531, other than

applications for a paging geographic area authorization, must contain

the applicable supplementary information described in this section.

* * * * *

Section 22.561 is amended by revising the introductory text to read

as follows:

Sec. 22.561 Channels for one-way or two-way mobile operation.

The following channels are allocated for paired assignment to

transmitters that provide (or support other transmitters that provide)

one-way or two-way public land mobile service, either individually or

collectively under a paging geographic area authorization. The paging

geographic areas used for these channels are the EAs (see

Sec. 22.503(b)(3)). These channels may be assigned for use by mobile or

base transmitters as indicated, and or by fixed transmitters (including

control, repeater or other fixed transmitters). The mobile channels may

also be assigned for use by base or fixed transmitters under certain

circumstances (see Sec. 22.567(h)). Unless otherwise indicated, all

channels have a bandwidth of 20 kHz and are designated by their center

frequencies in MegaHertz.

* * * * *

Section 22.569 is amended by revising paragraph (d) to read as

follows:

Sec. 22.569 Additional channel policies.

* * * * *

(d) Additional transmitters on same channel. Notwithstanding other

provisions of this section, the following applications are not

considered to be requests for an additional channel:

(1) Applications for transmitters to be located in the same

geographic area as an authorized station controlled by the applicant,

and to operate on the same paging channel;

(2) Applications for transmitters to be located within a paging

geographic area for which the applicant holds the paging geographic

area authorization for the requested channel; and,

(3) Applications for paging geographic area authorizations.

* * * * *

Section 22.589 is amended by revising the introductory text to read

as follows:

Sec. 22.589 One-way or two-way application requirements.

In addition to information required by subparts B and D and

Sec. 22.529, applications for authorization to operate a paging

transmitter on the channels listed in Sec. 22.531, other than

applications for a paging geographic area authorization, must contain

the applicable supplementary information described in this section.

* * * * *

Sec. 22.717 [Amended]

Section 22.717 is amended by removing paragraph (c).

A new Sec. 22.721 is added to read as follows:

Sec. 22.721 Geographic area authorizations.

Eligible persons may apply for a paging geographic area

authorization in the Rural Radiotelephone Service, on the channel pairs

listed in Sec. 22.725, by following the procedures and requirements set

forth in Sec. 22.503 for paging geographic area authorizations.

25. A new Sec. 22.723 is added to read as follows:

Sec. 22.723 Secondary site-by-site authorizations.

Authorizations for new facilities (including new sites and

additional channel pairs for existing sites) in the Rural

Radiotelephone Service (including BETRS facilities) may be granted

after May 12, 1997 only on the condition that such authorizations shall

be secondary to any existing or future co-channel paging geographic

area authorization in the Paging and Radiotelephone Service or the

Rural Radiotelephone Service. If the paging geographic area licensee

notifies the Rural Radiotelephone Service licensee that operation of a

co-channel secondary facility must be discontinued because it may cause

interference to existing or planned facilities, the Rural

Radiotelephone Service licensee must discontinue operation of that

facility on the particular channel pair involved no later than six

months after such notice.

II. Part 90 of Chapter I of Title 47 of the Code of Federal

Regulations is amended as follows:

1. The authority citation for part 90 continues to read as follows:

PART 90--PRIVATE LAND MOBILE RADIO SERVICES

Authority: Sec. 4, 303, 309, and 332, 48 Stat. 1066, 1082, as

amended; 47 U.S.C 154, 303, 309, and 332, unless otherwise noted.

2. Section 90.162 is amended by adding paragraph (f) to read as

follows:

Sec. 90.162 Agreements to dismiss applications, amendments, or

pleadings

* * * * *

(f) Notwithstanding the provisions of this section, any payments

made or received in exchange for withdrawing a short-form application

for an FCC authorization awarded through competitive bidding shall be

subject to the restrictions set forth in section Sec. 1.2105(c) of this

chapter.

3. A new Sec. 90.493 is added to read as follows:

Sec. 90.493 Paging operations on exclusive channels in the 929-930 MHz

band.

Paging operations on the exclusive channels in the 929-930 MHz band

are subject to the rules set forth in this section.

(a) Exclusive channels. The center frequencies of the channels in

the 929-930 MHz band that may be assigned on an exclusive basis are as

follows: 929.0125, 929.1125, 929.1375, 929.1875, 929.2125, 929.2375,

929.2875, 929.3125, 929.3375, 929.3625, 929.3875, 929.4125, 929.4375,

929.4625, 929.4875, 929.5125, 929.5375, 929.5625, 929.5875, 929.6125,

929.6375, 929.6625, 929.6875, 929.7125, 929.7375, 929.7625, 929.7875,

929.8125, 929.8375, 929.8625, 929.8875, 929.9125, 929.9375, 929.9625,

and 929.9875 MHz.

(b) Part 22 licensing, construction and operation rules apply.

Licensing, construction and operation of paging stations on the

exclusive channels in the 929-930 MHz band are subject to the

application filing, licensing procedure, auction procedure,

construction, operation and notification rules and requirements that

are set forth in part 22

[[Page 11637]]

of this chapter for paging stations operating in the 931-932 MHz band,

instead of procedures elsewhere in this part.

(c) Part 22 power limits apply; type acceptance required. Paging

operations on the exclusive channels in the 929-930 MHz band are

subject to the transmitting power limits set forth in part 22 of this

chapter for paging stations operating in the 931-932 MHz band, instead

of power limits elsewhere in this part. Transmitters used on the

exclusive channels in the 929-930 MHz band must be of a type accepted

under either part 22 of this chapter or this part (or both).

4. Section 90.494 is amended by revising the heading, paragraphs

(a), (f) and (g), to read as follows:

Sec. 90.494 Paging operations on shared channels in the 929-930 MHz

band.

(a) This section applies to licensing of paging stations on the

shared (non-exclusive) channels in the 929-930 MHz band. The center

frequencies of these channels are listed in paragraph (b) of this

section.

* * * * *

(f) The effective radiated power for base stations providing paging

service on the shared channels must not exceed 3500 Watts.

(g) Licenses may be granted on these shared paging channels only

for expansion (addition of new sites or relocation of existing sites)

or other modification, assignment or transfer of control of existing,

licensed private (including Special Emergency Radio Service) or

commercial paging systems, and for new private (including Special

Emergency Radio Service), internal-use paging systems. Any application

for authority to operate a new commercial paging system on any of these

shared channels is unacceptable for filing.

Sec. 90.495 [Removed]

5. Section 90.495 is removed.

Sec. 90.496 [Removed]

6. Section 90.496 is removed.

[FR Doc. 97-6092 Filed 3-11-97; 8:45 am]

BILLING CODE 6712-01-P