Plan for Sharing the Costs of Microwave Relocation

FEDERAL COMMUNICATIONS COMMISSION

47 CFR Parts 24 and 101

[WT Docket No. 95-157; FCC 97-48]

Plan for Sharing the Costs of Microwave Relocation

AGENCY: Federal Communications Commission.

ACTION: Final rule.

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SUMMARY: By this Second Report and Order, the Commission amends certain

aspects of the microwave relocation rules, which were first established

in the Emerging Technologies proceeding and were modified and clarified

in the First Report and Order and Further Notice of Proposed Rule

Making in this docket. Specifically, the Commission adjusts the

relocation timetables for the broadband PCS C, D, E, and F blocks by

shortening the voluntary negotiation period applicable to each block

for non-public safety incumbents by one year. This change will

facilitate the relocation process for the most recently licensed PCS

blocks and will create incentives for all parties to enter into early

negotiations. The Commission does not alter the timetable for public

safety incumbents in the broadband PCS C, D, E, and F blocks. In

addition, the Commission permits microwave incumbents to participate in

the cost-sharing program adopted in the First Report and Order. The

cost-sharing program currently allows PCS licensees who relocate

microwave incumbents to obtain reimbursement rights and collect

reimbursement under the cost-sharing plan from later-entrant PCS

licensees that benefit from the relocation.

EFFECTIVE DATE: May 19, 1997.

FOR FURTHER INFORMATION CONTACT: Michael Hamra, Wireless

Telecommunications Bureau, (202) 418-0620.

SUPPLEMENTARY INFORMATION: This is a synopsis of the Second Report and

Order, adopted February 13, 1997 and released February 27, 1997. The

complete text of this Second Report and Order is available for

inspection and copying during normal business hours in the FCC

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

also may be purchased from the Commission's copy contractor,

International Transcription Service, at (202) 857-3800, 2100 M Street,

NW., Suite 140, Washington, DC 20037.

I. Background

1. In the Emerging Technologies proceeding, ET Docket No. 92-9, 57

FR 49020 (October 29, 1992) the Commission reallocated the 1850-1990,

2110-2150, and 2160-2200 MHz bands from private and common carrier

fixed microwave services to emerging technology services. In that

proceeding the Commission established the procedures for relocating 2

GHz microwave incumbents to available frequencies in higher bands or to

other media. These procedures are intended to encourage incumbents to

negotiate relocation agreements with emerging technology licensees or

manufacturers of unlicensed devices to accelerate the deployment of

emerging technologies.

2. The relocation process established in that proceeding provided

two negotiation periods that must expire before an emerging technology

licensee may request involuntary relocation of the incumbent. The first

is a fixed two-year period for voluntary negotiations--three years for

public safety incumbents, e.g., police, fire, and emergency medical

licensees--commencing with the Commission's acceptance of long form

(Form 600) applications for emerging technology services. During that

time period, the emerging technology providers and microwave licensees

may negotiate any mutually acceptable relocation agreement. Such

negotiations are strictly voluntary. At any time following the

conclusion of the voluntary negotiation period, the emerging technology

licensee may initiate a one-year mandatory negotiation period--two

years for public safety licensees. During this period the parties are

required to negotiate in good faith. If the parties fail to reach an

agreement during these periods, the emerging technology provider may

request involuntary relocation of the existing facility. As a condition

of relocation, however, the emerging technology licensee is required to

pay the cost of relocating the incumbent to a comparable facility.

3. In the Commission's First Report and Order in WT Docket 95-157,

61 FR 29679 (June 12, 1996) the Commission adopted a cost-sharing

formula that allows a PCS licensee who relocates an incumbent microwave

system to obtain reimbursement rights and collect reimbursement from

later-entrant PCS licensees that benefit from the relocation under a

cost-sharing plan administered by the industry. The Commission also

addressed concerns

[[Page 12753]]

raised by PCS licensees that negotiations during the voluntary period

for the A and B blocks were not progressing as fast as they should and

were potentially delaying the deployment of PCS service to the public.

The Commission decided that altering the timetable for A and B block

negotiation periods at that time would not be in the public interest

because ongoing negotiations were likely to be interrupted, while

parties re-assessed their positions to the detriment of the process and

ultimately, the public interest. In the Further Notice of Proposed Rule

Making (Further NPRM) 61 FR 24470 (May 15, 1996) accompanying the First

Report and Order, however, the Commission sought comment on a proposal

to shorten the voluntary negotiation period and lengthen the mandatory

negotiation period for the D, E, and F blocks and on whether these same

changes should apply to the C block.

4. In the Further NPRM, the Commission also considered whether to

allow microwave incumbents who pay their own relocation expenses to

participate in the cost-sharing plan adopted in the First Report and

Order under certain conditions. To further expedite clearing of the

band, the Commission tentatively concluded that incumbents should be

permitted to relocate their own links and obtain reimbursement rights

pursuant to the cost-sharing plan.

II. Discussion

A. Voluntary and Mandatory Negotiation Periods for D, E, and F Blocks

5. The comments of both PCS licensees and microwave incumbents have

confirmed that most incumbents are willing to negotiate reasonable

relocation agreements during the voluntary negotiation period. As many

PCS licensees argue, however, the current length of the voluntary

period unnecessarily provides opportunities for some incumbents to

demand excessive premiums from PCS licensees after they have invested

substantial amounts at auction and face competitive pressure to

construct their systems and enter the market, particularly on 10 MHz

blocks where PCS licensees have limited flexibility to build around

incumbents. In addition, because of the staggered timing of PCS

licensing, D, E, and F block licensees who are unable to negotiate

voluntary agreements cannot initiate mandatory negotiations for more

than a year after their A and B block competitors have begun such

negotiations. Thus, the current rules give the A and B block licensees

a significant ``head start'' in the relocation process.

6. The Commission agrees that shortening the voluntary period for

non-public safety incumbents in the D, E, and F blocks by one year will

spur voluntary negotiations and speed the deployment of PCS services to

the public. This modification will also enhance competitive parity by

reducing the A and B block licensees' head start in the relocation

process. The voluntary period for the A and B block licensees expires

on April 5, 1997 (with respect to non-public safety incumbents), at

which point A and B block licensees may begin mandatory negotiations.

Shortening the voluntary period for D, E, and F blocks will help

licensees in those blocks to initiate mandatory negotiations a year

earlier than under the current rules, providing some compensation for

the fact that the D, E, and F block voluntary negotiation period

commenced approximately twenty-one months after the A and B block

voluntary negotiation period. The A and B block voluntary negotiation

period commenced April 5, 1995. The D, E, and F block voluntary

negotiation period will commence January 30, 1997, when long forms are

filed. The Commission therefore amends the rules and shortens the

voluntary negotiation period for the D, E, and F blocks by one year for

non-public safety incumbents.

7. The Commission concludes that shortening the voluntary

negotiation period for non-public safety incumbents in the D, E, and F

blocks at this juncture will not adversely affect such incumbents. The

Commission notes that microwave incumbents have been on notice since

October 1992 that they will be required to relocate to alternative

spectrum. Moreover, the Commission's experience with voluntary

negotiations in the A and B blocks indicates that most incumbents who

are motivated to enter into voluntary agreements are willing to do so

early in the voluntary period and do not require prolonged negotiations

to reach an agreement. Under the timetables adopted here, D, E, and F

block incumbents will continue to have a reasonable window for

voluntary negotiations and may continue to negotiate in the mandatory

negotiation period. Moreover, if parties are successfully negotiating

an agreement during the voluntary negotiation period and believe that

more time is needed, they may agree to postpone commencement of the

mandatory period. Finally, shortening of the voluntary period does not

alter the Commission's fundamental policy that incumbents must be made

whole for the reasonable expense of being relocated to comparable

facilities, regardless of whether relocation occurs in the voluntary

period, the mandatory period, or as a result of involuntary relocation.

8. While the Commission adopts it's proposal to shorten the

voluntary negotiation period for non-public safety incumbents in the D,

E, and F blocks, the Commission concludes it is unnecessary to lengthen

the one-year mandatory negotiation period. Because the D, E, and F

blocks are 10 MHz blocks, there are fewer links to relocate than in the

30 MHz A, B, and C blocks. In addition, no additional time should be

required for mandatory negotiation in the D, E, and F blocks because

many of the links will have been relocated by A, B, and C block

licensees by the time the D, E, and F block licensees commence

negotiations. The Commission is encouraged, from our discussions with

industry, by the speed with which relocation agreements are being

negotiated and believe that a total of two years, (one year voluntary

and one year mandatory) is sufficient to accommodate negotiations

between non-public safety incumbents and D, E, and F block licensees.

Lengthening the mandatory negotiation period by one year, on the other

hand, will do little to accomplish the Commission's objective of

speeding the deployment of PCS services to the public. The Commission

also do not believe that non-public safety incumbents will be harmed by

a shorter combined negotiation period because in conjunction with these

changes, the Commission is providing microwave incumbents more

flexibility to self-relocate by permitting them to participate in the

Commission's cost-sharing plan (see, infra, para. 22). Consequently,

the Commission declines to increase the amount of time in the mandatory

period needed to complete the relocation process for these blocks.

9. The Commission declines to alter the voluntary or mandatory

negotiation periods for public safety incumbents in the D, E, and F

blocks. Under the Commission's current rules, public safety incumbents

in the 2 GHz band are distinguished from non-public safety 2 GHz

incumbents in that they have a three-year voluntary and a two-year

mandatory negotiation period. The Commission has given public safety

incumbents more time to negotiate and relocate because of the

importance of ensuring a seamless transition for facilities that

support vital emergency services such as police, fire, and emergency

medical treatment. In addition, the longer negotiation timetable

reflects the fact that public safety agencies typically operate under

[[Page 12754]]

greater budgetary constraints and longer planning cycles than non-

public safety entities. For example, the LA Sheriff's Department notes

that replacing its 2 GHz simulcast mobile network entails a lengthy

review and approval process in which numerous county personnel must

participate at all stages. APCO contends that for public safety

agencies, the relocation process requires significant commitment of

scarce agency time and resources to ensure that vital emergency

communications will not be compromised or disrupted. The Commission

agrees that these continue to be significant concerns that distinguish

public safety incumbents from other incumbents. The Commission further

concludes that there is insufficient support in the record for

modifying the negotiation timetable for public safety incumbents at

this time. Even prior to the commencement of negotiations, many public

safety agencies have begun to plan for relocation in reliance on the

existing rules. Because changing the rules could disrupt this process,

and because of the vital importance of providing the public with

reliable emergency communications, the Commission concludes that the

current relocation timetable for public safety agencies in the D, E,

and F blocks should be retained.

10. The Commission does not believe that retaining the current

relocation rules for public safety incumbents will adversely affect PCS

licensees in the D, E, and F blocks. Because public safety incumbents

account for fewer than 20 percent of the microwave facilities in all

PCS blocks, PCS licensees will be able to clear most of their spectrum

under the shorter timetable applicable to non-public safety licensees.

In addition, the Commission's experience after twenty-one months of

voluntary negotiations in the A and B blocks indicates that most public

safety incumbents in those blocks have entered into voluntary

negotiations with PCS licensees and are cooperating in the relocation

process. Based on this experience, the Commission anticipates that

public safety agencies in the D, E, and F blocks will not wait until

the conclusion of the voluntary period to begin negotiations requested

by D, E, and F block licensees and will make good-faith efforts to

complete the relocation process in a reasonable time. Because the

Commission believes that the current rules fairly balance the interests

of PCS licensees and public safety incumbents, the Commission concludes

that further alteration to the voluntary or mandatory negotiation

periods for public safety incumbents is unnecessary.

B. Voluntary and Mandatory Negotiation Periods for C Block

11. The C block winners are potentially at a greater disadvantage

compared to A and B block winners under the current voluntary

negotiation timetable. Currently the voluntary negotiation period for

non-public safety incumbents and A and B block licensees will expire

April 5, 1997, whereas the equivalent voluntary negotiation period for

C block will expire May 22, 1998. The C block winners are small

businesses that do not have financial resources similar to their A and

B block competitors. The C block is an entrepreneurs block that

restricted eligibility to applicants with gross revenues of less than

$125 million in each of the last two years and total assets of less

than $500 million at the time the applicants' short-form application

(Form 175) was filed. It is not as feasible for a small business to pay

premiums to accelerate negotiations. The purpose of the special C block

bidding rules is to encourage small business participation in PCS. The

Commission believes an extended voluntary negotiation period could

hinder or deter small businesses from effectively participating in the

PCS business because it increases the likelihood that they will incur

start-up business expenses such as relocation premiums and related

costs due to extended negotiations. The Communications Act requires the

Commission to eliminate market entry barriers for entrepreneurs and

small businesses. The Commission believes that modifying the

negotiation periods will eliminate market entry barriers pursuant to

Section 257 of the Communications Act and will assist small businesses

in C block to deploy service to the consumer faster. The Commission

concludes that these factors are sufficiently compelling to justify

modification of the voluntary negotiation period for non-public safety

incumbents, even though negotiations have commenced. The Commission

therefore shortens the voluntary negotiation period for C block to one

year for non-public safety incumbents, which will cause it to terminate

on May 22, 1997.

12. Similar to the Commission's decision not to extend the

mandatory negotiation period in the D, E, and F blocks, the Commission

also conclude that it is unnecessary to extend the mandatory

negotiation period for non-public safety incumbents in the C block. As

in the case of the D, E, and F blocks, the Commission believe that no

additional time is required for mandatory negotiations in the C block

because many C block links will have been relocated by A and B block

licensees by the time C block licensees commence mandatory

negotiations. The Commission also believes that a combined two-year

negotiation period will be sufficient for negotiations between C block

licensees and non-public safety incumbents, whereas lengthening the

mandatory period by one year could delay the deployment of PCS services

to the public. Also, microwave incumbents will have greater flexibility

in the relocation process because the Commission is permitting them to

participate in the Commission's cost-sharing plan (see, infra, para.

22). In addition, by retaining the one-year mandatory negotiation

period for C block, the Commission achieves greater symmetry with the

negotiations period for A and B blocks: the earliest that the mandatory

negotiation period for C block will expire is now May 22, 1998 for non-

public safety incumbents--approximately the same time as the A and B

block mandatory negotiation periods, which in most cases should expire

April 5, 1998. This will create greater parity between C block

entrepreneurs and their A and B block competitors in terms of clearing

the band and offering service to the public.

13. The Commission declines to alter the voluntary or mandatory

negotiation periods for public safety incumbents in the C block for the

same reasons the Commission has articulated for the D, E, and F blocks.

As modified, the voluntary negotiation period for the C block will

expire on May 22, 1997 for non-public safety incumbents--approximately

the same time as the A and B block voluntary negotiation periods, which

end April 5, 1997. The voluntary negotiation period for public safety

incumbents in the C block will remain unchanged and will end May 22,

1999--approximately one year after the voluntary negotiation period for

public safety incumbents in the A and B block voluntary negotiation

periods end, which is April 5, 1998.

C. Microwave Incumbent Participation in Cost-Sharing Plan

14. The Commission adopts it's tentative conclusion from the

Further Notice of Proposed Rule Making, to permit microwave incumbents

that relocate themselves to obtain reimbursement rights and collect

reimbursement under the Commission's cost-sharing plan from subsequent

PCS licensees that would have interfered with the relocated link had it

not been

[[Page 12755]]

moved. The Commission agrees with PCS licensees and microwave

incumbents who argue that incumbent participation will accelerate the

relocation process by promoting system-wide relocations. Incumbent

participation will also give microwave incumbents the option of

avoiding time-consuming negotiations, allowing for faster clearing of

the 2 GHz band in some instances. The Commission believes that

promoting system-wide relocation in this way may even reduce the

overall cost of clearing the 2 GHz band.

15. In concluding that microwave incumbents should be allowed to

participate in cost-sharing, the Commission agrees with commenters that

some safeguards are needed to ensure that voluntarily relocating

microwave incumbents do not seek reimbursement for unreasonable

expenses. The Commission therefore will impose the same restrictions on

reimbursement of incumbents that apply to PCS licensees. These include

the limitations under the cost-sharing plan on links for which

reimbursement may be sought, and the monetary cap on the amount a

relocator may be reimbursed for the relocation of each individual

microwave link.

16. The Commission also concludes that the cost-sharing formula,

when applied to microwave incumbents, should include depreciation.

First, a microwave incumbent who voluntarily relocates itself may

obtain benefits it would not realize if it waited to be relocated by a

PCS licensee. Early relocation by the incumbent on a voluntary basis

provides more options for obtaining alternative spectrum, more control

over the relocation process, and reduces uncertainty about further

operations. Depreciation ensures that the self-relocation pays for

these benefits rather than passing them on to a PCS licensee who

otherwise would not have relocated the incumbent until later. Second,

the Commission observed in the First Report and Order that depreciation

creates an incentive for the relocator to minimize costs because its

own share of the cost is not depreciated. The Commission concludes that

this element of the cost-sharing plan applies equally to microwave

incumbents who relocate themselves. Therefore, the Commission retains

depreciation as an incentive for microwave incumbents who relocate

themselves to minimize their relocation costs.

17. Finally, the Commission concludes that microwave incumbents who

self-relocate should be required to provide independent verification of

their relocation costs. Although the cost-sharing plan already requires

all relocators to keep documents of all expenses, the Commission

believe this additional safeguard is appropriate in the case of

incumbents seeking reimbursement. In the case of an incumbent who self-

relocates, it may be difficult for subsequent PCS licensees to verify

the incumbent's costs to determine whether they are compensable under

the cost-sharing plan. Therefore, any incumbent seeking reimbursement

under the cost-sharing plan must submit to the clearinghouse an

independent third party appraisal of its compensable relocation costs.

The appraisal should be based on the actual cost of replacing the

incumbent's system with comparable facilities, and should exclude the

cost of any equipment upgrades that would not be reimbursable under the

cost-sharing plan.

III. Conclusion

18.The changes the Commission makes to the timetables for the

voluntary and mandatory negotiation periods for the broadband PCS C, D,

E, and F blocks will facilitate negotiations between microwave

incumbents and PCS licensees. Allowing microwave incumbents to

participate in the cost-sharing plan will also encourage more rapid

system relocation and will reduce relocation costs. As a result of

these changes, PCS licensees will be able to speed their deployment of

service to the public.

IV. Procedural Matters

A. Regulatory Flexibility Act

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 Rule Making in WT Docket No. 95-

157. The Commission sought written comments on the proposals in the

NPRM, including the IRFA. The Commission's Final Regulatory Flexibility

Analysis (FRFA) in this Order conforms to the RFA, as amended by the

Contract With America Advancement Act of 1996.

Need for and Purpose of the Action: This Second Report and Order

(i) shortens the voluntary negotiation period for all non-public safety

microwave incumbents in the C, D, E, and F blocks by one year, (ii)

allows the microwave incumbents who self-relocate to obtain

reimbursement rights and collect reimbursement under the cost-sharing

formula. The changes adopted herein will facilitate the rapid

relocation of microwave facilities in the 2 GHz band and will

accelerate the deployment of PCS services to the public.

Summary of Significant Issues Raised by the Public Comments in

Response to the Initial Regulatory Flexibility Analysis: No comments

were submitted in response to the IRFA. However, two commenters to the

Further Notice of Proposed Rule Making, raised an issue that might

affect small business entities. The commenters, American Petroleum

Institute (API) and the American Public Power Association (APPA) argued

that shortening the voluntary negotiation periods would disrupt and

impose a significant burden on microwave incumbent businesses by

forcing them to negotiate an agreement during a shorter voluntary

negotiation period. Both commenters believe that without a two-year

voluntary negotiation period, incumbents will be forced to negotiate

during the mandatory negotiation period. The Commission does not

believe that successful negotiations will be forced into the mandatory

negotiation period. If successful negotiations are occurring, parties

may agree not to commence with the mandatory negotiation period and may

continue to negotiate successfully throughout a voluntary negotiation

period.

Description and Estimate of the Number of Small Entities To Which

Rule Will Apply: For purposes of this Order, the Small Business

Administration (SBA) has defined a small business for Standard

Industrial Classification (SIC) category 4813 (Telephone Communications

Except Radiotelephone) to be a small entity when it has fewer than

1,500 employees.

Estimates for Broadband PCS Services: The broadband PCS spectrum is

divided into six frequency blocks designated A through F. As set forth

in 47 CFR 24.720(b), the Commission has defined small businesses in the

C and F block auctions to mean a firm that had average gross revenues

of less than $40 million in the three previous calendar years. The

Commission's definition of a small business has been approved by the

SBA.

The Commission has auctioned broadband PCS licenses in the A, B, C,

D, E, and F blocks. The Commission does not have sufficient data to

determine how many small businesses bid successfully for licenses in

the A and B blocks. There are 81 non-defaulting winning bidders that

qualify as small entities in the C block PCS auctions. Based on this

information, the Commission conclude that the number of broadband PCS

licensees affected by the decisions in this Order includes, at

[[Page 12756]]

a minimum, the 81 non-defaulting winning bidders that qualified as

small entities in the C block broadband PCS auction.

The D, E, and F block auction closed January 14, 1997, but

presently there have been no licenses awarded for the D, E, and F block

auctions. Therefore, there are no small businesses providing these

services. However, there were 125 winning bidders and the Commission

anticipates a total of 1,479 licenses will be awarded in the D, E, and

F blocks. Participation in the F block was limited to entrepreneurs

with under $125 million in average gross revenues over the past three

years. More than 40 percent of the licenses in the D, E, and F blocks

were won by 93 small businesses. The Commission estimate that most, if

not all, of the small businesses will be awarded licenses.

Estimates for Microwave Services: Due to the nature of this private

service, the Commission does not have a definition for small business

with respect to microwave services. Therefore, the Commission will

utilize the SBA's definition applicable to radiotelephone companies--

i.e. an entity with less than 1,500 persons. The Census Bureau reports

that there were 1,176 such companies in operation for at least one year

at the end of 1992. Also, the Federal Communication Commission's Office

of Engineering and Technology developed a study in 1992 that provides

statistical data for all microwave incumbents in 1850 MHz to 1990 MHz

bands. Specifically, the study finds that in the 1850 MHz to 1990 MHz,

local governments, including public safety entities have 168 licensees;

petroleum companies have 67 licenses; power companies have 164

licenses; railroad companies have 18 licenses; and all other microwave

incumbents in this band have 143 licenses. However, the Commission does

not have specific statistics that determine how many of these companies

are small businesses. In addition, this Second Report and Order only

affects microwave incumbents in PCS blocks C, D, E, and F. Therefore,

this Second Report and Order does not affect all microwave incumbents

in the 1850 MHz to 1990 MHz band.

However, the Commission recognizes that a number of microwave

incumbents have already relocated due to the current negotiations of A,

B, and C block PCS licensees. The Commission cannot determine at this

time how many licensees have moved. The Commission therefore is unable

to estimate the number of microwave service providers that qualify

under the SBA's definition.

Description, Projected Reporting, Record keeping and Other

Compliance Requirements: In this Second Report and Order the Commission

allows microwave incumbents who voluntarily relocate their links to

obtain reimbursement from subsequent PCS licensees under the cost-

sharing plan. Microwave incumbents that participate in the cost-sharing

plan will be required to submit documentation itemizing the amount

spent for the actual cost of relocating the links. The voluntarily

relocating microwave incumbent will also be required to submit an

independent third party appraisal of its compensable costs. See, supra,

IV., C, paragraph 27.

Significant Alternatives and Steps Taken By Agency to Minimize

Significant Economic Impact on a Substantial Number of Small Entities

Consistent with Stated Objectives: In the Further Notice of Proposed

Rule Making the Commission sought comment on adjusting the negotiation

periods for the D, E, and F blocks by shortening the voluntary

negotiation period and lengthening the mandatory negotiation period by

the corresponding amount. The Commission also sought comment on whether

the same adjustments should be made in the C block. This Second Report

and Order shortens the voluntary negotiation period for the C, D, E,

and F blocks by one year and lengthens the mandatory negotiation period

for C block by one year. The Commission did not lengthen the mandatory

negotiation period for the D, E, and F blocks because these are 10 MHz

blocks and have fewer links to relocate than in the 30 MHz blocks that

C block has. These alterations were made to diminish the opportunity of

a few incumbents that were delaying negotiations by demanding excessive

premiums from PCS licensees during the voluntary negotiation periods.

Commenters to the Further NPRM generally indicated that microwave

incumbents were negotiating successfully during the voluntary

negotiation period and did not require prolonged negotiations to reach

agreement. The Commission believes that these changes do not affect an

incumbent's ability to negotiate an agreement during the voluntary

negotiation period. If parties are successfully negotiating an

agreement during the voluntary negotiation period, they may agree that

more time is needed, thereby agreeing to postpone the commencement of

the mandatory negotiation period. See, supra, IV., A, paragraph 13.

These alterations will accelerate the deployment of PCS services to

the consumer and still guarantee microwave incumbents full compensation

for relocating.

Report to Congress: The Commission shall send a copy of this Final

Regulatory Flexibility Analysis with this Second Report and Order in a

report to Congress pursuant to Section 251 of the Small Business

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

copy of this Regulatory Flexibility Analysis will also be published in

the Federal Register.

B. Authority

Authority for issuance of this Second Report and Order is contained

in the Communications Act, Sections 4(i), 7, 303(c), 303(f), 303(g),

303(r), and 332, 47 U.S.C. 154(i), 157, 303(c), 303(f), 303(g), 303(r),

332, as amended.

C. Ordering Clauses

Accordingly, it is ordered That Parts 24 and 101 of the

Commission's rules are amended as set forth below and will become

effective May 19, 1997.

It is further ordered That the Regulatory Flexibility Analysis, as

required by Section 604 of the Regulatory Flexibility Act, and as set

forth herein is Adopted.

It is further ordered That the Secretary shall send a copy of this

Second Report and Order to the Chief Counsel for Advocacy of the Small

Business Administration.

D. Further Information

For further information concerning this proceeding, contact Michael

Hamra, Wireless Telecommunications Bureau, Commercial Wireless Division

at (202) 418-0620.

List of Subjects

47 CFR Part 24

Personal communications services, Radio.

47 CFR Part 101

Fixed microwave services, Radio.

Federal Communications Commission

William F. Caton,

Acting Secretary.

Rule Changes

Parts 24 and 101 of Chapter I of Title 47 of the Code of Federal

Regulations are amended as follows:

Part 24 of Chapter 1 of Title 47 of the Code of Federal Regulations

is amended as follows:

PART 24--PERSONAL COMMUNICATIONS SERVICES

1. The authority citation for Part 24 continues to read as follows:

[[Page 12757]]

Authority: 47 U.S.C. 154, 301, 302, 303, 309 and 332, unless

otherwise noted.

2. Section 24.5 is amended by adding the definition for

``Voluntarily Relocating Microwave Incumbent'' in alphabetical order to

read as follows:

Sec. 24.5 Terms and definitions.

* * * * *

Voluntarily Relocating Microwave Incumbent. A microwave incumbent

that voluntarily relocates its licensed facilities to other media or

fixed channels.

3. Section 24.239 is revised to read as follows:

Sec. 24.239 Cost-sharing requirements for broadband PCS.

Frequencies in the 1850-1990 MHz band listed in Sec. 101.147(c) of

this chapter have been allocated for use by PCS. In accordance with

procedures specified in Secs. 101.69 through 101.81 of this chapter,

PCS entities (both licensed and unlicensed) are required to relocate

the existing Fixed Microwave Services (FMS) licensees in these bands if

interference to the existing FMS operations would occur. All PCS

entities who benefit from spectrum clearance by other PCS entities or a

voluntarily relocating microwave incumbent, must contribute to such

relocation costs. PCS entities may satisfy this requirement by entering

into private cost-sharing agreements or agreeing to terms other than

those specified in Sec. 24.243. However, PCS entities are required to

reimburse other PCS entities or voluntarily relocating microwave

incumbents that incur relocation costs and are not parties to the

alternative agreement. In addition, parties to a private cost-sharing

agreement may seek reimbursement through the clearinghouse (as

discussed in Sec. 24.241) from PCS entities that are not parties to the

agreement. The cost-sharing plan is in effect during all phases of

microwave relocation specified in Sec. 101.69 of this chapter.

4. Section 24.243 is revised to read as follows:

Sec. 24.243 The cost-sharing formula.

A PCS relocator who relocates an interfering microwave link, i.e.

one that is in all or part of its market area and in all or part of its

frequency band or a voluntarily relocating microwave incumbent, is

entitled to pro rata reimbursement based on the following formula:

[GRAPHIC] [TIFF OMITTED] TR18MR97.001

(a) RN equals the amount of reimbursement.

(b) C equals the actual cost of relocating the link. Actual

relocation costs include, but are not limited to, such items as: Radio

terminal equipment (TX and/or RX--antenna, necessary feed lines, MUX/

Modems); towers and/or modifications; back-up power equipment;

monitoring or control equipment; engineering costs (design/path

survey); installation; systems testing; FCC filing costs; site

acquisition and civil works; zoning costs; training; disposal of old

equipment; test equipment (vendor required); spare equipment; project

management; prior coordination notification under Sec. 101.103(d) of

this chapter; site lease renegotiation; required antenna upgrades for

interference control; power plant upgrade (if required); electrical

grounding systems; Heating Ventilation and Air Conditioning (HVAC) (if

required); alternate transport equipment; and leased facilities. C also

includes voluntarily relocating microwave incumbent's independent third

party appraisal of its compensable relocation costs and incumbent

transaction expenses that are directly attributable to the relocation,

subject to a cap of two percent of the ``hard'' costs involved. C may

not exceed $250,000 per link, with an additional $150,000 permitted if

a new or modified tower is required.

(c) N equals the number of PCS entities that would have interfered

with the link. For the PCS relocator, N = 1. For the next PCS entity

that would have interfered with the link, N=2, and so on.

(d) Tm equals the number of months that have elapsed between the

month the PCS relocator obtains reimbursement rights and the month that

the clearinghouse notifies a later-entrant of its reimbursement

obligation. A PCS relocator obtains reimbursement rights on the date

that it signs a relocation agreement with a microwave incumbent.

5. Section 24.245 is amended by revising paragraphs (a) and (b) to

read as follows:

Sec. 24.245 Reimbursement under the cost-sharing plan.

(a) Registration of reimbursement rights. (1) To obtain

reimbursement, a PCS relocator must submit documentation of the

relocation agreement to the clearinghouse within ten business days of

the date a relocation agreement is signed with an incumbent.

(2) To obtain reimbursement, a voluntarily relocating microwave

incumbent must submit documentation of the relocation to the

clearinghouse within ten business days of the date that relocation

occurs.

(b) Documentation of expenses. Once relocation occurs, the PCS

relocator or the voluntarily relocating microwave incumbent, must

submit documentation itemizing the amount spent for items listed in

Sec. 24.243(b). The voluntarily relocating microwave incumbent, must

also submit an independent third party appraisal of its compensable

relocation costs. The appraisal should be based on the actual cost of

replacing the incumbent's system with comparable facilities and should

exclude the cost of any equipment upgrades or items outside the scope

of Sec. 24.243(b). The PCS relocator or the voluntarily relocating

microwave incumbent, must identify the particular link associated with

appropriate expenses (i.e., costs may not be averaged over numerous

links). If a PCS relocator pays a microwave incumbent a monetary sum to

relocate its own facilities, the PCS relocator must estimate the costs

associated with relocating the incumbent by itemizing the anticipated

cost for items listed in Sec. 24.243(b). If the sum paid to the

incumbent cannot be accounted for, the remaining amount is not eligible

for reimbursement. A PCS relocator may submit receipts or other

documentation to the clearinghouse for all relocation expenses incurred

since April 5, 1995.

* * * * *

6. Section 24.247 is amended by revising the introductory text of

paragraph (a) to read as follow:

Sec. 24.247 Triggering a reimbursement obligation.

(a) Licensed PCS. The clearinghouse will apply the following test

to determine if a PCS entity preparing to initiate operations must pay

a PCS relocator or a voluntarily relocating microwave incumbent in

accordance with the formula detailed in Sec. 24.243:

* * * * *

7. Section 24.249 is amended by revising paragraph (a) to read as

follows:

Sec. 24.249 Payment issues.

(a) Timing. On the day that a PCS entity files its prior

coordination notice (PCN) in accordance with Sec. 101.103(d) of this

chapter, it must file a copy of the PCN with the clearinghouse. The

clearinghouse will determine if any reimbursement obligation exists and

notify the PCS entity in writing of its repayment obligation, if any.

When the PCS entity receives a written copy of such obligation, it must

pay directly to the PCS relocator or the voluntarily relocating

microwave incumbent the

[[Page 12758]]

amount owed within thirty days, with the exception of those businesses

that qualify for installment payments. A business that qualifies for an

installment payment plan must make its first installment payment within

thirty days of notice from the clearinghouse. UTAM's first payment will

be due thirty days after its reimbursement obligation is triggered as

described in Sec. 24.247(b).

* * * * *

PART 101--FIXED MICROWAVE SERVICES

8. The authority citation for Part 101 continues to read as

follows:

Authority: 47 U.S.C. Secs. 154, 303, unless otherwise noted.

9. Section 101.69 is revised to read as follows:

Sec. 101.69 Transition of the 1850-1990 MHz, 2110-2150 MHz, and 2160-

2200 MHz bands from the fixed microwave services to personal

communications services and emerging technologies.

Fixed Microwave Services (FMS) frequencies in the 1850-1990 MHz,

2110-2150 MHz, and 2160-2200 MHz bands listed in Secs. 101.147(c), (d)

and (e) have been allocated for use by emerging technology (ET)

services, including Personal Communications Services (PCS). The rules

in this section provide for a transition period during which ET

licensees may relocate existing FMS licensees using these frequencies

to other media or other fixed channels, including those in other

microwave bands.

(a) ET licensees may negotiate with FMS licensees authorized to use

frequencies in the 1850-1990 MHz, 2110-2150 MHz, and 2160-2200 MHz

bands, for the purpose of agreeing to terms under which the FMS

licensees would:

(1) Relocate their operations to other fixed microwave bands or

other media; or alternatively

(2) Accept a sharing arrangement with the ET licensee that may

result in an otherwise impermissible level of interference to the FMS

operations.

(b) Except as provided in paragraph (c) of this section, FMS

operations in the 1850-1990 MHz, 2110-2150 MHz, and 2160-2200 MHz

bands, with the exception of public safety facilities defined in

Sec. 101.77, will continue to be co-primary with other users of this

spectrum until two years after the FCC commences acceptance of

applications for ET services (voluntary negotiation period), and until

one year after an ET licensee initiates negotiations for relocation of

the fixed microwave licensee's operations (mandatory negotiation

period). In the 1910-1930 MHz band allocated for unlicensed PCS, FMS

operations will continue to be co-primary until one year after UTAM,

Inc. initiates negotiations for relocation of the fixed microwave

licensee's operations. Except as provided in paragraph (c) of this

section, public safety facilities defined in Sec. 101.77 will continue

to be co-primary in these bands until three years after the Commission

commences acceptance of applications for an emerging technology service

(voluntary negotiation period), and until two years after an emerging

technology service licensee or an emerging technology unlicensed

equipment supplier or representative initiates negotiations for

relocation of the fixed microwave licensee's operations (mandatory

negotiation period). If no agreement is reached during either the

voluntary or mandatory negotiation periods, an ET licensee may initiate

involuntary relocation procedures. Under involuntary relocation, the

incumbent is required to relocate, provided that the ET licensee meets

the conditions of Sec. 101.75.

(c) Voluntary and mandatory negotiation periods for PCS C, D, E,

and F blocks are defined as follows:

(1) Non-public safety incumbents will have a one-year voluntary

negotiation period and a one-year mandatory negotiation period; and

(2) Public safety incumbents will have a three-year voluntary

negotiation period and a two-year mandatory negotiation period.

10. Section 101.71 is revised to read as follows:

Sec. 101.71 Voluntary negotiations.

During the voluntary negotiation period, negotiations are strictly

voluntary and are not defined by any parameters. However, if the

parties have not reached an agreement within one year after the

commencement of the voluntary period for non-public safety entities, or

within three years after the commencement of the voluntary period for

public safety entities, the FMS licensee must allow the ET licensee if

it so chooses to gain access to the existing facilities to be relocated

so that an independent third party can examine the FMS licensee's 2 GHz

system and prepare an estimate of the cost and the time needed to

relocate the FMS licensee to comparable facilities. The ET licensee

must pay for any such estimate.

11. Section 101.73 is amended by revising paragraph (a) to read as

follows:

Sec. 101.73 Mandatory negotiations.

(a) If a relocation agreement is not reached during the voluntary

period, the ET licensee may initiate a mandatory negotiation period.

This mandatory period is triggered at the option of the ET licensee,

but ET licensees may not invoke their right to mandatory negotiation

until the voluntary negotiation period has expired.

* * * * *

12. Section 101.77 is amended by revising the section heading and

paragraph (a) to read as follows:

Sec. 101.77 Public safety licensees in the 1850-1990 MHz, 2110-2150

MHz, and 2160-2200 MHz bands.

(a) Public safety facilities are subject to the three-year

voluntary and two-year mandatory negotiation period, except as

otherwise defined in paragraph 101.69(c). In order for public safety

licensees to qualify for extended negotiation periods, the department

head responsible for system oversight must certify to the ET licensee

requesting relocation that:

(1) The agency is a licensee in the Police Radio, Fire Radio,

Emergency Medical, Special Emergency Radio Services, or that it is a

licensee of other part 101 facilities licensed on a primary basis under

the eligibility requirements of part 90, subparts B and C; and

(2) The majority of communications carried on the facilities at

issue involve safety of life and property.

* * * * *

13. Section 101.79 is amended by revising the section heading and

paragraph (a) to read as follows:

Sec. 101.79 Sunset provisions for licensees in the 1850-1990 MHz,

2110-2150 MHz, and 2150-2160 MHz bands.

(a) FMS licensees will maintain primary status in the 1850-1990

MHz, 2110-2150 MHz, and 2160-2200 MHz bands unless and until an ET

licensee requires use of the spectrum. ET licensees are not required to

pay relocation costs after the relocation rules sunset (i.e. ten years

after the voluntary period begins for the first ET licensees in the

service). Once the relocation rules sunset, an ET licensee may require

the incumbent to cease operations, provided that the ET licensee

intends to turn on a system within interference range of the incumbent,

as determined by TIA Bulletin 10-F of any standard successor. ET

licensee notification to the affected FMS licensee must be in writing

and must provide the incumbent with no less than six months to vacate

the spectrum. After the six-month notice period has expired, the FMS

licensee must turn its license back into the

[[Page 12759]]

Commission, unless the parties have entered into an agreement which

allows the FMS licensee to continue to operate on a mutually agreed

upon basis.

* * * * *

14. Section 101.81 is amended by revising the section heading and

the introductory paragraph to read as follows:

Sec. 101.81 Future licensing in the 1850-1990 MHz, 2110-2150 MHz, and

2160-2200 MHz bands.

After April 25, 1996, all major modifications and extensions to

existing FMS systems in the 1850-1990 MHz, 2110-2150 MHz, and 2160-2200

MHz bands will be authorized on a secondary basis to ET systems. All

other modifications will render the modified FMS license secondary to

ET operations, unless the incumbent affirmatively justifies primary

status and the incumbent FMS licensee establishes that the modification

would add to the relocation costs of ET licensees. Incumbent FMS

licensees will maintain primary status for the following technical

changes:

* * * * *

[FR Doc. 97-6751 Filed 3-17-97; 8:45 am]

BILLING CODE 6712-01-P