# Provision for the Use of the 220-222 MHz Band by the Private Land Mobile Radio Service

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## Record

- **Collection:** Federal Register
- **Document type:** Rule
- **Published:** April 3, 1997
- **Citation:** 62 FR 15978

## Text

SUMMARY: The Commission adopts a Third Report and Order and Fifth
Notice of Proposed Rulemaking in this proceeding. The Fifth Notice of
Proposed Rulemaking portion of this decision is summarized elsewhere in
this issue of the Federal Register. The Third Report and Order adopts
rules to govern the future operation and licensing of the 220-222 MHz
band. This action is taken as part of the Commission's continuing
implementation of the regulatory framework for mobile radio services
enacted by Congress in the Omnibus Budget Reconciliation Act of 1993.
This Third Report and Order also contains proposed and/or modified
information collections subject to the Paperwork Reduction Act of 1995
(PRA). These will be submitted to the Office of Management and Budget
(OMB) for review under the PRA. The general public and other Federal
agencies are invited to comment on the proposed or modified information
collections contained in this proceeding.

DATES: Effective: August 21, 1997. Written comments by the public on
the proposed and/or modified information collections are due June 2,
1997.

ADDRESSES: A copy of any comments on the information collections
contained herein should be submitted to Dorothy Conway, Federal
Communications Commission, Room 234, 1919 M Street, NW., Washington, DC
20554, or via the Internet to [email protected].

FOR FURTHER INFORMATION CONTACT: Marty Liebman or Mary Woytek, 202-418-
1310, or Frank Stilwell, 202-418-0660. For additional information
concerning the information collections contained in this Third Report
and Order, contact Dorothy Conway at 202-418-0217, or via the Internet
at [email protected].

SUPPLEMENTARY INFORMATION: This is a synopsis of the Third Report and
Order portion of the Third Report and Order and Fifth Notice of
Proposed Rulemaking in PR Docket No. 89-552, GN Docket No. 93-252, and
PP Docket No. 93-253, FCC 97-57, adopted February 19, 1997, and
released March 12, 1997. The Fifth Notice of Proposed Rulemaking is
summarized elsewhere in this edition of the Federal Register. The
complete text of the Third Report and Order is available for inspection
and copying during normal business hours in the FCC Reference Center
(Room 239), 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.

Paperwork Reduction Act

1. This Third Report and Order contains either a proposed or
modified information collection. The Commission, as part of its
continuing effort to reduce paperwork burdens, invites the general
public to comment on the information collections contained in this
Third Report and Order, as required by the Paperwork Reduction Act of
1995, Public Law 104-13. Public and agency comments are due June 2,
1997. Comments should address: (a) Whether the proposed collection of
information is necessary for the proper performance of the functions of
the Commission, including whether the information shall have practical
utility; (b) the accuracy of the Commission's burden estimates; (c)
ways to enhance the quality, utility, and clarity of the information
collected; and (d) ways to minimize the burden of the collection of
information on the respondents, including the use of automated
collection techniques or other forms of information technology.
OMB Approval Number: New Collection.
Title: Private Land Mobile Radio Services Part 90.
Form No.: N/A.
Type of Review: New collection.
Respondents: Licensees in the 220-222 MHz band; applicants for
licenses in the 220-222 MHz band; and governmental entities.
Number of Respondents: Approximately 34,200.
Estimated Time Per Response: Approximately 5 hours.
Total Annual Burden: Approximately 176,400 hours.
Needs and Uses: The information collected will be used by the
Commission to verify licensee compliance with Commission rules and
regulations, to ensure the integrity of the 220 MHz service, and to
ensure that licensees continue to fulfill their statutory
responsibilities in accordance with the Communications Act of 1934.

Synopsis of the Third Report and Order

2. This Third Report and Order adopts rules to govern the future
operation and licensing of the 220-222 MHz band (220 MHz service). This
action is taken as part of the Commission's continuing implementation
of the regulatory framework for mobile radio services enacted by
Congress in section 6002(b) of the Omnibus Budget Reconciliation Act of
1993, which amended sections 3(n) and 332 of the Communications Act of
1934.1 As part of the implementation of the Budget Act, the
Commission initiated a series of rulemaking proceedings to provide
guidelines for the regulation of commercial and private mobile radio
services, including the 220 MHz service, consistent with the policy of
regulatory symmetry as reflected in the revisions to section 332 of the
Act.
---------------------------------------------------------------------------

\1\ Omnibus Budget Reconciliation Act of 1993, Pub. L. 103-66,
Title VI, sections 6002(b)(2)(A), 6002(b)(2)(B), 107 Stat. 312, 392
(1993) (Budget Act). Section 3(n) of the Communications Act has been
redesignated as section 3(14). See section 3(c)(4) of the
Telecommunications Act of 1996. The reference to former section 3(n)
in section 332 has been changed to a reference to section 3. See
section 3(d)(2) of the Telecommunications Act of 1996.
---------------------------------------------------------------------------

3. One of the Commission's actions resulting from these
proceedings, the CMRS Third Report and Order in GN Docket No. 93-252,
59 FR 59945 (November 21, 1994), addressed a variety of issues relating
to the licensing of the 220 MHz service, but deferred a detailed
examination of that service to a separate rulemaking proceeding. That
proceeding was initiated by the adoption of the Second Memorandum
Opinion and Order and Third Notice of Proposed Rulemaking in PR Docket
No. 89-552, 60 FR 46564 (September 7, 1995), where the Commission
proposed a new licensing plan for 220 MHz service. The Third Report and
Order adopted today generally establishes that proposal for the Phase
II 2 licensing of the 220-222 MHz band, with some modifications.
The Commission's decisions in the Third Report and Order are summarized
as follows:
---------------------------------------------------------------------------

\2\ We refer herein to licenses granted pursuant to this new
framework as Phase II licenses. Licenses granted under the rules
that existed prior to the adoption of this Order are referred to
herein as Phase I licenses.
---------------------------------------------------------------------------

4. The Commission will return the pending, mutually exclusive
applications for the four non-commercial, Phase I nationwide licenses
and adopt a new licensing procedure for the 30 channels associated with
these licenses. The 30 channels will be licensed on a nationwide basis
to all applicants--i.e., applicants that intend to use the channels to
offer commercial

[[Page 15979]]

services as well as applicants that intend to use the channels for
their private, internal use. The channels will be assigned, in the form
of three 10-channel authorizations, through competitive bidding, based
upon the Commission's conclusion that the principal use of the spectrum
will be for the provision of for-profit, subscriber-based services. The
license term will be ten (10) years, and licensees will be required to
meet five- and ten-year construction benchmarks.
5. The Commission will assign Phase II, non-nationwide 220 MHz
channels as follows: Fifty channels will be assigned in 175 geographic
areas defined as Economic Areas by the Bureau of Economic Analysis,
Department of Commerce (``EA licenses'') and 75 channels in the
geographic areas defined by six ``Regional Economic Area Groupings''
(``Regional licenses''). Codes and names for the Economic Areas are
listed in Appendix D of the full text of this decision. The Regional
Economic Area Groupings are described in Appendix E of the full text of
this decision. The Commission will make these channels available to all
eligible applicants, and resolve mutually exclusive applications for
these channels through competitive bidding. EA and Regional licensees
will be permitted to operate stations anywhere within their geographic
borders, provided that their transmissions do not exceed a predicted
field strength of 38 dBuV/m at their border, and they protect the base
stations of Phase I licensees in accordance with the existing co-
channel separation criteria for 220 MHz stations. The Commission adopts
a 10-year license term for EA and Regional licensees, and will require
EA and Regional licensees to meet five- and ten-year construction
benchmarks.
6. The Commission adopts the following Phase II band plan for non-
nationwide channels:

Non-Nationwide 220 MHz Channel Allocation Plan
------------------------------------------------------------------------
Channels
------------------------------------------------------------------------
EA Block

A: Channel Groups \3\ 2, 13.................................. 10
B: Channel Groups 3, 16...................................... 10
C: Channel Groups 5, 18...................................... 10
D: Channel Groups 8, 19...................................... 10
E: Channels 171-180.......................................... 10
----------
Total.................................................... 50

Regional Block

F: Channel Groups 1, 6, 11................................... 15
G: Channel Groups 4, 9, 14................................... 15
H: Channel Groups 7, 12, 17.................................. 15
I: Channel Groups 10, 15, 20................................. 15
J: Channels 186-200.......................................... 15
----------
Total.................................................... 75
------------------------------------------------------------------------
\3\ The Channel Groups indicated in the allocation plan are the 5-
channel, non-contiguous assignments identified as ``Group Nos. 1, 2,
3,'' etc., in Sec. 90.721 of the Commission's rules, 47 CFR 90.721.

7. The Commission will continue to assign, on a single-station
basis, 10 channels to applicants eligible in the Public Safety Radio
Service (PSRS) and five channels to applicants eligible in the
Emergency Medical Radio Service (EMRS) to meet internal communications
needs. The Commission will assign five of the 10 PSRS channel pairs on
a shared basis to all public safety eligibles. This will enable public
safety licensees within a particular geographic area to share these
channels and coordinate the location and operation of base stations on
these channels, which will enable them to communicate more effectively
with each other during emergencies. The Commission will assign channels
in the PSRS and EMRS pools on a first-come, first-served basis and
resolve mutually exclusive applications by random selection procedures.
8. The Commission will allow Phase I and Phase II, nationwide and
non-nationwide 220 MHz licensees to operate paging systems without the
requirement that such use be on an ancillary basis to land mobile
operations. Phase I and Phase II, nationwide and non-nationwide 220 MHz
licensees, will also be allowed to aggregate any and all of their
authorized, contiguous channels to operate on channels wider than 5
kHz, so long as they comply with a prescribed spectrum efficiency
standard.
9. The Commission also modifies existing 220 MHz rules with regard
to certain technical and operational matters. Specifically, Phase I and
Phase II, nationwide and non-nationwide non-CMRS 220 MHz licensees will
be permitted to operate fixed stations without the requirement that
such use be on an ancillary basis to land mobile operations; and
licensees using the 220-222 MHz band for geophysical telemetry
operations will be permitted to operate fixed stations on a temporary
basis, without the requirement that such use be ancillary to land
mobile operations, and on a secondary basis to Phase I and Phase II
licensees authorized to operate on 220 MHz channels on a primary basis.
10. The Commission adopts procedures and definitions for initial
applications, amended applications, applications to modify
authorizations, and renewal of authorizations. First, the Commission
defines initial applications for 220 MHz licenses as applications for
the nationwide, EA, and Regional licenses to be assigned in Phase II.
Second, the Commission adopts the same procedures for amending
applications and modifying authorizations for Phase II 220 MHz licenses
that are established for other Part 90 Commercial Mobile Radio Services
(CMRS). Third, the Commission adopts the same procedures for obtaining
grants of Special Temporary Authority for Phase II 220 MHz licenses
that are established for other Part 90 CMRS services. Fourth, the
Commission adopts for all 220 MHz licensees the renewal standards
adopted in the CMRS Third Report and Order for Part 90 CMRS services.

Auction Rules

Competitive Bidding Design

11. A total of 908 licenses (3 nationwide, 30 Regional, and 875
Economic Area (``EA'') licenses) will be awarded in the Phase II 220
MHz service. The Commission will use a simultaneous multiple round
auction to award these licenses. These licenses will be significantly
interdependent, because of the desirability of aggregation across
spectrum blocks and geographic areas. Simultaneous multiple round
bidding will generate more information about license values during the
course of the auction and provide bidders with more flexibility to
pursue back-up strategies than if the licenses were auctioned
separately or through sealed bidding.

License Grouping

12. Grouping interdependent licenses and putting them up for bid at
the same time facilitates awarding licenses to bidders who value them
most highly by providing bidders with information about the prices of
complementary and substitutable licenses during the course of an
auction. As a result, the Commission plans to hold a single
simultaneous multiple round auction for all nationwide, Regional, and
EA 220 MHz licenses. The Commission reserves the discretion, however,
to auction each of these license groupings (i.e., nationwide, Regional,
EA) separately or in different combinations (e.g., nationwide and
Regional) if there are administrative reasons for doing so.

[[Page 15980]]

Bid Increments and Tie Bids

13. The general guidelines for bid increments will be announced by
Public Notice prior to the auction. In the case of a tie bid, the high
bidder will be determined by the order in which the bids were received
by the Commission.

Stopping Rules

14. The Commission adopts a simultaneous stopping rule for the 220
MHz service auction, and elects not to employ a hybrid rule or a
market-by-market closing rule. Under a simultaneous stopping rule,
bidding will remain open on all licenses in an auction until bidding
stops on every license. The Commission concludes that the
substitutability between and among licenses in different geographic
areas and the importance of preserving bidders' ability to pursue back-
up strategies support the use of a simultaneous stopping rule. The
Phase II 220 MHz service auction will close after one round passes in
which no new valid bids or proactive activity rule waivers (as
discussed below) are submitted. The Commission retains the discretion,
however, to keep the auction open even if no new acceptable bids and no
proactive waivers are submitted in a single round. In the event that
this discretion is exercised, the effect will be the same as if a
bidder has submitted a proactive waiver. The Commission also retains
the discretion to announce market-by-market closing.
15. The Commission further retains the discretion to declare, at
any point, that the auction will end after some specified number of
additional rounds. If this option is exercised, bids will be accepted
only on licenses where the high bid has increased in the last three
rounds. This will deter bidders from continuing to bid on a few low
value licenses solely to delay the closing of the auction. It also will
enable the Commission to end the auction when it determines that the
benefits of terminating the auction and issuing licenses exceed the
likely benefits of continuing to allow bidding.

Activity Rules

16. The Commission will employ the Milgrom-Wilson activity rule in
conjunction with the simultaneous stopping rule in a manner similar to
that employed in prior FCC auctions. In each round of Stage I, a bidder
that wishes to maintain its current eligibility must be active on
licenses encompassing at least sixty percent of the activity units for
which it currently is eligible. In each round of Stage II, a bidder
that wishes to maintain its current eligibility in the next round is
required to be active on at least eighty percent of the activity units
for which it is eligible in the current round. In each round of Stage
III, a bidder that wishes to maintain its current eligibility must be
active on licenses encompassing at least ninety-eight percent of the
activity units for which it is eligible in the current round.
17. The Commission believes that initially establishing required
activity at these levels will achieve a proper balance between allowing
for bidder flexibility and completing the auction within a reasonable
time. Requiring a 100 percent level of activity in Stage III, as
originally proposed, might inhibit bidder flexibility and be unduly
restrictive. In addition, activity levels of sixty, eighty and ninety-
eight percent are far easier to administer, both for bidders and for
the Commission, than the fractional one-third, two-thirds and 100
percent activity levels initially proposed. In addition to easing
administrative burdens, the increased activity requirement will require
bidders to focus their bidding and will contribute to increasing the
pace of the auction.
18. As in prior auctions, the transition from one stage to the next
in the Phase II 220 MHz auction will be determined based on a variety
of measures of bidder activity, including, but not limited to, the
auction activity level (i.e., the sum of bidding units of those
licenses whose high bid increased in the current round, as a percentage
of the total bidding units of all licenses in the auction), the
percentage of licenses (measured in terms of bidding units) on which
there are new bids, the number of new bids, and the percentage increase
in revenue. In no case can the auction revert to an earlier stage. The
Wireless Telecommunications Bureau will announce when the auction will
move from one stage to the next. To avoid the consequences of clerical
errors and to compensate for unusual circumstances that might delay a
bidder's bid preparation or submission on a particular day, bidders
will be provided with five activity rule waivers that may be used in
any round during the course of the auction. Bidders will have the
option to proactively enter an activity rule waiver during the bid
submission period. A proactive waiver, as distinguished from an
automatic waiver, is one requested by the bidder. If a bidder submits a
proactive waiver in a round in which no other bidding activity occurs,
the auction will remain open.

Duration of Bidding Rounds

19. The Wireless Telecommunications Bureau will announce the
duration of and intervals between bidding rounds, either by Public
Notice prior to the auction or by announcement during the auction.

Pre-Auction Application Procedures

20. Bidders will be able to submit bids from remote locations using
special bidding software or by telephone. The Commission has adopted a
fee schedule for obtaining access to the Commission's database and
remote bidding software packages. The remote access bidding software
package is available for $175.00. The charge for on-line remote access
via a 900 number is $2.30 per minute. Bidders also may bid via
telephone for no charge. There is no charge for the first Bidder
Information Package, and a $16.00 fee for each additional package that
is subsequently requested by the same party. 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. When submitting bids telephonically,
bidders may utilize the Internet to learn the round-by-round results of
the auction. Bidders also may, at negligible cost, use a computerized
bulletin board service, accessible by telephone lines, from which
auction results can be downloaded to a personal computer. The
Commission intends to hold a seminar for prospective bidders to
acquaint them with these bidding procedures.

Short-Form Applications

21. Applicants for 220 MHz service licenses will be required to
file a short-form application, FCC Form 175 and 175-S, prior to the
auction. If only one application that is acceptable for filing is
received for a particular license, and thus there is no mutual
exclusivity, a Public Notice will be issued cancelling the auction for
that license and establishing a date for the filing of a long-form
application. Filing deadlines will be announced by Public Notice.

Short-Form Application Amendments and Modifications

22. Upon reviewing the short-form applications, the Commission will
issue a Public Notice listing all defective applications. Applicants
with minor defects in their applications will be given an opportunity
to cure them and resubmit a corrected version.

[[Page 15981]]

Upfront Payments

23. The Commission proposed to require 220 MHz auction participants
to tender in advance to the Commission an upfront payment of $2,500 or
$0.02 per MHz-pop, whichever is greater, for the largest combination of
MHz-pops (bidding units) on which they anticipate bidding in any round.
In the Competitive Bidding Second Report and Order, 59 FR 22980, (May
4, 1994), the Commission indicated that upfront payments should equal
approximately five percent of the expected amounts of winning bids. In
general, the license values in previous auctions have exceeded
expectations. Based upon defaults occurring in the broadband PCS, IVDS
and MDS auctions, and to guard against future defaults, the Commission
believes that there is a need to obtain a higher payment upfront than
the one proposed. Authority is delegated to the Wireless
Telecommunications Bureau to determine an appropriate upfront payment
for each license being auctioned, taking into account such factors as
the population in each geographic license area and the value of similar
spectrum. In no event will the upfront payment for any license be less
than $2,500, and the Wireless Telecommunications Bureau will retain the
flexibility to modify this minimum if it finds that a higher amount
would better deter speculative filings. Prior to the 220 MHz auction,
the Wireless Telecommunications Bureau will publish a Public Notice
listing the upfront payment amounts required for the licenses to be
auctioned. The number of bidding units determines the amount of upfront
payment for the license. 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.

Down Payments and Full Payments

24. All winning bidders, including small businesses and very small
businesses will be required to 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 already tendered by a
winning bidder, after deducting any bid withdrawal and default payments
due, amounts to 20 percent or more of its winning bids, no additional
deposit will be required. 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.
25. Winning bidders, except small businesses and very small
businesses, must submit the required down payment by cashier's check or
wire transfer to the Commission's lock-box bank within ten business
days following release of a Public Notice announcing the close of
bidding. All auction winners, except those eligible for an installment
payment plan, will be required to make full payment of the balance of
their winning bids within ten business days following release of a
Public Notice mailed to the successful applicant that the Commission is
prepared to award the license. The Commission generally will grant
uncontested licenses within ten business days after receiving full
payment.

Bid Withdrawal, Default, and Disqualification

26. The Commission will apply the bid withdrawal rules set forth in
Part 1 of its rules in the 220 MHz auction. Any bidder that withdraws a
high bid before the Commission declares bidding closed will be required
to reimburse the Commission in the amount of the difference between its
high bid and the amount of the ``winning bid'' the next time the
license is offered, if this subsequent ``winning bid'' is lower than
the withdrawn bid.
27. 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.
28. After bidding closes, the Commission will assess a defaulting
auction winner an additional payment of three percent of the subsequent
winning bid or three percent of the amount of the defaulting bid,
whichever is less. This additional payment is designed to encourage
bidders who wish to withdraw their bids to do so before bidding ceases.
In the unlikely event that there is more than one bid withdrawal on the
same license, each withdrawing bidder will be held responsible for the
difference between its withdrawn bid and the amount of the winning bid
the next time the license is offered for auction.
29. If a bidder has withdrawn a bid or defaulted, but the amount of
the default payment cannot yet be determined, the bidder will be
required to make a deposit of up to 20 percent of the amount bid on the
license. When it becomes possible to calculate and assess the default
payment, any excess deposit will be refunded. Upfront payments will be
applied to such deposits, and to bid withdrawal and default assessments
due, before being applied toward the bidder's down payment on licenses
the bidder has won and seeks to acquire.
30. The Commission recently addressed the issue of how its bid
withdrawal provisions apply to bids that are mistakenly placed and
withdrawn in a decision involving the 900 MHz Specialized Mobile Radio
(SMR) and broadband Personal Communication Service (PCS) C block
auctions. See Atlanta Trunking Associates, Inc. and MAP Wireless L.L.C.
Request to Waive Bid Withdrawal Payment Provisions, FCC 96-203, Order
(released May 3, 1996) (summarized in 61 FR 25807 (May 23, 1996)),
recon. pending. 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.

Long-Form Applications

31. The Commission will apply its Part 1 long-form procedures to
the 220 MHz auction. A long-form application filed on FCC Form 600 must
be filed by a date specified by Public Notice, generally within ten
business days after the close of bidding. After the winning bidder's
down payment and long-form application are received, the Commission
will review the application to determine if it is acceptable for
filing. Upon acceptance for filing, the Commission will issue a Public
Notice announcing this fact, triggering the filing window for petitions
to deny. If all petitions to deny are dismissed or denied, the
license(s) will be granted to the auction winner.

Petitions To Deny and Limitations on Settlements

32. In the Third Notice, the Commission proposed to adopt petition
to deny procedures based on former Sec. 22.30 of its rules, which
provided for

[[Page 15982]]

procedures regarding opposition to applications. In addition, the
Commission proposed to adopt rules similar to former Sec. 22.943 of its
rules, which provided for procedures regarding the withdrawal of
applications, to prevent the filing of speculative applications and
pleadings designed to extract money from sincere 220 MHz license
applicants. The Commission adopted these proposals. The restrictions in
Sec. 90.162, 47 CFR 90.162 (which replaced Sec. 22.943 for purposes of
CMRS), were established to prevent the filing of speculative
applications and pleadings (or threats of the same) designed to extract
money from license applicants. Thus, the Commission will limit the
consideration that an individual or entity is permitted to receive for
agreeing to withdraw an application or a petition to deny to the
legitimate and prudent expenses of the applicant or petitioner.

Anti-Collusion Rules

33. The Commission will require 220 MHz 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. Even where the applicant discloses parties with whom it has
reached an agreement on the short-form application, thereby permitting
discussions with those parties, the applicant nevertheless is subject
to existing antitrust laws. Moreover, 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.

Transfer Disclosure Requirements

34. The Commission will apply Sec. 1.2111(a) of its rules, 47 CFR
1.2111(a), to all Phase II 220 MHz licenses obtained through the
competitive bidding process. The Commission has also adopted specific
rules that will apply solely to small business licensees, as discussed
in subsequent sections. The Commission will give particular scrutiny to
auction winners who have not yet begun commercial service and who seek
approval for a transfer of control or assignment of their licenses
within three years after the initial license grant, so that it may
determine if any unforeseen problems relating to unjust enrichment have
occurred.

Treatment of Designated Entities

Minority- and Women-Owned Businesses
35. In the Phase II 220 MHz service, as in other auctionable
services, the Commission is committed to meeting the objectives of 47
U.S.C. 309(j) of promoting economic opportunity and competition, of
avoiding excessive concentrations 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 did not cite any evidence of
specific discrimination for purposes of creating a record sufficient to
support special provisions for minorities under the strict scrutiny
standard of judicial review, which applies to federal race-based
provisions. Adarand Constructors, Inc. v. Pena, 115 S.Ct. 2097 (1995).
The Commission is also concerned that the record would not support
gender-based provisions under intermediate scrutiny, the standard of
judicial review applicable to such provisions. United States v.
Virginia, 116 S.Ct. 2263 (1996). Balancing the Commission's statutory
obligation to provide opportunities for women- and minority-owned
businesses to participate in spectrum-based services against the
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 Phase II 220 MHz
service auction 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
that the Commission is adopting for small businesses, as discussed
infra.
36. The Commission also notes that it has initiated a separate
inquiry to gather information regarding barriers to entry faced by
minority- and women-owned firms as well as small businesses. Section
257 Proceeding to Identify and Eliminate Market Entry Barriers for
Small Businesses, Notice of Inquiry, GN Docket No. 96-113, 61 FR 33066
(June 26, 1996). The Commission will continue to track the rate of
participation in its auctions by minority- and women-owned firms. It
will evaluate this information, together with other data gathered, with
the goal of developing a record to support race-and gender-based
provisions that will satisfy judicial scrutiny. If a sufficient record
can be adduced, the Commission will consider race- and gender-based
provisions for future auctions. Finally, the Commission will continue
to look for other ways to reduce barriers to entry for women- and
minority-owned businesses, such as extending partitioning and
disaggregation of licenses to entities that do not currently qualify,
an adjustment to its rules that may be helpful to small businesses
generally.
Small Businesses
37. Congress specifically cited the needs of small businesses in
enacting Section 309(j), directing the Commission to promote economic
opportunities for small businesses. The Commission believes that small
businesses applying for 220 MHz licenses should be entitled to some
type of bidding credit and should be allowed to pay their bids in
installments. In order to ensure the meaningful participation of small
business entities in the 220 MHz auction the Commission adopts a two-
tiered definition of small business with thresholds applicable across
all three categories of license. This approach will give qualifying
small businesses flexibility to bid for a Regional license or, on the
other hand, elect to bid for several EAs, without having to choose
which type of license to bid for prior to the start of the auction. For
purposes of bidding on the nationwide, Regional, and EA licenses,
therefore, the Commission will define (1) a very small business as an
entity that, together with its affiliates and controlling principals,
has average gross revenues that are not more than $3 million for the
three preceding years; and (2) a small business as an entity that,
together with affiliates and controlling principals, has average gross
revenues that are not more than $15 million for the three preceding
years. Bidding credits will be determined, as discussed infra, based
upon this two-tiered approach.
38. The Commission believes the cost of building out a 220 MHz
system most closely resembles the cost of a 900 MHz SMR system, and
that it is therefore appropriate to establish definitions of ``small
business'' and ``very small business'' for the 220 MHz service that

[[Page 15983]]

are consistent with the definitions adopted for the 900 MHz SMR
service. The Commission's experience in conducting the 900 MHz SMR
auction indicates that its definitions of eligible small businesses in
that service were appropriate, and that it would substantially dilute
the value of the small business preferences to increase the size of
small businesses eligible for special bidding provisions in the 220 MHz
service.
39. For purposes of the Phase II 220 MHz small business definition,
the Commission will consider the gross revenues of the small business
applicant, its controlling principals, and its affiliates. The
Commission will not impose specific equity requirements on the
controlling principals of entities that meet the small business
definition. The Commission will still require, however, that in order
for an applicant to qualify as a small business or very small business,
qualifying small business principals must maintain control of the
applicant, including both de facto and de jure control. For this
purpose, the Commission will borrow from certain Small Business
Administration 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 licensees; 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 or very small business.
40. Exceptions will apply for small business consortia and publicly
traded corporations with widely dispersed voting power. Specifically,
eligible small businesses or very 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 or very small business status. Thus, an applicant may qualify,
even in the absence of identifiable control being held by particular
investors.
41. Applicants and licensees claiming eligibility as a small
business, a very small business, a consortium of small businesses, or a
consortium of very small businesses, 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).
Such consent includes 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 also includes inspection at all
reasonable times of the facilities, or parts thereof, engaged in
providing and transacting business or keeping records regarding
licensed Phase II 220 MHz service, and will also include consent to the
interview of principals, employees, customers, and suppliers of the
applicant or licensee.

Bidding Credits

42. The Commission adopts bidding credits consistent with its two-
tiered definition of small business that will apply to all three
license groups. Very small businesses that, together with affiliates
and controlling principals, have average gross revenues that are not
more than $3 million for the three preceding years, will receive a 25
percent bidding credit, available for all three categories of Phase II
220 MHz licenses. Likewise, small businesses that, together with
affiliates and controlling principals, have average gross revenues that
are not more than $15 million for the three preceding years, will
receive a bidding credit of ten percent, available for all three
categories of Phase II 220 MHz licenses. While the 25 percent bidding
credit is less than the 40 percent bidding credit proposed for one of
the nationwide licenses and the Regional geographic area licenses, the
Commission concludes that this bidding credit is appropriate since the
Commission is now going to offer bidding credits generally for all
channel blocks. The Commission also had favorable results in previous
auctions with bidding credits at this level or lower.

Installment Payments, Upfront Payments, and Down Payments

43. The Commission will make installment payment plans available to
small businesses that are winners in the 220 MHz auction(s). Licensees
who qualify as small businesses or very small businesses in the 220 MHz
auction(s) 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.
44. The Commission will not adopt a second installment payment plan
with a longer interest-only period for very 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 all small businesses with the appropriate level of
financing to overcome difficulties in attracting capital.
45. The Commission also concludes that there should be a late
payment fee in connection with the installment payment plan for Phase
II 220 MHz licensees. The Commission stated in the Third Notice that
timely payment of all installments would be a condition of the award of
a license. Therefore, when licensees are more than fifteen days late in
their scheduled installment payments, the Commission will charge a late
payment fee equal to five percent of the amount of the past due
payment. 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 make
installment payments on time and may attempt to maximize their cash
flow at the government's expense by paying late. The five percent
payment 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, and principal
payments.

[[Page 15984]]

46. Substantial upfront payments are necessary for both large and
small businesses to deter speculation and ensure participation by
sincere bidders only. The Commission therefore declines to adopt a
reduced upfront payment provision for small businesses or very small
businesses.
47. The Commission likewise concludes that small businesses should
be required to pay a down payment of 20 percent of their winning
bid(s). Such a requirement is consistent with ensuring that winning
bidders have the financial capability of building out their systems,
will provide the Commission with stronger assurance against defaults
than a ten percent down payment, and should cover the required payments
in the unlikely event of default. Thus, small businesses will be
required to bring their deposit up to ten percent of their 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.

Partitioning

48. The Commission will permit any holder of an EA, Regional, or
nationwide Phase II 220 MHz license to partition portions of its
authorization and enter into contracts with eligible parties, and will
allow such parties to file long-form applications for the usable
channels within the partitioned area. The Commission concludes that
allowing holders of EA, Regional and nationwide Phase II 220 MHz
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 Phase II 220 MHz 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.
49. The Commission will not, at this time, authorize spectrum
disaggregation for the Phase II 220 MHz service. Instead, the
Commission will seek comment on the feasibility of spectrum
disaggregation for the 220 MHz service in a notice of proposed
rulemaking adopted concurrently with this Third Report and Order.
50. Providers of 220 MHz 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; and (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. In the event the
Commission receives applications requesting FCC consent to partitioning
transfers prior to the adoption of rules governing such issues as
whether to permit partitioning based on any license area defined by the
parties--upon which the Commission seeks comment in a notice of
proposed rulemaking--action on such applications will be deferred.

Transfer Restrictions and Unjust Enrichment Provisions

51. To ensure that large businesses do not become the unintended
beneficiaries of measures meant for smaller firms, the Commission
adopts unjust enrichment provisions similar to those adopted for
narrowband PCS and the 900 MHz SMR service. Licensees seeking to
transfer their licenses to entities which do not qualify as small
businesses (or very small businesses seeking to transfer their licenses
to small businesses or large companies), as a condition of approval of
the transfer, must remit to the government a payment equal to a portion
of the total value of the benefit conferred by the government. Thus,
for example, a small business that received a bidding credit seeking to
transfer or assign a license to an entity that does not qualify as a
small business will be required to reimburse the government for the
amount of the bidding credit, plus interest at the rate imposed for
installment financing at the time the license was awarded, before the
transfer will be permitted. Similarly, a very small business that
received a bidding credit seeking to transfer or assign a license to a
small business that qualified for a lesser bidding credit will be
required to reimburse the government for the difference between the
amount of its bidding credit and the lesser credit, plus interest at
the rate imposed for installment financing at the time the license was
awarded, before the transfer will be permitted. 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, in the case of very
small businesses transferring to small businesses, 100 percent of the
difference between the bidding credit received by the former and the
bidding credit for which the latter 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
assessments will have to be paid to the U.S. Treasury as a condition of
approval of the assignment or transfer.
52. 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 or very 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, this unjust enrichment provision will apply. The
Commission will apply these payment requirements for the entire license
term to ensure that small businesses will 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.

Spectrum Set Asides

53. Because there will be both a large number and a large variety
of licenses available in the Phase II 220 MHz auction, the Commission
will not adopt an entrepreneurs' block for the service. Small
businesses will have a significant opportunity to compete for Phase II
220 MHz licenses, particularly given the special provisions that have
been adopted for small businesses.

Procedural Matters; Ordering Clauses

Final Regulatory Flexibility Analysis

54. As required by the Regulatory Flexibility Act of 1980, Pub. L.
96-354, 94 Stat. 1164, as amended by the Contract with America
Advancement Act of 1996, Pub. L. 104-121, 110 Stat. 847, 5 U.S.C. 601
et seq., the Commission has prepared a Final Regulatory Flexibility
Analysis of the expected impact of the rule changes adopted in this
proceeding on small entities. The Secretary shall send a copy of this
Third Report and Order and Fifth Notice of Proposed Rulemaking,
including the Final Regulatory Flexibility Analysis, to the Chief
Counsel for Advocacy of the Small Business Administration in accordance
with paragraph 603(a) of the Regulatory Flexibility Act.4
---------------------------------------------------------------------------

\4\ Pub. L. 96-354, 94 Stat. 1164, 5 U.S.C. section 601 et seq.
(1980).

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[[Page 15985]]

Final Regulatory Flexibility Analysis

55. 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 Third Notice of Proposed Rulemaking in this
proceeding (Third Notice).5 The Commission sought written public
comments on the proposals in the Third Notice, including on the IRFA.
The Commission's Final Regulatory Flexibility Analysis (FRFA) in this
220 MHz Third 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) (CWAAA).6
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\5\ Third Notice, 11 FCC Rcd at 287.
\6\ Title II of the CWAAA is the Small Business Regulatory
Enforcement Fairness Act of 1996 (SBREFA), codified at 5 U.S.C. 601
et seq.
---------------------------------------------------------------------------

I. Need for and Objective of the Rules

56. The rules adopted in this decision will establish a flexible
regulatory scheme that will allow for efficient licensing and use of
the 220 MHz service, eliminate unnecessary regulatory burdens on
existing and future 220 MHz licensees, provide a wide variety of radio
services to the public, enhance the competitive potential of 220 MHz
services in the mobile marketplace, and continue to provide a home for
the development of spectrally efficient technologies. By establishing
competitive bidding procedures pursuant to section 309(j) of the
Communications Act, this decision will promote economic opportunity and
ensure that new and innovative technologies are readily accessible to
the American people by avoiding excessive concentration of licenses and
by disseminating licenses among a wide variety of applicants, including
small businesses. The adoption of competitive bidding rules will also
permit the recovery for the public of a portion of the value of the
public spectrum resource made available for commercial use and
avoidance of unjust enrichment through the methods employed to award
uses of that resource.

II. Summary of Issues Raised by the Public Comments in Response to the
Initial Regulatory Flexibility Analysis

57. No issues were raised specifically in response to the IRFA.
However, we have considered the significant economic impact on a
substantial number of small entities through consideration of comments
that pertained to issues of concern to small businesses. For example,
two equipment manufacturers, SEA and Securicor, argued against allowing
Phase I and Phase II licensees to aggregate their contiguous channels
to create wider bandwidth channels.7 (See para. 98 of the full
text of this decision). These commenters, who have developed radio
equipment in the 220 MHz band using spectrally efficient technologies,
argue that allowing aggregation of channels would severely jeopardize
their ability to continue to develop and market their technology. The
Commission decided in favor of allowing licensees to aggregate their
channels, agreeing with those commenters who support allowing such
aggregation because this type of flexibility will allow 220 MHz
licensees to offer a wider variety of communications services and more
effectively compete in the wireless marketplace. While allowing channel
aggregation, the Commission agreed with SEA and Securicor that it
should also require licensees and equipment manufacturers to meet a
spectrum efficiency standard. In adopting a spectrum efficiency
standard, the Commission sought to ensure that the 220 MHz band would
continue to be a home for the development of spectrally efficient
technologies.
---------------------------------------------------------------------------

\7\ The Commission received comments from five equipment
manufacturers: Fairfield Industries (Fairfield), SEA Inc. (SEA),
Securicor Radiocoms, Ltd. (Securicor), Ericsson Corporation, and E.
F. Johnson Company. Of these commenters, Fairfield, SEA, and
Securicor may be small businesses under the definition used in this
analysis. Securicor is a corporation based in England. A sixth
equipment manufacturer, Motorola, while not submitting formal
comments, filed ex parte presentations in this proceeding.
---------------------------------------------------------------------------

58. The Commission proposed two classifications of non-nationwide
220 MHz licensing--i.e., Economic Area (EA) licenses and Regional
licenses. Pagenet endorsed this proposal, noting that such assignments
would be a ``complement to nationwide'' licensing, and would allow
``participation by small, medium and large carriers in which local to
nationwide service will be provided by a number of different licensees
in each marketplace.'' (See para. 79 of the full text of this
decision). The Commission adopted this proposal. (See para. 80 of the
full text of this decision).
59. American Mobile Telecommunications Association (AMTA) and
Comtech asked that no limit be placed on the number of channels a
licensee may obtain within an EA or Region through our auction
procedures. Comtech also asked that EA and Regional licensees not be
required to construct a minimum number of channels at all of their base
stations. The Commission adopted both of these proposals.
60. The Commission also adopted a proposal by Fairfield to allow
for fixed operations on a secondary basis. In so doing, the Commission
acknowledged the concerns of other commenters that such operations
might cause interference to primary users of the band. We thus required
secondary licensees to notify nearby primary users of their secondary
facilities, limited secondary licensees' operating parameters beyond
those initially proposed, and restricted secondary licensees from
operating on public safety, Emergency Medical Radio Service (EMRS), or
Federal Government 220-222 MHz channels.
61. A number of commenters asked that we provide greater protection
to Phase I base stations than initially proposed. We decided to adopt
our proposed co-channel protection criteria because we concluded that,
inter alia, this decision would provide protection to Phase I base
stations consistent with other recent Commission decisions establishing
protection criteria in other mobile services. Commenters were also
opposed to our proposal for limiting field strength at EA and Regional
borders. We adopted our proposal in order to afford Phase II licensees
the maximum degree of flexibility in designing their systems and to
enable them to provide a quality signal at the borders of their service
areas.
62. Association of Public-Safety Communications Officials--
International (APCO) asked that we refrain from assigning the 125 non-
nationwide channels not reserved for Public Safety or EMRS eligibles by
competitive bidding in order to give public safety entities a realistic
opportunity to obtain authorization for more than ten 220 MHz channels.
We decided that such channels should be assigned through competitive
bidding because we could not conclusively determine the demand by
public safety entities for 220 MHz channels, and because we intend to
fully explore the spectrum needs of the public safety community in a
future rulemaking proceeding.
63. A number of commenters urged the Commission to maintain a non-
commercial set-aside for the 220 MHz service, arguing that there is a
continuing demand for such a set-aside and that it is necessary for
licensees' internal communications. Other commenters disagreed. We
found that it would not be in the public interest to establish a non-
commercial set-aside based in part on our continuing commitment to
efficient use of the spectrum. As discussed in para. 42 of the full
text of this Third Report and

[[Page 15986]]

Order, we agree with those commenters who believe that it is
unnecessary to set aside spectrum for exclusively internal
communications, given the apparent demand for nationwide spectrum for
the provision of service to the public and the fact that we are not
precluding a nationwide licensee from using all or part of its spectrum
for internal communications.
64. Commenters disagreed regarding how the Commission should treat
pending applications for nationwide 220 MHz licenses. Many commenters
urged the Commission to exercise its discretion to award the licenses
through lotteries. Other commenters argued that the pending
applications should be returned and the licenses should be awarded
through auctions. We found that it would be in the public interest to
return the pending applications for the 220 MHz service without
prejudice and award the licenses through competitive bidding. We
concluded that, because the nature of the 220 MHz service is undergoing
a substantial change, it would be unfair to preclude new applicants
from having the opportunity to apply for these licenses. We also noted
that awarding licenses through auctions benefits the public by ensuring
that licenses go to those who value them the most and to those who have
an incentive to build their systems quickly, thereby speeding the
provision of service to the public.

III. Description and Estimate of the Small Entities Involved

65. The Commission anticipates receiving approximately 2,220 total
applications for the Phase II 220 MHz service--i.e., 2,000 Public
Safety applications (including 1,000 EMRS applications), 90
applications for Economic Area channels, 20 applications for Regional
channels, 100 applications for secondary service, and 10 applications
for nationwide channels. These applicants, many of whom may be small
businesses, as well as approximately 3,800 Phase I 220 MHz licensees,
many of whom may be small entities, and at least six equipment
manufacturers, three of which may be small businesses, will be subject
to the rules adopted in the 220 MHz Third Report and Order.
66. The Commission has not developed a definition of small entities
applicable to 220 MHz Phase I licensees, or equipment manufacturers for
purposes of this Final Regulatory Flexibility Analysis, and since the
Regulatory Flexibility Act amendments were not in effect until the
record in this proceeding was closed, the Commission was unable to
request information regarding the number of small businesses that are
associated with the 220 MHz service. However, we have adopted criteria
for defining small businesses and very small businesses for purposes of
determining eligibility for auction bidding credits and installment
payments.8 We will therefore use this definition for estimating
the number of potential Phase II entities applying for auctionable
spectrum that are small businesses. To estimate the number of Phase I
licensees and the number of 220 MHz equipment manufacturers that are
small businesses, and the number of Phase II entities applying for non-
auctionable spectrum (i.e., public safety and EMRS channels) we shall
turn to the relevant definitions as provided by the Small Business
Administration (SBA).
---------------------------------------------------------------------------

\8\ Approval from the Small Business Administration for this
definition is pending.
---------------------------------------------------------------------------

Phase I Licensees
There are approximately 3,800 non-nationwide Phase I licensees and
4 nationwide licensees currently authorized to operate in the 220 MHz
band. To estimate the number of such entities that are small
businesses, we apply the definition of a small entity under SBA rules
applicable to radiotelephone companies. This definition provides that a
small entity is a radiotelephone company employing fewer than 1,500
persons.9 However, the size data provided by the SBA do not allow
us to make a meaningful estimate of the number of 220 MHz providers
that are small entities because they combine all radiotelephone
companies with 500 or more employees.10 We therefore use the 1992
Census of Transportation, Communications, and Utilities, conducted by
the Bureau of the Census, which is the most recent information
available. Data from the Bureau of the Census' 1992 study indicate that
only 12 out of a total 1,178 radiotelephone firms which operated during
1992 had 1,000 or more employees--and these may or may not be small
entities, depending on whether they employed more or less than 1,500
employees.11 But 1,166 radiotelephone firms had fewer than 1,000
employees and therefore, under the SBA definition, are small entities.
However, we do not know how many of these 1,166 firms are likely to be
involved in the 220 MHz service.
---------------------------------------------------------------------------

\9\ 13 CFR 121.201, Standard Industrial Classification (SIC)
Code 4812.
\10\ U.S. Small Business Administration 1992 Economic Census
Employment Report, Bureau of the Census, U.S. Department of
Commerce, Table 3, SIC Code 4812 (radiotelephone communications
industry data adopted by the SBA Office of Advocacy).
\11\ U.S. Bureau of the Census, U.S. Department of Commerce,
1992 Census of Transportation, Communications, and Utilities, UC92-
S-1, Subject Series, Establishment and Firm Size, Table 5,
Employment Size of Firms; 1992, SIC Code 4812 (issued May 1995).
---------------------------------------------------------------------------

Phase II Entities Applying for Auctionable Spectrum
The 220 MHz Third Report and Order adopts a two-tiered definition
of small business for the purpose of competitive bidding. The
Commission defines a ``very small business'' as 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; and a ``small business'' as an entity that, together with
affiliates and controlling principals, has average gross revenues for
the three preceding years of not more than $15 million. For purposes of
determining small business status, the Commission will attribute the
gross revenues of all controlling principals in the small business
applicant as well as the gross revenues of affiliates of the applicant.
The Commission is not imposing specific equity requirements on the
controlling principals that meet this small business definition. In
order for an applicant to qualify as a small business, qualifying small
business principals must maintain both de facto and de jure control of
the applicant.
67. As noted above, the SBREFA was not in effect at the time the
Third Notice was issued, so comment was not sought on the number of
prospective Phase II applicants in the 220 MHz service which might
qualify as small businesses. Therefore, the Commission cannot
accurately predict the number of applicants in the 220 MHz service who
will fit the description of a small business. However, using the
definitions of small business and very small business we adopted for
the purpose of determining eligibility for bidding credits and
installment payments, the Commission can attempt to estimate the number
of applicants for 220 MHz licenses that are small businesses by looking
at the number of applicants in similar services that qualified as small
businesses. For example, the 900 MHz SMR service utilized a definition
of very small business based on gross revenues of not more than $3
million and a definition of small business based on gross revenues of
not more than $15 million. A total of 128 applications were received in
the 900 MHz SMR auction, and, of these applications, 71 qualified as
very small businesses and an additional 30 qualified as small
businesses.
68. Approximately 900 licenses will be made available for
authorization in

[[Page 15987]]

the 220 MHz auction. In the 900 MHz SMR auction, 1050 licenses were
made available. Given that 128 qualified applications were received in
the 900 MHz auction, we anticipate receiving slightly fewer, or 120
applications in the 220 MHz auction. Given that 71 applicants qualified
as very small businesses and 30 applicants qualified as small
businesses in the 900 MHz SMR auction, we estimate that proportionately
fewer, or 65 applicants, will qualify as very small businesses, and 27
applicants will qualify as small businesses in the 220 MHz auction.
Phase II Entities Applying for Non-Auctionable Spectrum
We estimate that approximately 1,000 applications will be filed for
authorization on the 220 MHz public safety channels, and we estimate
that approximately 1,000 applications will be filed for authorization
on the 220 MHz EMRS channels. To estimate the number of such applicants
that are small entities, we apply the definition of a small entity
under the SBA rules applicable to small governmental entities. The
SBREFA requires that we estimate the number of governmental entities
with populations of less than 50,000 for which our rules will
apply.12 According to the Census Bureau, 96 percent of the
nation's counties, cities, and towns have populations of fewer than
50,000.13 The Census Bureau estimates that this ratio is
approximately accurate for all governmental entities. We thus estimate
that 96 percent of all governmental entities are small; and further
estimate that, because the estimated 1,000 applications for the public
safety channels will be from governmental entities, that 960 of these
applications may be from small governmental entities. Some EMRS
applicants will be governmental entities, while others will be non-
governmental (e.g., hospitals, ambulance services). Because we assume
that all such non-governmental entities applying for EMRS licenses will
be small entities, we estimate that a slightly higher percentage of
applicants for EMRS licenses, or 98 percent of EMRS applicants, will be
small entities. We therefore estimate that approximately 980
applications for the EMRS channels will be from small entities.
---------------------------------------------------------------------------

\12\ See 5 U.S.C. 601(5) (including cities, counties, towns,
townships, villages, school districts, or special districts).
\13\ See 1992 Census of Governments, U.S. Bureau of the Census,
U.S. Department of Commerce.
---------------------------------------------------------------------------

Radio Equipment Manufacturers
We anticipate that at least six radio equipment manufacturers will
be affected by our decisions in this proceeding. According to the SBA's
regulations, a radio and television broadcasting and communications
equipment manufacturer must have 750 or fewer employees in order to
qualify as a small business concern.14 Census Bureau data indicate
that there are 858 U.S. firms that manufacture radio and television
broadcasting and communications equipment, and that 778 of these firms
have fewer than 750 employees and would therefore be classified as
small entities.15 We do not have information that indicates how
many of the six radio equipment manufacturers associated with this
proceeding are among these 778 firms. However, because three of these
manufacturers (Motorola, Ericsson and E.F. Johnson) are major,
nationwide radio equipment manufacturers, we conclude that these
manufacturers would not qualify as small businesses.
---------------------------------------------------------------------------

\14\ 13 CFR 121.201, (SIC) Code 3663.
\15\ U.S. Dept. of Commerce, 1992 Census of Transportation,
Communications and Utilities (issued May 1995), SIC category 3663.
---------------------------------------------------------------------------

IV. Summary of the Projected Reporting, Recordkeeping, and Other
Compliance Requirements

69. The 220 MHz Third Report and Order adopts a number of rules
that will entail reporting, recordkeeping, and/or third party
consultation. However, the Commission believes that these requirements
are the minimum needed to ensure the integrity of the 220 MHz service.
The Commission considers the effects of these requirements first on
Phase II applicants and licensees and then on Phase I licensees.
Phase II Applicants
Applicants for the Phase II 220 MHz auction will be required to
submit a completed FCC Form 175. Auction winners, as well as applicants
for the 220 MHz public safety and EMRS channels, will be required to
file a completed FCC Form 600. In addition, applicants for the 220 MHz
EMRS channels, like all other EMRS applicants, must furnish a statement
from the governmental body having jurisdiction over the state emergency
plan indicating that the applicant is included in the emergency plan,
or is otherwise supporting the application.
Phase II Licensees
Phase II licensees authorized on Channels 161-200 and Channels 1-40
will be required to coordinate among themselves to locate their base
stations to avoid interference. Regional licensees operating on
Channels 196-200 may operate stations at powers exceeding 2 watts ERP
or at antenna heights greater than 20 feet provided that they obtain
the written concurrence of all Phase I and Phase II licensees operating
base stations on Channels 1-40 within 6 km of the base stations of the
Regional licensees.
70. Phase II licensees operating secondary, fixed stations will be
required to notify any co-channel primary licensees authorized in the
area of their operation of the location of their secondary facilities.
Phase II licensees implementing nationwide land mobile or paging
systems will be required to meet construction ``benchmarks'' and must
submit maps and other supporting documentation to demonstrate
compliance with these benchmarks five and ten years after grant of the
initial license. Also, nationwide licensees implementing fixed systems,
in lieu of meeting the construction benchmarks described above, may
make a showing of ``substantial service'' within five and ten years of
the initial license grant. To comply with these requirements, such
licensees must also submit maps and other supporting documents five and
ten years after grant of the initial license. Regional licensees and EA
licensees implementing land mobile, paging, or fixed systems must also
comply with 5- and 10-year construction or substantial service
requirements and must also provide maps and other supporting documents
to demonstrate compliance with such requirements. Preparation of maps
and supporting documentation may involve engineering expertise. Failure
by nationwide, EA, or Regional licensees to meet either the five- or
ten-year construction requirement will result in automatic cancellation
of the licensees' nationwide authorization. Phase II licensees will not
be permitted to construct their stations less than 120 km from a
constructed and operating Phase I, co-channel station unless they
submit a technical analysis demonstrating that the predicted 28 dBuV/m
interfering contour of their base station does not overlap the
predicted 38 dBuV/m service contour of the Phase I licensee's station.
This technical analysis will involve engineering expertise. Phase II
licensees may also locate their stations less than 120 km from the
station of an existing Phase I co-channel licensee or with less 10 dB
protection to such co-channel's station's 38 dBuV/m contour if the
Phase II licensee obtains the written consent of the affected Phase I

[[Page 15988]]

licensee. Finally, Phase II licensees operating in adjacent EAs or
Regions may exceed the specified field strength limit at their border
if all affected, co-channel EA and Regional licensees agree to the
higher field strength.
71. 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.'' 16 The Commission adopted safeguards designed to
ensure that the requirements of this section are satisfied, including a
transfer disclosure requirement for licenses obtained through the
competitive bidding process for the 220 MHz service. 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.
---------------------------------------------------------------------------

\16\ 47 U.S.C. 309(j)(4)(E).
---------------------------------------------------------------------------

72. With respect to small businesses, we have 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 very small
businesses seeking to transfer their licenses to small businesses or
large companies), as a condition of approval of the transfer, must
remit to the government a payment equal to a portion of the total value
of the benefit conferred by the government.
73. Finally, applicants and licensees claiming eligibility for
competitive bidding as a small business, a very small business, or a
consortium of small businesses (or very small businesses) 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).
Phase I Licensees
Phase I nationwide licensees intending to operate primary, fixed or
paging operations instead of or in addition to their land mobile
operations must revise their 10-year schedule for construction of their
land mobile system to describe the fixed or paging system they intend
to deploy. They must also certify that the financial showings and all
other certifications they had previously provided in demonstrating
their ability to construct and operate their nationwide land mobile
system remain applicable to their planned, primary fixed or paging
system, or they must revise their financial showings and provide all
other relevant certifications to demonstrate their ability to construct
and operate a nationwide, primary fixed or paging system. These
certifications and showings may involve engineering and financial
expertise. The Commission anticipates that two Phase I licensees will
seek to deploy primary fixed or paging operations.
74. Phase I nationwide licensees intending to operate primary fixed
systems will be required to comply with existing construction,
recordkeeping, and reporting requirements, but, rather than
constructing base stations (for base and mobile operations) and placing
them in operation to meet their 4-, 6- and 10-year construction
benchmarks, must demonstrate how their fixed stations are providing
``substantial service'' to the public. This demonstration of
substantial service will be provided in the same form as documentation
currently required for nationwide Phase I licensees providing evidence
of the construction of their primary land mobile systems.
All 220 MHz Licensees
All 220 MHz licensees seeking renewal of their authorizations will
be required, inter alia, to demonstrate that they have provided
substantial service during their past license term, and submit a
showing explaining why they should receive a renewal expectancy.

V. Significant Alternatives and Steps Taken by Agency to Minimize the
Significant Economic Impact on a Substantial Number of Small Entities
Consistent With Stated Objectives

75. The Commission's chief objectives in adopting the 220 MHz Third
Report and Order are to establish a regulatory plan for the 220 MHz
service that will allow for the efficient licensing and use of the
service, to eliminate unnecessary regulatory burdens, to enhance the
competitive potential of the 220 MHz service in the mobile services
marketplace, to provide a wide variety of radio services to the public,
and to continue to provide a home for the development of spectrally
efficient technologies. A number of the Commission's original proposals
were modified in order to minimize the significant economic impact on
small entities consistent with these objectives, based on issues and
suggestions raised in the public comment.
76. For example, the Commission made significant changes to the
proposed Phase II channel band plan based on an analysis of the
comments. Most of the commenters favored the assignment of larger
numbers of channels to individual EA and Regional licensees than the
proposed 5-channel blocks. The Commission concurred with the
commenters' argument that proposed 5-channel blocks would unjustly
inhibit licensees' revenue-producing ability and therefore decided to
authorize 10- and 15-channel EA and Regional assignments, respectively.
We concluded that adoption of a licensing scheme that provides for 10-
channel and 15-channel assignments should enable Phase II licensees,
many of which are likely to be small businesses, to establish more
viable radio services. Commenters were also generally opposed to the
Commission's use of contiguous channel assignments in our proposed
Phase II band plan after having previously adopted predominantly non-
contiguous assignments in Phase I. The Commission found merit in the
argument of those who emphasized the difficulties that are likely to be
encountered by both Phase I licensees and Phase II licensees, many of
which are likely to be small businesses, if we adopted completely
inconsistent Phase II and Phase I band plans. We therefore adopted a
Phase II band plan that mirrored the existing Phase I plan. We
concluded that adopting a Phase II band plan patterned after the Phase
I plan will benefit both Phase I and Phase II licensees because Phase I
licensees will be able to more easily expand on their existing
authorized channels, and Phase II licensees will be able to more easily
provide protection to co-channel Phase I licensees. In addition, at the
suggestion of a commenter, we decided not to require EA, Regional or
nationwide licensees to construct a minimum number of channels at all
of their base stations.
77. In order to provide licensees with maximum flexibility to
employ a variety

[[Page 15989]]

of technologies, the Commission decided to allow them to aggregate
their contiguous channels. However, in so doing the Commission agreed
with the views of commenters SEA and Securicor and adopted a spectrum
efficiency standard. In adopting a spectrum efficiency standard, we
rejected other commenters' arguments that a standard is not necessary
because licensees acquiring spectrum assigned on contiguous channels
through competitive bidding will have an incentive to use that spectrum
as efficiently as possible, and that adoption of a particular spectrum
efficiency standard could limit the types of services that licensees
would be able to provide. The Commission concluded that a standard was
needed to ensure that the 220 MHz band would continue to be a home for
the development of spectrum efficient technologies.
78. The Commission also attempted, wherever possible, to offer
licensees the most flexibility with a minimum regulatory burden. For
example, the Commission elected to allow Phase I and Phase II licensees
the flexibility to conduct paging operations on a primary basis. The
commenters were divided on this issue. Commenters opposed to allowing
paging on a primary basis maintained that to do so would transform the
220 MHz band into merely an additional band for the provision of paging
services, and that this would be unfair to existing paging licensees in
other bands. These commenters argued that there are a sufficient number
of paging bands already in existence and that the 220 MHz band should
continue to be used to advance the development of narrowband
technology. The Commission, however, decided to allow paging on a
primary basis in the 220 MHz band in order to provide additional
spectrum for a rapidly growing communications service and to enable 220
MHz licensees to compete more effectively in the wireless marketplace.
79. The Commission also decided to allow 220 MHz licensees to
conduct fixed operations on a primary basis to provide them with the
flexibility to offer a wider array of communications services to the
public. Similarly, the Commission decided that 220 MHz licensees
conducting geophysical telemetry operations should be permitted to
obtain secondary authorizations to operate their fixed facilities on a
non-interference basis to licensees authorized to operate on a primary
basis. In making this decision, the Commission acknowledged concerns
raised by commenters about possible interference to primary operations,
but concluded that the risk of interference from secondary, geophysical
telemetry operations was minimal, and that such operations should
therefore be allowed.
80. In prescribing rules for the 220 MHz service auction, we
initially proposed to begin by auctioning the nationwide licenses and
the Regional licenses in one simultaneous multiple round auction. We
proposed to then auction the economic area (EA) licenses in a
subsequent auction. The SMR Advisory Group supported this approach.
After further consideration, however, we concluded that all three
categories of licenses are highly interdependent. Grouping such
licenses and putting them up for bid at the same time facilitates
awarding licenses to bidders who value them the most highly by
providing bidders, including small businesses, with information about
the prices of complementary and substitutable licenses during the
course of an auction. We therefore announced our plan to hold a single,
simultaneous multiple round auction for all classes of licenses. We
did, however, reserve the discretion to auction each of these license
groupings (nationwide, Regional, EA) separately or in different
combinations (e.g., nationwide and Regional together) if there are
administrative reasons for doing so.
81. In establishing bidding procedures, the Commission proposed the
use of the Milgrom-Wilson activity rule. We proposed a minimum activity
level requiring bidders to be active on at least one-third of the MHz-
pops for which they are eligible in Stage I, two-thirds of the MHz-pops
for which they are eligible in Stage II, and 100 percent of the MHz-
pops for which they are eligible in Stage III. The SMR Advisory Group
and AMTA supported use of the Milgrom-Wilson activity rule. However,
NTIA stated that requiring a 100 percent level of activity in Stage III
may inhibit bidder flexibility and be unduly restrictive. We agree with
NTIA and decided not to require a 100 percent level of activity in
Stage III. Moreover, in order to enhance bidder flexibility at the end
of the auction and to make the figures easier to administer, we
eliminated the use of fractions. Thus, we adopted eligibility levels of
60 percent, 80 percent, and 98 percent, for Stages I, II, and III,
respectively. This change will benefit all bidders, including small
businesses.
82. In establishing auction rules for the 220 MHz service, the
Commission adopted a number of provisions to support the participation
of small businesses. For example, the Commission established bidding
credits and an installment payment plan, designed to increase the
opportunities for small businesses to become 220 MHz service providers.
In addition, the Commission established rules for the partitioning of
geographic area licenses, which will increase opportunities for small
businesses to participate in the 220 MHz service. Through partitioning,
small businesses may acquire licenses for portions of geographic areas,
a less expensive alternative to acquiring a license for an entire area.
83. The Commission initially proposed to define small business, for
purposes of eligibility for such provisions as bidding credits and
installment payments as follows: For companies wishing to bid on
nationwide and Regional licenses, we proposed to define small
businesses as those entities with $15 million or less in average annual
gross revenues for the preceding three years. For EA licenses, we
proposed to define small businesses as those entities with $6 million
or less in average annual gross revenues for the preceding three years.
AMTA and the SMR Advisory Group agreed with this definition. We
concluded, however, that while the nationwide and Regional Phase II 220
MHz licenses would have higher build-out and operational costs than
would the EA licenses, it is likely that bidders will attempt to
aggregate licenses across regions or EAs to establish their markets.
Thus, for example, bidders may elect to aggregate EA licenses to create
a Regional market, rather than bid for the Regional license itself. In
order to ensure the meaningful participation of small business entities
in the auction, we adopted a two-tiered definition of small business
with gross revenues limits applicable across all three categories of
license. This approach will give qualifying small businesses
flexibility to bid for a Regional license or, on the other hand, elect
to bid for several EAs, without having to choose which type of license
to bid for prior to the start of the auction. For purposes of bidding
for the nationwide, Regional and EA licenses, therefore, we defined (1)
a very small business as an entity that, together with its affiliates
and controlling principals, has average gross revenues for the three
preceding years of no more than $3 million and (2) a small business as
an entity that, together with affiliates and controlling principals,
has average gross revenues for the preceding three years of no more
than $15 million. Defining a ``very small business'' at the $3 million
threshold, rather than at the $6 million threshold, is consistent with
the

[[Page 15990]]

definitions successfully used in the 900 MHz SMR service, where build-
out costs are similar to those in the 220 MHz service. Bidding credits
are based upon this two-tiered approach.
84. We disagreed with the suggestion of Metricom that we should
increase the gross revenues threshold of our small business definition
to $25 million, because, based upon our experience in the 900 MHz SMR
auction, such an increase would be far too inclusive. In the 900 MHz
SMR auction, we established small business definitions of $15 million
and $3 million. Of the 128 applicants that qualified to participate in
the auction, 101 qualified for the small business or very small
business bidding credits. Because we believe the cost of building out a
220 MHz system most closely resembles the cost of a 900 MHz SMR system,
and because it would substantially dilute the value of the small
business preferences for virtually all applicants to qualify for them,
we declined to adopt the Metricom proposal.
85. For purposes of determining small business status, we will
attribute the gross revenues of the applicant, all controlling
principals of the applicant, and their affiliates. This is a much
simpler approach than we utilized in broadband PCS, because it does not
require a control group. We will still require, however, that in order
for an applicant to qualify as a small business, qualifying small
business principals must maintain ``control'' of the applicant,
including both de facto and de jure control. Thus, small businesses
will have less difficulty determining their eligibility. We declined to
adopt Comtech's suggestion that, for determining whether an entity
qualifies as a small business, revenues and assets of investors holding
more than 25 percent of an applicant's voting stock and revenues and
assets of all affiliates should be attributable to the applicant. Our
approach is a more accurate indicator of the control of an applicant.
86. With respect to bidding credits, in order to ensure that small
businesses have a realistic opportunity to acquire Phase II 220 MHz
nationwide and Regional licenses, we proposed a 40 percent bidding
credit for all qualified designated entities. For Phase II 220 MHz
nationwide licenses, we proposed, inter alia, to offer this bidding
credit on only one of the available channel blocks. For Phase II 220
MHz Regional licenses, we proposed to offer the bidding credit on all
available channel blocks. Because we believed that the Phase II 220 MHz
EA licenses are similar in their number and in the level of incumbency
to the licenses offered in the 900 MHz SMR service, we proposed
offering the same 10 percent bidding credit to qualified small
businesses bidding on Phase II 220 MHz EA licenses as we did in the 900
MHz SMR auction. SMR Advisory Group supported these proposals. AMTA,
U.S. MobilComm, Roamer, and Incom also supported these proposals,
although they supported bidding credits solely for regional and EA
licenses. Comtech agreed with a 40 percent bidding credit for Regional
licenses, but suggested this credit should be extended to all
nationwide licenses as well.
87. We concluded, however, that small businesses are in the best
position to decide which blocks of licenses to bid on. As we have
stated, based upon our experience in prior auctions, it is very likely
that bidders will attempt to aggregate Regional and EA licenses in the
development of their bidding strategies, particularly if these licenses
are auctioned together. Thus, in order to enhance bidder flexibility,
we elected to establish bidding credits consistent with our two-tiered
definition of small business that will apply to all three license
groups. For very small businesses that, together with affiliates and
controlling principals, have average gross revenues for the three
preceding years of not more than $3 million, we will give a 25 percent
bidding credit, applicable for all three categories of licenses.
Likewise, we 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, available for all three categories of licenses. While the 25
percent bidding credit is less than originally proposed for the
nationwide and Regional licenses, we believe it is appropriate since we
are now going to offer bidding credits generally for all channel
blocks. Moreover, we had favorable results--i.e., a significant number
of small business applicants were winning bidders--in previous auctions
with bidding credits at this level or lower.
88. We initially proposed the use of installment payments and
reduced down payments for all small businesses bidding for any of the
Phase II 220 MHz nationwide, Regional and EA licenses. The SMR Advisory
Group supported these positions. We also tentatively concluded that
reduced upfront payments for small businesses would be unnecessary.
89. We adopted an installment payment plan for small businesses and
very small businesses participating in the 220 MHz auction. We declined
to provide very small businesses with a longer interest-only period
than the two-year period provided for small businesses. We determined
that a two-year interest-only period in the single plan we adopted
provides all small businesses with the appropriate level of financing
to overcome difficulties in attracting capital. Given that we are
making additional financial assistance available to very small
businesses in the form of a 25 percent bidding credit, we concluded
that a longer interest-only period is not needed. We also concluded
that small businesses should not be permitted to pay a reduced down
payment. As we stated in the case of the broadband PCS D, E and F Block
auction, we believe that a substantial down payment is necessary to
ensure that winning bidders have the financial capability of building
out their systems, and will provide us with 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. We also
believe that a 20 percent down payment should cover the required
payments in the unlikely event of default.
90. Finally, we elected not to adopt a spectrum set-aside for
designated entities, including small businesses. Because there will be
both a large number and a large variety of licenses available in the
Phase II 220 MHz auction, we decided not to adopt an entrepreneur's
block for this service. Small businesses, we concluded, will have a
significant opportunity to compete for Phase II 220 MHz licenses,
particularly given the special provisions adopted for small businesses.
91. In making its various decisions in this proceeding, the
Commission considered all available alternatives. It believes that the
rules it has adopted in this decision represent the best balance of
providing licensees, many of whom are small businesses, with the most
flexibility and the smallest regulatory burden, and enables them to
offer a variety of radio services to the public and compete effectively
in the mobile communications marketplace.

VI. Report to Congress

92. The Commission shall send a copy of this Final Regulatory
Flexibility Analysis (FRFA) along with this 220 MHz Third Report and
Order, in a report to Congress pursuant to 5 U.S.C. 801(a)(1)(A). A
copy of this FRFA will also be published in the Federal Register.

[[Page 15991]]

Ordering Clauses

93. Authority for issuance of this Third Report and Order is
contained in sections 4(i), 303(r), 309(j), and 332 of the
Communications Act of 1934, 47 U.S.C. 154(i), 303(r), 309(j), 332.
94. Accordingly, it is ordered that part 90 of the Commission's
rules, 47 CFR part 90, is amended as set forth below, effective August
21, 1997.
95. It is further ordered that the Petitions for Reconsideration
filed by Columbia Cellular Corporation, PLMRS Narrowband Corp. and 360
Mobile Data Joint Venture on August 6, 1993, are dismissed as moot.
96. 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 Phase II
220 MHz service, 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.
97. It is further ordered that all pending nationwide and non-
nationwide 220 MHz applications, together with the appropriate filing
fees, will be returned to applicants, without prejudice.
98. It is further ordered that a Public Notice will be issued
announcing the acceptance of applications for authorizations on
Channels 161-170 and Channels 181-185 after August 21, 1997.
99. It is further ordered that applications for temporary,
secondary authorizations for geophysical telemetry operations will be
accepted beginning August 21, 1997.

List of Subjects

47 CFR Part 2

Radio.

47 CFR Part 90

Radio.

Federal Communications Commission.
William F. Caton,
Acting Secretary.

Rule Changes

Parts 2 and 90 of Title 47 of the Code of Federal Regulations are
amended as follows:

PART 2--FREQUENCY ALLOCATIONS AND RADIO TREATY MATTERS; GENERAL
RULES AND REGULATIONS

1. The authority citation for part 2 continues to read as follows:

Authority: Secs. 4, 302, 303, and 307 of the Communications Act
of 1934, as amended, 47 U.S.C. 154, 302, 303, and 307, unless
otherwise noted.

2. Section 2.106, the Table of Frequency Allocations, is amended as
follows:
a. Revise entries for 220-222 MHz;
b. Remove international footnote 625; and
c. Add United States footnote US335.

Sec. 2.106 Table of Frequency Allocations.

* * * * *

International table United States table FCC use designators
----------------------------------------------------------------------------------------------------------------
Government Non-
Region 1-- Region 2-- Region 3-- --------------- Government
allocation MHz allocation MHz allocation MHz --------------- Rule part(s) Special-use
Allocation Allocation frequencies
MHz MHz
(1) (2) (3) (4) (5) (6) (7)
----------------------------------------------------------------------------------------------------------------
* * * * * * *
----------------------------------------------------------------------------------------------------------------
220-222 220-222 AMATEUR 220-222 FIXED 220-222 FIXED 220-222 FIXED PRIVATE LAND
BROADCASTING FIXED MOBILE MOBILE LAND MOBILE LAND MOBILE MOBILE (90)
Radiolocation BROADCASTING Radiolocatio
627 n 627
621 623 628 6 ................ 626 G2 US335 627 US335
29
* * * * * * *
----------------------------------------------------------------------------------------------------------------

United States (US) Footnotes

* * * * *
US335 The primary Government and non-Government allocations for
the various segments of the 220-222 MHz band are divided as follows:
(1) the 220.0-220.55/221.0-221.55, 220.6-220.8/221.6-221.8, 220.85-
220.90/221.85-221.90 and 220.925-221.0/221.925-222.0 MHz bands
(Channels 1-110, 121-160, 171-180 and 186-200, respectively) are
available for exclusive non-Government use; (2) the 220.55-220.60/
221.55-221.60 MHz bands (Channels 111-120) are available for
exclusive Government use; and (3) the 220.80-220.85/221.80-221.85
and 220.900-220.925/221.900-221.925 MHz bands (Channels 161-170 and
181-185, respectively) are available for shared Government and non-
Government use. The exclusive non-Government band segments are also
available for temporary fixed geophysical telemetry operations on a
secondary basis to the fixed and mobile services.
* * * * *

PART 90--PRIVATE LAND MOBILE RADIO SERVICES

1. The authority citation for part 90 continues to read as follows:

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

2. Section 90.7 is amended by revising the definitions for ``EA-
based or EA license'' and ``Economic Areas (EAs),'' and by adding
definitions for ``Geophysical Telemetry,'' ``Regional Economic Area
Groupings (REAGs),''

[[Page 15992]]

``Regional License,'' and ``220 MHz Service'' in alphabetical order to
read as follows:

Sec. 90.7 Definitions.

* * * * *
EA-based or EA license. A license authorizing the right to use a
specified block of SMR and 220-222 MHz spectrum within one of 175
Economic Areas (EAs) as defined by the Department of Commerce Bureau of
Economic Analysis. The EA Listings and the EA Map are available for
public inspection at the Wireless Telecommunications Bureau's public
reference room, Room 5608, 2025 M St. NW, Washington, DC 20554 and
Office of Operations--Gettysburg, 1270 Fairfield Road, Gettysburg, PA
17325.
Economic Areas (EAs). A total of 175 licensing regions based on the
United States Department of Commerce Bureau of Economic Analysis
Economic Areas defined as of February 1995, with the following
exceptions:
(1) Guam and Northern Mariana Islands are licensed as a single EA-
like area (identified as EA 173 in the 220 MHz Service);
(2) Puerto Rico and the U.S. Virgin Islands are licensed as a
single EA-like area (identified as EA 174 in the 220 MHz Service); and
(3) American Samoa is licensed as a single EA-like area (identified
as EA 175 in the 220 MHz Service).
* * * * *
Geophysical Telemetry. Telemetry involving the simultaneous
transmission of seismic data from numerous locations to a central
receiver and digital recording unit.
* * * * *
Regional Economic Area Groupings (REAGs). The six geographic areas
for Regional licensing in the 220-222 MHz band, based on the United
States Department of Commerce Bureau of Economic Analysis Economic
Areas (see 60 FR 13114 (March 10, 1995)) defined as of February 1995,
and specified as follows:
REAG 1 (Northeast): REAG 1 consists of the following EAs: EA 001
(Bangor, ME) through EA 011 (Harrisburg-Lebanon-Carlisle, PA); and EA
054 (Erie, PA).
REAG 2 (Mid-Atlantic): REAG 2 consists of the following EAs: EA 012
(Philadelphia-Wilmington-Atlantic City, PA-NJ-DE-MD) through EA 026
(Charleston-North Charleston, SC); EA 041 (Greenville-Spartanburg-
Anderson, SC-NC); EA 042 (Asheville, NC); EA 044 (Knoxville, TN)
through EA 053 (Pittsburgh, PA-WV); and EA 070 (Louisville, KY-IN).
REAG 3 (Southeast): REAG 3 consists of the following EAs: EA 027
(Augusta-Aiken, GA-SC) through EA 040 (Atlanta, GA-AL-NC); EA 043
(Chattanooga, TN-GA); EA 069 (Evansville-Henderson, IN-KY-IL); EA 071
(Nashville, TN-KY) through EA 086 (Lake Charles, LA); EA 088
(Shreveport-Bossier City, LA-AR) through EA 090 (Little Rock-North
Little Rock, AR); EA 095 (Jonesboro, AR-MO); EA 096 (St. Louis, MO-IL);
and EA 174 (Puerto Rico and the U.S. Virgin Islands).
REAG 4 (Great Lakes): REAG 4 consists of the following EAs: EA 055
Cleveland-Akron, OH-PA) through EA 068 (Champaign-Urbana, IL); EA 097
(Springfield, IL-MO); and EA 100 (Des Moines, IA-IL-MO) through EA 109
(Duluth-Superior, MN-WI).
REAG 5 (Central/Mountain): REAG 5 consists of the following EAs: EA
087 (Beaumont-Port Arthur, TX); EA 091 (Forth Smith, AR-OK) through EA
094 (Springfield, MO); EA 098 (Columbia, MO); EA 099 (Kansas City, MO-
KS); EA 110 (Grand Forks, ND-MN) through EA 146 (Missoula, MT); EA 148
(Idaho Falls, ID-WY); EA 149 (Twin Falls, ID); EA 152 (Salt Lake City-
Ogden, UT-ID); and EA 154 (Flagstaff, AZ-UT) through EA 159 (Tucson,
AZ).
REAG 6 (Pacific): REAG 6 consists of the following EAs: EA 147
(Spokane, WA-ID); EA 150 (Boise City, ID-OR); EA 151 (Reno, NV-CA); EA
153 (Las Vegas, NV-AZ-UT); EA 160 (Los Angeles-Riverside-Orange County,
CA-AZ) through EA 173 (Guam and the Northern Mariana Islands); and EA
175 (American Samoa).
Regional License. A license authorizing the right to use a
specified block of 220-222 MHz spectrum within one of six Regional
Economic Area Groupings (REAGs).
* * * * *
220 MHz Service. The radio service for the licensing of frequencies
in the 220-222 MHz band.
* * * * *
3. Section 90.41(a) is revised to read as follows:

Sec. 90.41 Disaster relief organizations.

(a) Eligibility. Organizations established for disaster relief
purposes having an emergency radio communications plan are eligible to
hold authorizations to operate radio stations for the transmission of
communications relating to the safety of life or property, the
establishment and maintenance of temporary relief facilities, and the
alleviation of emergency situations during periods of actual or
impending emergency, or disaster, and until substantially normal
conditions are restored. In addition, the stations may be used for
training exercises, incidental to the emergency communications plan,
and for operational communications of the disaster relief organization
or its chapter affiliates.
* * * * *
4. Section 90.137 is amended by revising paragraph (a)(3) to read
as follows:

Sec. 90.137 Applications for operation at temporary locations.

(a) * * *
(3) Applications for operation at temporary locations exceeding 180
days must be accompanied by evidence of frequency coordination, except
that applications for operation at temporary locations exceeding 180
days by applicants using 220-222 MHz spectrum for geophysical telemetry
operations need not be accompanied by evidence of frequency
coordination.
* * * * *
5. Section 90.203 is amended by adding paragraph (k) to read as
follows:

Sec. 90.203 Type acceptance required.

* * * * *
(k)(1) For transmitters operating on frequencies in the 220-222 MHz
band, type acceptance will only be granted for equipment with channel
bandwidths up to 5 kHz, except that type acceptance will be granted for
equipment operating on 220-222 MHz band Channels 1 through 160
(220.0025 through 220.7975/221.0025 through 221.7975), 171 through 180
(220.8525 through 220.8975/221.8525 through 221.8975), and 186 through
200 (220.9275 through 220.9975/221.9275 through 221.9975) with channel
bandwidths greater than 5 kHz if the equipment meets the following
spectrum efficiency standard: Applications for Part 90 type acceptance
of transmitters designed to operate on frequencies in the 220-222 MHz
band must include a statement that the equipment meets a spectrum
efficiency standard of at least one voice channel per 5 kHz of channel
bandwidth (for voice communications), and a data rate of at least 4,800
bits per second per 5 kHz of channel bandwidth (for data
communications). Type acceptance for transmitters operating on 220-222
MHz band Channels 1 through 160 (220.0025 through 220.7975/221.0025
through 221.7975), 171 through 180 (220.8525 through 220.8975/221.8525
through 221.8975), and 186 through 200 (220.9275 through 220.9975/
221.9275 through 221.9975) with channel bandwidths greater than 5 kHz
will be granted without the requirement that a statement be included
that the

[[Page 15993]]

equipment meets the spectrum efficiency standard if the requests for
type acceptance of such transmitters are filed after December 31, 2001.
(2) Type acceptance may be granted on a case-by-case basis by the
Commission's Equipment Authorization Division for equipment operating
on 220-222 MHz band Channels 1 through 160 (220.0025 through 220.7975/
221.0025 through 221.7975), 171 through 180 (220.8525 through 220.8975/
221.8525 through 221.8975), and 186 through 200 (220.9275 through
220.9975/221.9275 through 221.9975) with channel bandwidths greater
than 5 kHz and not satisfying the spectrum efficiency standard
identified in paragraph (k)(1) of this section, if requests for Part 90
type acceptance of such transmitters are accompanied by a technical
analysis that satisfactorily demonstrates that the transmitters will
provide more spectral efficiency than that which would be provided by
use of the spectrum efficiency standard.
6. Section 90.701 is revised to read as follows:

Sec. 90.701 Scope.

(a) Frequencies in the 220-222 MHz band are available for land
mobile and fixed use for both Government and non-Government operations.
This subpart sets out the regulations governing the licensing and
operation of non-Government systems operating in the 220-222 MHz band.
It includes eligibility requirements, application procedures, and
operational and technical standards for stations licensed in these
bands. The rules in this subpart are to be read in conjunction with the
applicable requirements contained elsewhere in this part; however, in
case of conflicts, the provisions of this subpart shall govern with
respect to licensing and operation in this frequency band.
(b)(1) Licensees granted initial authorizations for operations in
the 220-222 MHz band from among applications filed on or before May 24,
1991 are referred to in this subpart as ``Phase I'' licensees;
(2) Applicants that filed initial applications for operations in
the 220-222 MHz band on or before May 24, 1991 are referred to in this
subpart as ``Phase I'' applicants; and
(3) All assignments, operations, stations, and systems of licensees
granted authorizations from among applications filed for operations in
the 220-222 MHz band on or before May 24, 1991 are referred to in this
subpart as ``Phase I'' assignments, operations, stations, and systems,
respectively.
(c)(1) Licensees granted initial authorizations for operations in
the 220-222 MHz band from among applications filed after May 24, 1991
are referred to in this subpart as ``Phase II'' licensees;
(2) Applicants that filed initial applications for operations in
the 220-222 MHz band after May 24, 1991 are referred to in this subpart
as ``Phase II'' applicants; and
(3) All assignments, operations, stations, and systems of licensees
granted authorizations from among applications filed for operations in
the 220-222 MHz band after May 24, 1991 are referred to in this subpart
as ``Phase II'' assignments, operations, stations, and systems,
respectively.
(d) The rules in this subpart apply to both Phase I and Phase II
licensees, applicants, assignments, operations, stations, and systems,
unless otherwise specified.
7. Section 90.705 is revised to read as follows:

Sec. 90.705 Forms to be used.

Phase II applications for EA, Regional, or Nationwide radio
facilities under this subpart must be prepared in accordance with
Secs. 90.1009 and 90.1013. Phase II applications for radio facilities
operating on public safety/mutual aid channels (Channels 161 through
170) or Emergency Medical Radio Service channels (Channels 181 through
185) under this subpart must be prepared on FCC Form 600 and submitted
or filed in accordance with Sec. 90.127.
8. Paragraphs (a) and (c) of Sec. 90.709 are revised and paragraph
(e) is added to read as follows:

Sec. 90.709 Special limitations on amendment of applications and on
assignment or transfer of authorizations licensed under this subpart.

(a) Except as indicated in paragraph (b) of this section, the
Commission will not consent to the following:
(1) Any request to amend an application so as to substitute a new
entity as the applicant;
(2) Any application to assign or transfer a license for a Phase I,
non-nationwide system prior to the completion of construction of
facilities; or
(3) Any application to transfer or assign a license for a Phase I
nationwide system before the licensee has constructed at least 40
percent of the proposed system pursuant to the provisions of
Sec. 90.725(a) or Sec. 90.725(h), as applicable.
* * * * *
(c) The assignee or transferee of a Phase I nationwide system is
subject to the construction benchmarks and reporting requirements of
Sec. 90.725. The assignee or transferee of a Phase I nationwide system
is not subject to the entry criteria described in Sec. 90.713.
* * * * *
(e) The assignee or transferee of a Phase II system is subject to
the provisions of Sec. 90.1017 and Sec. 1.2111(a) of this chapter.
9. Section 90.711 is revised to read as follows:

Sec. 90.711 Processing of Phase II applications.

(a) Phase II applications for authorizations on Channels 166
through 170 and Channels 181 through 185 will be processed on a first-
come, first-served basis. When multiple applications are filed on the
same day for these frequencies in the same geographic area, and
insufficient frequencies are available to grant all applications (i.e.,
if all applications were granted, violation of the station separation
provisions of Sec. 90.723(i) would result), these applications will be
considered mutually exclusive and will be subject to random selection
procedures pursuant to Sec. 1.972 of this chapter.
(1) All applications will first be considered to determine whether
they are substantially complete and acceptable for filing. If so, they
will be assigned a file number and put in pending status. If not, they
will be dismissed.
(2) Except as otherwise provided in this section, all applications
in pending status will be processed in the order in which they are
received, determined by the date on which the application was received
by the Commission in its Gettysburg, Pennsylvania office (or the
address set forth at Sec. 1.1102 of this chapter for applications
requiring the fees established by part 1, subpart G of this chapter).
(3) Each application that is accepted for filing will then be
reviewed to determine whether it can be granted. Frequencies will be
assigned by the Commission pursuant to the provisions of Sec. 90.723.
(4) An application which is dismissed will lose its place in the
processing line.
(5) If an application is returned for correction and resubmitted
and received by the Commission within 60 days from the date on which it
was returned to the applicant, it will retain its place in the
processing line. If it is not received within 60 days, it will lose its
place in the processing line.
(b) All applications for Channels 161 through 165 that comply with
the applicable rules of this part shall be

[[Page 15994]]

granted. Licensees operating on such channels shall cooperate in the
selection and use of frequencies and resolve any instances of
interference in accordance with the provisions of Sec. 90.173.
(c) Phase II applications for authorization on all non-Government
channels other than Channels 161 through 170 and 181 through 185 shall
be processed in accordance with the provisions of subpart W of this
part.
10. Section 90.713 is revised to read as follows:

Sec. 90.713 Entry criteria.

(a) As set forth in Sec. 90.717, four 5-channel blocks are
available for nationwide, commercial use to non-Government, Phase I
applicants. Applicants for these nationwide channel blocks must comply
with paragraphs (b), (c), and (d) of this section.
(b)(1) An applicant must include certification that, within ten
years of receiving a license, it will construct a minimum of one base
station in at least 70 different geographic areas designated in the
application; that base stations will be located in a minimum of 28 of
the 100 urban areas listed in Sec. 90.741; and that each base station
will have all five assigned nationwide channels constructed and placed
in operation (regularly interacting with mobile and/or portable units).
(2) An applicant must include certification that it will meet the
construction requirements set forth in Sec. 90.725.
(3) An applicant must include a ten-year schedule detailing plans
for construction of the proposed system.
(4) An applicant must include an itemized estimate of the cost of
constructing 40 percent of the system and operating the system during
the first four years of the license term.
(5) An applicant must include proof that the applicant has
sufficient financial resources to construct 40 percent of the system
and operate the proposed land mobile system for the first four years of
the license term; i.e., that the applicant has net current assets
sufficient to cover estimated costs or a firm financial commitment
sufficient to cover estimated costs.
(c) An applicant relying on personal or internal resources for the
showing required in paragraph (b) of this section must submit
independently audited financial statements certified within one year of
the date of the application showing net current assets sufficient to
meet estimated construction and operating costs. An applicant must also
submit an unaudited balance sheet, current within 60 days of the date
of submission, that clearly shows the continued availability of
sufficient net current assets to construct and operate the proposed
system, and a certification by the applicant or an officer of the
applicant organization attesting to the validity of the balance sheet.
(d) An applicant submitting evidence of a firm financial commitment
for the showing required in paragraph (b) of this section must obtain
the commitment from a bona fide commercially acceptable source, e.g., a
state or federally chartered bank or savings and loan institution,
other recognized financial institution, the financial arm of a capital
equipment supplier, or an investment banking house. If the lender is
not a state or federally chartered bank or savings and loan
institution, other recognized financial institution, the financial arm
of a capital equipment supplier, or an investment banking house, the
lender must also demonstrate that it has funds available to cover the
total commitments it has made. The lender's commitment shall contain a
statement that the lender:
(1) Has examined the financial condition of the applicant including
an audited financial statement, and has determined that the applicant
is creditworthy;
(2) Has examined the financial viability of the proposed system for
which the applicant intends to use the commitment; and
(3) Is willing, if the applicant is seeking a Phase I, commercial
nationwide license, to provide a sum to the applicant sufficient to
cover the realistic and prudent estimated costs of construction of 40
percent of the system and operation of the system for the first four
years of the license term.
(e) A Phase II applicant for authorization in a geographic area for
Channels 166 through 170 in the public safety/mutual aid category may
not have any interest in another pending application in the same
geographic area for Channels 166 through 170 in the public safety/
mutual aid category, and a Phase II applicant for authorization in a
geographic area for channels in the Emergency Medical Radio Service
(EMRS) category may not have any interest in another pending
application in

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Source: Frix Law Library, https://www.frixlaw.com/law-library/documents/fr%3A97-8014. Public record. Not legal advice.