Geographic Partitioning and Spectrum Disaggregation by Commercial Mobile Radio Services Licensees; and Implementation of Section 257 of the Communications Act; Elimination of Market Entry Barriers

FEDERAL COMMUNICATIONS COMMISSION

47 CFR Part 24

[WT Docket No. 96-148; GN Docket No. 96-113; FCC 96-474]

Geographic Partitioning and Spectrum Disaggregation by Commercial

Mobile Radio Services Licensees; and Implementation of Section 257 of

the Communications Act; Elimination of Market Entry Barriers

AGENCY: Federal Communications Commission.

ACTION: Final rule.

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SUMMARY: In this Report and Order in WT Docket No. 96-148, the

Commission adopts rules concerning geographic partitioning and spectrum

disaggregation by broadband personal communications service (PCS)

licensees. The rules adopted for broadband PCS will permit partitioning

and disaggregation by all broadband PCS licensees. This will provide

broadband PCS licensees with desirable flexibility to determine the

amount of spectrum they will occupy and the geographic area they will

serve. Such flexibility will: facilitate the efficient use of spectrum

by providing licensees with the flexibility to make offerings directly

responsive to market demands for particular types of service; increase

competition by allowing market entry by new entrants; and expedite the

provision of service to areas that otherwise may not receive broadband

PCS service in the near term.

EFFECTIVE DATE: March 7, 1997.

FOR FURTHER INFORMATION CONTACT: Shaun A. Maher, Commercial Wireless

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

SUPPLEMENTARY INFORMATION: This Report and Order in WT Docket No. 96-

148 and GN Docket No. 96-113, adopted on December 13, 1996, and

released December 20, 1996, is available for inspection and copying

during normal business hours in the FCC Reference Center, Room 234,

1919 M Street, N.W., Washington, D.C. The complete text may also be

purchased from the Commission's copy contractor, International

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

Washington, D.C. 20037, (202) 857-3800. Synopsis of Report and Order.

I. Background

1. The Commission's initial regulations and policies for broadband

PCS were adopted in the Broadband PCS Second Report and Order,

Amendment of the Commission's Rules to Establish New Personal

Communications Services, GEN Docket No. 90-314, Second Report and

Order, 58 FR 59174 (November 8, 1993) (Broadband PCS Second Report and

Order), and amended in the Broadband PCS Memorandum Opinion and Order,

Amendment of the Commission's Rules to Establish New Personal

Communications Services, GEN Docket No. 90-314, Memorandum Opinion and

Order, 59 FR 32830 (June 24, 1994) (Broadband PCS Memorandum Opinion

and Order). In the Broadband PCS Memorandum Opinion and Order, the

Commission declined to adopt unrestricted geographic partitioning for

broadband PCS based on its concern that licensees might use

partitioning as a means of circumventing construction requirements.

However, the Commission stated that it would consider the issue of

geographic partitioning for rural telephone companies (rural telcos)

and other designated entities in a future proceeding to establish

competitive bidding rules for broadband PCS. The Commission then

permitted broadband PCS geographic partitioning for rural telcos in the

Competitive Bidding Fifth Report and Order, Implementation of Section

309(j) of the Communications Act--Competitive Bidding, PP Docket No.

93-253, Fifth Report and Order, 59 FR 37566 (July 22, 1995)

(Competitive Bidding Fifth Report and Order). The Commission observed

that partitioning was one method to satisfy Congress' mandate to

provide an opportunity for rural telcos to participate in the provision

of broadband PCS. The Commission also found that rural telcos could

take advantage of their existing infrastructure to provide broadband

PCS services, thereby speeding service to rural areas. In the

Competitive Bidding Further Notice of Proposed Rule Making,

Implementation of Section

[[Page 654]]

309(j) of the Communications Act--Competitive Bidding, PP Docket No.

93-253, Further Notice of Proposed Rule Making, 59 FR 41426 (August 12,

1994) (Competitive Bidding Further Notice of Proposed Rule Making), the

Commission sought comment on whether to extend post-auction geographic

partitioning of broadband PCS licenses to women- and minority-owned

businesses.

2. Section 24.229(c) of the Commission's rules permits a broadband

PCS licensee that has met its five-year construction requirement to

disaggregate its licensed PCS spectrum after January 1, 2000. In the

Broadband PCS Memorandum Opinion and Order, the Commission reasoned

that this limit on spectrum disaggregation for broadband PCS would

allow the PCS market to develop and prevent anti-competitive practices

with regard to disaggregation.

3. The Commission believes that it is appropriate at this time to

liberalize its rules to allow partitioning and disaggregation for

broadband PCS. The rules adopted in the Report and Order will provide

licensees with the flexibility to use their spectrum more efficiently,

will increase opportunities for small businesses and other entities to

enter into the broadband PCS market, and will speed service to

underserved or unserved areas.

II. Discussion

A. Partitioning

1. License Eligibility

4. The Commission concludes that relaxing its PCS geographic

partitioning rules, as discussed herein, will help to (1) remove

potential barriers to entry thereby increasing competition in the PCS

marketplace; (2) encourage parties to use PCS spectrum more

efficiently; and (3) speed service to unserved and underserved areas.

Parties that were unsuccessful bidders or that did not participate in

the PCS auctions will be able to use partitioning as a method to

acquire PCS licenses after the auctions. Smaller or newly-formed

entities, for example, may enter the PCS market for the first time

through partitioning. Under the prior rules, such entities would have

been unable to qualify for partitioning because of the Commission's

rural telco restriction. By eliminating that restriction, these

entities will be able to negotiate for licenses for portions of the

original service area at a cost that is proportionately less than that

of the full geographic market.

5. The Commission also finds that increasing the number of parties

that may obtain partitioned PCS licenses will lead to more efficient

use of PCS spectrum and will speed service to underserved or rural

areas. PCS licensees will be able to partition portions of their

markets to entities more willing to serve niche markets instead of

postponing service to those areas. The Commission believes that

retaining the existing partitioning restrictions, as recommended by the

rural telco commenters, would prevent additional small businesses and

other entities from using partitioning to enter the broadband PCS

market. In addition, restricting the number of parties that are

eligible for partitioned PCS licenses only serves to unreasonably

reduce the number of potential entrants into the PCS marketplace

without any corresponding public interest benefit.

6. The rural telco commenters claim that changing the current

partitioning rules would be inconsistent with the mandate set forth in

Section 309(j)(3)(B) of the Communications Act of 1934, as amended

(Communications Act), 47 U.S.C. 309(j)(3)(B), to ensure that licenses

are disseminated among a wide variety of applicants including rural

telcos. They contend that partitioning was the sole means by which the

Commission sought to fulfill the mandate of Section 309(j)(3)(B) of the

Communications Act, 47 U.S.C. 309(j)(3)(B) for rural telcos. The

Commission disagrees. Rural telcos are able to take advantage of the

special provision for small businesses the Commission designed in its

auction rules to obtain licenses in the entrepreneur block auctions.

Furthermore, Sections 309(j)(3)(A), (B), and (D) of the Communications

Act, 47 U.S.C. 309(j)(A), (B) & (D), direct the Commission to further

the rapid deployment of new technologies for the benefit of the public

including those residing in rural areas, to promote economic

opportunity and competition, and to ensure the efficient use of

spectrum. While encouraging rural telco participation in PCS service

offerings is an important element in meeting these goals, Congress did

not dictate that this should be the sole method of ensuring the rapid

deployment of service in rural areas. The Commission concludes that

allowing open partitioning will further the goals of Section 309(j)(3)

of the Communications Act, 47 U.S.C. 309(j)(3), by allowing PCS

licensees to partition to multiple entities within their markets rather

than limiting partitioning to a small number of rural telcos.

7. The rural telcos argue further that they will not be able to

compete for partitioned PCS licenses unless the Commission retains its

current restriction because PCS licensees will be unwilling to

partition their licenses to rural telcos and will choose to partition

to Commercial Mobile Radio Service (CMRS) providers with greater

financial resources. The rural telco commenters also argue that they

relied to their detriment upon the current partitioning restrictions

when devising their business plans and that many of them chose not to

participate in the broadband PCS auctions because they believed that

they would be the only parties that could obtain partitioned PCS

licenses. The Commission is unpersuaded that its action herein will

harm the rural telcos' business plans. Under the new rules adopted

herein, rural telcos will be fully able to obtain partitioned PCS

licenses, as they were previously. Moreover, in many instances, rural

telcos are likely to be in a superior position to obtain partitioned

licenses.

8. The Commission declines to adopt the rural telcos' proposal to

require a right of first refusal. Granting the rural telcos a right of

first refusal would limit the number of parties that could obtain

partitioned PCS licenses which would be at odds with the Commission's

goals of encouraging participation in the PCS marketplace by as many

parties as possible and reducing barriers to entry for small

businesses. The Commission finds that increasing the number of

potential entities that can acquire partitioned PCS licenses will

result in better service and increased competition which may result in

lower prices for PCS service.

9. The Commission also finds that the right of first refusal would

be difficult to administer and could discourage partitioning. The area

proposed in a partitioning agreement may not coincide exactly with the

area for which a rural telco would have a right of first refusal or a

single partitioning transaction may encompass more than one rural

telcos' service area. In those cases, the consent of multiple rural

telcos would be required before a partitioning transaction could be

consummated. Additionally, a partitioning agreement may be part of a

larger assignment transaction. If a rural telco were to exercise its

right of first refusal to acquire the partitioned area, it may not be

possible to separate out the partitioning agreement to stand on its own

and the entire assignment transaction could not be consummated.

[[Page 655]]

2. Available License Area, Restrictions on Timing of Partitioning, and

Matters Related to Entrepreneur Block Licensees

a. License Area. 10. The Commission is persuaded by the commenters'

arguments that limiting geographic partitioning of PCS licenses to

those areas defined by county lines may not be reflective of market

realities and may otherwise inhibit partitioning. As the commenters

note, parties seeking a partitioned license may not desire to serve an

entire county but rather a smaller niche market. The Commission

believes that permitting partitioning along any service area defined by

the partitioner and partitionee is the most logical approach, provided

they submit sufficient information to the Commission to maintain its

licensing records. This will be the rule for all parties, including

rural telcos.

11. Partitioning applicants will be required to submit, as separate

attachments to the partial assignment application, a description of the

partitioned service area and a calculation of the population of the

partitioned service area and licensed market. The partitioned service

area must be defined by coordinate points at every 3 seconds along the

partitioned service area agreed to by both parties, unless either (1)

an FCC-recognized service area is utilized (i.e., Major Trading Area,

Basic Trading Area, Metropolitan Service Area, Rural Service or

Economic Area) or (2) county lines are followed. These geographical

coordinates must be specified in degrees, minutes and seconds to the

nearest second of latitude and longitude, and must be based upon the

1927 North American Datum (NAD27). Applicants may also supply

geographical coordinates based on 1983 North American Datum (NAD83) in

addition to those required based on NAD27. This coordinate data should

be supplied as an attachment to the partial assignment application, and

maps need not be supplied. In cases where an FCC recognized service

area or county lines are being utilized, applicants need only list the

specific area(s) (through use of FCC designations) or counties that

make up the newly partitioned area. Allowing partitioning along any

agreed-upon service area will provide an opportunity for PCS licensees

to design flexible and efficient partitioning agreements. By providing

such flexibility to licensees for determining partitioned areas, the

Commission will permit the market to decide the most suitable service

areas.

b. Non-entrepreneur block licenses. 12. The Commission concludes

that the public interest will be served by allowing non-entrepreneur

block licensees to freely partition their licenses to any other

qualifying entity following the issuance of the license. Since non-

entrepreneur block licensees are permitted to assign their entire

license after grant, the Commission finds they should be able to assign

a portion of their license following the issuance of their license. PCS

licensees will be permitted to partition their licensed market areas

without limitation on the overall size of the partitioned areas

consistent with the Commission's rules.

c. Entrepreneur block licenses. 13. The Commission will permit

entrepreneur block PCS licensees to partition at any time to other

parties that would be eligible for licenses in those blocks.

Partitioning of entrepreneur block license areas to non-entrepreneurs

will not be permitted for the first five years of an entrepreneur block

license term. This restriction is necessary in order to ensure that

entrepreneurs do not circumvent the Commission's restrictions on full

license transfers by attempting to immediately partition a portion of

their licenses to non-entrepreneurs.

14. The Commission finds that its unjust enrichment requirements

should be applied if an entrepreneur block licensee partitions a

portion of its license area to a non-entrepreneur, after the initial

five-year license term. The Commission will apply its unjust enrichment

rules to transactions where entrepreneurs obtain partitioned licenses

from other entrepreneurs and subsequently seek to assign their

partitioned license to a non-entrepreneur. The Commission will also

apply the unjust enrichment provisions to an entrepreneur block

licensee that qualifies as a small business who partitions to an entity

that satisfies the entrepreneur block eligibility criteria but is not a

small business that would be eligible for bidding credits or

installment payments.

15. The Commission will use population as the objective measure to

calculate the relative value of the partitioned area for determining

all of its unjust enrichment obligations. Population will be calculated

based upon the latest census data.

16. In partitioning cases involving installment payments, the

Commission finds that separating the payment obligations and default

provisions of the original licensee and partitionee is the best

approach because it reduces each party's risk and creates payment

obligations that can be enforced separately against the defaulting

party without adversely affecting the other licensee. The Commission

adopts the following rules to address the various combinations of

parties and the relative obligations for each in the event an

entrepreneur seeks to partition its license:

(a) No Continued Installment Payments. When an entrepreneur block

licensee with installment payments partitions its license after the

five-year holding period to a party that would not qualify for

installment payments under our rules or to an entity that does not

desire to pay for its share of the license with installment payments,

the Commission will first apportion the percentage of the remaining

government obligation (including accrued and unpaid interest calculated

on the date the partial assignment application is filed) between the

partitionee and original licensee based upon the ratio of the

population of the partitioned area to the population of the entire

original licensed area. Under this procedure, both parties will be

responsible to the U.S. Treasury for their proportionate share of the

balance due including accrued and unpaid interest calculated on the

date the partial assignment application is filed. The Commission will

require, as a condition of grant of the partial assignment application,

that the partitionee pay its entire pro rata amount within 30 days of

Public Notice conditionally granting the partial assignment

application. Failure to meet this condition will result in the

automatic cancellation of the grant of the partial assignment

application. The partitioner will receive new financing documents

(promissory note and security agreement) with a revised payment

obligation, based on the remaining amount of time on the original

installment payment schedule. These financing documents will replace

the partitioner's existing financing documents which will be marked

``superseded'' and returned to the licensee upon receipt of the new

financing documents. The original interest rate, established at the

time of the issuance of the initial license in the market, will

continue to be applied to the partitioner's portion of the remaining

government obligation. The Commission will require, as a further

condition to approval of the partial assignment application, that the

partitioner execute and return to the U.S. Treasury the new financing

documents within 30 days of the Public Notice conditionally granting

the partial assignment application. Failure to meet this condition will

result in the automatic cancellation of the grant of the partial

assignment application. A

[[Page 656]]

default on an obligation will only affect that portion of the market

area held by the defaulting party. The payments to the U.S. Treasury

are required notwithstanding any additional terms and conditions agreed

to between or among the parties.

(b) Partitioning With Continued Installment Payments. Where both

parties to the partitioning arrangement qualify for installment

payments under Sec. 24.720(b)(1), 47 CFR 24.720(b)(1), the Commission

will permit the partitionee to make installment payments on its portion

of the remaining government obligation. Partitionees are free, however,

to make a lump sum payment of their pro rata portion of the remaining

government obligation within 30 days of the Public Notice conditionally

granting the partial assignment application. Should a partitionee

choose to make installment payments, the Commission will require, as a

condition to approval of the partial assignment application, that both

parties execute financing documents (promissory note and security

agreement) agreeing to pay the U.S. Treasury their pro rata portion of

the balance due (including accrued and unpaid interest on the date the

partial assignment application is filed) based upon the installment

payment terms for which they would qualify. These documents must be

executed and returned to the U.S. Treasury within 30 days of the Public

Notice conditionally granting the partial assignment application.

Either party's failure to meet this condition will result in the

automatic cancellation of the grant of the partial assignment

application. The original interest rate, established at the time of the

issuance of the initial license in the market, will apply to both

parties' portion of the remaining government obligation. Each party

will receive a license for its portion of the market area and each

party's financing documents will provide that a default on its

obligation would only affect their portion of the market area. These

payments to the U.S. Treasury are required notwithstanding any

additional terms and conditions agreed to between or among the parties.

3. Construction Requirements

17. The Commission will adopt two alternative construction options

for broadband PCS partitioning. Under the first option, the partitionee

certifies that it will satisfy the same construction requirements as

the original licensee. The partitionee then must meet the same five-

and ten-year service requirements as the original 10 MHz or 30 MHz

licensee in its partitioned area, while the partitioner remains

responsible for meeting those requirements in the area it has retained.

Under the second option, the partitioner certifies that it has already

met or will meet its five-year construction requirement and that it

will meet the ten-year construction requirement for the entire market.

Because the partitioner retains the responsibility for meeting the

construction requirements for the entire market, the partitionee will

only be required to meet the substantial service requirement for its

partitioned area at the end of the ten-year license term. The

definition of substantial service will be that definition found at

Sec. 24.16(a) of the rules, 47 CFR 24.16(a). If a partitionee fails to

meet its construction requirements, the license for the partitioned

area will automatically cancel without further Commission action.

18. At the five- and ten-year benchmarks, partitionees are required

to file supporting documentation showing compliance with the

construction requirements. Licensees failing to meet the coverage

requirements will be subject to forfeiture, license cancellation, or

other penalties.

B. Disaggregation

1. Timing of Disaggregation

19. The Commission concludes that disaggregation of broadband PCS

spectrum should be allowed prior to January 1, 2000, and that the

condition that the licensee must first satisfy the five-year build out

requirement before disaggregating should be eliminated. To the extent

that disaggregation would enable other entities to provide broadband

PCS within geographic market areas, the Commission finds that allowing

immediate disaggregation would encourage rather than impede competition

by enabling the entry of new competitors. Moreover, the current

prohibition on disaggregation may constitute a barrier to entry for

small businesses that lacked the resources to participate successfully

at auction for 30 MHz and 10 MHz spectrum blocks. In furtherance of the

mandate prescribed by Section 257 of the Communications Act, the

Commission is eliminating such market entry barriers by permitting non-

entrepreneur block (A, B, D, and E block) PCS licensees to disaggregate

spectrum at any time to other entities with minimum eligibility

qualifications. Entrepreneur block (C and F block) licensees may

disaggregate at any time to other entrepreneurs, or to non-

entrepreneurs after a five-year holding period. While the Commission

concludes that disaggregation should generally be allowed, it

emphasizes that all proposed disaggregation agreements, like

partitioning agreements, will be subject to Commission review and

approval under the public interest standard of Section 310 of the Act.

In addition, as discussed below, disaggregatees will be subject to the

CMRS spectrum cap to ensure that disaggregation is not used to

accumulate large amounts of spectrum in order to preclude entry by

other competitors.

2. Amount of Spectrum to Disaggregate

20. The Commission concludes that there should be no restriction on

the amount of broadband PCS spectrum that can be disaggregated.

Providing the flexibility to allow parties to decide the exact amount

of spectrum to be disaggregated is preferable because it will encourage

more efficient use of spectrum and will permit the deployment of a

broader mix of service offerings, leading to a more competitive

wireless marketplace. The Commission finds that requiring parties to

obtain disaggregated spectrum in a predetermined amount, such as a

block of 1 MHz, may result in parties obtaining more spectrum they

need, leaving some spectrum unused, and may foreclose some parties from

using disaggregation as a means of obtaining the spectrum they need to

provide their service offerings. Therefore, the Commission will not

restrict the amount of broadband PCS spectrum that can be

disaggregated. Similarly, it will not require the disaggregator to

retain a minimum amount of spectrum.

21. The Commission is not adopting a limit on the maximum amount of

spectrum that licensees may disaggregate, provided that the

disaggregatee complies with the CMRS spectrum cap. The Commission finds

no evidence at this time that a maximum limitation for disaggregation

is necessary. PCS licensees shall be permitted to disaggregate spectrum

without limitation on the overall size of the disaggregation as long as

such disaggregation is otherwise consistent with the rules.

3. Matters Relating to Entrepreneur Block Licensees

22. In keeping with the proposals the Commission is adopting for

partitioning, it will permit entrepreneur block licensees to

disaggregate at any time to other parties that qualify as

entrepreneurs. Disaggregation to entities that do not qualify as

entrepreneurs is not permitted for the first five years of a license

term. Allowing unrestricted entrepreneur block disaggregation

[[Page 657]]

would be inconsistent with the five-year restriction on full license

transfers to non-entrepreneurs which was designed to ensure that

entrepreneurs do not take advantage of special entrepreneur block

provisions by immediately seeking to transfer their licenses to non-

entrepreneurs. The Commission believes the same rationale would apply

to entrepreneur block disaggregation, as licensees who have benefited

from such provisions could immediately disaggregate spectrum to parties

that would not qualify for such benefits.

23. The Commission declines to permit entrepreneur block licensees

to swap equivalent blocks of entrepreneur spectrum with non-

entrepreneurs within the same market area. The administrative burden of

keeping track of such arrangements would far outweigh any benefit to

the public.

24. The Commission will follow the approach outlined for

partitioning and apply unjust enrichment payments to entrepreneur block

licensees that disaggregate to non-entrepreneurs after the five-year

holding period and to entrepreneur block licensees that qualified for

bidding credits and installment payments and that disaggregate to other

entrepreneurs that would not have qualified for such benefits. All such

unjust enrichment payments will be calculated based upon the ratio of

the amount of spectrum disaggregated to the amount of spectrum retained

by the original licensee. With respect to disaggregation from an

entrepreneur block licensee to another entrepreneur that would also

qualify for installment payments, the Commission adopts an approach

similar to the one it adopted for partitioning. The Commission will

apportion the payment obligations between the disaggregator and

disaggregatee based upon the amount of spectrum disaggregated and

require separate payment obligations, promissory notes and default

liabilities for each party.

4. Construction Requirements

25. The Commission concludes that the proposed construction

requirements for disaggregation set forth in the NRPM would be

inconsistent with the approach adopted in its partitioning rules, and

that a more flexible approach is appropriate. Because the rules do not

dictate a minimum level of spectrum usage by the original PCS licensee,

the Commission believes it would be inconsistent to impose separate

construction requirements on both disaggregator and disaggregatee for

their respective spectrum portions. At the same time, the Commission

wishes to ensure that the parties do not use disaggregation to

circumvent its underlying construction requirements. Therefore, the

Commission adopts a flexible approach analogous to its approach in the

partitioning context: to retain the underlying five- and ten-year

construction requirements for the spectrum block as a whole, but allow

either party to meet the requirements on its disaggregated portion.

Thus, a PCS licensee who disaggregates a portion of its spectrum may

elect to retain responsibility for meeting the five- and ten-year

coverage requirements, or it may negotiate a transfer of this

obligation to the disaggregatee. In either case, the rules ensure that

the spectrum will be developed to at least the same degree that was

required prior to disaggregation.

26. To ensure compliance with the rules, the Commission will

require that parties seeking Commission approval of a disaggregation

agreement include a certification as to which party will be responsible

for meeting the applicable five- and ten-year construction

requirements. Parties may also propose to share the responsibility for

meeting the construction requirements. The specific requirements to be

met will depend on whether the spectrum being disaggregated was

originally licensed as a 30 MHz block or a 10 MHz block. In the event

that only one party agrees to take responsibility for meeting the

construction requirement and later fails to do so, that party's license

will be subject to forfeiture, but the other party's license will not

be affected. Should both parties agree to share the responsibility for

meeting the construction requirements and either party later fails to

do so, both parties' licenses will be subject to forfeiture. So that

the CMRS rules remain consistent and competitively neutral,

disaggregatees that already hold a broadband PCS license or other CMRS

license in the same geographic market will be subject to the same

coverage requirements as disaggregatees who do not hold other licenses

for disaggregated spectrum.

C. Related Matters

1. Combination of Partitioning and Disaggregation

27. To allow parties flexibility to design the types of agreements

they desire, the Commission will permit combined partitioning and

disaggregation. For example, this will allow a party to obtain a

license for a single county of an A block market with only 15 MHz of

spectrum. In the event that there is a conflict in the application of

the partitioning and disaggregation rules, the partitioning rules

should prevail. For the purpose of applying the unjust enrichment

requirements and/or for calculating obligations under installment

payment plans, when a combined partitioning and disaggregation is

proposed, the Commission will use a combination of both population of

the partitioned area and amount of spectrum disaggregated to make these

pro rata calculations.

2. Licensing

28. The Commission will follow existing partial assignment

procedures for broadband PCS licenses in reviewing requests for

geographic partitioning, disaggregation, or a combination of both. Such

applications will be placed on Public Notice and will be subject to

petitions to deny. A licensee will be required to file an FCC Form 490

that is signed by both the licensee and the qualifying entity. With

respect to partitioning, the FCC Form 490 must include the attachment

defining the partitioned license area and an attachment demonstrating

the population of the partitioned license area. Partial assignment

applications that are filed seeking partitioning or disaggregation in

the entrepreneur blocks must include an attachment demonstrating

compliance with the five year entrepreneur block holding period. The

qualifying entity will also be required to file an FCC Form 430 unless

a current FCC Form 430 is already on file with the Commission. An FCC

Form 600 must be filed by the qualifying entity to receive

authorization to operate in the market area being partitioned or to

operate the disaggregated spectrum or to modify an existing license of

the qualifying entity to include the new/additional market area being

partitioned or the spectrum that is disaggregated. Any requests for a

partitioned license or disaggregated spectrum must contain the FCC

Forms 490, 430, and 600 and be filed as one package under cover of the

FCC Form 490.

29. The 45 MHz CMRS spectrum cap contained in Section 20.6 of the

rules applies to partitioned license areas and disaggregated spectrum.

3. License Term

30. The Commission will allow partitionees and disaggregatees to

hold their licenses for the remainder of the original licensee's ten-

year license term. Partitionees and disaggregatees may also earn a

renewal expectancy on the same basis as other PCS licensees.

31. The Commission will not permit an existing broadband PCS

licensee acquiring a partitioned license or disaggregated spectrum in a

market in

[[Page 658]]

which it is already a licensee to apply its original license term to

the partitioned license or spectrum. Such a proposal would be

burdensome to administer because the processing staff would be required

to determine the licensee's other licenses in the market and calculate

the correct expiration date for the partitioned or disaggregated

license. The Commission finds that such an administrative burden would

outweigh the benefit that may result from such a proposal.

4. Technical Rules

32. The Commission finds that its existing technical rules are

sufficient for application in the partitioning and disaggregation

contexts and that no additional technical rules are required at this

time. Should technical difficulties arise, however, the Commission will

take whatever action is necessary to alleviate any technical or

interference problems that result from partitioning or disaggregation,

including appropriate modifications to its technical rules.

5. Microwave Relocation

33. The Commission concludes that partitionees and disaggregatees

should be treated the same as all other PCS licensees with respect to

microwave relocation issues. In particular, partitionees will have the

same rights and obligations as other broadband PCS licensees under the

cost-sharing plan adopted in Amendment of the Commission's Rules

Regarding a Plan for Sharing the Costs of Microwave Relocation, WT

Docket No. 95-157, Report and Order and Further Notice of Proposed

Rulemaking, 61 FR 24470 (May 15, 1996). Thus, partitionees and

disaggregatees may seek reimbursement under the plan if they relocate

incumbents and they will be required to pay their share of microwave

relocation costs if they benefit from the spectrum-clearing efforts of

another party, according to the cost-sharing formula adopted by the

Commission.

34. The Commission declines to require that the original PCS

licensee guarantee payments under the cost-sharing plan by the

partitionee or disaggregatee. To require licensees to guarantee such

payments would be unfair because the original licensees would have no

control over the actions of the partitionees and disaggregatees.

6. Clearinghouse for Spectrum

35. The Commission declines to create a Commission-based resource

of information, but will continue to make available, in a user-friendly

manner, information contained in its existing databases, concerning

geographic areas open to partitioning and spectrum that would be

available through disaggregation. Although a few entities offered to

serve as commercial clearinghouses of PCS spectrum information, the

Commission declines to establish an official Commission clearinghouse.

VI. Conclusion

36. The partitioning and disaggregation proposals the Commission

has adopted are consistent with a pro-competitive policy framework.

These rules will eliminate barriers to entry for small businesses

seeking to enter the PCS marketplace and will promote the rapid

creation of a competitive market for the provision of PCS services.

These rules also meet the Congressional objectives to further the rapid

development of new technologies for the benefit of the public including

those residing in rural areas, without administrative delay, to promote

economic opportunity and competition, and to ensure that new

technologies are available by avoiding excessive concentration of

licenses.

VII. Procedural Matters and Ordering Clauses

A. Regulatory Flexibility Act

Summary

As required by Section 603 of the Regulatory Flexibility Act (RFA),

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

was incorporated in the Notice of Proposed Rulemaking (NRPM) in WT

Docket No. 96-148. The Commission sought written public comment on the

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

Regulatory Flexibility Analysis in this Report and Order conforms to

the RFA, as amended by the Contract With America Advancement Act of

1996.

Need for and Purpose of this Action

In this Report and Order the Commission modifies the broadband PCS

rules to permit partitioning and disaggregation for all Part 24

licenses. The proposals adopted herein also implement Congress' goal of

giving small businesses the opportunity to participate in the provision

of spectrum-based services in accordance with 47 U.S.C. 309(j)(4)(D)

and to reduce entry barriers for small businesses in accordance with 47

U.S.C. 257. With more open partitioning and disaggregation, additional

entities, including small businesses, may participate in the provision

of broadband PCS service without needing to acquire wholesale an

existing license (with all of the bundle of rights currently associated

with the existing license). Acquiring less than the current license

will presumably be a more flexible and less expensive alternative for

entities desiring to enter these services.

Summary of Issues Raised in Response to the Initial Regulatory

Flexibility Analysis

Only one commenter, National Telephone Cooperative Association

(NTCA), submitted comments that were specifically in response to the

IRFA. NTCA argues that the Commission is required under the RFA to

identify significant alternatives to the proposed rules in order to

accomplish the stated objectives of Sections 309(j) and 257 of the

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

Specifically, NTCA argues that the Commission must consider the right

of first refusal approach suggested by some commenters as an

alternative to allowing open partitioning of PCS licenses and how it

might minimize significant economic impacts on rural telcos. NTCA

contends that, for the purposes of determining which businesses are to

be included in an RFA analysis, the Commission should adopt the U.S.

Small Business Administration's (SBA) definition of small business,

which is any company with fewer than 1,500 employees.

In the Report and Order, significant alternatives were identified

and considered in order to further the mandates of Sections 309(j) and

257 of the Communications Act. In addition, significant consideration

was given to the rural telcos' right of first refusal approach for

partitioning; however, the Commission concluded that such an approach

was unworkable and would actually discourage partitioning. Finally, the

Commission declined to adopt NTCA's suggestion to utilize the SBA

definition of small business (businesses with fewer than 1,500

employees). As noted below, the existing definition of small business

(firms with revenues of less than $40 million in each of the last three

years) was used in the PCS C-Block auction and was approved by the SBA.

The Commission also notes that it has found incumbent LECs to be

``dominant in their field of operation'' since the early 1980's, and it

has consistently certified under the RFA that incumbent LECs are not

subject to regulatory flexibility analyses because they are not small

businesses. The Commission has made similar determinations in other

areas.

[[Page 659]]

Description and Number of Small Entities Involved

The rules adopted in the Report and Order will affect all small

businesses which avail themselves of these rule changes, including

small businesses currently holding broadband PCS licenses who choose to

partition and/or disaggregate, and small businesses who may acquire

licenses through partitioning and/or disaggregation. The rules will

also affect rural telephone companies which, under the current rules,

have the exclusive right to obtain partitioned broadband PCS licenses.

Small businesses will be defined for these purposes as firms that have

revenues of less than $40 million in each of the last three calendar

years. This definition was used in the PCS C-Block auction and approved

by the SBA. The definition of rural telephone company shall be that

definition found at Sec. 24.720(e) of the rules, 47 CFR 24.720(e).

The broadband PCS spectrum is divided into six frequency blocks

designated A through F. The Commission has auctioned broadband PCS

licenses in blocks A, B, and C. The Commission does not have sufficient

information to determine whether any small businesses within the SBA-

approved definition bid successfully for licenses in the A or B block

PCS auctions. There were 89 winning bidders that qualified as small

businesses in the C block PCS auctions. Based upon this information,

the Commission concludes that the number of broadband PCS licensees

affected by the rules adopted herein includes the 89 winning bidders

that qualified as small entities in the block C broadband PCS auctions.

The Commission anticipates that a total of 10,370 PCS licensees or

potential licensees could take the opportunity to partition or

disaggregate a license or obtain a license through partitioning and/or

disaggregation. This estimate is based on the total number of broadband

PCS licenses auctions and subject to auction, 2,074, and the

Commission's estimate that each license would probably not be

partitioned and/or disaggregated to more than five parties. Currently,

the C and F block licensees and potential licensees (holding a total of

986 licenses) must be small businesses or entrepreneurs with average

gross revenues over the past three years of less than $125 million.

Under the rules adopted in the Report and Order, they will be permitted

to partition and/or disaggregate to other qualified entrepreneurs at

any time and to non-entrepreneurs after the first five years of their

license term. The A, B, D, and E block licensees and potential

licensees (holding a total of 1,088 licenses) will also be permitted

under the proposed rules to partition and/or disaggregate to small

businesses.

The Commission is presently conducting auctions for the D, E, and F

blocks of broadband PCS spectrum. The Commission anticipates that a

total of 1,479 licenses will be awarded in the D, E, and F block PCS

auctions. Eligibility for the F block licenses is limited to

entrepreneurs with average revenues of less than $125 million. It is

not possible to estimate the number of licenses that will be awarded to

small businesses in the F block nor is it possible to estimate how many

small businesses will win the D or E block licenses. The Commission

believes that it is possible that small businesses will constitute a

significant number of the up to 10,370 PCS licensees or potential

licensees who could take the opportunity to partition and/or

disaggregate or who could obtain a license through partitioning and/or

disaggregation.

Summary of Projected Reporting, Recordkeeping and Other Compliance

Requirements

The rules adopted in the Report and Order will impose reporting and

recordkeeping requirements on small businesses seeking licenses through

partitioning and disaggregation. The information requirements will be

used to determine whether the licensee is a qualifying entity to obtain

a partitioned license or disaggregated spectrum. This information will

be given in a one-time filing by any applicant requesting such a

license. The information will be submitted on the FCC Form 490 (or 430

and/or 600 filed as one package under cover of the Form 490) which are

currently in use and have already received OMB clearance. The

Commission estimates that the average burden on the applicant is three

hours for the information necessary to complete these forms. The

Commission estimates that 75 percent of the respondents (which may

include small businesses) will contract out the burden of responding.

The Commission estimates that it will take approximately 30 minutes to

coordinate information with those contractors. The remaining 25 percent

of respondents (which may include small businesses) are estimated to

employ in-house staff to provide the information.

Steps Taken To Minimize Burdens on Small Entities

The rules adopted in the Report and Order are designed to implement

Congress' goal of giving small businesses, as well as other entities,

the opportunity to participate in the provision of spectrum-based

services and are consistent with the Communications Act's mandate to

identify and eliminate market entry barriers for entrepreneurs and

small businesses in the provision and ownership of telecommunications

services.

Allowing non-restricted partitioning of PCS licenses will

facilitate market entry by parties who may lack the financial resources

for participation in PCS auctions, including small businesses. Some

small businesses may have been unable to be winning bidders at the PCS

auctions due to high bidding and would have been unable to qualify for

partitioning because of our current restriction which permits

partitioning of PCS licenses to only rural telephone companies (rural

telcos). By eliminating this restriction, small businesses will be able

to obtain partitioned PCS licenses for smaller service areas at

presumably reduced costs, thereby providing a method for small

businesses to enter the PCS marketplace.

Similarly, allowing immediate disaggregation of PCS licenses will

facilitate the entry of new competitors to the provision of PCS

services, many of whom will be small businesses seeking to acquire a

smaller amount of PCS spectrum at a reduced cost.

Allowing geographic partitioning of PCS licenses by services areas

defined by the parties rather than only by county lines will provide an

opportunity for small businesses to obtain partitioned PCS license

areas designed to serve smaller, niche markets. This will permit small

businesses to enter the PCS marketplace by reducing the overall cost of

acquiring a partitioned PCS license.

Allowing disaggregation of spectrum in any amount will also promote

participation by small businesses who may seek to acquire a smaller

amount of PCS spectrum tailored to meet the needs of their proposed

service.

The Commission's proposals to allow non-entrepreneur block

licensees to partition or disaggregate to any party and to allow

entrepreneurs to partition or disaggregate to other entrepreneurs at

any time and to non-entrepreneurs after a five year holding period will

significantly increase the opportunities for small businesses to enter

the PCS marketplace. Allowing entrepreneur partitionees and

disaggregatees to pay their proportionate share of the remaining

government obligation through installment payments will provide a

further opportunity for small

[[Page 660]]

businesses to participate in the provision of PCS services.

The Commission's decision to allow partitioning parties to choose

between two construction requirements will provide small businesses

with more flexibility to construct their systems at a rate that is

determined by market forces, thus allowing them to conserve their

resources.

Significant Alternatives Considered and Rejected

The Commission considered and rejected a number of alternative

proposals concerning partitioning and disaggregation.

The rural telephone companies (rural telcos) argued that the

Commission should either retain the current partitioning restriction or

adopt a right of first refusal approach that would require partitioning

parties to notify the rural telco and offer it the partitioned license

area under similar terms and conditions. The Commission found that

retaining the current partitioning restriction would prevent small

businesses from using partitioning to enter the broadband PCS market.

Since retaining the partitioning restriction would constitute a

significant barrier to entry for small businesses, the Commission

declined to continue to limit partitioning to rural telcos.

The Commission found that the right of first refusal would be

difficult to implement and could discourage partitioning. Areas

proposed in partitioning agreements may not coincide exactly with areas

for which a rural telco may have a right of first refusal. A single

partitioning transaction may encompass more than one rural telco's

service area, or a partitioning agreement may be part of a larger

assignment transaction. Parties would be unwilling to enter into

partitioning agreements not knowing how much of an area would

ultimately be partitioned or whether they could consummate the

transaction. This determination will make it easier for non-rural-

telcos, including some small business entities, to enter partitioning

agreements.

The Commission declined to adopt the proposal set forth in the NPRM

to limit partitioning to areas defined by county lines. The Commission

was convinced by the majority of commenters that geographic

partitioning along county lines is too restrictive. The Commission

found that parties seeking a partitioned license may not desire to

serve an entire county but rather a smaller niche market. Therefore,

the Commission found that allowing partitioning along service areas

defined by the parties would allow the parties to design flexible

partitioning agreements.

The Commission rejected proposals to permit partitioning and

disaggregation during the first five years of an entrepreneur's license

term. While allowing entrepreneurs to immediately partition or

disaggregate to non-entrepreneurs may have resulted in additional

entities participating in the provision of PCS services, the Commission

concluded that the five year holding period restriction is necessary in

order to ensure that entrepreneurs do not take advantage of the special

entrepreneur block benefits by immediately partitioning a portion of

their licenses or disaggregating a portion of their spectrum to parties

that would not have qualified at auction, on their own merits, for such

benefits. Furthermore, limiting partitioning and disaggregation during

the first five years of an entrepreneur's license term will increase

the possibility that small businesses will be able to acquire PCS

licenses.

The Commission declined to adopt proposals to apply a new license

term to partitioned license areas and disaggregated spectrum. Under

this approach, entities obtaining partitioned licenses or disaggregated

spectrum would receive a new ten-year license term beginning from the

date the Commission approved the partitioning or disaggregation. The

Commission found that permitting parties to ``re-start'' their license

term would effectively allow a licensee to extend its license term and

could lead to circumvention of our license term rules.

The Commission rejected the proposal to require disaggregation of

broadband PCS spectrum in blocks of 1 MHz of paired frequencies (500

kHz plus 500 kHz). The Commission found that requiring parties to

obtain that large a block of spectrum could act as a barrier to entry

for entities that do not require that much spectrum to provide service.

Finally, the Commission declined the proposal put forth by some

commenters that PCS licensees be required to assume the obligations and

responsibilities for microwave relocation costs for their entire

license area and spectrum block even if they partition a portion of

their license area or disaggregate a portion of their spectrum to

another party. The Commission found that requiring licensees to

guarantee the payments of partitionees and disaggregatees would be

unfair because licensees would not have control over the actions of

partitionees and disaggregatees and because there was no reason to

treat those parties differently than other late-entrant PCS licensees

with respect to microwave relocation costs.

Report to Congress:

The Commission shall include a copy of this Final Regulatory

Flexibility Analysis, along with this Report and Order, in a report to

be sent to Congress pursuant to the Small Business Regulatory

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

Final Regulatory Flexibility Analysis will also be published in the

Federal Register.

B. Ordering Clauses

Accordingly, it is ordered That, pursuant to the authority of

Sections 4(i), 257, 303(g), 303(r) and 332(a) of the Communications Act

of 1934, as amended, 47 U.S.C. 154(i), 257, 303(g), 303(r), and 332(a),

Part 24 of the Commission's Rules, 47 CFR 24, is amended as set forth

below.

It is further ordered That the rules adopted herein will become

effective March 7, 1997. This action is taken pursuant to 4(i), 303(r)

and 332(a) of the Communications Act of 1934, as amended, 47 U.S.C.

154(i), 303(r), and 332(a).

List of Subjects in 47 CFR Part 24

Communications common carriers, Reporting and recordkeeping

requirements.

Federal Communications Commission.

William F. Caton,

Acting Secretary.

Rule Changes

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

is amended as follows:

PART 24--PERSONAL COMMUNICATIONS SERVICES

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

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

otherwise noted.

Sec. 24.229 [Amended]

2. Section 24.229 is amended by removing paragraph (c).

Sec. 24.707 [Amended]

3. Section 24.707 is amended by removing the phrase from the third

sentence: ``(and applicants seeking partitioned licenses pursuant to

agreements with auction winners under Sec. 24.714).''

4. Section 24.714 is revised to read as follows:

[[Page 661]]

Sec. 24.714 Partitioned licenses and disaggregated spectrum.

(a) Eligibility. (1) Parties seeking approval for partitioning and

disaggregation shall request an authorization for partial assignment of

a license pursuant to Sec. 24.839.

(2) Broadband PCS licensees in spectrum blocks A, B, D, and E may

apply to partition their licensed geographic service area or

disaggregate their licensed spectrum at any time following the grant of

their licenses.

(3) Broadband PCS licensees in spectrum blocks C and F may not

partition their licensed geographic service area or disaggregate their

licensed spectrum for the first five years of the license term unless

it is to an entity that meets the eligibility criteria set forth in

Sec. 24.709 at the time the request for partial assignment of license

is filed or to an entity that holds license(s) for frequency blocks C

and F that met the eligibility criteria set forth in Sec. 24.709 at the

time of receipt of such license(s). Partial assignment applications

seeking partitioning or disaggregation of broadband PCS licenses in

spectrum blocks C and F must include an attachment demonstrating

compliance with this section.

(b) Technical standards--(1) Partitioning. In the case of

partitioning, requests for authorization for partial assignment of a

license must include, as attachments, a description of the partitioned

service area and a calculation of the population of the partitioned

service area and the licensed geographic service area. The partitioned

service area shall be defined by coordinate points at every 3 seconds

along the partitioned service area unless an FCC recognized service

area is utilized (i.e., Major Trading Area, Basic Trading Area,

Metropolitan Service Area, Rural Service Area or Economic Area) or

county lines are followed. The geographic coordinates must be specified

in degrees, minutes, and seconds to the nearest second of latitude and

longitude and must be based upon the 1927 North American Datum (NAD27).

Applicants may supply geographical coordinates based on 1983 North

American Datum (NAD83) in addition to those required (NAD27). In the

case where an FCC recognized service area or county lines are utilized,

applicants need only list the specific area(s) (through use of FCC

designations or county names) that constitute the partitioned area.

(2) Disaggregation. Spectrum may be disaggregated in any amount.

(3) Combined partitioning and disaggregation. The Commission will

consider requests for partial assignment of licenses that propose

combinations of partitioning and disaggregation.

(c) Unjust enrichment--(1) Installment payments. Licensees in

frequency Blocks C and F making installment payments that partition

their licenses or disaggregate their spectrum to entities not meeting

the eligibility standards for installment payments, will be subject to

the provisions concerning unjust enrichment as set forth in

Secs. 1.2111 of this chapter and 24.716(d).

(2) Bidding credits. Licensees in frequency Blocks C and F that

received a bidding credit and partition their licenses or disaggregate

their spectrum to entities not meeting the eligibility standards for

such a bidding credit, will be subject to the provisions concerning

unjust enrichment as set forth in Secs. 1.2110(f) of this chapter and

24.717(c).

(3) Apportioning unjust enrichment payments. Unjust enrichment

payments for partitioned license areas shall be calculated based upon

the ratio of the population of the partitioned license area to the

overall population of the license area and by utilizing the most recent

census data. Unjust enrichment payments for disaggregated spectrum

shall be calculated based upon the ratio of the amount of spectrum

disaggregated to the amount of spectrum held by the licensee.

(d) Installment payments--(1) Apportioning the balance on

installment payment plans. When a winning bidder elects to pay for its

license through an installment payment plan pursuant to Secs. 1.2110(e)

of this chapter or 24.716, and partitions its licensed area or

disaggregates spectrum to another party, the outstanding balance owed

by the licensee on its installment payment plan (including accrued and

unpaid interest) shall be apportioned between the licensee and

partitionee or disaggregatee. Both parties will be responsible for

paying their proportionate share of the outstanding balance to the U.S.

Treasury. In the case of partitioning, the balance shall be apportioned

based upon the ratio of the population of the partitioned area to the

population of the entire original license area calculated based upon

the most recent census data. In the case of disaggregation, the balance

shall be apportioned based upon the ratio of the amount of spectrum

disaggregated to the amount of spectrum allocated to the licensed area.

(2) Parties not qualified for installment payment plans. (i) When a

winning bidder elects to pay for its license through an installment

payment plan, and partitions its license or disaggregates spectrum to

another party that would not qualify for an installment payment plan or

elects not to pay for its share of the license through installment

payments, the outstanding balance owed by the licensee (including

accrued and unpaid interest) shall be apportioned according to

Sec. 24.714(d)(1).

(ii) The partitionee or disaggregatee shall, as a condition of the

approval of the partial assignment application, pay its entire pro rata

amount within 30 days of Public Notice conditionally granting the

partial assignment application. Failure to meet this condition will

result in a rescission of the grant of the partial assignment

application.

(iii) The licensee shall be permitted to continue to pay its pro

rata share of the outstanding balance and shall receive new financing

documents (promissory note, security agreement) with a revised payment

obligation, based on the remaining amount of time on the original

installment payment schedule. These financing documents will replace

the licensee's existing financing documents which shall be marked

``superseded'' and returned to the licensee upon receipt of the new

financing documents. The original interest rate, established pursuant

to Sec. 1.2110(e)(3)(i) of this chapter at the time of the grant of the

initial license in the market, shall continue to be applied to the

licensee's portion of the remaining government obligation. We will

require, as a further condition to approval of the partial assignment

application, that the licensee execute and return to the U.S. Treasury

the new financing documents within 30 days of the Public Notice

conditionally granting the partial assignment application. Failure to

meet this condition will result in the automatic cancellation of the

grant of the partial assignment application.

(iv) A default on the licensee's payment obligation will only

affect the licensee's portion of the market.

(3) Parties qualified for installment payment plans. (i) Where both

parties to a partitioning or disaggregation agreement qualify for

installment payments, the partitionee or disaggregatee will be

permitted to make installment payments on its portion of the remaining

government obligation, as calculated according to Sec. 24.714(d)(1).

(ii) Each party will be required, as a condition to approval of the

partial assignment application, to execute separate financing documents

(promissory note, security agreement) agreeing to pay their pro rata

portion of

[[Page 662]]

the balance due (including accrued and unpaid interest) based upon the

installment payment terms for which they qualify under the rules. The

financing documents must be returned to the U.S. Treasury within thirty

(30) days of the Public Notice conditionally granting the partial

assignment application. Failure by either party to meet this condition

will result in the automatic cancellation of the grant of the partial

assignment application. The interest rate, established pursuant to

Sec. 1.2110(e)(3)(i) of this chapter at the time of the grant of the

initial license in the market, shall continue to be applied to both

parties' portion of the balance due. Each party will receive a license

for their portion of the partitioned market or disaggregated spectrum.

(iii) A default on an obligation will only affect that portion of

the market area held by the defaulting party.

(iv) Partitionees and disaggregatees that qualify for installment

payment plans may elect to pay some of their pro rata portion of the

balance due in a lump sum payment to the U.S. Treasury and to pay the

remaining portion of the balance due pursuant to an installment payment

plan.

(e) License term. The license term for a partitioned license area

and for disaggregated spectrum shall be the remainder of the original

licensee's license term as provided for in Sec. 24.15.

(f) Construction requirements--(1) Requirements for partitioning.

Parties seeking authority to partition must meet one of the following

construction requirements:

(i) The partitionee may certify that it will satisfy the applicable

construction requirements set forth in Sec. 24.203 for the partitioned

license area; or

(ii) The original licensee may certify that it has or will meet its

five-year construction requirement and will meet the ten-year

construction requirement, as set forth in Sec. 24.203, for the entire

license area. In that case, the partitionee must only satisfy the

requirements for ``substantial service,'' as set forth in

Sec. 24.16(a), for the partitioned license area by the end of the

original ten-year license term of the licensee.

(iii) Applications requesting partial assignments of license for

partitioning must include a certification by each party as to which of

the above construction options they select.

(iv) Partitionees must submit supporting documents showing

compliance with the respective construction requirements within the

appropriate five- and ten-year construction benchmarks set forth in

Sec. 24.203.

(v) Failure by any partitionee to meet its respective construction

requirements will result in the automatic cancellation of the

partitioned or disaggregated license without further Commission action.

(2) Requirements for disaggregation. Parties seeking authority to

disaggregate must submit with their partial assignment application a

certification signed by both parties stating which of the parties will

be responsible for meeting the five- and ten-year construction

requirements for the PCS market as set forth in Sec. 24.203. Parties

may agree to share responsibility for meeting the construction

requirements. Parties that accept responsibility for meeting the

construction requirements and later fail to do so will be subject to

license forfeiture without further Commission action.

[FR Doc. 97-98 Filed 1-3-97; 8:45 am]

BILLING CODE 6712-01-P