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 Parts 22 and 26

[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: Proposed rule.

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SUMMARY: In this Further Notice of Proposed Rulemaking in WT Docket No.

96-148, the Commission proposes modifications to the cellular and

General Wireless Communications Services (GWCS) rules to expand

geographic partitioning and spectrum disaggregation provisions. The

Commission solicits comment on certain issues relating to these rules.

DATES: Comments must be filed on or before February 10, 1997. Reply

comments must be filed on or before February 25, 1997.

ADDRESSES: Federal Communications Commission, 1919 M Street, N.W.,

Washington, D.C. 20554.

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

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

SUPPLEMENTARY INFORMATION: This Further Notice of Proposed Rulemaking

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 Further Notice of Proposed Rulemaking

I. Introduction

1. There are Commercial Mobile Radio Services (CMRS) in which

partitioning and disaggregation have either not been proposed or have

been adopted on a more limited basis than the rules adopted for

broadband PCS. For example, while partitioning is allowed for cellular

licensees, there are no rules on disaggregation. Similarly, General

Wireless Communications Service (GWCS) licensees are permitted to

partition only to rural telcos and currently there is no rule for GWCS

disaggregation.

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

consider whether to permit full partitioning and disaggregation in

cellular, GWCS and any other services that are licensed on a geographic

area basis, or in spectrum blocks of sufficient size to make

disaggregation practical. Therefore, the Commission seeks comment on

whether these benefits similarly justify extension of partitioning and

disaggregation to other services.

II. Discussion

A. Partitioning and Disaggregation for Cellular and GWCS Services

3. Cellular. The Commission seeks comment as to whether to permit

cellular disaggregation. Commenters should address whether there are

technical or other constraints, unique to the cellular service, that

would make disaggregation either impractical or administratively

burdensome. Commenters should address whether regulatory or

technological changes expected in the near future may provide the

opportunity for cellular licensees to disaggregate portions of their

licensed spectrum to other parties. The Commission seeks comment as to

whether such regulatory changes may create a demand for cellular

disaggregation and whether, in anticipation of such changes, the

Commission should adopt interim disaggregation rules for cellular.

4. GWCS. The Commission seeks comment as to whether open

partitioning of GWCS licenses should be permitted similar to the

proposal for open partitioning the Commission has adopted for broadband

Personal Communications Service (PCS) licensees. In addition, the

Commission seeks comment as to whether GWCS licensees should be

permitted to disaggregate their spectrum. The Commission also seeks

comment as to whether there are technical or regulatory constraints

unique to the GWCS service that would render disaggregation impractical

or administratively burdensome. Further, the Commission recognizes that

there are special competitive bidding issues, similar to those raised

in the broadband PCS context, that must be resolved if it permits open

partitioning and disaggregation for GWCS.

B. Available License Area

5. Section 22.947(b) of the rules, 47 CFR 22.947(b), provides that

a cellular licensee may partition portions of its cellular market to

other eligible parties. The parties are free to define the license area

or ``CGSA'' of the new partitioned cellular system. Because the

cellular partitioning rule is sufficiently flexible to permit parties

to freely define the partitioned license area, the Commission does not

propose to modify the cellular rules at this time.

6. GWCS service areas are based on Economic Areas. Similar to the

former rule for broadband PCS partitioning, GWCS licensees must

partition along an established geopolitical boundary, such as county

lines, the partitioned area must include the wireline service area

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of a rural telephone company (rural telco) and it must be reasonably

related to the rural telco's wireline service area. The Commission

seeks comment on whether and how its existing partitioning rule for

GWCS, which requires partitioning along established geopolitical

boundaries and along an area that is reasonably related to a rural

telco's wireline service area, should be modified, if it chooses to

open partitioning of GWCS licenses to entities other than rural telcos.

The Commission tentatively concludes that a more flexible approach,

similar to the one it adopted for broadband PCS, is appropriate for

GWCS. Partitioning of GWCS licenses would be permitted based on any

license area defined by the parties. The Commission seeks comment on

whether this proposal is consistent with the licensing of GWCS based on

Economic Areas and whether there are any technical or other issues

unique to GWCS that might impede the adoption of a flexible approach to

defining the partitioned license area.

C. Amount of Spectrum To Disaggregate

7. The Commission seeks comment as to whether minimum

disaggregation standards are necessary for cellular and GWCS. The

Commission seeks to determine whether technological and administrative

considerations warrant the adoption of such standards. Cellular

licenses are currently issued for a 25 MHz block of spectrum and GWCS

licenses for 5 MHz blocks. GWCS licensees are also permitted to obtain

multiple 5 MHz blocks and are subject to a 15 MHz GWCS spectrum

aggregation limit. The Commission finds that any such standard it

adopts should be sufficiently flexible so as to encourage

disaggregation while providing a standard which is consistent with the

technical rules and by which the Commission will be able to track

disaggregated spectrum and review disaggregation proposals in an

expeditious fashion.

D. Combined Partitioning and Disaggregation

8. The Commission seeks comment as to whether combined partitioning

and disaggregation should be permitted for cellular and GWCS services.

The Commission tentatively concludes that it should permit such

combinations to provide parties the flexibility they need to respond to

market forces and demands for service relevant to their particular

locations and service offerings.

E. Construction Requirements

9. Cellular. While the Commission does not propose to modify the

existing cellular build-out procedures, it seeks comment as to whether

the cellular partitioning rule is sufficiently flexible to increase the

viability and value of partitioned cellular licenses and to facilitate

cellular partitioning while preventing circumvention of the cellular

build-out procedures. The Commission invites comment as to whether the

existing cellular rules might be amended to further facilitate cellular

partitioning and what types of alternative partitioning mechanisms

might be adopted.

10. In addition, the Commission seeks comment as to whether it

should adopt a disaggregation certification procedure similar to the

type adopted for broadband PCS. The Commission proposes requiring

parties seeking Commission approval of a cellular disaggregation

agreement to include a certification as to which party will be

responsible for building out the remainder of the market. Should that

party fail to build out, the Commission proposes that the unserved

portion of the market would be subject to Phase II or unserved area

applications. The Commission seeks comment as to whether such an

approach is feasible for cellular disaggregation given the distinctive

nature of the cellular build-out rules.

11. GWCS. The Commission seeks comment as to whether it should

amend its existing partitioning rule for GWCS to allow dual

construction options for GWCS partitioning and adopt a certification

procedure for GWCS disaggregation similar to the procedure it has

adopted for broadband PCS.

12. For example, under the first construction option for GWCS

partitioning, the partitionee would certify that it will satisfy the

same construction requirement as the original GWCS licensee for its

partitioned license area. Under the second construction option, the

original GWCS licensee may certify that it has or will meet its five-

year construction requirement and that it will meet the ten-year

construction requirement for the entire license area. Since the

original GWCS licensee retains responsibility for meeting the

construction requirements, the Commission believes that the partitionee

should be permitted to meet a less substantial construction

requirement. The Commission seeks comment as to what lesser

construction requirement would be appropriate.

13. As for GWCS disaggregation, the Commission proposes adopting a

procedure similar to the one adopted for broadband PCS and proposed for

cellular. Under such an approach, the disaggregating parties would be

required to submit a certification, signed by both the disaggregator

and disaggregatee, as to which of the parties will retain

responsibility for meeting the five and ten-year construction

requirements for the GWCS market. The parties would be permitted to

share responsibility for meeting the construction requirements. The

party or parties taking responsibility for meeting the construction

requirements would be subject to license forfeiture for failing to meet

the construction requirements.

F. License Term

14. The Commission seeks comment as to whether the cellular and

GWCS rules should be amended to provide that parties obtaining

partitioned cellular or GWCS licenses or disaggregated spectrum hold

their license for the remainder of the original licensee's ten-year

license term. In addition, the Commission seeks comment as to whether

GWCS partitionees and disaggregatees should be afforded the same

renewal expectancy as other GWCS licensees. The Commission tentatively

concludes that limiting the license term of the partitionee or

disaggregatee is necessary to ensure that there is maximum incentive

for parties to pursue available spectrum as quickly as practicable.

G. GWCS Competitive Bidding Issues

15. The Commission tentatively concludes that GWCS partitionees and

disaggregatees that would qualify as designated entities should be

permitted to pay their pro rata share of the remaining government

obligation via installment payments. The Commission seeks comment as to

the exact mechanisms for apportioning the remaining government

obligation between the parties and whether there are any unique

circumstances that would make devising such a scheme for the GWCS

service more difficult than for broadband PCS. Since GWCS service areas

are allotted on a geographic basis, similar to broadband PCS, the

Commission proposes using population as the objective measure to

calculate the relative value of the partitioned area and amount of

spectrum disaggregated as the objective measure for disaggregation.

16. The Commission seeks comment on whether to apply unjust

enrichment rules to designated entity GWCS licensees that partition or

disaggregate to non-designated entities. Commenters

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should address whether the unjust enrichment payments should be

calculated on a proportional basis, using population of the partitioned

area and amount of spectrum disaggregated as the objective measures.

The Commission further seeks comment as to how to enforce unjust

enrichment payments for designated entity GWCS licensees paying via

installment payments and those that were awarded bidding credits that

partition or disaggregate to non-designated entities. The Commission

tentatively proposes using methods similar to those adopted for

broadband PCS for calculating the amount of the unjust enrichment

payments that must be paid in those circumstances.

H. Licensing Issues

17. Partial assignment procedures are not used for cellular

partitioning. Instead, whenever a cellular licensee enters into a

partitioning agreement, the partitionee must file an application (FCC

Form 600) for a new cellular system covering the partitioned market.

Since this procedure provides the appropriate level of review of the

partitioning transaction, the Commission proposes no modification at

this time. However, should the Commission permit cellular

disaggregation, it seeks comment on the method it should devise for

reviewing cellular disaggregation transactions.

18. Since there are existing partial assignment rules for both

cellular and GWCS, the Commission proposes utilizing partial assignment

procedures, similar to those adopted for broadband PCS, to review

cellular disaggregation and GWCS partitioning and disaggregation

transactions. Partial assignment applications would be placed on public

notice and subject to petitions to deny. The parties would be required

to submit an FCC Form 490, an FCC Form 600 and, if necessary, an FCC

Form 430, together as one package under cover of the FCC Form 490. The

Commission invites comment whether any additional procedures are

necessary for reviewing these applications.

III. Procedural Matters and Ordering Clauses

A. Regulatory Flexibility Act

Summary

As required by Section 603 of the Regulatory Flexibility Act, 5

U.S.C. 603, the Commission has prepared an Initial Regulatory

Flexibility Analysis (IRFA) of the expected impact on small entities of

the policies and rules proposed in this Further Notice of Proposed

Rulemaking (FNPRM).

Reason for Action

This rulemaking proceeding was initiated to secure comment on

proposals to modify our cellular and General Wireless Communications

Service (GWCS) rules to permit partitioning and disaggregation for all

licensees in those services. The proposals advanced in the FNPRM are

also designed to implement Congress' goal of giving small businesses

the opportunity to participate in the provision of spectrum-based

services in accordance with Sections 257 and 309(j) of the

Communications Act of 1934, as amended, 47 U.S.C. 257, 309(j) (the

Communications Act).

Objectives

The Commission proposes to change its rules for cellular and GWCS

to facilitate the efficient use of cellular and GWCS spectrum, increase

competition, and expedite the provision of cellular and GWCS services

in the near term. These proposals seek to increase the level of small

business participation in the provision of cellular and GWCS services.

The Commission considers whether to modify the existing cellular rules

to provide for more flexible partitioning and to allow disaggregation

of cellular spectrum for the first time. In addition, the Commission

proposes to allow GWCS licensees to partition and disaggregate to

entities that are eligible for GWCS licenses. Designated entity GWCS

licensees will be allowed to partition or disaggregate to non-

designated entities, subject to unjust enrichment payments. Entities

that qualify for installment payments will be permitted to pay their

pro rata share of the remaining government obligation via installment

payments. The Commission proposes to establish license terms that

permit cellular and GWCS partitionees to hold partitioned licenses and

disaggregatees to hold disaggregated spectrum for the remaining

duration of the original ten-year license term. The Commission also

proposes to establish construction requirements for GWCS partitioning

to ensure expedient access to GWCS service in partitioned areas, to

ensure coverage and to increase spectrum efficiency. Finally, the

Commission proposes to allow combined partitioning and disaggregation

for cellular and GWCS services and to follow the existing partial

assignment procedures for cellular and GWCS.

Legal Basis

The proposed action is authorized under Sections 4(i), 257, 303(r)

and 309(j) of the Communications Act of 1934, as amended, 47 U.S.C.

154(i), 257, 303(r), and 309(j).

Reporting, Recordkeeping, and Other Compliance Requirements

The proposals under consideration in this FNPRM include the

possibility of imposing reporting and recordkeeping requirements on

small businesses seeking licenses through the proposed partitioning and

disaggregation rules. The information requirements would be used to

determine whether the licensee was qualified to obtain a partitioned

license or disaggregated spectrum. This information will be a one-time

filing by an applicant requesting cellular disaggregation or GWCS

partitioning or disaggregation. This information will be submitted on

FCC Forms 490 (and 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. We estimate that the average burden on the applicant is

three hours for the information necessary to complete these forms. We

estimate that 75 percent of the respondents (which may include small

businesses) will contract out the burden of responding. We estimate

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.

Federal Rules Which Overlap, Duplicate or Conflict With These Rules

None.

Description, Potential Impact, and Number of Small Entities Involved

The rule changes proposed in this proceeding will affect all small

businesses which avail themselves of these rule changes, including

small businesses currently holding cellular licenses who choose to

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

licenses through partitioning and/or disaggregation. The Commission is

required to estimate in its Final Regulatory Flexibility Analysis the

number of small entities to which a rule will apply, provide a

description of such entities, and assess the impact of the rule on such

entities. To assist the Commission in this analysis, commenters are

requested to provide information regarding how many total cellular and

GWCS entities, existing and potential, would be affected by the

proposed rules in the FNPRM. In particular, we seek estimates of how

many cellular and GWCS entities, existing or potential, will be

considered small businesses. Small business is

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defined here as a firm that has revenues of less than $40 million in

each of the last three calendar years. This definition was adopted for

the GWCS service. We seek comment as to whether this definition is

appropriate in this context. Additionally, we request each commenter to

identify whether it is a small business under this definition. If the

commenter is a subsidiary of another entity, this information should be

provided for both the subsidiary and the parent corporation or entity.

The Commission anticipates that a total of 8,465 cellular 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 upon the current number of

existing cellular licensees (1,693) and our estimate that each license

would probably not be partitioned and/or disaggregated to more than

five parties. However, we estimate that a significant number of the

cellular and GWCS licensees and potential licensees who take the

opportunity to partition and/or disaggregate a license or who could

obtain a license through partitioning and/or disaggregation will be

small businesses.

SBA has not developed a definition of small entities specifically

applicable to cellular. The closest applicable definition under SBA

rules is radiotelephone (wireless) companies. According to SBA's

definition, a small business radiotelephone company is one employing

fewer than 1,500 persons. According to our most recent data, there are

1,693 existing cellular licensees. We are unable at this time to

estimate the number of cellular service carriers that would qualify as

small business concerns under SBA's definition. We estimate that fewer

than 1,693 small entity cellular service carriers may be affected by

the decisions and rules adopted in this FNPRM.

Significant Alternatives Minimizing the Impact on Small Entities

Consistent With the Stated Objectives

The proposals advanced in the FNPRM 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. The impact on small entities in the proposals in the FNPRM is

the opportunity to enter the cellular and GWCS market through

partitioning and disaggregation. With more open partitioning and

disaggregation, additional entities, including small businesses, may

participate in the provision of cellular and GWCS services 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.

The rule changes proposed in the FNPRM by the Commission are

consistent with the Communications Act's mandate to identify and

eliminate market entry barriers for small business in the provision and

ownership of telecommunications services, and the mandate under Section

309(j) of the Communications Act, 47 U.S.C. 309(j), to utilize auctions

to ensure that small, minority and women-owned businesses and rural

telcos have an opportunity to participate in the provision of spectrum-

based services. The proposals in the FNPRM, if implemented, will

facilitate market entry by parties, including small businesses, that

may lack the financial resources for participation in cellular and GWCS

services. The alternative is to continue to allow GWCS partitioning

only for rural telcos. Limiting GWCS partitioning to rural telcos would

not permit other small businesses to obtain partitioned licenses or to

partition to other parties, and thus would not promote the

participation of small business in the provision of GWCS service.

In the FNPRM, the Commission proposes facilitating GWCS

partitioning by offering a choice between two different build-out

options, which could be negotiated by the parties. The Commission

tentatively concludes that these proposed flexible build-out

requirements, if adopted, will encourage partitioning to entities that

have a sincere interest in providing GWCS service and will thereby

expedite the provision of service to geographic areas that otherwise

may not receive it as quickly.

This FNPRM solicits comments on a variety of proposals discussed

herein. Any significant alternatives presented in the comments will be

considered.

B. Paperwork Reduction Act

The Further Notice of Proposed Rulemaking (FNPRM) contains either a

proposed or modified information collection. As part of its continuing

effort to reduce paperwork burdens, we invite the general public and

the Office of Management and Budget to take this opportunity to comment

on the information collections contained in this FNPRM, as required by

the Paperwork Reduction Act of 1995, Public Law No. 104-13. Public and

agency comments are due at the same time as other comments on this

FNPRM; OMB comments are due March 7, 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.

19. In addition to filing comments with the Secretary, a copy of

any comments on the information collections contained herein should be

submitted to both of the following: Dorothy Conway, Federal

Communications Commission, Room 234, 1919 M Street, N.W., Washington,

DC 20554, or via the Internet to [email protected] and to Timothy Fain,

OMB Desk Officer, 10236 NEOB, 725--17th Street, N.W., Washington, DC

20503 or via the Internet at [email protected]. For additional

information regarding the information collections contained herein,

contact Dorothy Conway above.

C. Ex Parte Rules--Non-Restricted Proceedings

This is a non-restricted notice and comment rule making proceeding.

Ex parte presentations are permitted except during the Sunshine Agenda

period, provided they are disclosed as provided in the Commission's

rules, 47 CFR 1.1201, 1203, and 1.1206(a).

D. Comment Period

Pursuant to applicable procedures set forth in Secs. 1.415 and

1.419 of the Commission's rules, 47 CFR 1.415 and 1.419, interested

parties may file comments to the Further Notice of Proposed Rulemaking

on or before February 10, 1997, and reply comments on or before

February 25, 1997. To file formally in this proceeding, you must file

an original and four copies of all comments, reply comments, and

supporting comments. If you want each Commissioner to receive a

personal copy of your comments, you must file an original plus nine

copies. You should send comments and reply comments to Office of the

Secretary, Federal Communications Commission, Washington, D.C. 20554.

Comments and reply comments will be available for public inspection

during regular business hours in the FCC Reference Center of the

Federal Communications

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Commission, Room 239, 1919 M Street, N.W., Washington, D.C. 20554.

E. Authority

Authority for issuance of this Further Notice of Proposed

Rulemaking is contained in Sections 4(i), 257, 303(r), and 309(j) of

the Communications Act of 1934, as amended, 47 U.S.C. 154(i), 257,

303(r), and 309(j).

F. 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. Secs. 154(i), 257, 303(g), 303(r),

and 332(a), a further notice of proposed rulemaking is hereby adopted.

It is further ordered, that comments in WT Docket No. 96-148 will

be due February 10, 1997, and reply comments will be due February 25,

1997.

List of Subjects

47 CFR Part 22

Communications common carriers, Reporting and recordkeeping

requirements.

47 CFR Part 26

Communications common carriers; Reporting and recordkeeping

requirements.

Federal Communications Commission.

William F. Caton,

Acting Secretary.

[FR Doc. 97-99 Filed 1-3-97; 8:45 am]

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