# 800 MHz SMR Licensees

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URL: https://www.frixlaw.com/law-library/documents/fr%3A98-22946

## Record

- **Collection:** Federal Register
- **Document type:** Rule
- **Published:** August 27, 1998
- **Citation:** 63 FR 45751

## Text

FEDERAL COMMUNICATIONS COMMISSION

47 CFR Part 90

[FCC 95-211]

800 MHz SMR Licensees

AGENCY: Federal Communications Commission.

ACTION: Final rule.

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SUMMARY: In this document, the Federal Communications Commission
(Commission) addresses petitions for waiver which establishes the
maximum period for Specialized Mobile Radio (SMR) licensees to
construct their facilities and commence operation. The document grants
certain licensees an additional four months to construct and commence
operations of their licenses. The Commission partially granted the
waiver petitions because during the pendency of the waiver petitions,
it had changed the construction period for all new Commercial Mobile
Radio Service (CMRS) licenses, including conventional SMR licenses,
from eight months to twelve months. Thus, the basis for granting the
additional four months to these licensees was to place them in the same
posture as CMRS providers licenses after January 2, 1995, when the new
rule took effect.

DATES: Licensees have four months from August 27, 1998 to construct and
commence operation of their licenses.

FOR FURTHER INFORMATION CONTACT: Terry Fishel at (717) 338-2602 or
Ramona Melson or David Judelsohn at (202) 418-7240.

SUPPLEMENTARY INFORMATION:
1. This order addresses petitions for waiver of Section 90.633(c)
of the Commission's Rules, which establishes the maximum period for
Specialized Mobile Radio (SMR) licensees to construct their facilities
and commence operation. The petitions were filed on March 15, 1994 and
March 21, 1994, respectively, by Dr. Robert Chan and Daniel R. Goodman.
On April 6, 1994, the Private Radio Bureau released a Public Notice 59
FR 17547 (April 13, 1994) seeking comments on the Goodman and Chan
petitions. Based on the facts set forth in the petitions and the
comments filed in this matter, we conclude that the waivers requested
by Chan and Goodman should be granted to the extent described below.
2. The Goodman and Chan petitions are brought by or on behalf of
approximately 4,000 individuals who have obtained 800 MHz conventional
SMR licenses on General Category channels by using the services of one
of

[[Page 45752]]

several companies that are the subject of an enforcement action brought
by the Federal Trade Commission. These companies have used TV
infomercials and telemarketing solicitations to promote SMR licenses as
``investment opportunities'' for individuals. The typical service
offered by these companies is to prepare SMR applications for a
substantial fee (usually $7000 per application). The companies
typically induce potential customers to purchase these services by
representing that SMR licenses have great value that can be recouped
through subsequent resale of these licenses, but do not emphasize the
obligations to which each licensee is subject.
3. The Commission has taken steps to protect the public against
deception and misinformation. In December 1992, the Commission issued a
public ``Consumer Alert'' regarding SMR licensing. Among other things,
the alert stated that SMR licenses could be obtained directly from the
FCC for a $35 fee, that licensees would be required to construct
facilities within eight months or lose their licenses, and that
licenses could not be sold or transferred prior to construction. The
Commission also developed a consumer information packet, which is sent
to individuals who contact the Commission after being solicited by SMR
application companies. The Commission also assisted the Federal Trade
Commission (FTC) in preparing a consumer information pamphlet issued in
January 1994.
4. The Commission has actively cooperated with the Federal Bureau
of Investigation, the FTC and the Securities Exchange Commission in
investigations of SMR application companies. In January 1994, one such
investigation culminated in a lawsuit brought by the FTC in U.S.
District Court against four companies, Metropolitan Communications
Corp., Nationwide Digital Data Corp., Columbia Communications Services
Corp., and Stephens Sinclair Ltd. (the ``Receivership Companies''). In
its complaint, the FTC alleged that approximately 4,000 individuals who
were assisted by the Receivership Companies in obtaining licenses for
conventional SMR channels were defrauded and misled as to the FCC rules
by the sales practices of these companies. The first phase of the
scheme involved selling consumers application preparation services for
FCC licenses at excessive cost. In the second phase of the scheme,
certain defendants used misrepresentations to solicit the purchase of
shares in partnerships that would purportedly construct and operate SMR
systems in various cities. On January 14, 1994, the court issued a
preliminary injunction freezing the assets of the Receivership
Companies and their principal officers and appointed Daniel R. Goodman
as Receiver of the Receivership Companies.
5. Waiver Requests. On March 15, 1994, Dr. Robert Chan filed a
petition for waiver on his own behalf as licensee of five SMR stations
acquired through two of the Receivership Companies. Dr. Chan requested
an additional year in which to build and place his facilities in
operation. On March 21, 1994, Daniel Goodman, the court-appointed
Receiver, filed a petition for waiver on behalf of all SMR licensees
who have received licenses through the Receivership Companies. Noting
that virtually no construction had taken place under these licenses and
that automatic license cancellation was imminent, Goodman requested an
eight month extension of time for all such licensees to construct and
commence operations, starting from the petition grant date. Goodman
also requested a 120-day emergency stay of all automatic cancellations
of licenses during the pendency of the petition. Goodman indicated that
its request for waiver was limited to the Commission's eight month
construction deadline, and no request was made to waive any of the
other requirements that apply to General Category channels.
6. On April 21, 1994, Goodman filed a supplement to his initial
waiver request asking that we waive the Commission's requirement of a
separate waiver fee for each individual license covered by the
petition. On April 29, 1994, Goodman filed another supplement
requesting that the Commission (1) issue a stay (retroactively
effective January 14, 1994) of any cancellation of the exclusive SMR
authorizations during the pendency of the waiver request; (2) suspend
the mailing of automatic cancellation notices to affected licensees;
and, (3) if the request for waiver is denied, grant the licensees a
120-day period from the date of such denial in which to construct their
facilities. In this supplemental request, Goodman stated that
petitioners needed ``an additional eight month period to construct and
load their licensed facilities,'' indicating that compliance with the
Commission's mobile loading requirements for the General Category
channels was contemplated.
7. Public Notice and Comments on Petitions. On April 6, 1994, the
Private Radio Bureau issued a Public Notice seeking comments and
replies on the Goodman and Chan petitions. Approximately 300 comments
and five replies were received. Many comments in support of the Goodman
petition were submitted by individual licensees who received their
licenses through the services of the Receivership Companies. In
addition, the FTC has submitted a letter to the Commission supporting
the Goodman petition. Oppositions to the waiver requests have been
filed by major SMR operators, frequency coordinators, and trade
associations, including Nextel Communications, Inc., the American
Mobile Telecommunications Association, the Association of Public-Safety
Communications Officials-International, National Association of
Business and Educational Radio, American Digital Communications, the
Industrial Telecommunications Association and Council of Independent
Communication Suppliers, Express Communications, TC3M, Inc., and Brown
and Schwaninger.

A. Receiver's Standing as Party in Interest

8. Background and Comments. As a threshold issue, several
commenters argue that Goodman lacks standing to bring a waiver petition
on behalf of multiple SMR licensees. These commenters note the apparent
lack of an express agreement between the licensees (individually or as
a group) and the Receiver for the latter to represent them. In
addition, commenters assert that Goodman's status as Receiver is
insufficient to make him a real-party-in-interest with respect to the
licenses at issue. The Receiver's duty is to receive monies due and
owing to the Receivership Companies so that these funds can be used to
satisfy the debts of these companies and their creditors. Because any
monies received from the sale of the licenses would go directly to the
licensees and not to the Receivership Companies, commenters argue, the
Receiver has no interest that would be affected by the request.
9. In reply, Goodman argues that he is the proper entity to submit
waiver requests on behalf of all the licensees. First, Goodman argues
that he should be recognized as having standing for reasons of
administrative convenience because requiring each licensee to file an
individual waiver petition would be unduly burdensome. Goodman also
contends that because many of the licensees entered into management
agreements with the Receivership Companies, the licensees depend on the
Receiver to take whatever actions are necessary to preserve the
validity of their authorizations. Finally, Goodman

[[Page 45753]]

alleges that no licensee has objected to the Receiver's filing of a
petition on behalf of all licensees.
10. Decision. We conclude on grounds of administrative convenience
that Goodman should be deemed to have standing to file the instant
petition. Although this case involves multiple licenses, weighing the
merits of the waiver request for each licensee involves evaluating a
common fact situation rather than a diverse set of facts for each
licensee. Because the request for waiver for all of the licensees is
based on common facts, it would be a waste of time and resources to
require each licensee to file individually. There is also no evidence
that any licensee has objected to the Receiver filing the waiver
petition on his or her behalf. For purposes of the Goodman petition,
therefore, we believe that it is in the public interest to consider the
Receiver as representing the interests of all licensees whose interests
are affected by the FTC's action against the Receivership Companies.

B. Waiver of Application Fees

11. Petition. Section 1.1102 of the Commission's Rules requires
waiver petitions to be accompanied by a $105 fee for each rule section
that the petitioner seeks to waive multiplied by the number of stations
to which the petition applies. Although the Goodman petition was filed
on behalf of multiple licensees, Goodman has submitted only a single
$105 waiver petition fee instead of a separate fee for each affected
license. The Chan petition was not accompanied by any fee payment.
Goodman has requested that the Commission waive the requirement of a
separate fee for each license and accept the single payment as
sufficient. Goodman argues that the public interest warrants waiving
the fee requirement because the purpose of the underlying waiver
petition is to allay potential financial hardship to defrauded
licensees and a fee waiver would avoid a further depletion of the
licensees' funds.
12. Comments. The Public Notice did not solicit comment on the
Receiver's request for waiver of fees because it was filed subsequent
to the release of the Public Notice. Nevertheless, a few comments on
the issue of waiving filing fees were submitted. Express Communications
in particular opposes waiving the fee requirement on the grounds that
there is no provision in the rules to lump multiple requests together
for a single fee.
13. Decision. Section 1.1115(a) of the Commission's rules permits
the waiver of fees where good cause is shown and where waiver would
promote the public interest. If we were to require a separate fee for
each licensee that is covered by the Goodman petition, the total fees
due (based on 4,000 licensees) would total $420,000. We believe that
waiving this fee amount is in the public interest. The Goodman petition
was filed in an attempt to limit the financial harm caused to licensees
by the alleged fraudulent conduct of the Receivership Companies. The
petition also raises substantive issues that we believe should be
decided on the merits. We therefore conclude that good cause exists to
waive the filing fee requirement. For the same reasons, we also waive
the fee requirement with respect to the Chan petition on our own
motion.

C. Waiver of Construction and Operation Deadline

14. Petition. In support of his waiver petition, Goodman contends
that the individuals who obtained licenses through the Receivership
Companies are threatened with an aggregate loss of $28,000,000
(calculated based on 4,000 licenses times the $7,000 application fee
paid by each licensee) if their licenses are allowed to expire. Goodman
states that neither the licensees nor the Receiver have the financial
or technical resources to construct SMR facilities pursuant to their
authorizations within the required eight-month period. Goodman states
that he is in the process of negotiating and finalizing the sale and
assignment of thousands of these licenses to large, legitimate,
publicly-traded SMR companies. Because Commission rules do not allow
the assignment or transfer of unconstructed SMR licenses, however,
Goodman requests that the licensees be given additional time to
construct so that they can then sell the stations and potentially
recoup their investment. Without such an extension, Goodman contends,
the number of licenses that may be transferred will be substantially
diminished. The Receiver contends that if the licensees are granted
additional time to construct, they will be able to place in operation
and load their channels as required by our rules.
15. The Receiver acknowledges that many of the licensees on whose
behalf the waiver is sought were unaware of their obligations under the
Commission's Rules, including the intention to construct and operate
and the eight month construction requirement. Goodman contends that
their lack of knowledge should be excused, however, on the grounds that
the licensees were defrauded by the Receivership Companies concerning
their responsibilities as licensees. Goodman also notes that the
Commission has granted extended construction periods for licensees of
wide-area, multi-site SMR systems and urges us to treat the individual
licensees in this case as similarly entitled to extended construction
authority on a collective basis. Finally, Goodman argues that a waiver
grant would not compromise efficient use of spectrum or otherwise be
contrary to the public interest. If additional time for construction is
allowed, he argues, the systems can be constructed and the Commission's
policies fulfilled with only a brief delay.
16. The Chan petition raises essentially the same issues as the
Goodman petition with respect to the five SMR licenses held by Dr.
Chan. Dr. Chan states that he acquired licenses through two of the
Receivership Companies and that one of the companies, Nationwide
Digital, had undertaken to construct and operate Dr. Chan's SMR
facilities. Because Nationwide does not have the capability to
construct the stations in time, Dr. Chan requests a one-year extension
so that he can employ other business entities to construct and operate
his SMR stations.
17. Comments. The FTC supports the Goodman petition on the grounds
that an extension of the construction and operation deadline would help
to alleviate the financial injury suffered by the 4,000 licensees.
Licensees would directly benefit by a rule waiver, the FTC contends,
because it would give the Receiver adequate time to negotiate
arrangements with legitimate SMR operators to manage and/or construct
the stations. The FTC further argues that these arrangements would
indirectly benefit other investors who have been defrauded by the
Receivership Companies because reducing the licensees' damages will
preserve the assets of the Receivership Companies as a source of
redress for other claims.
18. Many individual licensees have submitted comments in support of
the Goodman petition. These commenters echo Goodman's argument that an
extension of time is necessary to allow construction of their SMR
stations because of the delay engendered by the Receivership Companies'
fraudulent scheme.
19. Petition opponents argue that extending the construction and
operation deadline is an inappropriate remedy for licensees who made
speculative and ill-advised investments. The purpose of the waiver
request, opponents contend, is not to promote development of SMR
service, but to

[[Page 45754]]

protect the interests of a group of licensees who hope to make a profit
from selling their licenses to established operators. Opponents assert
that the Commission cannot act as the guarantor of the public's
investment decisions. Opponents also argue that licensees are charged
with knowing and fulfilling the responsibilities of holding a license.
If these licensees were in fact victims of fraud, opponents argue, they
have legal remedies other than an extension of the construction and
operation deadline. Opponents assert that the Commission would better
serve the public interest by allowing these licenses to lapse so that
the Commission can relicense these frequencies directly to legitimate
operators.
20. Decision. To obtain a waiver of our construction requirements,
petitioners must demonstrate that their circumstances are unique, that
there is no reasonable alternative solution within existing rules, and
that good cause exists to justify the requested relief. The thrust of
petitioners' argument is that they should be excused from the eight-
month construction requirement because they were the victims of fraud
by the Receivership Companies. As discussed more fully below, we will
waive our rules to the extent necessary to put petitioners in the same
posture as other part 90 CMRS providers now subject to a twelve-month
construction period under our rules. Specifically, we will grant
petitioners a four-month extension from the effective date of this
Memorandum Opinion and Order to construct and commence operations. A
four-month extension augments petitioners' original eight-month
construction period to the degree necessary to give them the twelve
months to build their systems that we allowed for all Part 90 CMRS
licensees in the Third Report and Order in General Docket No. 93-252.
We emphasize, however, that all other requirements in our rules
continue to apply. In particular, as licensees on General Category
channels, petitioners do not earn exclusive use of their channels
unless they have achieved loading of 70 mobiles per channel. To the
extent that petitioners have less than 70 mobiles operating on each of
their channels, additional licensees may be licensed to use those
channels. We believe our decision to grant petitioners limited relief
in this manner in no way undermines our commitment to strict
enforcement of our construction rules, which are intended to promote
efficient use of SMR spectrum and the availability of service to the
public.
21. Since the inception of the SMR service, our rules have required
licensees to comply with strict time limits for constructing and
loading their systems. These limits were viewed as essential to
ensuring that SMR spectrum would be used efficiently, and to promote
the rapid deployment of services to the public. We have enforced these
rules strictly in order to recover unused spectrum for relicensing. We
have particularly noted the importance of enforcing our construction
requirements with respect to the General Category channels, on which
the petitioners are licensed. In this regard, we have stated our intent
``to aggressively enforce Section 90.633 of our Rules requiring that
conventional 800 MHz systems be placed in operation eight months after
the date of the grant of the license for the system.''
22. Our policy of strict enforcement of our construction
requirements has led us to deny extensions in a wide variety of
circumstances in which the failure of SMR licensees to comply with our
construction or loading requirements resulted from circumstances that
were the result of the licensees' own business decisions or of risks
commonly assumed by all licensees. For example, in P & R Temmer, an SMR
licensee sought an extension of our construction and loading
requirements because it had been required to change its transmitter
site to eliminate technical problems and because of the equipment
manufacturer's alleged reluctance to aggressively market the system to
potential customers. In denying the waiver, we concluded that problems
with site selection and marketing strategy were not beyond the
licensee's control because they resulted from independent business
judgments made by the licensee. We have applied this standard in other
circumstances as well, denying extension requests by SMR licensees who
have been delayed by such factors as interference from adjacent
buildings, zoning difficulties, inability to obtain construction
permits, and equipment delivery problems.
23. In this respect, the facts of the present case bear a strong
resemblance to the facts in Robert A. Baker, Receiver, a case involving
individuals who were solicited by a company to prepare and file
cellular applications on their behalf. Shortly before the filing
deadline, the FTC brought a fraud action against the company and the
court appointed a receiver to assist the victims of the alleged fraud.
The receiver sought waiver of the deadline to enable the affected
parties to submit applications and the request was supported by the
FTC. In a decision affirmed by the Commission, the Common Carrier
Bureau denied the waiver request. The Bureau concluded that the
individual applicants were responsible for the consequences of their
decision to use a mass application preparer, and that there was no
evidence of compelling circumstances that would justify waiver of the
filing deadline. If the applicants had been defrauded, the Bureau
further stated, the appropriate remedy was to seek indemnification from
the party that had committed the fraud, not belated insertion into the
lottery. The Bureau concluded that the ``tribulations of a mass
application preparer cannot excuse the individual applicants from their
responsibilities.''
24. We also conclude that the principles set forth in Baker are
relevant here. Each individual licensee who hired the Receivership
Companies bears responsibility for the decision to rely on a third
party to act on his or her behalf in meeting the obligations imposed by
the Commission's rules. Assuming that these licensees were defrauded by
the Receivership Companies, they have recourse to other legal remedies
specifically designed to provide redress. The Commission's mandate,
however, is to allocate and assign radio spectrum to serve the public
interest.
25. Our decision to grant the petitions in part is motivated by our
determination that granting the waiver is equitable in light of the
fact that during the pendency of the Goodman and Chan requests, we
changed our construction requirements for SMRs licensed in the General
Category and all CMRS providers licensed under part 90 of our rules. In
the Third Report and Order in the CMRS docket, we adopted a uniform
twelve-month construction period for all CMRS providers licensed under
part 90 of our rules. We indicated that such a rule change would
eliminate the obvious disparity between Part 90 and Part 22 and would
further the goal of comparable regulation for all substantially similar
services. Recently, on grounds similar to our decision here, the
Private Radio Bureau granted 220 MHz non-nationwide licensees a four-
month extension to construct their stations. Petitioners and future
applicants should not interpret our decision today as a sign of any
diminution of our resolve to enforce the twelve-month construction
period that applies to General Category and other part 90 CMRS
licensees. Like the licensees in Baker, petitioners are fully
responsible for the consequences of their decision to use a mass
application preparer.
26. We nonetheless find that the request at hand are
distinguishable from Baker and other cases in which we denied
construction time extensions on

[[Page 45755]]

the grounds that we changed our rules while the Goodman and Chan
petitions were pending before us. In the interests of fairness, we will
grant petitioners the relief necessary to place them in the same
posture as other SMR licensees that are subject to a twelve-month rule.
We will not, however, permit petitioners who have not achieved loading
of 70 mobiles to treat their channels as exclusive. Such relief was not
requested and, indeed, was deemed by the Receiver to be unnecessary.
27. We are granting petitioners only limited relief, and for the
reasons stated above. To grant this relief for the reasons stated by
the petitioners would undermine the objectives of our construction
requirements. As we have noted on numerous occasions, the purpose of
the prohibition against assignment or transfer of unconstructed
licenses is to deter speculation and trafficking in licenses. Even if
we assume that many of the licensees at issue here were unaware of or
misinformed about this rule, as appears likely, petitioners do not
dispute that these licensees were primarily interested in acquiring SMR
licenses as a form of investment that they could subsequently sell for
a profit. We believe it would be incongruous to grant waivers to
licensees on this basis when we have consistently denied them to
licensees who had a bona fide intent to construct and operate SMR
systems but were unable to construct because of adverse business
decisions. The Commission has previously noted that frequencies in the
800 MHz band are extremely scarce in many areas, making it difficult
for applicants to obtain channels. Moreover, the licenses at issue here
are for General Category frequencies, which may be licensed not only to
SMR operators but also to public safety entities and other categories
of private radio users.
28. We also want to be clear that by granting limited relief for
the reasons stated, we do not intend to reward and encourage further
speculative activity by entities like the Receivership Companies and
possibly invite abuse of the Commission's processes. The problem of
application mills is one that we have encountered and continue to
encounter in a number of services. If we were to grant a waiver on the
grounds that such action was needed to afford relief to the unwitting
victims of a few such companies, the result almost inevitably would be
to encourage numerous similar requests. Furthermore, we would be
compelled in each case to ascertain whether the licensee in fact was a
victim of fraud or was claiming fraud as a pretext.
Finally, the grant of a waiver for the reasons stated by
petitioners could inadvertently become a tool used by the application
mills themselves in their solicitation of new clients, resulting in
more unsuitable applicants seeking Commission licenses. We do, however,
affirm our commitment to pursue ongoing initiatives and explore new
ways to deter the practices of application mills and alert the public
regarding licensing fraud.

Federal Communications Commission.
Magalie Roman Salas,
Secretary.
[FR Doc. 98-22946 Filed 8-26-98; 8:45 am]
BILLING CODE 6712-01-P

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Source: Frix Law Library, https://www.frixlaw.com/law-library/documents/fr%3A98-22946. Public record. Not legal advice.