Interactive Video and Data Service (218-219 MHz Service)

FEDERAL COMMUNICATIONS COMMISSION

47 CFR Parts 20 and 95

[WT Docket No. 98-169; WT Docket No. 95-47; FCC 98-228]

Interactive Video and Data Service (218-219 MHz Service)

AGENCY: Federal Communications Commission.

ACTION: Proposed rule.

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SUMMARY: In this Notice of Proposed Rule Making (``NPRM''), the

Commission examines ways to maximize the efficient and effective use of

the 218-219 MHz Service (formerly, Interactive Video and Data Service

(IVDS)), both on its own motion, and in response to issues raised in a

Petition for Rulemaking, RM-8951. The Commission also seeks comment on

whether any of the general competitive bidding rules would be

inappropriate for future auctions of 218-219 MHz Service licenses. The

Commission believes that these actions will result in a regulatory

framework that will promote efficient use of spectrum, foster

competition, and facilitate technological innovation in the 218-219 MHz

band.

DATES: Interested parties may file comments on or before October 30,

1998, and reply comments on or before November 25, 1998.

ADDRESSES: Federal Communications Commission, Room 222, 1919 M Street,

N.W., Washington, D.C. 20554.

FOR FURTHER INFORMATION CONTACT: Bob Allen at (202) 418-0660 (Auctions

& Industry Analysis Division) or James Moskowitz at (202) 418-0680

(Public Safety & Private Wireless Division), Wireless

Telecommunications Bureau.

SUPPLEMENTARY INFORMATION: This is a summary of the Commission's Notice

of Proposed Rule Making, WT Docket No. 98-169, RM-8951, adopted

September 15, 1998, released September 17, 1998. The full text of this

Notice of Proposed Rule Making is available for inspection and copying

during normal business hours in the FCC Dockets Branch, Room 230, 1919

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

from the Commission's copy contractor, International Transcription

Service, Inc., 1231 20th Street, N.W., Washington, D.C. 20036, (202)

857-3800.

1. As the agency charged with management of the non-government

radio frequency spectrum, the Commission continually seeks to improve

the efficiency of spectrum use, reduce the regulatory burden on

spectrum users, encourage competition and provide services to the

largest feasible number of users. The Commission believes its proposals

herein help further these goals. While its proposals are designed to

foster service in the 218-219 MHz band, the Commission makes no

representations or warranties about the use of this spectrum for

particular services. An FCC auction represents an opportunity to become

an FCC licensee in this service, subject to certain conditions and

regulations, and does not constitute an endorsement by the FCC of any

particular services, technologies or products, nor does an FCC license

constitute a guarantee of business success. Applicants for an auction

of FCC licenses should perform their individual due diligence before

proceeding as they would with any new business venture.

2. This NPRM revisits the regulatory status and permissible role of

licensee in the 218-219 MHz service. The Commission initiates this

rulemaking on its own motion and in response to the issues raised by

the Petitioners. In their September 4, 1996 filing, Petitioners request

that the Commission amend Sec. 95.811(d) of its rules to extend the

term of a 218-219 MHz Service station license from five to ten years.

Petitioners further request that the Commission allow 218-219 MHz

Service licensees that qualify for installment payments to extend the

installment payment period over the new ten-year license term.

3. In their January 28, 1997 amendment, Petitioners also request

the following: (1) a reamortization plan consisting of interest-only

payments for the first five years, followed by principal and interest

payments over the final five years; (2) elimination of the construction

benchmarks set forth in Sec. 95.833; (3) elimination of

Sec. 95.813(b)(1), which precludes one 218-219 MHz Service licensee

from having any financial interest in the other 218-219 MHz Service

license in the same market; (4) grant of the then-pending petition for

reconsideration of the Mobility Report and Order with regard to

elimination of the 100 milliwatt ERP limit on mobile response

transmitter unit (RTU) operation; (5) elimination of Sec. 95.863(a),

the duty cycle limitations; and (6) elimination of Sec. 95.859(a)(2),

the height and power limitations for cell transmitter station (CTS)

antennas located beyond a boundary line 10 miles outside the predicted

Grade B contour of a TV Channel 13 station.

4. Petitioners added three requests in their supplement filed on

February 26, 1997: (1) elimination of the prohibition on RTU-to-RTU

communications; (2) an additional spectrum allocation; and (3)

clarification of several engineering issues in demonstrating compliance

with construction benchmarks. Finally, Petitioners supplemented their

Petition for Rulemaking on March 13, 1998 with the following requests:

(1) clarification that one-way transmission from two or more RTUs to a

CTS is a permissible communication that would satisfy any construction

requirements; (2) modification of Sec. 95.855 to delete the word

``automatic'' from the power control rule; (3) clarification of

[[Page 52216]]

Sec. 95.861(c) concerning notification of potential interference from

218-219 MHz Service systems; and (4) the opportunity to choose among

``work out'' options for making installment payments that would include

an amnesty component.

5. The Commission's decision to postpone the February 1997 auction

of Rural Service Area (RSA) and defaulted Metropolitan Statistical Area

(MSA) licenses was guided by its concern that its assessment to date

regarding the principal uses and regulatory structure of the 218-219

MHz Service may not accurately reflect the breadth of services being

developed in the 218-219 MHz band. The Commission has observed the

evolution of the wireless telecommunications industry since our Report

and Order, 57 FR 8272 (March 9, 1992) (``1992 Allocation Report and

Order''), and the Commission agrees with Petitioners that it is

appropriate to reexamine the current and future uses of, and demand

for, the 218-219 MHz band, and to determine the appropriate regulatory

models to be used for future licensing and regulation of this spectrum.

Therefore, in this NPRM, the Commission seeks to examine its rules to

determine whether they should be modified to provide for maximum

flexibility for 218-219 MHz Service licensees, and a regulatory

structure that will enable these licensees to meet the public's current

and future needs through the most technically and economically

efficient use of this spectrum practicable.

A. Regulatory Status and Permissible Communications

6. In the 1992 Allocation Report and Order, the Commission

classified the 218-219 MHz band as a private radio service regulated

under Part 95 of our rules (i.e., Personal Radio Services), primarily

because the proposed uses were to provide services ``of a personal

nature and offered on a subscription basis.'' With the recent addition

of mobile services as permissible communications, licensees can provide

a variety of mobile, fixed, point-to-point, point-to-multipoint, and

multipoint-to-point services.

7. The Commission believes that in order to fully accommodate the

wide array of service offerings emerging in the 218-219 MHz Service,

and those contemplated for future development, the Commission should

change its approach to determining the regulatory status of 218-219 MHz

Service licensees. Specifically, the Commission proposes to redesignate

the 218-219 MHz Service from a strictly private radio service to a

service that can be used for both common carrier and private

operations, depending on the services offered by the licensee. This is

consistent with Commission precedent, in which the Commission has

concluded that authorizing a wide variety of services comports with our

statutory authority and serves the public interest by fostering the

provision of a mix of services. In its regulation of other bands

designated for both common carrier and private operations, the

Commission permits licensees to elect common carrier or private status

in a manner that allows for a broad range of uses. Similarly, for the

218-219 MHz Service, the Commission proposes to rely on applicants and

licensees to specifically identify the type of service or services they

intend to provide within the technical parameters of the spectrum

allocation, and to require that they include sufficient detail to

enable the Commission to determine whether the service will be offered

as commercial mobile radio services (CMRS), private mobile radio

services (PMRS), a common carrier fixed service, or a private fixed

service. The Commission proposes that 218-219 MHz Service mobile

service providers elect regulatory status as commercial mobile or

private land mobile based on the three-prong statutory definition of

CMRS, as interpreted by the Commission in the CMRS Second Report and

Order, 59 FR 18493 (April 19, 1994), (``CMRS Second Report and Order'')

and for fixed operations, elect common carrier or private status based

on the nature of their service offerings under the definitions set

forth in Section 3 of the Communications Act of 1934, as amended

(``Communications Act''). The regulatory status that the provider

elects would determine the extent to which the applicant or licensee is

subject to common carrier regulation. The Commission also proposes to

apply regulatory fees and license application requirements consistent

with the election of common carrier or private status made by the

licensee.

8. This approach should allow the Commission to carry out its

regulatory responsibilities without imposing an unnecessary regulatory

limitation upon licensees. The Commission notes that its final

determination of permissible communications in the 218-219 MHz Service

will depend on its conclusions after reviewing the record in this

proceeding. The Commission seeks comment on these proposals, or any

alternatives, that will ensure that licensees can design their service

offerings in response to market demand.

B. License Term

9. Under the Commission's current rules, the term of each system or

CTS licensed to operate in the 218-219 MHz Service is five years. The

Commission adopted this license term in the 1992 Allocation Report and

Order in the context of awarding licenses by lottery ``to reduce any

potential for trafficking in licenses by persons who have no real

interest in constructing,'' and as ``consistent with the license term

used in most other private radio services.'' To support their request

for a ten-year license term, Petitioners note that (1) in services with

similar technologies and market areas, the license term is ten years;

(2) the use of auctions to award licenses negates the original intent

of the five-year term (i.e., discouraging trafficking of lottery-won

licenses); and (3) awarding licenses by auction requires a longer

license term in which licensees (many of whom are small businesses) may

secure adequate financing, develop viable services, and eventually

recoup their initial investment. Petitioners also contend that the

extension of the license term would trigger a reamortization of the

installment payments over the longer license term, and request that the

Commission offer 218-219 MHz Service licensees a choice of (i)

fulfilling payment obligations with any changes thereto associated with

adjustments adopted through this NPRM; (ii) amnesty; or (iii) payment

through a royalty-based schedule as an alternative to auction payments.

i. Extension of the License Term

10. The Commission agrees with Petitioners that auctionable service

licensees should have consistent license terms. The Commission

continues to believe that licenses in the 218-219 MHz Service can

attract small businesses interested in opportunities to participate in

the provision of spectrum-based services. In this regard, a five-year

term is particularly burdensome on small businesses paying for licenses

using installment payments; to date, the Commission has held auctions

in four other wireless services in which certain designated entities

were eligible for installment payment plans, and each of those services

has a ten-year license term. Therefore, the Commission proposes to

amend Sec. 95.811(d) of the Commission's rules to extend the term of

218-219 MHz Service licenses to ten years from the date of license

grant. In doing so, the Commission notes that a ten-year license term

comports with its proposal to redesignate the 218-219 MHz Service from

a private radio

[[Page 52217]]

service (generally licensed for a five-year term) to a service that can

also provide common carrier services (generally licensed for a ten-year

term). Since all 218-219 MHz Service licensees will face the same

competitive setting and opportunity costs going forward under the

regulatory flexibility the Commission proposes today (irrespective of

whether they acquired their licenses by auction or lottery), the

Commission proposes to extend the license term of all licenses in the

218-219 MHz Service to ten years to ensure regulatory parity. The

Commission seeks comment on these proposals.

ii. Reamortization of Installment Payment Debt and Financing Options

11. The Commission also tentatively concludes that it is in the

public interest to permit reamortization of principal and interest

installment payments for non-defaulted 218-219 MHz Service licensees in

conjunction with the extension of the license term from five to ten

years, an approach that is consistent with our general auction rules.

Therefore, the Commission proposes reamortization of installment

payment terms for 218-219 MHz Service licensees to allow for two years

of interest-only payments, followed by payments consisting of interest

and principal over the remaining eight years of the license term, an

approach that is also consistent with the Commission's general auction

rules. Based on the Commission's structure of installment payment plans

in other services in which it has limited the interest-only period to

two years, the Commission believes that the two-year interest-only

period currently applicable to 218-219 MHz Service licensees provides

small businesses with the appropriate level of U.S. government assisted

financing. The Commission's proposal here is inextricably tied to the

requested extension of the license term from five to ten years, in

contrast to prior requests to extend payment terms beyond the five year

license term based on market considerations, which the Commission

denied.

12. To ensure that all 218-219 MHz Service licensees that are not

currently in default can take advantage of the proposed reamortization

of installment payments, the Commission proposes to grant all properly

filed grace period requests as of the effective date of reamortization.

At that time, the Commission would recalculate every non-defaulting

licensee's installment payment obligations as reamortized, and credit

all payments already received under the revised schedule, with any

additional funds held in reserve for application against future

payments. With regard to interest calculations for 218-219 MHz Service

licensees, the Commission notes that Sec. 95.816(d)(2) of its rules

require the fixing of such calculations at the time of licensing at a

rate equal to the rate for five-year U.S. Treasury obligations. If the

Commission adopts its proposal to reamortize the 218-219 MHz Service

installment payments over a ten-year license term, then it would impose

an interest rate for those plans based on the rate for ten-year U.S.

Treasury obligations at the time of licensing. All Suspension Interest

(i.e., interest payments back-due from September 30, 1995 and December

31, 1995) would be submitted in eight equal payments over a two-year

period, due and payable with each of the first eight scheduled

installment payments, as reamortized.

13. The Commission understands that this proposal may trigger the

payment of back due amounts, including accrued interest, earlier than

expected for some 218-219 MHz Service licensees. Therefore, the

Commission proposes to offer licensees two financing options, with such

election to be made on a license-by-license basis 90 days from the

release date of any Report and Order promulgating the proposed

reamortization. First, licensees may choose to continue making

installment payments by submitting a payment consisting of all accrued

interest and principal (as reamortized) due and owing as of that date.

At that time, if necessary, licensees would be able to utilize the 180-

day late payment period in the Commission's revised installment payment

rules, subject to the applicable late payment fees, before their

licenses would automatically cancel as being in default. Alternatively,

per Petitioners' request, licensees may surrender any licenses they

choose to the Commission for reauction and, in return, have all of the

outstanding debt on those licenses forgiven (i.e., an amnesty option

much like that offered to broadband personal communication services

(PCS) C block licensees). For each license returned under the amnesty

option, the licensee would choose either to (1) receive no credit for

its down payment but remain eligible to bid on the surrendered licenses

in the reauction, with no restriction on after-market acquisitions; or

(2) obtain credit for 70 percent of its down payment and forego for a

period of two years from the start date of the reauction eligibility to

reacquire the licenses surrendered through either reauction or any

other secondary market transaction. Under either option, all

installment payments made on surrendered licenses, plus the 70 percent

credit under the second option, would be applied to previously accrued

interest for retained markets, with any excess installment payments

(but not down payments) refunded, subject to applicable federal debt

collection laws. Every licensee electing to continue making installment

payments would be required to execute appropriate loan documentation,

that may include a note and security agreement, as a condition of the

reamortization of its installment payment plan under the revised ten-

year term, pursuant to Sec. 1.2110(f)(3) of the Commission's rules.

Licensees that fail to elect a financing option on a timely basis, and

licensees who do not complete the requisite loan documentation, would

be held to the original five-year payment schedule. The Commission

believes that providing this choice would substantially increase

licensees' flexibility to make market driven decisions regarding their

licenses and enable them to revise their business plans to make them

more attractive to lenders and investors. The Commission seeks comment

on these proposals.

C. Service and Construction Requirements

14. Section 95.831 of the Commission's rules provides that 218-219

MHz Service licensees make service available to at least 50 percent of

the population or land area located within the service area. To

accomplish this service level requirement, The Commission sets

construction benchmarks as follows: service to at least 10 percent of

the population or geographic area within the license service area

within one year of the grant of the license; 30 percent within three

years; and, 50 percent within five years. Under the Commission rules,

failure to meet these build-out requirements results in automatic

cancellation of the 218-219 MHz Service system license. For purposes of

this benchmark, service is provided by a CTS when two associated RTUs

are placed in operation. Each 218-219 MHz Service system licensee must

file a progress report at the conclusion of each benchmark period to

inform the Commission of the construction status of the system.

15. These rules were crafted in the 1992 Allocation Report and

Order in the context of awarding licenses by lottery, and were intended

``to reduce the filing of speculative applications by entities that

have no real intention of implementing [218-219 MHz Service] systems.''

The Commission eliminated the one-year construction benchmark in early

1996, at the request of several

[[Page 52218]]

licensees that won their licenses in the July 1994 auction. At that

time, the Commission stated that the use of auctions to award licenses

reduces the incentives for speculation, and therefore, concluded that

the one-year benchmark was unnecessary. The Commission further stated

that ``eliminating the one-year construction requirement will provide

licensees with greater flexibility in selecting service options,

obtaining financing, selecting equipment, and other considerations

related to construction of their systems.'' More recently, the Bureau

waived the three-year construction benchmark date for all licenses

because it would have been unreasonable and contrary to the public

interest to enforce the benchmark while relevant Commission policy was

subject to review in this rulemaking proceeding.

16. Section 309(j)(3) of the Communications Act states, in part,

that when designing competitive bidding systems, ``the Commission shall

include safeguards to protect the public interest in the use of the

spectrum * * *.'' In addition, Section 309(j)(4)(B) provides that the

Commission shall promote investment in, and rapid deployment of, new

technologies and services by means of performance requirements, such as

deadlines and penalties for performance failures. The Commission

previously found that these provisions could be satisfied through

construction requirements.

17. The Commission continues to seek to provide 218-219 MHz Service

licensees with optimal flexibility in selecting service options,

obtaining financing, selecting equipment, and other considerations

regarding construction of systems. This interest must be balanced,

however, by the mandate of Section 309(j) of the Communications Act.

Given the Commission's belief that many of the service offerings that

could be provided by 218-219 MHz Service licensees could also be

provided by licensees of other services, the Commission believes it is

appropriate to revisit the service and construction requirements in the

218-219 MHz Service to ensure that 218-219 MHz Service licensees are

subject to consistent policies. Although the Commission disagrees with

Petitioners that all construction benchmarks should be eliminated, the

Commission believes that strict construction requirements are not the

most suitable and effective means of addressing these statutory

obligations given that the 218-219 MHz Service spectrum may be used to

offer a variety of fixed and mobile services that may compete with

capabilities of other wireless services.

18. Balancing these factors, the Commission tentatively concludes

that 218-219 MHz Service licensees should be subject to construction

requirements consistent with those presently used in other services.

Specifically, the Commission proposes to eliminate the three-year and

five-year construction benchmarks currently provided in its rules, and

instead require that 218-219 MHz Service licensees provide

``substantial service'' to their service areas within five years of

license grant. In past Orders, the Commission has defined ``substantial

service'' as ``service that is sound, favorable, and substantially

above a level of mediocre service, which would barely warrant

renewal,'' and the Commission has provided safe harbor examples of

substantial service showings, such as licensees offering specialized or

technologically sophisticated service that does not require a high

level of coverage to be of benefit to customers, or licensees providing

a niche service to businesses or focusing on serving populations

outside of areas currently serviced by other licensees. The Commission

seeks comment on whether this definition or some other articulable

standard should be adopted to define substantial service for the 218-

219 MHz Service.

19. If the Commission amends its rules to extend 218-219 MHz

Service licenses to a ten-year term, it further proposes to require

that all 218-219 MHz Service licensees either make service available to

at least 20 percent of the population or land area, or demonstrate

substantial service, within ten years of license grant. Licensees would

demonstrate compliance with the construction requirements by basing

their calculations on signal field strengths that ensure reliable

service for the technology utilized, using any service radius contour

formula developed or generally used by industry, provided that such

formula is based on the technical characteristics of their systems. In

the alternative, under a ten-year license term scenario, the Commission

asks whether, in lieu of establishing benchmarks, it should require

licensees to provide substantial service to their service area within

ten years of license grant as a condition of renewal. Finally, under a

ten-year license term scenario, the Commission proposes to assess

compliance of incumbent 218-219 MHz Service licensees with the five-

year substantial service benchmark five years from the effective date

of such rules promulgated pursuant to this NPRM, and the ten-year

requirement at the end of their ten-year license term. Under any of

these proposals, licensees will be required to file supporting

documentation showing compliance with the construction requirements.

Failure to meet the benchmark would result in automatic termination of

the license, which is consistent with the Commissions current rules for

this service.

20. The Commission believes that a substantial service construction

requirement can promote efficient use of the spectrum and encourage

broad deployment of service. The Commission further believes that this

approach will permit a variety of service offerings, facilitate market

development, provide a clear and expeditious accounting of spectrum use

by licensees, and ensure that meaningful service is being provided

without unduly restricting service offerings. The Commission seeks

comment on these tentative conclusions and proposals, and any

alternatives thereto.

D. License Transferability

21. The Commission adopted a restriction on 218-219 MHz block

license transferability in the 1992 Allocation Report and Order as an

anti-trafficking rule governing the award of licenses by lottery. Under

the rule, 218-219 MHz Service licensees may not transfer, assign, sell,

or give the licenses to any other entity until the five year (50

percent coverage) construction benchmark has been met. In the Fourth

Report and Order, 59 FR 24947 (May 13, 1994), (``Competitive Bidding

Fourth Report and Order''), the Commission specifically amended the

rule to exclude its application to licenses acquired through auction.

Thus, the transferability restriction applies only to the 18 licenses

won in the September 1993 lottery. The Commission seeks comment on

whether this transfer restriction should be retained. Further, assuming

the rule is retained, the Commission seeks comment on determining

whether and when a lottery-won license may be transferred in light of

its proposed changes to the service and construction rules, and its

proposal to permit partitioning and disaggregation of 218-219 MHz

Service licenses.

E. Spectrum Aggregation

22. In establishing rules for the 218-219 MHz band, the Commission

concluded that the best way to promote competition in the developing

marketplace would be ``to make at least two facilities available in

each market.'' Therefore, the Commission's cross-ownership rule

prohibits an entity from

[[Page 52219]]

holding or having an interest in the licenses for both frequency

segment A (218.0-218.5 MHz) and frequency segment B (218.5-219 MHz) in

the same service area.

23. Petitioners seek elimination of the cross-ownership rule,

stating, inter alia, that competing services with larger bandwidth and

greater capitalization provide the necessary competition to alleviate

any concern that a 218-219 MHz Service licensee would exert monopoly

power by aggregating one megahertz of spectrum, and that a full one

megahertz of spectrum would enhance spectrum flexibility through

expanded applications and services. In 1996, the Commission denied a

request for rulemaking on this issue. In deciding not to grant the

petition for rulemaking, the Commission observed that the ``interactive

television marketplace is in a relatively early state of competition,''

and that ``allowing a single entity to acquire both licenses in a

service area would limit the opportunity for other potential

competitors to emerge.'' That notwithstanding, restricting the

competitive analysis of the 218-219 MHz band to the interactive

television marketplace is inconsistent with the myriad of services

evolving in the 218-219 MHz Service. The Commission believes that the

new regulatory environment it seeks to establish with its proposals in

this NPRM will broaden the field of potential competitors providing

services similar to those in the 218-219 MHz Service. Therefore, it is

now appropriate to reexamine the cross-ownership prohibition.

24. The Commission seeks comment on whether it should allow

licensees to aggregate spectrum in the 218-219 MHz Service without

restriction. Would removal of the current cross-ownership prohibition

pose a risk of significant competitive harm in some markets? The

Commission's goal in managing spectrum efficiently and fostering

competition is to license the maximum number of commercially viable

competitors per region. Commenters should address whether the 500

kilohertz spectrum capacity limit of one license per market renders

these licenses not commercially viable, and why. What other

technologies provide, or may in the future provide, comparable services

to those currently provided or proposed for this spectrum? The

Commission also seeks comment on whether it would be appropriate to

include 218-219 MHz in the calculation of spectrum aggregation limits,

given its proposal to expand service options to common carrier or CMRS

operations.

F. Partitioning and Disaggregation

25. In the Report and Order and Further Notice of Proposed

Rulemaking, 62 FR 653, 62 FR 696 (January 6, 1997), (``Partitioning

Report and Order''), the Commission expanded its rules to permit

geographic partitioning and spectrum disaggregation for broadband PCS

licensees. Consistent with these broadband PCS rules, the Commission

proposes to permit partitioning and disaggregation for the 218-219 MHz

Service. The Commission tentatively concludes that a flexible approach

to partitioned areas, similar to the one it adopted for broadband PCS,

is appropriate for the 218-219 MHz Service. The Commission therefore

proposes to permit partitioning of 218-219 MHz Service licenses based

on any area defined by the parties within the licensee's service area.

The Commission seeks comment on this proposal, and in particular on

whether there are any technical or other issues unique to the 218-219

MHz Service that might impede the adoption of such a flexible approach.

With regard to disaggregation, the Commission notes that even if it

permits ownership of both licenses in a market by one entity as

proposed above, there would still be only one megahertz of spectrum to

disaggregate. Given this relatively narrow frequency segment, and the

propagation and technological limitations of the 218-219 MHz band, the

Commission seeks comment on the feasibility of spectrum disaggregation

in the 218-219 MHz Service, and particularly, whether minimum

disaggregation standards are necessary. Commenters should provide

technical justifications and other relevant support in responding to

this issue. The Commission tentatively concludes that combined

partitioning and disaggregation should also be permitted for the 218-

219 MHz Service. This approach would afford parties optimal flexibility

to respond to market forces and demands for service relevant to their

particular locations and service offerings. Further, the Commission

proposes to authorize a partitionee and disaggregatee to hold its

license for the remainder of the original licensee's term, with renewal

expectancy. The Commission believes that this approach would prevent

licensees from using partitioning and disaggregation to circumvent our

established license term rules. Additionally, by limiting the license

term of the partitionee or disaggregatee, the Commission ensures that

there will be maximum incentive for parties to pursue available

spectrum as quickly as practicable, thus expediting the delivery of

service to the public. The Commission seeks comment on these proposals

and tentative conclusions.

26. In the Partitioning Report and Order, the Commission concluded

that allowing partitioning and disaggregation would help to (1) remove

potential barriers to entry, thereby increasing competition; (2)

encourage parties to use spectrum more efficiently; and (3) speed

service to unserved and underserved areas. Similarly, the Commission

believes that such an approach for the 218-219 MHz Service would result

in the same public interest benefits. The Commission notes that small

businesses may face certain barriers to entry into the provision of

spectrum-based services, which it believes may be addressed by its

partitioning and disaggregation proposals. Providing licensees with the

flexibility to partition and disaggregate would create smaller areas

that could be licensed to small businesses, including those entities

that previously may not have had the resources to participate

successfully in spectrum auctions. The Commission seeks comment on

these tentative conclusions. In particular, commenters are invited to

address whether partitioning and disaggregation will help eliminate

market entry barriers for small businesses consistent with Section 257

of the Communications Act. The Commission further invites comment as to

the exact mechanisms for apportioning and paying the remaining

government obligation between the parties, and whether there are any

unique circumstances that would make devising such a scheme for the

218-219 MHz Service more difficult than for broadband PCS.

27. In this NPRM, the Commission seeks comment on a new set of

construction requirements for 218-219 MHz Service licensees. In other

wireless services, the Commission has allowed licensees the flexibility

to negotiate which party will be responsible for meeting the applicable

construction requirements. In each of those cases, the Commission's

goals has been to ensure that licensees had the flexibility to

structure their business plans while ensuring that partitioning and

disaggregation not be used as a vehicle to circumvent the applicable

construction requirements, and that service be offered over the

relevant population, even if not on the entire spectrum. The Commission

proposes that parties to partitioning and disaggregation in the 218-219

MHz Service have comparable flexibility in meeting construction

requirements. Parties to partitioning would be allowed to choose

between both parties

[[Page 52220]]

satisfying build-out requirements within their respective service

areas, or having the partitionor build-out the entire market. Parties

to disaggregation would choose whether one or both parties would be

obligated to satisfy build-out requirements within the geographic

service area. Non-performing licensees' authorizations would be subject

to cancellation at the end of the license term. The Commission seeks

comment on these proposals.

G. Technical Standards

28. In light of the fact that the Commission's primary goal in this

rulemaking is to provide additional flexibility for 218-219 MHz Service

licensees, the Commission must also seek to reexamine the technical

restrictions currently applicable to the 218-219 MHz Service to

determine whether it can enhance the technical flexibility of these

licensees, particularly in light of the proposals contained in this

NPRM. The technical restrictions, including rules requiring automatic

power control capability, antenna height and transmitter power

limitations, duty cycle limitations, and other interference protection

standards, were based on an agreement between TV Answer and the

Association for Maximum Service Television that IVDS (as proposed by TV

Answer, now known as EON Corporation) and TV Channel 13 operations

could co-exist. Interference was of particular concern since the RTU

proposed for use by TV Answer was planned to be co-located with the

subscriber/viewer's television set. However, the potential applications

for the 218-219 MHz Service go far beyond the service envisioned by TV

Answer when these rules were designed. The Commission also notes that

other services are authorized to transmit in frequencies adjacent to or

nearby 218-219 MHz with higher power levels than allowed at 218-219 MHz

and no duty cycle restrictions, and that the Commission has not

received any complaints of interference to TV Channel 13 from any of

these operations.

29. These facts prompt the Commission to seek comment as to whether

it should relax some or all of the following technical restrictions, as

requested by Petitioners: (a) automatic power control in RTUs with

power in excess of 100 milliwatts; (b) limits on transmitter effective

radiated power, including the 100 milliwatt power limitation on mobile

RTUs; (c) CTS antenna height and transmitter power ratios, whether or

not the CTS is located beyond a boundary line 10 miles outside the

Grade B contour of a TV Channel 13 station; and (d) duty cycle

limitations. The Commission also notes that it has received various

requests for waiver of these technical standards that it choose to

address in the larger context of this rulemaking, and therefore invite

comment on these proposed operations in conjunction with the comments

addressing the issues raised in this NPRM. The Commission requests that

commenters provide empirical data and analysis of the expected effect

on interference of changes they recommend. Commenters suggesting

specific limits are urged to provide support for their choices,

recognizing that the Commission is seeking to provide technical

flexibility to coincide with the regulatory flexibility it proposes.

Alternatively, comments are sought on whether the interference

provisions of Sec. 95.861 of the Commission's rules, which require 218-

219 MHz Service licensees to resolve interference problems to

television broadcast reception or discontinue operation, are sufficient

to protect broadcast reception. The Commission tentatively concludes

that the evolution toward precise digital technology, both within the

evolving 218-219 MHz Service industry, and on the part of the broadcast

industry, will further reduce interference potential, and the

Commission seeks comment on this tentative conclusion. Commenters

should also address any other technical standards that could be

reexamined in this rulemaking that inhibit flexible use of the spectrum

and technological innovation.

H. Incorporation by Reference of Part 1 Standardized Auction Rules

30. In the Part 1 Third Report and Order, the Commission

streamlined its auction procedures by adopting general competitive

bidding rules applicable to all auctionable services. These procedures,

set forth in Part 1, subpart Q of the Commission's rules, supersede

previously-adopted service-specific rules, unless the Commission

determines that with regard to particular matters, the retention or

adoption of service-specific rules is warranted.

31. The Commission proposes to conduct all future auctions for

licenses in the 218-219 MHz Service (both auctions of initial licenses

and reauctions of defaulted licenses) in conformity with the general

competitive bidding rules set forth in Part 1, subpart Q of the

Commission's rules. Specifically, the Commission proposes to employ the

Part 1 rules governing designated entities, application issues, payment

issues, competitive bidding design, procedure and timing issues, and

anti-collusion. In this regard, consistent with the Commission's

decision in the Part 1 Third Report and Order, the Commission would no

longer offer installment payments as a means of financing small

business participation in the 218-219 MHz Service auction. Instead, the

Commission would retain the two tiers of small business size standards

currently set for 218-219 MHz Service licensees, and utilize the

standard schedule of bidding credits set forth in the Part 1 Third

Report and Order as applied to those two tiers of small businesses,

which would allow for somewhat higher bidding credits in light of the

suspension of installment payment financing. The Commission seeks

comment on these proposals and on whether any of our Part 1 rules would

be inappropriate in an auction for this service.

32. The Commission adopts this NPRM as part of its comprehensive

examination of regulations governing the licensing and use of

frequencies in the 218-219 MHz band. These actions are intended to

establish a flexible regulatory framework for the 218-219 MHz Service

that will encourage spectrum efficiency, technical innovation, and

competition by these licensees in the wireless marketplace, and serve

the ultimate goal of ensuring that the spectrum at 218-219 MHz provides

the greatest benefit to the public.

Procedural Matters and Ordering Clauses

I. Ex Parte Rules--Non-Restricted Proceeding

33. This is a non-restricted notice and comment rulemaking

proceeding. Ex Parte presentations are permitted, except during the

Sunshine Agenda period, provided they are disclosed as provided in

Commission rules. See generally 47 CFR 1.1202, 1.1203, and 1.1206(a).

B. Initial Regulatory Flexibility Analysis

34. As required by the Regulatory Flexibility Act of 1980, Public

Law 96-354, 94 Stat. 1164, as amended by the Contract with America

Advancement Act of 1996, Public Law 104-121, 110 Stat. 847, 5 U.S.C.

603, the Commission has prepared an Initial Regulatory Flexibility

Analysis (IRFA) of the possible impact on small entities of the

proposals suggested in this document. The IRFA is set forth immediately

below the Ordering Clause. Written public comments are requested with

respect to the IRFA. These comments must be filed

[[Page 52221]]

in accordance with the same filing deadlines for comments on the rest

of this NPRM, but they must have a separate and distinct heading,

designating the comments as responses to the IRFA. The Office of Public

Affairs, Reference Operations Division, shall send a copy of this NPRM,

including the IRFA, to the Chief Counsel for Advocacy of the Small

Business Administration, in accordance with the Regulatory Flexibility

Act.

C. Initial Paperwork Reduction Act of 1995 Analysis

35. This NPRM contains either a proposed or modified information

collection. As part of the Commission's continuing effort to reduce

paperwork burdens, we invite the general public, the Office of

Management and Budget (OMB), and other agencies to take this

opportunity to comment on the information collections contained in this

NPRM, as required by the Paperwork Reduction Act of 1995, Public Law

104-13. Public and agency comments are due at the same time as other

comments on this NPRM; OMB comments are due November 30, 1998. 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. 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: Judy Boley, Federal Communications Commission,

Room 234, 1919 M Street, N.W., Washington, D.C. 20554, or via the

Internet to [email protected], and Timothy Fain, OMB Desk Officer, 10236

NEOB, 725 17th Street, N.W., Washington, D.C. 20503, or via the

Internet to [email protected].

D. Notice and Comment Provisions

36. Pursuant to Secs. 1.415 and 1.419 of the Commission's rules, 47

CFR 1.415, 1.419, interested parties may file comments on or before

October 30, 1998, and reply comments on or before November 25, 1998.

Comments may be filed using the Commission's Electronic Comment Filing

System (ECFS) or by filing paper copies. See Electronic Filing of

Documents in Rulemaking Proceedings, 63 FR 24121 (May 1, 1998).

37. Comments filed through the ECFS can be sent as an electronic

file via the Internet to http://www.fcc.gov/e-file/ecfs.html>.

Generally, only one copy of an electronic submission must be filed. If

multiple docket or rulemaking numbers appear in the caption of this

proceeding, however, commenters must transmit one electronic copy of

the comments to each docket or rulemaking number referenced in the

caption. In completing the transmittal screen, commenters should

include their full name, Postal Service mailing address, and the

applicable docket or rulemaking number. Parties may also submit an

electronic comment by Internet e-mail. To get filing instructions for

e-mail comments, commenters should send an e-mail to [email protected], and

should include the following words in the body of the message, ``get

form .'' A sample form and directions will be sent

in reply.

38. Parties who choose to file by paper must file an original and

four copies of each filing. If more than one docket or rulemaking

number appear in the caption of this proceeding, commenters must submit

two additional copies for each additional docket or rulemaking number.

All filings must be sent to the Commission's Secretary, Magalie Roman

Salas, Office of the Secretary, Federal Communications Commission, 1919

M St. N.W., Room 222, 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 Commission, Room 239, 1919 M Street, N.W., Washington,

DC 20554.

39. Authority for issuance of this Notice of Proposed Rulemaking is

contained in Sections 4(i), 257, 303(b), 303(g), 303(r), 309(j), and

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

Secs. 154(i), 257, 303(b), 303(g), 303(r), 309(j), and 332(a).

40. Accordingly, it is ordered that this Notice of Proposed

Rulemaking is adopted. It is further ordered that the Commission's

Office of Public Affairs, Reference Operations Division, shall send a

copy of this Notice of Proposed Rulemaking, including the IRFA, to the

Chief Counsel for Advocacy of the Small Business Administration.

41. It is further ordered that notice is hereby given of the

proposed amendments to Parts 20 and 95 of the Commission's rules, 47

CFR Parts 20 and 95, in accordance with the proposals in this Notice of

Proposed Rulemaking, and that comment is sought regarding such

proposals. Pursuant to Secs. 1.415 and 1.419 of the Commission's rules,

47 CFR 1.415, 1.419, interested parties may file comments on or before

October 30, 1998, and reply comments on or before November 25, 1998.

42. It is further ordered that the Petition for Rulemaking and

associated amendments filed is granted in part to the extent described

above and is denied in all other respects.

Initial Regulatory Flexibility Analysis (IRFA)

43. The Commission has prepared this IRFA of the possible

significant economic impact on small entities by the policies and rules

proposed in this Notice of Proposed Rulemaking, Amendment of Part 95 of

the Commission's Rules to Provide Regulatory Flexibility in the 218-219

MHz Service (Notice). Written public comments are requested on this

IRFA. Comments must be identified as responses to the IRFA and must be

filed by the deadline for comments on the NPRM, as described supra. The

Commission will send a copy of the NPRM, including this IRFA, to the

Chief Counsel for Advocacy of the Small Business Administration (SBA).

See 5 U.S.C. 603(a).

I. Need for, and Objectives of, the Proposed Rules

44. This rulemaking proceeding was initiated to secure public

comment on proposals to maximize the efficient and effective use of

spectrum in the 218-219 MHz band, allocated in 1992 to the Interactive

Video and Data Service (IVDS) in the Personal Radio Services, now

redesignated as the 218-219 MHz Service. In attempting to maximize the

use of the 218-219 MHz band, the Commission continues its efforts to

improve the efficiency of spectrum use, reduce the regulatory burden on

spectrum users, facilitate technological innovation, and provide

opportunities for development of competitive new service offerings. The

proposals advanced in the NPRM 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 Section 309(j)

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

II. Legal Basis

45. This action, including publication of proposed rules, is

authorized under Sections 4(i), 257, 303(b), 303(g), 303(r), 309(j),

and 332(a) of the Communications Act, 47 U.S.C. 154(i), 257, 303(b),

303(g), 303(r), 309(j), and 332(a).

[[Page 52222]]

III. Description and Estimate of the Number of Small Entities to

which the Proposed Rules Will Apply

46. The Regulatory Flexibility Act directs agencies to provide a

description of and, where feasible, an estimate of the number of small

entities that may be affected by the proposed rules, if adopted. The

Regulatory Flexibility Act generally defines the term ``small entity''

as having the same meaning as the terms ``small business,'' ``small

organization,'' and ``small governmental jurisdiction.'' In addition,

the term ``small business'' has the same meaning as the term ``small

business concern'' under the Small Business Act, unless the Commission

has developed one or more definitions that are appropriate for its

activities. A small business concern is one which: (1) is independently

owned and operated; (2) is not dominant in its field of operation; and

(3) satisfies any additional criteria established by the SBA. A small

organization is generally ``any not-for-profit enterprise which is

independently owned and operated and is not dominant in its field.''

Nationwide, as of 1992, there were approximately 275,801 small

organizations. ``Small governmental jurisdiction'' generally means

``governments of cities, counties, towns, townships, villages, school

districts, or special districts, with a population of less than

50,000.'' As of 1992, there were approximately 85,006 such

jurisdictions in the United States. This number includes 38,978

counties, cities, and towns; of these, 37,566, or 96 percent, have

populations of fewer than 50,000. The Census Bureau estimates that this

ratio is approximately accurate for all governmental entities. Thus, of

the 85,006 governmental entities, we estimate that 81,600 (91 percent)

are small entities. Below, the Commission further describes and

estimate the number of small entity licensees and regulatees that may

be affected by the proposed rules, if adopted.

47. There are three ways that may be applicable to define small

entities for these proposed rules: (1) the U.S. Small Business

Administration's (SBA) size standards under the SBA's Standard

Industrial Classifications (SIC), 13 CFR 121.201; (2) the Small

Business Act's definition of small entities under 15 U.S.C. 632(a); and

(3) the Commission's refined definition of small business for a

particular service for the purposes of competitive bidding.

48. The proposals in the NPRM would affect a number of small

entities who are either licensees, or who may choose to become

applicants for licenses, in the 218-219 MHz Service. Such entities fall

into two categories: (1) those using the 218-219 MHz Service for

providing interactivity capabilities in conjunction with broadcast

services; and (2) those using the 218-219 MHz Service to operate other

types of wireless communications services with a wide variety of uses,

such as commercial data applications and two-way telemetry services.

Theoretically, an entity could fall into both categories. The spectrum

uses in the two categories differ markedly.

49. With respect to the first category, the provision of

interactivity capabilities in conjunction with broadcast services could

be described as a wireless provider of subscription television service.

The SBA's rules applicable to subscription television services define

small entities as those with annual gross revenues of $11 million or

less. In the Tenth Report and Order, 61 FR 60198 (November 27, 1996),

(``Competitive Bidding Tenth Report and Order''), the Commission

extended special competitive bidding provisions to small businesses

with annual gross revenues that are not more than $15 million, and

additional benefits to very small businesses with annual gross revenues

that are not more than $3 million. On January 6, 1998, the SBA approved

of the small business size standards established in the Competitive

Bidding Tenth Report and Order.

50. The Commission's estimate of the number of small business

entities operating in the 218-219 MHz band for interactivity

capabilities with television viewers begins with the 1992 Bureau of

Census report on businesses listed under SIC Code 4841, subscription

television services, which is the most recent information available.

The total number of entities under this category is 1,788. There are

1,463 companies in the 1992 Census Bureau report which are categorized

as small businesses providing cable and pay TV services. The Commission

knows that many of these businesses are cable and television service

businesses, rather than businesses operating in the 218-219 MHz band.

The Commission also knows that, to date, it has issued 612 licenses in

the 218-219 MHz Service. Therefore, the number of small entities

currently providing interactivity capability to television viewers in

the 218-219 MHz Service which will be subject to the rules will be less

than 612.

51. With respect to the second category, neither the Commission nor

the SBA has developed a specific definition of small entities

applicable to 218-219 MHz band licensees that would provide wireless

communications services other than that described above. Generally, the

applicable definition of a small entity in this instance appears to be

the definition under the SBA rules applicable to establishments

primarily engaged in furnishing telegraph and other message

communications, SIC Code 4822. This definition provides that a small

entity is an entity with annual receipts of $5 million or less. The

1992 Census data, which is the most recent information available,

indicates that of the 286 firms under this category, 247 had annual

receipts of $4.999 million or less. The Commission seeks comment on

whether the appropriate definition for such licensees in the 218-219

MHz Service is SIC Code 4822, or whether it should conclude, for

purposes of the Final Regulatory Flexibility Analysis (FRFA) in this

matter, that the appropriate definition for all providers of services

in the 218-219 MHz Service is the Commission's definition of small

businesses for the purposes of competitive bidding in this service.

52. The first auction of 218-219 MHz spectrum resulted in 170

entities winning licenses for 594 Metropolitan Statistical Area (MSA)

licenses. Of the 594 licenses, 557 were won by entities qualifying as a

small business. For that auction, the Commission defined a small

business as an entity, together with its affiliates, that has no more

than a $6 million net worth and, after federal income taxes (excluding

any carry over losses), has no more than $2 million in annual profits

each year for the previous two years. The Commission cannot estimate,

however, the number of licenses that will be won by entities qualifying

as small or very small businesses under its rules in future auctions of

218-219 MHz spectrum. Given the success of small businesses in the

previous auction, and the above discussion regarding the prevalence of

small businesses in the subscription television services and message

communications industries, the Commission assumes for purposes of this

IRFA that in future auctions, all of the licenses may be awarded to

small businesses, which would be affected by the rule changes it

proposes.

IV. Description of Projected Reporting, Recordkeeping and Other

Compliance Requirements

53. The proposed rules under consideration in this NPRM include the

possibility of altered reporting and recordkeeping requirements for a

number of small business entities. Specifically, under the proposals

contained in the NPRM: (1) 218-219 MHz Service licensees and applicants

will be required to elect regulatory status (common carrier, private,

[[Page 52223]]

commercial mobile radio service, private mobile radio service) and file

appropriate documentation coincident with the regulatory status

elected; (2) 218-219 MHz Service licensees will not be required to file

a license renewal application after five years from the date of grant

of the license, but will be required to file a license renewal

application after ten years after the date of grant of the license; (3)

non-defaulting 218-219 MHz Service licensees currently participating in

the installment payment plan will be required to elect either to

continue making payments as reamortized under the revised ten-year term

or surrender any licenses it chooses to the Commission for reauction;

(4) 218-219 MHz Service licensees electing to continue making

installment payments will be required to execute a note and security

agreement as a condition of the reamortization of its installment

payment plan under the revised ten-year term; (5) 218-219 MHz Service

licensees will not be required to file a construction report after the

third year of being licensed, but will be obligated to file

construction reports in accordance with the benchmarks to be adopted

under the proposals herein; and (6) acquisitions by partitioning or

disaggregation will be treated as assignments of a license and parties

will be required to comply with construction requirements, and to

submit a certification to that effect. The Commission requests comment

on how these requirements can be modified to reduce the burden on small

entities and still meet the objectives of the proceeding.

V. Steps Taken To Minimize Significant Economic Impact on Small

Entities, and Significant Alternatives Considered

54. The NPRM solicits comment on a variety of proposals, some of

which are described below. Rather than having a significant economic

impact on small entities, the NPRM is written toward maximizing

opportunities for participation by, and growth of, small businesses in

providing wireless services. The Commission has requested comment

regarding the appropriate definition of small business to be applied

under the expanded nature of the 218-219 MHz Service it proposes in the

NPRM. The Commission expects that its proposals in this NPRM regarding

extension of license terms from five to ten years, with a corresponding

reamortization of installment payment debt, and allowing partitioning

and disaggregation of licenses, will specifically assist small

businesses. The Commission also believes that its proposals regarding

permissible uses of 218-219 MHz Service, liberalization of construction

requirements and technical restrictions, and elimination of the cross-

ownership restriction, will make expansion of 218-219 MHz Service

operations easier, and this flexibility assists all licensees,

including small business licensees. The Commission tentatively

concludes that a flexible approach to regulation of the 218-219 MHz

Service will afford all providers, including small businesses, the

ability to respond to market forces and demands for service relevant to

their particular locations and service offerings. The regulatory

burdens the Commission proposes are necessary in order to ensure that

the public receives the benefits of innovative new services in a prompt

and efficient manner. The Commission seeks comment on, and will

consider, any significant alternatives that are consistent with the

objectives set forth in the NPRM.

VI. Federal Rules That May Duplicate, Overlap, or Conflict With the

Proposed Rules

None.

List of Subjects

47 CFR Part 20

Communications common carrier, Communications equipment, Radio.

47 CFR Part 95

Communications equipment, Penalties, Radio, Report and record

keeping requirements.

Federal Communications Commission.

Magalie Roman Salas,

Secretary.

Proposed Rules

Parts 20 and 95 of Chapter I of Title 47 of the Code of Federal

Regulations are proposed to be amended as follows:

PART 20--COMMERCIAL MOBILE RADIO SERVICES

1. The authority citation for part 20 would be revised to read as

follows:

Authority: Secs. 4, 251, 252, 303, and 332, 48 Stat. 1066, 1082,

as amended; 47 U.S.C. 154, 251, 252, 303, and 332, unless otherwise

noted.

2. Section 20.9 would be amended by redesignating paragraphs

(a)(12) and (a)(13), as (a)(13) and (a)(14), and adding a new paragraph

(a)(12) to read as follows:

Sec. 20.9 Commercial mobile radio services.

(a) * * *

(12) Mobile operations in the 218-219 MHz Service (part 95, subpart

F of this chapter) that provide for-profit interconnected service to

the public;

* * * * *

PART 95--PERSONAL RADIO SERVICES

3. The authority citation for part 95 would be revised to read as

follows:

Authority: Secs. 4, 303, 48 Stat. 1066, 1082, as amended; 47

U.S.C. 154, 303, unless otherwise noted.

4. Section 95.1 would be amended by revising paragraph (b) to read

as follows:

Sec. 95.1 The General Mobile Radio Service (GMRS).

* * * * *

(b) The 218-219 MHz Service is a two-way radio service authorized

for system licensees to provide communication service to subscribers in

a specific service area. The rules for this service are contained in

subpart F of this part.

5. Section 95.803 would be amended by revising the section heading

and paragraphs (a) and (b) to read as follows:

Sec. 95.803 218-219 MHz Service description.

(a) The 218-219 MHz Service is a two-way radio service authorized

for system licensees to provide communication service to subscribers in

a specific service area.

(b) The components of each 218-219 MHz Service system are its

administrative apparatus, its response transmitter units (RTUs), and

one or more cell transmitter stations (CTSs). RTUs may be used in any

location within the service area.

* * * * *

6. Section 95.805 would be revised to read as follows:

Sec. 95.805 Permissible communications.

A 218-219 MHz Service system may provide any fixed or mobile

communications service to subscribers within its service area on its

assigned spectrum, consistent with the Commission's rules and the

regulatory status of the system to provide services on a common carrier

or private basis.

7. A new Sec. 95.807 would be added to read as follows:

Sec. 95.807 Requesting regulatory status.

(a) Authorizations for systems in the 218-219 MHz Service will be

granted to provide services on a common carrier basis or a private

basis, or on both a common carrier and private basis in a single

authorization.

(1) Initial applications. An applicant will specify on FCC Form 601

if it is requesting authorization to provide services on a common

carrier basis, a

[[Page 52224]]

private basis, or on both a common carrier and private basis.

(2) Amendment of pending applications. Any pending application may

be amended to: (i) change the carrier status requested; or (ii) add to

the pending request in order to obtain both common carrier and private

status in a single license.

(3) Modification of license. A licensee may modify a license to:

(i) change the carrier status authorized; or (ii) add to the status

authorized in order to obtain both common carrier and private status in

a single license. Applications to change, or add to, carrier status in

a license must be submitted on FCC Form 601 in accordance with

Sec. 1.1102 of this chapter.

(b) An applicant or licensee may submit a petition at any time

requesting clarification of the regulatory status required to provide a

specific communications service.

8. Section 95.811, would be amended by removing paragraph (d) and

revising paragraphs (b) and (c) to read as follows:

Sec. 95.811 License requirements.

* * * * *

(b) Each CTS that is in the vicinity of certain receiving locations

(see Sec. 1.923(f) of this chapter), or that may have significant

environmental effect (see part 1, subpart I of this chapter), or that

requires notification to the Federal Aviation Administration (see part

17, subpart B of this chapter), or that has an antenna that exceeds 6.1

meters (m) (20 feet) above ground or an existing man-made structure

(other than an antenna structure), must be individually licensed to the

218-219 MHz Service licensee for the service area in which the CTS is

located. All other CTSs are authorized under the 218-219 MHz Service

system license.

(c) Each component RTU in a 218-219 MHz Service system is

authorized under the system license or if associated with an

individually licensed CTS, under that CTS license.

9. A new Sec. 95.812 would be added to read as follows:

Sec. 95.812 License term.

(a) The term of each 218-219 MHz Service system license is ten

years from the date of original issuance or renewal.

(b) Licenses for individually licensed CTSs will be issued for a

period running concurrently with the license of the associated 218-219

MHz Service system with which it is licensed.

10. Section 95.813 would be amended by revising paragaph (b) and

removing paragraph (c) to read as follows:

Sec. 95.813 Eligibility.

* * * * *

(b) An entity that loses its 218-219 MHz Service authorization due

to failure to meet the construction requirements specified in

Sec. 95.833 may not apply for a 218-219 MHz Service system license for

three years from the date the Commission takes final action affirming

that the 218-219 MHz Service license has been canceled.

11. Section 95.815 would be amended by revising paragraph (a) to

read as follows:

Sec. 95.815 License application.

(a) In addition to the requirements of part 1, subpart F of this

chapter, each application for a 218-219 MHz Service system license must

include a plan showing how the applicant intends to minimize co-channel

interference and interference to adjacent channel users and a showing

that the proposed system will meet the service requirements set forth

in Sec. 95.831 of this part.

* * * * *

12. Section 95.816 would be amended by revising paragraphs (a),

(b), (c), (d) introductory text, (d)(1), (d)(2) and (d)(3) to read as

follows:

Sec. 95.816 Competitive bidding proceedings.

(a) Mutually exclusive initial applications for 218-219 MHz Service

system licenses are subject to competitive bidding. The procedures set

forth in part 1, subpart Q, of this chapter will apply unless otherwise

provided in this part.

(b) The Wireless Telecommunications Bureau will select competitive

bidding designs and mechanisms in accordance with Secs. 1.2103 and

1.2104 of this chapter.

(c) The specific procedures applicable to auctioning particular

218-219 MHz Service licenses will be set forth by Public Notice.

Generally, the following competitive bidding procedures will be used to

auction mutually exclusive 218-219 MHz Service licenses.

(1) Forms. (i) Short-form application. See Sec. 1.2105 of this

chapter.

(ii) Long-form application. See Sec. 1.2107 (c) and (d) of this

chapter.

(2) Upfront payments. Each applicant to participate in a 218-219

MHz Service auction will be required to submit an upfront payment of

$9,000 per Metropolitan Statistical Area license and $2,500 per Rural

Service Area license for the maximum number of licenses on which it

intends to bid pursuant to Sec. 1.2106 of this chapter and procedures

specified by Public Notice.

(3) Down payments. See Sec. 1.2107(b) of this chapter.

(4) Full payment. See Sec. 1.2109(a) of this chapter.

(5) Default or disqualification. See Secs. 1.2104(g)(2) of this

chapter.

(d) Designated entities. Designated entities are small businesses

and very small businesses, as defined in 95.816(d)(4) of this section,

and businesses owned by members of minority groups and/or women, as

defined in Sec. 1.2110(b) of this chapter.

(1) Bidding credits. (i) A winning bidder that qualifies as a small

business (as defined in 95.816(d)(4)(i) of this section) may use a

bidding credit of 25 percent to lower the cost of its winning bid.

(ii) A winning bidder that qualifies as a very small business (as

defined in 95.816(d)(4)(i)(ii) of this section) may use a bidding

credit of 35 percent to lower the cost of its winning bid.

(iii) The bidding credits referenced in paragraphs (1) and (2) of

this subsection are not cumulative.

(2) Installment payments. See Sec. 1.2110(f) of this chapter.

Note to paragraph (d)(2): Each 218-219 MHz Service system

licensee already utilizing an installment payment plan as of the

effective date of these rules will be notified by the Commission of

the revised terms of its installment payment plan. The Commission

may require that such licensee execute appropriate loan

documentation, that may include promissory notes, security

agreements, and other related agreements as a condition of the

revised installment payment plan.

(3) Audits. See Sec. 1.2110(l) of this chapter.

* * * * *

13. Section 95.819 would be revised to read as follows:

Sec. 95.819 License transferability.

(a) A 218-219 MHz Service system license acquired through

competitive bidding procedures (including licenses obtained in cases of

no mutual exclusivity), together with all of its component CTS

licenses, may be transferred, assigned, sold, or given away only in

accordance with the provisions and procedures set forth in Sec. 1.2111

of this chapter.

(b) A 218-219 MHz Service system license obtained through random

selection procedures, together with all of its component CTS licenses,

may be transferred, assigned, sold, or given away to any other entity

once the five year construction benchmark (substantial service) has

been met, in accordance with the provisions of Sec. 1.948 of this

chapter.

(c) If the transfer, assignment, sale, or gift of a license is

approved, the new licensee is held to the original construction

requirements set forth in Sec. 95.833 of this subpart.

[[Page 52225]]

14. A new Sec. 95.823 would be added to read as follows:

Sec. 95.823 Geographic partitioning and spectrum disaggregation.

(a) Eligibility. Parties seeking Commission approval of geographic

partitioning or spectrum disaggregation of 218-219 MHz Service system

licenses shall request an authorization for partial assignment of

license pursuant to Sec. 1.948 of this chapter.

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

partitioning, requests for authorization of 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, 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 the

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 maybe disaggregated in any amount.

(3) Combined partitioning and disaggregation. The Commission will

consider requests for partial assignments of licenses that propose

combinations of partitioning and disaggregation.

(c) Provisions applicable to designated entities.--(1) Unjust

Enrichment. See Sec. 1.2111(e) of this chapter.

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

winning bidder that elected to pay for its license through an

installment payment plan 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. 1.2111(e)(3) of this chapter.

(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 cancellation of the grant of the partial assignment

application.

(iii) The partitionor or disaggregator 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 partitionor's or disaggregator'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(f)(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 partitionor's or

disaggregator's portion of the remaining government obligation.

(iv) A default on the partitionor's or disaggregator's payment

obligation will affect only the partitionor's or disaggregator'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.

(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 its pro rata

portion of the balance due (including accrued and unpaid interest), as

apportioned according to Sec. 1.2111(e)(3) of this chapter, based upon

the installment payment terms for which it qualifies 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(f)(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 its portion of the partitioned market.

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

the market area held by the defaulting party.

(iv) Partitionees or 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

remainder in installments as set forth in Sec. 1.2110(f) of this

chapter.

(d) Construction Requirements.--(1) Partitioning. Partial assignors

and assignees for license partitioning have two options to meet

construction requirements. Under the first option, the partitionor and

partitionee would each certify that they will independently satisfy the

applicable construction requirements set forth in Sec. 95.833 for their

respective partitioned areas. If either licensee failed to meet its

Sec. 95.833 requirement, only the non-performing licensee's renewal

application would be subject to dismissal. Under the second option, the

partitionor certifies that it has met or will meet the Sec. 95.833

requirement for the entire market. If the partitionor fails to meet the

Sec. 95.833 requirement, however, only its renewal application would be

subject to forfeiture at renewal.

(2) Disaggregation. Partial assignors and assignees for license

disaggregation have two options to meet construction requirements.

Under the first option, the disaggregator and disaggregatee would

certify that they each will share responsibility for meeting the

applicable construction requirements set forth in Sec. 95.833 for the

geographic service area. If parties choose this option and either party

fails to do so, both licenses would be subject to forfeiture at

renewal. The second option would allow the parties to agree that either

the disaggregator or the disaggregatee would be responsible for meeting

the Sec. 95.833 requirement for the geographic service area. If parties

choose this option, and the party responsible for meeting the

construction requirement fails to do so, only the license of the

nonperforming party would be subject to forfeiture at renewal.

(3) All applications requesting partial assignments of license for

partitioning or disaggregation must include the above-referenced

certification as to which of the construction options is selected.

(4) Responsible parties must submit supporting documents showing

compliance with the respective construction requirements within the

[[Page 52226]]

appropriate construction benchmarks set forth in Sec. 95.833.

15. Section 95.831 would be revised to read as follows:

Sec. 95.831 Service requirements.

Subject to the initial construction requirements of Sec. 95.833 of

this subpart, each 218-219 MHz Service system licensee must either

demonstrate that it provides substantial service, or make service

available to at least 20 percent of the population or land area located

within the service area. ``Substantial service'' means service that is

sound, favorable, and substantially above a level of mediocre service

that would barely warrant renewal.

16. Section 95.833 would be revised to read as follows:

Sec. 95.833 Construction requirements.

(a) Each 218-219 MHz Service system licensee must demonstrate that

it provides substantial service to its service area within five years

of license grant.

Note to paragraph (a): Each 218-219 MHz Service system licensed

as of the effective date of these rules must demonstrate that it

provides substantial service to its service area within five years

of the effective date of these rules.

(b) Each 218-219 MHz Service system licensee must make service

available to at least 20 percent of the population or land area within

the service area within ten years of grant of the 218-219 MHz Service

system license. As an alternative to the coverage requirement of this

paragraph, the 218-219 MHz Service system licensee may demonstrate that

it provides substantial service to its service area within ten years of

license grant.

(c) In demonstrating compliance with the construction requirements

set forth in this section, licensees must base their calculations on

signal field strengths that ensure reliable service for the technology

utilized. Licensees may use any service radius contour formula

developed or generally used by industry, provided that such formula is

based on the technical characteristics of their system.

(d) Failure to meet the construction requirements set forth in this

section will result in automatic cancellation of the 218-219 MHz

Service system license, and will result in the licensee's ineligibility

to apply for 218-219 MHz Service licenses for three years from the date

the Commission takes final action affirming that the 218-219 MHz

Service license has been canceled. See 47 CFR Sec. 95.813(b). For the

purposes of this section, a CTS is not considered as providing service

unless that CTS and two associated RTUs are placed in operation.

(e) Each 218-219 MHz Service system licensee must file a progress

report at the conclusion of each of the two benchmark periods to inform

the Commission of the construction status of the system. The report

must include:

(1) A showing of how the system meets the benchmark; and

(2) A list, including addresses, of all component CTSs constructed.

17. Section 95.853 would be amended by adding a new first sentence

to paragraph (a) to read as follows:

Sec. 95.853 Frequency segments.

(a) There are two frequency segments available for assignment to

the 218-219 MHz Service in each service area. * * *

* * * * *

[FR Doc. 98-26168 Filed 9-29-98; 8:45 am]

BILLING CODE 6712-01-P