Future Development of Paging Systems

FEDERAL COMMUNICATIONS COMMISSION

47 CFR Parts 22 and 90

[WT Docket No. 96-18; PR Docket No. 93-253; FCC 99-98]

Future Development of Paging Systems

AGENCY: Federal Communications Commission.

ACTION: Final rule.

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SUMMARY: This document concerns rules and policies for the geographic

area licensing of Common Carrier Paging and exclusive 929 MHz Private

Carrier Paging, and competitive bidding procedures for auctioning

mutually exclusive applications for these licenses. This document also

adopts rules concerning the partitioning and disaggregation of paging

licenses, and institutes procedures designed to deter application fraud

on shared paging channels. The intended effect of this action is to

clarify and resolve issues pertaining to the paging service prior to

the Commission's auctions of remaining spectrum within that service.

EFFECTIVE DATES: Effective August 23, 1999.

ADDRESSES: Federal Communications Commission, 445 Twelfth Street, SW,

Washington DC 20554.

FOR FURTHER INFORMATION CONTACT: For non-auction information: Cyndi

Thomas or Todd Slamowitz, Commercial Wireless Division, Wireless

Telecommunications Bureau, at (202) 418-7240. For auction information:

Anne Napoli, Auctions and Industry Analysis Division, Wireless

Telecommunications Bureau, at (202) 418-0660. TTY (202) 418-7233.

SUPPLEMENTARY INFORMATION: This is a synopsis of the Memorandum Opinion

and Order on Reconsideration and Third Report and Order in WT Docket

No. 96-18 and PR Docket No. 93-253, FCC 99-98, adopted on May 13, 1999,

and released on May 24, 1999. The complete text of this decision is

available for inspection and copying during normal business hours in

the

[[Page 33763]]

FCC Reference Center, 445 Twelfth Street, SW, Room CY-A257, Washington

DC, and also may be purchased from the Commission's copy contractor,

International Transcription Service, (202) 857-3800, 445 Twelfth

Street, SW, Room CY-B400, Washington DC. The complete text is also

available under the file name fcc99098.wp on the Commission's internet

site at http://www.fcc.gov/Bureaus/Wireless/Orders/1999.

Paperwork Reduction Act

The Second R&O and this MO&O and Third R&O contain a revision to an

existing information collection that has been approved by the Office of

Management and Budget (OMB) under the Paperwork Reduction Act, Public

Law No. 104-13 (3060-0697). The Commission, as part of its continuing

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

the OMB to comment on this information collection in a separate Federal

Register publication.

Synopsis of Memorandum Opinion and Order on Reconsideration and

Third Report and Order

Memorandum Opinion and Order on Reconsideration

1. The Commission adopts a Memorandum Opinion and Order on

Reconsideration (MO&O) and Third Report and Order (Third R&O) that

responds to petitions for reconsideration or clarification of the

Second Report and Order (Second R&O) and Further Notice of Proposed

Rulemaking (Further Notice) adopted in this proceeding on February 19,

1997. The Second R&O (62 FR 11616, March 12, 1997) established rules to

govern the geographic area licensing of Common Carrier Paging (CCP) and

exclusive 929 MHz Private Carrier Paging (PCP), and procedures for

auctioning mutually exclusive applications for these licenses. In

general, the MO&O affirms the rules adopted in the Second R&O, with

some changes and clarifications, stating the Commission's continuing

belief that the adopted rules will facilitate competition in the

wireless market by encouraging a more diverse array of entities,

including small businesses and rural telephone companies, to offer

paging services to the public. The Further Notice (62 FR 11616, March

12, 1997) sought comment on issues concerning partitioning and

disaggregation of paging licenses, coverage requirements for nationwide

geographic area licensees, and possible revisions to application

procedures for shared channels. The Third R&O modifies the paging rules

to permit partitioning by all nationwide geographic area licensees and

to allow disaggregation by all geographic area licensees; adopts rules

governing the coverage requirements for parties to partitioning or

disaggregation agreements involving non-nationwide geographic area

licenses, and the license term of partitioned or disaggregated

geographic area licenses; permits geographic area licensees to combine

partitioning and disaggregation; and establishes additional mechanisms

to inform consumers of the rules governing paging licenses and the

danger of fraudulent schemes perpetrated by application mills.

Dismissal of Pending Applications

2. The MO&O denies the petitions seeking reconsideration of the

Commission's decision to dismiss all mutually exclusive paging

applications and all paging applications filed after July 31, 1996. In

the Second R&O, the Commission stated that, in light of its decision to

adopt geographic area licensing, it would dismiss all pending mutually

exclusive paging applications, including those filed under the interim

rules adopted in the First R&O (61 FR 21380, May 10, 1996), and all

applications filed after July 31, 1996. On December 14, 1998, the

Commercial Wireless Division of the Wireless Telecommunications Bureau

dismissed these applications pursuant to the Second R&O.1

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\1\ Revision of Part 22 and Part 90 of the Commission's Rules to

Facilitate Future Development of Paging Systems, Order, WT Docket

No. 96-18, DA 98-2543 (Dec. 14, 1998) (CWD Order).

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3. The Commission disagrees with petitioners' arguments that the

Commission did not notify the public prior to release of the Second R&O

of its intent to dismiss these applications; that the Commission is

unlawfully applying new rules retroactively; that applicants reasonably

relied on the Commission's prior procedures for processing

applications; and that the only reason for licensing paging spectrum

through competitive bidding is to raise money for the Federal

government. The Commission notes that courts have consistently

recognized that the filing of an application creates no vested right to

continued application of licensing rules that were in effect when the

application was filed, and an application may be dismissed if

substantive standards subsequently change. In this proceeding, the

Commission dismissed pending applications based on its substantive rule

changes establishing geographic area licensing for paging. In light of

the notice the Commission gave of its interest in instituting

geographic area licensing, and of its intent not to process

applications filed after July 31, 1996, the Commission does not believe

that any applicants could have reasonably relied on its processing

applications filed after that date.

4. Moreover, the Commission does not think that carriers that had

previously pending applications will be irreparably harmed by a

decision to proceed to the auction of paging licenses without any

further processing of site-specific applications because such

applications were dismissed without prejudice and these applicants may

therefore file applications to participate in the auctions. The

Commission states that the reasons for adopting competitive bidding

procedures for paging licenses are set forth at length in the Notice of

Proposed Rulemaking (Notice) (61 FR 6199, February 16, 1996) and Second

R&O, and these reasons do not include revenue-raising considerations.

The Commission also notes that it concluded in the Competitive Bidding

Second R&O (59 FR 162981, May 4, 1994) that mutually exclusive initial

paging applications were auctionable under the auction authority

provided the Commission by the 1993 Budget Act. This conclusion is

unchanged by the Balanced Budget Act of 1997, which amended Section

309(j) to expand the Commission's auction authority.

5. Petitioners also assert that dismissal of pending applications

undermines the policy goal of expediting the licensing of paging

spectrum because dismissal will delay the initiation of paging service

in many market areas and will prevent the expansion of networks. The

Commission finds, however, that it was the formidable administrative

burden of processing site-by-site applications, and the substantial

number of mutually exclusive applications that were filed, which

created a backlog of pending applications and caused their processing

to be delayed. The Commission further rejects petitioners' suggestion

to hold an additional auction for the purpose of resolving mutually

exclusive site-by-site licenses, prior to conducting an auction for

geographic areas containing these same sites, because it would be

grossly inefficient.

6. Citing section 309(j)(6)(E) of the Communications Act of 1934,

petitioners contend that the Commission may not proceed to geographic

area licensing without first attempting to avoid mutual exclusivity

through ``engineering solutions, negotiation, threshold qualifications,

service regulations, and other means.'' The Commission has previously

[[Page 33764]]

construed Section 309(j)(6)(E) to mean that it has an obligation to

attempt to avoid mutual exclusivity by the methods prescribed therein

only when it would further the public interest goals of Section

309(j)(3). In the Second R&O, the Commission concluded that the public

interest would be better served by licensing all remaining paging

spectrum through a geographic area licensing scheme than by processing

additional site-specific licenses. The Commission thereby effectively

determined that it would not be in the public interest to implement

other licensing schemes or other processes that avoid mutual

exclusivity, thus fulfilling its obligation under Section 309(j)(6)(E).

7. Several petitions for reconsideration and an application for

review were filed in response to the CWD Order. The parties generally

reiterate the same arguments against dismissing their applications that

were set forth in the petitions for reconsideration filed in response

to the Second R&O. Having already considered these arguments, the

Commission denies the application for review filed by Robert J. and

Laurie F. Keller d/b/a Western Maryland Wireless Company on December

28, 1998, and petitions for reconsideration filed on January 13, 1999,

by: AirTouch Paging, AirTouch Paging of California, AirTouch Paging of

Kentucky, AirTouch Paging of Texas, AirTouch Paging of Virginia, Allcom

Communications, Inc., Arch Capitol District, Inc., Arch Connecticut

Valley, Inc., Arch Southeast Communications, Inc., Becker Beeper, Inc.,

Blasiar, Inc., Electronic Engineering Company, Hello Pager Company,

Paging Systems Management, Inc., PowerPage Inc., Robert Kester et al.,

Satellite Paging, Inc., South Texas Paging, Inc. (Arthur Flemmer), USA

Mobile Communications, Inc. II, Westlink Licensee Corporation, and

Westlink of New Mexico Licensee.

Geographic Areas

8. The Commission grants the petitions that request the Commission

to use Major Economic Areas (MEAs) instead of Major Trading Areas

(MTAs) for geographic licensing of the upper bands (929 and 931 MHz).

When the Commission adopted the Second R&O, it had not established

MEAs, which were first developed by the Commission to define geographic

license areas for the Wireless Communications Service (WCS). Although

MTAs and MEAs are substantially similar, the Commission finds that

geographic area licensing based on MEAs will provide geographic area

licensees with benefits that could not be obtained if the Commission

maintained MTAs as the geographic area for the 929-931 MHz band.

Licensees with paging systems in both the upper bands and the lower

bands (35-36 MHz, 43-44 MHz, 152-159 MHz, and 454-460 MHz), which will

be licensed as EAs, will benefit from the use of MEAs for the upper

bands because MEAs are composed of EAs. The fact that the geographic

borders of MEAs coincide with those of the EAs contained within the

MEAs will enable licensees with both upper and lower band systems to

operate more efficiently. The Commission also finds that adopting MEAs

on the upper bands will enhance competition between the paging systems

on the lower channels and the paging systems on the upper bands because

the paging systems on the lower channels will be able to combine their

EAs to form MEAs. The Commission also acknowledges that licensees will

benefit economically from licensing based on a geographic designation

that is in the public domain.

9. The Commission rejects one petitioner's contention that the

decision to eliminate section 90.496 of the Commission's rules was

arbitrary and capricious and an unlawful retroactive rulemaking without

the opportunity for notice and comment. In the Second R&O, the

Commission eliminated section 90.496 of its rules, which provided for

extended implementation of construction and operations deadlines for

proposed systems on the 929-930 MHz band that qualified for regional or

nationwide channel exclusivity. As explained in the Notice, the

Commission found that extended implementation would be unnecessary

under its geographic area licensing scheme and, in fact, would hinder

geographic area licensing because construction extensions for

incumbents could effectively allow them to occupy an entire geographic

area. The Commission sought comment in the Notice on its proposal to

eliminate extended implementation and to dismiss all ``slow growth''

applications pending at the time an order pursuant to the Notice was

adopted without prejudice to refile under its geographic area licensing

scheme. The Commission affirms removal of section 90.496 of its rules

and clarifies that removal of the rule does not affect the rights

associated with extended implementation authority granted under that

rule as of May 12, 1997, the effective date of the Second R&O. In

addition, any requests pending as of May 12, 1997, are dismissed

without prejudice to obtain licenses under the geographic area

licensing rules.

10. The Commission rejects one petitioner's request to use BTAs for

geographic area licensing in the lower bands, affirming its

determination that EAs are appropriate for geographic area licensing on

the 35-36 MHz, 43-44 MHz, 152-159 MHz, and 454-460 MHz bands. The

petitioner contends that the size of EAs will prevent small and rural

paging companies from participating in the geographic area licensing

auctions; that EAs contain major urban areas as well as rural and

suburban areas, and that small and rural companies are only interested

in the rural and suburban areas of the EA; and that partitioning does

not address the concerns of small and rural companies. Contrary to the

petitioner's arguments, the Commission believes that the size of EA

geographic areas will not prevent paging operators of smaller systems

from participating in geographic area licensing auctions. The

Commission also believes bidding credits will allow small businesses to

compete against larger bidders. Further, small and rural paging

companies will not be prevented from expanding their systems even if

they choose not to participate in the geographic area licensing

auctions, because the Commission will allow geographic area licensees

to partition their service areas and it has no reason to believe that

geographic area licensees will be unwilling to enter into partitioning

agreements. The Commission continues to conclude that EAs, which the

majority of commenters supported, best reflect the geographic area that

the paging licensees on the lower channels seek to serve.

11. The Commission amends section 22.503(b)(3) of the Commission's

rules to include three additional EA-like areas for the U.S.

territories, which the Commission inadvertently omitted in the Second

R&O. The Commission adds the following three EA-like service areas:

Guam and the Northern Mariana Islands (EA 173); Puerto Rico and the

United States Virgin Islands (EA 174); and American Samoa (EA 175).

Highly Encumbered Areas

12. The Commission denies petitions arguing that those incumbent

licensees that have previously satisfied certain coverage requirements

should receive a geographic area license without competitive bidding.

Petitioners advocate granting a market area license to an incumbent

providing coverage to at least 70 percent, two-thirds, or a similar

portion of the market. Petitioners propose a two-step process for

granting market area licenses. First,

[[Page 33765]]

where an incumbent operator certifies that it covers 70 percent of a

market area's population or geographic area, the Commission should

grant a market area license to that incumbent. If multiple incumbents

serving a market on a single frequency together cover 70 percent of the

population or geographic area, those licensees should be permitted

jointly to file an application that demonstrates their joint coverage,

and receive a market area license on that basis. In the second step,

interested parties could file applications for all remaining available

frequencies in each market. Mutually exclusive applications would then

be subject to the Commission's auction rules. Petitioners alternatively

propose to limit eligible bidders to the same channel incumbents

operating within the geographic area or in an area adjacent to the

geographic area license.

13. To support their proposals, petitioners argue, for example,

that, under the Commission's rules adopted in the Second R&O, new

opportunities for greenmail and speculative applications will result in

inflated auction prices, and reliable service will decline because

auctions introduce additional parties for coordination and negotiation

and customers will be unable to receive or obtain services if multiple

providers are using the same channel within a market area. Petitioners

further argue that new entrants will increase the potential for co-

channel interference; ``dead zones'' will occur between the incumbent

and geographic area licensee's service areas; the incumbent's ability

to expand to provide the ``widest area coverage'' will be blocked if a

new entrant wins at auction; new entrants will be encouraged to enter

markets where it would not be economically viable to do so; and

customers will not reap the benefits of competition. In addition,

petitioners state that an applicant is not qualified if it cannot meet

the construction benchmark of covering two-thirds of the population of

an MTA where operating incumbents already meet the coverage

requirements. Petitioners further assert that the Commission's current

rules do not meet its statutory obligation to avoid mutual exclusivity,

while mutual exclusivity could be avoided through ``threshold

qualifications,'' identified in their percent-of-coverage proposals.

14. While the Commission recognizes that some geographic areas are

significantly served by incumbent licensees, it believes that the

market should decide whether an economically viable paging system can

be established in the unserved area of a geographic market. For

instance, a paging provider that primarily serves an adjacent

geographic market may have a strong desire to serve the unserved area

in its neighbor's ``home'' market. In addition, even where only 30

percent of a geographic area is available to a potential new entrant,

the Commission does not believe that it has been shown that the new

entrant cannot establish a viable system that serves the public as well

as the incumbent. Thus, the Commission cannot conclude that an

incumbent licensee is entitled to a geographic area license without

competitive bidding simply because its paging system may cover a

substantial portion of the geographic area. The Commission continues to

believe that open eligibility promotes prompt service to the public by

allocating spectrum to the entity that values it most.

15. The Commission also believes that the benefits of open

eligibility outweigh the risks that speculators and misguided

applicants pose to the competitive bidding process. Indeed, while

speculation can be a problem when licenses are awarded through such

systems as lotteries, the Commission believes that auctions deter

speculation. The Commission has auctioned other highly encumbered

services and has not seen any evidence that speculative applications

have raised bidding prices. Petitioners also have not provided any

evidence that speculative applications have raised bidding prices in

prior auctions.

16. Other issues raised by petitioners are addressed in other

sections of the MO&O. The Commission states that a new entrant will be

able to meet its coverage requirements by providing ``substantial

service'' within the geographic area and geographic area licensees must

provide co-channel protection to all incumbents. Moreover, the

Commission notes that petitioners have not provided any evidence that

the ``border'' issues raised here, including problems related to ``dead

zones,'' are any different from issues that arise under other

circumstances where one licensee is adjacent to another. Finally,

turning to its obligation to attempt to avoid mutual exclusivity when

it is in the public interest, the Commission does not believe that

Congress intended the Commission to interpret the term ``threshold

qualifications'' in Section 309(j)(6)(E) to mean that carriers should

receive licenses for unserved areas without competitive bidding simply

because they already hold certain licenses for other areas in the

vicinity, particularly because the result of such an approach would be

to preclude the dissemination of licenses to new entrants.

Basic Exchange Telecommunications Radio Systems Licensees

17. The Second R&O directs that Basic Exchange Telecommunications

Radio Systems (BETRS) licensed under the Rural Radiotelephone Service

should be subject to geographic area licensing and competitive bidding,

and also allows providers in these services to obtain site licenses on

a secondary basis. It further provides that all existing BETRS

operating on a co-primary basis remain in place and receive full

protection from interference by geographic area licensees. BETRS

licensees may also enter into partitioning agreements with auction

participants and auction winners both before and after the paging

auctions. In the Second R&O, the Commission stated that ``[i]f a

geographic area licensee is concerned that a BETRS facility operating

on secondary sites may cause interference to the geographic area

licensee's existing or planned facilities, the BETRS provider must

discontinue use of the interfering channel no later than six months

after the geographic area licensee notifies the BETRS provider of the

actual or potential interference.'' This policy is codified at section

22.723 of the rules.

18. Several petitioners argue that BETRS is essential to the

Commission's universal service goal of delivering local exchange

service to remote, rural areas and should be licensed on a site-by-

site, co-primary basis with geographic area licensees, and exempt from

competitive bidding procedures. These petitioners contend that

participation in auctions will impair the ability of rural telephone

companies to respond to their customers' needs for local exchange

service in remote rural areas.

19. The Commission declines to adopt rules that permit site-by-site

licensing of BETRS on a co-primary basis with geographic area paging

licensees. The Commission agrees that BETRS provide an important

service, but finds that BETRS do not require exemption from competitive

bidding to ensure continued BETRS service and lower costs to

subscribers. The rules that the Commission adopted in the Second R&O

provide competitive bidding benefits to small businesses that will

enable them to compete more effectively with larger auction

participants. The Commission also believes that BETRS operators will be

able to obtain interests in paging licenses or actual paging licenses

through entering into partitioning arrangements both before and after

the paging auctions. The

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Commission emphasizes that it is committed to promoting service in

rural areas and believes that the rules adopted for BETRS in the Second

R&O will further that goal. If a BETRS operator demonstrates that it

cannot serve a particular need in a rural area under these rules, the

Commission will consider appropriate action to address specific

concerns.

20. Petitioners contend that, contrary to the Commission's

universal service goals, section 22.723 of the Commission's rules will

allow geographic area licensees to terminate BETRS upon any allegation

of harmful co-channel interference, resulting in a loss of

communications services essential to the public in rural areas.

Petitioners argue that the Commission must either retain existing rules

or establish safeguards against allowing geographic area licensees to

``shut down BETRS operations.'' Another petitioner, however, seeks

clarification that section 22.723 confers no right on rural radio

service licensees to continue operations that cause actual interference

to geographic area licenses for six months after receiving notice of

the interference. The Commission affirms its earlier decision to allow

BETRS licensees to obtain site licenses and operate facilities on a

secondary basis. The Commission clarifies that under section 22.723 of

its rules, the geographic area licensee must provide notification to

the BETRS provider that the relevant BETRS facility causes or will

cause interference with the geographic area licensee's service contour

in violation of the Commission's interference rules. Where the BETRS

facility would create interference with a facility the geographic area

licensee is proposing to build, the geographic area licensee may not

provide notification of impermissible interference to the BETRS

provider earlier than six months prior to the date it intends to

initiate operation of the proposed facility. Thus, the geographic area

licensee may not force the BETRS provider to discontinue service before

the geographic area licensee initiates service. Where the BETRS

facility is constructed after the geographic area licensee's facility

is already constructed and the BETRS facility causes interference with

that existing facility, the BETRS operator must discontinue use of the

interfering channel in accordance with the Commission's interference

rules. Where a geographic area licensee plans construction and

initially determines that the BETRS facility would not cause

interference, but after construction determines the BETRS facility is

causing interference, the BETRS operator must discontinue use of its

facility within six months of receiving notification. If a dispute

arises, either party may submit the interference information to the

Commission to resolve the dispute. If the geographic area licensee

provides proper notification to the BETRS provider, no adjustments will

be made to the initial six month period. If the Commission determines

that the notification was improper or inaccurate, the geographic area

licensee, where appropriate, must submit a new, corrected notification

to the BETRS provider. In the latter case, the six month period would

restart.

21. Contrary to petitioners' argument, the Commission has not

exceeded its statutory authority by employing competitive bidding

procedures to issue geographic area paging licenses. Section 309(j) of

the Communications Act, as amended, gives the Commission authority to

issue geographic area paging licenses through competitive bidding.

Petitioners have offered no evidence to support their assertion that

revenue for the federal treasury ``appears to be the real reason for

the Commission's proposal.'' The recovery of a portion of the value of

the public spectrum made available through competitive bidding does not

amount to maximizing revenue, nor is it the Commission's sole

objective.

22. Certain petitioners also argue that the Commission did not

adequately consider adopting ``mandatory partitioning'' of rural areas

of the geographic area license, at no cost to the rural telephone

company, to offset the unwillingness of geographic area licensees to

enter into agreements for the provision of BETRS service. The

Commission affirms its conclusion in the Second R&O that BETRS

licensees may acquire partitioned licenses from other licensees by: (1)

participating in bidding consortia; or (2) acquiring partitioned

licenses from other licensees through private negotiation and agreement

either before or after the auctions. The Commission has no reason to

believe that auction winners will not be willing to enter into

partitioning arrangements. Petitioners themselves argue that winning

geographic area licensees may have no desire or intention to build in

rural areas. If this is true, there appears to be little incentive for

these licensees to demand unreasonable amounts of money for the rural

portion of a license prior to or subsequent to the auction, especially

if the choice is between selling to a willing buyer or leaving the

rural area unserved. Where possible, the Commission encourages market

forces and the business judgment of companies to dictate the formation

of business relationships. The Commission believes voluntary agreements

will be an adequate means of accommodating BETRS licensees seeking

modifications to existing BETRS or wishing to establish new systems,

and that mandatory partitioning is unnecessary.

Spectrum Reversion

23. The Commission reaffirms that where an incumbent permanently

discontinues operations at a given site, as defined by the Commission's

rules, the spectrum automatically reverts to the geographic area

licensee. In the Second R&O, the Commission concluded that spectrum

within a geographic area recovered by the Commission from a non-

geographic area licensee should automatically revert to the geographic

area licensee. The Commission found that granting this right to

geographic area licensees would give them greater flexibility in

managing their spectrum, establish greater consistency with cellular

and PCS rules, and reduce the regulatory burdens on both licensees and

the Commission with respect to future management of the spectrum.

24. One petitioner suggests that the Commission should clarify that

recovered spectrum automatically reverts to the geographic area

licensee in all instances except where an incumbent licensee

discontinues operations in a location wholly encompassed by the

incumbent licensee's valid composite interference contours. The

petitioner argues that the geographic area licensee would not be able

to serve such an area, and that reversion would be contrary to the

Commission's policy of allowing fill-in transmitters anywhere within

the incumbent's outer perimeter interference contour. The Commission

disagrees. As an initial matter, the Commission notes that an

incumbent's valid composite interference contour does not include areas

surrounded by the composite interior contour that is not part of the

interference contours of the incumbent's individual sites. The

Commission further finds that the petitioner has not demonstrated that

a geographic area licensee would be unable to serve areas wholly

surrounded by an incumbent; such service by the geographic area

licensee would be subject to the Commission's interference rules.

Moreover, where an incumbent discontinues service to an area, the

Commission does not believe it serves the public interest to withhold

that area from the geographic area licensee in the hope that the

incumbent may wish to

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resume service sometime in the future. Should an incumbent desire to

serve the reverted area in the future, it is free to reach an agreement

with the geographic area licensee for the partitioning of this area.

This approach is consistent with the Commission's treatment of reverted

spectrum in the 800 MHz SMR service, and it is in the public interest,

as it promotes use of the spectrum.

System-wide Licensing

25. The Commission clarifies certain aspects of its rules regarding

system-wide licensing. In the Second R&O, the Commission allowed all

incumbent paging licensees to either continue operating under existing

authorizations or trade in their site-specific licenses for a single

system-wide license. The Commission stated that such a system-wide

license would be demarcated by the aggregate of the interference

contours around each of the incumbent licensee's contiguous sites

operating on the same channel. The Commission also concluded that

incumbent licensees may add or modify sites within their existing

interference contours without filing site-specific applications, but

may not expand their existing interference contours without the consent

of the geographic area licensee.

26. Although system-wide licenses and site-specific licenses are

identical in terms of operational and technical flexibility, some

licensees may realize administrative benefits from consolidating site-

specific licenses. Petitioners seek clarification of the procedures for

converting site-specific licenses to a system-wide license. In the ULS

Order (63 FR 856163, December 14, 1998), the Commission stated that

conversions from site-specific to system-wide licenses are minor

modifications subject to the Commission's prior approval. Applicants

requesting a system-wide license will be notified by public notice of

the action taken on their request and public notices granting such

requests will indicate the new call sign associated with the system-

wide license. The expiration date of the system-wide license will be

determined by the earliest expiration date of the site-specific

licenses that are consolidated into the system-wide license. Once a

system-wide license is approved, the licensee must submit a timely

renewal application for the system-wide license based on that

expiration date. The Commission emphasizes, however, that the licensee

is solely responsible for filing timely renewal applications for site-

specific licenses included in a system-wide license request until the

request is approved. If the situation arises where a site-specific

renewal application for a site included in a system-wide license

request and the system-wide license request itself are pending at the

same time before the Wireless Telecommunications Bureau, the Bureau may

elect to complete the site-specific license renewal proceeding prior to

making a determination on the system-wide license request. Renewal

applications will be placed on public notice as accepted for filing

pursuant to the Commission's rules. To minimize administrative burdens

on licensees and conserve government resources, the Bureau will use

electronic filing to the greatest extent possible in accepting and

processing these applications.

27. Several petitioners seek clarification of the definition of

``contiguous sites'' for the purpose of determining an incumbent's

``aggregate interference contour.'' Petitioners also urge the

Commission to modify section 22.503(i) to define non-geographic area

incumbent systems according to the composite interference contours of

all authorized transmitters, including valid construction permits,

regardless of the grant date. The Commission has consistently stated

that system-wide licenses are defined by interference contours and it

now clarifies that contiguous sites are defined by overlapping

interference contours, not service contours. The Commission further

clarifies that all authorized site-specific paging licenses and

construction permits are included in a composite interference contour.

The Commission is continuing to process site-specific applications that

were not mutually exclusive and were filed prior to July 31, 1996, and

it will not revoke authorized construction permits before the

construction deadline. In addition, the Commission is continuing to

resolve pending petitions that might result in grants of applications.

The Commission also notes that for purposes of due diligence it intends

to release, prior to auction, a list of site-specific applications and

petitions pending at that time. Accordingly, the Commission amends

section 22.503(i) to clarify that geographic area licensees must

provide co-channel interference protection in accordance with sections

22.537 or 22.567, as appropriate for the channel involved, to all

authorized co-channel facilities of exclusive licensees within the

paging geographic area.

28. Petitioners also contend that system-wide licenses should

include areas where an incumbent's interference contours do not

overlap, but where no other licensee could place a transmitter because

of interference rules. The Commission concludes that a system-wide

license is merely a consolidation of a system's call signs such that

one call sign will be associated with the system-wide license. The

contours of the system-wide license remain as the aggregate of the

contours of the individual sites. The Commission finds that inclusion

of areas that are outside of an incumbent's interference contours

within a system-wide license would be contrary to the Commission's

objective of prohibiting encroachment on the geographic area licensee's

operations. A system-wide license is not intended to expand an

incumbent's system beyond the contours of its individual sites.

Incumbent licensees seeking to expand their contours may participate in

the auction of geographic area licenses, or may seek partitioning

agreements with the geographic area licensee.

29. One petitioner seeks clarification as to whether the

discontinuance of operation of an interior site would jeopardize a

system-wide license. Where a system-wide licensee allows an area within

its system to revert to the geographic area licensee, the system-wide

license shall remain intact; however, the parameters of the system-wide

license shall be amended to the demarcation of the remaining contiguous

interference contours.

30. The Commission will allow licensees to include in system-wide

licenses remote, stand-alone transmitters that are linked to contiguous

systems via control/repeater facilities or by satellites. Including

these remote, stand-alone sites in the system-wide license, however, in

no way expands the licensee's composite interference contours. The

Commission will also permit licensees to maintain separate site-

specific licenses for remote, stand-alone transmitters. The Commission

further finds that an incumbent licensee should be permitted to obtain

multiple system-wide licenses where applicable.

Interference

31. The Commission affirms its earlier decision to use Tables E-1

and E-2 to determine interference contours for both perimeter and

``fill-in'' transmitters. Co-channel interference rules are designed to

protect licensees from interference caused by other licensees operating

facilities on the same channel. Exclusive paging systems are protected

from co-channel interference by a variety of rules that govern

transmitter height and power, distance between transmission stations,

the licensee's protected service area, and the field strength of the

licensee's service and interfering signals. For the CCP channels below

931 MHz, the Commission uses

[[Page 33768]]

mathematical formulas to determine the distance from each transmitting

site to its service and interference contours along the eight cardinal

radials from the transmitter site. To determine service and

interference contours for the 931 MHz channels, the Commission uses two

tables of fixed radii, Tables E-1 and E-2. Prior to adoption of the

Second R&O, for the 929 MHz exclusive channels, the Commission used

geographic separation rules that agreed with the separations that

result from the application of the fixed radii tables for 931 MHz.

Unlike the Commission's CCP rules, at that time, the PCP rules did not

formally define a protected service or interference contour for each

station.

32. In the Notice, the Commission proposed to adopt the eight-

radial contour method and new mathematical formulas, rather than fixed

tables, to determine the service and interference contours for the

exclusive 929 MHz and 931 MHz channels. The commenters addressing this

issue strenuously objected to the Commission's proposal, stating that

the proposed method could require incumbents to reduce coverage or be

required to accept interference from geographic area licensees.

Consequently, the Commission decided not to adopt the proposed

formulas. The Commission did, however, adopt Tables E-1 and E-2 for the

exclusive 929 MHz channels, thus maintaining the status quo for 931 MHz

channels and conforming 929 MHz channels to the current procedures for

931 MHz channels.

33. Several petitioners now request that instead of using Tables E-

1 and E-2, the Commission permit incumbents to employ alternative

formulas to determine the interference contours of ``fill-in''

transmitters. One petitioner suggests using signal strength criteria,

rather than alternative formulas, for determining the interference

contours of ``fill-in'' transmitters. The Commission does not find that

permitting incumbents to use different formulas for ``fill-in''

transmitters will serve the public interest. The record in this

proceeding supports the decision to use Tables E-1 and E-2 to determine

interference and service contours for all 929 MHz and 931 MHz

transmitters. The Commission finds that to permit incumbents to add

sites under alternative formulas depending on the location and power of

each of their transmitters significantly raises the risk of

encroachment on a geographic area licensee's territory. In addition,

the incumbent will have the opportunity to cover any existing gaps in

coverage by either competing for the geographic area license or by

partitioning from the geographic area licensee.

34. The Commission affirms its previous conclusion to require

geographic area licensees to negotiate to resolve interference problems

with adjacent geographic area licensees. In the Second R&O, the

Commission concluded that geographic area licensees should be able to

negotiate mutually acceptable agreements with all adjacent geographic

area licensees if their interfering contours extend into other

geographic areas. The Commission also indicated that adjacent licensees

have a duty to negotiate in good faith with one another regarding co-

channel interference protection. The Commission noted that lack of

adequate service to the public because of failure to negotiate

reasonable solutions with adjacent geographic area licensees could

reflect negatively on licensees seeking renewal.

35. Certain parties now seek clarification of the good faith

negotiation requirement, arguing the standard is vague and invites

litigation. One petitioner further notes that while the cellular

industry has negotiated agreements, paging coordination will be more

difficult because paging carriers operate on only one frequency, while

cellular carriers have many channels with which to negotiate. The

Second R&O adopted the good faith standard to provide flexibility for

licensees to negotiate mutually acceptable agreements. Providing for

adjacent geographic area licensees to negotiate mutually acceptable

agreements should reduce the amount of unserved area that could result

from specifying a minimum distance a geographic area licensee's

transmitter must be from a geographic border. In other services, such

as the Multipoint Distribution Service (MDS), the Commission has

expected licensees to cooperate among themselves to resolve

interference issues before bringing them to the attention of the

Commission. Based on the limited number of interference complaints that

it has been called upon to resolve, the Commission believes this policy

has worked well in the MDS service. Moreover, none of the parties have

proposed a better way to achieve flexibility and the reduction of

unserved areas.

36. The Commission clarifies various issues regarding channel

exclusivity on the 929-930 MHz bands. Prior to 1993, all PCP channels

were assigned on a non-exclusive basis. In 1993, the Commission

established rules allowing PCP carriers in the 929-930 MHz band to

obtain channel exclusivity as local, regional, and nationwide paging

systems on thirty-five of the forty 929 MHz PCP channels. Those

licensees that qualified for exclusivity as a local, regional, or

nationwide system at that time were grandfathered as exclusive

licensees, and required to maintain their existing sharing arrangements

with other licensees, but were protected from the addition of other

licensees on these channels. Thus, no application for a new paging site

would be granted on a channel assigned to an incumbent who qualified

for exclusivity if the applicant proposed a paging facility that did

not comply with the separation standards based on antenna height and

transmitter power of the respective systems. All other incumbent

licensees were grandfathered with respect to their existing systems as

shared licensees, and required to continue to share channels with each

other. The Commission notes that grandfathered licensees could not add

stations to their existing systems in areas where a co-channel licensee

had qualified for exclusivity. Therefore, on these thirty-five 929 MHz

channels, the Commission has: (1) exclusive incumbents: grandfathered

exclusive systems that are exclusive with respect to new licensees, but

share with other grandfathered licensees; (2) non-exclusive incumbents:

grandfathered shared licensees; (3) licensees who failed to construct

enough sites to qualify for exclusivity under the PCP Exclusivity Order

(considered ``secondary'' with respect to licensees with earned

exclusivity); and (4) licensees with earned exclusivity. In the Second

R&O, the Commission concluded that geographic area licensees must

provide co-channel protection to all incumbent licensees.

37. Certain petitioners seek clarification as to whether non-

exclusive 929 MHz licensees operating on the thirty-five exclusive

channels (i.e., categories 2 and 3 in the above paragraph) will receive

the same interference protection as an exclusive licensee. Other

petitioners seek clarification that the Commission did not elevate

incumbent licensees operating on shared channels to exclusive status.

One petitioner specifically argues that section 22.503(i) will require

that nationwide geographic area licensees terminate sharing

arrangements they have with non-exclusive licensees and provide

interference protection to them, while another contends that section

22.503(i) does not require the termination of existing channel sharing

arrangements involving exclusive incumbent licensees and non-exclusive

incumbent licensees. Non-exclusive incumbent licensees on

[[Page 33769]]

the thirty-five exclusive 929 MHz channels will continue to operate

under the same arrangements established with the exclusive incumbent

licensees and other non-exclusive incumbent licensees prior to the

adoption of the Second R&O. The Commission further clarifies that MEA,

EA, and nationwide geographic area licensees will be able to share with

non-exclusive incumbent licensees on a non-interfering shared basis.

The non-exclusive incumbent licensees must cooperate with the

nationwide and geographic area licensees' right to share on a non-

interfering shared basis. Accordingly, the Commission amends section

22.503(i) to clarify that nationwide and geographic area licensees are

afforded the right to share with non-exclusive incumbent licensees on a

non-interfering shared basis. As for shared PCP channels, the

Commission concluded in the Second R&O that licensees on these channels

will not be converted to exclusive status and that these channels will

not be subject to competitive bidding. Therefore, licensees on these

shared channels will continue to share with any future licensees.

38. The Commission declines to grant one petitioner's request to

grant full interference protection to existing control link operations

on the UHF and VHF paired channels originally allocated for mobile

telephone service once the ``auction for the UHF and VHF common carrier

channels'' is completed. The petitioner contends that in reliance on

the Commission's proceeding in CC Docket 87-120, which permitted paging

carriers to use these two-way channels as control links, ``numerous

carriers have configured their paging systems on [the] basis of their

protected use of a VHF or UHF frequency to link their base stations.''

Another petitioner requests clarification as to whether incumbent

mobile telephone service providers operating on the lower paging

frequencies will be protected from interference from geographic area

licensees. Furthermore, the petitioner requests that incumbent mobile

telephone service providers be permitted to obtain additional site

licenses on a secondary basis.

39. The Commission concludes that the petitioner's request to

protect control link operations is unclear and outside the scope of

this proceeding. The Commission's rules do not generally provide

protection from interference to fixed stations and the petitioner's

request would require a rulemaking to develop interference criteria,

which is beyond the scope of this proceeding. In addition, the

petitioner's request is unclear. For example, the petitioner does not

specify whether any protection provided should apply to the mobile

channel used as a control link or the base channel used as a control

link. The Commission therefore denies the request. With respect to the

request for clarification, the Commission reiterates that geographic

area licensees must provide co-channel protection to all incumbent

licensees, including incumbent mobile telephone service providers

operating on the 150 MHz and 450 MHz bands.

40. The Commission will not, however, grant the petitioner's

request that incumbent mobile telephone service providers be permitted

to obtain additional site licenses on a secondary basis. While the

Commission is generally aware that two-way incumbent mobile telephone

service providers serve rural areas in the western part of the country,

the petitioner provides no information at all for determining whether

to permit incumbent mobile telephone service providers to operate

facilities on a secondary basis. The Commission therefore denies the

request.

Shared Channels

41. The Commission affirms its decision to not impose a limit or

``cap'' on the number of licensees for each of the shared channels. In

the Notice, the Commission sought comment on whether to use geographic

area licensing for the shared PCP channels in the 152-158 MHz, 462 MHz,

and 465 MHz bands. Most commenters who responded to this issue in the

Notice were opposed to geographic area licensing for the shared

channels and sought to retain the status quo. In the Second R&O, the

Commission found that the cost and disruption caused by converting

shared channels to exclusive channels and subjecting them to

competitive bidding would outweigh the benefits. The Commission did not

impose a limit or ``cap'' on the number of licensees for each of the

shared channels, as it found that capacity limits of paging channels

are based primarily on use and not the number of licensees. Thus,

``capping'' the number of licensees would not necessarily ensure

efficient spectrum use. The Commission also determined in the Second

R&O that pending the resolution of issues related to consumer fraud

addressed in the Further Notice, it would retain the interim licensing

rules, which limited applications to incumbents seeking to expand their

systems. The Commission did, however, eliminate the 40-mile requirement

for new sites, allowing incumbents to file for new sites at any

location. Finally, noting that it would not grant applications

proposing operations on a commercial basis, the Commission allowed new

applicants to file applications for private, internal-use systems, and

reiterated that Special Emergency Radio Service providers would remain

exempt from the licensing freeze and could continue to file

applications on shared channels.

42. Petitioners oppose granting new applicants licenses for

private, internal-use systems, alleging that allowing new applications

would encourage speculative applications and result in harmful

congestion on the shared PCP channels. As a remedy, petitioners urge

the Commission to retain the interim rules, which limit the filing of

new applications primarily to incumbents. Petitioners further urge the

Commission to limit incumbents' expansion applications to sites that

are within 75 miles of an existing facility, in lieu of the 40-mile

requirement that the Commission has eliminated, to deter incumbents

from filing speculative applications, and ask that the Commission

permit applications from public safety and medical services providers

for shared channels only upon certification that no public safety

channels are available to meet those providers' needs.

43. The Commission does not believe that eliminating the

opportunity for new licensees to establish service on shared channels

serves the public interest because it does not promote efficient use of

spectrum. The Commission does not believe that concerns about

speculation or congestion on shared channels are sufficient at this

time to warrant additional burdens on new applicants. The Commission's

goal is to increase the use of these shared channels, not to unduly

restrict access to them. Therefore, the Commission affirms its previous

decision and declines to impose limits on the number of licensees for

each channel in a particular area. The Commission will take further

action if it finds that the transition of the exclusive channels to

geographic area licensing results in congestion and interference

problems on the shared channels. The Commission also declines to adopt

a certification requirement for public safety providers. Finally, as

described below, the Commission will be removing the interim licensing

rules on all the shared paging channels. Accordingly, the Commission

declines to impose any mileage limitations on expansion applications to

provide service on shared paging channels.

44. One petitioner contends that the Commission should reconsider

its

[[Page 33770]]

decision not to subject the five 929 MHz non-exclusive channels to

competitive bidding. The Commission declines to reconsider this

decision. Petitioner's arguments to include shared channels in

competitive bidding are effectively a request to limit the number of

licensees authorized to operate on shared channels. As previously

stated, the Commission declines to impose limits on the number of

licensees for each channel in a particular area.

45. The Commission also denies another petitioner's request to

adopt specific interference rules for shared frequencies, and provide

shared frequency licensees with some form of exclusivity protection. In

the Second R&O, the Commission found that shared channels are heavily

used by incumbent systems, many of whom have entered into time-sharing

or interconnection agreements to avoid interference with one another.

The Commission believes the imposition of specific interference

requirements at this time could jeopardize the viability of some of

these existing relationships.

Coordination with Canada

46. The Commission clarifies rules regarding coordination

requirements with Canada. The Commission states that it is bound by

international agreement to coordinate with the Canadian government

(Industry Canada) stations using certain frequencies north of Line A or

east of Line C. Incumbent and geographic area licensees on the lower

paging channels must submit a Form 600 (or Form 601) to obtain

authorization to operate stations north of Line A or east of Line C

because the lower paging channels are subject to the Above 30

Megacycles per Second Agreement with Industry Canada. The U.S.-Canada

Interim Coordination Considerations for the Band 929-932 MHz, as

amended, assigns specific 929 and 931 MHz frequencies to the United

States for licensing along certain longitudes above Line A, and assigns

other specific 929 and 931 MHz frequencies to Canada for licensing

along certain longitudes along the U.S.-Canada border. As a result, the

Commission notes that frequency coordination with Canada is not

required for the 929 and 931 MHz frequencies that U.S. licensees are

permitted to use north of Line A pursuant to that agreement. In

addition, the 929 and 931 MHz frequencies assigned to Canada are

unavailable for use by U.S. licensees above Line A as set out in the

agreement. Finally, the Commission is implementing electronic filing

and automated coordination procedures to the extent practical and

allowable under its agreements with Canada.

Power Requirements

47. The Commission clarifies that 929 MHz licensees, with certain

limitations, do not need to file a modification application to increase

the effective radiated power (ERP). Thus, the Commission states that

licensees may modify power levels without filing a modification

application only to the extent that their composite interference

contour, as determined by Table E-2, remains constant or decreases.

Again, the Commission restates that, pursuant to the First R&O, an

incumbent licensee is not permitted to increase its composite

interference contour.

Coverage Requirements

48. The Commission reaffirms coverage requirements for MEA and EA

licensees. In the Second R&O, the Commission concluded that for each

MTA or EA the geographic area licensee must provide coverage to one-

third of the population of the entire area within three years of the

license grant, and to two-thirds of the population of the entire area

within five years of the license grant; or in the alternative, the MTA

or EA licensee may provide substantial service to the geographic

license area within five years of license grant. In addition, the

Commission concluded that failure to meet the coverage requirements

would result in automatic termination of the geographic area license.

The Commission stated that it would reinstate any licenses that were

authorized, constructed, and operating at the time of termination of

the geographic area license.

49. One petitioner advocates requiring the geographic area licensee

to provide coverage to one-third of the market area within one year,

and two-thirds within three years. Other petitioners argue, however,

that small companies will have difficulty meeting these suggested

coverage requirements, especially if they must construct in rugged

areas with low population density to cover two-thirds of the

population. The Commission declines to adopt the proposal. The

Commission believes that its previously adopted coverage requirements

adequately promote prompt service to the public without being unduly

burdensome on licensees that require a reasonable amount of time to

complete construction. The Commission finds that areas which are

currently unserved have remained so in spite of the fact that paging

service has existed for many years and is extremely competitive in some

markets. This finding suggests that providers of service in these areas

may face unusual difficulties. Moreover, the Commission finds that

overly stringent coverage requirements would unfairly favor incumbents

by erecting a formidable barrier to entry.

50. Petitioners argue that the ``substantial service'' alternative

should be eliminated because it will encourage speculation, greenmail

and anticompetitive conduct. However, in some MEAs or EAs, an incumbent

licensee may already serve more than one-third of the population. The

elimination of the substantial service alternative would prevent a

potential co-channel licensee other than the incumbent from bidding in

these markets because the five-year coverage requirement could only be

satisfied by the incumbent. The option of providing a showing of

substantial service allows those MEA and EA licensees who cannot meet

the three-year and five-year coverage requirements because of the

existence of incumbent co-channel licensees to satisfy a construction

requirement. Moreover, the Commission recognizes that the unserved

areas of many MEAs and EAs are rural areas that may be more difficult

to serve than urban areas. The Commission thinks it is in the public

interest to encourage build-out in rural areas by allowing licensees to

make a substantial service showing. Further, the substantial service

option enables licensees to use spectrum flexibly to provide new

services without being concerned that they must meet a specific

percentage of the coverage benchmark or lose their license.

51. Certain petitioners argue that the vagueness of the definition

of ``substantial service'' will result in an abundance of litigation.

One petitioner suggests that substantial service could be defined as

coverage of fifty percent at three years, and seventy-five percent at

five years, of the geographic area that is not served by co-channel

incumbent licensees; and that the Commission could require licensees to

show a specified level of infrastructure investment by the three-year

and five-year deadlines. Another petitioner suggests that the

Commission provide specific examples of what construction levels would

satisfy the substantial service test.

52. The Commission declines to adopt specific coverage requirements

as the sole means of defining ``substantial service.'' As already

noted, the unserved area of an MEA or EA license (i.e., the area not

served by co-channel incumbent licensees at the time the MEA or EA

license is granted) may consist largely of spectrum in rural

[[Page 33771]]

areas. The Commission believes that imposing strict coverage

requirements to define substantial service in the unserved area would

discourage new entrants from attempting to acquire licenses to serve

rural areas. Nonetheless, the Commission finds that establishing an

objective criterion as one means of meeting the substantial service

option in the unserved areas of an MEA or EA would be useful.

Therefore, the Commission will presume that the substantial service

coverage requirement is satisfied if an MEA or EA licensee provides

coverage to two-thirds of the population in the unserved area of the

MEA or EA within five years of license grant.

53. At the same time, the Commission recognizes the need for

flexibility in areas where stringent coverage requirements would

discourage provision of any service. Therefore, the Commission

clarifies that an MEA or EA licensee may be able to satisfy the

substantial service requirement even if it does not provide coverage to

two-thirds of the population in the unserved area within five years of

license grant. The Commission offered guidance to WCS licensees with

regard to factors that it would consider in evaluating whether the

substantial service requirement has been met, and the Commission now

applies this additional guidance to paging licensees. Thus, the

Commission may consider such factors as whether the licensee is

offering a specialized or technologically sophisticated service that

does not require a high level of coverage to be of benefit to

customers, and whether the licensee's operations serve niche markets. A

licensee may also demonstrate that it is providing service to unserved

or underserved areas without meeting a specific percentage, as the

Commission permitted SMR providers in the 800 MHz band to do. Because

the substantial service requirement can be met in a variety of ways,

the Wireless Telecommunications Bureau will review licensees' showings

on a case-by-case basis.

54. Petitioners request clarification as to whether licensees who

fail to meet coverage requirements will be permitted to retain licenses

for those facilities authorized, constructed, and operating at the time

the geographic area license is cancelled, or only those authorized,

constructed, and operating at the time of grant of the geographic area

license. The Commission agrees with the argument that licenses

reinstated after termination of the geographic area license should be

limited to the sites authorized, constructed, and operating at the time

the geographic area license was granted. In other words, the right to

use channels any place in the geographic area will be forfeited, but

any licenses for which individual sites were constructed and operating

prior to the grant of the geographic area license will be reinstated.

The Commission believes that this approach properly balances its

overarching goal of ensuring, to the extent possible, continuous

service to the public and the Commission's policy of discouraging

speculation and spectrum warehousing. Accordingly, the Commission

amends section 22.503(k) to provide that licensees who fail to meet

their coverage requirements will be permitted to retain licenses only

for those facilities authorized, constructed, and operating at the time

the geographic area license was granted. In such instances, incumbent

licensees will have the burden of showing when their facilities were

authorized, constructed, and operating, and they should retain

necessary records of these sites until they have fulfilled their

construction requirements.

Geographic Area Licensing for Nationwide Channels

55. The Commission affirms its decision in the Second R&O to grant

nationwide geographic area licenses without competitive bidding to

those licensees that met the exclusivity criteria established under its

previous rules. The Second R&O awarded nationwide geographic area

licenses on three 931 MHz channels and to the eighteen licensees who

had constructed sufficient stations to obtain nationwide exclusivity on

929 MHz channels under the Commission's rules as of February 8, 1996.

In addition, the Commission granted nationwide geographic area licenses

to four licensees on the 929 MHz band that had sufficient

authorizations, as of February 8, 1996, to qualify for nationwide

exclusivity on a conditional basis, but had not completed build-out at

that time. The Commission also granted nationwide exclusivity to

Nationwide 929.8875 LLC on 929.8875 MHz based on showings that it had

met the criteria for nationwide exclusivity as of February 8, 1996.

56. Certain petitioners argue that the exemption from competitive

bidding for nationwide licensees is arbitrary and capricious because it

results in similarly situated licensees being treated in a disparate

manner. According to petitioners, incumbents that have met their five-

year coverage requirement are similar to nationwide licensees that met

the Commission's previous build-out requirements to qualify for

exclusivity. The Commission does not believe that its decision to

exempt nationwide licensees from competitive bidding discriminates

against other paging systems. This decision merely recognizes licenses

granted prior to this rulemaking proceeding. The exclusivity rules

provided nationwide licensees with the right to continue to build out

anywhere in the country on their designated channels, whereas non-

nationwide paging licensees have been afforded no right to expand their

service area beyond their interference contours. Thus, there are no

areas available for auction on the channels on which nationwide

geographic area licensees operate, while there are available areas on

the channels on which non-nationwide licensees operate.

57. The Commission affirms its decision to deny Mobile

Telecommunications Technologies, Inc. (MTel) a nationwide geographic

area license on the 931.4375 MHz channel. The Commission disagrees with

MTel's argument that denying MTel a nationwide grant on 931.4375 MHz is

inconsistent with the Commission's grant of nationwide geographic area

licenses to paging carriers in the 929 MHz band. The Commission

recognizes that MTel is extensively licensed on 931.4375 MHz with over

800 transmitters in various locations throughout the United States. In

addition, several other 931 MHz channels are extensively licensed by

one carrier. But these 931 MHz channels, including 931.4375 MHz, have

never been designated as nationwide channels. The Commission did not

establish rules for a licensee to earn nationwide exclusivity on the

thirty-seven channels in the 931 MHz band reserved for local and

regional paging, as it did for the thirty-five exclusive 929 MHz

channels, so MTel could not reasonably have expected to be granted

nationwide status.

Competitive Bidding

58. The MO&O declines to adopt proposals regarding various

operational aspects of the paging auctions, including: the sequence of

the auctions (e.g., auctioning the lower band channels prior to the

upper band channels); modification of the hybrid simultaneous/license-

by-license stopping rule adopted in the Second R&O (e.g., replacing it

with a market-by-market or license-by-license stopping rule); and the

information disclosure to bidders during the Paging auctions (e.g.,

whether bidder identities will be announced). The Commission concludes

that, consistent with the Balanced Budget Act of 1997, the Wireless

Telecommunications Bureau

[[Page 33772]]

will seek further comment on these matters during the pre-auction

process. Doing so will allow the Bureau, pursuant to its delegated

authority, to fully consider these matters in the unique context of the

Paging auctions, and will provide adequate notice and opportunity for

comment on auction procedures prior to the commencement of the

auctions.

59. The MO&O declines to require paging auctions participants to

identify on the FCC Form 175 each market for which they wish to bid and

submit an upfront payment for each identified license. The Commission's

current rules allow bidders to apply to bid for all available markets

and submit an upfront payment that corresponds to the maximum number of

bidding units on which a bidder expects to be active in a single round.

The Commission believes that this approach provides bidders the

flexibility to pursue back-up strategies and adequately protects

against insincere bidding.

60. The MO&O rejects a proposal that the Commission modify its bid

withdrawal rule to allow the withdrawal of high bids placed due to

typographical or clerical error. The Commission concludes that recent

modifications to its bid software adequately protect against the

placement of erroneous bids. The MO&O also rejects petitions for

reconsideration of the Commission's decision to apply its general anti-

collusion rule, see 47 CFR 1.2105(c), in the Paging auctions. These

petitions seek safe harbors for business discussions regarding such

topics as mergers/consolidations and intercarrier agreements. The

Commission concludes that sufficient guidance regarding application of

the anti-collusion rule currently is readily available, and that

applicants, not the Commission, are in the best position to determine

whether their conduct or discussions may give rise to a potential

violation of the rule.

61. In response to petitions for clarification of the Commission's

attribution rules and small business definitions, the MO&O clarifies

that personal net worth is not attributable for purposes of determining

eligibility for small business bidding credits, and that controlling

interests in an applicant are not required to hold a minimum amount of

equity. In addition, the MO&O adopts a definition of ``controlling

interest,'' which focuses on the concepts of de jure and de facto

control, to further clarify the application of the attribution rule.

Moreover, the MO&O declines to conclude that intercarrier agreements

among otherwise independent entities do not constitute affiliation

under the Commission's Rules, and explains that such agreements may

rise to the level of affiliation if they meet the criteria set forth in

the affiliation rule, see 47 CFR 22.223(d).

62. Finally, although the MO&O declines to eliminate the

availability of bidding credits for small businesses, it does eliminate

the availability of installment payments for these entities. This

action is consistent with the Commission's prior decision in Part 1

Third R&O and Second Further Notice (63 FR 2315, January 15, 1998), to

eliminate installment payments for all future auctions, including the

Paging auctions. To balance the impact of this action, however, the

MO&O increases the level of bidding credits available to small and very

small businesses respectively from ten percent to twenty-five percent,

and from fifteen percent to thirty-five percent. These amounts are

based on the schedule of bidding credits adopted in the Part 1 Third

R&O and Second Further Notice. Finally, the MO&O further conforms the

paging competitive bidding rules with the Commission's general

competitive bidding rules by allowing winning bidders to make their

final payments within ten business days of the deadline, provided they

also pay a late fee equal to five percent of the amount due. These

actions will allow participants in the Paging auctions to enjoy the

same advantages as bidders in other recent spectrum auctions.

Third Report and Order

63. In the Second R&O, the Commission adopted rules governing

geographic area licensing of paging systems for exclusive channels in

the 35-36 MHz, 43-44 MHz, 152-159 MHz, 454-460 MHz, 929-930 MHz, and

931-932 MHz bands allocated for paging. The Commission adopted

competitive bidding rules for granting mutually exclusive applications,

adopted partitioning for non-nationwide geographic area licenses,

imposed coverage requirements on non-nationwide geographic area

licenses, and awarded nationwide geographic area licenses on the 929

MHz and 931 MHz bands. The Commission concurrently adopted a Further

Notice seeking comment on whether it should adopt coverage requirements

for nationwide geographic area licenses, various rules related to

partitioning and disaggregation by paging licensees, and whether the

Commission should revise the application procedures for shared

channels.

Coverage Requirements for Nationwide Geographic Area Licenses

64. The Commission elects to defer a decision on whether to impose

coverage requirements on nationwide geographic area licensees. As

discussed in the MO&O, the Commission designated three channels in the

931 MHz band for exclusive nationwide use. In 1993, to encourage the

development of wide-area paging systems, the Commission also

implemented exclusive licensing of qualified local, regional, and

nationwide paging systems on thirty-five of the forty 929 MHz channels

licensed, at that time, under Part 90 of its rules. In the Second R&O,

the Commission noted that its existing Part 22 and Part 90 requirements

for construction of nationwide systems were not consistent, and both

sets of requirements differ from the construction and coverage

requirements applicable to nationwide narrowband PCS licenses. As a

result, the Commission sought comment in the Further Notice on whether

to impose minimum coverage requirements for nationwide paging licenses,

and on what the appropriate coverage area should be. The Commission

also sought comment on whether it should auction the entire nationwide

license, or just a portion of the license, if the licensee fails to

meet the coverage requirements.

65. The Commission rejects the constitutional and statutory

arguments commenters make in opposition to coverage requirements. The

Commission also disagrees with several commenters that argue that

nationwide licensees' compliance with existing rules created a

reasonable expectation that they would enjoy exclusivity on a

nationwide basis, and imposing additional coverage requirements would

improperly subject those licensees to retroactive rulemaking. Certain

commenters also argue against nationwide coverage requirements on the

basis that nationwide licensees are not similarly situated with either

MEA/EA paging licensees or narrowband PCS licensees. Commenters that

oppose coverage requirements also oppose any cancellation of nationwide

licenses based on a failure to meet such requirements.

66. While petitioners have not persuaded the Commission that there

are any legal impediments to the adoption of coverage requirements for

nationwide geographic area paging licensees, the Commission concludes

that it is best to defer any decision on this issue until the

Commission resolves similar issues raised in the Narrowband PCS Further

Notice (62 FR 27507, May 20, 1997). Doing so will allow the

[[Page 33773]]

Commission to more fully consider the question of whether regulatory

parity with respect to coverage requirements is appropriate not only

for nationwide and MEA/EA paging licensees, but also for nationwide

paging and narrowband PCS carriers. In the Narrowband PCS Further

Notice, the Commission sought comment on whether to conform its

narrowband PCS coverage rules to its paging rules by allowing

narrowband PCS licensees to meet their performance requirements through

a demonstration of substantial service as an alternative to meeting the

coverage requirements provided under the existing rules. The Commission

further sought comment on whether to conform MTA-based narrowband PCS

coverage requirements to the same requirements adopted for MTA and EA

paging licenses in this proceeding. As a result, commenters in the

Narrowband PCS proceeding have raised the issue of whether narrowband

PCS, nationwide paging, and MTA/EA licensees provide substantially

similar services. The Commission believes that it needs to consider

this issue more carefully and to make a decision on nationwide paging

coverage requirements in conjunction with a decision on narrowband PCS.

Accordingly, the Commission defers resolution of whether to impose

coverage requirements on nationwide paging geographic area licensees to

the Narrowband PCS Further Notice proceeding. If it ultimately

determines that coverage requirements are appropriate for nationwide

paging geographic area licensees, the Commission will decide, at that

time, what the consequence of failing to meet those requirements should

be.

Partitioning and Disaggregation

67. In the Second R&O, the Commission adopted partitioning rules

that permit all MEA and EA paging licensees to partition to any party

eligible to be a paging licensee. In the Further Notice, the Commission

sought comment as to whether nationwide geographic area licensees

should also be permitted to partition their license areas. In the Third

R&O, the Commission adopts rules that permit partitioning of nationwide

geographic area licenses to any eligible party. The Commission agrees

with the commenters that geographic partitioning would be an effective

means of providing nationwide geographic area licensees with the

flexibility to tailor their service offerings to meet market demands

and facilitating greater participation in the paging industry by small

businesses and rural telephone companies. The Commission found that the

overall goal of partitioning--operational flexibility--outweighs any

possible disadvantage of allowing nationwide licensees to receive a

financial windfall though partitioning. Finally, consistent with the

partitioning rules established for MEA and EA licensees, the Commission

will permit partitioning of nationwide geographic area paging licenses

based on any boundaries defined by the parties.

68. Under the rules adopted in the Third R&O, all MEA and EA

licensees may partition at any time after the grant of their geographic

area licenses, and all nationwide geographic area licensees may

partition upon the effective date of this Order. The Commission

established two options for parties to a partitioning agreement

involving an MEA or EA license to satisfy coverage requirements. Under

the first option, both the partitioner and partitionee are individually

responsible for meeting the coverage requirements for their respective

areas. Therefore, partitionees of MEA or EA licenses must provide

coverage to one-third of the population in their partitioned area

within three years of the initial grant of the license, and to two-

thirds of the population in their partitioned area within five years of

the initial grant of the license; or, licensees may provide, in the

alternative, substantial service within five years of the grant of the

MEA or EA license. The Commission states that failure by either party

to meet its coverage requirements will result in the automatic

cancellation of its license without further Commission action.

69. Under the second option, the original licensee may certify at

the time of the partitioning transaction that it has already met, or

will meet, the coverage requirements for the entire geographic area.

The Commission states that only the partitioner's license will be

cancelled if it fails to meet the coverage requirements for the entire

geographic area. The Commission also states that the partitionee will

not be subject to coverage requirements except for those necessary to

obtain renewal. Finally, the Commission states that partitioners whose

licenses are cancelled will retain those sites authorized, constructed,

and operating at the time the geographic area license was granted.

70. The Commission rejects a proposal to eliminate the

``substantial service'' option because the Commission explains that

this option will encourage licensees to build out their systems while

safeguarding the financial investments made by those licensees who are

financially unable to meet specific population coverage requirements.

Thus, the Commission states that the substantial service alternative

will promote service growth while helping licensees to remain

financially viable and retain their licenses.

71. The Commission decided not to impose coverage requirements at

this time on partitionees of a nationwide geographic area license, and

will defer reaching a decision on this issue until it resolves the

question of coverage requirements for nationwide licensees generally.

The Commission believes that it would be inappropriate to subject

entities that obtain partitioned licenses from nationwide geographic

area licensees to coverage requirements when no such requirements have

been established for partitioners. However, the Commission states that

partitionees of nationwide licenses may be subject to coverage

requirements in the future.

72. The Commission determined that partitionees should be

authorized to hold their licenses for the remainder of the

partitioner's original ten-year term. The Commission rejected a

proposal that a partitionee receive a one-year term when any

partitioning transaction occurs within one year of the renewal date of

the original license because, in this instance, the partitioner would

be conferring greater rights than it was awarded under the terms of its

license grant. The Commission also found that a partitionee should be

granted the same renewal expectancy as the partitioner; a Commercial

Mobile Radio Services (CMRS) licensee will be entitled to a renewal

expectancy if it demonstrates that it has provided substantial service

during the license term and has complied with the Commission's rules

and policies and the Communications Act.

73. Although several commenters oppose establishing disaggregation

rules at this time, the Commission will permit MEA, EA, and nationwide

geographic area licensees to engage in disaggregation. The Commission

also will not impose a minimum limit on spectrum disaggregation in the

paging service. The Commission concludes that the market should

determine if paging spectrum is technically and economically feasible

to disaggregate. In addition, the Commission notes that allowing

disaggregation will encourage the further development of paging

equipment capable of operating on less than 25 kHz. The Commission

further concludes that allowing spectrum disaggregation at this time

could potentially expedite the introduction of service to underserved

areas, provide increased flexibility to licensees, and encourage

participation by small businesses in the provision of services.

[[Page 33774]]

The Commission also finds that commenters have not provided sufficient

evidence that interference to adjacent or co-channel licensees is a

substantial risk that should preclude the Commission from allowing

disaggregation of paging spectrum. The Commission finds that its

existing technical rules provide parties with sufficient protection

from interference. The Commission also believes that all qualified

parties should be eligible to disaggregate any geographic area license.

The Commission states that open eligibility to disaggregate spectrum

promotes prompt service to the public by facilitating the assignment of

spectrum to the entity that values it most.

74. The Commission establishes two options for parties to a

disaggregation agreement involving an MEA or EA license to satisfy

coverage requirements. Under the first option, which is the option

proposed in the Further Notice, the parties may agree that either the

disaggregator or the disaggregatee will be responsible for meeting the

coverage requirements for the geographic service area. Under this

option, the disaggregating party certifying responsibility for the

coverage requirements of an MEA or EA license will be required to

provide coverage to one-third of the population of the licensed

geographic area within three years of license grant, and to two-thirds

of the population within five years of license grant; or, in the

alternative, provide substantial service to the geographic area within

five years of license grant. Under the second option, the disaggregator

and disaggregatee may certify that they will share the responsibility

for meeting the coverage requirements for the entire geographic area.

Under this option, both parties jointly will be required to provide

coverage to one-third of the population of the licensed geographic area

within three years of license grant, and to two-thirds of the

population within five years of license grant; or, in the alternative,

provide substantial service to the geographic area within five years of

license grant.

75. The Commission recognizes that if the parties to a

disaggregation agreement select the first option, situations may arise

where a party minimally builds its system but will retain its license

because the other party has met the coverage requirements for the

geographic area. Nonetheless, the Commission believes that it is

appropriate for one party to assume full responsibility for

construction within the shared service area, because service would be

offered to the required percentage of the population on a common

frequency, even if not on the entire spectrum.

76. Under the first option, if the certifying party fails to meet

the coverage requirements for the entire geographic area, that party's

license will be subject to cancellation, but the non-certifying party's

license will not be affected. However, if the parties to a

disaggregation agreement select the second option and jointly fail to

satisfy the coverage requirements for the entire geographic area, both

parties' licenses will be subject to cancellation. The Commission notes

that MEA or EA licensees whose licenses are cancelled will retain those

sites authorized, constructed, and operating at the time the geographic

area license was granted.

77. As the Commission did with respect to the issue of coverage

requirements for partitionees of nationwide geographic area licenses,

it will defer any decision on such requirements for disaggregatees of

nationwide geographic area licenses until the Commission decides the

question of whether to impose coverage requirements on nationwide

geographic area licensees generally. Thus, the Commission notes that

disaggregatees of nationwide licenses may be subject to coverage

requirements in the future.

78. Disaggregatees will be authorized to hold licenses for the

remainder of the disaggregator's original ten-year term. As the

Commission concluded with respect to partitioners, the disaggregator

should not be entitled to confer greater rights than it was awarded

under the initial license grant. The Commission also concludes that a

disaggregatee should be afforded the same renewal expectancy as the

disaggregator. The Commission also concludes that carriers may engage

in combinations of partitioning and disaggregation. As in other

wireless services, the Commission further concludes that in the event

there is a conflict in the application of the partitioning and

disaggregation rules, the partitioning rules should prevail.

Unjust Enrichment Provisions Regarding Partitioning and Disaggregation

79. The Commission concludes that unjust enrichment provisions

adopted in the Part 1 Third R&O and Second Further Notice will apply to

any MEA or EA paging licensee that receives a bidding credit and later

elects to partition or disaggregate its license. Specifically, the

rules adopted in the Part 1 Third R&O and Second Further Notice

indicate that if a licensee seeks to partition any portion of its

geographic area, the amount of the unjust enrichment payment will be

calculated based on the ratio of the population in the partitioned area

to the overall population of the license area. In the event of

disaggregation, the amount of the unjust enrichment payment will be

based upon the ratio of the amount of spectrum disaggregated to the

amount of spectrum held by the disaggregating licensee. When combined

partitioning and disaggregation is proposed, the Commission will,

consistent with its rules for other services, use a combination of both

population of the partitioned area and amount of spectrum disaggregated

to make these pro rata calculations. The Commission does not address

how partitioning and disaggregation will affect installment payments

because, in the MO&O, the Commission eliminated the use of installment

payments for auctioned spectrum in the paging service.

Application Fraud

80. To deter fraud by application mills on the shared channels, the

Commission will add language to the long-form application regarding

construction and coverage requirements, and will disseminate

information regarding its licensing rules and the potential for fraud

through public notices and the Commission's website. The Commission is

currently in the process of modifying FCC Form 601 to include language

near the signature block that warns applicants that the failure of the

licensee to construct may result in cancellation of the license. The

Commission believes this language will be helpful to applicants in all

services and may be of some use in deterring fraud. The Commission also

applauds the measures taken by the Personal Communications Industry

Association (PCIA) (frequency coordinator) to make applicants aware of

the potential for fraud by applications mills.

81. Finally, once the Commission has completed the modification of

FCC Form 601 to include warning language as described above, the

Wireless Telecommunications Bureau will release a public notice that

removes the interim licensing rules for both the lower band shared PCP

channels and the five shared 929 MHz PCP channels. Presently, the

interim paging rules for the shared PCP paging channels permit only

incumbents to file for new sites at any location. The Commission allows

non-incumbents to file applications, but only for private, internal-use

systems. Once the interim licensing rules are removed, non-incumbents

will be permitted to file applications on the shared PCP paging

channels for new sites at any location. The Commission further notes

that while frequency

[[Page 33775]]

coordination is no longer required on the exclusive paging channels,

all applications for new sites filed on the shared PCP paging channels

will continue to require frequency coordination prior to the filing of

these applications with the Commission. Accordingly, the Commission

amends section 90.175(f) to clarify that frequency coordination is only

needed for shared frequencies in the 929-930 MHz band.

Supplemental Final Regulatory Flexibility Analysis

Memorandum Opinion and Order on Reconsideration

82. As required by the Regulatory Flexibility Act (RFA), an Initial

Regulatory Flexibility Analysis (IRFA) was incorporated in Appendix A

of the Notice in this proceeding, and a Final Regulatory Flexibility

Analysis (FRFA) was incorporated in Appendix C of the subsequent Second

R&O. As described below, two petitions for reconsideration of the

Second R&O raise an issue concerning the previous FRFA. The MO&O

addresses those reconsideration petitions, among others. This

associated Supplemental Final Regulatory Flexibility Analysis

(Supplemental FRFA) also addresses those petitions and conforms to the

RFA.

I. Need for and Purpose of this Action

83. In the Second R&O, the Commission adopted rules for geographic

area licensing of Common Carrier Paging and exclusive 929 MHz Private

Carrier Paging and procedures for auctioning mutually exclusive

applications for these licenses. The actions taken in this MO&O are in

response to petitions for reconsideration or clarification of the

Second R&O. Throughout this proceeding, the Commission has sought to

promote Congress's goal of regulatory parity for all CMRS, and to

encourage the participation of a wide variety of applicants, including

small businesses, in the paging industry. In addition, the Commission

has sought to establish rules for the paging services that will

streamline the licensing process and provide a flexible operating

environment for licensees, foster competition, and promote the delivery

of service to all areas of the country, including rural areas.

II. Summary of Significant Issues Raised in Response to the Final

Regulatory Flexibility Analysis

84. Priority Communications, Inc.'s (Priority) petition for

reconsideration raises various issues, one of which is in direct

response to the FRFA contained in the Second R&O. Priority states that

the FRFA did not address alternatives to competitive bidding, e.g.,

granting geographic area licenses, without competitive bidding, to

incumbents of highly encumbered areas. The Commission disagrees with

the contention that the Commission failed to consider alternatives to

competitive bidding. In the Second R&O, the Commission considered and

rejected proposals to retain site-by-site licensing for the paging

industry. In rejecting the proposals, the Commission found that

geographic area licensing provides flexibility for licensees and ease

of administration for the Commission, facilitates further build-out of

wide-area systems, and enables paging operators to meet the needs of

their customers more easily. Moreover, the Commission concluded that

geographic area licensing will further the goal of providing carriers

that offer substantially similar services more flexibility to compete,

and will enhance regulatory symmetry between paging and other service

in the CMRS marketplace.

85. The Commission further concluded that it would grant mutually

exclusive applications for geographic area licenses through competitive

bidding even in areas extensively built out by an incumbent licensee.

The Commission specifically considered and rejected proposals to award

geographic area licenses, without competitive bidding, to any incumbent

providing coverage to 70 percent or more of the population or to two-

thirds of the population in the license area. Similarly, the Commission

rejected a proposal not to hold auctions where an incumbent licensee is

serving at least 50 percent of the geographic area or 50 percent of the

population in that market. The Commission also considered and rejected

proposals to award a dispositive preference in the auction to a

licensee that provides service to one-third or greater of the

population, or one-half or greater of the geographic area, or to

restrict competitive bidding to incumbent licensees. In rejecting these

proposals, the Commission concluded that market forces, not regulation,

should determine participation in competitive bidding for geographic

area licenses.

86. In its petition for reconsideration, the National Telephone

Cooperative Association (NTCA) contends that the FRFA failed to address

alternatives that parties suggested in response to the Notice to

minimize the impact of the rule changes adopted in the Second R&O on

small BETRS operators. NTCA specifically contends that the Commission

did not address the investment BETRS operators would be unable to

recover once they were required to terminate operations upon

notification by a geographic area licensee of interference. NTCA

further contends that the Commission did not address the adverse impact

on small BETRS operators resulting from auctions that ``pit them

against paging operations that have no interest in the site licenses

needed for BETRS operations.'' Initially, the Commission notes that

NTCA did not raise these issues in response to the Notice. NTCA has

raised these issues only in response to the Second R&O. The Commission

also disagrees with the contention that the Commission failed to

consider alternatives that would minimize the impact on small BETRS

operators. The Commission specifically found it unnecessary to adopt

the plan that Puerto Rico Telephone proposed, under which (1) BETRS

operators would be given preferential treatment over paging operators

for mutually exclusive applications (on a site-by-site basis), and (2)

the Commission would designate a frequency block for reallocated

frequencies solely for BETRS use. Based on the potentially competitive

environment in local exchange services, the Commission saw no basis for

distinguishing BETRS from other commercial radio services that are

auctionable under Section 309(j) of the Communications Act. Rather, the

Commission determined that BETRS licensees should be required to

participate in competitive bidding for paging licenses. In considering

proposals to continue licensing BETRS facilities on a site-specific

basis, the Commission decided that BETRS licensees could obtain site

licenses on a secondary basis and enter into partitioning agreements

with paging geographic area licensees. With respect to the issue of

stranded costs, the Second R&O does not limit BETRS operators' options

to that of obtaining licenses on a secondary basis. As already

explained, they may also obtain co-primary licenses through

partitioning. Moreover, the Commission has adopted specific procedures

in the MO&O to limit the extent to which BETRS providers will be

required to discontinue operations at secondary sites.

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

Which the Rules Will Apply

87. The rules adopted in the MO&O will affect all small businesses

that hold or seek to acquire commercial paging

[[Page 33776]]

licenses. As noted, a FRFA was incorporated into the Second R&O. In

that analysis, the Commission described the small businesses that might

be significantly affected at that time by the rules adopted in the

Second R&O. Those entities include existing commercial paging operators

and new entrants into the paging market. To ensure the more meaningful

participation of small business entities in the auctions, the

Commission adopted a two-tiered definition of small businesses in the

Second R&O: (1) an entity that, together with its affiliates and

controlling interests, has average gross revenues for the three

preceding years of not more than $3 million; or (2) an entity that,

together with affiliates and controlling interests, has average gross

revenues for the three preceding years of not more than $15 million.

Because the Small Business Administration (SBA) had not yet approved

this definition, the Commission relied in the FRFA on the SBA's

definition applicable at that time to radiotelephone companies, i.e.,

an entity employing less than 1,500 persons. Given the fact that nearly

all radiotelephone companies had fewer than 1,000 employees, and that

no reasonable estimate of the number of prospective paging licensees

could be made, the Commission assumed, for purposes of the evaluations

and conclusions in the FRFA, that all the auctioned 16,630 geographic

area licenses would be awarded to small entities. In December 1998, the

SBA approved the two-tiered size standards for paging services set

forth in the Second R&O.

88. In the FRFA, the Commission anticipated that approximately

16,630 non-nationwide geographic area licenses will be auctioned. No

party submitting or commenting on the petitions for reconsideration

giving rise to this MO&O commented on the potential number of small

businesses that might participate in the commercial paging auction and

no reasonable estimate can be made. While the Commission is unable to

predict accurately how many paging licensees meeting one of the above

definitions will choose to participate in or be successful at auction,

the Third CMRS Competition Report estimated that, as of January 1998,

there were more than 600 paging companies in the United States. The

Third CMRS Competition Report also indicates that at least ten of the

top twelve publicly held paging companies had average gross revenues in

excess of $15 million for the three years preceding 1998. Data obtained

from publicly available company documents and SEC filings indicate that

this is also true for the three years preceding 1999. While the

Commission expects these ten companies to participate in the paging

auction, the Commission also expects, for the purposes of the

evaluations and conclusions in this Supplemental FRFA, that a number of

geographic area paging licenses will be awarded to small businesses.

IV. Description of Projected Reporting, Recordkeeping, and Other

Compliance Requirements

89. With one exception, this MO&O does not impose additional

recordkeeping or other compliance requirements beyond the requirements

contained in the Second R&O. If an MEA or EA licensee fails to meet its

coverage requirements, that licensee will have the burden of showing

which of its facilities were authorized, constructed, and operating at

the time the geographic area license was granted. MEA and EA licensees

will need to retain necessary records of any such facilities until they

meet the geographic area license coverage requirements.

V. Steps Taken to Minimize Significant Economic Impact on Small

Entities, and Significant Alternatives Considered

90. The previous FRFA stated that the rules adopted for geographic

area licensing will affect the Common Carrier Paging and exclusive 929

MHz Private Carrier Paging services. This Supplemental FRFA concludes

that a number of geographic area commercial paging licenses may be

awarded to small businesses. As described below, the Commission's

actions taken to implement the transition to geographic area licensing

and competitive bidding represent a balancing of various factors.

91. Certain petitioners suggested replacing Rand McNally MTAs with

Major Economic Areas (MEAs) for the 929 MHz and 931 MHz bands.

Considering these requests, the Commission has decided to adopt MEAs

instead of MTAs. Because MEAs are composed of EAs, licensees with

paging systems on both the lower channels and the 929 and 931 MHz

bands, including small businesses, will be able to operate their

systems more efficiently. The MEA designation will also enhance

competition because paging systems on the lower channels, including

small business paging systems, will be able to combine their EAs to

form MEAs. In addition, the Commission considered and rejected a

recommendation to use Basic Trading Areas (BTAs) for geographic area

licensing on the lower paging bands. In rejecting the BTA designation,

the Commission concluded that EAs, which the majority of commenters

supported, best reflect the geographic area that the paging licensees

on the lower channels seek to serve. The Commission also found that the

use of EAs will not prevent paging operators of small systems from

participating in the auction. The Commission noted that bidding credits

will allow small businesses to compete against larger bidders. In

addition, the Commission's partitioning rules will allow entities,

including small businesses, to acquire licenses for areas smaller than

EAs.

92. A number of petitioners have requested that the Commission

reconsider its decision to grant mutually exclusive applications for

geographic area licenses through competitive bidding even in areas

extensively built out by an incumbent licensee. Again balancing various

interests, the Commission has affirmed the use of competitive bidding

to grant mutually exclusive paging applications. The Commission has

rejected the petitioners' request because open eligibility promotes

prompt service to the public by allocating spectrum to the entity that

values it most. The Commission believes that the market should decide

whether an economically viable paging system can be established in the

unserved area of a geographic market. The Commission's decision on this

issue will provide adjacent geographic area licensees and new entrants,

including small businesses, with the opportunity to establish a viable

system that serves the public as well as an incumbent. Moreover, the

Commission sees no reason to give licensees that serve a substantial

portion of a geographic area an advantage over other entities,

including small businesses, that may also value the spectrum in that

particular market.

93. Several petitioners request that the Commission clarify section

22.723 of its rules, which requires Rural Radiotelephone Service (RRS)

licensees, including BETRS operators, to discontinue operations once

the paging geographic area licensee notifies the RRS licensee that its

co-channel secondary facilities may cause interference to the

geographic area licensee's existing or planned facilities. The

petitioners argue that the Commission's rules will allow geographic

area licensees to terminate BETRS upon any allegation of harmful

interference. In response to this concern, the Commission is adopting

new procedures in the MO&O that geographic area licensees must follow

in notifying a BETRS operator that its facility causes or will cause

interference

[[Page 33777]]

with the geographic area licensee's service contour in violation of the

Commission's interference rules. The new procedures limit the

termination of operating BETRS co-channel secondary facilities until

harmful interference would occur.

94. In the Second R&O, the Commission defined a system-wide license

by the aggregate of the interference contours around each of the

incumbent's contiguous sites operating on the same channel. The

Commission also concluded that incumbent licensees may add or modify

sites within their existing interference contours without filing site-

specific applications, but may not expand their existing interference

contours without the consent of the geographic area licensee. Several

petitioners expressed confusion over the Commission's definition of

``contiguous sites'' for the purpose of determining an incumbent's

``aggregate interference contour.'' In addition, one petitioner asked

that the Commission define ``composite interference contours'' to

include all authorized transmitters, including valid construction

permits, regardless of the grant date. Another petitioner requested

that the Commission include remote transmitters within system-wide

licenses, or in the alternative maintain separate licenses for any

stand-alone or remote transmitter. Recognizing these concerns and

balancing various interests as explained more fully in the MO&O, the

Commission has maximized the definition of composite interference

contour to reduce unnecessary regulatory burdens on licensees, reduce

administrative costs on the industry, and thereby benefit consumers. In

this regard, the Commission has clarified that contiguous sites, for

the purpose of defining an incumbent's composite interference contour,

are defined by overlapping interference contours, not service contours.

The Commission further states that all authorized site-specific paging

licenses and construction permits are included in a composite

interference contour. Finally, the Commission has amended section

22.507 to allow system-wide licensees to maintain separate licenses for

any stand-alone or remote transmitters, or to include remote and stand-

alone sites within the system-wide license.

95. On a related matter, petitioners asked the Commission to allow

reversion to the geographic area licensee of spectrum recovered from an

incumbent in all instances except where an incumbent licensee

discontinues operations in a location wholly encompassed by the

incumbent's composite interference contour. In balancing the various

relevant considerations, the Commission concluded that no demonstration

had been made showing that the geographic area licensee would be unable

to serve areas wholly surrounded by an incumbent. Moreover, the

Commission does not believe the public interest would be served by

withholding such areas from the geographic area licensee in hope that

the incumbent will one day resume service to those areas. The

Commission further noted that if incumbents, including small

businesses, wish to serve reverted areas, they may seek to enter into

partitioning agreements with the geographic area licensees. Similarly,

a number of petitioners contended that system-wide licenses should

include areas where an incumbent licensees' interference contours do

not overlap, but where no other licensee could place a transmitter

because of interference rules. The Commission considered and rejected

this proposal, finding that inclusion of areas outside of an

incumbent's interference contours would be contrary to the objective of

prohibiting encroachment on the geographic area licensee's operations.

Incumbents seeking to expand their contours, including small

businesses, may participate in the auction or seek partitioning

agreements with geographic area licensees.

96. In the Second R&O, the Commission elected not to impose a limit

or ``cap'' on the number of licensees that may operate on shared paging

channels. Two petitioners asked the Commission to reconsider that

determination. Again, balancing the options, the Commission reaffirmed

its prior decision. A ``cap'' would not promote efficient use of

spectrum because the capacity limits on paging channels are based

primarily on use and not the number of licensees. The Commission's goal

is to increase the use of these shared channels, not to unduly restrict

access to them. This decision will provide new entrants, including

small businesses, with another opportunity to acquire paging spectrum.

97. In the Second R&O, the Commission also eliminated the Part 90

height and power limitations on 929 MHz stations and increased the

maximum permitted effective radiated power (ERP) to 3,500 watts. Some

petitioners have asked for clarification as to whether incumbent 929

MHz licensees must file a modification application to increase the

current ERP for their base stations up to the maximum permissible. In

response to this request, the Commission has clarified that incumbent

929 MHz licensees need not file a modification application to increase

the ERP for base stations at any location, including exterior base

stations, as long as they do not expand their existing composite

interference contour. This clarification conforms the Commission's

technical requirements for height and power with the general rule that

incumbents need not file applications for internal system changes.

Adopting this rule will minimize burdens on all entities, including

small businesses, that increase the ERP of their base stations.

98. One petitioner advocated that the Commission make its coverage

requirements more stringent by requiring geographic area licensees to

provide coverage to one-third of the market area within one year, and

two-thirds within three years. The Commission considered and rejected

this proposal because it believes that the coverage requirements

adequately promote prompt service to the public without being unduly

burdensome on licensees, including small businesses, that need a

reasonable amount of time to complete construction. Moreover, the

Commission believes that overly stringent coverage requirements

unfairly favor incumbents by erecting formidable barriers to new

entrants, including small businesses. Several petitioners also

requested that the Commission eliminate the ``substantial service''

option for meeting MEA or EA coverage requirements. The Commission

rejected this request because the Commission believes that the

``substantial service'' option will facilitate build-out in rural

areas, encourage licensees to provide new services, and enable new

entrants to satisfy the Commission's coverage requirements in

geographic areas where incumbents are already substantially built out.

The Commission believes that rural service providers as well as new

entrants are likely to include small businesses, and thus retaining the

``substantial service'' option should benefit small businesses. While

the Commission will presume that the ``substantial service'' option is

satisfied if an MEA or EA licensee provides coverage to two-thirds of

the population in unserved areas within five years of license grant,

the Commission declines to adopt specific coverage requirements as the

sole means of defining ``substantial service.'' Giving licensees

flexibility to satisfy the ``substantial service'' option in different

ways should benefit small businesses.

99. In the Part 1 Third R&O and Further Notice, the Commission

suspended the availability of installment payment financing for small

businesses participating in future

[[Page 33778]]

auctions. Consistent with this decision, the MO&O rescinds installment

payment financing for the paging auctions. To balance the impact of

this decision on small businesses, however, the Commission is

increasing the bidding credits available to qualifying entities. The

revised rule conforms to a schedule of bidding credits adopted in the

Part 1 Third R&O and Second Further Notice. Under this rule, an

applicant will qualify for a twenty-five percent (25%) bidding credit

if the average gross revenues for the preceding three years of the

applicant, its affiliates and controlling interests do not exceed $15

million. Similarly, an applicant will qualify for a thirty-five percent

(35%) bidding credit if the average gross revenues for the preceding

three years of the applicant, its affiliates and controlling interests

do not exceed $3 million. As the Commission stated in the Part 1 Third

R&O and Second Further Notice, the Commission believes that these

increased bidding credits will provide small businesses with adequate

opportunities to participate in the paging auctions. Moreover, the

Commission is further conforming the paging competitive bidding rules

to the Part 1 rules by allowing winning bidders to make their final

payments within ten (10) business days after the payment deadline,

provided that they also pay a late fee of five (5) percent of the

amount due. As the Commission stated in the Part 1 Third R&O and Second

Further Notice, it believes that this additional ten-day period

provides winning bidders with adequate time to adjust for any last-

minute problems in arranging financing and making final payment.

VI. Report to Congress

100. The Commission will send a copy of the MO&O, including this

Supplemental FRFA, in a report to Congress pursuant to the Small

Business Regulatory Enforcement Fairness Act of 1996. In addition, the

Commission will send a copy of the MO&O, including this Supplemental

FRFA, to the Chief Counsel for Advocacy of the Small Business

Association. A copy of the MO&O and Supplemental FRFA (or summaries

thereof) will also be published in the Federal Register.

Final Regulatory Flexibility Analysis

Third Report and Order

101. As required by the Regulatory Flexibility Act (RFA), an

Initial Regulatory Flexibility Analysis (IRFA) was incorporated in

Appendix D of the Second R&O and Further Notice in this proceeding. The

Commission sought written public comment on the proposals in that

Further Notice, including comment on the IRFA. As described below, no

commenter raised an issue concerning the IRFA. The Commission's Final

Regulatory Flexibility Analysis in this Third R&O conforms to the RFA.

I. Need for and Purpose of this Action

102. In the Second R&O, the Commission adopted coverage

requirements for and decided to allow partitioning by non-nationwide

geographic area licensees, including small businesses. In the Further

Notice, the Commission sought comment on whether to adopt coverage

requirements for nationwide geographic area licenses, whether to allow

partitioning by nationwide geographic area licensees, whether to permit

disaggregation of paging licenses, and whether to revise the

application procedures for shared channels. In the Third R&O, the

Commission concludes that it is best to defer any decision on coverage

requirements for nationwide geographic area licenses until similar

issues raised in the Narrowband PCS Further Notice of Proposed

Rulemaking are resolved. The Commission further modifies the paging

rules to permit partitioning by all nationwide geographic area

licensees and to allow disaggregation by all MEA, EA, and nationwide

geographic area licensees. The Third R&O also adopts rules governing

the coverage requirements for parties to partitioning or disaggregation

agreements involving MEA or EA licenses, and the license term of

partitioned or disaggregated MEA, EA, and nationwide geographic area

licenses. Further, the Third R&O permits MEA, EA, and nationwide

geographic area licensees to combine partitioning and disaggregation.

These partitioning and disaggregation rules will allow entities in

addition to the initial geographic area licensees, including small

businesses, to participate in providing paging services. Indeed,

partitioning and disaggregation should be well suited to small

businesses that do not wish to acquire an entire geographic area

license. Finally, the Third R&O establishes additional mechanisms to

inform consumers of the rules governing paging licenses and the danger

of fraudulent schemes perpetrated by application mills. These

mechanisms should help to reduce application fraud and protect

consumers.

II. Summary of Issues Raised in Response to the Initial Regulatory

Flexibility Analysis

103. None of the commenters submitted comments specifically in

response to the IRFA. The Commission has, however, taken small business

concerns into account in the Third R&O, as discussed in Sections V and

VI of the FRFA.

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

Which the Rules Will Apply

104. The rules adopted in the Third R&O will affect small

businesses that hold or seek to acquire commercial paging licenses.

These entities include small business nationwide geographic area

licensees that decide to partition or disaggregate, small businesses

that obtain MEA or EA licenses through auction and subsequently decide

to partition or disaggregate, and small businesses that may acquire

partitioned and/or disaggregated MEA, EA, or nationwide geographic area

licenses. To ensure the more meaningful participation of small business

entities in the auctions, the Commission adopted a two-tiered

definition of small businesses in the Second R&O: (1) An entity that,

together with affiliates and controlling interests, has average gross

revenues for the three preceding years of not more than $3 million; or

(2) an entity that, together with affiliates and controlling interests,

has average gross revenues for the three preceding years of not more

than $15 million. In December 1998, the Small Business Association

approved the two-tiered size standards for paging services set forth in

the Second R&O.

MEA and EA Licenses

105. In the Final Regulatory Flexibility Analysis incorporated in

Appendix C of the Second R&O, the Commission anticipated that

approximately 16,630 non-nationwide geographic area licenses will be

auctioned. No parties, however, commented in response to the Further

Notice on the number of small businesses that might elect to use the

proposed partitioning and disaggregation rules and no reasonable

estimate can be made. While the Commission is unable to predict

accurately how many paging licensees meeting one of the above

definitions will participate in or be successful at auction, the Third

CMRS Competition Report estimated that, as of January 1998, there were

more than 600 paging companies in the United States. The Third CMRS

Competition Report also

[[Page 33779]]

indicates that at least ten of the top twelve publicly held paging

companies had average gross revenues in excess of $15 million for the

three years preceding 1998. The Commission expects that these ten

companies will participate in the paging auction and may employ the

partitioning or disaggregation rules. The Commission also expects, for

purposes of the evaluations and conclusions in this Final Regulatory

Flexibility Analysis, that a number of paging licenses will be awarded

to small businesses, and at least some of those small business

licensees will likely also take advantage of the partitioning and

disaggregation rules. The Commission is unable to predict accurately

the number of small businesses that may choose to acquire partitioned

or disaggregated MEA or EA licenses. The Commission expects, however,

for purposes of the evaluations and conclusions in this Final

Regulatory Flexibility Analysis, that entities meeting one of the above

definitions will use partitioning and disaggregation as a means to

obtain a paging license from an MEA or EA licensee at a cost lower than

the cost of the license for the entire MEA or EA.

Nationwide Geographic Area Licenses

106. The partitioning and disaggregation rules pertaining to

nationwide geographic area licenses adopted in the Third R&O will

affect the 26 licensees holding nationwide geographic area licenses to

the extent they choose to partition or disaggregate, as well as any

entity that enters into a partitioning or disaggregation agreement with

a nationwide geographic area licensee. No parties, however, commented

on the number of small business nationwide geographic area licensees

that might elect to partition or disaggregate their licenses and no

reasonable estimate can be made. While the Commission is unable to

state accurately how many nationwide geographic area licensees meet one

of the above small business definitions, the Third CMRS Competition

Report indicates that at least eight of the top twelve publicly held

paging companies hold nationwide geographic area licenses and had

average gross revenues in excess of $15 million for the three years

preceding 1998. The Commission expects at least some of these eight

companies to employ the partitioning or disaggregation rules, and also

expects, for the purposes of evaluations and conclusions in this Final

Regulatory Flexibility Analysis, that nationwide geographic area

licensees meeting one of the above definitions may use the partitioning

or disaggregation rules. No parties commented on the number of small

businesses that may choose to acquire partitioned or disaggregated

licenses from nationwide geographic area licensees and, again, no

reasonable estimate can be made. While the Commission is unable to

predict accurately the number of small businesses that may choose to

acquire partitioned or disaggregated licenses from nationwide

geographic area licensees, the Commission expects, for purposes of the

evaluations and conclusions in the Final Regulatory Flexibility

Analysis, that entities meeting one of the above small business

definitions will use partitioning and disaggregation as a means to

obtain a paging license from a nationwide geographic area licensee.

Fraud on Shared Paging Channels

107. The additional mechanisms established to inform consumers of

the paging rules and the potential for paging application fraud on the

shared channels will not affect small businesses seeking to acquire a

license on a shared paging channel, except that small businesses

interested in investing in shared channel licenses will be more

informed of the potential for fraud.

IV. Summary of Projected Reporting, Recordkeeping, and Other

Compliance Requirements

108. The rules adopted in the Third R&O impose reporting and

recordkeeping requirements on small businesses, as well as others,

seeking to obtain or transfer licenses through partitioning and

disaggregation. The information requirements would be used to determine

whether the proposed partitionee or disaggregatee is an entity

qualified to obtain a partitioned license or disaggregated spectrum.

This information will be a one-time filing by any applicant requesting

such a license. The information can be submitted on FCC Form 490 or

Form 603 for Part 22 paging services until July 1, 1999. Part 22

applicants must file electronically in the Universal Licensing System

(ULS) on Form 603 on or after July 1, 1999. The Commission estimates

that the average burden on the applicant is three hours for the

information necessary to complete these forms. The Commission estimates

that seventy-five percent of the respondents, which may include small

businesses, will contract out the burden of responding. The Commission

estimates that it will take approximately 30 minutes to coordinate

information with those contractors. The remaining twenty-five percent

of respondents, which may include small businesses, are estimated to

employ in-house staff to provide the information. Applicants filing

electronically, including small businesses, will not incur any per

minute on-line charge. The Commission estimates that applicants

contracting out the information would use an attorney or engineer

(average of $200 per hour) to prepare the information.

V. Steps Taken to Minimize Burdens on Small Entities

109. The rules adopted in the Third R&O are designed to implement

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

the opportunity to participate in the provision of spectrum-based

services. The rules are also consistent with the Communications Act's

mandate to identify and eliminate market entry barriers for

entrepreneurs and small businesses in the provision and ownership of

telecommunications services.

Partitioning and Disaggregation

110. Partitioning of nationwide geographic area licenses and

disaggregation of MEA, EA, and nationwide geographic area licenses will

facilitate market entry by parties that may lack the financial

resources to participate in auctions, including small businesses.

Partitioning and disaggregation are expected to enable small businesses

to obtain licenses for areas smaller than MEA, EA, and nationwide

areas, or smaller amounts of spectrum, at costs they will be able to

afford. Allowing for the partitioning and disaggregation of MEA and EA

licenses prior to fulfillment of construction requirements by the

initial licensees will facilitate the immediate entry of new

competitors, including small businesses, into the paging market.

Finally, the Commission's decision to allow parties to partitioning or

disaggregation agreements of MEA and EA licenses to choose between two

options to meet the coverage requirements will provide small businesses

with more flexibility in managing their resources.

Fraud on Shared Paging Channels

111. As stated above, the additional mechanisms established to

deter paging application fraud on the shared channels are not expected

to have an impact on any small business or other entity applying for a

paging license on a shared channel. The changes are intended to protect

consumers from application fraud. Small businesses interested in

investing in shared channel licenses, however, will be more informed of

the potential for fraud.

[[Page 33780]]

VI. Significant Alternatives Considered

112. The Commission considered and rejected the following

alternative proposals concerning partitioning, disaggregation, coverage

requirements for parties to partitioning and disaggregation agreements,

and license terms.

Partitioning

113. The Commission declined to adopt Paging Network, Inc.'s

(PageNet) proposal that partitioning should be allowed only after the

initial geographic area licensee has met the build-out requirements for

the entire geographic area, and that partitioning before a geographic

area licensee meets its construction requirements should be allowed

only on a waiver basis where good cause is shown. PageNet's concern was

that the ability to partition may encourage bidders in the auction to

engage in unlawful contact with other bidders, particularly if the

market is highly contested, and that geographic area licensees may seek

to avoid the cancellation of their licenses by partitioning to a

``straw man'' when they fail to meet the Commission's coverage

requirements. The Commission found, however, that there was no evidence

that ``sham'' arrangements between geographic area licensees and other

parties to avoid construction requirements are likely to occur in the

paging service or have already taken place in other services. The

Commission also determined that any unlawful activity between bidders

concerning partitioning falls within its anti-collusion rules. Finally,

allowing parties to partition spectrum immediately after license grant

will facilitate the entry of new competitors to the paging market, many

of whom will be small businesses seeking to acquire a smaller service

area or smaller amount of paging spectrum at a reduced cost.

Disaggregation

114. A number of petitioners opposed the Commission's proposal to

allow MEA, EA, and nationwide geographic area licensees to

disaggregate, contending that disaggregation of paging spectrum is

neither technically nor practically feasible. Small Business in

Telecommunications (SBT) proposes that disaggregation should be limited

only to small businesses during the original licensee's construction

period. In considering and rejecting the petitioners' arguments, the

Commission concluded that the market should determine whether it is

technically or economically feasible to disaggregate spectrum. The

Commission further concluded that all qualified parties should be

eligible to disaggregate any geographic area license because open

eligibility to disaggregate spectrum promotes prompt service to the

public by facilitating the assignment of spectrum to the entity that

values it most. The Commission found that allowing spectrum

disaggregation at this time could potentially expedite the introduction

of service to underserved areas, provide increased flexibility to

licensees, and encourage participation by small businesses in the

provision of services.

Coverage Requirements

115. The Commission declined to adopt Metrocall, Inc.'s proposal

that geographic area licensees' coverage benchmarks should be based on

the entire geographic area, including the partitioned area, to prevent

the geographic area licensee from using partitioning to circumvent

coverage requirements. As stated previously, the Commission found that

there was no evidence that ``sham'' arrangements between geographic

area licensees and other parties to avoid construction requirements are

likely to occur in the paging service or have already taken place in

other services. The Commission also declined to adopt PCIA's proposal

that the partitioner should be responsible for build-out in the

partitioned area if the partitionee fails to build out, and that the

entire license should be cancelled if build-out in the partitioned area

is not completed by either the partitionee or the partitioner. The

decision not to place the ultimate responsibility for the partitionee's

coverage requirements on the partitioner, as well as the decision to

provide parties to partitioning agreements with two options for meeting

the coverage requirements, is expected to encourage more partitioning

agreements, including agreements involving small businesses. The

resulting benefits will be the same for disaggregation arrangements.

116. Finally, the Commission declined to adopt commenters' proposal

to eliminate the ``substantial service'' option as it applies to

coverage requirements in the partitioning and disaggregation context.

The Commission found that maintaining the ``substantial service''

option will encourage licensees to build out their systems while

safeguarding the financial investments made by those licensees who are

financially unable to meet specific population coverage requirements.

Thus, the Commission found that the substantial service alternative

will promote service growth while helping licensees to remain

financially viable and retain their licenses. Retaining the

``substantial service'' option will also allow small businesses

flexibility in meeting their coverage requirements.

License Term

117. The Commission declines to adopt SBT's proposal that when an

area is partitioned within one year of the renewal date of the original

ten-year license term, the partitionee should receive the license for a

one-year term. The Commission found that adopting this proposal would

result in the partitioner conferring greater rights than it was awarded

under the original terms of its license grant.

VII. Report to Congress

118. The Commission shall send a copy of the Third R&O, including

this Final Regulatory Flexibility Analysis, in a report to Congress

pursuant to the Small Business Regulatory Enforcement Fairness Act of

1996. In addition, the Commission will send a copy of the Third R&O,

including this Final Regulatory Flexibility Analysis, to the Chief

Counsel for Advocacy of the Small Business Association. A copy of the

Third R&O and Final Regulatory Flexibility Analysis (or summaries

thereof) will also be published in the Federal Register.

Ordering Clauses

119. Authority for issuance of this Memorandum Opinion and Order on

Reconsideration and Third Report and Order is contained in Sections

4(i), 303(r), 309(j), 332, and 405 of the Communications Act of 1934,

as amended, 47 U.S.C. 154(i), 303(r), 309(j), 332, and 405.

120. Accordingly, it is ordered that the petitions for

reconsideration or clarification listed in Appendix A are granted to

the extent provided herein and otherwise are denied; and that the

Petition for Partial Reconsideration of PSWF Corporation filed April

11, 1997, is to the extent provided herein dismissed as moot. This

action is taken pursuant to Sections 4(i), 303(r), 309(j), 332, and 405

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

303(r), 309(j), 332, and 405, and Section 1.429(i) of the Commission's

rules, 47 CFR 1.429(i).

121. It is further ordered that the petitions for reconsideration

and application for review of the CWD Order listed in footnote 51 are

denied. This action is taken pursuant to Sections 4(i), 303(r), 309(j),

332, and 405 of the Communications Act of 1934, as amended, 47 U.S.C.

154(i), 303(r), 309(j), 332, and 405, and Sections

[[Page 33781]]

1.429(i) and 1.115 of the Commission's rules, 47 CFR 1.429(i), 1.115.

122. It is further ordered that the Commission's rules are amended

as set forth in Appendix B. It is further ordered that the provisions

of this Memorandum Opinion and Order on Reconsideration and Third

Report and Order and the Commission's rules, as amended in Appendix B,

shall become effective 60 days after publication of this Memorandum

Opinion and Order on Reconsideration and Third Report and Order in the

Federal Register.

123. It is further ordered that a Public Notice will be issued by

the Wireless Telecommunications Bureau following the adoption of this

Memorandum Opinion and Order on Reconsideration and Third Report and

Order that will remove the interim licensing rules on the shared PCP

channels from the Commission's rules.

124. it is further ordered that the Commission's Office of Public

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

Memorandum Opinion and Order on Reconsideration and Third Report and

Order, including the Supplemental Final Regulatory Flexibility Analysis

and Final Regulatory Flexibility Analysis, to the Chief Counsel for

Advocacy of the Small Business Administration.

List of Subjects

47 CFR Part 22

Public mobile services.

47 CFR Part 90

Private land mobile radio services.

Rule Changes

For the reasons stated in the preamble, parts 22 and 90 of title 47

of the Code of Federal Regulations is amended as follows:

PART 22--PUBLIC MOBILE SERVICES

1. The authority citation for Part 22 continues to read as follows:

Authority: Sections 4, 303, 309 and 332, 48 Stat. 1066, 1082, as

amended; 47 U.S.C. 154, 303, 309 and 332, unless otherwise noted.

2. Section 22.213 is added to read as follows:

Sec. 22.213 Long-form application (FCC Form 601).

Each successful bidder for a paging geographic area authorization

must submit a ``long-form'' application (Form 601) within ten (10)

business days after being notified by Public Notice that it is the

winning bidder. Applications for paging geographic area authorizations

on FCC Form 601 must be submitted in accordance with Sec. 1.2107 and

Sec. 1.2112 of this chapter, all applicable procedures set forth in the

rules in this part, and any applicable Public Notices that the FCC may

issue in connection with an auction. After an auction, the FCC will not

accept long-form applications for paging geographic area authorizations

from anyone other than the auction winners and parties seeking

partitioned authorizations pursuant to agreements with auction winners

under Sec. 22.221 of this part.

3. Section 22.215 is amended by revising paragraph (a) to read as

follows:

Sec. 22.215 Authorization, grant, denial, default, and

disqualification.

(a) Each winning bidder will be required to pay the full balance of

its winning bid no later than ten (10) business days following the

release date of a Public Notice establishing the payment deadline. If a

winning bidder fails to pay the balance of its winning bids in a lump

sum by the applicable deadline as specified by the Commission, it will

be allowed to make payment no later than ten (10) business days after

the payment deadline, provided that it also pays a late fee equal to

five (5) percent of the amount due. When a winning bidder fails to pay

the balance of its winning bid by the late payment deadline, it is

considered to be in default on its authorization(s) and subject to the

applicable default payments. Authorizations will be awarded upon the

full and timely payment of winning bids and any applicable late fees.

* * * * *

4. Section 22.217 is amended by revising paragraph (a) and adding

paragraph (b)(4) to read as follows:

Sec. 22.217 Bidding credits for small businesses.

(a) A winning bidder that qualifies as a small business or a

consortium of small businesses as defined in Sec. 22.223(b)(1)(i) of

this part may use a bidding credit of thirty-five (35) percent to lower

the cost of its winning bid. A winning bidder that qualifies as a small

business or a consortium of small businesses as defined in

Sec. 22.223(b)(1)(ii) of this part may use a bidding credit of twenty-

five (25) percent to lower the cost of its winning bid.

(b) * * *

(4) If a small business that utilizes a bidding credit under this

section partitions its authorization or disaggregates its spectrum to

an entity not meeting the eligibility standards for the same bidding

credit, the partitioning or disaggregating licensee will be subject to

the provisions concerning unjust enrichment as set forth in

Sec. 1.2111(e) (2) and (3) of this chapter.

Sec. 22.219 [Removed]

5. Section 22.219 is removed.

6. Section 22.221 is amended by revising paragraphs (b) and (c) to

read as follows:

Sec. 22.221 Eligibility for partitioned licenses.

* * * * *

(b) Each party to an agreement to partition the authorization must

file a long-form application (FCC Form 601) for its respective,

mutually agreed-upon geographic area together with the application for

the remainder of the MEA or EA filed by the auction winner.

(c) If the partitioned authorization is being applied for as a

partial assignment of the MEA or EA authorization following grant of

the initial authorization, request for authorization for partial

assignment of an authorization shall be made pursuant to Sec. 1.948 of

this part.

7. Section 22.223 is amended by revising paragraphs (b)(1)(i),

(b)(1)(ii) and (b)(2) and adding paragraphs (b)(4) and (e) to read as

follows:

Sec. 22.223 Definitions concerning competitive bidding process.

* * * * *

(b) * * *

(1) * * *

(i) Together with its affiliates and controlling interests has

average gross revenues that are not more than $3 million for the

preceding three years; or

(ii) Together with its affiliates and controlling interests has

average gross revenues that are not more than $15 million for the

preceding three years.

(2) For purposes of determining whether an entity meets either the

$3 million or $15 million average annual gross revenues size standard

set forth in paragraph (b)(1) of this section, the gross revenues of

the entity, its affiliates, and controlling interests shall be

considered on a cumulative basis and aggregated.

(3) * * *

(4) Applicants without identifiable controlling interests. Where an

applicant (or licensee) cannot identify controlling interests under the

standards set forth in this section, the gross revenues of all interest

holders in the applicant, and their affiliates, will be attributable.

* * * * *

(e) Controlling interest. (1) For purposes of this section,

controlling interest includes individuals or entities with de jure and

de facto control of the applicant. De jure control is greater than 50

percent of the voting stock of a corporation, or in the case of a

[[Page 33782]]

partnership, the general partner. De facto control is determined on a

case-by-case basis. An entity must disclose its equity interest and

demonstrate at least the following indicia of control to establish that

it retains de facto control of the applicant:

(i) The entity constitutes or appoints more than 50 percent of the

board of directors or management committee;

(ii) The entity has authority to appoint, promote, demote, and fire

senior executives that control the day-to-day activities of the

licensee; and

(iii) The entity plays an integral role in management decisions.

(2) Calculation of certain interests. (i) Ownership interests shall

be calculated on a fully diluted basis; all agreements such as

warrants, stock options and convertible debentures will generally be

treated as if the rights thereunder already have been fully exercised.

(ii) Partnership and other ownership interests and any stock

interest equity, or outstanding stock, or outstanding voting stock

shall be attributed as specified below.

(iii) Stock interests held in trust shall be attributed to any

person who holds or shares the power to vote such stock, to any person

who has the sole power to sell such stock, and, to any person who has

the right to revoke the trust at will or to replace the trustee at

will. If the trustee has a familial, personal, or extra-trust business

relationship to the grantor or the beneficiary, the grantor or

beneficiary, as appropriate, will be attributed with the stock

interests held in trust.

(iv) Non-voting stock shall be attributed as an interest in the

issuing entity.

(v) Limited partnership interests shall be attributed to limited

partners and shall be calculated according to both the percentage of

equity paid in and the percentage of distribution of profits and

losses.

(vi) Officers and directors of an entity shall be considered to

have an attributable interest in the entity. The officers and directors

of an entity that controls a licensee or applicant shall be considered

to have an attributable interest in the licensee or applicant.

(vii) Ownership interests that are held indirectly by any party

through one or more intervening corporations will be determined by

successive multiplication of the ownership percentages for each link in

the vertical ownership chain and application of the relevant

attribution benchmark to the resulting product, except that if the

ownership percentage for an interest in any link in the chain exceeds

50 percent or represents actual control, it shall be treated as if it

were a 100 percent interest.

(viii) Any person who manages the operations of an applicant or

licensee pursuant to a management agreement shall be considered to have

an attributable interest in such applicant or licensee if such person

or its affiliate pursuant to paragraph (d) of this section has

authority to make decisions or otherwise engage in practices or

activities that determine, or significantly influence,

(A) The nature or types of services offered by such an applicant or

licensee;

(B) The terms upon which such services are offered; or

(C) The prices charged for such services.

(ix) Any licensee or its affiliate who enters into a joint

marketing arrangement with an applicant or licensee, or its affiliate,

shall be considered to have an attributable interest, if such applicant

or licensee, or its affiliate, has authority to make decisions or

otherwise engage in practices or activities that determine, or

significantly influence,

(A) The nature or types of services offered by such an applicant or

licensee;

(B) The terms upon which such services are offered; or

(C) The prices charged for such services.

8. Section 22.225 is amended by revising paragraphs (a)(1), (b)(1)

and (e) to read as follows:

Sec. 22.225 Certifications, disclosures, records maintenance and

audits.

(a) * * *

(1) The identity of the applicant's controlling interests and

affiliates, and, if a consortium of small businesses, the members of

the joint venture; and

* * * * *

(b) * * *

(1) Disclose separately and in the aggregate the gross revenues,

computed in accordance with Sec. 22.223, for each of the following: the

applicant, the applicant's affiliates, the applicant's controlling

interests, and, if a consortium of small businesses, the members of the

joint venture;

* * * * *

(e) Definitions. The terms affiliate, small business, consortium of

small businesses, gross revenues, and controlling interest used in this

section are defined in Sec. 22.223.

9. Section 22.503 is amended by revising paragraphs (b)(2), (b)(3),

(h), (i), and (k)(1) and (k)(2) to read as follows:

Sec. 22.503 Paging geographic area authorizations.

* * * * *

(b) * * *

(2) Major Economic Areas (MEAs) and Economic Areas (EAs) are

defined below. EAs are defined by the Department of Commerce, Bureau of

Economic Analysis. See Final Redefinition of the MEA Economic Areas, 60

FR 13114 (March 10, 1995). MEAs are based on EAs. In addition to the

Department of Commerce's 172 EAs, the FCC shall separately license Guam

and the Northern Mariana Islands, Puerto Rico and the United States

Virgin Islands, and American Samoa, which have been assigned FCC-

created EA numbers 173-175, respectively, and MEA numbers 49-51,

respectively.

(3) The 51 MEAs are composed of one or more EAs as defined in the

following table:

------------------------------------------------------------------------

MEAs EAs

------------------------------------------------------------------------

1 (Boston)................... 1-3.

2 (New York City)............ 4-7, 10.

3 (Buffalo).................. 8.

4 (Philadelphia)............. 11-12.

5 (Washington)............... 13-14.

6 (Richmond)................. 15-17, 20.

7 (Charlotte-Greensboro- 18-19, 21-26, 41-42, 46.

Greenville-Raleigh).

8 (Atlanta).................. 27-28, 37-40, 43.

9 (Jacksonville)............. 29, 35.

10 (Tampa-St. Petersburg- 30, 33-34.

Orlando).

11 (Miami)................... 31-32.

12 (Pittsburgh).............. 9, 52-53.

13 (Cincinnati-Dayton)....... 48-50.

14 (Columbus)................ 51.

[[Page 33783]]

15 (Cleveland)............... 54-55.

16 (Detroit)................. 56-58, 61-62.

17 (Milwaukee)............... 59-60, 63, 104-105, 108.

18 (Chicago)................. 64-66, 68, 97, 101.

19 (Indianapolis)............ 67.

20 (Minneapolis-St. Paul).... 106-107, 109-114, 116.

21 (Des Moines-Quad Cities).. 100, 102-103, 117.

22 (Knoxville)............... 44-45.

23 (Louisville-Lexington- 47, 69-70, 72.

Evansville).

24 (Birmingham).............. 36, 74, 78-79.

25 (Nashville)............... 71.

26 (Memphis-Jackson)......... 73, 75-77.

27 (New Orleans-Baton Rouge). 80-85.

28 (Little Rock)............. 90-92, 95.

29 (Kansas City)............. 93, 99, 123.

30 (St. Louis)............... 94, 96, 98.

31 (Houston)................. 86-87, 131.

32 (Dallas-Fort Worth)....... 88-89, 127-130, 135, 137-138.

33 (Denver).................. 115, 140-143.

34 (Omaha)................... 118-121.

35 (Wichita)................. 122.

36 (Tulsa)................... 124.

37 (Oklahoma City)........... 125-126.

38 (San Antonio)............. 132-134.

39 (El Paso-Albuquerque)..... 136, 139, 155-157.

40 (Phoenix)................. 154, 158-159.

41 (Spokane-Billings)........ 144-147, 168.

42 (Salt Lake City).......... 148-150, 152.

43 (San Francisco-Oakland-San 151, 162-165.

Jose).

44 (Los Angeles-San Diego)... 153, 160-161.

45 (Portland)................ 166-167.

46 (Seattle)................. 169-170.

47 (Alaska).................. 171.

48 (Hawaii).................. 172.

49 (Guam and the Northern 173.

Mariana Islands).

50 (Puerto Rico and U.S. 174.

Virgin Islands).

51 (American Samoa).......... 175.

------------------------------------------------------------------------

* * * * *

(h) Adjacent geographic area coordination required. Before

constructing a facility for which the interfering contour (as defined

in Sec. 22.537 or Sec. 22.567 of this part, as appropriate for the

channel involved) would extend into another paging geographic area, a

paging geographic area licensee must obtain the consent of the relevant

co-channel paging geographic area licensee, if any, into whose area the

interfering contour would extend. Licensees are expected to cooperate

fully and in good faith attempt to resolve potential interference

problems before bringing matters to the FCC. In the event that there is

no co-channel paging geographic area licensee from whom to obtain

consent in the area into which the interfering contour would extend,

the facility may be constructed and operated subject to the condition

that, at such time as the FCC issues a paging geographic area

authorization for that adjacent geographic area, either consent must be

obtained or the facility modified or eliminated such that the

interfering contour no longer extends into the adjacent geographic

area.

(i) Protection of existing service. All facilities constructed and

operated pursuant to a paging geographic area authorization must

provide co-channel interference protection in accordance with

Sec. 22.537 or Sec. 22.567, as appropriate for the channel involved, to

all authorized co-channel facilities of exclusive licensees within the

paging geographic area. Non-exclusive licensees on the thirty-five

exclusive 929 MHz channels are not entitled to exclusive status, and

will continue to operate under the sharing arrangements established

with the exclusive licensees and other non-exclusive licensees that

were in effect prior to February 19, 1997. MEA, EA, and nationwide

geographic area licensees have the right to share with non-exclusive

licensees on the thirty-five exclusive 929 MHz channels on a non-

interfering basis.

* * * * *

(k) Coverage requirements. Failure by an MEA or EA licensee to meet

either the coverage requirements in paragraphs (k)(1) and (k)(2) of

this section, or alternatively, the substantial service requirement in

paragraph (k)(3) of this section, will result in automatic termination

of authorizations for those facilities that were not authorized,

constructed, and operating at the time the geographic area

authorization was granted. MEA and EA licensees have the burden of

showing when their facilities were authorized, constructed, and

operating, and should retain necessary records of these sites until

coverage requirements are fulfilled. For the purpose of this paragraph,

to ``cover'' area means to include geographic area within the composite

of the service contour(s) determined by the methods of Secs. 22.537 or

22.567 as appropriate for the particular channel involved. Licensees

may determine the population of geographic areas included within their

service contours using either the 1990 census or the 2000 census, but

not both.

(1) No later than three years after the initial grant of an MEA or

EA geographic area authorization, the licensee must construct or

otherwise acquire and operate sufficient facilities to cover one third

of the population in the paging geographic area. The licensee

[[Page 33784]]

must notify the FCC at the end of the three-year period pursuant to

Sec. 1.946 of this chapter, either that it has satisfied this

requirement or that it plans to satisfy the alternative requirement to

provide substantial service in accordance with paragraph (k)(3) of this

section.

(2) No later than five years after the initial grant of an MEA or

EA geographic area authorization, the licensee must construct or

otherwise acquire and operate sufficient facilities to cover two thirds

of the population in the paging geographic area. The licensee must

notify the FCC at the end of the five year period pursuant to

Sec. 1.946 of this chapter, either that it has satisfied this

requirement or that it has satisfied the alternative requirement to

provide substantial service in accordance with paragraph (k)(3) of this

section.

* * * * *

10. Section 22.507 is amended by revising paragraph (c) to read as

follows:

Sec. 22.507 Number of transmitters per station.

* * * * *

(c) Consolidation of separate stations. The FCC may consolidate

site-specific contiguous authorizations upon request (FCC Form 601) of

the licensee, if appropriate under paragraph (a) of this section.

Paging licensees may include remote, stand-alone transmitters under the

single system-wide authorization, if the remote, stand-alone

transmitter is linked to the system via a control/repeater facility or

by satellite. Including a remote, stand-alone transmitter in a system-

wide authorization does not alter the limitations provided under

Sec. 22.503(f) on entities other than the paging geographic area

licensee. In the alternative, paging licensees may maintain separate

site-specific authorizations for stand-alone or remote transmitters.

The earliest expiration date of the authorizations that make up the

single system-wide authorization will determine the expiration date for

the system-wide authorization. Licensees must file timely renewal

applications for site-specific authorizations included in a single

system-wide authorization request until the request is approved.

Renewal of the system-wide authorization will be subject to Sec. 1.949

of this chapter.

Sec. 22.509 [Amended]

11. Paragraph (c) of Sec. 22.509 is removed.

12. Section 22.513 is added to read as follows:

Sec. 22.513 Partitioning and disaggregation.

MEA and EA licensees may apply to partition their authorized

geographic service area or disaggregate their authorized spectrum at

any time following grant of their geographic area authorizations.

Nationwide geographic area licensees may apply to partition their

authorized geographic service area or disaggregate their authorized

spectrum at any time as of August 23, 1999.

(a) Application required. Parties seeking approval for partitioning

and/or disaggregation shall apply for partial assignment of a license

pursuant to Sec. 1.948 of this chapter.

(b) Partitioning. In the case of partitioning, requests for

authorization for partial assignment of a license must include, as

attachments, a description of the partitioned service area and a

calculation of the population of the partitioned service area and the

authorized geographic service area. The partitioned service area shall

be defined by 120 sets of geographic coordinates at points at every 3

degrees azimuth from a point within the partitioned service area along

the partitioned service area boundary unless either an FCC-recognized

service area is used (e.g., MEA or EA) or county lines are followed.

The geographical coordinates must be specified in degrees, minutes, and

seconds to the nearest second latitude and longitude, and must be based

upon the 1983 North American Datum (NAD83). In the case where FCC-

recognized service areas or county lines are used, applicants need only

list the specific area(s) through use of FCC designations or county

names that constitute the partitioned area.

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

(d) Combined partitioning and disaggregation. Licensees may apply

for partial assignment of authorizations that propose combinations of

partitioning and disaggregation.

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

and for disaggregated spectrum shall be the remainder of the original

licensee's license term as provided for in Sec. 1.955 of this chapter.

(f) Coverage requirements for partitioning. (1) Parties to a

partitioning agreement must satisfy at least one of the following

requirements:

(i) The partitionee must satisfy the applicable coverage

requirements set forth in Sec. 22.503(k)(1), (2) and (3) for the

partitioned license area; or

(ii) The original licensee must meet the coverage requirements set

forth in Sec. 22.503(k)(1), (2) and (3) for the entire geographic area.

In this case, the partitionee must meet only the requirements for

renewal of its authorization for the partitioned license area.

(2) Parties seeking authority to partition must submit with their

partial assignment application a certification signed by both parties

stating which of the above options they select.

(3) Partitionees must submit supporting documents showing

compliance with their coverage requirements as set forth in

Sec. 22.503(k)(1), (2) and (3).

(4) Failure by any partitionee to meet its coverage requirements

will result in automatic cancellation of the partitioned authorization

without further Commission action.

(g) Coverage requirements for disaggregation.

(1) Parties to a disaggregation agreement must satisfy at least one

of the following requirements:

(i) Either the disaggregator or disaggregatee must satisfy the

coverage requirements set forth in Sec. 22.503 (k)(1), (2) and (3) for

the entire license area; or

(ii) Parties must agree to share responsibility for meeting the

coverage requirements set forth in Sec. 22.503 (k)(1), (2) and (3) for

the entire license area.

(2) Parties seeking authority to disaggregate must submit with

their partial assignment application a certification signed by both

parties stating which of the above requirements they meet.

(3) Disaggregatees must submit supporting documents showing

compliance with their coverage requirements as set forth in Sec. 22.503

(k)(1), (2) and (3).

(4) Parties that accept responsibility for

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