[Federal Register Volume 62, Number 147 (Thursday, July 31, 1997)]
[Rules and Regulations]
[Pages 41190-41225]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 97-19913]
[[Page 41189]]
_______________________________________________________________________
Part IV
Federal Communications Commission
_______________________________________________________________________
47 CFR Part 90
Future Development of SMR Systems in the 800 MHz Frequency Band; Final
Rules
Federal Register / Vol. 62, No. 147 / Thursday, July 31, 1997 / Rules
and Regulations
[[Page 41190]]
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FEDERAL COMMUNICATIONS COMMISSION
47 CFR Part 90
[PR Docket No. 93-144; FCC 97-223]
Future Development of SMR Systems in the 800 MHz Frequency Band
AGENCY: Federal Communications Commission.
ACTION: Final rule.
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SUMMARY: This Second Report and Order resolves issues raised in the
Second Further Notice of Proposed Rulemaking and completes the process
by establishing technical and operational rules for the lower 230 800
MHz channels. Specifically, this order establishes the U.S. Department
of Commerce Bureau of Economic Analysis Economic Areas (EAs) as the
relevant geographic service area for licensing these channels and
defines the rights of incumbent SMR licensees already operating on the
lower 230 channels. It also provides further details concerning the
mandatory relocation rules adopted in the 800 MHz Report and Order, and
establishes rules for partitioning and disaggregation of EA licenses.
Coupled with the rules adopted in the 800 MHz Report and Order, the
decisions reached in this order complete the process of converting to
new rules for the 800 MHz SMR service and enable us to commence
geographic area licensing of the service. These rule revisions not only
eliminate a cumbersome and outdated regulatory regime, they will
promote competition and provide SMR licensees with flexibility to
deploy multiple technologies in response to a changing marketplace, and
they further the Congressionally mandated goal of establishing
regulatory symmetry between 800 MHz SMR licensees and other competing
providers of Commercial Mobile Radio Services (CMRS).
EFFECTIVE DATE: September 29, 1997.
FOR FURTHER INFORMATION CONTACT: Shaun Maher or Michael Hamra, Policy
and Rules Branch, Commercial Wireless Division, Wireless
Telecommunications Bureau at (202) 418-0620 or Alice Elder, Auctions
and Industry Analysis Division, Wireless Telecommunications Bureau at
(202) 418-0660.
SUPPLEMENTARY INFORMATION: This Second Report and Order in PR Docket
No. 93-144, GN Docket No. 93-252, and PP Docket No. 9-253, adopted June
23, 1997, and released July 10, 1997, is available for inspection and
copying during normal business hours in the FCC Dockets Branch, Room
230, 1919 M Street, NW., Washington, DC. The complete text may be
purchased from the Commission's copy contractor, International
Transcription Service, Inc., 2100 M Street, NW., Suite 140, Washington,
DC 20037 (telephone (202) 857-3800).
I. Background
1. As described in the 800 MHz Report and Order in PR Docket 93-
144, 61 FR 6138 (February 16, 1996), the Commission formerly used a
site-by-site licensing approach for 800 MHz SMR channels, which were
primarily used to provide dispatch radio service. In recent years,
however, a number of SMR licensees have expanded the geographic scope
of their services, aggregated channels, and developed digital networks
to enable them to provide a type of service comparable to that provided
by cellular and Personal Communications Service (PCS) operators. This
trend led us to rethink our site-by-site licensing procedures, which
were very cumbersome for systems comprised of several hundred sites
because licensees were required to receive individual Commission
approval for each site. We were concerned that site-by-site licensing
procedures also impaired an SMR licensee's ability to respond to
changing market conditions and consumer demand. We concluded that
granting licenses through waivers and other case-by-case mechanisms was
administratively burdensome and had resulted in a licensing regime that
lacked uniformity. Accordingly, we initiated this proceeding to
transition to a geographic area licensing approach for the 800 MHz SMR
service. At the same time, we emphasized the need to consider the
interests of incumbent SMR licensees, many of whom continue to provide
traditional dispatch service and do not seek to develop services
comparable to cellular or PCS.
2. In the 800 MHz Report and Order, the Commission established an
EA-based licensing procedure for the upper 200 channels in the 800 MHz
SMR band. That procedure will enable an EA licensee to, among other
things, construct facilities at any available site within its EA and to
add, remove or relocate sites within the EA without prior Commission
approval. The new rules also give the EA licensee flexibility to
determine the channelization of available spectrum within the
authorized channel block, the right to use any spectrum within its EA
block that is recovered by the Commission from an incumbent licensee
(i.e., the incumbent's license is terminated for some reason), and
establishes a presumption that assignments from incumbents to the
relevant EA licensee are in the public interest. In addition, the 800
MHz Report and Order adopted a 10-year license term, and a five-year
construction period with three-year and five-year coverage requirements
for EA licensees on the upper 200 channels. We also created a mechanism
for relocation of incumbent licensees on the upper 200 channels,
delineated the parameters of unrelocated incumbents' expansion rights,
and reallocated the former General Category channels to the 800 MHz SMR
service. Finally, we established competitive bidding procedures for 525
EA licenses in the upper 200 channel block.
3. In the Second Further Notice of Proposed Rulemaking, in PP
Docket 93-253, 61 FR 6212 (February 16, 1996), we sought comment on
additional service rules for the upper 200 channels, and on instituting
geographic area licensing for the lower 230 800 MHz SMR channels. With
respect to the upper 200 channels, we asked commenters to address
whether EA licensees should be permitted to partition and disaggregate
their spectrum blocks. We also proposed additional procedures and
clarifications regarding mandatory relocation of incumbent licensees
from the upper 200 channels. With respect to the lower 230 channels, we
proposed geographic area licensing procedures and auction rules similar
to those adopted for the upper 200 channels. We declined to propose a
mandatory relocation plan for incumbents on the lower 230 channels,
however, and we proposed to adopt operating parameters for incumbents
that would give them a reasonable opportunity to expand their
businesses. We further proposed to establish competitive bidding rules
for licensing the General Category and lower 80 channels with special
provisions to encourage participation by designated entities in the
auction of that spectrum.
4. Sixty-five parties filed initial comments and fifty-eight
parties filed reply comments in response to the Second Further Notice
of Proposed Rulemaking. Numerous written ex parte presentations also
have supplemented the record. Notably, in reply comments, AMTA, SMR WON
and Nextel offered a proposal (``Industry Proposal'') for licensing the
lower 230 channels through a pre-auction process that would allow
incumbents to obtain rights to unlicensed spectrum through settlement
agreements with one another. The parties submit that the Industry
Proposal represents a consensus of the SMR industry and takes into
account
[[Page 41191]]
the interests of wide-area licensees as well as site-by-site
incumbents.
II. Discussion
A. Service Rules for the Lower 230 Channels
1. Geographic Area Licensing
5. We adopt geographic area licensing for the lower 230 channels.
Geographic area licensing will increase the flexibility afforded to
licensees to manage their spectrum, and will reduce administrative
burdens and operating costs by allowing licensees to modify, move, or
add to their facilities within specified geographic areas without need
for prior Commission approval. Geographic area licensing will also
ensure that licensees on these channels have operational flexibility
similar to that afforded to SMR licensees on the upper 200 channels as
well as to cellular and PCS licensees.
6. We reject the view that the heavy use of the lower 230 channels
by incumbents renders geographic area licensing impractical. To the
contrary, incumbents benefit from geographic area licensing because it
will make it far easier for them to fill in gaps in their current
systems, make modifications to meet shifting market demands, and expand
into unserved areas. Even where a licensee's ability to expand is
limited by the presence of adjacent systems, geographic licensing is
preferable to site-specific licensing because it affords the same
degree of protection from interference but allows licensees greater
flexibility within their existing service areas. We also do not agree
with the view that the prospective relocation of SMR incumbents from
the upper 200 channels to the lower 230 is an obstacle to geographic
licensing. Upon moving to the lower 230 channels, relocated licensees
will be able to take advantage of the flexibility in our rules to the
same extent as other licensees.
7. We also disagree with UTC and other commenters who contend that
geographic area licensing is inappropriate because of the presence of
non-SMRs on the lower 230 channels. While non-SMR operators may not
require geographic licenses to operate systems designed for internal
communications, geographic area licensing remains the most efficient
and logical licensing approach for the majority of licensees in the
band. We are not persuaded that we should forego the benefits of
geographic licensing to accommodate the interests of a small minority
of systems. In any event, systems that are not SMR systems will remain
fully protected under our geographic licensing rules. In addition, non-
SMRs can obtain spectrum to suit their internal communications needs by
forming joint bidding consortia or by entering into partitioning and
disaggregation agreements with EA licensees.
2. Service Areas
8. We adopt EAs as the basis for geographic licensing of the lower
230 channels. EAs are generally recognized by the SMR industry as being
optimally sized for geographic licensing in this band, because EAs
approximate the coverage of most SMR systems except the largest wide-
area operations. As we stated in the 800 MHz Report and Order, EAs will
encourage a diverse group of prospective bidders, because they are
small enough that licensees seeking to serve small markets can bid on
areas they wish to serve, but are large enough that they can also form
the basis for wide-area systems. By encouraging more diverse bidders in
the auction, we believe we will fulfill the mandate of section
309(j)(3)(B) & (4)(C) of the Communications Act to disseminate licenses
among a wide variety of applicants and to ensure economic opportunities
for a wide variety of applicants. In addition, having the same
geographic area licenses for the upper 200 and lower 230 channels makes
it easier for licensees to develop systems that use both upper 200 and
lower 230 channels in a common licensing area.
3. Channel Blocks
a. Lower 80 Channels
9. We adopt our proposal to license the lower 80 channels in five-
channel blocks. The non-contiguous nature of these channels makes it
impractical to impose any other channel plan. This approach will also
provide opportunities for incumbents and applicants that base their
systems on trunking of non-contiguous channels, in keeping with the
mandate of section 309(j)(4)(C) of the Communications Act to make
equitable distribution of licenses and provide economic opportunities
for a wide variety of entities. Furthermore, we find that this will be
the less disruptive method for smaller incumbent licensees since they
have acquired their channels in five channel increments. Therefore, we
will license the lower 80 channels in sixteen five-channel blocks as
set forth in Sec. 90.617(d) of our rules.
b. General Category Channels
10. We understand the needs of those providers who want contiguous
spectrum to implement frequency re-use technology, and those that want
non-contiguous spectrum because the spectrum is highly encumbered, or
because it suits their current technology. If we were to adopt very
large contiguous blocks of spectrum we would preclude smaller entities
from participating in the auction because presumably bigger blocks of
spectrum would require larger bids to acquire than smaller blocks of
spectrum. On the other hand, if we were to auction EAs on a channel-by-
channel basis, as suggested by Fresno, it would be difficult to
accumulate contiguous spectrum and would require all licensees
interested in accumulating spectrum to keep track of 150 auctions at
one time. If one entity wanted to acquire five channel blocks in three
EAs, the licensee would have to potentially keep track of 450
simultaneous auctions.
11. To accommodate licensees who want contiguous as well as those
licensees that want large blocks of spectrum, we will adopt the
Industry Proposal and allot three contiguous 50-channel blocks. We
expect a significant amount of the former General Category channels to
continue to be used for traditional SMR systems and retaining the
contiguity of these channels will permit alternative offerings that may
require multiple, contiguous channels. In addition, we find that
allotting 50 channel blocks will allow bidders to aggregate even larger
contiguous blocks of spectrum. We find that adopting such a channel
plan strikes a balance between licensees with different spectrum
allocation needs and allows licensees with different goals to pursue
spectrum in the General Category. Once again, this fulfills the mandate
of section 309(j)(4)(C) of the Communications Act that we distribute
licenses in such a way so as to ensure economic opportunities for a
wide variety of entities. While we do not adopt Fresno's or Sierra's
proposals, small system licensees will have the opportunity to acquire
smaller amounts of spectrum compatible with their existing technology
through the newly-created disaggregation rules we adopt herein.
Meanwhile licensees seeking to deploy contiguous spectrum technology
will have the opportunity to acquire a 100 or 150 channel block of
contiguous spectrum. Adopting this channel plan addresses the competing
demands of trunked systems and wide-area systems that require
contiguous spectrum.
4. Channel Aggregation Limits
12. We conclude that no aggregation limit is necessary for the
lower 230 channels. In both the CMRS Third Report and Order and the 800
MHz
[[Page 41192]]
Report and Order, we observed that the 800 MHz SMR service is just one
of many competitive services in the CMRS marketplace. If a single
licensee were to acquire all 230 channels in a single market, it would
hold an aggregated 11.5 MHz of spectrum, not all of which would be
contiguous. Even if a single licensee combined this spectrum with
spectrum from the upper 200 channels, it would fall well short of the
45 MHz spectrum cap, and would have less spectrum than PCS and cellular
providers in the same market. The total potential aggregation of
spectrum in the 800 MHz SMR service, combined with the General
Category, is 21.5 MHz of spectrum, not all of which is contiguous. We
do not believe that this level of aggregation would enable an SMR
licensee to have an anticompetitive effect on the CMRS market.
Moreover, we are concerned that limiting the ability of SMR providers
to aggregate spectrum could handicap their efforts to compete with
other services. As a practical matter, the presence of numerous
incumbents on the lower 230 channels reduces the likelihood that
significant aggregation of this spectrum will occur. However, we
conclude that the marketplace, not our rules, should determine whether
these channels will be used on an aggregated or disaggregated basis.
13. We also decline to limit SMR applicants on the lower 230
channels to obtaining one channel block at a time. This is inconsistent
with our approach to licensing of other CMRS, including cellular, PCS,
900 MHz SMR, and the upper 200 channels in the 800 MHz band. In
addition, the use of competitive bidding to resolve mutually exclusive
geographic area licenses on the lower 230 channels provides a strong
incentive for licenses to utilize the channels.
5. Licensing in the Mexican and Canadian Border Areas
14. In the 800 MHz Report and Order, we acknowledged that in the
Canadian and Mexican border areas, some upper 200 channels would not be
available or would be subject to power and height restrictions.
Nevertheless, we did not distinguish between border and non-border
areas for the upper 200 channels in our EA licensing plan, because we
concluded that EA applicants could best determine the effect of such
restrictions on the value of the spectrum. We adopt the same approach
for the lower 230 channels as well. Thus, EA licensees on the lower 230
channels of EAs that are adjacent to Canada or Mexico will be entitled
to use any available channels within their spectrum blocks, except
where use of such channels is restricted by international agreement.
15. In addition, we clarify that SMR and General Category channels
assigned to non-SMR pools in the border areas are not available for use
by EA licensees in those regions. Thus, non-SMR licensees operating on
those channels in border areas may continue to operate and will not be
subject to relocation. Moreover, EA licensees must afford full
interference protection to non-SMR licensees operating on these
channels. We admonish potential applicants for EA licenses to carefully
evaluate these limitations on spectrum availability when determining
their bidding strategies for blocks of spectrum adjacent to the Mexican
and Canadian borders.
16. Finally, we note that there are some non-SMR channels in the
non-border areas that in the Canadian and Mexican border areas are
available soley to SMR eligibles. These channels will be associated
with specific SMR and General Category spectrum blocks in these border
areas. Prospective bidders on EAs near the Canadian and Mexican borders
should be aware that these channels, which are not available to them
anywhere else except in the border regions, will be assigned for their
use in the Canadian and Mexican border regions. EA licensees must also
afford full interference protection to non-SMR licensees operating in
adjacent areas on these channels.
6. Construction and Coverage Requirements for the Lower 230
Channels
a. Requirements for EA Licensees
17. We adopt the construction requirements proposed in the Second
Further Notice of Proposed Rulemaking for the lower 230 channels. We
believe that adoption of such flexible construction requirements will
enhance the rapid deployment of new technologies and services and will
expedite service to rural areas. We disagree with those commenters that
contend that adoption of stricter construction requirements for the
lower 230 channels will better serve the public interest. We find that
more flexible construction requirements will allow EA licensees in the
encumbered lower 230 channels to respond to market demands for service
and thus eliminate the need for an EA licensee to meet construction
requirements based on population alone. We disagree with those
commenters that believe that strict construction requirements are
necessary to deter speculation and warehousing. We believe that, by
participating in the auction, licensees will have shown that they are
genuinely interested in acquiring spectrum to utilize and not
warehouse. At the same time, we continue to believe that licensees
should be held to some type of construction requirement in order to
encourage expedited construction and foster service to rural areas.
Therefore, EA licensees in the lower 230 channel blocks, just as their
counterparts in the upper 200 channels, will be required to provide
coverage to one-third of the population within three years of the
license grant, and to two-thirds of the population within five years of
the license grant. However, in the alternative, EA licensees in the
lower 230 channel block may provide ``substantial service'' to the
geographic license area within five years of license grant.
``Substantial service'' will be defined as service that is sound,
favorable, and substantially above a level of mediocre service, which
would barely warrant renewal. For example, a licensee may demonstrate
that it is providing a technologically innovative service or that it is
providing service to unserved or underserved areas. This flexibility
will allow EA licensees to expedite service to rural areas that may
have a higher service demand than a heavily populated urban area with
less demand. As we proposed in the Second Further Notice of Proposed
Rulemaking, we will not adopt a channel usage requirement for licensees
in the lower 230 channel block. In addition, we decline to adopt PCIA's
proposal to require that construction requirements be met on a ``per-
channel'' basis. We believe EA licensees should have the flexibility to
respond to market-based demands for service and that adopting a ``per-
channel'' construction requirement would greatly interfere with
licensees' ability to respond to such demands.
18. The failure to meet these performance requirements will result
in automatic termination of the geographic area license. This is
consistent with our rules for broadband PCS, 900 MHz SMR services,
Multipoint Distribution Services (MDS), and most recently for paging.
We will individually license any incumbent facilities that were
authorized, constructed, and operating at the time of termination of
the geographic area license.
b. Requirements for Site-Based Licensees
19. As a result of our decision to convert to EA-based licensing of
the lower 230 channels, the only instances in which future site-based
applications will be necessary are those few instances where site
approval continues
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to be required, e.g., for sites at environmentally sensitive locations
that require Commission approval under NEPA. In such instances, we will
require incumbent licensees to construct facilities and commence
service within 12 months in accordance with our proposal. EA licensees
that are required to seek separate approval for environmentally
sensitive locations within their geographic areas will be permitted to
include those sites in their geographic area license and will not be
subject to the 12 month construction deadline.
20. We also take this opportunity to clarify two points. First, we
note the applicability of the 12-month construction requirement to
incumbents on the lower 230 channels holding site-based authorizations
with construction periods that have not yet expired. In general, SMR
licensees with site specific authorizations have 12 months from the
grant date to complete construction and commence service, unless the
authorization is part of a system that has received an extended
implementation grant. Pursuant to the new rules we adopt herein,
interior sites added within an incumbent's existing footprint will not
be subject to construction requirements because they do not require
separate authorizations.
c. Transfers and Assignments of Unconstructed Site-Specific Licenses
21. We agree with SMR WON and Digital that temporary waiver of our
restrictions against assignment or transfer of unconstructed site-
specific SMR licenses would facilitate the relocation process and
geographic licensing. We believe that there is good cause to support
waiver of the rule in this case. The special circumstances that exist
with this innovative approach to licensing support temporary waiver of
Sec. 90.609(b) of the rules. That rule was designed to prevent
trafficking in site-specific licenses and spectrum warehousing by
taking back unused spectrum. However, in this proceeding, we seek to
encourage rapid migration of incumbents, preferably through voluntary
negotiations, from the upper 200 channels to lower band 800 MHz
channels. If we were to rigidly apply Sec. 90.609(b) in such
circumstances, licensees holding unconstructed site-specific licenses
on the lower channels would not be able to transfer their
authorizations for relocation purposes unless they had constructed them
first. Therefore, it is more efficient to waive the rule and allow
licensees who have unconstructed lower channels suitable for relocation
of upper channel incumbents to transfer them without prior
construction, so that the relocated licensees can construct facilities
suitable to their needs.
22. In addition, relaxing our transfer restrictions facilitates
geographic licensing of the lower channels themselves. We expect that
in many instances, incumbents on the lower channels will bid for EA
licenses on those channels to consolidate their existing holdings.
However, because we are adopting new channel blocks for geographic
licensing, particularly in the General Category, incumbents may find it
advantageous to their bidding strategy to modify their holdings in
advance of the auction through transfers or channel swaps. In addition,
allowing transfer of unconstructed as well as constructed spectrum
provides an opportunity for new entrants to position themselves for the
auction by acquiring existing licenses in areas where they intend to
bid.
23. Therefore, to facilitate relocation and geographic licensing,
we will temporarily waive the prohibition on assignment or transfer of
unconstructed authorizations on the lower 80 and General Category
channels. Thus, licensees on these channels may apply to transfer or
assign their authorizations regardless of construction. Where
unconstructed spectrum is transferred, the assignee or transferee will
be subject to the same construction deadline as the transferor/
assignor. We will, however, allow licensees with extended
implementation authority to apply their system-wide construction
deadlines to licenses acquired by transfer that are within their pre-
existing footprint. This waiver will remain in effect until six months
after the conclusion of the upper band EA auction. We believe this
period will provide sufficient time for licensees to identify suitable
lower band spectrum for transfer as part of voluntary relocation
agreements, and for potential bidders in the lower band auction to
negotiate transfers as part of their pre-auction strategy.
24. We will extend this waiver to all holders of unconstructed
spectrum on the lower 80 and General Category channels, including both
SMR and non-SMR licensees. We will also allow these licensees to
transfer or assign their authorizations to any eligible entity.
Although Nextel argues that such transfers should be allowed only if
they are between wide-area SMR incumbents and EA licensees, we believe
such restrictions are unnecessary and unduly restrictive. First, we see
no reason to allow only wide-area licensees to transfer unconstructed
spectrum. The purpose of this policy is to facilitate the rapid
assignment of all lower band spectrum--not just spectrum held by wide-
area licensees--to those who are most likely to use it. Similarly, we
will not restrict holders of unconstructed spectrum to dealing with EA
licensees. Although we expect that many transfers will in fact be to EA
licensees, we do not believe that incumbents should be prevented from
negotiating transfers to other parties who value the spectrum. In any
event, such a restriction would prevent incumbents from negotiating
transfers prior to the conclusion of the auction because EA winners
will not be identified until then.
25. We recognize that relaxing transfer restrictions makes it more
difficult to take action against speculators who have not constructed
facilities on their spectrum but instead have sought to warehouse
spectrum for profit. However, we believe that the benefits of this
approach for relocation and future geographic licensing in this service
outweigh the potential cost. First, not all 800 MHz licensees who have
failed to construct are necessarily speculators: our application freeze
and uncertainty caused by the lengthy pendency of this proceeding have
also made it difficult for legitimate licensees to develop their
systems. Moreover, even in the case of licensees who acquired spectrum
through application mills, allowing unconstructed spectrum to be
transferred rapidly and efficiently to those who value it most allows
development of the service to proceed and provides potential benefits
to prospective bidders in the auction. This approach will also not
compromise the objectives of geographic area licensing: because only
currently licensed spectrum can be transferred, there is no impact on
unlicensed spectrum that will be awarded to EA licensees. In addition,
EA licensees are not obliged by this policy to negotiate with
incumbents they believe have no intention of constructing facilities;
if an incumbent fails to construct and commence operations within the
period required by its license, the unused spectrum reverts to the EA
licensee.
B. Rights and Obligations of EA Licensees in the Lower 230 Channels
1. Operational Restrictions
26. Except for using the 18 dBV/m contour to define the
interference protection obligations of EA licensees with respect to
lower 230 incumbents (discussed in Sec. IV-B-3-b, infra.), we will
apply the same operational rules to EA licensees on the lower 230
channels that are applicable to the upper 200 channels. No commenter
has suggested that EA licensees on the lower 230 channels should not
have the right to
[[Page 41194]]
modify their facilities without prior Commission approval, and we see
no reason to treat the lower 230 channels differently in this regard.
We also adopt the same notification requirements applicable to the
upper 200 channels with respect to system additions, deletions, and
modifications.
2. Spectrum Management Rights--Acquisition and Recovery of Channels
Within Spectrum Blocks
27. In light of our decision to extend EA licensing to the lower
230 channels, we adopt the same rules for these channels with respect
to recovery of unused spectrum and transfers and assignments of
spectrum from incumbents to EA licensees. For the same reasons, we
dismiss all wait-listed applications for these channels. Our action
today will not apply to any application that is currently pending that
includes a request for waiver of the processing freeze. We shall
resolve those applications by separate action.
3. Treatment of Incumbents
a. Mandatory Relocation of Lower Channel Incumbents
28. We will not adopt mandatory relocation procedures for either
SMR or non-SMR incumbents on the lower 230 channels. The record
supports our tentative conclusion that requiring incumbents to migrate
off this spectrum would be impractical because there is no identifiable
alternative spectrum to accommodate such migration. In addition, it is
likely that many of the incumbents who will operate on these channels
will have relocated from the upper 200 channels, and we have already
determined that such relocatees should not be required to relocate more
than once. Therefore, EA licensees on the lower 230 channels will not
have the right to move incumbents off of their spectrum blocks unless
the incumbent voluntarily agrees to move.
b. Incumbent Operations
i. Expansion and Flexibility Rights of Lower Channel Incumbents
29. In the Further Notice of Proposed Rulemaking in this
proceeding, we recognized that the geographic licensing scheme we
designed for the upper 200 channels could result in some incumbent
licensees remaining in this channel block, despite our mandatory
relocation provisions. To avoid interference between these incumbent
licensees and the new EA licensees in the upper 200 channel block, we
concluded in our 800 MHz Report and Order that it was necessary to
limit the ability of incumbent licensees to expand their systems after
geographic licensing had occurred. At the same time, we concluded that
incumbents should be afforded operational flexibility to add sites or
make system modifications within those areas already licensed to them.
We concluded that, for the upper 200 channel block, incumbent licensees
would be allowed to make modifications within their current 22
dBV/m interference contour and would be allowed to add new
transmitters in their existing service areas without prior notification
to the Commission. However, incumbents would be required to notify the
Commission of any changes in technical parameters or additional
stations constructed, including agreements with an EA licensee to
expand beyond their signal strength contour, through a minor
modification of their license.
30. In the Second Further Notice of Proposed Rulemaking, we
acknowledged that transitioning to a geographic licensing scheme in the
lower 230 channels raises similar issues with respect to the rights of
incumbents. We proposed to limit expansion rights of incumbent SMR
licensees in the lower 230 channels in the same manner as we did in the
upper 200 channel block. Under our proposal, incumbent licensees on the
lower 230 channels would be allowed to modify or add transmitters in
their existing service area without prior notification to the
Commission, so long as they did not expand their 22 dBV/m
interference contour. We proposed that incumbents would not be allowed
to expand beyond the 22 dBV/m contour and into the geographic
area licensee's territory without obtaining the prior consent of the
geographic area licensee or unless the incumbent is the geographic area
licensee for the relevant channel. We sought comment on this proposal
and asked commenters to discuss whether a basis other than the 22
dBV/m interference contour should be used to determine an
incumbent's service area.
31. We agree with the supporters of the Industry Proposal that the
public interest would be served by giving incumbents on the lower 230
channels some flexibility to expand beyond their 22 dBV/m
contours. However, we decline to adopt the Industry Proposal in its
entirety. The settlement concept would, in essence, allow incumbents to
divide all remaining unlicensed spectrum on the lower 230 channels
among themselves, with no opportunity for new entrants to obtain or
even compete for such spectrum. As set forth below, this raises both
statutory and policy concerns that prevent us from endorsing the
proposal.
32. First, by restricting the settlement process to incumbents, the
Industry Proposal would foreclose new entrants from obtaining spectrum
on any of the lower 230 channels that are subject to a settlement among
incumbents. In any market where all of the channels in an EA were
allocated by such settlements, the result would be that no
opportunities for geographic licensing would be available to new
entrants. The Industry Proposal would also preclude competition in the
licensing process and restrict the number of potential applicants who
can obtain licenses. Thus, it could yield a higher concentration of
licenses than would result if non-incumbents were allowed to compete
for the spectrum at the same time. We conclude that allowing only
incumbent licensees to obtain rights to an entire EA while foreclosing
opportunities for new entrants would be at odds with our goals of
promoting economic competition in the 800 MHz SMR service and avoiding
an undue concentration of licenses. The approach we adopt herein,
unlike the Industry Proposal, would encourage participation of new
entrants, including small businesses, and, therefore, promote vigorous
economic competition and avoid excessive concentration of licenses.
33. Furthermore, the Industry Proposal provides no method for the
Commission to recover a portion of the value of public spectrum
pursuant to section 309(j)(3)(C) of the Communications Act. Instead,
incumbent licensees who negotiate expansion rights among themselves
could obtain a windfall by obtaining rights to an entire EA without
having to pay for such expanded rights. We disagree with commenters who
attempt to justify this potential windfall by arguing that the proposed
settlement procedure complies with the directive in section
309(j)(6)(E) for the Commission to avoid mutual exclusivity through
``engineering solutions, negotiation, threshold qualifications, service
regulations, and other means'' section 309(j)(6)(E) requires us to
adopt such methods where we find them to be ``in the public interest.''
We do not believe it is in the public interest to ``resolve'' the
competing claims of incumbents and non-incumbents for spectrum by
establishing a settlement mechanism that is limited to incumbents and
excluding non-incumbents from the process.
34. The Industry Proposal would also be inconsistent with the
approach we have adopted in other services where we have converted from
site-by-site licensing to geographic area licensing.
[[Page 41195]]
In our 900 MHz SMR proceeding and our recent paging proceeding, for
example, we adopted similar rules for licensing on a geographic basis
while protecting the existing operations of incumbent operators. In
neither instance did we give incumbents the unrestricted right to
obtain available spectrum through a pre-auction settlement process that
excluded non-incumbents. We also rejected this and similar alternatives
for the upper 200 channels of the 800 MHz band. For all of these
reasons, we conclude that the Industry Proposal would not serve the
public interest.
35. While we reject the specific settlement procedure described in
the Industry Proposal, we note that many of the positive aspects of the
proposal can still be accomplished through the auction process we are
establishing for the lower 230 channels. For example, incumbents on
these channels are free to enter into partnerships, joint ventures, or
consortia for purposes of applying for EA licenses on the lower 230
channels in the areas where they currently operate. Incumbents may also
negotiate transfers, swaps, partitioning arrangements, or similar
agreements with respect to spectrum that is currently licensed to them.
In some instances, taking these steps may result in only one entity
applying for a given EA license. Where that occurs, no auction will be
necessary because there will be no mutually exclusive applications to
resolve. At the same time, providing all parties, incumbents and non-
incumbents alike, with the opportunity to compete for EA licenses will
ensure that the spectrum is awarded to the party that values it the
most.
36. We also conclude that while geographic licensing is appropriate
for the lower 230 channels, some additional flexibility is appropriate
for incumbents on these channels to facilitate modifications and
limited expansion of their systems. First, allowing incumbent licensees
on the lower 230 channels such flexibility will facilitate the
relocation of incumbent licensees on the upper 200 channels. Licensees
who are faced with relocation will have a significant incentive to
relocate rapidly and voluntarily if they know they will have greater
flexibility to modify and expand their systems on the channels to which
they are relocating. This will promote our objectives for enabling EA
licensees on the upper 200 channels to make flexible use of their
spectrum, while also protecting the interests of incumbents who
relocate.
37. In addition, affording greater flexibility to lower 230
incumbents is appropriate because these channels are subject to an
application freeze and geographic licensing of these channels will not
occur until after the upper 200 channel auction is concluded and
incumbents have had an opportunity to relocate to the lower channels.
Because the upper 200 channels will be licensed first, EA winners on
these channels will obtain the ability to expand within their
geographic areas earlier than lower channel licensees. Allowing lower
channel incumbents limited flexibility to expand prior to the auction
will help to compensate for the fact that upper 200 licensees will
obtain the benefits of geographic licensing sooner.
38. Therefore, we adopt our proposal to allow incumbents on the
lower 230 channels to make system modifications within their
interference contours without prior Commission approval. Incumbent
licensees who currently utilize the 40 dBu signal strength contour for
their service area contour and 22 dBu signal strength contour for their
interference contour will be permitted to utilize their existing 18 dBu
signal strength contour for their interference contour as long as they
obtain the consent of all affected parties to do so. See Sec. IV-B-4-a.
Thus, an incumbent licensee, with the concurrence of all affected
incumbents, that desires to make modifications to its existing system
will be able to make such modifications such as adding new
transmitters, and altering its coverage area, so long as such incumbent
does not expand the 18 dBu interference contour of its system.
Moreover, licensees who do not receive the consent of all incumbent
affected licensees, will be able to make similar modifications within
their 22 dBu signal strength interference contour. Licensees that do
not desire to make modifications may also continue to operate with
their existing systems. We find that this approach will not only enable
incumbents to fill in ``dead spots'' in coverage or to reconfigure
their systems to increase capacity, but will also allow for some
incremental expansion of their systems.
39. In the 800 MHz Report and Order, some commenters stated that
smaller SMR entities only need to make smaller incremental changes to
their service areas to better serve their customers. We believe that
adopting the 18 dBu standard will allow such entities to make the
incremental changes they desire. At the same time, we find that the 18
dBu standard is superior to the Industry Proposal because it preserves
opportunities for new entrants in areas that are currently unserved and
that are not reasonably proximate to existing facilities. The 18 dBu
standard is more flexible than the 22 dBu standard and will thereby
increase opportunities for lower 230 incumbents to modify their
existing operations to meet technological changes and market demands
for service. This additional flexibility will also facilitate the
relocation of incumbent SMR licensees from the upper 200 to the lower
230 channels by providing these licensees with more flexibility to
modify their existing systems than they would possess if they remained
on the upper 200 channels.
40. Because our prior rules governing separation of 800 MHz
facilities are based on a 40/22 dBV/m standard, we recognize
that the 18 dBV/m standard adopted here may have little
practical significance in portions of the United States areas where
incumbents are already operating in close proximity to one another,
e.g., most markets east of the Mississippi. Therefore, as discussed in
Sec. IV-B-4-a, we will continue to use the current separation tables
and short-spacing rules based on the 40/22 dBV/m ratio to
define the interference protection rights of incumbents against other
incumbents, except where incumbents consent to the use of a more
relaxed standard. In less densely populated areas, however, we expect
the 18 dBV/m standard to be beneficial to incumbent systems
seeking greater operational flexibility. In addition, as discussed in
Sec. IV-B-4-b, we will use the incumbent's 36 dBV/m as opposed
to 40 dBV/m contour as the basis for protection from
interference by adjacent EA licensees.
ii. Converting Site-Specific Licenses to Geographic Licenses
41. We will allow lower 230 channel incumbents to combine their
site-specific licenses into single geographic licenses as proposed.
This option will provide incumbents with the same flexibility and
reduced administrative burden that geographic licensing affords to EA
licensees, and will simplify the licensing process for the Commission.
Because we have adopted the 18 dBu contour rather than the 22 dBu
contour, where the incumbent licensee has obtained the consent of all
affected parties, as the benchmark for defining an incumbent licensee's
protected service area, we will use the contiguous and overlapping 18
dbu contours of the incumbent's previously authorized sites to define
the scope of the incumbent's geographic license. Therefore, after the
auction of the lower 230 channels has been completed, incumbents in the
lower 230 channels may convert their current multiple site licenses to
a single
[[Page 41196]]
license. Incumbents seeking such reissued licenses must make a one-time
filing of specific information for each of their external base station
sites to update our database. Such filings should be made on FCC Form
600 and should include a detailed map of the area the system will
cover. We also will require evidence that such facilities are
constructed and placed in operation. Once the geographic license has
been issued, facilities that are later added or modified that do not
extend the licensees' 18 dBu interference contour will not require
prior approval or subsequent notification under this procedure. Such
facilities should not receive interference because they will be
protected by the presence of the licensee's external co-channel
stations. Licensees who do not receive the consent of all affected
parties may also follow the same process utilizing their 22 dBu signal
strength interference contour, rather than the 18 dBu contour.
4. Co-Channel Interference Protection
a. Incumbent SMR Systems
42. Our interference protection proposals in the Second Further
Notice of Proposed Rulemaking assumed that we would use the 22
dBV/m contour as the basis for determining the area in which
lower 230 incumbents could operate. As noted in Sec. IV-B-3-b, supra,
we have decided instead to allow all incumbents on the lower 230
channels to use the 18 dBV/m contour as the basis for
modifying and expanding their systems, provided that they obtain the
consent of all co-channel incumbents potentially affected by the use of
this standard. Because the 18 dBV/m standard gives incumbents
greater flexibility to expand, we must apply stricter interference
protection criteria to EA licensees to ensure that they do not
interfere with incumbent operations. Specifically, we will require EA
licensees either: (1) to locate their stations at least 173 km (107
miles) from the licensed coordinates of any incumbent, or (2) to comply
with co-channel separation standards based on a 36/18 dBV/m
standard rather than the previously applicable 40/22 dBV/m
standard. The 36 dBV/m desired signal strength contour is
determined from the R-6602, F(50,50) curves for Channels 7-13 in
Sec. 73.699 of the Commission's rules (Figure 10), with a 9 dB
correction factor for antenna height differential. The 18 dBV/
m undesired signal strength contour is calculated using the R-6602,
F(50,10) curves for Channels 7-13 found in Sec. 73.699 of the
Commission's rules (Figure 10a), with a 9 dB correction factor for
antenna height differential. In PR Docket No. 93-60, the Commission
determined that a protection ratio of 18 dB would result in co-channel
station spacings that provide reasonable protection from co-channel
interference and, at the same time, provide for efficient reuse of
valuable spectrum. Thus, EA licensees are required to ensure that the
18 dBV/m undesired signal strength contour of a proposed
station does not encroach upon the 36 dBV/m desired signal
strength contour of an existing incumbent station. Furthermore, in the
opposite situation, EA licensees will have their 36 dBV/m
desired signal strength contour protected with an 18 dB ratio, since
the undesired signal strength contour limit for incumbents that have
reached consent of all other affected parties shall be 18 dBV/
m.
43. We emphasize that this revised interference standard protects
incumbents only against EA licensees, not against other incumbents. As
noted above, incumbents who seek to use the 18 dBV/m standard
must obtain the consent of other affected incumbents to do so. In the
absence of such consent, the protection that one incumbent must afford
another continues to be governed by Sec. 90.621(b) of the Commission's
rules, i.e., incumbents must locate their stations at least 113 km (70
miles) from the facilities of any other incumbent or comply with the
co-channel separation standards based on the 40/22 dBV/m
standard set forth in our prior short-spacing rules.
b. Adjacent EA Licensees
44. We adopt the same interference protection standards for the
lower 230 channels that we previously adopted for the upper 200
channels. Thus, EA licensees on the lower 230 channels must limit their
signal strength at their EA borders to 40 dBV/m, unless
affected adjacent EA licensees agree to higher signal strength. We
emphasize that this rule applies only to resolving interference issues
between EA licensees. Thus, an EA licensee who complies with this rule
may nevertheless be required to limit its operations further in order
to comply with the rules governing protection of incumbents (see
Sec. IV-B-4-a, infra).
c. Emission Masks
45. In response to a request for reconsideration from Ericcson,
again supported by Motorola, we are further modifying our emission mask
rule for the upper 200 channels in the accompanying Memorandum Opinion
and Order. We conclude that this rule, as modified, should also be
applied to the lower 230 channels. Use of a common emission standard
throughout the 800 MHz SMR band will facilitate use of common equipment
and make it easier for licensees to combine upper 200 and lower 230
channels in their systems. As in the case of the upper 200 channels,
application of the emission mask rule to the lower 230 channels will
apply only to ``outer'' channels used by the licensee, i.e., to
channels that are creating out-of-band emissions that affect another
licensee. Thus, the emission mask rules do not apply to ``interior''
channels in a spectrum block that do not create out-of-band emissions
outside that block or on channels in the block that are used by
incumbents.
5. Regulatory Classification of EA Licensees on the Lower 230 Channels
46. We adopt our proposal with respect to SMR applicants who obtain
EA licensees on the lower 230 channels, but modify it with respect to
non-SMR applicants for EA licenses. We anticipate that most applicants
for EA licenses on these channels will be SMR applicants who seek to
provide interconnected service, thus meeting the statutory definition
of CMRS. Therefore, we will presumptively classify SMR winners of EA
licenses as CMRS providers. However, we will allow SMR applicants and
licensees to overcome this presumption by demonstrating that their
service does not meet the CMRS definition. This is consistent with our
approach to broadband PCS and other services. We reject Genesee's
contention that we have illegitimately used CMRS classification as a
basis for auctioning the lower 230 channels. In fact, the issue of
regulatory classification under section 332 of the Act is irrelevant to
the issue of auctionability, which turns on the factors enumberated in
section 309(j) of the Act. We address the issue of auctionability
elsewhere in this order and decline to revisit it here.
47. In the Memorandum Opinion and Order adopted today, we determine
that non-SMRs as well as SMRs will be eligible to obtain EA licenses on
the 150 General Category channels. While we expect most EA licenses to
be sought by SMR providers, we agree with E.F. Johnson that where an EA
license is obtained by a non-SMR operator, the CMRS presumption is
inapplicable. Thus, in the event that EA licenses are awarded to Public
Safety, Industrial/Land Transportation, or Business licensees, such
licensees will be classified as PMRS providers. Although Business Radio
licensees below 800 MHz may be classified as CMRS, Business Radio
licensees above 800 MHz are precluded from providing for-
[[Page 41197]]
profit service, and therefore are classified as PMRS.
C. Relocation of Incumbents From the Upper 200 Channels
1. Comparable Facilities
48. We adopt our proposed definition of ``comparable'' facilities,
with certain clarifications discussed below. In general, we define
comparable facilities as facilities that will provide the same level of
service as the incumbent's existing facilities. We also agree with
commenters that being provided with comparable facilities requires that
the change be transparent to the end user to the fullest extent
possible. However, our definition does not require an EA licensee to
upgrade the incumbent's facilities. As we proposed, EA licensees will
not be required to replace existing analog equipment with digital
equipment when there is an acceptable analog alternative that satisfies
the comparable facilities definition. Thus, under these circumstances
the cost obligation of the EA licensee will be the minimum cost the
incumbent would incur if it sought to replace, but not upgrade, its
system.
49. We agree with many of commenters' suggestions for further
refining the factors that are used to define comparable facilities. We
conclude that the determination of whether facilities are comparable
should be made from the perspective of the end user. To this end, we
identify four factors--system, capacity, quality of service, and
operating costs--that are relevant to this determination. We emphasize
that these factors are only relevant to determining what facilities the
EA licensee must provide to meet the requirements for mandatory
relocation; we reiterate that incumbents and EA licensees are free to
negotiate any mutually agreeable alternative arrangement.
a. System
50. To meet the comparable facilities requirement, an EA licensee
must provide the relocated incumbent with a comparable system. We
believe the term ``system'' should be defined functionally from the end
user's point of view, i.e., a system is comprised of base station
facilities that operate on an integrated basis to provide service to a
common end user, and all mobile units associated with those base
stations. System comparability includes stations licensed on a
secondary, non-protected basis. An incumbent that is licensed on a
secondary basis at the time of notification must receive at least the
equivalent type of license. We agree with SMR WON that this definition
can include multiple-licensed facilities that share a common switch or
are otherwise operated as a unitary system, provided that an end user
has the ability to access all such facilities. However, our definition
does not extend to facilities that are operationally separate. For
example, if a subscriber on one system has the ability to roam on a
neighboring system, we would not define the two facilities as part of a
common ``system.'' In addition, our definition does not include managed
systems that are comprised of individual licenses. We also agree with
SMR WON and AMTA that a ``system'' may cover more than one EA if its
existing geographic coverage extends beyond the EA borders. We reject
Nextel and Pittencrief's suggestions that we define ``system'' more
narrowly. In our view, a narrower definition would impair the
flexibility of incumbents to continue meeting their customer's needs.
b. Capacity
51. To meet the comparable facilities requirement, an EA licensee
must relocate the incumbent to facilities that provide equivalent
channel capacity. We define channel capacity as the same number of
channels with the same bandwidth that is currently available to the end
user. For example, if an incumbent's system consists of five 50 kHz
(two 25 kHz paired frequencies) channels, the replacement system must
also have five 50 kHz channels. If a different channel configuration is
used, it must have the same overall capacity as the original
configuration. We agree with commenters that comparable channel
capacity requires equivalent signaling capability, baud rate, and
access time. In addition, the geographic coverage of the channels must
be coextensive with that of the original system.
c. Quality of Service
52. Comparable facilities must provide the same quality of service
as the facilities being replaced. We define quality of service to mean
that the end user enjoys the same level of interference protection on
the new system as on the old system. In addition, where voice service
is provided, the voice quality on the new system must be equal to the
current system. Finally, we consider reliability of service to be
integral to defining quality of service. We measure reliability as the
degree to which information is transferred accurately within the
system. Reliability is a function of equipment failures (e.g.
transmitters, feed lines, antennas, receivers, battery back-up power,
etc.) and the availability of the frequency channel due to propagation
characteristics (e.g. frequency, terrain, atmospheric conditions,
radio-frequency noise, etc.) For digital data systems, this will be
measured by the percent of time the bit error rate exceeds the desired
value. For analog or digital voice transmissions, we will measure the
percent of time that audio signal quality meets an established
threshold. If analog voice system is replaced with a digital voice
system the resulting frequency response, harmonic distortion, signal-
to-noise ratio, and reliability will be considered.
d. Operating Costs
53. Another factor in determining whether facilities are comparable
is operating costs. We define operating costs as costs that affect the
delivery of services to the end user. If the EA licensee provides
facilities that entail higher operating cost than the incumbent's
previous system, and the cost increase is a direct result of the
relocation, the EA licensee must compensate the incumbent for the
difference. We anticipate that costs associated with the relocation
process will fall into several categories. First, the incumbent must be
compensated for any increased recurring costs associated with the
replacement facilitates (e.g. additional rental payments, increased
utility fees). Second, increased maintenance costs must be taken into
consideration when determining whether operating costs are comparable.
For example, maintenance costs associated with analog systems may be
higher than the costs of digital equipment because manufacturers are
producing mostly digital equipment and analog replacement parts can be
difficult to find.
54. While we conclude that EA licensees should be responsible for
increased operating costs caused by relocation, we note that
identifying whether increased costs are attributable to relocation
becomes more difficult over time. Therefore, we will not impose this
obligation indefinitely, but will end the EA licensee's obligation to
pay increased costs five years after relocation has occurred. We
believe this appropriately balances the interests of EA licensees and
relocated incumbents.
2. Cost-Sharing
a. Sharing Relocation Costs on a Pro Rata Basis
55. We adopt an approach that is similar to our PCS microwave
relocation rules. We conclude that, absent an
[[Page 41198]]
agreement among EA licensees who are prepared to relocate the
incumbent, all EA licensees who benefit from the relocation of the
incumbent must share the relocation costs on a pro rata basis. Although
several commenters believe that the Commission should adopt detailed
rules for sharing relocation costs among multiple EA licensees, we do
not believe that detailed rules are necessary since all EA licensees
will be licensed at approximately the same time. However, we do not
believe that all EA licensees will notify incumbents of their intention
to relocate within 90 days of the release of the Public Notice
announcing the commencement of the voluntary negotiation period because
they may not be ready or capable of relocating an incumbent and,
therefore will not participate in the relocation process. Those non-
notifying EA licensees, however may subsequently determine that those
channels relocated out of their EA by other EA licensees are necessary
for their use. Therefore, EA licensees who relocate the incumbent will
obtain a right to reimbursement from non-notifying EA licensees who
want to benefit from the relocation. We believe that allowing all EA
licensees who relocate the incumbent a right to reimbursement is
necessary to avoid a ``free-rider'' problem by those EA licensees who
did not provide notification, but subsequently benefit from the
relocation. We also believe that reimbursement rights will ensure that
the incumbent is relocated as a whole and not on a piece-meal basis.
56. The pro rata formula will be based on the number of channels
being relocated out of each EA. Several commenters support this
proposal, because the relocation process is likely to involve multiple
EA licensees and one incumbent. The pro rata formula requires those EA
licensees who participate in the relocation process to share the costs
for relocating those channels that are located in a non-notifying
licensee's EA. Therefore, the cost-sharing formula will determine the
costs for relocating the incumbent's system out of each EA. We believe
that determining the relocation costs for each EA will allow those EA
licensees who participate in the relocation process to easily determine
their cost obligation and their reimbursement share from later entrant
EA licensees who did not participate. We believe that such a formula
will negate the need for a complicated plan. The new formula is:
[GRAPHIC] [TIFF OMITTED] TR31JY97.000
Ci equals the amount of reimbursement
Tc equals the actual cost of relocating the incumbent
TCh equals the total number of channels that are being relocated
Chj equals the number of channels that each respective EA licensee
will benefit from
57. We believe the formula provides an effective and
straightforward means of determining a participating EA licensee's cost
obligation and the reimbursement shares for later entrant EA licensees.
This formula is essential to make cost-sharing administratively
feasible and fair for those EA licensees who participate in the
relocation process and those who choose not to.
58. The formula is similar to the formula adopted for sharing the
relocation costs of microwave incumbents, but it does not take into
account depreciation for the costs of reimbursing EA licensees who
participated in the relocated process. Instead, non-notifying EA
licensees who subsequently decide to use the channels or area of their
EA that an incumbent was relocated out of must fully reimburse those
participating EA licensees prior to testing. Similar to our decision in
the microwave relocation proceeding, EA licensees who relocate channels
that benefit other EA licensees and are fully outside of their market,
should be entitled to full reimbursement of compensable costs for
relocating that portion of the incumbent that are either fully outside
their market area or licensed EA. However, because we realize that a
non-notifying EA licensee may not decide to use those channels or serve
the area of their EA that was once occupied by an incumbent, we
conclude that ten years from the date of the Public Notice commencing
the voluntary negotiation period, reimbursement rights will sunset.
59. The following is an example of how the formula will work: In
October 1997, EA licensees A, B, and C each notify the incumbent in a
timely manner that they are prepared to relocate the incumbent. EA
licensee D does not provide notification to the incumbent. The
incumbent decides to compel simultaneous negotiations among EA
licensees A, B, and C. As a result, EA licensees A, B, and C fully
relocate the incumbent. The total costs for relocating the incumbent is
$100,000. There were 60 channels that EA licensees A, B, C, and D can
use as a result of the relocation. The channels located in each EA are
as follows: EA A has 25 channels; EA B has 15 channels; EA C has 10
channels; and EA D has 10 channels. For this example, we will calculate
the formula for determining the costs share of EA licensee B. As a
result, Chj=25, because that is the number of channels that EA licensee
B will benefit from. The total number of channels that were relocated
is 60 and, therefore TCh=60. In addition, Tc equals $100,000, because
that is the total costs of relocating the incumbent. The calculation of
licensee B's reimbursement payment is as follows:
[GRAPHIC] [TIFF OMITTED] TR31JY97.001
Thus, licensee B pays $25,000. Licensee A would pay $41,666.66,
licensee C would pay $16,666.66 and licensee D would pay $16,666.66.
Therefore, licensee D will be obligated to reimburse licensees A, B,
and C $16,666.66 if licensee D subsequently decides to use the channels
in EA D. This amount must be equally divided among EA licensees A, B,
and C. All three licensees will trigger a right to reimbursement from
licensee D and will have the right to collect their share of the costs
prior to licensee D commencing with testing.
60. We decline to adopt the proposals of commenters that would
allow EA licensees who relocate the incumbent to step into the shoes of
the incumbent. We realize that not all EA licensees will provide
notice, even though there are sufficient incentives to do so. However,
we do not believe it would be appropriate to allow an EA licensee who
is prepared to relocate the incumbent to succeed to all of the rights
and obligations of that incumbent. In essence, succeeding to the rights
and obligations of the incumbent would allow EA licensees to attain a
de facto license for parts of an EA that they were not the high bidder
for at auction. Therefore, we believe that all EA licensees who benefit
initially or subsequently from the relocation of an incumbent should
share the costs of the relocation on a pro rata basis. To accomplish
this, EA licensees who relocate the incumbent will obtain a right to
reimbursement from non-notifying EA licensees who subsequently decide
to use the channels that were relocated. Therefore, we have designed a
two-step process that will allow a participating EA licensee to obtain
a reimbursement right and collect the initial costs for relocating
channels outside of their EA.
b. Triggering a Reimbursement Right
61. Commenters, although supportive of the Commission's proposal to
allow EA licensees who negotiate a relocation
[[Page 41199]]
agreement the right to reimbursement from EA licensees who benefitted,
did not specifically address how such right should be created. We
believe that a right to reimbursement can easily be triggered by the
procedures we adopted in the First Report and Order.
62. In the First Report and Order, we developed a notification
procedure that requires an EA licensee to file a copy of the relocation
notice and proof of the incumbent's receipt of the notice to the
Commission within ten days of receipt. Because notification affects an
EA licensee's right to relocate an incumbent, we believe that such
notification should also be the first step in triggering an EA
licensee's reimbursement right. We believe the second step of
triggering a reimbursement right is signing a relocation agreement with
the incumbent. Thus, if an EA licensee timely notifies an incumbent of
its intention to relocate, and subsequently negotiates and signs a
relocation agreement with the incumbent, the EA licensee will have
triggered its right to reimbursement from EA licensees who benefitted.
63. In addition, because notification is the first step in
establishing a reimbursement right for an EA licensee, we believe that
such notification should also establish an obligation for those EA
licensees who benefited from the relocation. We believe that an EA
licensee who is sincere about using the channels in its EA will provide
notice to the incumbent of its intention to relocate the incumbent. We
agree with AMTA that EA licensees who do not participate in the
relocation process should be prohibited from invoking mandatory
negotiations or any of the provisions of the Commission's mandatory
relocation guidelines.
64. Therefore, if an EA licensee timely notifies an incumbent of
its intention to relocate, but during the voluntary negotiation period
decides not to participate in the relocation process, such EA licensee
will be obligated to reimburse those EA licensees who have triggered a
reimbursement right. EA licensees who do not provide notice to the
incumbent, but subsequently decide to use the channels in the EA will
be required to reimburse, outside of the Commission's mandatory
relocation guidelines, those EA licensees who have established a
reimbursement right. We believe that this procedure strikes a fair
balance between EA licensees who relocate incumbents and those EA
licensees who decide not to relocate incumbents.
c. Compensable Costs
65. We agree with those commenters who believe that premium
payments should not be reimbursable and therefore adopt our proposal
that reimbursable costs will be limited to the actual costs of
relocating the incumbent. We believe that EA licensees who have an
incentive to be first to market will have a need to accelerate the
relocation process. We agree with those commenters that believe other
EA licensees will not receive the same advantage and therefore should
not be required to contribute to premium payments. Therefore, we
conclude that reimbursement rights will only apply to actual relocation
costs.
66. In the Second Further Notice of Proposed Rulemaking, we
tentatively concluded that actual relocation costs will include, but
not be limited to: SMR equipment; towers and/or modifications; back-up
power equipment; engineering costs; installation; system testing; FCC
filing costs; site acquisition and civil works; zoning costs; training;
disposal of old equipment; test equipment; spare equipment; project
management; and site lease negotiation. Commenters generally supported
the list proposed, but were concerned that the list did not address
other cost factors related to relocation. We agree with those
commenters who argue that there are other factors related to the
relocation process and therefore conclude that this list should be
illustrative, and not exhaustive. However, because we want to encourage
a fast relocation process free of disputes, we believe that the bulk of
compensable costs should be tied as closely as possible to actual
equipment costs. Based on this goal, we believe that subsequent EA
licensees should only be required to reimburse EA relocators for
incumbent transaction expenses that are directly attributable to the
relocation, subject to a cap of two percent of the ``hard costs''
involved. Hard costs are defined as the actual costs associated with
providing a replacement system, such as equipment and engineering
expenses. This restriction on the reimbursement of transaction fees
corresponds to the restriction we adopted with respect to PCS
reimbursement of incumbent transaction expenses for cost-sharing during
any time period--voluntary, mandatory, or involuntary. Therefore, we
adopt the same restriction for purposes of this cost-sharing plan.
However, EA licensees are not required to pay for transaction costs
incurred by EA licensees during the voluntary or mandatory periods once
the involuntary period is initiated, or for fees that cannot be
legitimately tied to the provision of comparable facilities.
67. In addition, we believe that actual costs should also include
costs directly related to a seamless transition. In the First Report
and Order, we concluded that during the involuntary negotiation period,
the EA licensee must conduct the relocation in such a fashion that
there is a ``seamless'' transition from the incumbents ``old''
frequency to its ``new'' frequency. We agree with ITA and SMR Systems
that it may be necessary to operate the old system and the new system
simultaneously to ensure a seamless transition. We want to encourage EA
licensees and incumbents to exercise flexibility when negotiating a
relocation agreement, but we also want to ensure that the incumbent is
made whole, and is relocated without a substantial disruption in
service. We also recognize that alternative means may be agreed upon to
avoid a substantial disruption in service. Therefore, we will require
that any costs directly associated with a seamless transition will be
considered actual costs and, therefore reimbursable.
d. Payment Issues
68. We partially agree with Genessee and conclude that
reimbursement payments should be due when the frequencies of the
incumbent have been cleared. We also agree with Fresno that an EA
licensee may choose not to use the frequencies in a particular EA.
Therefore, it is the EA licensee who must, within 90 days of the
release of the Public Notice announcing the commencement of the
voluntary negotiation period, decide whether they intend to participate
in the mandatory relocation process.
69. We believe that an EA licensee who provides notification is
sincere of its intention to use the frequencies in the EA and
therefore, concluded supra, that once an EA licensee notifies an
incumbent of its intention to relocate the incumbent, the EA licensee
will be obligated to pay its share of reimbursement. However, EA
licensees who have triggered an obligation should not be required to
submit payment until the channels they have been licensed for are
available for use. Therefore, we conclude that payments will not be due
until the incumbent has been fully relocated and the frequencies are
free and clear. We believe this procedure strikes a clear balance
between those EA licensees who negotiate a relocation agreement and
those EA licensees who want the use of the frequencies, but decide not
to negotiate a relocation agreement.
[[Page 41200]]
70. Because non-notifying EA licensees will not receive the benefit
of the Commission's relocation guidelines, they will be required to
reimburse those EA licensees who have triggered a reimbursement right.
Therefore, we conclude that non-notifying EA licensees who subsequently
decide to use the channels, should be required to submit payment to
those EA licensees who have triggered a reimbursement right prior to
commencing testing of their system. We believe this strikes a fair
balance between the EA licensee who has benefited a non-notifying EA
licensee and the non-notifying EA licensees right to use those channels
within its licensed EA. In addition, we believe that this will create
an incentive for both parties to expedite negotiations among
themselves.
3. Resolution of Disputes that Arise During Relocation
71. Commenters strongly support the Commission's proposal to use
ADR procedures when disputes arise as to the amount of reimbursement
required and the relocation negotiations (including disputes over
comparability of facilities and the requirement to negotiate in good
faith). We agree with those commenters who believe that the use of ADR
procedures will help resolve disputes in a timely fashion, while
conserving Commission resources. In addition, we believe that the rapid
resolution of disputes will speed the development of wide-area systems,
and therefore will ultimately benefit the public. Therefore, to the
extent that disputes cannot be resolved among the parties, we strongly
encourage parties to use expedited ADR procedures. ADR procedures
provide several alternative methods such as binding arbitration,
mediation, or other ADR techniques. Because we are encouraging parties
to use ADR procedures, we do not need to designate an arbiter to
resolve the disputes as some commenters suggest. As several commenters
pointed out, the choice of arbiter should be a decision left to the
parties.
72. We encourage parties to use ADR procedures prior to seeking
Commission involvement and caution that entire resolution of disputes
by the Commission will be time consuming and costly to the parties. In
addition, we emphasize that parties who neglect their obligation to
satisfy a reimbursement right will be subject to the full realm of
Commission enforcement mechanisms.
4. Administration of the Cost-Sharing Plan
73. We believe that the cost-sharing plan we have adopted for 800
MHz SMR does not require us to designate an administrator. We believe
that an administrator was necessary to administer the cost-sharing plan
under the microwave relocation procedures because of the complexity of
the plan. We do not believe that the cost-sharing plan we have adopted
for 800 MHz SMR is as complex and therefore decline to designate a
clearinghouse to administer the cost-sharing plan. However, we will not
prohibit an industry supported, not-for-profit clearinghouse from being
established for purposes of administering the cost-sharing plan under
the 800 MHz relocation procedures.
D. BETRS Eligibility on the Upper 200 Channels
74. As we did in our Paging Second Report and Order, 62 FR 11616
(March 12, 1997), we do not believe it is necessary to continue
separate primary licensing of BETRS facilities on 800 MHz SMR
frequencies. Under the rules adopted in our CMRS Flex Report and Order,
61 FR 45336 (August 29, 1996), all CMRS providers, including SMRs, may
provide fixed services of the type provided by BETRS licensees. In
addition, entities seeking to offer BETRS on 800 MHz SMR frequencies
will be able to obtain spectrum through geographic area licensing. We
see no basis for distinguishing BETRS from other services that use 800
MHz SMR spectrum to provide commercial communications service to
subscribers.
75. As we noted in our Paging Second Report and Order, we recognize
that BETRS primarily serves rural, mountainous, and sparsely populated
areas that might not otherwise receive basic telephone service.
However, according to our records, there are few BETRS facilities
licensed on 800 MHz SMR frequencies. According to our licensing
records, as of November 13, 1996, there were only eleven BETRS
authorizations in the 800 MHz service, and all of them were located in
the State of Alaska. Furthermore, our records show no BETRS facilities
licensed in Puerto Rico. Therefore, we disagree with PRTC that
eliminating separate primary licensing of BETRS facilities on 800 MHz
SMR frequencies will negatively affect phone penetration in Puerto
Rico. More importantly, concerns about the delivery of service to rural
and other high cost areas are currently being addressed in our ongoing
rulemaking proceeding examining universal service issues. We also note
that BETRS has other frequencies available to it under part 22. In
light of the limited demand for these channels by BETRS licensees, and
the alternatives available for providing telecommunications service in
sparsely populated areas, we conclude that continued licensing of 800
MHz channels to BETRS on a co-primary basis is not necessary.
76. We will, however, allow BETRS licensees to obtain new sites and
channels in the 800 MHz band on a secondary basis. If any EA licensee
subsequently notifies the BETRS licensee that a secondary facility must
be shut down because it may cause interference to the EA licensee's
existing or planned facilities, the BETRS licensee must discontinue use
of the particular channel at that site no later than six months after
such notice.
E. Partitioning and Disaggregation for 800 MHz and 900 MHz Licensees
1. Partitioning
a. Eligibility
77. We adopt our tentative conclusion and further extend
partitioning to all incumbent licensees and eligible SMR licensees on
all SMR channel blocks. We agree with commenters that partitioning will
provide SMR licensees with increased flexibility and result in more
efficient spectrum management. In the broadband PCS proceeding, we
eliminated the existing restriction that limited partitioning of
broadband PCS licenses to only rural telcos. We concluded that allowing
more entities to acquire partitioned broadband PCS licenses would:
``(1) Remove potential barriers to entry thereby increasing competition
in the PCS marketplace; (2) encourage parties to use PCS spectrum more
efficiently; and (3) speed service to unserved and underserved areas.''
We conclude that the very same important goals will be met by allowing
more open partitioning in the SMR service. Eliminating the existing
rural telco restriction on SMR partitioning will: (1) Allow new
entities, such as small businesses, to acquire SMR licenses and thus
increase competition and foster the development of new technologies and
services; (2) encourage existing SMR licensees to use their spectrum
more efficiently; and (3) ensure the faster delivery of SMR service to
rural areas. We also believe that allowing more flexible partitioning
will provide an alternative to the relocation of incumbent licensees.
78. Under our rules, SMR licensees are required to meet performance
requirements based on substantial service, which may be fulfilled by
providing population-based coverage. As some of the 900 MHz commenters
noted, these requirements encourage SMR licensees to initially focus
their attention on the more populated, urban
[[Page 41201]]
portions of their markets, in order to meet the construction
requirements, while leaving the less-populated, rural areas unserved.
With the present rural telco restriction in place, SMR licensees are
not permitted to partition the more rural portions of the their markets
to another entity, unless that entity is a qualified rural telco. In
those cases where no rural telco is present in the market or where the
rural telco does not desire to provide SMR service, there may be a
delay in the delivery of service to the rural portions of the MTA.
Allowing SMR licensees to partition portions of their markets to other
entities more interested in providing service to those niche areas not
only allows those other entities an opportunity to enter the SMR
marketplace but also increases the odds that the less populated, rural
portions of markets receive higher quality SMR service. Therefore, we
are eliminating the existing rural telco restriction on both 800 MHz
and 900 MHz SMR partitioning.
79. We do not find that retaining the rural telco restriction will
result in higher quality service to rural areas. We find that allowing
more open partitioning in the 900 MHz SMR service will mean that
additional, highly qualified wireless operators, including incumbent
SMR operators, will be permitted to provide 900 MHz SMR service which
may result in better service and increased competition which may result
in lower prices for service. We also do not find that allowing more
open partitioning of 900 MHz SMR licenses is inconsistent with the
mandate of section 309(j)(3)(B) of the Communications Act to ensure
that licenses are disseminated among a wide variety of applicants
including rural telcos. RTG argues that partitioning is the only
preference that has been devised to ensure that rural telcos are
afforded economic opportunities to participate in the provision of new
and innovative services. We disagree. Rural telcos are able to take
advantage of the special provisions for small businesses adopted for
the 900 MHz SMR auction. Furthermore, sections 309(j)(3) (A), (B), and
(D) of the Communications Act direct the Commission to further the
rapid deployment of new technologies for the benefit of the public
including those residing in rural areas, to promote economic
opportunity and competition, and to ensure the efficient use of
spectrum. While encouraging rural telco participation in 900 MHz SMR
service offerings is an important element in meeting these goals,
Congress did not dictate that this should be the sole method of
ensuring the rapid deployment of service in rural areas. Allowing more
open partitioning will further the goals of section 309(j)(3) by
allowing 900 MHz SMR licensees to partition their licenses to multiple
entities rather than to a limited number of rural telcos. In addition,
we find that, because they possess the existing infrastructure and
local marketing knowledge in rural areas, rural telcos will be able to
compete with other parties to obtain partitioned 900 MHz SMR licenses.
80. We decline to adopt SMR WON's proposal to restrict non-
incumbent 800 MHz SMR licensees from partitioning until they have
relocated all incumbent licensees from their band. We agree with those
800 MHz commenters that believe that the auctions process obviates the
need for restricting partitioning. While we acknowledge SMR WON's
concerns that partitioning could be used as a method for avoiding
responsibility for relocation of incumbents, we believe that such a
restriction would unfairly discourage partitioning without any
corresponding public interest benefit. We note that partitionees will
be permitted to acquire partitioned license areas from EA licensees but
will not be permitted to operate on channels that were previously
cleared by other EA licensees until they have satisfied the relocation
reimbursement requirements under our rules. EA licensees and
partitionees are free to negotiate among themselves as to who will be
responsible for paying the reimbursement costs, and we will require
that parties seeking approval for a partitioning arrangement in the 800
MHz SMR service certify which party will be responsible for such
reimbursement. We believe that such a certification is a more flexible
approach to ensuring that partitioning is not used as a means to
circumvent our reimbursement requirements.
b. Available License Area
81. In the broadband PCS and WCS proceedings, we allowed
partitioning along any service area defined by the partitioner and
partitionee. We found that, by providing such flexibility to licensees
for determining partitioned broadband PCS license areas, we would
permit the market to decide the most suitable services areas. We find
that the same rationale holds true in the SMR service. Restricting the
partitioning of SMR licenses to geopolitical boundaries, as originally
proposed in the Second Further Notice of Proposed Rulemaking and by
AMTA, may inhibit partitioning and may not allow licensees to respond
to market demands for service. We find that allowing unrestricted
partitioning of SMR licenses is preferable, as long as the parties
submit information in their partial assignment applications that
describes the partitioned license area.
82. We will require that applications seeking approval to partition
an SMR license will be required to submit, as separate attachments to
the partial assignment application, a description of the partitioned
service area and, where applicable, a calculation of the population of
the partitioned service area and licensed market. The partitioned
service area must be defined by coordinate points at every 3 degrees
along the partitioned service area agreed to by both parties, unless
either (1) an FCC-recognized service area is utilized (i.e., Major
Trading Area, Basic Trading Area, Metropolitan Statistical Area, Rural
Service or Economic Area) or (2) county lines are followed. Applicants
need only define that portion of the partitioned service area that is
not encompassed by an FCC-recognized service area or county line. For
example, if the partitioned service area consisted of five counties and
three additional townships, the applicant must only define that portion
of the partitioned service area comprised of the additional townships.
These geographical coordinates must be specified in degrees, minutes
and seconds to the nearest second of latitude and longitude, and must
be based upon the 1927 North American Datum (NAD27). Applicants may
also supply geographical coordinates based on 1983 North American Datum
(NAD83) in addition to those required based on NAD27. This coordinate
data should be supplied as an attachment to the partial assignment
application, and maps need not be supplied. In cases where an FCC
recognized service area or county lines are being utilized, applicants
need only list the specific area(s) (through use of FCC designations)
or counties that make up the newly partitioned area. For example, if a
licensee desires to partition its license only for the service area
needed by a rural telco, it will simply provide coordinate data points
at each 3 degree data point extending from the center of the service
area (i.e, at the 3 degree, 6 degree, 9 degree, 12 degree, etc. azimuth
points with respect to true north).
83. We note that this rule will also apply to incumbent 800 MHz SMR
licensees seeking partial assignments of license. Incumbent licensees
are currently licensed on a site-by-site basis and currently must seek
a partial assignment of license under our existing rules if they desire
to assign a portion of their licensed transmitter sites to
[[Page 41202]]
another entity. Under our new rules, incumbent 800 MHz SMR licensees
must follow the same procedures as all other licensees and must include
the necessary description of the ``partitioned license area.'' For
incumbent 800 MHz SMR licensees, the ``partitioned license area'' will
mean that area encompassed by the protected service contours of all of
the transmitter sites being assigned.
2. Disaggregation
a. Eligibility
84. We conclude that all SMR licensees should be allowed to
disaggregate portions of their spectrum to any party that is qualified
for the spectrum's underlying channel block. We find that
disaggregation will provide SMR licensees greater flexibility to manage
their spectrum more efficiently and, in the 800 MHz band, will
facilitate the coexistence of geographic area licensees and incumbents
by allowing geographic licensees to subdivide their spectrum holdings
and assign or transfer parts of their spectrum to other eligible
entities or incumbents. We further find that disaggregation will
increase competition by encouraging a broader range of SMR
participants; foster a broader range of services offered by those
participants as they seek niche markets and services; expedite the
provision of SMR service to areas that may not otherwise receive CMRS
service; and, allow the marketplace to determine who and by whom the
spectrum will be used. Moreover, allowing SMR disaggregation will help
establish regulatory symmetry with similar services, such as PCS, as
mandated by the 1993 Budget Act. Once again, we find that allowing
disaggregation will provide a less disruptive alternative for the
relocation of incumbent licensees.
85. As we did with partitioning, we decline to adopt SMR WON's
proposal to restrict non-incumbent 800 MHz SMR licensees' ability to
disaggregate. We agree with commenters that conclude that the market
should determine when and how much spectrum to disaggregate.
b. Amount of Spectrum to Disaggregate
86. We agree with commenters that we should not limit the amount of
SMR spectrum that can be disaggregated. We find that the marketplace
should decide the amount of SMR spectrum to be disaggregated and that
there is no need to set a minimum disaggregation amount. As we did for
broadband PCS and WCS, we seek to provide flexibility to the parties to
decide the amount of spectrum they need. This will permit more
efficient use of spectrum and deployment of a wider range of service
offerings. Requiring a minimum disaggregation amount for SMR may
interfere with parties intend use of spectrum and may foreclose some
parties from using disaggregation as a means of obtaining SMR spectrum
to provide their unique service offerings. We note that parties
acquiring disaggregated SMR spectrum will continue to be subject to all
of our technical and operating requirements.
1. Construction, Coverage and Channel Usage Requirements
87. We agree that SMR licensees should not be able to use
partitioning and disaggregation as a means of circumventing our
performance requirements and that some version of these requirements
should apply to parties obtaining licenses through these means. By
adopting such requirements we seek to ensure that spectrum is used to
the same degree that it would have been used had the partitioning or
disaggregation transaction not taken place.
88. Therefore, we will adopt flexible coverage and channel usage
requirements for partitioning and disaggregation in the 800 MHz and 900
MHz SMR services that are consistent with the underlying requirements
in those services. We find that granting the parties flexibility to
devise a scheme for meeting these requirements will increase the
viability and value of partitioned licenses and disaggregated spectrum
and will facilitate partitioning and disaggregation for the SMR
service.
89. With respect to incumbent licensees, we believe that it would
be inappropriate to subject entities that obtain partitioned licenses
or disaggregated spectrum from incumbent SMR licensees to additional
performance requirements when no such requirements currently exist for
these licensees. However, to prevent incumbent licensees from using
partitioning or disaggregation as a means of circumventing our one-year
construction requirement, we will hold partitionees and disaggregatees
to the original construction deadline(s) for each of the partitioned
facilities they acquire. These deadlines may vary depending on when the
facility was originally licensed. In any case, a partitionee or
disaggregatee that obtains a portion of an incumbent SMR licensees'
facilities or spectrum with only a few months remaining before the
expiration of the construction deadline, will be required to have these
facilities constructed and providing ``service to subscribers'' by each
individual construction deadline. Failure to meet the individual
construction deadline for a specific facility will result in automatic
termination of that facility's authorization. We believe that such a
requirement is a fair balance between allowing incumbent SMR licensees
the opportunity to utilize the helpful spectrum management tools of
partitioning and disaggregation while ensuring continued compliance
with our performance requirements.
90. Geographic Area Licensees--Partitioning. Because the coverage
requirements differ for licensees in the 800 MHz and 900 MHz bands, we
will adopt coverage requirements that are consistent with the
licensees' underlying requirements. In the 900 MHz band and in the
lower 230 channels of the 800 MHz band, licensees are required to
provide ``substantial service'' to their markets within five years of
the grant of their initial licensees. As such, we will permit parties
seeking to partition licenses in those bands to meet one of the
following performance requirements. Under the first option, the
partitioner and partitionee can each agree to meet the ``substantial
service'' requirement for their respective portions of the market. If a
partitionee fails to meet the ``substantial service'' requirement for
its portion of the market, the license for the partitioned area will
automatically cancel without further Commission action. Under the
second option, if the original geographic area licensee certifies that
it has already met or will meet the ``substantial service'' requirement
for the entire market by providing coverage to at least one-third of
the population of the entire (pre-partitioned) market within three
years of the grant of its license and at least two-thirds of the market
population within five years, then the partitionee not be subject to
performance requirements except for those necessary to obtain renewal.
91. In the upper 200 channels of the 800 MHz band, licensees must
meet specific coverage benchmarks by providing coverage to at least
one-third of the population of their market within three years of the
grant of their initial license and coverage to at least two-thirds of
the population within five years. For licensees in the upper 200
channels of the 800 MHz band, we will adopt flexible coverage
requirements similar to those we adopted in the broadband PCS
proceeding. Under the first option, we will require that the
partitionee certify that it will meet the same coverage requirement as
the original licensee for its partitioned
[[Page 41203]]
market. If the partitionee fails to meet its coverage requirement, the
license for the partitioned area will automatically cancel without
further Commission action. Under the second option, the original
licensee certifies that it has already met or will meet its three-year
coverage requirement and that it will meet the five-year construction
requirement for the entire geographic area market. In that case, the
partitionee will not be subject to performance requirements except for
those necessary to obtain renewal.
92. Geographic Area Licensees--Disaggregation. Licensees in the
upper 200 channels of the 800 MHz band are required to meet a channel
usage requirement. Consistent with that rule, we will require that
disaggregatees in the upper 200 channels of the 800 MHz band meet a
channel usage requirement for the spectrum they acquire. However,
consistent with our approach for partitioning and to provide
flexibility to the parties to facilitate disaggregation in the upper
200 channels, we will permit the parties to negotiate among themselves
the responsibility for meeting the channel usage requirement. Each
party may agree to separately meet its channel usage requirement for
its portion of the disaggregated spectrum or the original licensee may
certify that is has or will meet the channel usage requirement for the
entire spectrum block. Similar to our approach for partitioning, one
party's failure to meet its agreed-to channel usage requirement shall
result in that party's license automatically reverting to the
Commission and shall not affect the other party's license.
93. There are no channel usage requirements in the 900 MHz SMR band
or in the lower 230 channels of the 800 MHz band. We believe it would
be inconsistent with our existing construction requirements to impose
separate performance requirements on both the disaggregator and
disaggregatee in those bands. However, we wish to ensure that parties
do not use disaggregation to circumvent our underlying performance
requirements. Therefore, we will adopt an approach similar to the one
adopted for partitioning: we will retain the underlying ``substantial
service'' requirement for the spectrum as a whole but allow either
party to meet the requirements on its disaggregated portion. Therefore,
a licensee in either the 900 MHz band or the lower 230 channels of the
800 MHz band that disaggregates a portion of its spectrum may elect to
retain responsibility for meeting the ``substantial service''
requirement, or it may negotiate a transfer of this obligation to the
disaggregatee. In either case, the rules ensure that the spectrum will
be developed to at least the same degree that was required prior to
disaggregation.
94. To ensure compliance with our rules, we will require that
parties seeking Commission approval of disaggregation agreement in the
900 MHz band or the lower 230 channels of the 800 MHz band include a
certification as to which party will be responsible for meeting the
applicable ``substantial service'' requirements. Parties may also
propose to share the responsibility for meeting the requirement. As
part of our public interest review under section 310(d), we will review
each transaction to ensure that the party designated as responsible for
meeting the performance requirements is bona fide and has the ability
to meet these requirements. In the event that only one party agrees to
take responsibility for meeting the performance requirement and later
fails to do so, that party's license will be subject to forfeiture, but
the other party's license will not be affected. Should both parties
agree to share the responsibility for meeting the performance
requirements and either party later fail to do so, both parties'
licenses will be subject to forfeiture.
95. We note also that disaggregatees that already hold an SMR
license or other CMRS license in the same geographic market will be
subject to the same performance requirements as disaggregatees who do
not hold other licenses for disaggregated spectrum. In addition, as we
noted above, we will require that parties to partitioning and
disaggregation agreements involving 800 MHz licensees certify in their
applications which party will be responsible for relocating incumbent
licensees located in the partitioned license area or the disaggregated
spectrum block. The parties are free to negotiate among themselves
which party will be responsible for incumbent relocation.
2. Matters Related to Designated Entity Licensees
96. Geographic area licensees in both the 800 MHz and 900 MHz bands
that qualify as a ``small business'' (otherwise referred to generally
as ``designated entity'' licensees) may receive a bidding credit to
reduce the amount of their winning auction bid. Entities with average
gross revenues of not more than $3 million for the preceding three
years may receive a 35 percent bidding credit. Entities with average
gross revenues of not more than $15 million for the preceding three
years may receive a 25 percent bidding credit. While 900 MHz licensees
may repay their winning auction bid pursuant to installment payments,
pursuant to our Memorandum Opinion and Order released today,
installment payments for 800 MHz licensees in the upper 200 channels
have been eliminated and we decline to adopt such a provision for the
lower 230 channels. There are two levels of installment payments
available to small business EA licensees in the upper 200 channels
while only one level of installment payments is available to small
business EA licensees in the lower 230 channels. Therefore, we must
only concern ourselves with the question of installment payments with
respect to 900 MHz licensees.
97. Whenever an geographic area 800 MHz or 900 MHz SMR licensee,
that received a bidding credit at auction, transfers its entire license
to an entity that would not have qualified for such a bidding credit or
would have qualified for a lower bidding credit, the geographic area
licensee is required to repay some or all of its bidding credit. If the
transfer occurs in the first two years, 100 percent of the bidding
credit must be repaid; if it occurs in year three, 75 percent; in year
four, 50 percent; and in year five, 25 percent. After the fifth year,
no unjust enrichment penalty is imposed.
98. Similarly, if a 900 MHz geographic area licensee, that is
paying its winning bid through installment payments, transfers its
license to entire an entity that would not have qualified for such
installment payments or, in the case of the upper 200 channels, for a
less favorable installment payment plan, the geographic area licensee
must make full payment of the remaining unpaid principal and interest
accrued through the date of assignment or transfer. A similar rule has
been adopted for the lower 230 channels, however, only one level of
installment payments in available to EA licensees in the lower 230
channels.
99. We conclude that the above-outlined unjust enrichment
requirements shall apply if licensee, that received one of these
special small business benefits, partitions or disaggregates to an
entity that would not qualify for the benefit. We will follow the
approach adopted in both the broadband PCS and WCS proceedings and
apply all such unjust enrichment requirements on a pro rata basis using
population to calculate the relative value of the partitioned area and
amount of spectrum disaggregated to calculate the relative value of the
disaggregated spectrum. We disagree
[[Page 41204]]
with PCIA that these measures will slow the assignment process or
encourage the filing of frivolous petitions to deny. We find that such
measures will provide an objective method for calculating the relative
values of partitioned areas and disaggregated spectrum. We note that
population will be calculated based upon the latest census data.
Parties may use the latest census data when it is available.
100. With respect to installment payments, we will follow the
procedures established in the broadband PCS proceeding and require that
a 900 MHz SMR geographic area licensee, making installment payments,
and seeking to partition or disaggregate to an entity that does not
meet the applicable installment payment eligibility standards, make a
payment of principal and interest calculated on a proportional basis as
set forth above. If a geographic area licensee making installment
payments, partitions or disaggregates to an entity that would qualify
for less favorable installment payments, we will require the licensee
to reimburse the government for the difference between the installment
payment paid by the licensee and the installment payments for which the
partitionee or disaggregatee is eligible calculated on a proportional
basis as set forth above.
101. We will separate the payment obligations using the same
procedures adopted for broadband PCS. When a 900 MHz SMR geographic
area licensee with installment payments partitions or disaggregates to
a party that would not qualify for installment payments under our rules
or to an entity that does not desire to pay for its share of the
license with installment payments, we will require, as a condition of
grant of the partial assignment application, that the partitionee/
disaggregatee pay its entire pro rata amount within 30 days of Public
Notice conditionally granting the partial assignment application. The
partitioner or disaggregator will receive new financing documents
(promissory note and security agreement) with a revised payment
obligation, based on the remaining amount of time on the original
installment payment schedule. A default on an obligation will only
affect that portion of the market area held by the defaulting party.
102. Where both parties to the 900 MHz SMR partitioning or
disaggregation arrangement qualify for installment payments under our
rules, we will again follow the procedures established in the broadband
PCS proceeding and permit the partitionee/disaggregatee to make
installment payments on its portion of the remaining government
obligation. Partitionees/disaggregatees are free, however, to make a
lump sum payment of all or some of their pro rata portion of the
remaining government obligation within 30 days of the Public Notice
conditionally granting the partial assignment application. Should a
partitionee/disaggregatee choose to make installment payments, we will
require, as a condition to approval of the partial assignment
application, that both parties execute financing documents (promissory
note and security agreement) agreeing to pay the U.S. Treasury their
pro rata portion of the balance due (including accrued and unpaid
interest on the date the partial assignment application is filed) based
upon the installment payment terms for which they would qualify. Each
party will receive a license for its portion of the market area and
each party's financing documents will provide that a default on its
obligation would only affect their portion of the market area. These
payments to the U.S. Treasury are required notwithstanding any
additional terms and conditions agreed to between or among the parties.
3. Related Matters
103. We asked commenters in the Second Further Notice of Proposed
Rulemaking to discuss the conditions by which partitioning and
disaggregation should be allowed for 800 MHz licensees. In addition,
AMTA raised related matters in its Petition. We adopt the following
rules with respect to the above-outlined matters similar to those we
have adopted for the broadband PCS service.
a. Combined Partitioning and Disaggregation
104. In the broadband PCS proceeding, we found that allowing
entities to propose combined partitioning and disaggregation
transactions would provide added flexibility and would facilitate such
arrangements. We believe the same rationale would apply to partitioning
and disaggregation in the SMR service. Therefore, we will allow
licensees to propose combined partitioning and disaggregation
transactions. We believe that the goals of providing competitive serve
offering, encouraging new market entrants, and ensuring quality service
to the public will be advanced by allowing such combined transactions.
We further conclude that in the event that there is a conflict in the
application of the partitioning and disaggregation rules, the
partitioning rules should prevail. For the purpose of applying our
unjust enrichment requirements and/or for calculating obligations under
installment payment plans, when a combined 900 MHz SMR partitioning and
disaggregation is proposed, we will use a combination of both
population of the partitioned area and amount of spectrum disaggregated
to make these pro rata calculations.
b. License Term and Renewal Expectancy
105. In the broadband PCS proceeding, we concluded that entities
acquiring a license through partitioning and disaggregation should hold
their license for the remainder of the original licensee's license
term. We found that this approach was consistent with the approach we
had adopted for the Multipoint Distribution Service and was the easiest
to administer. We found that allowing licensees to ``re-start'' the
license term from the date of the grant of the partial assignment of
license application could invite parties to circumvent our license term
rules and unnecessarily delay service to the affected areas.
106. We find the same to be true with respect to the SMR service.
Limiting partitionees and disaggregatees in the SMR service to the
remainder of the original licensee's license term (whether it be five
years for incumbent licensees or ten years for geographic area
licensees) will ensure that there will be the maximum incentive for
parties to pursue available spectrum as quickly as practicable, thus
expediting delivery of service to the public.
107. We will also adopt renewal expectancy provisions for SMR
partitionees and disaggregatees that obtain their licenses from
geographic area licensees similar to those adopted in the broadband PCS
proceeding. Partitionees and disaggregatees obtaining license areas or
spectrum from geographic area licensees may earn a renewal expectancy
on the same basis as other geographic area licensees.
c. Licensing
108. In order to provide added flexibility, we will not adopt the
procedures set forth in the Second Further Notice of Proposed
Rulemaking and, instead, adopt procedures similar to those proposed by
AMTA and those devised for broadband PCS partitioning and
disaggregation. We will require that parties seeking approval for an
SMR partitioning or disaggregation transaction follow the existing
partial assignment procedures for the SMR service. Such applications
will be placed on Public Notice and will be subject to petitions to
deny. The licensee will be required to file an FCC Form 490 that is
signed by both the
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licensee and the qualifying entity. The qualifying entity will also be
required to file an FCC Form 430 unless a current FCC Form 430 is
already on file with the Commission. An FCC Form 600 must be filed by
the qualifying entity to receive authorization to operate in the market
area being partitioned or for the disaggregate spectrum and to modify
the existing license of the qualifying entity to include the new/
additional market area being partitioned or the spectrum being
disaggregated. Any requests for a partitioned license or disaggregated
spectrum must contain the FCC Forms 490, 430, and 600 and be filed as
one package under cover of the FCC Form 490. We note that the 45 MHz
CMRS spectrum cap contained in Sec. 20.6 of the rules applies to
partitioned license areas and disaggregated spectrum in the SMR
service. In the context of partitioning, we will determine compliance
with the spectrum cap based on the post-partitioning populations of
each licensees' partitioned market. This means that neither the
partitioner nor the partitionee may count the population in the other's
party's portion of the market in determining its own compliance with
the spectrum cap. Furthermore, by signing FCC Forms 490 and 600, the
parties will certify that grant of the partial assignment application
would not cause either party to be in violation of the spectrum
aggregation limit contained in Sec. 20.6 of the rules.
F. Competitive Bidding Issues of Lower 80 and General Category Channels
1. Auction of Lower 80 and General Category Channels
109. In previous proceedings, we concluded generally that we should
use ``competitive bidding procedures to select from among mutually
exclusive CMRS applications where we have the authority to do so and
where we find such processing to be in the public interest.'' Upon
consideration of the record in this proceeding, we conclude that
auctioning the Lower 80 channels and the General Category channels
meets the criteria set forth in section 309(j) of the Communications
Act and will further the public interest. Nextel, AMTA, and SMR Won
generally support competitive bidding for these channels.
110. Southern and ITA argue that the Commission lacks the authority
to auction this spectrum on the ground that under section 309(j) the
Commission is obligated to use existing means (i.e. engineering
solutions, negotiations, threshold qualifications) to avoid mutual
exclusivity in application and license proceedings. We note as an
initial matter that the Communications Act only requires the Commission
to use other such existing means when it is in the public interest.
After careful analysis of this spectrum, we conclude that the
likelihood of mutually exclusive applications in the 800 MHz SMR band
is considerable and that not all potential conflicts will be eliminated
through negotiations or other existing means. We therefore conclude
that the public interest will be served by using competitive bidding to
license these channels.
111. Some commenters contend that the General Category and Lower 80
are not auctionable because the channels are heavily licensed leaving
few or no channels or space available for new licensing. Further, these
commenters contend that those channels that are open will be used for
mandatory relocation of incumbents from the upper 10 MHz channels.
These commenters also contend that there is little to be gained by
adopting geographic licensing because geographic areas that already
have any value are licensed and there will be no increase in spectrum
efficiency. Further, commenters argue that because there is little open
space and no mandatory relocation proposal from the Lower 80 or General
Category channels, EA licensees will not be able to expand and these
licensees could be further frustrated by relocatees from the upper 200
channels.
112. We reject those arguments for several reasons. We do not
believe the purported dearth of channels in some areas or the potential
risk of relocatees from the upper 200 channels render the competitive
bidding process inapplicable. In this Order, we include provisions for
licensees to aggregate licenses within a geographic area, which will
enable them to expand the geographic coverage of their systems and
potentially enhance the commercial viability of these licenses, as well
as use this spectrum efficiently. As noted above, there is a high
likelihood that mutually exclusive applications will be filed for these
channels. The resolution of these applications by comparative hearings
or other means will unnecessarily delay the processing of these
applications, contrary to the public interest and to the Congressional
objectives under section 309(j)(3). Under the licensing scheme for
these channels, i.e., on a geographic area basis (as with the upper 200
channels, EAs will be used for the lower 80 channels), there will be
competitive opportunities to provide SMR service in this frequency band
and the application process for these channels will be open to any
qualified applicant. Furthermore, the use of competitive bidding to
select among these applicants will ensure that the qualified applicants
who place the highest value on the available spectrum will prevail in
the selection process. Additionally, as we concluded in the First
Report and Order, by using the same service area definition for the
lower 80 and General Category channels as we used for the upper 200
channels, we will realize greater administrative efficiency in the
licensing of these channels.
113. A few commenters contend that they cannot afford to
participate in the auction. Some commenters believe that the auction
procedure heavily favors large entities over smaller ones, that these
larger entities will hurt competition and delay provision of services
while the auction takes place. As noted below, to ensure small business
participation in the Lower 80 and General Category channel auctions,
the Commission has adopted bidding credits. Furthermore, contrary to
claims that auctions will delay the deployment of services, we believe
that the use of competitive bidding will enhance competition and serve
to streamline the administrative process, thereby allowing licenses to
provide service more quickly than alternative licensing procedures.
114. Several commenters argue that the government should be
concerned with the safety and welfare of citizens even when such
concerns prevent it from raising revenues. Some commenters believe that
this spectrum should be reserved for public safety entities and that
PMRS licensees need access to additional spectrum. Motorola believes
that PMRS providers play an important role in public safety and private
industry and that PMRS's concerns should be taken into account. We
addressed these concerns fully in the Second Further Notice of Proposed
Rulemaking. We stated that existing licensees will not be required to
relocate their public safety radio systems and geographic licensees
will be required to provide protection to all co-channel systems that
are constructed and operating within their service area. In addition,
an advisory committee has been established to address the concerns of
public safety users. Therefore, the Commission's rules will allow both
the efficient use of the spectrum and the preservation of public
safety.
2. Competitive Bidding Design
a. Bidding Methodology
115. Based on the record in this proceeding and our successful
experience conducting simultaneous
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multiple round auctions for other services, we believe a simultaneous
multiple round auction design is the preferred competitive bidding
design for these channels. Commenters generally support the use of this
methodology, on the grounds that there is interdependency among the
licenses. No commenter advocated the use of sequential multiple round
auctions. We also note, as discussed below, that we will adopt regional
groupings for the Lower 80 and General Category EA licenses. The
aggregation of licenses into these regional groupings creates stronger
interdependencies between the licenses, further warranting the use of
this auction methodology.
b. License Grouping
116. To expedite the process of auctioning the Lower 80 and General
Category EA licenses, we will auction these licenses using the five
regional groups that were used for the regional narrowband PCS auction:
Northeast, South, Midwest, Central, and West. We believe that by
grouping the licenses and auctioning them regionally, we reduce the
burden on small businesses which choose to participate in the auction
process. Each entity will need to participate only in those regional
auctions in which it is interested in winning licenses. Additionally,
by holding regional auctions and thereby limiting the number of
licenses available, we will decrease the administrative burden of the
auction on the participants, and further enable the auction to conclude
at an earlier time. Finally, we believe that this grouping will make it
easier for incumbents to secure spectrum that complements the licenses
they currently hold while allowing them to expand their systems.
c. Bidding Procedures
i. Bid Increments
117. We will adopt our minimum bid increment proposal, but delegate
authority to the Bureau to vary the minimum bid increment. While we
believe our proposal is appropriate, our experience with other auctions
indicates that flexibility is necessary to set appropriate bidding
levels to account for the pace of the auction, the needs of the
bidders, and the value of the spectrum. Commenters generally support a
minimum bid increment based upon a percentage of the bid from the
previous round. E.F. Johnson, on the other hand, argues that minimum
bid increments should be reduced or eliminated to facilitate small
business participation in the auction. There is no evidence that a
minimum bid increment will deter small business participation in the
auction. Rather, as we previously noted, an appropriate minimum bid
increment is important to the functioning of the auction as it speeds
the process of the auction and helps to ensure that it comes to closure
within a reasonable period of time. Moreover, as noted below, we have
adopted provisions to encourage small business participation. We will
follow the practice that we have used for other auctions and,
consistent with Sec. 1.2104 of the Commission's Rules, announce by
Public Notice prior to the auction the general guidelines for bid
increments.
ii. Stopping Rules
118. In view of our decision to aggregate licenses on a regional
basis, we believe that a simultaneous stopping rule is appropriate for
both the Lower 80 and the General Category licenses. Thus, bidding will
remain open on all licenses in an auction until bidding stops on every
license. Based on the success of our prior broadband PCS and 900 MHz
SMR auctions, Nextel agrees that there should be a simultaneous
stopping rule. AMTA and Nextel also claim that this rule is appropriate
because of the interdependencies between the markets. SMR Won supports
the market-by-market stopping rule, suggesting that it will deter
speculators and reduce artificial inflation of auction prices. We
conclude that bidding should remain open on all licenses in an auction
until bidding stops on every license. We believe that allowing
simultaneous closing for all licenses will afford bidders the
flexibility to pursue back-up strategies without the risk that bidders
will refrain from bidding until the final rounds. In any event, we will
retain the discretion to change the stopping rules during the course of
the auction, and delegate authority to the Bureau to exercise that
discretion.
iii. Activity Rules
119. In accordance with Sec. 1.2104 of the Commission's Rules and
the guidelines we adopted in the Competitive Bidding Second Report and
Order, we will employ the Milgrom-Wilson activity rule for both the
Lower 80 and General Category auctions. As we noted in the Competitive
Bidding Second Report and Order, the Milgrom-Wilson activity rule is
the preferred activity rule where a simultaneous stopping rule is used.
We believe that the Milgrom-Wilson approach best achieves the
Commission's goal of affording bidders flexibility to pursue backup
strategies, while at the same time ensuring that simultaneous auctions
are concluded within a reasonable period of time. Specifically, under
the Milgrom-Wilson rules, the auction is divided into three stages and
the minimum required activity level, measured as a fraction of the
bidder's eligibility in the current round, will increase during the
course of the auction. For purposes of this auction, we will adopt the
minimum required activity levels at each stage that recently were
adopted for the D, E, and F Broadband PCS auction.
120. As in previous auctions, we reserve the discretion to set and,
by announcement before or during the auction, vary the level of the
requisite minimum activity levels (and associated eligibility
calculations) for each auction stage. We believe that retaining this
flexibility will improve the Commission's ability to control the pace
of the auction and help ensure that the auction is completed within a
reasonable period of time. We delegate to the Bureau the authority to
set or vary the minimum activity levels if circumstances warrant a
modification. The Bureau will announce any such modification by Public
Notice. For the purposes of this auction, we also will use the general
transition guidelines that were used for the D, E, and F Broadband PCS
auctions. The auction will start in Stage One and move to Stage Two
when the auction activity level is below ten percent for three
consecutive rounds in Stage One. The auction will move from Stage Two
to Stage Three when the auction activity level is below ten percent for
three consecutive rounds in Stage Two. Under no circumstances can the
auction revert to an earlier stage. However, the Bureau will retain the
discretion to determine and announce during the course of an auction
when, and if, to move from one auction stage to the next.
121. To avoid the consequences of clerical errors and to compensate
for unusual circumstances that might delay a bidder's bid preparation
or submission in a particular round, we will provide bidders with five
activity rule waivers that may be used in any round during the course
of the auction. The Bureau will retain the discretion to issue
additional waivers during the course of an auction for circumstances
beyond a bidder's control, and also retain the flexibility to adjust,
by Public Notice prior to an auction, the number of waivers permitted,
or to institute a rule that allows one waiver during a specified number
of bidding rounds or during specified stages of the auction.
iv. Duration of Bidding Rounds
122. We will retain the discretion to vary the duration of bidding
rounds and
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the intervals at which bids are accepted. In simultaneous multiple
round auctions, bidders may need a significant amount of time to
evaluate back-up strategies. AMTA requests that we allow only one round
of an auction per day because many of its members who will participate
in the auction do not have sufficient staff to monitor the auction if
there is more than one round per day. Genesee requests that for the
first five rounds of the auction only one round of bids per day be
allowed. Genesee does not provide any rationale for its proposal. We do
not believe these proposed limitations are necessary. We note that we
have adopted regional license groupings that are intended to minimize
for small entity participants these burdens in participating and
monitoring the auctions. Therefore, we delegate authority to the Bureau
to vary the bidding rounds or the interval at which bids are accepted
in order to move the auction toward closure more quickly or as
circumstances warrant. The Bureau will announce any changes to the
duration of and intervals between bidding rounds, whether by Public
Notice prior to the auction or by announcement during the auction.
d. Rules Prohibiting Collusion
123. We adopt the rules prohibiting collusive conduct for use in
the Lower 80 and General Category auctions. These requirements, as set
forth in Secs. 1.2105 and 1.2107 of our Rules, operate along with
existing antitrust laws as a safeguard to prevent collusion in the
competitive bidding process. In addition, where specific instances of
collusion in the competitive bidding process are alleged during the
petition to deny process, we may conduct an investigation or refer such
complaints to the U.S. Department of Justice for investigation. Bidders
who are found to have violated the antitrust laws or the Commission's
rules in connection with their participation in the auction process may
be subject to a variety of sanctions, including the forfeiture of their
down payment or their full bid amount, revocation of their licenses,
and possible prohibition from participation in the auctions. Genesee
supports our proposal on the grounds that these same rules were
effective in the 900 MHz SMR auctions. Coral Gables, in contrast,
requests that public safety radio service providers under part 90, or
those proposing to provide such services, should be exempt from the
collusion rules when they are negotiating with other public safety
service providers. We reject Coral Gable's position. First, the
specific needs of public safety entities are the subject of, and will
be addressed in, a separate Commission proceeding. In addition, we
believe that continued negotiation past the short-form filing date by
any segment of bidders may impact the valuation of the licenses and
jeopardize the integrity of the auction process. We note that prior to
the short-form filing date, public safety radio service providers, like
other auction participants, are free to negotiate with each other to
the extent permitted by the antitrust laws.
e. Procedural and Payment Issues
i. Pre-Auction Application Procedures
124. We will generally use the applications and payment procedures
set forth in part 1 of our rules, with certain modifications for the
800 MHz SMR service. A Public Notice announcing the auction will
specify the licenses to be auctioned and the time and place of the
auction in the event that mutually exclusive applications are filed.
The Public Notice will also specify the method of competitive bidding
to be used, applicable bid submission procedures, stopping rules,
activity rules, the short-form filing deadline, and the upfront payment
amounts.
125. Prior to the auction, the Wireless Telecommunications Bureau
will also provide information about incumbent licensees for applicants
planning to participate in the auction. We encourage all potential
bidders to examine these records carefully and do their own independent
investigation regarding existing licensees' operations in each license
area on which they intend to bid in order to maximize their success in
the auction.
126. Section 309(j)(5) provides that no party may participate in an
auction ``unless such bidder submits such information and assurances as
the Commission may require to demonstrate that such bidder's
application is acceptable for filing.'' We adopt our proposal to
require all applicants for 800 MHz SMR licenses to submit FCC Form 175
in order to participate in the auction. As we indicated in the
Competitive Bidding Second Report and Order, if we receive only one
application that is acceptable for filing for a particular license, and
thus there is no mutual exclusivity, we will issue a Public Notice
canceling the auction for that license and establish a date for the
filing of a long-form application.
ii. Amendments and Modifications
127. We will apply the provisions set forth in part 1 of our rules
governing amendments to and modifications of short-form application to
the 800 MHz SMR service. The only commenter on this issue, Genesee,
supports the Commission's proposal. Upon reviewing the short-form
applications, we will issue a Public Notice listing all defective
applications. Applicants with minor defects in their applications will
be given an opportunity to cure them and resubmit a corrected version.
iii. Upfront Payments
128. We will adopt our upfront payment proposal, particularly
because the majority of commenters support it. Fresno states that the
upfront payment should be high enough to discourage frivolous bidders
but flexible enough to reflect the lower value of the channels. As we
previously noted, a substantial upfront payment requirement is
necessary to ensure that only serious qualified bidders participate in
auctions, thereby ensuring that sufficient funds are available to
satisfy any bid withdrawal or default payments that may be incurred. We
thus reject Coral Gables' claim that bidders that provide public safety
radio services under part 90 of the Commission's Rules should not be
required to make an upfront payment or, alternatively, that they should
have a reduced upfront payment. We believe that making these exceptions
to the upfront payment requirement would jeopardize the integrity of
the auction process. As Fresno suggests, we recognize the standard
upfront payment formula may yield too high a payment as compared to the
value of these licenses. Accordingly, we delegate authority to the
Bureau to vary the minimum upfront payment when it determines the
general formula of $0.02 per MHz-pop is an unreasonably high upfront
payment. The Bureau will announce any such modification by Public
Notice.
iv. Down Payment and Full Payment
129. We conclude that we should require all winning bidders to
supplement their upfront payments with down payments sufficient to
bring their total deposits up to 20 percent of the winning bid(s).
Genesee, the sole commenter to address this issue, supports our
proposal. If the upfront payment already tendered by a winning bidder,
after deducting any bid withdrawal and default payments due, amounts to
20 percent of its winning bids, no additional deposit will be required.
If the upfront payment amount on deposit is greater than 20 percent of
the winning bid amount after deducting any bid withdrawal and default
payments due, the additional monies will be refunded.
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130. We will require winning bidders to submit the required down
payment to our lock-box bank within ten business days following release
of a Public Notice announcing the close of bidding. All auction winners
will be required to make full payment of the balance of their winning
bids within ten business days following Public Notice that the
Commission is prepared to award the license. The Commission generally
will grant uncontested licenses within ten business days after
receiving full payment.
131. We believe that small businesses should also be subject to a
20 percent down payment requirement. We believe that such a requirement
is consistent with ensuring that winning bidders have the financial
capability of building out their systems and will provide us a strong
assurance against default. Increasing the amount of the bidder's funds
at risk in the event of default discourages insincere bidding and
therefore increases the likelihood that licenses are awarded to parties
who are best able to serve the public. We also believe that a 20
percent down payment should cover the required payments in the unlikely
event of default. In view of our decision to defer the issue of
installment payments to the part 1 proceeding, we will also defer our
decision as to when small businesses must make their down payment to
the part 1 proceeding.
v. Bid Withdrawal, Default, and Disqualification
132. To prevent insincere bidding we will apply our general bid
withdrawal, default, and disqualification rules, as set forth in
Sec. 1.2104(g) of the Commission's Rules, to the Lower 80 and General
Category auctions. Genesee, the sole commenter to address these issues,
supports this proposal. Any bidder that withdraws a high bid before the
Commission declares bidding closed will be required to reimburse the
Commission in the amount of the difference between its high bid and the
amount of the winning bid the next time the license is offered by the
Commission if this subsequent winning bid is lower than the withdrawn
bid. If a bidder has withdrawn a bid or defaulted, but the amount of
the withdrawal or default payment cannot yet be determined, the bidder
will be required to make a deposit of up to 20 percent on the amount
bid on such licenses. When it becomes possible to calculate and assess
the payment, any excess deposit will be refunded.
133. In the event an auction winner defaults on its initial down
payment, the Commission must exercise our discretion to decide whether
to hold a new auction or offer the licenses to the second highest
bidder. In exercising our discretion, the Commission will evaluate the
particular facts and circumstances of the specific case. In the
unlikely event that there is more than one bid withdrawal on the same
licenses, we will hold each withdrawing bidder responsible for the
difference between its withdrawn bid and the amount of the winning bid
the next time the license is offered by the Commission.
vi. Long-Form Applications and Petitions to Deny
134. In the Second Further Notice of Proposed Rulemaking we
proposed to adopt the general procedures for filing long-form
applications to the 800 MHz SMR auctions. In addition, we proposed that
the petition to deny procedures that were adopted in the CMRS Third
Report and Order should apply to the processing of applications for the
800 MHz SMR service. Genesee, the sole commenter on this issue,
supports our proposal. Therefore, we adopt our proposals regarding
petitions to deny. A party filing a petition to deny against an 800 MHz
SMR license application will be required to demonstrate standing and
meet all other applicable filing requirements. The restrictions in
Sec. 90.162 were established to prevent the filing of speculative
applications and pleadings (or threats of the same) designed to extract
money from 800 MHz license applicants. Thus, we will limit the
consideration that a winning bidder or an individual or entity filing a
petition to deny is permitted to receive for agreeing to withdraw an
application or a petition to deny to the legitimate and prudent
expenses of the withdrawing applicant or petitioner. We note also that
we recently amended Sec. 90.162 to reflect the fact that discussions
regarding withdrawal of short-form applications are subject to
Sec. 1.2105(c) of our Rules.
vii. Transfer Disclosure Requirements
135. In section 309(j) of the Communications Act, Congress directed
the Commission to ``require such transfer disclosures and anti-
trafficking restrictions and payment schedules as may be necessary to
prevent unjust enrichment as a result of the methods employed to issue
licenses and permits.'' Therefore, we imposed a transfer disclosure
requirement on licenses obtained through the competitive bidding
process, whether by designated entity or not. We tentatively concluded
in the Second Further Notice of Proposed Rulemaking that the transfer
disclosure requirements should apply to all 800 MHz SMR licenses
obtained through the competitive bidding process. Genesee, again the
sole commenter on this issue, supports the Commission's tentative
conclusion. We will adopt the transfer disclosure requirements
contained in Sec. 1.2111(a) of our rules to auctions for the Lower 80
and General Category. We will give particular scrutiny to auction
winners who have not yet begun commercial service and who seek approval
for a transfer of control or assignment of their licenses within three
years after the initial license grant, so that we may determine if any
unforeseen problems relating to unjust enrichment outside the
designated entity context have arisen. These particular transfer
disclosure requirements are in addition to the unjust enrichment
provisions discussed infra.
3. Treatment of Designated Entities
a. Overview and Objectives
136. In authorizing the Commission to use competitive bidding,
Congress mandated that the Commission ``ensure that small businesses,
rural telephone companies, and businesses owned by members of minority
groups and women are given the opportunity to participate in the
provision of spectrum-based services.'' The statute required the
Commission to ``consider the use of tax certificates, bidding
preferences and other procedures'' in order to achieve this
congressional goal. In addition, section 309(j)(3)(B) provided that in
establishing eligibility criteria and bidding methodologies the
Commission shall promote ``economic opportunity and competition * * *
by avoiding excessive concentration of licenses and by disseminating
licenses among a wide variety of applicants, including small
businesses, rural telephone companies, and businesses owned by members
of minority groups and women.'' Section 309(j)(4)(A) provides that to
promote these objectives, the Commission shall consider alternative
payment schedules, including installment payments.
137. We have employed a wide range of special provisions and
eligibility criteria designed to meet the statutory objectives of
providing opportunities to designated entities in other spectrum-based
services. The measures considered for each service were established
after closely examining the specific characteristics of the service and
determining whether any particular barriers to accessing capital stood
in the way of designated entity opportunities. For example, in
narrowband PCS we
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provided installment payments for small businesses and bidding credits
for minority-owned and women-owned businesses. In 900 MHz SMR, we
adopted bidding credits and installment payment plans for small
businesses.
138. In the Second Further Notice of Proposed Rulemaking, we sought
comment on the type of designated entity provisions that should be
incorporated into our competitive bidding procedures for the Lower 80
and General Category channels. We requested comment on the possibility
that, in addition to small business provisions, separate provisions for
women- and minority-owned entities should be adopted for the Lower 80
and General Category channels. We requested commenters to discuss
whether the capital requirements of the 800 MHz SMR service pose a
barrier to entry by minorities and women and whether overcoming such a
barrier, if it exists, would constitute a compelling governmental
interest. In particular, we sought comment on the actual costs
associated with the acquisition, construction, and operation of an 800
MHz SMR system with a service area based on a pre-defined geographic
area as well as the proportion of existing 800 MHz SMR businesses that
are owned by women and minorities. We also urged the parties to submit
evidence about patterns or actual cases of discrimination in the 800
MHz SMR industry or in related communications services.
b. Eligibility for Designated Entity Provisions
139. At this time, we have not developed a record sufficient to
sustain race-based measures in the Lower 80 and General Category
licenses based on the standard established by the Adarand decision. In
addition, we believe that the record is insufficient to support any
gender-based provisions under the intermediate scrutiny standard
established in the VMI decision. Fresno urges the Commission to design
a regulatory scheme that will provide opportunities for businesses
owned by women and minorities to comply with the congressional mandate
set out in section 309(j). Fresno, however, does not provide any
evidence of past discrimination. Conversely, Nextel states that there
is no evidence that minorities and women have been historically
discriminated against in the SMR industry. Based upon the record in
this proceeding, we will adopt bidding credits solely for applicants
qualifying as small businesses. We believe these provisions will
provide small businesses with a meaningful opportunity to obtain
licenses for the Lower 80 and General Category channels. Moreover, many
women- and minority-owned entities are small businesses and will
therefore qualify for these provisions. As such, these provisions will
meet Congress' goal of promoting wide dissemination of licenses in this
spectrum. We have determined that no special provisions for rural
telephone companies are warranted but we note that rural telephone
companies may take advantage of the geographic partitioning and
disaggregation provisions and, to the extent that they fall within the
definition of small businesses, they can take advantage of the
designated entity provisions too.
i. Small Businesses Definition
140. Based upon the record in this proceeding, we conclude that
special provisions for small businesses are appropriate for 800 MHz SMR
services. We will adopt a two-tiered definition of small business. We
will define a small business as an entity that, together with its
affiliates and controlling principals, has average gross revenues for
the three preceding years that do not exceed $15 million; we will
define a very small business as an entity that, together with
affiliates and controlling principals, has average gross revenues for
the preceding three years of that do not exceed $3 million. Bidding
credits will be determined, as discussed infra, based upon this two-
tiered approach.
141. In determining whether an applicant qualifies as a small
business at any level, we will consider the gross revenues of the small
business applicant and its affiliates. Specifically, for purposes of
determining small business status, we will follow the procedure
recently adopted for auctions involving other services and will
attribute the gross revenues of affiliates of the applicant. We thus
choose not to impose specific equity requirements on the controlling
principals that meet our small business definition, as suggested by SMR
WON and Genesee. We will still require, however, that in order for an
applicant to qualify as a small business, qualifying small business
principals must maintain ``control'' of the applicant. The term
``control'' would include both de facto and de jure control of the
applicant. For this purpose, we will borrow from certain SBA rules that
are used to determine when a firm should be deemed an affiliate of a
small business. Typically, de jure control is evidenced by ownership of
50.1 percent of an entity's voting stock. De facto control is
determined on a case-by-case basis. An entity must demonstrate at least
the following indicia of control to establish that it retains de facto
control of the applicant: (1) The entity constitutes or appoints more
than 50 percent of the board of directors or partnership management
committee; (2) the entity has authority to appoint, promote, demote and
fire senior executives that control the day-to-day activities of the
licensees; and (3) the entity plays an integral role in all major
management decisions. While we are not imposing specific equity
requirements on the small business principals, the absence of
significant equity could raise questions about whether the applicant
qualifies as a bona fide small business.
ii. Bidding Credits
142. We believe that bidding credits are appropriate as a special
provision for designated entities in the Lower 80 and General Category
licenses. While bidding credits do not guarantee the success of small
businesses, we believe that they at least provide such bidders with an
opportunity to successfully compete against larger, well-financed
bidders. We also conclude that it is appropriate to adopt tiered
bidding credits for 800 MHz SMR auction participants based on the size
of the small businesses. Such an approach, we believe, furthers our
mandate under section 309(j) of the Communications Act to disseminate
licenses to a variety of applicants. Consistent with the tiered small
business definition that we adopt today, we will give small businesses
that, together with affiliates and controlling principals, have average
gross revenues for the preceding three years that do not exceed $3
million, a 35 percent bidding credit. We will give small businesses
that, together with affiliates and controlling principals, have average
gross revenues for the preceding three years that do not exceed $15
million, a 25 percent bidding credit. Consistent with our approach in
the upper 200 channels, we believe that these tiered bidding credits
take into account the difficulties smaller businesses have in accessing
capital and their differing business strategies.
iii. Installment Payments
143. We will defer the decision regarding whether to adopt
installment payments in the lower 80 and General Category channels to
our part 1 proceeding. We do not disagree with the contention of
Genesee and AMTA that small businesses benefit from the ability to pay
for their licenses in installments. Nonetheless, in the part 1
proceeding, we sought comment on whether there are better alternatives
to help small
[[Page 41210]]
businesses, such as offering higher bidding credits in lieu of
installment payments for qualified winning bidders.
144. Finally, we do not see a reason to adopt an alternative
payment plan for public safety auction winners, as suggested by Coral
Gables. Coral Gables argues that there is a greater public interest
value to use these channels for public safety purposes and that special
installment payment provisions should be made in the auction rules for
public safety auction winners. We decline to provide this benefit for
several reasons. First, Coral Gables will not be forced to relocate to
other channels and will not be required to participate in the auction
to retain the spectrum for which it is currently licensed. Second, we
are granting Coral Gables' request to allow disaggregation of channels
by geographic area license winners which should enable public safety
entities to secure more frequencies from auction winners. Also, as
noted above, the Commission is engaged in a separate proceeding
dedicated to the issue of spectrum allocation for public safety
entities.
iv. Reduced Upfront Payment
145. In view of the favorable bidding credits adopted herein, we do
not see a need to adopt reduced upfront payments in order to ensure
small business participation in the auction, as advocated by Genesee.
Rather, we believe that the standard upfront payment is appropriate for
all participants and will help guard against defaults. In addition,
reduced upfront payments impose heavy administrative burdens on the
Commission and are more confusing to auction participants. We do note
that the standard upfront payment amount of $.02/MHz-pop will be
discounted on a uniform basis by the Bureau to account for incumbency
on this spectrum. The Bureau will announce by Public Notice the amount
of this discount.
v. Set-Aside Spectrum
146. We will not adopt an entrepreneurs' block for the Lower 80 and
General Category channels for several reasons. First, contrary to the
contention of some commenters that an entrepreneurs' block is required
to ensure small businesses will be able to obtain licenses, we believe
that small businesses will have significant opportunity to compete for
licenses given the bidding credits we adopt herein. Second, as noted by
at least two commenters, the establishment of an entrepreneurs' block
could unfairly exclude some incumbent operators from participation in
the auction because some incumbents on these channels are larger
companies. Finally, we agree with the argument of one commenter that
adoption of an entrepreneurs' block for these channels would contravene
the goal of regulatory parity since there is no set-aside in the
cellular service and only one-third of the broadband PCS spectrum was
set aside for small businesses.
vi. Unjust Enrichment Provisions
147. To ensure that large businesses do not become the unintended
beneficiaries of measures meant for smaller firms, we adopt unjust
enrichment provisions similar to those adopted for narrowband PCS and
900 MHz SMR services. No comments were received on this issue.
Licensees seeking to transfer their licenses to entities which do not
qualify as small businesses, as a condition to approval of the
transfer, must remit to the government a payment equal to a portion of
the total value of the benefit conferred by the government. The amount
of this payment will be reduced over time as follows: a transfer in the
first two years of the license term will result in a forfeiture of 100
percent of the value of the bidding credit; in year three of the
license term the payment will be 75 percent; in year four the payment
will be 50 percent and in year five the payment will be 25 percent,
after which there will be no payment. These assessments will have to be
paid to the U.S. Treasury as a condition of approval of the assignment
or transfer. Thus, a small business that received bidding credits
seeking transfer or assignment of a license to an entity that does not
qualify as a small business will be required to reimburse the
government for the amount of the bidding credit before the transfer
will be permitted.
148. Also, if an investor subsequently purchases an interest in a
small business licensee and, as a result, the gross revenues of the
business exceed the applicable financial caps, the unjust enrichment
provision will apply. We will apply these payment requirements for the
entire license term to ensure that small businesses will look first to
other small businesses when deciding to transfer their licenses. While
small business licensees must abide by these unjust enrichment
provisions when transferring their licenses to entities that would not
qualify under our small business definitions, we will not impose a
holding period or other transfer restrictions on small businesses.
III. Conclusion
149. We believe that the service and auction rules we adopted
herein in this Second Report and Order are necessary to continue our
implementation of a new licensing scheme for the 800 MHz and 900 MHz
SMR services. We further believe that the rules will facilitate the
rapid implementation of wide-area licensing in the SMR service, thus
advancing the public interest by fostering economic growth of
competitive new services via efficient spectrum use. The rules also
will allow the public to recover a portion of the value of the public
spectrum and promote expeditious access to 800 MHz SMR services by
consumers, and rapid deployment of 800 MHz SMR by existing licensees
and potential new entrants. We also believe that the technical rules
proposed and adopted herein strike the proper balance between the
rights of incumbent licensees in the 800 MHz SMR spectrum and new EA
licensees.
IV. Procedural Matters
A. Regulatory Flexibility Act: (Second Report and Order and Memorandum
Opinion and Order on Reconsideration)
150. As required by the Regulatory Flexibility Act, 5 U.S.C. 603
(RFA), an Initial Regulatory Flexibility Analysis (IRFA) was
incorporated in the Second Further Notice of Proposed Rulemaking in PR
Docket No. 93-144. The Commission sought written public comment on the
proposals in the Second Further Notice of Proposed Rulemaking,
including the IRFA. This Final Regulatory Flexibility Analysis to
accompany final rules in both the Second Report and Order and the
accompanying Memorandum Opinion and Order on Reconsideration conforms
to the RFA, amended by the Contract With America Advancement Act of
1996.
151. Need for and Purpose of this Action: In this Second Report and
Order, the Commission establishes a flexible regulatory scheme for the
800 MHz Specialized Mobile Radio (SMR) service to promote efficient
licensing and enhance the service's competitive potential in the
commercial mobile radio marketplace. The rules adopted in the Second
Report and Order also implement Congress's goal of regulatory symmetry
in the regulation of competing commercial mobile radio services as
described in sections 3(n) and 332 of the Communications Act of 1934,
as amended, 47 U.S.C. 153(n), 332 (Communications Act), as amended by
Title VI of the Omnibus Budget Reconciliation Act of 1993 (Budget Act).
[[Page 41211]]
The Commission also adopts rules regarding competitive bidding for the
remaining 800 MHz SMR spectrum based on section 309(j) of the
Communications Act, 47 U.S.C. 309(j), which delegates authority to the
Commission to use auctions to select among mutually exclusive initial
applications in certain services, including 800 MHz SMR.
152. Summary of Issues Raised in Response to the Initial Regulatory
Flexibility Analysis: No comments were submitted in response to the
IRFA. However, there were several comments concerning the potential
impact of some of the Commission's proposals on small entities,
especially on certain incumbent 800 MHz SMR licensees.
153. The Commission adopted geographic area licensing for the lower
230 800 MHz SMR channels in order to facilitate the evolution of larger
800 MHz SMR systems covering wider areas and offering commercial
services to rival other wireless telephony services. Some licensees
that were not SMR licensees opposed this plan arguing that it was
unsuitable to the needs of smaller, private systems, which do not seek
to cover large geographic areas in the manner of commercial service
providers.
154. The Commission adopted a portion of a proposal set forth by a
number of incumbent 800 MHz SMR licensees (``Industry Proposal'') and
allotted three contiguous 50-channel blocks from the former General
Category block of channels. Some commenters argued that allotting such
large contiguous blocks would not suit the needs of smaller SMR
systems, which typically trunk smaller numbers of non-contiguous
channels. These commenters argued that large blocks of contiguous
channels could be prohibitively expensive to bid for at auction,
thereby limiting the opportunities for smaller operators to take
advantage of geographic area licensing.
155. The Commission adopted a proposal to allow incumbent licensees
in the lower 230 channels to make system modifications within their
interference contours without prior Commission approval, so long as
they do not expand the 18 dBV/m interference contour of their
systems. Proponents of the Industry Proposal argued for an alternative
plan to limit incumbent expansion rights on the lower 230 channels. The
Industry Proposal called for the Commission to permit incumbent
licensees in the lower 230 channels to negotiate expansion rights
within each EA through a settlement process. The proposed settlement
process would occur on a channel-by-channel basis prior to the auction
of the lower 230 channels, but after incumbents on the upper 200
channels had an opportunity to relocate or retune to the lower 230
channels. For each channel, incumbents licensed on the channel within
the EA would negotiate among themselves to allocate rights to the
channel within the EA. If all incumbents on the single channel
negotiated an agreement for use of that channel within the EA (e.g., by
forming a partnership, joint venture, or consortium), they would then
receive an EA license for that channel. If only one incumbent operated
on the channel within an EA, it would receive an EA license for that
channel automatically. If incumbents on a channel were unable to reach
a settlement, the channel would be included in the auction of the lower
230 channels. The Industry Proposal called for non-settling channels in
the lower 80 channels to be auctioned in five-channel blocks and the
150 General Category channels to be auctioned in three 50-channel
blocks.
156. Commenters argued, inter alia, that the Industry Proposal
would provide significant opportunities for small businesses. Although
commenters acknowledged that auctions are a fast and generally
efficient means of licensing new spectrum, they argued that small
businesses will ``have no chance of succeeding in gaining the spectrum
they need for future growth if they must compete against larger
entities with deeper pockets.'' The commenters contended that, in the
case of non-SMR licensees, the provision of communications services is
not their primary business and they will not be in the position to
compete with commercial operators at auction.
157. The Commission adopted rules allowing all 800 MHz SMR
licensees to partition their market areas and to disaggregate their
spectrum. Commenters generally supported these new rules arguing that
partitioning and disaggregation will result in more participation in
the marketplace by small entities and allow coalitions of smaller
entities to bid at auction.
158. The Commission adopted a proposal to auction the Lower 80
channels and the General Category channels. Some commenters argued that
there is little space in the Lower 80 and General Categories and that
there was no mandatory relocation proposal for incumbents in these
channels. These commenters argue that the combination of these factors
will further frustrate incumbent licensees in these channels when
incumbents from the Upper 200 channels are relocated. Several other
commenters argue that they are not financially capable of participating
in the auction of the Lower 80 channels and General Category. These
commenters believe that the auction process favors large entities and
that the large entities an effectively stifle competition in the
auction process including the delaying the conclusion of the auction.
159. The Commission adopted its proposal for a minimum bid
increment of the greater of $.01 per MHz-pop, or 5% percent of the high
bid from the previous round. E.F. Johnson argued that minimum bid
increments should be reduced or eliminated to facilitate small business
participation in the auction.
160. The Commission adopted a two-tiered small business definition.
In order to be eligible for designated entity provisions, an applicant
must qualify as a ``small business,'' where an entity must have had
average gross revenues of not more than $15 million for the preceding
three years or as ``very small business,'' where a company must have
had average gross revenues of not more than $3 million for the
preceding three years.
161. The Commission adopted bidding credit amounts that were
tailored to the Commission's small business definition. Specifically,
small businesses with average gross revenues of not more than $15
million for the preceding three years will receive a 10 percent bidding
credit and those entities with average gross revenues of not more than
$3 million for the preceding three years will receive a 15 percent
bidding credit. Some commenters expressed concern that the proposed
bidding credits were too low. Coral Gables argued that the bidding
credits for public safety entities should be set at a different level
than non-public safety entities.
162. The Commission did not adopt an entrepreneurs' block for the
Lower 80 and General Category channels. Some commenters argued that by
establishing an entrepreneurs' block, some incumbents could be unfairly
excluded from participation in the auction because some incumbents in
these channels are larger companies. Nextel argued that the adoption of
an entrepreneurs' block would contravene the goal of regulatory parity
since there is no set-aside in the cellular service and only one-third
of the broadband PCS spectrum was set aside for small businesses.
163. Description and Number of Small Entities Involved: The rules
adopted will apply to current 800 MHz SMR operators and new entrants
into the 800 MHz SMR market. Under these rules, Economic Area (EA)
licenses will
[[Page 41212]]
be granted on a market area basis, instead of site-by-site, and
mutually exclusive applications will be resolved through competitive
bidding procedures. In order to ensure the more meaningful
participation of small business entities in the auction for mutually
exclusive geographic area 800 MHz SMR licenses, the Commission, as
noted, has adopted a two-tier definition of small businesses. A very
small business will be defined for these purposes as an entity that,
together with its affiliates and controlling principals, has average
gross revenues for the three preceding years of not more than $3
million. A small business will be defined as an entity that, together
with affiliates and controlling principals, has average gross revenues
for the three preceding years of not more than $15 million. The Small
Business Administration (SBA) has approved these definitions for 800
MHz SMR services.
164. The Commission anticipates that a total of 3,325 EA licenses
will be auctioned in the lower 230 channel blocks of the 800 MHz SMR
service. This figure is derived by multiplying the total number of EAs
(175) by the number of channel blocks (19) in the lower 230 channels.
The lower 80 channels were divided into 16 blocks of 5 channels each
and the General Category channels were divided into 3 blocks of 50
channels each. This results in 19 channels blocks available for auction
in each of the 175 EAs. Auctions of 800 MHz SMR licenses have not yet
been held, and there is no basis to determine the number of lower 230
channel licenses that will be awarded to small entities. However, the
Commission assumes, for purposes of the evaluations and conclusions in
this Final Regulatory Flexibility Analysis, that all the auctioned
3,325 geographic area 800 MHz SMR licenses in the lower 230 channels
will be awarded to small entities, as that term is defined by the SBA.
165. Summary of Projected Reporting, Recordkeeping and Other
Compliance Requirements: Geographic area 800 MHz SMR licensees may be
required to report information concerning the location of their
transmission sites under some circumstances, although generally they
will not be required to file applications on a site-by-site basis.
Additionally, geographic area license applicants will be subject to
reporting and recordkeeping requirements to comply with the competitive
bidding rules. Specifically, applicants will apply for 800 MHz SMR
licenses by filing a short-form application (FCC Form 175). Winning
bidders will file a long-form application (FCC Form 600) at the
conclusion of the auction. Additionally, entities seeking treatment as
small businesses will need to submit information pertaining to the
gross revenues of the small business applicant and its affiliates and
controlling principals. Such entities will also need to maintain
supporting documentation at their principal place of business.
166. Section 309(j)(4)(E) of the Communications Act directs the
Commission to ``require such transfer disclosures and anti-trafficking
restrictions and payment schedules as may be necessary to prevent
unjust enrichment as a result of the methods employed to issue licenses
and permits.'' The Commission adopted safeguards designed to ensure
that the requirements of this section are satisfied, including a
transfer disclosure requirement for 800 MHz SMR licenses obtained
through the competitive bidding process. An applicant seeking approval
for a transfer of control or assignment of a license within three years
of receiving a new license through a competitive bidding procedure
must, together with its application for transfer of control or
assignment, file with the Commission a statement indicating that its
license was obtained through competitive bidding. Such applicant must
also file with the Commission the associated contracts for sale, option
agreements, management agreements, or other documents disclosing the
total consideration that the applicant would receive in return for the
transfer or assignment of its license.
167. With respect to small businesses, we have adopted unjust
enrichment provisions to deter speculation and participation in the
licensing process by those who do not intend to offer service to the
public, or who intend to use the competitive bidding process to obtain
a license at a lower cost than they would otherwise have to pay and to
later sell it at a profit, and to ensure that large businesses do not
become the unintended beneficiaries of measures meant to help small
firms. Small business licensees seeking to transfer their licenses to
entities which do not qualify as small businesses (or which qualify for
a lower bidding credit), as a condition of approval of the transfer,
must remit to the government a payment equal to a portion of the value
of the benefit conferred by the government.
168. The Second Report and Order also adopts rules for 800 MHz SMR
partitioning and disaggregation rules. These rules contain information
requirements that will be used to determine whether the licensee is a
qualifying entity 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 will be submitted on the FCC
Form 490 (or 430 and/or 600 filed as one package under cover of the
Form 490) which are currently in use and have already received OMB
clearance. The Commission estimates that the average burden on the
applicant is three hours for the information necessary to complete
these forms. The Commission estimates that 75 percent of the
respondents (which may include small businesses) will contract out the
burden of responding. The Commission estimates that it will take
approximately 30 minutes to coordinate information with those
contractors. The remaining 25 percent of respondents (which may include
small businesses) are estimated to employ in-house staff to provide the
information. Applicants (including small businesses) filing the package
under cover of FCC Form 490 electronically will incur a $2.30 per
minute on-line charge. On-line time would amount to no more than 30
minutes. The Commission estimates that 75 percent of the applicants may
file electronically. The Commission estimates that applicants
contracting out the information would use an attorney or engineer
(average of $200 per hour) to prepare the information.
169. Steps Taken to Minimize Any Significant Economic Burdens on
Small Entities: Section 309(j)(3)(B) of the Communications Act provides
that in establishing eligibility criteria and bidding methodologies the
Commission shall, inter alia, promote economic opportunity and
competition and ensure that new and innovative technologies are readily
accessible by avoiding excessive concentration of licenses and by
disseminating licenses among a wide variety of applicants, including
small businesses, rural telephone companies, and businesses owned by
members of minority groups and women. Section 309(j)(4)(A) provides
that in order to promote such objectives, the Commission shall consider
alternative payment schedules and methods of calculation, including
lump sums or guaranteed installment payments, with or without royalty
payments, or other schedules or methods. In awarding geographic area
800 MHz licenses in the lower 230 channels, the Commission is committed
to meeting the statutory objectives of promoting economic opportunity
and competition, of avoiding excessive concentration of licenses, and
of ensuring access to new and innovative technologies by disseminating
licenses among a wide
[[Page 41213]]
variety of applicants, including small businesses, rural telephone
companies, and businesses owned by members of minority groups and
women. The Commission finds that it is appropriate to establish special
provisions in the 800 MHz SMR rules for the lower 230 channels for
competitive bidding by small businesses. The Commission believes that
small businesses applying for these licenses should be entitled to
bidding credits.
170. In order to ensure the more meaningful participation of small
business entities in the 800 MHz auctions, the Commission has adopted a
two-tier definition of small businesses. This approach will give
qualifying small businesses bidding flexibility. A small business will
be defined as an entity that, together with its affiliates and
controlling principals, has average gross revenues for the three
preceding years that do not exceed $3 million. A very small business
will be defined as an entity that, together with affiliates and
controlling principals, has average gross revenues for the three
preceding years that do not exceed $15 million. The Commission will
require that in order for an applicant to qualify as a small business,
qualifying small business principals must maintain control of the
applicant. The Commission will establish bidding credits consistent
with the two-tiered definition of a small business. Small businesses
that, together with affiliates and controlling principals, have average
gross revenues for the three preceding years that do not exceed $3
million, will receive a 35 percent bidding credit. Small businesses
that, together with affiliates and controlling principals, have average
gross revenues for the three preceding years that do not exceed $15
million, will receive a bidding credit of 25 percent.
171. The Commission is also extending geographic partitioning and
disaggregation to all entities eligible to be 800 MHz and 900 MHz SMR
licensees. The Commission believes that this provision will allow SMR
licensees to tailor their business strategies and allow them to use the
spectrum more efficiently, will allow more entities to participate in
the provision of SMR services, and will facilitate market entry by
small entities that have the ability to provide service only to a
limited population.
172. Significant Alternatives Considered and Rejected: The
Commission considered a number of alternative channelization plans for
licensing the 150 General Category 800 MHz SMR channels. The three
alternatives were: (a) a 120-channel block, a 20-channel block and a
10-channel block; (b) six 25-channel blocks; or (c) fifteen 10-channel
blocks.
173. Some commenters argued that allotting large contiguous blocks
would not suit the needs of smaller SMR systems, which typically trunk
smaller numbers of non-contiguous channels. These commenters argued
that large blocks of contiguous channels could be prohibitively
expensive to bid for at auction, thereby limiting the opportunities for
smaller operators to take advantage of geographic area licensing.
174. In order to accommodate licensees who wanted contiguous as
well as those that wanted large blocks of spectrum, the Commission
adopted the Industry Proposal and alloted three contiguous 50-channel
blocks. As for the concerns of smaller entities that such blocks may be
too large, the Commission found that such entities will have the
opportunity to acquire smaller amounts of spectrum compatible with
their existing technology through the newly-created disaggregation
rules.
175. The Commission adopted a proposal to allow incumbent licensees
in the lower 230 channels to make system modifications within their
interference contours without prior Commission approval, so long as
they do not expand the 18 dBV/m interference contour of their
systems. As noted above, the Industry Proposal called for the
Commission to permit incumbent licensees in the lower 230 channels to
negotiate expansion rights within each EA through a settlement process.
The Commission rejected this approach finding that it would not serve
the public interest. The Commission found that the Industry Proposal
would foreclose new entrants from obtaining spectrum on any of the
lower 230 channels that are subject to a settlement. In any market
where all of the channels in an EA were allocated by such settlements,
the result would be that no opportunities for geographic licensing
would be available to new entrants. The Commission also found that the
Industry Proposal would preclude competition in the licensing process
and restrict the number of potential applicants who can obtain
licenses. Thus, it could yield a higher concentration of licenses than
would result if non-incumbents were allowed to compete for the spectrum
at the same time. The Commission also found that the Industry Proposal
would also be inconsistent with the approach it has adopted in other
services where it has converted from site-by-site licensing to
geographic area licensing.
176. The Commission adopted bidding credits qualified small
business entities in the lower 230 channel auctions. Coral Cables
sought to have eligibility for, and percentage of, bidding credits set
at different levels for public safety entities. The Commission found
that its rules were reasonable and met the concerns of commenters and
that the bidding credits took into account the fact that different
small businesses will pursue different strategies.
177. The Commission declined to adopt rules to allow licensees who
qualify as small businesses in a geographic area 800 MHz SMR license
auction for the lower 230 channels to pay their winning bid amount in
installments over the term of the license. The Commission found that a
better alternative to help small businesses, as well as ensure new
services to the public is to offer a higher level of bidding credit.
178. Finally, the Commission declined to set aside a special block
of 800 MHz SMR channels for entrepreneurs. The Commission found that
small businesses will have significant opportunity to compete for
licenses given the special bidding credit provisions it had adopted.
179. Report to Congress: The Commission shall send a copy of this
Final Regulatory Flexibility Analysis, along with this Second Report
and Order, in a report to Congress pursuant to the Small Business
Regulatory Enforcement Fairness Act of 1996, 5 U.S.C. 801(a)(1)(A). A
copy of this Final Regulatory Flexibility Analysis will also be
published in the Federal Register.
B. Authority
180. Authority for issuance of this Second Report and Order is
contained in the Communications Act, sections 4(i), 7, 303(c), 303(f),
303(g), 303(r), and 332, 47 U.S.C. 154(i), 157, 303(c), 303(f), 303(g),
303(r), 332, as amended.
C. Ordering Clauses
181. Accordingly, IT IS ORDERED that, pursuant to authority of
sections 4(i), 303(r), and 309(j) of the Communications Act of 1934, as
amended, 47 U.S.C. 154(i), 303(r), and 309(j), Part 90 of the
Commission's Rules, 47 CFR part 90 IS AMENDED as set forth below.
182. IT IS FURTHER ORDERED that the rule changes made herein WILL
BECOME EFFECTIVE September 29, 1997. This action is taken pursuant to
sections 4(i), 303(r), and 309(j) of the Communications Act of 1934, as
amended, 47 U.S.C. 154(i), 303(r), and 309(j).
[[Page 41214]]
183. IT IS FURTHER ORDERED that the Regulatory Flexibility
Analysis, as required by section 604 of the Regulatory Flexibility Act
is ADOPTED.
184. IT IS FURTHER ORDERED that all waiting lists for the lower 230
channels of 800 MHz SMR spectrum ARE ELIMINATED and all applications
currently on waiting lists for such frequencies ARE DISMISSED,
effective July 10, 1997.
D. Further Information
185. For further information concerning this proceeding, contact
Shaun A. Maher or Michael Hamra, Policy and Rules Branch, Commercial
Wireless Division, Wireless Telecommunications Bureau at (202) 418-0620
or Alice Elder, Auctions and Industry Analysis Division, Wireless
Telecommunications Bureau at (202) 418-0660.
List of Subjects in 47 CFR Part 90
Radio, Specialized mobile radio services.
Federal Communications Commission.
William F. Caton,
Acting Secretary.
Rule Changes
Part 90 of chapter I of title 47 of the Code of Federal Regulations
is amended as follows:
PART 90--PRIVATE LAND MOBILE RADIO SERVICES
1. The authority citation for part 90 continues to read as follows:
Authority: 47 U.S.C. 154, 303, and 332, unless otherwise noted.
2. Section 90.210 is amended by revising footnote 3 in the table in
the introductory paragraph to read as follows:
Sec. 90.210 Emission masks.
* * * * *
APPLICABLE EMISSION MASKS
* * * * *
\3\ Equipment used in this band licensed to EA or non-EA systems
shall comply with the emission mask provisions of Sec. 90.691.
* * * * *
3. Section 90.615 is revised to read as follows:
Sec. 90.615 Spectrum blocks available in the General Category for 800
MHz SMR General Category.
TABLE 1.--806-821/851-866 MHZ BAND CHANNELS (150 CHANNELS)
------------------------------------------------------------------------
Spectrum block Channel Nos.
------------------------------------------------------------------------
D......................................... 1 through 50.
E......................................... 51 through 100.
F......................................... 101 through 150.
------------------------------------------------------------------------
4. Section 90.617 is amended by revising paragraph (d) and Table 4A
to read as follows:
Sec. 90.617 Frequencies in the 809.750-824/854.750-869 MHz, and 896-
901/935-940 MHz bands available for trunked or conventional system use
in non-border areas.
* * * * *
(d) The channels listed in Tables 4A and 4B are available only to
eligibles in the SMR category which consists of Specialized Mobile
Radio (SMR) stations and eligible end users. The frequencies listed in
Table 4A are available to SMR eligibles desiring to be authorized for
EA-based service areas in accordance with Sec. 90.681. SMR licensees
licensed on Channels 401-600 on or before March 3, 1996, may continue
to utilize these frequencies within their existing service areas,
subject to the mandatory relocation provisions of Sec. 90.699. This
paragraph deals with the assignment of frequencies only in areas
farther than 110 km (68.4 miles) from the U.S./Mexico border and
farther than 140 km (87) miles from the U.S./Canada border. See
Sec. 90.619 for the assignment of SMR frequencies in these border
areas. For stations located within 113 km (70 miles) of Chicago,
channels 401-600 will be assigned in blocks as outlined in Table 4C.
TABLE 4A.--SMR CATEGORY 806-821/851-866 MHZ BAND CHANNELS (280 CHANNELS)
------------------------------------------------------------------------
Spectrum block Channel Nos.
------------------------------------------------------------------------
A......................................... 401 through 420.
B......................................... 421 through 480.
C......................................... 481 through 600.
G......................................... 201-241-281-321-361.
H......................................... 202-242-282-322-362.
I......................................... 203-243-283-323-363.
J......................................... 204-244-284-324-364.
K......................................... 205-245-285-325-365.
L......................................... 206-246-286-326-366.
M......................................... 207-247-287-327-367.
N......................................... 208-248-288-328-368.
O......................................... 221-261-301-341-381.
P......................................... 222-262-302-342-382.
Q......................................... 223-263-303-343-383.
R......................................... 224-264-304-344-384.
S......................................... 225-265-305-345-385.
T......................................... 226-266-306-346-386.
U......................................... 227-267-307-347-387.
V......................................... 228-268-308-348-388.
------------------------------------------------------------------------
* * * * *
5. Section 90.619 is amended by revising paragraphs (a)(5) and
Table 4A, (b)(8) Table 12, (b)(9) Table 16, (b)(10) Table 20, and
(b)(11) Table 24 to read as follows:
Sec. 90.619 Frequencies available for use in the U.S./Mexico and U.S./
Canada border areas.
(a) * * *
(5) Tables 4A and 4B list the channels that are available for
assignment for the SMR Category (consisting of Specialized Mobile Radio
systems as defined in Sec. 90.7).
These channels are not available for inter-category sharing.
Table 4A.--United States-Mexico Border Area, SMR and General Categories
806-821/851-866 MHZ Band (95 Channels)
------------------------------------------------------------------------
Spectrum block Offset channel Nos.
------------------------------------------------------------------------
EA-Based SMR Category (83 Channels)
------------------------------------------------------------------------
A......................................... 398-399-400.
B......................................... 429-431-433-435-437-439-469-
471-473-475-477-479.
C......................................... 509-511-513-515-517-519-549-
551-553-555-557-559-589-591
-593-595-597-599.
G......................................... 229-272-349.
H......................................... 230-273-350.
I......................................... 231-274-351.
J......................................... 232-278-352.
K......................................... 233-279-353.
L......................................... 234-280-354.
M......................................... 235-309-358.
N......................................... 236-310-359.
[[Page 41215]]
O......................................... 237-311-360.
P......................................... 238-312-389.
Q......................................... 239-313-390.
R......................................... 240-314-391.
S......................................... 269-318-392.
T......................................... 270-319-393.
U......................................... 271-320-394.
V......................................... 228-268-308-348-388.
------------------------------------------------------------------------
General Category (12 Channels)
------------------------------------------------------------------------
D......................................... 275-315-355-395.
E......................................... 276-316-356-396.
F......................................... 277-317-357-397
------------------------------------------------------------------------
(b) * * *
(8) * * *
Table 12.--SMR and General Categories--95 Channels
(Regions 1, 4, 5, 6)
------------------------------------------------------------------------
Spectrum block Channel Nos.
------------------------------------------------------------------------
EA-Based SMR Category (90 Channels)
------------------------------------------------------------------------
A......................................... None.
B......................................... 463 through 480.
C......................................... 493 through 510, 523 through
540, 553 through 570, 583
through 600.
G through V............................... None.
------------------------------------------------------------------------
General Category (5 Channels)
------------------------------------------------------------------------
D......................................... 30.
E......................................... 60 and 90.
F......................................... 120 and 150.
------------------------------------------------------------------------
(9) * * *
Table 16.--SMR and General Categories--60 Channels
(Region 2)
------------------------------------------------------------------------
Spectrum block Channel Nos.
------------------------------------------------------------------------
SMR Category (55 Channels)
------------------------------------------------------------------------
A......................................... None.
B......................................... None.
C......................................... 518 through 528, 536 through
546, 554 through 564, 572
through 582, 590 through
600.
G through V............................... None.
------------------------------------------------------------------------
General Category (5 Channels)
------------------------------------------------------------------------
D 18 and 36...............................
E......................................... 54-72-90.
F......................................... None.
------------------------------------------------------------------------
(10) * * *
Table 20.--SMR and General Categories (135 Channels)
(Region 3)
------------------------------------------------------------------------
Spectrum block Channel Nos.
------------------------------------------------------------------------
SMR Category (120 Channels)
------------------------------------------------------------------------
A......................................... 417 through 420.
B......................................... 421 through 440, 457 through
480.
C......................................... 497 through 520, 537 through
560, 577 through 600.
G through V............................... None.
------------------------------------------------------------------------
General Category (15 Channels)
------------------------------------------------------------------------
D......................................... 38-39-40-158-159.
E......................................... 78-79-80-160-198.
F......................................... 118-119-120-199-200.
------------------------------------------------------------------------
(11) * * *
Table 24.--(Regions 7, 8) SMR and General Categories--190 Channels
------------------------------------------------------------------------
Spectrum block Channel Nos.
------------------------------------------------------------------------
SMR Category (172 Channels)
------------------------------------------------------------------------
A......................................... 389 through 400.
B......................................... 425 through 440, 465 through
480.
C......................................... 505 through 520, 545 through
560, 585 through 600.
G......................................... 155-229-269-309-349.
H......................................... 156-230-270-310-350.
I......................................... 157-231-271-311-351.
J......................................... 158-232-272-312-352.
K......................................... 159-233-273-313-353.
L......................................... 160-234-274-314-354.
M......................................... 195-235-275-315-355.
N......................................... 196-236-276-316-356.
O......................................... 197-237-277-317-357.
P......................................... 198-238-278-318-358.
Q......................................... 199-239-279-319-359.
R......................................... 200-240-280-320-360.
S......................................... 225-265-305-345-385.
T......................................... 226-266-306-346-386.
U......................................... 227-267-307-347-387.
V......................................... 228-268-308-348-388.
------------------------------------------------------------------------
General Category (18 Channels)
------------------------------------------------------------------------
D......................................... 35 through 40.
E......................................... 75 through 80.
F......................................... 115 through 120.
------------------------------------------------------------------------
* * * * *
6. Section 90.621 is amended by revising paragraphs (b)
introductory text, (b)(1) and (b)(3) introductory text to read as
follows:
Sec. 90.621 Selection and assignment of frequencies.
* * * * *
(b) Stations authorized on frequencies listed in this subpart,
except for those stations authorized pursuant to paragraph (g) of this
section and EA-based and MTA-based SMR systems, will be afforded
protection solely on the basis of fixed distance separation criteria.
For Channel Blocks A, through V, as set forth in Sec. 90.917(d), the
separation between co-channel systems will be a minimum of 113 km (70
mi) with one exception. For incumbent licensees in Channel Blocks D
through V, that have received the consent of all affected parties to
utilize an 18 dBV/m signal strength interference contour (see
Sec. 90.693), the separation between co-channel systems will be a
minimum of 173 km (107 mi). The following exceptions to these
separations shall apply:
(1) Except as indicated in paragraph (b)(4) of this section, no
station in Channel Blocks A through V shall be less than 169 km (105
mi) distant from a co-channel station that has been granted channel
exclusivity and authorized 1 kW ERP on any of the following mountaintop
sites: Santiago Peak, Sierra Peak, Mount Lukens, Mount Wilson
(California). Except as indicated in paragraph (b)(4) of this section,
no incumbent licensee in Channel Blocks D through V that have received
the consent of all affected parties to utilize an 18 dBV/m
signal strength interference contour shall be less than 229 km (142 mi)
distant from a co-channel station that has been
[[Page 41216]]
granted channel exclusivity and authorized 1 kW ERP on any of the
following mountaintop sites: Santiago Peak, Sierra Peak, Mount Lukens,
Mount Wilson (California).
* * * * *
(3) Except as indicated in paragraph (b)(4) of this section,
stations in Channel Blocks A through V that have been granted channel
exclusivity and are located in the State of Washington at the locations
listed below shall be separated from co-channel stations by a minimum
of 169 km (105 mi). Except as indicated in paragraph (b)(4) of this
section, incumbent licensees in Channel Blocks D through V that have
received the consent of all affected parties to utilize an 18
dBV/m signal strength interference contour, have been granted
channel exclusivity and are located in the State of Washington at the
locations listed below shall be separated from co-channel stations by a
minimum of 229 km (142 mi). Locations within one mile of the
geographical coordinates listed in the table below will be considered
to be at that site.
* * * * * * *
7. Subpart S is amended by revising the undesignated center heading
following Sec. 90.671 to read as follows:
POLICIES GOVERNING THE LICENSING AND USE OF EA-BASED SMR SYSTEMS IN THE
806-821/851-866 BAND
8. Section 90.681 is revised to read as follows:
Sec. 90.681 EA-based SMR service areas.
EA licenses in Spectrum Blocks A through V band listed in Table 4A
of Sec. 90.617(d) are available in 175 Economic Areas (EAs) as defined
in Sec. 90.7.
9. Section 90.683(a) introductory text is revised to read as
follows:
Sec. 90.683 EA-Based SMR system operations.
(a) EA-based licensees authorized in the 806-821/851-866 MHz band
pursuant to Sec. 90.681 may construct and operate base stations using
any of the base station frequencies identified in their spectrum block
anywhere within their authorized EA, provided that:
* * * * *
10. Section 90.685 is revised to read as follows:
Sec. 90.685 Authorization, construction and implementation of EA
licenses.
(a) EA licenses in the 806-821/851-866 MHz band will be issued for
a term not to exceed ten years. Additionally, EA licensees generally
will be afforded a renewal expectancy only for those stations put into
service after August 10, 1996.
(b) EA licensees in the 806-821/851-866 MHz band must, within three
years of the grant of their initial license, construct and place into
operation a sufficient number of base stations to provide coverage to
at least one-third of the population of its EA-based service area.
Further, each EA licensee must provide coverage to at least two-thirds
of the population of the EA-based service area within five years of the
grant of their initial license. Alternatively, EA licensees in Channel
blocks D through V in the 806-821/851-866 MHz band must provide
substantial service to their markets within five years of the grant of
their initial license. Substantial service shall be defined as:
``Service which is sound, favorable, and substantially above a level of
mediocre service.''
(c) Channel Use Requirement. In addition to the population coverage
requirements described in this section, we will require EA licensees in
Channel blocks A, B and C in the 816-821/861-866 MHz band to construct
50 percent of the total channels included in their spectrum block in at
least one location in their respective EA-based service area within
three years of initial license grant and to retain such channel usage
for the remainder of the construction period.
(d) An EA licensee's failure to meet the population coverage
requirements of paragraphs (b) and (c) of this section, will result in
forfeiture of the entire EA license. Forfeiture of the EA license,
however, would not result in the loss of any constructed facilities
authorized to the licensee prior to the date of the commencement of the
auction for the EA licenses.
11. Section 90.687 is revised to read as follows:
Sec. 90.687 Special provisions regarding assignments and transfers of
authorizations for incumbent SMR licensees in the 806-821/851-866 MHz
band.
An SMR licensee initially authorized on any of the channels listed
in Table 4A of Sec. 90.617 may transfer or assign its channel(s) to
another entity subject to the provisions of Secs. 90.153 and 90.609(b).
If the proposed transferee or assignee is the EA licensee for the
spectrum block to which the channel is allocated, such transfer or
assignment presumptively will be deemed to be in the public interest.
However, such presumption will be rebuttable.
12. Section 90.689(a) is revised to read as follows:
Sec. 90.689 Field strength limits.
(a) For purposes of implementing Secs. 90.689 through 90.699,
predicted 36 and 40 dBV/m contours shall be calculated using
Figure 10 of Sec. 73.699 of this chapter with a correction factor of -9
dB, and predicted 18 and 22 dBV/m contours shall be calculated
using Figure 10a of Sec. 73.699 of this chapter with a correction
factor of -9 dB.
* * * * *
13. Section 90.693 is revised to read as follows:
Sec. 90.693 Grandfathering provisions for incumbent licensees.
(a) General Provisions. These provisions apply to ``incumbent
licensees'', all 800 MHz SMR licensees who obtained licenses or filed
applications on or before December 15, 1995.
(b) Spectrum Blocks A through V. An incumbent licensee's service
area shall be defined by its originally-licensed 40 dBV/m
field strength contour and its interference contour shall be defined as
its originally-licensed 22 dBV/m field strength contour.
Incumbent licensees are permitted to add, remove or modify transmitter
sites within their original 22 dBV/m field strength contour
without prior notification to the Commission so long as their original
22 dBV/m field strength contour is not expanded and the
station complies with the Commission's short-spacing criteria in
Secs. 90.621(b)(4) through 90.621(b)(6). The incumbent licensee must,
however, notify the Commission within 30 days of the completion of any
changes in technical parameters or additional stations constructed
through a minor modification of their license. Such notification must
be made by submitting an FCC Form 600 and must include the appropriate
filing fee, if any. These minor modification applications are not
subject to public notice and petition to deny requirements or mutually
exclusive applications.
(c) Special Provisions for Spectrum Blocks D through V. Incumbent
licensees that have received the consent of all affected parties to
utilize an 18 dBV/m signal strength interference contour shall
have their service area defined by their originally-licensed 36
dBV/m field strength contour and its interference contour
shall be defined as their originally-licensed 18 dBV/m field
strength contour. Incumbent licensees are permitted to add, remove or
modify transmitter sites within their original 18 dBV/m field
strength contour without prior notification to the Commission so long
as their original 18 dBV/m field strength contour is not
expanded and the station complies with the Commission's short-spacing
criteria in Secs. 90.621(b)(4) through 90.621(b)(6). The incumbent
licensee must, however,
[[Page 41217]]
notify the Commission within 30 days of the completion of any changes
in technical parameters or additional stations constructed through a
minor modification of their license. Such notification must be made by
submitting an FCC Form 600 and must include the appropriate filing fee,
if any. These minor modification applications are not subject to public
notice and petition to deny requirements or mutually exclusive
applications.
(d) Consolidated License. (1) Spectrum Blocks A through V.
Incumbent licensees operating at multiple sites may, after grant of EA
licenses has been completed, exchange multiple site licenses for a
single license, authorizing operations throughout the contiguous and
overlapping 40 dBV/m field strength contours of the multiple
sites. Incumbents exercising this license exchange option must submit
specific information for each of their external base sites after the
close of the 800 MHz SMR auction.
(2) Special Provisions for Spectrum Blocks D through V. Incumbent
licensees that have received the consent of all affected parties to
utilize an 18 dBV/m signal strength interference contour
operating at multiple sites may, after grant of EA licenses has been
completed, exchange multiple site licenses for a single license. This
single site license will authorize operations throughout the contiguous
and overlapping 36 dBV/m field strength contours of the
multiple sites. Incumbents exercising this license exchange option must
submit specific information for each of their external base sites after
the close of the 800 SMR auction.
14. Section 90.699 is revised to read as follows:
Sec. 90.699 Transition of the upper 200 channels in the 800 MHz band
to EA licensing.
In order to facilitate provision of service throughout an EA, an EA
licensee may relocate incumbent licensees in its EA by providing
``comparable facilities'' on other frequencies in the 800 MHz band.
Such relocation is subject to the following provisions:
(a) EA licensees may negotiate with incumbent licensees as defined
in Sec. 90.693 operating on frequencies in Spectrum Blocks A, B, and C
for the purpose of agreeing to terms under which the incumbents would
relocate their operations to other frequencies in the 800 MHz band, or
alternatively, would accept a sharing arrangement with the EA licensee
that may result in an otherwise impermissible level of interference to
the incumbent licensee's operations. EA licensees may also negotiate
agreements for relocation of the incumbents' facilities within Spectrum
Blocks A, B or C in which all interested parties agree to the
relocation of the incumbent's facilities elsewhere within these bands.
``All interested parties'' includes the incumbent licensee, the EA
licensee requesting and paying for the relocation, and any EA licensee
of the spectrum to which the incumbent's facilities are to be
relocated.
(b) The relocation mechanism consists of two phases that must be
completed before an EA licensee may proceed to request the involuntary
relocation of an incumbent licensee.
(1) Voluntary Negotiations. There is a one year voluntary period
during which an EA licensee and an incumbent may negotiate any mutually
agreeable relocation agreement. The Commission will announce the
commencement of the first phase voluntary period by Public Notice. EA
licensees must notify incumbents operating on frequencies included in
their spectrum block of their intention to relocate such incumbents
within 90 days of the release of the Public Notice that commences the
voluntary negotiation period. Failure on the part of the EA licensee to
notify the incumbent licensee during this 90 period of its intention to
relocate the incumbent will result in the forfeiture of the EA
licensee's right to request involuntary relocation of the incumbent at
any time in the future.
(2) Mandatory Negotiations. If no agreement is reached by the end
of the voluntary period, a one-year mandatory negotiation period will
begin during which both the EA licensee and the incumbent must
negotiate in ``good faith.'' Failure on the part of the EA licensee to
negotiate in good faith during this mandatory period will result in the
forfeiture of the EA licensee's right to request involuntary relocation
of the incumbent at any time in the future.
(c) Involuntary Relocation Procedures. If no agreement is reached
during either the voluntary or mandatory negotiating periods, the EA
licensee may request involuntary relocation of the incumbent's system.
In such a situation, the EA licensee must:
(1) Guarantee payment of relocation costs, including all
engineering, equipment, site and FCC fees, as well as any legitimate
and prudent transaction expenses incurred by the incumbent licensee
that are directly attributable to an involuntary relocation, subject to
a cap of two percent of the hard costs involved. Hard costs are defined
as the actual costs associated with providing a replacement system,
such as equipment and engineering expenses. EA licensees are not
required to pay incumbent licensees for internal resources devoted to
the relocation process. EA licensees are not required to pay for
transaction costs incurred by incumbent licensees during the voluntary
or mandatory periods once the involuntary period is initiated, or for
fees that cannot be legitimately tied to the provision of comparable
facilities;
(2) Complete all activities necessary for implementing the
replacement facilities, including engineering and cost analysis of the
relocation procedure and, if radio facilities are used, identifying and
obtaining, on the incumbents' behalf, new frequencies and frequency
coordination; and
(3) Build the replacement system and test it for comparability with
the existing 800 MHz system.
(d) Comparable Facilities. The replacement system provided to an
incumbent during an involuntary relocation must be at least equivalent
to the existing 800 MHz system with respect to the following four
factors:
(1) System. System is defined functionally from the end user's
point of view (i.e., a system is comprised of base station facilities
that operate on an integrated basis to provide service to a common end
user, and all mobile units associated with those base stations). A
system may include multiple-licensed facilities that share a common
switch or are otherwise operated as a unitary system, provided that the
end user has the ability to access all such facilities. A system may
cover more than one EA if its existing geographic coverage extends
beyond the EA borders.
(2) Capacity. To meet the comparable facilities requirement, an EA
licensee must relocate the incumbent to facilities that provide
equivalent channel capacity. We define channel capacity as the same
number of channels with the same bandwidth that is currently available
to the end user. For example, if an incumbent's system consists of five
50 kHz (two 25 kHz paired frequencies) channels, the replacement system
must also have five 50 kHz channels. If a different channel
configuration is used, it must have the same overall capacity as the
original configuration. Comparable channel capacity requires equivalent
signaling capability, baud rate, and access time. In addition, the
geographic coverage of the channels must be coextensive with that of
the original system.
(3) Quality of Service. Comparable facilities must provide the same
quality
[[Page 41218]]
of service as the facilities being replaced. Quality of service is
defined to mean that the end user enjoys the same level of interference
protection on the new system as on the old system. In addition, where
voice service is provided, the voice quality on the new system must be
equal to the current system. Finally, reliability of service is
considered to be integral to defining quality of service. Reliability
is the degree to which information is transferred accurately within the
system. Reliability is a function of equipment failures (e.g.,
transmitters, feed lines, antennas, receivers, battery back-up power,
etc.) and the availability of the frequency channel due to propagation
characteristics (e.g., frequency, terrain, atmospheric conditions,
radio-frequency noise, etc.) For digital data systems, this will be
measured by the percent of time the bit error rate exceeds the desired
value. For analog or digital voice transmissions, this will be measured
by the percent of time that audio signal quality meets an established
threshold. If analog voice system is replaced with a digital voice
system the resulting frequency response, harmonic distortion, signal-
to-noise ratio, and reliability will be considered.
(4) Operating Costs. Operating costs are those costs that affect
the delivery of services to the end user. If the EA licensee provides
facilities that entail higher operating cost than the incumbent's
previous system, and the cost increase is a direct result of the
relocation, the EA licensee must compensate the incumbent for the
difference. Costs associated with the relocation process can fall into
several categories. First, the incumbent must be compensated for any
increased recurring costs associated with the replacement facilitates
(e.g., additional rental payments, increased utility fees). Second,
increased maintenance costs must be taken into consideration when
determining whether operating costs are comparable. For example,
maintenance costs associated with analog systems may be higher than the
costs of digital equipment because manufacturers are producing mostly
digital equipment and analog replacement parts can be difficult to
find. An EA licensee's obligation to pay increased operating costs will
end five years after relocation has occurred.
(e) If an EA licensee cannot provide comparable facilities to an
incumbent licensee as defined in this section, the incumbent licensee
may continue to operate its system on a primary basis in accordance
with the provisions of this rule part.
(f) Cost-Sharing Plan for 800 MHz SMR EA licensees. EA licensees
are required to relocate the existing 800 MHz SMR licensee in these
bands if interference to the existing incumbent operations would occur.
All EA licensees who benefit from the spectrum clearing by other EA
licensees must contribute, on a pro rata basis to such relocation
costs. EA licensees may satisfy this requirement by entering into
private cost-sharing agreements or agreeing to terms other than those
specified in this section. However, EA licensees are required to
reimburse other EA licensees that incur relocation costs and are not
parties to the alternative agreement as defined in this section.
(1) Pro Rata Formula. EA licensees who benefit from the relocation
of the incumbent must share the relocation costs on a pro rata basis.
For purposes of determining whether an EA licensee benefits from the
relocation of an incumbent, benefitted will be defined as any EA
licensee that:
(i) Notifies incumbents operating on frequencies included in their
spectrum block of their intention to relocate such incumbents within 90
days of the release of the Public Notice that commences the voluntary
negotiation period; or
(ii) Fails to notify incumbents operating on frequencies included
in their spectrum block of their intention to relocate such incumbents
within 90 days of the release of the Public Notice that commences the
voluntary negotiation period, but subsequently decides to use the
frequencies included in their spectrum block. EA licensees who do not
participate in the relocation process will be prohibited from invoking
mandatory negotiations or any of the provisions of the Commission's
mandatory relocation guidelines. EA licensees who do not provide notice
to the incumbent, but subsequently decide to use the frequencies in
their EA will be required to reimburse, outside of the Commission's
mandatory relocation guidelines, those EA licensees who have
established a reimbursement right pursuant to paragraph (f)(3) of this
section.
(2) Triggering a Reimbursement Obligation. An EA licensees
reimbursement obligation is triggered by:
(i) Notification (i.e., files a copy of the relocation notice and
proof of the incumbent's receipt of the notice to the Commission within
ten days of receipt), to the incumbent within 90 days of the release of
the Public Notice commencing the voluntary negotiation period of its
intention to relocate the incumbent; or
(ii) An EA licensee who does not provide notification within 90
days of the release of the Public Notice commencing the voluntary
negotiation period, but subsequently decides to use the channels that
were relocated by other EA licensees.
(3) Triggering a Reimbursement Right. In order for the EA licensee
to trigger a reimbursement right, the EA licensee must notify (i.e.,
files a copy of the relocation notice and proof of the incumbent's
receipt of the notice to the Commission within ten days of receipt),
the incumbent of its intention to relocate the incumbent within 90 days
of the release of the Public Notice commencing the voluntary
negotiation period, and subsequently negotiate and sign a relocation
agreement with the incumbent. An EA licensee who relocates a channel
outside of its licensed EA (i.e., one that is in another frequency
block or outside of its market area), is entitled to pro rata
reimbursement from non-notifying EA licensees who subsequently exercise
their right to the channels based on the following formula:
[GRAPHIC] [TIFF OMITTED] TR31JY97.002
Ci equals the amount of reimbursement
Tc equals the actual cost of relocating the incumbent
TCh equals the total number of channels that are being relocated
Chj equals the number of channels that each respective EA licensee
will benefit from
(4) Payment Issues. EA licensees who benefit from the relocation of
the incumbent will be required to submit their pro rata share of the
relocation expense to EA licensees who have triggered a reimbursement
right and have incurred relocation costs as follows:
(i) For an EA licensee who, within 90 days of the release of the
Public Notice announcing the commencement of the voluntary negotiation
period, provides notice of its intention to relocate the incumbent, but
does not participate or incur relocation costs in the relocation
process, will be required to reimburse those EA licensees who have
triggered a reimbursement right and have incurred relocation costs
during the relocation process, its pro rata share when the channels of
the incumbent have been cleared (i.e., the incumbent has been fully
relocated and the channels are free and clear).
[[Page 41219]]
(ii) For an EA licensee who does not, within 90 days of the release
of the Public Notice announcing the commencement of the voluntary
negotiation period, provide notice to the incumbent of its intention to
relocate and does not incur relocation costs during the relocation
process, but subsequently decides to use the channels in its EA, will
be required to submit its pro rata share payment to those EA licensees
who have triggered a reimbursement right and have incurred relocation
costs during the relocation process prior to commencing testing of its
system.
(5) Sunset of Reimbursement Rights. EA licensees who do not trigger
a reimbursement obligation as set forth in paragraph (f)(2) of this
section, shall not be required to reimburse EA licensees who have
triggered a reimbursement right as set forth in paragraph (f)(3) of
this section ten (10) years after the voluntary negotiation period
begins for EA licensees (i.e., ten (10) years after the Commission
releases the Public Notice commencing the voluntary negotiation
period).
(6) Resolution of Disputes that Arise During Relocation. Disputes
arising out of the costs of relocation, such as disputes over the
amount of reimbursement required, will be encouraged to use expedited
ADR procedures. ADR procedures provide several alternative methods such
as binding arbitration, mediation, or other ADR techniques.
(7) Administration of the Cost-Sharing Plan. We will allow for an
industry supported, not-for-profit clearinghouse to be established for
purposes of administering the cost-sharing plan adopted for the 800 MHz
SMR relocation procedures.
14. Section 90.813 is revised to read as follows:
Sec. 90.813 Partitioned licenses and disaggregated spectrum.
(a) Eligibility. Parties seeking approval for partitioning and
disaggregation shall request an authorization for partial assignment of
a license pursuant to Sec. 90.153(c).
(b) Technical Standards. (1) Partitioning. In the case of
partitioning, requests for authorization for partial assignment of a
license must include, as attachments, a description of the partitioned
service area and a calculation of the population of the partitioned
service area and the licensed geographic service area. The partitioned
service area shall be defined by coordinate points at every 3 degrees
along the partitioned service area unless an FCC recognized service
area is utilized (i.e., Major Trading Area, Basic Trading Area,
Metropolitan Service Area, Rural Service Area or Economic Area) or
county lines are followed. The geographic coordinates must be specified
in degrees, minutes, and seconds to the nearest second of latitude and
longitude and must be based upon the 1927 North American Datum (NAD27).
Applicants may supply geographical coordinates based on 1983 North
American Datum (NAD83) in addition to those required (NAD27). In the
case where an FCC recognized service area or county lines are utilized,
applicants need only list the specific area(s) (through use of FCC
designations or county names) that constitute the partitioned area.
(2) Disaggregation. Spectrum may be disaggregated in any amount.
(3) Combined Partitioning and Disaggregation. The Commission will
consider requests for partial assignment of licenses that propose
combinations of partitioning and disaggregation.
(c) Unjust Enrichment. (1) Installment Payments. Licensees that
qualified under Sec. 90.812 to pay the net auction price for their
licenses in installment payments that partition their licenses or
disaggregate their spectrum to entities not meeting the eligibility
standards for installment payments, will be subject to the provisions
concerning unjust enrichment as set forth in Sec. 90.812(b).
(2) Bidding Credits. Licensees that qualified under Sec. 90.810 to
use a bidding credit at auction that partition their licenses or
disaggregate their spectrum to entities not meeting the eligibility
standards for such a bidding credit, will be subject to the provisions
concerning unjust enrichment as set forth in Sec. 90.810(b).
(3) Apportioning Unjust Enrichment Payments. Unjust enrichment
payments for partitioned license areas shall be calculated based upon
the ratio of the population of the partitioned license area to the
overall population of the license area and by utilizing the most recent
census data. Unjust enrichment payments for disaggregated spectrum
shall be calculated based upon the ratio of the amount of spectrum
disaggregated to the amount of spectrum held by the licensee.
(d) Installment Payments. (1) Apportioning the Balance on
Installment Payment Plans. When a winning bidder elects to pay for its
license through an installment payment plan pursuant to Sec. 90.812,
and partitions its licensed area or disaggregates spectrum to another
party, the outstanding balance owed by the licensee on its installment
payment plan (including accrued and unpaid interest) shall be
apportioned between the licensee and partitionee or disaggregatee. Both
parties will be responsible for paying their proportionate share of the
outstanding balance to the U.S. Treasury. In the case of partitioning,
the balance shall be apportioned based upon the ratio of the population
of the partitioned area to the population of the entire original
license area calculated based upon the most recent census data. In the
case of disaggregation, the balance shall be apportioned based upon the
ratio of the amount of spectrum disaggregated to the amount of spectrum
allocated to the licensed area.
(2) Parties Not Qualified For Installment Payment Plans. (i) When a
winning bidder elects to pay for its license through an installment
payment plan pursuant to Sec. 90.812, and partitions its license or
disaggregates spectrum to another party that would not qualify for an
installment payment plan or elects not to pay for its share of the
license through installment payments, the outstanding balance owed by
the licensee (including accrued and unpaid interest) shall be
apportioned according to paragraph (d)(1) of this section.
(ii) The partitionee or disaggregatee shall, as a condition of the
approval of the partial assignment application, pay its entire pro rata
amount within 30 days of Public Notice conditionally granting the
partial assignment application. Failure to meet this condition will
result in a rescission of the grant of the partial assignment
application.
(iii) The licensee shall be permitted to continue to pay its pro
rata share of the outstanding balance and shall receive new financing
documents (promissory note, security agreement) with a revised payment
obligation, based on the remaining amount of time on the original
installment payment schedule. These financing documents will replace
the licensee's existing financing documents which shall be marked
``superseded'' and returned to the licensee upon receipt of the new
financing documents. The original interest rate, established pursuant
to Sec. 1.2110(e)(3)(i) of this chapter at the time of the grant of the
initial license in the market, shall continue to be applied to the
licensee's portion of the remaining government obligation. We will
require, as a further condition to approval of the partial assignment
application, that the licensee execute and return to the U.S. Treasury
the new financing documents within 30 days of the Public Notice
conditionally granting the partial assignment application. Failure to
meet this condition will result
[[Page 41220]]
in the automatic cancellation of the grant of the partial assignment
application.
(iv) A default on the licensee's payment obligation will only
affect the licensee's portion of the market.
(3) Parties Qualified For Installment Payment Plans. (i) Where both
parties to a partitioning or disaggregation agreement qualify for
installment payments, the partitionee or disaggregatee will be
permitted to make installment payments on its portion of the remaining
government obligation, as calculated according to paragraph (d)(1) of
this section.
(ii) Each party will be required, as a condition to approval of the
partial assignment application, to execute separate financing documents
(promissory note, security agreement) agreeing to pay their pro rata
portion of the balance due (including accrued and unpaid interest)
based upon the installment payment terms for which they qualify under
the rules. The financing documents must be returned to the U.S.
Treasury within thirty (30) days of the Public Notice conditionally
granting the partial assignment application. Failure by either party to
meet this condition will result in the automatic cancellation of the
grant of the partial assignment application. The interest rate,
established pursuant to Sec. 1.2110(e)(3)(i) of this chapter at the
time of the grant of the initial license in the market, shall continue
to be applied to both parties' portion of the balance due. Each party
will receive a license for their portion of the partitioned market or
disaggregated spectrum.
(iii) A default on an obligation will only affect that portion of
the market area held by the defaulting party.
(iv) Partitionees and disaggregatees that qualify for installment
payment plans may elect to pay some of their pro rata portion of the
balance due in a lump sum payment to the U.S. Treasury and to pay the
remaining portion of the balance due pursuant to an installment payment
plan.
(e) License Term. The license term for a partitioned license area
and for disaggregated spectrum shall be the remainder of the original
licensee's license term as provided for in Sec. 90.665(a).
(f) Construction Requirements. (1) Requirements for Partitioning.
Parties seeking authority to partition must meet one of the following
construction requirements:
(i) The partitionee may certify that it will satisfy the applicable
construction requirements set forth in Sec. 90.665 for the partitioned
license area; or
(ii) The original licensee may certify that it has or will meet the
construction requirements set forth in Sec. 90.665 for the entire
market. In that case, the partitionee must only meet the requirements
for renewal of its license for the partitioned license area.
(iii) Applications requesting partial assignments of license for
partitioning must include a certification by each geographic area 800
MHz SMR licenses in the lower 230 channels will be awarded to small
entities, as that term is defined by the SBA.
(iv) Partitionees must submit supporting documents showing
compliance with the respective construction requirements within the
appropriate time frames set forth in Sec. 90.665.
(v) Failure by any partitionee to meet its respective performance
requirements will result in the automatic cancellation of the
partitioned or disaggregated license without further Commission action.
(2) Requirements for Disaggregation. Parties seeking authority to
disaggregate must submit with their partial assignment application a
certification signed by both parties stating which of the parties will
be responsible for meeting the construction requirements for the market
as set forth in Sec. 90.665. Parties may agree to share responsibility
for meeting the construction requirements. Parties that accept
responsibility for meeting the construction requirements and later fail
to do so will be subject to license forfeiture without further
Commission action.
15. Section 90.901 is revised to read as follows:
Sec. 90.901 800 MHz SMR spectrum subject to competitive bidding.
Mutually exclusive initial applications for Spectrum Blocks A
through V in the 800 MHz band are subject to competitive bidding
procedures. The general competitive bidding procedures provided in 47
CFR part 1, subpart Q will apply unless otherwise indicated in this
subpart.
16. Section 90.902 is revised to read as follows:
Sec. 90.902 Competitive bidding design for 800 MHz SMR licensing.
The Commission will employ a simultaneous multiple round auction
design when selecting from among mutually exclusive initial
applications for EA licenses for Spectrum Blocks A through V in the 800
MHz band, unless otherwise specified by the Wireless Telecommunications
Bureau before the auction.
17. Section 90.903 is amended by revising paragraphs (a) and (b)
and adding paragraph (f) to read as follows:
Sec. 90.903 Competitive bidding mechanisms.
(a) Sequencing. The Wireless Telecommunications Bureau will
establish and may vary the sequence in which 800 MHz SMR licenses for
Spectrum Blocks A through V will be auctioned.
(b) Grouping. (1) Spectrum Blocks A through C. All EA licenses for
Spectrum Blocks A through C will be auctioned simultaneously, unless
the Wireless Telecommunications Bureau announces, by Public Notice
prior to the auction, an alternative competitive bidding design.
(2) Spectrum Blocks D through V. All EA licenses for Spectrum
Blocks D through V will be auctioned by the following Regions:
(i) Region 1 (Northeast): The Northeast Region consists of the
following MTAs: Boston-Providence, Buffalo-Rochester, New York,
Philadelphia, and Pittsburgh.
(ii) Region 2 (South): The South Region consists of the following
MTAs: Atlanta, Charlotte-Greensboro-Greenville-Raleigh, Jacksonville,
Knoxville, Louisville-Lexington-Evansville, Nashville, Miami-Fort
Lauderdale, Richmond-Norfolk, Tampa-St. Petersburg-Orlando, and
Washington-Baltimore; and, Puerto Rico and United States Virgin
Islands.
(iii) Region 3 (Midwest): The Midwest Region consists of the
following MTAs: Chicago, Cincinnati-Dayton, Cleveland, Columbus, Des
Moines-Quad Cities, Detroit, Indianapolis, Milwaukee, Minneapolis-St.
Paul, and Omaha.
(iv) Region 4 (Central): The Central Region consists of the
following MTAs: Birmingham, Dallas-Fort Worth, Denver, El Paso-
Albuquerque, Houston, Kansas City, Little Rock, Memphis-Jackson, New
Orleans-Baton Rouge, Oklahoma City, San Antonio, St. Louis, Tulsa, and
Wichita.
(v) Region 5 (West): The West Region consists of the following
MTAs: Honolulu, Los Angeles-San Diego, Phoenix, Portland, Salt Lake
City, San Francisco-Oakland-San Jose, Seattle (including Alaska), and
Spokane-Billings; and, American Samoa, Guam, and the Northern Mariana
Islands.
* * * * *
(f) Duration of Bidding Rounds. The Wireless Telecommunications
Bureau retains the discretion to vary the duration of bidding rounds or
the intervals at which bids are accepted.
18. Section 90.904 is revised to read as follows:
[[Page 41221]]
Sec. 90.904 Aggregation of EA licenses.
The Commission will license each Spectrum Block A through V in the
800 MHz band separately. Applicants may aggregate across spectrum
blocks within the limitations specified in Sec. 20.6 of this chapter.
19. Section 90.906 is revised to read as follows:
Sec. 90.906 Bidding application (FCC Form 175 and 175-S Short-form).
All applicants to participate in competitive bidding for 800 MHz
SMR licenses in Spectrum Blocks A through V must submit applications on
FCC Forms 175 and 175-S pursuant to the provisions of Sec. 1.2105 of
this chapter. The Wireless Telecommunications Bureau will issue a
Public Notice announcing the availability of these 800 MHz SMR licenses
and, in the event that mutually exclusive applications are filed, the
date of the auction for those licenses. This Public Notice also will
specify the date on or before which applicants intending to participate
in a 800 MHz SMR auction must file their applications in order to be
eligible for that auction, and it will contain information necessary
for completion of the application as well as other important
information such as the materials which must accompany the Forms, any
filing fee that must accompany the application or any upfront payment
that will need to be submitted, and the location where the application
must be filed. In addition to identifying its status as a small
business or rural telephone company, each applicant must indicate
whether it is a minority-owned entity and/or a women-owned entity, as
defined in Sec. 90.912(e).
20. Section 90.907 is revised to read as follows:
Sec. 90.907 Submission of upfront payments and down payments.
(a) Upfront Payments. Bidders in a 800 MHz SMR auction for Spectrum
Blocks A through V will be required to submit an upfront payment prior
to the start of the auction. The amount of the upfront payment for each
license auctioned and the procedures for submitting it will be set
forth by the Wireless Telecommunications Bureau in a Public Notice in
accordance with Sec. 1.2106 of this chapter.
(b) Down Payments. Winning bidders in a 800 MHz SMR auction for
Spectrum Blocks A through V must submit a down payment to the
Commission in an amount sufficient to bring their total deposits up to
20 percent of their winning bids within ten (10) business days after
the auction closes. Winning bidders will be required to make full
payment of the balance of their winning bids ten (10) business days
after Public Notice announcing that the Commission is prepared to award
the license.
21. Section 90.909 is amended by revising the section heading to
read as follows:
Sec. 90.909 License grant, denial, default, and disqualification.
* * * * *
22. Section 90.910 is revised to read as follows:
Sec. 90.910 Bidding credits.
(a) A winning bidder that qualifies as a very small business or a
consortium of very small businesses, as defined in Secs. 90.912(b)(2)
and (b)(5), may use a bidding credit of 35 percent to lower the cost of
its winning bid on Spectrum Blocks A through V. A winning bidder that
qualifies as a small business or a consortium of small businesses, as
defined in Secs. 90.912(b)(1) or (b)(4), may use a bidding credit of 25
percent to lower the cost of its winning bid on Spectrum Blocks A
through V.
(b) Unjust Enrichment. (1) If a small business or very small
business (as defined in Secs. 90.912(b)(1) and 90.912(b)(2),
respectively) that utilizes a bidding credit under this section seeks
to assign or transfer control of an authorization to an entity that is
not a small business or very small business, or seeks to make any other
change in ownership that would result in the licensee losing
eligibility as a small business or very small business, the small
business or very small business must seek Commission approval and
reimburse the government for the difference between the amount of the
bidding credit obtained by the licensee and the bidding credit for
which the assignee, transferee, or licensee is eligible under this
section as a condition of the approval of such assignment, transfer, or
other ownership change.
(2) If a very small business (as defined in Sec. 90.912(b)(2)) that
utilizes a bidding credit under this section seeks to assign or
transfer control of an authorization to a small business meeting the
eligibility standards for a lower bidding credit, or seeks to make any
other change in ownership that would result in the licensee qualifying
for a lower bidding credit under this section, the licensee must seek
Commission approval and reimburse the government for the difference
between the amount of the bidding credit obtained by the licensee and
the bidding credit for which the assignee, transferee, or licensee is
eligible under this section as a condition of the approval of such
assignment, transfer, or other ownership change.
(3) The amount of payments made pursuant to paragraphs (b)(1) and
(b)(2) of this section will be reduced over time as follows: a transfer
in the first two years of the license term will result in a forfeiture
of 100 percent of the value of the bidding credit (or the difference
between the bidding credit obtained by the original licensee and the
bidding credit for which the post-transfer licensee is eligible); in
year three of the license term the payment will be 75 percent; in year
four the payment will be 50 percent; and in year five the payment will
be 25 percent, after which there will be no assessment.
23. Section 90.911 is revised to read as follows:
Sec. 90.911 Partitioned licenses and disaggregated spectrum
(a) Eligibility. Parties seeking approval for partitioning and
disaggregation shall request an authorization for partial assignment of
a license pursuant to Sec. 90.153(c).
(b) Technical Standards. (1) Partitioning. In the case of
partitioning, requests for authorization for partial assignment of a
license must include, as attachments, a description of the partitioned
service area and a calculation of the population of the partitioned
service area and the licensed geographic service area. The partitioned
service area shall be defined by coordinate points at every 3 degrees
along the partitioned service area unless an FCC recognized service
area is utilized (i.e., Major Trading Area, Basic Trading Area,
Metropolitan Service Area, Rural Service Area or Economic Area) or
county lines are followed. The geographic coordinates must be specified
in degrees, minutes, and seconds to the nearest second of latitude and
longitude and must be based upon the 1927 North American Datum (NAD27).
Applicants may supply geographical coordinates based on 1983 North
American Datum (NAD83) in addition to those required (NAD27). In the
case where an FCC recognized service area or county lines are utilized,
applicants need only list the specific area(s) (through use of FCC
designations or county names) that constitute the partitioned area.
(2) Disaggregation. Spectrum may be disaggregated in any amount.
(3) Combined Partitioning and Disaggregation. The Commission will
consider requests for partial assignment of licenses that propose
combinations of partitioning and disaggregation.
(c) Unjust Enrichment. (1) Bidding Credits. Licensees that
qualified under Sec. 90.910 to use a bidding credit at auction that
partition their licenses or
[[Page 41222]]
disaggregate their spectrum to entities not meeting the eligibility
standards for such a bidding credit, will be subject to the provisions
concerning unjust enrichment as set forth in Sec. 90.910(b).
(2) Apportioning Unjust Enrichment Payments. Unjust enrichment
payments for partitioned license areas shall be calculated based upon
the ratio of the population of the partitioned license area to the
overall population of the license area and by utilizing the most recent
census data. Unjust enrichment payments for disaggregated spectrum
shall be calculated based upon the ratio of the amount of spectrum
disaggregated to the amount of spectrum held by the licensee.
(d) 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 Secs. 90.629(a), 90.665(a)
or 90.685(a).
(e) Construction and Channel Usage Requirements--Incumbent
Licensees. Parties seeking to acquire a partitioned license or
disaggregated spectrum from an incumbent licensee will be required to
construct and commence ``service to subscribers'' all facilities
acquired through such transactions within the original construction
deadline for each facility as set forth in Secs. 90.629 and 90.683.
Failure to meet the individual construction deadline will result in the
automatic termination of the facility's authorization.
(f) Construction and Channel Usage Requirements--EA Licensees.
(1) Licensees in Channel Blocks A, B and C. (i) Requirements for
Partitioning. (A) The partitionee may certify that it will satisfy the
applicable construction requirements set forth in Sec. 90.685(c) for
the partitioned license area; or
(B) The original licensee may certify that it has or will meet the
three and five year construction requirements set forth in
Sec. 90.685(c) for the entire market.
(C) Applications requesting partial assignments of license for
partitioning must include a certification by each party as to which of
the above options they select.
(D) Partitionees must submit supporting documents showing
compliance with the respective construction requirements within the
appropriate time frames set forth in Sec. 90.685(c).
(E) Failure by any partitionee to meet its respective construction
requirements will result in the automatic cancellation of the
partitioned license without further Commission action.
(ii) Requirements for Disaggregation. Parties seeking authority to
disaggregate spectrum from an EA licensee in Spectrum Blocks A, B and C
must meet one of the following channel use requirements:
(A) The partitionee may certify that it will satisfy the channel
usage requirements set forth in Sec. 90.685(d) for the disaggregated
spectrum; or
(B) The original licensee may certify that it has or will meet the
channel usage requirements as set forth in Sec. 90.685(d) for the
entire spectrum block. In that case, the disaggregatee must only
satisfy the requirements for ``substantial service,'' as set forth in
Sec. 90.685(c), for the disaggregated spectrum within five years of the
license grant.
(C) Applications requesting partial assignments of license for
disaggregation must include a certification by each party as to which
of the above options they select.
(D) Disaggregatees must submit supporting documents showing
compliance with the respective channel usage requirements within the
appropriate time frames set forth in Sec. 90.685(c).
(E) Failure by any disaggregatee to meet its respective channel
usage requirements will result in the automatic cancellation of the
disaggregated license without further Commission action.
(2) Licensees in Channel Blocks D through V. (i) Requirements for
Partitioning. Parties seeking authority to partition an EA license must
meet one of the following construction requirements:
(A) The partitionee may certify that it will satisfy the applicable
construction requirements set forth in Sec. 90.685(c) for the
partitioned license area; or
(B) The original licensee may certify that it has or will meet the
construction requirements set forth in Sec. 90.685(c) for the entire
market.
(C) Applications requesting partial assignments of license for
partitioning must include a certification by each party as to which of
the above options they select.
(D) Partitionees must submit supporting documents showing
compliance with the respective construction requirements within the
appropriate time frames set forth in Sec. 90.685(c).
(E) Failure by any partitionee to meet its respective construction
requirements will result in the automatic cancellation of the
partitioned license without further Commission action.
(ii) Requirements for Disaggregation. Parties seeking authority to
disaggregate must submit with their partial assignment application a
certification signed by both parties stating which of the parties will
be responsible for meeting the construction requirements for the market
as set forth in Sec. 90.685. Parties may agree to share responsibility
for meeting the construction requirements. Parties that accept
responsibility for meeting the construction requirements and later fail
to do so will be subject to license forfeiture without further
Commission action.
(g) Certification Concerning Relocation of Incumbent Licensees.
Parties seeking approval of a partitioning or disaggregation agreement
pursuant to this section must include a certification with their
partial assignment of license application as to which party will be
responsible for meeting the incumbent relocation requirements set forth
at Sec. 90.699.
24. Section 90.912 is revised to read as follows:
Sec. 90.912 Definitions.
(a) Scope. The definitions in this section apply to Secs. 90.910
and 90.911, unless otherwise specified in those sections.
(b) Small Business; Very Small Business; Consortium of Small
Businesses; Consortium of Very Small Businesses. (1) A small business
is an entity that together with its affiliates and controlling
principals, has average gross revenues that do not exceed $15 million
for the three preceding years; or
(2) A very small business is an entity that together with its
affiliates and controlling principals, has average gross revenues that
do not exceed $3 million for the three preceding years.
(3) For purposes of determining whether an entity meets 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 principals shall be considered
on a cumulative basis and aggregated.
(4) A consortium of small business is a conglomerate organization
formed as a joint venture between or among mutually-independent
business firms, each of which individually satisfies the definition of
a small business in paragraphs (b)(1) of this section. In a consortium
of small businesses, each individual member must establish its
eligibility as a small business, as defined in this section.
(5) A consortium of very small business is a conglomerate
organization formed as a joint venture between or among mutually-
independent business firms, each of which individually satisfies the
definition of a very small business in paragraph (b)(2) of this
[[Page 41223]]
section. In a consortium of small businesses, each individual member
must establish its eligibility as a very small business, as defined in
this section.
(c) Gross Revenues. Gross revenues shall mean all income received
by an entity, whether earned or passive, before any deductions are made
for costs of doing business (e.g., cost of goods sold). Gross revenues
are evidenced by audited financial statements for the relevant number
of calendar or fiscal years preceding the filing of the applicant's
short-form application (FCC Form 175). If an entity was not in
existence for all or part of the relevant period, gross revenues shall
be evidenced by the audited financial statements of the entity's
predecessor-in-interest or, if there is no identifiable predecessor-in-
interest, unaudited financial statements certified by the applicant as
accurate. When an applicant does not otherwise use audited financial
statements, its gross revenues may be certified by its chief financial
officer or its equivalent.
(d) Affiliate. (1) Basis for Affiliation. An individual or entity
is an affiliate of an applicant if such individual or entity:
(i) Directly or indirectly controls or has the power to control the
applicant, or
(ii) Is directly or indirectly controlled by the applicant, or
(iii) Is directly or indirectly controlled by a third party or
parties who also control or have the power to control the applicant, or
(iv) Has an ``identity of interest'' with the applicant.
(2) Nature of control in determining affiliation. (i) Every
business concern is considered to have one or more parties who directly
or indirectly control or have the power to control it. Control may be
affirmative or negative and it is immaterial whether it is exercised so
long as the power to control exists.
Example for paragraph (d)(2)(i) of this section. An applicant
owning 50 percent of the voting stock of another concern would have
negative power to control such concern since such party can block
any action of the other stockholders. Also, the bylaws of a
corporation may permit a stockholder with less than 50 percent of
the voting stock to block any actions taken by the other
stockholders in the other entity. Affiliation exists when the
applicant has the power to control a concern while at the same time
another person, or persons, are in control of the concern at the
will of the party or parties with the power of control.
(ii) Control can arise through stock ownership; occupancy of
director, officer, or key employee positions; contractual or other
business relations; or combinations of these and other factors. A key
employee is an employee who, because of his/her position in the
concern, has a critical influence in or substantive control over the
operations or management of the concern.
(iii) Control can arise through management positions if the voting
stock is so widely distributed that no effective control can be
established.
Example for paragraph (d)(2)(iii) of this section. In a
corporation where the officers and directors own various size blocks
of stock totaling 40 percent of the corporation's voting stock, but
no officer or director has a block sufficient to give him/her
control or the power to control and the remaining 60 percent is
widely distributed with no individual stockholder having a stock
interest greater than 10 percent, management has the power to
control. If persons with such management control of the other entity
are controlling principals of the applicant, the other entity will
be deemed an affiliate of the applicant.
(3) Identity of interest between and among persons. Affiliation can
arise between or among two or more persons with an identity of
interest, such as members of the same family or persons with common
investments. In determining if the applicant controls or is controlled
by a concern, persons with an identity of interest will be treated as
though they were one person.
(i) Spousal Affiliation. Both spouses are deemed to own or control
or have the power to control interests owned or controlled by either of
them, unless they are subject to a legal separation recognized by a
court of competent jurisdiction in the United States.
(ii) Kinship Affiliation. Immediate family members will be presumed
to own or control or have the power to control interests owned or
controlled by other immediate family members. In this context
``immediate family member'' means father, mother, husband, wife, son,
daughter, brother, sister, father- or mother-in-law, son- or daughter-
in-law, brother- or sister-in-law, step-father or -mother, step-brother
or -sister, step-son or -daughter, half-brother or -sister. This
presumption may be rebutted by showing that:
(A) The family members are estranged,
(B) The family ties are remote, or
(C) The family members are not closely involved with each other in
business matters.
Example for paragraph (d)(3)(ii) of this section. A owns a
controlling interest in Corporation X. A's sister-in-law, B, has a
controlling interest in an SMR application. Because A and B have a
presumptive kinship affiliation, A's interest in Corporation X is
attributable to B, and thus to the applicant, unless B rebuts the
presumption with the necessary showing.
(4) Affiliation through stock ownership. (i) An applicant is
presumed to control or have the power to control a concern if he/she
owns or controls or has the power to control 50 percent or more of its
voting stock.
(ii) An applicant is presumed to control or have the power to
control a concern even though he/she owns, controls, or has the power
to control less than 50 percent of the concern's voting stock, if the
block of stock he/she owns, controls, or has the power to control is
large as compared with any other outstanding block of stock.
(iii) If two or more persons each owns, controls or has the power
to control less than 50 percent of the voting stock of a concern, such
minority holdings are equal or approximately equal in size, and the
aggregate of these minority holdings is large as compared with any
other stock holding, the presumption arises that each one of these
persons individually controls or has the power to control the concern;
however, such presumption may be rebutted by a showing that such
control or power to control, in fact, does not exist.
(5) Affiliation arising under stock options, convertible
debentures, and agreements to merge. Stock options, convertible
debentures, and agreements to merge (including agreements in principle)
are generally considered to have a present effect on the power to
control the concern. Therefore, in making a size determination, such
options, debentures, and agreements will generally be treated as though
the rights held thereunder had been exercised. However, neither an
affiliate nor an applicant can use such options and debentures to
appear to terminate its control over another concern before it actually
does so.
Example 1 for paragraph (d)(5) of this section. If company B
holds an option to purchase a controlling interest in company A, who
holds a controlling interest in an SMR application, the situation is
treated as though company B had exercised its rights and had become
owner of a controlling interest in company A. The gross revenues of
company B must be taken into account in determining the size of the
applicant.
Example 2 for paragraph (d)(5) of this section. If a large
company, BigCo, holds 70% (70 of 100 outstanding shares) of the
voting stock of company A, who holds a controlling interest in an
SMR application, and gives a third party, SmallCo, an option to
purchase 50 of the 70 shares owned by BigCo, BigCo will be deemed to
be an affiliate of company A, and thus the applicant, until SmallCo
actually exercises its options to purchase such shares. In order to
prevent BigCo from circumventing the intent of the
[[Page 41224]]
rule, which requires such options to be considered on a fully
diluted basis, the option is not considered to have present effect
in this case.
Example 3 for paragraph (d)(5) of this section. If company A has
entered into an agreement to merge with company B in the future, the
situation is treated as though the merger has taken place.
(6) Affiliation under voting trusts. (i) Stock interests held in
trust shall be deemed controlled by 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.
(ii) If a trustee has a familial, personal or extra-trust business
relationship to the grantor or the beneficiary, the stock interests
held in trust will be deemed controlled by the grantor or beneficiary,
as appropriate.
(iii) If the primary purpose of a voting trust, or similar
agreement, is to separate voting power from beneficial ownership of
voting stock for the purpose of shifting control of or the power to
control a concern in order that such concern or another concern may
meet the Commission's size standards, such voting trust shall not be
considered valid for this purpose regardless of whether it is or is not
recognized within the appropriate jurisdiction.
(7) Affiliation through common management. Affiliation generally
arises where officers, directors, or key employees serve as the
majority or otherwise as the controlling element of the board of
directors and/or the management of another entity.
(8) Affiliation through common facilities. Affiliation generally
arises where one concern shares office space and/or employees and/or
other facilities with another concern, particularly where such concerns
are in the same or related industry or field of operations, or where
such concerns were formerly affiliated, and through these sharing
arrangements one concern has control, or potential control, of the
other concern.
(9) Affiliation through contractual relationships. Affiliation
generally arises where one concern is dependent upon another concern
for contracts and business to such a degree that one concern has
control, or potential control, of the other concern.
(10) Affiliation under joint venture arrangements.
(i) A joint venture for size determination purposes is an
association of concerns and/or individuals, with interests in any
degree or proportion, formed by contract, express or implied, to engage
in and carry out a single, specific business venture for joint profit
for which purpose they combine their efforts, property, money, skill
and knowledge, but not on a continuing or permanent basis for
conducting business generally. The determination whether an entity is a
joint venture is based upon the facts of the business operation,
regardless of how the business operation may be designated by the
parties involved. An agreement to share profits/losses proportionate to
each party's contribution to the business operation is a significant
factor in determining whether the business operation is a joint
venture.
(ii) The parties to a joint venture are considered to be affiliated
with each other.
25. Section 90.913 is revised to read as follows:
Sec. 90.913 Eligibility for small business status.
(a) Short-Form Applications: Certifications and Disclosure. Each
applicant for an EA license which qualifies as a small business or
consortium of small businesses under Secs. 90.912(b) or (c) shall
append the following information as an exhibit to its short-form
application (FCC Form 175):
(1) The identity of the applicant's affiliates and controlling
principals, and, if a consortium of small businesses (or a consortium
of very small businesses), the members of the joint venture; and
(2) The applicant's gross revenues, computed in accordance with
Sec. 90.912.
(b) Long-Form Applications: Certifications and Disclosure. In
addition to the requirements in subpart V of this part, each applicant
submitting a long-form application for license(s) for Spectrum Blocks A
through V and qualifying as a small business shall, in an exhibit to
its long-form application:
(1) Disclose separately and in the aggregate the gross revenues,
computed in accordance with Sec. 90.912, for each of the following: the
applicant, the applicant's affiliates, the applicant's controlling
principals, and, if a consortium of small businesses (or consortium of
very small businesses), the members of the joint venture;
(2) List and summarize all agreements or other instruments (with
appropriate references to specific provisions in the text of such
agreements and instruments) that support the applicant's eligibility as
a small business, very small business, consortium of small businesses
or consortium of very small businesses under Secs. 90.910 and 90.912,
including the establishment of de facto and de jure control; such
agreements and instruments include articles of incorporation and
bylaws, shareholder agreements, voting or other trust agreements,
franchise agreements, and any other relevant agreements (including
letters of intent), oral or written; and
(3) List and summarize any investor protection agreements,
including rights of first refusal, supermajority clauses, options, veto
rights, and rights to hire and fire employees and to appoint members to
boards of directors or management committees.
(c) Records Maintenance. All winning bidders qualifying as small
businesses or very small businesses, shall maintain at their principal
place of business an updated file of ownership, revenue and asset
information, including any document necessary to establish eligibility
as a small business, very small business and/or consortium of small
businesses (or consortium of very small businesses) under Sec. 90.912.
Licensees (and their successors in interest) shall maintain such files
for the term of the license.
(d) Audits. (1) Applicants and licensees claiming eligibility as a
small business, very small business or consortium of small businesses
(or consortium of very small businesses under Secs. 90.910 and 90.912
shall be subject to audits by the Commission, using in-house and
contract resources. Selection for audit may be random, on information,
or on the basis of other factors.
(2) Consent to such audits is part of the certification included in
the short-form application (FCC Form 175). Such consent shall include
consent to the audit of the applicant's or licensee's books, documents
and other material (including accounting procedures and practices)
regardless of form or type, sufficient to confirm that such applicant's
or licensee's representations are, and remain, accurate. Such consent
shall include inspection at all reasonable times of the facilities, or
parts thereof, engaged in providing and transacting business, or
keeping records regarding licensed 800 MHz SMR service and shall also
include consent to the interview of principals, employees, customers
and suppliers of the applicant or licensee.
(3) Definitions. The terms affiliate, small business, very small
business consortium of small businesses, consortium of very small
businesses,
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and gross revenues used in this section are defined in Sec. 90.912.
[FR Doc. 97-19913 Filed 7-30-97; 8:45 am]
BILLING CODE 6712-01-P
