[Federal Register Volume 62, Number 48 (Wednesday, March 12, 1997)]
[Rules and Regulations]
[Pages 11616-11637]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 97-6092]
[[Page 11615]]
_______________________________________________________________________
Part V
Federal Communications Commission
_______________________________________________________________________
47 CFR Parts 22 and 90
Facilitate Future Development of Paging Systems and Implementation of
Section 309(j) of the Communications Act; Competitive Bidding; Final
and Proposed Rules
Federal Register / Vol. 62, No. 48 / Wednesday, March 12, 1997 /
Rules and Regulations
[[Page 11616]]
FEDERAL COMMUNICATIONS COMMISSION
47 CFR Parts 22 and 90
[WT Docket No. 96-18; PP Docket No. 93-253; FCC 97-59]
Facilitate Future Development of Paging Systems and
Implementation of Section 309(j) of the Communications Act; Competitive
Bidding
AGENCY: Federal Communications Commission.
ACTION: Final rule.
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SUMMARY: In this Second Report and Order the Commission adopts rules
governing geographic area licensing of Common Carrier Paging (CCP) and
exclusive 929 MHz Private Carrier Paging (PCP), and competitive bidding
procedures for auctioning mutually exclusive applications for these
licenses. This action is necessary to promote efficient licensing and
competition in paging services. The Commission's objectives in this
proceeding are to ensure that the paging service rules are consistent
with the rules for competing services, so that competitive success is
dictated by the marketplace, rather than by regulatory distinctions,
and to ensure that the licensing process promotes the goals of
competition and efficient use of spectrum.
EFFECTIVE DATE: May 12, 1997.
ADDRESSES: Federal Communications Commission, 1919 M Street, NW.,
Washington, DC 20554
FOR FURTHER INFORMATION CONTACT: Mika Savir, Commercial Wireless
Division, Wireless Telecommunications Bureau, at (202) 418-0620, or
Frank Stilwell, Auctions Division, Wireless Telecommunications Bureau,
at (202) 418-0660.
SUPPLEMENTARY INFORMATION: This Second Report and Order in WT Docket
96-18 and PP Docket No. 93-252, adopted on February 19, 1997, and
released on February 24, 1997, is available for inspection and copying
during normal business hours in the FCC Reference Center, Room 239,
1919 M Street NW., Washington, DC 20554. The complete text may also be
purchased from the Commission's copy contractor, International
Transcription Service, Inc., 2100 M Street, NW., Suite 140, Washington,
DC 20037 (202) 857-3800.
Paperwork Reduction Act: The collection of information requirements
have been approved by the Office of Management and Budget and assigned
OMB control number 3060-0697. The FCC Form 175 is assigned OMB control
number 3060-0600. The FCC Form 600 is assigned OMB control number 3060-
0623.
Summary of Action
I. Background
1. In the NPRM, Revision of part 22 and part 90 of the Commission's
rules to Facilitate Future Development of Paging Systems, WT Docket No.
96-18, Notice of Proposed Rulemaking, 61 FR 6199 (February 16, 1996)
(NPRM), the Commission proposed a transition to geographic area
licensing for CCP and PCP channels pursuant to the statutory objective
of regulatory symmetry for all Commercial Mobile Radio Services (CMRS)
set forth in the Omnibus Budget Reconciliation Act of 1993, Pub. L.
103-66, Title VI section 6002(b)(2) (A), (B), 107 Stat. 312 (largely
codified at 47 U.S.C. 332 et seq.) (1993 Budget Act). The 1993 Budget
Act mandated that substantially similar mobile services receive
comparable regulatory treatment. In the NPRM, the Commission also
proposed competitive bidding procedures for resolving mutually
exclusive applications for these licenses pursuant to its statutory
authority under the 1993 Budget Act, section 6002 (codified at 47
U.S.C. 309(j)).
2. In the NPRM, the Commission proposed a transition from site-by-
site licensing to geographic area licensing for all exclusive, non-
nationwide paging services. The Commission also proposed to adopt
competitive bidding rules for the geographic area licenses. Due to the
fundamental changes proposed in the NPRM, the Commission suspended
acceptance of new applications for paging licenses as of February 8,
1996. The Commission observed that continuing to accept new
applications after releasing the NPRM with the proposed rule changes
would impair the objectives of the rulemaking proceeding. The
Commission partially lifted the paging freeze for incumbent licensees
by allowing incumbents to file applications for additional sites within
65 kilometers (40 miles) of operating sites in the First Report and
Order, Revision of part 22 and part 90 of the Commission's rules to
Facilitate Future Development of Paging Systems, WT Docket No. 96-18,
First Report and Order, 61 FR 21380 (May 10, 1996); reconsideration in
Order on Reconsideration of First Report and Order, 61 FR 34375 (July
2, 1996). Additionally, the First Report and Order exempted Basic
Exchange Telecommunications Radio Service (BETRS), Rural Radiotelephone
Service, and Special Emergency Radio Service (SERS) from the interim
freeze.
3. In this Second Report and Order, the Commission adopts final
rules governing geographic area licensing for channels in the 35-36
MHz, 43-44 MHz, 152-159 MHz, 454-460 MHz, 929-930 MHz, and 931-932 MHz
bands allocated for paging; competitive bidding rules for granting
geographic area non-nationwide licenses; and a standard methodology for
providing protection to incumbent licensees from co-channel
interference for the 929-930 MHz and 931-932 MHz paging bands. All
pending mutually exclusive paging applications will be dismissed,
including those filed under the interim rules. As of the adoption date
of this Second Report and Order, February 19, 1997, no further
applications for site-by-site licenses, other than for shared channels
will be accepted (with the exception of applications filed pursuant to
47 CFR 22.369, 90.177, 1.1301 et seq., and applications filed for
coordination with Mexico and Canada).
II. Second Report and Order
A. Geographic Area Licensing for Non-Nationwide Paging Channels
1. Geographic Area Licensing for Exclusive 929 MHz and 931 MHz Bands
4. The Commission observes that geographic area licensing provides
flexibility for licensees and ease of administration, facilitates
further build-out of wide-area systems, and enables paging operators to
act quickly to meet the needs of their customers. The Commission finds,
therefore, that converting the 931 MHz channels and the exclusive 929
MHz channels to geographic area licensing will further the goal of
giving carriers offering substantially similar services more
flexibility to compete, and will enhance regulatory symmetry between
paging and narrowband personal communications services (PCS). The
Commission states that exclusive 929 MHz and 931 MHz licensees will be
extended the same flexibility as narrowband PCS licensees in terms of
the location, design, construction, and modification of their
facilities throughout their geographic areas.
5. The Commission is implementing geographic area licensing in lieu
of the current site-by-site licensing, with Major Trading Areas (MTAs)
as the geographic area for the 931 MHz and exclusive 929 MHz channels.
The Commission is licensing these channels using 51 MTA geographic
areas. In addition to the 47 Rand McNally MTAs, the Commission is
adding three MTAs for the U.S. territories of (1) Guam and the Northern
[[Page 11617]]
Mariana Islands, (2) Puerto Rico and the U.S. Virgin Islands, and (3)
American Samoa. The Commission is also licensing Alaska as a single
area separate from the Seattle MTA.
6. Geographic area licensees will have the flexibility to construct
transmitters at any place within their license area, subject to the co-
channel interference rules and will not be required to file
applications for additional sites or modifications with the Commission.
Geographic area licensees may add or modify sites consistent with this
Second Report and Order. Applications must be filed with the Commission
for coordination with Mexico or Canada and where required by
Secs. 22.369, 90.177, or 1.1301 et seq. Geographic area licensees will
be able to act quickly to add sites or make modifications of existing
sites to meet the needs of their customers. Due to the prevalence of
wide-area paging systems on these channels and the flexibility
geographic area licensing will afford paging licensees, the Commission
believes that geographic area licensing for exclusive 929 MHz and 931
MHz channels, with MTAs as the geographic area, is consistent with the
public interest, convenience and necessity, and the purposes of the
Communications Act of 1934, as amended (Communications Act), and
fulfills the objectives of section 309(j)(4)(c).
7. Spectrum recovered by the Commission within a geographic area
will revert automatically to the geographic area licensee. The
Commission will consider transfers and assignments between a geographic
area licensee and an incumbent to be presumptively in the public
interest. The Commission is also eliminating finders' preferences
immediately for paging services, and will no longer accept finders'
preferences requests following adoption of the Second Report and Order.
8. Mutually exclusive applications for geographic area licenses
will be processed pursuant to the competitive bidding rules adopted in
this Second Report and Order. All incumbent licensees will continue to
operate under the existing authorizations with full protection from co-
channel interference, and will not be required to file applications for
additional internal sites.
2. Geographic Area Licensing for Common Carrier Paging Services in the
35-36 MHz, 43-44 MHz, 152-159 MHz, and 454-460 MHz Bands
a. Common Carrier Paging Services
9. The Commission believes that the advantages of geographic
licensing--flexibility, enhanced regulatory symmetry with other CMRS,
and eliminating the inefficiencies in the licensing process--are
applicable to these channels, particularly for regional and wide-area
paging services. One of the Commission's goals in this proceeding is to
revise the paging rules so that substantially similar mobile services
receive comparable regulatory treatment, to the extent feasible, in a
manner consistent with the public interest, convenience, necessity, and
the purposes of the Communications Act. The Commission notes that
paging providers on these CCP channels generally have smaller paging
systems than the 931 MHz band paging services, and therefore smaller
market areas would be more appropriate than MTAs for these bands. The
Commission finds that Economic Areas (EAs) would be an appropriate size
for geographic licensing on these bands. The Bureau of Economic
Analysis of the Department of Commerce has divided the United States
into 172 EAs. See Final Redefinition of the BEA Economic Areas,
Department of Commerce, Docket No. 950-3020-64-5064-01, 60 FR 13114
(March 10, 1995). The Commission adopts EAs as the geographic area for
paging licenses. Geographic area licensees will have the flexibility to
construct transmitters at any place within their EA, subject to the co-
channel interference rules; however, geographic area licensees must
file applications with the Commission if such filing is necessary for
coordination with Canada or Mexico, or is required by Sec. 22.369,
90.177, or 1.1301 et seq. The EA geographic area licenses will be
assigned pursuant to the competitive bidding rules.
b. Other Services in the 152-159 MHz and 454-460 MHz Bands
10. The Commission concludes that Rural Radiotelephone Service
licensees, including BETRS licensees, can participate in the geographic
area licensing framework adopted for paging. Additionally, these
licensees may obtain site licenses and operate facilities on a
secondary basis. If any geographic area licensee subsequently notifies
the Rural Radiotelephone or BETRS licensee that a secondary site must
be shut down because it may cause interference to the paging licensee's
existing or planned facilities, the Rural Radiotelephone or BETRS
licensee must discontinue use of the particular channel at that site no
later than six months after such notice. Additionally, mobile two-way
telephone service on the paging channels will also be subject to
geographic area licensing and competitive bidding.
3. Shared Channels
11. The shared channels consist of five 929 MHz channels and
thirteen Business Radio Service channels. The Commission concludes that
the existing shared paging channels should continue to be licensed on a
shared basis. The Commission is concerned about the consumer fraud and
license application speculation issues and is seeking comment in a
Further Notice of Proposed Rulemaking on changes in the license
application and frequency coordination procedures. The Commission is
eliminating the interim 40-mile rule for additional sites. Pending
resolution of the fraud and speculation issues, the Commission is
limiting applications for shared channels to (1) licensees expanding
their commercial mobile radio systems; (2) applicants, including new
applicants, for private, internal-use systems; and (3) Special
Emergency Radio Services (SERS) providers on the shared channels.
4. Exempting Certain Incumbents From Competitive Bidding
12. The Commission believes that the market, not regulation, should
determine participation in competitive bidding for geographic area
licenses. Therefore, the Commission is adopting open eligibility for
paging licenses. The Commission believes that this will be pro-
competitive and potentially will result in further wide-area coverage
of paging services.
B. Geographic Area Licensing for Nationwide Channels
13. Three 931 MHz channels, 931.8875 MHz, 931.9125 MHz, and
931.9375 MHz, were allocated for nationwide paging, and have been
assigned to licensees on a nationwide basis. The Commission is granting
nationwide geographic area licenses, without competitive bidding, to
these three licensees. Additionally, 23 licensees have met requirements
for nationwide exclusivity on 929 MHz channels under Sec. 90.495 of the
Commission's rules. The Commission is granting nationwide geographic
area licenses, without competitive bidding, to those 929 MHz licensees
who had constructed sufficient transmitters to obtain nationwide
exclusivity under the
[[Page 11618]]
prior rules, and to those licensees who had sufficient authorizations
as of February 8, 1996 and have since constructed sufficient
transmitters to earn nationwide exclusivity. The Commission notes that
these nationwide licensees have built out their paging systems to serve
consumers, and the public interest would not be served in eliminating
the nationwide authorizations that were previously granted by the
Commission. Therefore, the Commission concludes that licensees on these
channels will not be subject to competitive bidding for nationwide
geographic area licenses.
14. The Commission declines to extend automatic nationwide
geographic area licensing to MTel's 931.4375 MHz channel. The
Commission notes that MTel has been extensively licensed on 931.4375
MHz; however, this channel has not been reallocated as a nationwide
channel thus MTel has not built-out this channel in reliance on a grant
of a nationwide license or nationwide exclusivity. The Commission notes
that many paging carriers, including MTel, have extensive systems on
channels that are not specifically designated as nationwide channels.
Paging is a competitive industry, and to the extent that nationwide
licensees not only compete with each other, but also with the paging
carriers who provide local and regional service, the Commission does
not believe it would be pro-competitive to automatically grant
nationwide geographic area licenses to any additional licensees.
C. Protection for Incumbents
15. The Commission believes that the public interest would be
served by allowing incumbent (non-geographic) paging licensees to
continue to operate under their existing authorizations with full
protection from co-channel interference, and similarly protecting the
geographic area licensees from co-channel interference from the
incumbent licensees. Therefore, consistent with the rules for 900 MHz
Specialized Mobile Radio (SMR), the Commission will not allow incumbent
(non-geographic) licensees to expand beyond their composite
interference contour unless the incumbents and the geographic licensee
have reached agreement on such modifications.
D. Coverage Requirements
16. The Commission notes that coverage requirements satisfy the
mandate for performance requirements under section 309(j)(4)(B) of the
Communications Act. The Commission is imposing the following coverage
requirements: for each MTA or EA, the geographic licensee must provide
coverage to one-third of the population within three years of the
geographic area license grant and to two-thirds of the population
within five years of the geographic area license grant. In the
alternative, the MTA or EA licensee may provide substantial service to
the geographic license area within five years of license grant.
Substantial service is defined as service that is sound, favorable, and
substantially above a level of mediocre service which would barely
warrant renewal. The failure to meet these coverage requirements will
result in automatic cancellation of the geographic license. The
Commission will reinstate any licenses held prior to auction for sites
that were authorized, constructed, and operating at the time of the
cancellation of the geographic area license.
E. Co-Channel Interference Protection
1. Co-Channel Interference Protection--Incumbent Licensees
17. The Commission is persuaded that the advantages of adopting the
formulas proposed in the NPRM are outweighed by the disadvantages noted
by the commenters. As the commenters observed, changing from Tables E-1
and E-2 to the proposed formulas would, in most cases, reduce the
service area and composite interference contour that incumbent
licensees have relied on in developing their systems to date.
Additionally, the proposed formulas may underestimate the actual
reliable coverage of the paging systems. Using the fixed distances in
Tables E-1 and E-2 in Sec. 22.537 for the 929 MHz and 931 MHz channels
would maintain the status quo for 931 MHz channels and conform 929 MHz
channels to the current procedure for 931 MHz. Therefore, the
Commission is adopting the fixed distances in Tables E-1 and E-2 in
Sec. 22.537 for the exclusive 929 MHz and 931 MHz channels. Geographic
area licensees must provide co-channel protection to all incumbent
licensees, including incumbents in other geographic areas. The
Commission will allow geographic and incumbent licensees to use short-
spaced locations pursuant to mutual written consent. The Commission
will continue to use the current formulas for the CCP channels below
931 MHz.
2. Co-Channel Interference Protection--Adjacent Geographic Licensees
18. Geographic licensees generally are not required to file
applications with the Commission, therefore it is possible that a
geographic licensee with a transmitter at or close to the border of the
MTA or EA could unknowingly cause interference to a neighboring
geographic licensee. It is in the interest of the geographic licensees
to find mutually beneficial ways to accommodate their needs in
providing service within their respective MTAs and EAs. Instead of
specifying a minimum distance a geographic licensee's transmission site
must be from the geographic border, which may result in unserved areas,
the Commission is allowing geographic licensees to negotiate mutually
acceptable agreements with all adjacent geographic area licensees if
the interfering contour of one geographic area licensee will extend
into the adjacent geographic area or areas. Adjacent geographic area
licensees have a duty to negotiate with each other in good faith
regarding co-channel interference protection. The Commission believes
that informal negotiations between parties in determining mutually
agreeable arrangements between adjacent MTAs and EAs will achieve the
most expeditious and effective resolution of co-channel interference.
The lack of adequate service to the public due to failure to negotiate
reasonable solutions to co-channel interference problems with adjacent
geographic area licensees could reflect negatively on licensees seeking
renewal.
3. Maximum Power and Height-Power Limit
19. The Commission believes that the 931 MHz and 929 MHz bands
should operate under the same power and height-power rules. Conforming
these rules will allow paging operators to design their systems in the
most economical manner. Most of the commenters addressing this issue
contend that the Commission should eliminate the disparity between the
931 and 929 MHz channels, and conform the maximum effective radiated
power (ERP) limit and the height-power limit in these bands. The
Commission is eliminating the height-power limit for 929 MHz systems,
to conform them to the 931 MHz systems. The Commission is also
increasing the permitted maximum ERP for all 929 MHz systems to 3500
Watts, to conform these systems with the nationwide 929 MHz systems and
the 931 MHz systems. With respect to the CCP bands below 931 MHz, the
Commission is maintaining the current power and height-power limits for
these channels.
[[Page 11619]]
F. Licensing in Mexican and Canadian Border Areas
20. The Commission notes that commenters agree with the proposal
that border areas should be treated like any other area for licensing
purposes and carriers can determine whether spectrum is usable in
border areas under applicable treaties and protocols. Therefore, the
Commission will not distinguish between border and non-border areas in
geographic licensing. Geographic licensees will be responsible for
advising the Commission of any transmitter site changes or additions if
site-by-site coordination is required by Canada or Mexico.
G. Eligibility to Participate in Competitive Bidding
21. The Commission believes that it is important to allow all
parties to participate in the competitive bidding process for
geographic area licenses, and accordingly, apart from foreign ownership
limitations, eligibility will not be restricted. The Commission
believes that non-incumbents should be allowed to bid for available
spectrum, or to enter into joint ventures with incumbents for purposes
of bidding in a geographic area. The competitive bidding process itself
should deter speculation by those not genuinely interested in providing
service to the public. In addition, the Commission believes that the
open eligibility for the geographic area licenses will be pro-
competitive and potentially will result in a diverse group of entities
providing paging services to the public.
H. Channel Aggregation Limit
22. The Commission has imposed a spectrum aggregation cap of 45 MHz
as the total amount of combined PCS, cellular, and SMR spectrum
classified as CMRS in which an entity may have an attributable interest
in any geographic area at any point in time. Narrowband radio services,
including paging, are not included in the spectrum cap because it is
highly unlikely that one entity could ever accumulate as much as 5 MHz
in any given geographic market. The Commission now concludes that a
channel aggregation limit is unnecessary for paging services. The
paging market is highly competitive and diversified, making it unlikely
that any one licensee could accumulate sufficient spectrum to dominate
the paging market, much less the CMRS market as a whole. The Commission
does not find any evidence that excessive channel aggregation has
occurred in the paging industry; to the contrary, paging channel use is
highly dispersed among numerous competing licensees. Additionally, the
Commission anticipates that many applicants for geographic area paging
licenses will be incumbents seeking to obtain geographic area licenses
where their existing facilities reside. Thus, the Commission does not
believe that geographic area licensing is likely to increase market
concentration in the paging industry. Finally, the Commission believes
that a cap could arbitrarily limit a carrier's capacity to provide
services that may require multiple channels. Therefore, the Commission
is not imposing a spectrum or channel aggregation cap on paging
licenses at this time.
I. Competitive Bidding
1. Competitive Bidding Design
a. Bidding Methodology
23. Based on the record in this proceeding and its successful
experience conducting simultaneous multiple round auctions for other
services, the Commission believes this type of auction is most
appropriate for paging licenses. The Commission believes that, for
certain bidders, these licenses will be significantly interdependent
because of the desirability of aggregation across spectrum blocks and
geographic areas and because some licenses are likely to be
substitutes. Given such interdependence, simultaneous multiple round
bidding generates more information about license values during the
course of the auction and provides bidders with more flexibility to
pursue back-up strategies than if the licenses were auctioned
separately or through sealed bidding. The Commission also expects the
value of paging licenses to be sufficiently high to warrant
simultaneous multiple round bidding. The Commission retains the
discretion, however, to use a different methodology if that proves to
be more efficient administratively. Prior to the auction, information
will be provided about the bidding design to be used.
b. License Grouping
24. Although it may be desirable to hold a single simultaneous
multiple round auction for all paging licenses, such an auction is not
currently feasible from an operational standpoint because there will be
more than 15,000 paging licenses available for auction. The Commission
finds that there is significant interdependence among licenses in the
929 MHz and 931 MHz services, and similar interdependency among the
licenses of the lower band paging services. The Commission also
believes that grouping interdependent licenses and putting them up for
bid at the same time promotes awarding licenses to bidders who value
them most highly. The Commission therefore will award the paging
licenses in a series of simultaneous multiple round auctions, grouping
them based on interdependency and operational feasibility. The
Commission reserves the discretion to decide on specific license
groupings as administrative circumstances dictate.
c. Bidding Procedures
25. Bid increments and tie bids. The Commission will announce, by
Public Notice prior to the auction, general guidelines for minimum bid
increments. Minimum bid increments for individual paging licenses or
groups of licenses may vary over the course of the auction and will be
announced before or during the auction. In the case of a tie bid, the
high bidder will be determined by the order in which the bids are
received by the Commission.
26. Stopping rules. With more than ten times the largest number of
licenses the Commission has ever auctioned simultaneously, there is an
increased risk of an excessively prolonged auction if a significant
proportion of the licenses are auctioned simultaneously using a
simultaneous stopping rule. To reduce this risk and to promote
expeditious service to the public, while at the same time preserving
most of the efficiency benefits of a simultaneous stopping rule, the
Commission adopts a hybrid simultaneous/license-by-license stopping
rule. The hybrid rule has three phases. During Phase I, which lasts one
month, or 100 rounds, whichever comes later, the Commission will employ
its standard simultaneous stopping rule whereby bidding will remain
open on all licenses until bidding stops on every license. The auction
will close after one round passes in which no new valid bids or
proactive activity rule waivers are submitted. This provides bidders
some protection against the risk that bidding on a license will be
closed before they have sufficient information to start bidding on it
as a back up strategy. In Phase II, the Wireless Telecommunications
Bureau will assess the extent to which bidders are pursuing back up
strategies and implement a license-by-license stopping rule if the
Bureau determines that the use of back up strategies is minimal. Under
the license-by-license stopping rule, bidding on a license will close
whenever 10 consecutive rounds pass with no new valid bids for that
license. The remaining licenses will close according to the standard
simultaneous stopping rule--when a round passes
[[Page 11620]]
with no new valid bids on any license. Phase III begins after two
months and 100 rounds have passed. If the auction has not closed by
then, the Commission intends to implement the license-by-license
stopping rule that is discretionary in the second phase. This approach
balances concerns about the time to complete the paging auction and the
benefits of preserving back up strategies which give bidders the
flexibility to acquire licenses that are consistent with their business
plans. The Commission reserves the discretion not to employ this hybrid
stopping rule in future paging auctions based on its experience in this
auction and depending on the circumstances in future auctions with
respect to factors such as the number of licenses and degree that
licenses are encumbered.
27. The Commission further retains the discretion, in Phase III, to
declare after 200 rounds that the auction will end after some specified
number of additional rounds. If this method is employed, bids will be
accepted only on licenses where the high bid has increased in the last
three rounds. This will provide the Commission with a mechanism to end
the auction in the unlikely event that a small number of bidders are
continuing to bid on a few low value licenses solely to delay the
closing of the auction. The Commission will declare the imminent end of
the auction only in the case of extremely dilatory bidding.
28. Revealing bidders' identities. In the Competitive Bidding
Second Memorandum Opinion and Order, 59 FR 44272 (August 26, 1994),
because of the advantages of providing more information to bidders, and
the difficulties involved in ensuring that bidder identities remain
confidential, the Commission determined that it generally would release
the identities of bidders before each auction. However, the Commission
reserved the option to withhold bidder identities on an auction-by-
auction basis if further experience showed that it would be feasible
and desirable to do so.
29. In the case of the upcoming paging auctions, the Commission
believes that shielding certain information from the bidders will help
to speed the bidding since there will be less of an opportunity for
strategic gaming practices to occur. The Commission will announce by
Public Notice prior to the auction the precise information that will be
revealed to bidders during the auction. This information may be limited
to the high bids (no identities of bidders) and may also include the
total number of bids on each license. The loss of efficiency from
denying bidders the identities of likely winners of adjacent licenses
should be minimal because, in contrast to broadband personal
communications services, paging does not provide for roaming and there
is little uncertainty about technologies (i.e., GSM versus CDMA
technology).
30. Activity Rule. The Commission will employ the Milgrom-Wilson
activity rules for the paging auctions. These rules discourage delay by
bidders and expedite simultaneous multiple round auctions in which a
simultaneous stopping rule is used. 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.
31. In each round of Stage One, a bidder that wishes to maintain
its current eligibility is required to be active on licenses
encompassing at least 60 percent of the activity units for which it is
currently eligible. The number of activity units for a given license is
calculated by multiplying the amount of spectrum (in MHz) by the
population of the market. A bidder's eligibility is determined by
multiplying the activity units by a specified monetary figure. Failure
to maintain the requisite activity level will result in a reduction in
the amount of activity units upon which a bidder will be eligible to
bid in the next round of bidding (unless an activity rule waiver is
used). During Stage One, if bidding activity is below the required
minimum level, eligibility in the next round will be calculated by
multiplying the current round activity by five-thirds (5/3).
Eligibility for each applicant at the start of the auction is
determined by the amount of the upfront payment received and the
licenses identified in its auction application.
32. In each round of Stage Two, a bidder that wishes to maintain
its current eligibility is required to be active on at least 80 percent
of the activity units for which it is eligible in the current round.
During Stage Two, if activity is below the required minimum level,
eligibility in the next round will be calculated by multiplying the
current round activity by five-fourths (5/4).
33. In each round of Stage Three, a bidder that wishes to maintain
its current eligibility must be active on licenses encompassing at
least 98 percent of the activity units for which it is eligible in the
current round. In Stage Three, if activity in the current round is
below 98 percent of current eligibility, eligibility in the next round
will be calculated by multiplying the current round activity by fifty
forty-ninths (50/49).
34. The Commission reserves the discretion to set and, by
announcement before or during the auction, vary the requisite minimum
activity levels (and associated eligibility calculations) for each
auction stage. 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.
35. For paging auctions, the Commission will use the following
general transition guidelines. The auction will start in Stage One and
typically will move to Stage Two when the auction activity level is
below ten percent for three consecutive rounds in Stage One. In
general, 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. In no case can the auction revert to an earlier
stage. The Commission retains the discretion to determine and announce
during the course of an auction when, and if, to move from one auction
stage to the next. These determinations will be based on a variety of
measures of bidder activity including, but not limited to, the auction
activity level defined above, the percentage of licenses (measured in
terms of activity units) on which there are new bids, the number of new
bids, and the percentage increase in revenue.
36. 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, bidders will be provided with five
activity rule waivers that may be used in any round during the course
of the auction. If a bidder's activity level is below the required
activity level, a waiver automatically will be applied. A waiver will
preserve current eligibility in the next round, but cannot be used to
correct an error in the amount bid. An activity rule waiver applies to
an entire round of bidding and not to a particular service area.
37. Bidders will be afforded an opportunity to override the
automatic waiver mechanism when they place a bid, if they wish to
reduce their bidding eligibility and do not want to use a waiver to
retain their eligibility at its current level. If a bidder overrides
the automatic waiver mechanism, its eligibility permanently will be
reduced (according to the formulas specified above), and it will not be
permitted to regain its bidding eligibility from a previous round. An
automatic waiver invoked in a round in which there are no valid bids
will not keep the auction
[[Page 11621]]
open. Bidders will have the option to proactively enter an activity
rule waiver during the bid submission period. If a bidder submits a
proactive waiver in a round in which no other bidding activity occurs,
the auction will remain open.
38. The Commission retains the discretion to issue additional
waivers during the course of an auction for circumstances beyond a
bidder's control. The Commission also retains 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.
39. Duration of bidding rounds. The Commission retains the
discretion to vary the duration of the bidding rounds or the interval
at which bids are accepted in order to move the auction to closure more
quickly. The duration of and intervals between bidding rounds will be
announced either by Public Notice prior to the auction or by
announcement during the auction.
2. Procedural and Payment Issues
a. Pre-auction Application Procedures
40. The Commission will use the pre-auction application procedures
established in the Competitive Bidding Second Report and Order, 59 FR
22980 (May 4, 1994), for the paging services. 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, inter
alia, the short-form filing deadline.
41. The Commission adopts the same general bidding procedures used
for the PCS, 900 MHz SMR, and Multipoint Distribution Service (MDS)
auctions. Under these procedures, bidders will be able to submit bids
remotely, either electronically or by telephone. The Commission has
established a schedule of fees that participants in the competitive
bidding process will be assessed for certain on-line computer services,
bidding software, and Bidder Information Packages. Bidders will be
permitted to bid electronically only if they have filed a short-form
application electronically. Bidders who file their short-form
applications manually may bid only telephonically.
b. Short-form Applications
42. Section 309(j)(5) of the Communications Act provides that no
person 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.'' Moreover,
``[n]o license shall be granted to an applicant selected pursuant to
this subsection unless the Commission determines that the applicant is
qualified pursuant to (section 309(a)) and sections 308(b) and 310'' of
the Communications Act. 47 U.S.C. 309(j)(5). The Commission will,
therefore, dismiss applications not meeting the requirements of its
rules prior to the auction.
43. The Commission disagrees with commenters who state that it
should not permit bidders to apply for all market areas by checking the
``all'' markets box on their FCC Form 175. The Commission believes
bidders should have the flexibility to pursue back-up strategies if
they are unable to obtain their first choice of licenses. Moreover, any
potential problems associated with so-called blanket bidding will be
cured through the Commission's eligibility rules and the submission of
a corresponding upfront payment. Finally, because the Commission has
permitted incumbents to expand their systems pending the commencement
of the auction, it believes that current application rules will have no
impact on planned expansions by incumbents. The Commission sees no
reason to change its current application procedures at this time.
44. If only one application that is acceptable for filing is
received for a particular market, and thus there is no mutual
exclusivity, the Commission will issue a Public Notice cancelling the
auction for that license and establish a date for the filing of a long-
form application, the acceptance of which will trigger the procedures
permitting petitions to deny.
c. Amendments and Modifications
45. Applicants for paging auctions will be provided with an
opportunity to correct minor defects in their short-form applications
prior to the auction. After review of the short-form applications, a
Public Notice will be issued listing all defective applications.
Applicants with minor defects in their applications will be given an
opportunity to cure them and resubmit a corrected version.
d. Upfront Payments
46. The Commission believes that a specific upfront payment amount
should be established for each license upon which bids are to be made.
It is important, as commenters point out, to deter speculation and
ensure, to the greatest extent practicable, that only sincere bidders
participate in the auction. The Commission delegates to the Wireless
Telecommunications Bureau the authority and discretion to determine an
appropriate upfront payment for each license being auctioned, taking
into account such factors as the population and the approximate amount
of unencumbered spectrum in each geographic license area. The
Commission expects that the Bureau will follow the guidelines laid out
in the Competitive Bidding Second Report and Order, and establish
upfront payments equal to approximately five percent of the expected
amounts of winning bids for the various licenses. In no event will the
upfront payment for any license be less than $2,500, the minimum
suggested in the Competitive Bidding Second Report and Order, and the
Bureau will retain the flexibility to modify this minimum if experience
demonstrates that a higher amount would better deter speculative
filings.
47. Prior to a paging license auction, the Bureau will issue a
Public Notice listing the upfront payment amounts corresponding to the
licenses to be auctioned. The number of activity units determines the
amount of the upfront payment for a license. A prospective bidder must
submit an upfront payment equal to the largest combination of activity
units on which the bidder anticipates being active in any single round.
Although a bidder may file applications for every license being
auctioned, the total upfront payment submitted by each applicant will
determine the combinations on which the applicant will actually be
permitted to be active in any single round of bidding. Upfront payments
will be due by a date specified by Public Notice, but generally no
later than 14 days before the scheduled auction.
e. Down Payments
48. The Commission concludes that winning bidders (including
winners that are small businesses, as discussed below) must supplement
their upfront payments with a down payment sufficient to bring their
total deposits up to 20 percent of their winning bid(s). 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. 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 of the amount bid. When it becomes possible to calculate
and assess the payment, any excess deposit will be refunded. Monies on
account will be applied to bid withdrawal and default
[[Page 11622]]
payments due before being applied toward the bidder's down payment on
licenses the bidder has won and seeks to acquire.
49. Winning bidders, except small businesses, must submit the
required down payment by cashier's check or by wire transfer to the
Commission's lock-box bank within 10 business days following release of
a Public Notice announcing the close of bidding. All auction winners,
except those that qualify for installment payments, will be required to
make full payment of the balance of their winning bids within 10
business days following Public Notice that licenses are ready for
grant.
f. Bid Withdrawal, Default, and Disqualification
50. The Commission will apply its general bid withdrawal, default,
and disqualification rules in paging license auctions. If a license is
re-offered by auction, the ``winning bid'' refers to the high bid in
the auction in which the license is re-offered. If a license is re-
offered in the same auction, the ``winning bid'' refers to the high bid
amount made subsequent to the withdrawal in that auction. If a license
which is the subject of withdrawal or default is offered to the highest
losing bidders in the initial auction, as opposed to being re-
auctioned, the ``winning bid'' refers to the bid of the highest bidder
who accepts the offer. In the unlikely event that there is more than
one bid withdrawal on the same license, the Commission will hold each
withdrawing bidder responsible for the difference between its withdrawn
bid and the amount of the winning bid the next time the licenses are
offered for auction. If a license winner defaults or is otherwise
disqualified after an auction is closed, the Commission will exercise
its discretion to hold a new auction or offer the license to the second
highest bidder.
51. If a default or disqualification involves gross misconduct,
misrepresentation or bad faith by an applicant, the Commission may
declare the applicant and its principals ineligible to bid in future
auctions, and may take any other action that it deems necessary,
including institution of proceedings to revoke any existing licenses
held by the applicant.
52. The Wireless Telecommunications Bureau has recently instituted
an additional procedure that warns bidders of the possibility of a
mistaken bid, and this procedure will be utilized in the paging license
auctions. The Commission also recently addressed the issue of how its
bid withdrawal payment provisions apply to bids that are mistakenly
placed and withdrawn. See Atlanta Trunking Associates, Inc. and MAP
Wireless L.L.C. Request to Waive Bid Withdrawal Payment Provisions, 61
FR 25807 (May 23, 1996), recon. pending.
g. Long-form Applications
53. In the Competitive Bidding Second Report and Order, the
Commission established rules requiring winning bidders to submit a
long-form application. These procedures, which are set forth in
Sec. 1.2107 of the Commission's rules, 47 CFR 1.2107, will be followed
if the winning bidder makes the down payment in a timely manner.
h. Petitions to Deny and Limitations on Settlements
54. The petition to deny procedures in Secs. 22.130 and 90.163 of
the Commission's rules, 47 CFR 22.130 and 90.163, will apply to the
paging services. A party filing a petition to deny against a paging
license application will be required to demonstrate standing and meet
all other applicable filing requirements. Sections 90.162 and 22.129 of
the Commission's rules, 47 CFR 90.162 and 22.129, prevent the filing of
speculative applications and pleadings for purposes of extracting money
from applicants. Thus, the Commission will limit the consideration that
an individual or entity is permitted to receive for agreeing to
withdraw an application or petition to deny to the legitimate and
prudent expenses of the withdrawing applicant or petitioner. To the
extent Secs. 22.129 and 90.162 conflict with Sec. 1.2105 of the
Commission's rules, 47 CFR 1.2105, these provisions should not apply to
paging licenses awarded through competitive bidding. Therefore, the
Commission will amend these provisions to prohibit agreements to
withdraw mutually exclusive applications, or pleadings filed by one
applicant against another applicant for a license in the same
geographic area, after the deadline for filing short-form applications.
3. Regulatory Safeguards
a. Anti-Collusion Rules
55. The Commission will require paging licensees to comply with the
reporting requirements and rules prohibiting collusion embodied in
Secs. 1.2105 and 1.2107 of the Commission's rules, 47 CFR 1.2105 and
1.2107. Thus, after the FCC Form 175 filing deadline, applicants may
not discuss the substance of their bids or bidding strategies with
other applicants, other than those identified on their short-form
applications, that are bidding in the same license areas, even if they
are not bidding for the same spectrum blocks.
56. Where specific instances of collusion in the competitive
bidding process are alleged during the petition to deny process, the
Commission may conduct an investigation or refer such complaints to the
United States Department of Justice for investigation. Bidders who are
found to have violated the antitrust laws, in addition to any penalties
they incur under the antitrust laws, or who are found to have violated
the Commission's rules in connection with their participation in the
auction process, may be subject to a variety of sanctions, including
forfeiture of their down payment or their full bid amount, revocation
of their license(s), and possible prohibition from participating in
future auctions.
b. Transfer Disclosure Requirements
57. Section 1.2111(a), 47 CFR 1.2111(a), will apply to all paging
licenses obtained through the competitive bidding process. The
Commission sees nothing disruptive in requiring the disclosure of this
information, and believes these disclosure requirements are necessary
to the enforcement of its unjust enrichment provisions. The Commission
also agrees with the Federal Trade Commission that speculation in
connection with the acquisition of paging licenses is a major concern.
By enabling the Commission to monitor license transfers, the disclosure
requirements of Secs. 1.2111(a), which implements section 309(j)(4)(E)
of the Communications Act, (47 U.S.C. 309(j)(4)(E)), will assist in
eliminating the problem of speculation while providing safeguards to
those who might otherwise fall victim to deceptive practices used to
induce them to invest in paging licenses.
4. Treatment of Designated Entities
a. Small Businesses
58. Congress specifically cited the needs of small businesses in
enacting Sec. 309(j) of the Communications Act, 47 U.S.C. 309(j),
directing the Commission to promote economic opportunities for small
businesses. While a number of small businesses are successfully
participating in the paging industry, the Commission concludes that it
is appropriate to establish special provisions in its paging rules for
competitive bidding by small businesses.
[[Page 11623]]
b. Minority- and Women-Owned Businesses
59. In the paging service, as in other auctionable services, 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 variety of
applicants, including businesses owned by members of minority groups
and women. Commenters failed to provide record evidence sufficient to
support special provisions for minorities under the strict scrutiny
standard of judicial review, which applies to federal race-based
programs. The Commission is also concerned that the record would not
support gender-based provisions under intermediate scrutiny, which is
the standard of judicial review that applies to such provisions.
Balancing its obligation to provide opportunities for women- and
minority-owned businesses to participate in spectrum-based services
against its statutory duties to facilitate the rapid delivery of new
services to the American consumer and promote efficient use of the
spectrum, the Commission concludes that it should not delay the paging
service auctions for the amount of time it would take to adduce
sufficient evidence to support race- and gender-based provisions.
Moreover, the Commission believes that most minority- and women-owned
businesses will be able to take advantage of the specific provisions
adopted for small businesses.
c. Bidding Credits
60. While bidding credits do not guarantee the success of small
businesses, the Commission believes that they at least provide such
bidders with an opportunity to successfully compete against larger,
well-financed bidders. The Commission also concludes that it is
appropriate to adopt tiered bidding credits for paging auction
participants based on the size of the small business. Such an approach
will further the Commission's mandate under section 309(j) of the
Communications Act to disseminate licenses to a variety of applicants.
61. The Commission therefore will define a small business as either
(1) 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, or (2) 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 Commission
will give small businesses that, together with affiliates and
controlling principals, have average gross revenues for the three
preceding years of not more than $3 million, a 15 percent bidding
credit. The Commission will give small businesses that, together with
affiliates and controlling principals, have average gross revenues for
the three preceding years of not more than $15 million, a bidding
credit of 10 percent. These bidding credits take into account the
difficulties smaller businesses have in accessing capital. Bidding
credits at these levels also achieve a reasonable compromise between
the arguments of commenters advocating greater credits and those of
commenters advocating no credits.
62. For purposes of the definitions adopted here, the Commission
will consider the gross revenues of the applicant, all controlling
principals in the applicant, and affiliates of the applicant. The
Commission chooses not to impose specific equity requirements on
controlling principals but will require that, in order for an applicant
to qualify as a small business, qualifying small business principals
must maintain both de jure and de facto control of the applicant. For
this purpose, the Commission will borrow from certain Small Business
Administration (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 licensee; and (3) the entity
plays an integral role in all major management decisions. The
Commission cautions that while it is not imposing specific equity
requirements on small business principals, the absence of significant
equity could raise questions about whether the applicant qualifies as a
bona fide small business.
63. Eligible small businesses will be permitted to form consortia
and not aggregate their gross revenues. Additionally, a small
corporation that has dispersed voting stock ownership and no
controlling affiliates will not be required to aggregate with its own
revenues the revenues of each shareholder for purposes of small
business status. Thus, the Commission clarifies that such an applicant
may qualify--even in the absence of identifiable control being held by
particular investors.
d. Installment Payments and Down Payments
64. The Commission adopts installment payments for small business
winners in the paging license auctions. The Commission recognizes that
small businesses, including those owned by women and minorities, face
capital access difficulties not encountered by other firms. Thus, they
require special measures to ensure their participation in the paging
service. Licensees who qualify as small businesses in paging license
auctions will be entitled to pay their winning bid amount in quarterly
installments over the term of the license, with interest charges to be
fixed at the time of licensing at a rate equal to the rate for ten-year
U.S. Treasury obligations plus 2.5 percent. The rate for ten-year U.S.
Treasury obligations will be determined by taking the coupon rate of
interest on the ten-year U.S. Treasury notes most recently auctioned by
the Treasury Department before licenses are conditionally granted.
These licensees will be able to make interest-only payments for the
first two years of the license term. Timely payment of all installments
will be a condition of the license grant, and failure to make such
timely payments will be grounds for revocation of the license.
65. The Commission declines to adopt a second installment payment
plan with a longer interest-only period for small businesses with
average gross revenues of not more than $3 million. The Commission
believes that the two-year interest-only period in the single plan it
adopts will provide small businesses with the appropriate level of
financing to overcome difficulties in attracting capital. Given that it
is making additional financial assistance available to very small
businesses in the form of a 15 percent bidding credit, the Commission
does not think a longer interest-only period is justified.
66. The Commission also concludes that it should provide for late
payment fees in connection with its installment payment plan for paging
licensees. Therefore, when licensees are more than fifteen days late in
their scheduled installment payments, a late payment fee equal to 5
percent of the amount of the past due payment will be charged. For
example, if a $50,000 payment is due on June 1, then on June 16 $2,500
is due in addition to the payment. Without such a fee licensees may not
have adequate financial incentives to
[[Page 11624]]
make installment payments on time and may attempt to maximize their
cash flow at the government's expense by paying late. The 5 percent
payment adopted is an approximation of late payment fees applied in
typical commercial lending transactions. Payments will be applied in
the following order: late charges, interest charges, principal
payments.
67. The Commission believes that small businesses should be
required to pay a down payment of 20 percent. Such a requirement is
consistent with ensuring that winning bidders have the financial
capability of building out their systems and will provide the
Commission with stronger assurance against default than a 10 percent
down payment. 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. A 20 percent down payment should also
cover the required payments in the unlikely event of default. Thus,
small business licensees will be required to bring their deposit up to
ten percent of the winning bid within ten business days of the close of
the auction. Prior to licensing, they will be required to pay an
additional ten percent. Specific procedures for payment will be
provided in a Public Notice issued by the Wireless Telecommunications
Bureau. The Commission declines to adopt reduced upfront payment rules
for small businesses participating in paging license auctions. The
Commission believes a uniform upfront payment provision for all bidders
in the auction is necessary in order to deter speculation and to ensure
that only sincere bidders participate in the auction.
e. Partitioning
68. Based on the strong support expressed by commenters for
granting broad partitioning rights to paging licensees, the Commission
will permit all MTA and EA paging licensees to partition to any party
eligible to be a paging licensee. The Commission takes this action with
respect to partitioning because of its conclusion that allowing holders
of paging licenses to partition their geographic service areas will
facilitate the provision of services in small markets and rural areas.
Partitioning will also furnish providers of paging service with
operational flexibility that will serve to promote the most efficient
use of the spectrum and encourage participation by a wide variety of
service providers. The Commission will permit partitioning of paging
licenses awarded through competitive bidding based on any license area
defined by the parties.
69. Due to the paucity of comments on the subject, and uncertainty
as to whether it is technically feasible, the Commission will not, at
this time, authorize spectrum disaggregation for the paging services.
Instead, the Commission seeks information regarding the technical
feasibility and appropriateness of spectrum disaggregation for the
paging services in a Further Notice of Proposed Rulemaking.
70. Providers of paging service will be permitted to acquire
partitioned licenses in either of two ways: (1) By forming bidding
consortia to participate in auctions, and then partitioning the
licenses won among consortium members; or (2) by acquiring partitioned
licenses from other licensees through private negotiation and agreement
either before or after the auction. Each member of a consortium will be
required to file a long-form application, following the auction, for
its respective mutually agreed-upon geographic area. With regard to
partitioning by small businesses, the Commission seeks comment in the
Further Notice of Proposed Rulemaking regarding the treatment of
bidding credits and installment payments. In the event the Commission
receives applications requesting FCC consent to partitioning transfers
from small businesses to non-small businesses or to small businesses
that qualify for less favorable bidding credits, action on such
applications will be deferred until the adoption of rules governing the
treatment of bidding credits and installment payments.
f. Unjust Enrichment Provisions for Full Transfers
71. The Commission adopts unjust enrichment rules for paging. These
rules provide that, during the initial license term, licensees
utilizing bidding credits and seeking to assign or transfer control of
a license to an entity that does not meet the eligibility criteria for
bidding credits will be required to reimburse the government for the
value of the benefit conferred by the government, that is, the amount
of the bidding credit, plus interest at the rate imposed for
installment financing at the time the license was awarded, before the
assignment or transfer will be approved by the Commission. Licensees
utilizing a bidding credit and seeking to assign or transfer control of
a license to a small business that meets the eligibility standards for
a lower bidding credit will be required to reimburse the U.S.
government for the difference between the amount of the bidding credit
obtained by the original licensee and the bidding credit for which the
assignee, transferee or new licensee is eligible, plus interest at the
rate imposed for installment financing at the time the license was
awarded as a condition of Commission approval of such assignment or
transfer. If a licensee that utilizes bidding credits seeks to make any
change in ownership structure that would render the licensee ineligible
for bidding credits, or eligible only for a lower bidding credit, the
licensee must first seek Commission approval and reimburse the
government for the amount of the bidding credit, or the difference
between its original bidding credit and the bidding credit for which it
is eligible after the ownership change, plus interest at the rate
imposed for installment financing at the time the license was awarded.
The amount of this payment will be reduced over time as follows: (1) 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 new licensee is eligible); (2) in
year three of the license term the payment will be 75 percent; (3) in
year four the payment will be 50 percent, and (4) in year five the
payment will be 25 percent, after which there will be no required
payment. These payments will have to be paid to the U.S. Treasury as a
condition of approval of the assignment, transfer, or ownership change.
72. In addition, if a licensee that qualifies for installment
payments seeks to assign or transfer control of its license during its
term to an entity that does not meet the small business definition, the
Commission will require payment of the remaining principal and any
interest accrued through the date of assignment as a condition of the
license assignment or transfer. Also, if an investor subsequently
purchases an interest in the business and, as a result, the gross
revenues of the business exceed the applicable financial caps, these
unjust enrichment provisions will apply. The Commission will apply
these payment requirements for the entire license term to ensure that
small businesses look first to other small businesses when deciding to
transfer their licenses. However, the Commission will not impose a
holding period or other transfer restrictions on these licensees.
g. Spectrum Set-aside
73. The Commission will not adopt an entrepreneurs' block for
paging licenses. The large number of licenses of different
[[Page 11625]]
sizes that will be available in the paging auctions should allow for
extensive participation of small businesses without an entrepreneurs'
block. Moreover, the special provisions for small businesses that the
Commission adopts, including installment payments and tiered bidding
credits, will give small businesses a significant opportunity to
acquire paging licenses through the auctions.
III. Conclusion
74. The Commission concludes that the paging rules and geographic
area licensing adopted in this Second Report and Order will facilitate
future development of paging systems and foster competition between
paging and other CMRS in general.
IV. Procedural Matters and Ordering Clauses
A. Regulatory Flexibility Analysis
75. As required by section 603 of the Regulatory Flexibility Act, 5
U.S.C. 603 (RFA), an Initial Regulatory Flexibility Analysis (IRFA) was
incorporated in the Notice of Proposed Rulemaking (NPRM) in WT Docket
No. 96-18. The Commission sought written public comment on the
proposals in the NPRM, including the IRFA. The Commission's Final
Regulatory Flexibility Analysis in this Second Report and Order
conforms to the RFA, as amended by the Contract With America
Advancement Act of 1996, Pub. L. 104-121, 110 Stat. 847 (1996). (CWAA,
Subtitle II of the Small Business Regulatory Enforcement Fairness Act
of 1996 (SBREFA) codified at 5 U.S.C. 601 et seq.)
Need for and Purpose of This Action
76. In the Second Report and Order, in WT Docket No. 96-18, the
Commission adopts rules to establish geographic area licensing and
competitive bidding for Common Carrier Paging (CCP) and exclusive 929
MHz Private Carrier Paging (PCP) services. These rules are adopted to
establish a flexible regulatory scheme for paging services, which will
promote efficient licensing and competition in the Commercial Mobile
Radio Services (CMRS) marketplace. The competitive bidding rules
adopted in the Second Report and Order are pursuant to section 309(j)
of the Communications Act of 1934, as amended (Communications Act),
which grants authority to the Commission to use auctions to select
among mutually exclusive applications for initial licenses for
subscriber-based services.
Summary of Issues Raised in Response to the Initial Regulatory
Flexibility Analysis
77. Several commenters submitted comments in response to the IRFA.
These commenters contend that the Commission did not assess how the
proposals for market area licensing and competitive bidding will impact
small businesses; that market area licensing will alleviate some
administrative burdens but the savings will mainly be seen by the
largest paging operators; and that market area licensing will impose
administrative burdens and additional costs on small businesses. In
addition to the comments specifically submitted in response to the
IRFA, several commenters raised issues in their comments to the NPRM
regarding the effects of the proposals in the NPRM on small businesses.
These commenters do not support geographic area licensing for the
exclusive 929 MHz and 931 MHz paging channels. These commenters contend
that geographic area licensing would be disruptive to existing
licensees, as well as to the public, without providing any overriding
benefit. The Commission addresses these issues in the Second Report and
Order, and concludes that geographic area licensing using Major Trading
Areas (MTAs) as the geographic area for these bands, is in the public
interest. The Commission also observes that small businesses will be
able to use bidding credits and installment payments in order to
compete with larger entities in the auction process.
78. Additionally, several commenters are opposed to geographic area
licensing for the 35-36 MHz, 43-44 MHz, 152-159 MHz, and 454-460 MHz
bands and claim that geographic area licensing would prevent the
continued growth of small paging businesses. Several commenters are
also opposed to geographic area licensing for other services, such as
Basic Exchange Telecommunications Radio Service (BETRS). Commenters
argue that it is not in the public interest to use competitive bidding
to select between applications for BETRS and paging, as this may leave
some rural areas without any local exchange service. Commenters contend
that requiring local exchange carriers to bid for BETRS spectrum would
defy the requirements in the Communications Act for universal service
and would jeopardize the Commission's goal to increase subscriber
penetration. The Commission addresses these issues in the Second Report
and Order, and concludes that geographic area licensing, using Economic
Areas (EAs) as the geographic area for these bands, is in the public
interest. The Commission notes that EAs, which are smaller than MTAs,
will provide more opportunities for small paging businesses. The
Commission also observes that small businesses will be able to use
bidding credits and installment payments in order to compete with
larger entities in the auction process. The Commission concludes that
rural areas will not be deprived of service because existing BETRS
systems will remain in place and the new partitioning rules adopted in
the Second Report and Order will allow BETRS operators to enter into
partitioning agreements with the geographic area paging licensees.
Additionally, the Commission notes that BETRS operators will be able to
obtain additional sites on a secondary basis.
79. Commenters are also opposed to geographic licensing for the
shared channels and request that the Commission maintain the present
system of site-by-site licensing for these channels. The commenters
observe that these channels are predominantly used by small businesses.
The Commission finds that the concerns raised by these commenters
regarding the shared channels are well-founded and therefore declines
to impose geographic area licensing for the shared channels.
Description and Number of Small Entities Involved
80. The rules adopted in this Second Report and Order will apply to
current paging operators and new entrants into the paging market. Under
these rules, exclusive 929 MHz paging licenses and licenses for all CCP
channels will 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 paging licenses the Commission has adopted a
two-tier definition of small businesses. A small business will be
defined for these purposes as either (1) 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, or (2) 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 not yet
approved this definition for paging services. The Commission will
utilize the SBA's definition applicable to radiotelephone companies,
i.e., an entity employing less than 1,500
[[Page 11626]]
persons. See 13 CFR 121.201, Standard Industrial Classification Code
4812.
81. The Commission anticipates that a total of 16,630 non-
nationwide geographic area licenses will be auctioned. The geographic
area licenses subject to auction will consist of 2,550 MTA licenses and
14,080 EA licenses. In addition to the 47 Rand McNally MTAs, the
Commission is adding three MTAs for the U.S. territories of (1) Guam
and the Northern Mariana Islands, (2) Puerto Rico and the U.S. Virgin
Islands, and (3) American Samoa. The Commission is also licensing
Alaska as a single MTA separate from the Seattle MTA. There will be a
total of 51 MTA licenses auctioned for each non-nationwide 931 MHz and
exclusive 929 MHz channel. Auctions of paging licenses have not yet
been held, and there is no basis to determine the number of licenses
that will be awarded to small entities. Given the fact that nearly all
radiotelephone companies have fewer than 1,000 employees, and that no
reliable estimate of the number of prospective paging licensees can be
made, the Commission assumes, for purposes of the evaluations and
conclusions in this Final Regulatory Flexibility Analysis, that all the
auctioned 16,630 geographic area paging licenses will be awarded to
small entities, as that term is defined by the SBA. See U.S. Bureau of
the Census, U.S. Department of Commerce, 1992 Census of Transportation,
Communications, and Utilities, UC 92-S-1, Subject Series, Establishment
and Firm Size, Table 5, Employment Size of Firms: 1992, SIC Code 4812
(issued May 1995).
Summary of Projected Reporting, Recordkeeping and Other Compliance
Requirements
82. Geographic area paging 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 paging license auctions 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.
83. 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.'' 47 U.S.C. 309(j)(4)(E). The Commission adopted
safeguards designed to ensure that the requirements of this section are
satisfied, including a transfer disclosure requirement for paging
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.
84. With respect to small businesses, the Commission has 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.
85. Finally, applicants and licensees claiming eligibility for
competitive bidding as a small business are subject to audits by the
Commission. Selection for audit may be random, on information, or on
the basis of other factors. Consent to such audit is part of the
certification included in the short-form application (FCC Form 175).
Steps Taken to Minimize Burdens on Small Entities
86. Section 309(j)(3)(B) of the Communications Act, 47 U.S.C.
309(j)(3)(B), 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) of the Communications Act, 47 U.S.C. 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 paging licenses 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 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 paging rules for competitive bidding by small
businesses. The Commission believes that small businesses applying for
paging licenses should be entitled to bidding credits and should be
permitted to pay their bids in installments.
87. In order to ensure the more meaningful participation of small
business entities in paging auctions, the Commission has adopted a two-
tiered definition of small businesses. This approach will give
qualifying small businesses bidding flexibility. A small business will
be defined as either (1) 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, or (2) 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 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 has established bidding
credits consistent
[[Page 11627]]
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 of not more than $3
million will receive a 15 percent bidding credit. Small businesses
that, together with affiliates and controlling principals, have average
gross revenues for the three preceding years of not more than $15
million will receive a bidding credit of 10 percent.
88. Additionally, licensees who qualify as small businesses in the
geographic area paging license auction will be entitled to pay their
winning bid amount in quarterly installments over the term of the
license, with interest charges to be fixed at the time of licensing at
a rate equal to the rate for ten-year U.S. Treasury obligations plus
2.5 percent. Licensees who qualify for this installment payment plan
will be permitted to make interest-only payments for the first two
years of the license term. Timely payment of all installments will be a
condition of the license grant, and failure to make such timely
payments will be grounds for revocation of the license.
89. The Commission is also extending geographic partitioning of MTA
and EA license areas to all entities eligible to be paging licensees.
The Commission believes that this provision will allow paging 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 paging services, and will facilitate market entry by small
entities that have the ability to provide service only to a limited
population. Additionally, the Commission is maintaining the current
site-by-site licensing procedure for the shared channels.
Significant Alternatives Considered and Rejected
90. The Commission considered and rejected a proposal for
geographic area licensing using MTAs for all licenses. Commenters
opposed this proposal, contending that MTAs were too large for the
smaller paging systems. The Commission believes that the advantages of
geographic area licensing--flexibility, enhanced regulatory symmetry
with other CMRS, and eliminating the inefficiencies in the licensing
process--are applicable to the UHF and VHF channels, particularly for
regional paging services offered on these bands. Based on the record in
this proceeding, the Commission concludes that EAs would be more
appropriate than MTAs for the paging channels below 931 MHz. The
Commission agrees with the commenters that the geographical definition
used should correspond as much as possible to the geographic area that
the paging licensees seek to serve, and concludes that EAs, which are
smaller than MTAs, would facilitate the ability of paging operators of
smaller systems to participate in geographic area licensing.
91. Additionally, the Commission considered and rejected converting
all or some of the shared channels to exclusive use and implementing
geographic area licensing. The Commission also considered and rejected
limiting the number of licensees on the shared channels. In the NPRM,
the Commission asked for comment on whether to (1) convert the shared
channels to exclusive use and implement geographic licensing; (2) limit
the number of licenses per shared channel and use competitive bidding
to choose among applications once the limit is reached; or (3) retain
the status quo. Most commenters opposed geographic area licensing for
the shared channels, because paging systems on these channels are
smaller paging systems, not wide-area systems. The Commission observed
that smaller paging systems have been able to utilize these channels
effectively on a shared basis. Most of the commenters requested that
the Commission maintain the present system of site-by-site licensing.
The Commission noted that attempting to superimpose a geographic
licensing scheme on channels that have historically been shared could
cause significant disruption to existing operations. Additionally, the
Commission declined to adopt a cap on licensing shared channels, or to
convert certain shared channels to exclusive licensing. The difficulty
with a licensing cap, as noted by several commenters, is that it is the
amount of time a paging channel is used and the transmission equipment
and protocol used, not the number of licensees, that determines the
capacity limits of a channel. The Commission was also concerned that
picking certain shared channels to be designated as exclusive would
only cause greater pressure on the remaining shared channels and
therefore could limit opportunities for entry by smaller systems. The
Commission concluded that the shared channels should not be converted
to exclusive use, and the number of licensees should not be limited in
order to provide continued opportunities for paging operators,
particularly small businesses.
92. With respect to competitive bidding rules, the Commission
considered using a market-by-market stopping rule, which many
commenters favored in order to facilitate bringing an earlier end to
the auction and permitting the earlier close of uncontested markets.
The Commission adopted instead a hybrid simultaneous/license-by-license
stopping rule, which combines the advantages of a simultaneous stopping
rule and a license-by-license stopping rule. This approach will prevent
the auction from being unreasonably long while also preserving bidders'
flexibility to pursue back up strategies and acquire licenses that are
consistent with their business plans.
93. The Commission also considered allowing small businesses that
are winning bidders to pay a lower down payment than non-small
businesses. The Commission concluded, however, that all winning bidders
should pay a down payment of 20 percent of their winning bids. The
Commission believes that a substantial down payment is necessary to
ensure that winning bidders have the financial capability of building
out their systems, and will provide stronger assurance against defaults
than a reduced down payment. 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. The Commission also believes
that a 20 percent down payment should cover the required payments in
the unlikely event of default.
94. The Commission requested comment on whether, in addition to
small business provisions, separate provisions should be adopted for
minority-and women-owned entities. Few comments were received on this
issue, and commenters failed to provide record evidence of
discrimination sufficient to support race-based provisions under the
strict scrutiny standard of judicial review. The Commission is also
concerned that the record would not support gender-based provisions
under intermediate scrutiny. Balancing its obligation to provide
opportunities for women- and minority-owned businesses to participate
in spectrum-based services against its statutory duties to facilitate
the rapid delivery of new services to the American consumer and promote
efficient use of the spectrum, the Commission concluded that it should
not delay paging service auctions for the amount of time it would take
to adduce sufficient evidence to support race- and gender-based
provisions. The Commission believes that most minority-and women-owned
businesses will be able to take advantage of the
[[Page 11628]]
specific provisions that it has adopted for small businesses.
95. The Commission proposed, with respect to installment payments,
that small businesses with not more than $3 million in average gross
revenues for the preceding three years be permitted to make interest-
only payments for the first five years of the license term, while small
businesses with not more than $15 million in average gross revenues for
the preceding three years be permitted to make interest-only payments
during the first two years. The Commission concluded, however, that all
licensees qualifying for installment payments should be allowed to make
interest-only payments only for the first two years of the license
term. The Commission declined to adopt a longer interest-only period
for small businesses with average gross revenues of not more than $3
million. The Commission believes that the two-year interest-only period
provides small businesses with the appropriate level of financing to
overcome difficulties in attracting capital. Given that additional
financial assistance is being made available to very small businesses
in the form of a 15 percent bidding credit, the Commission does not
think a longer interest-only period is needed.
96. The Commission sought comment on the need, if any, for a
reduced upfront payment for entities qualifying as a small business.
The Commission did not, however, adopt reduced upfront payment rules
for small businesses participating in the paging license auction
because it believes that a uniform upfront payment provision for all
bidders in the auction is necessary in order to deter speculation and
to ensure that only sincere bidders participate in the auction.
97. Finally, the Commission considered but elected not to adopt a
spectrum set-aside for entrepreneurs. In the NPRM, the Commission
tentatively concluded that it was not necessary to adopt an
entrepreneurs' block for paging license auctions, and most commenters
opposed the creation of an entrepreneurs' block or other form of
spectrum set-aside for paging license auctions. The Commission believes
that the large number of licenses of different sizes that will be
available in the paging auctions should allow for extensive
participation of small businesses without an entrepreneurs' block.
Moreover, the Commission believes that the special provisions for small
businesses that it has adopted, including installment payments and
tiered bidding credits, will give small businesses a significant
opportunity to acquire paging licenses through auctions.
Report to Congress
98. 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).
B. Paperwork Reduction Act
99. This collection of information requirements have been approved
by the Office of Management and Budget and assigned OMB control number
3060-0697. The FCC Form 175 is assigned OMB control number 3060-0600.
The FCC Form 600 is assigned OMB control number 3060-0623.
C. Authority
100. The above action is authorized under the Communications Act,
sections 4(i), 303(r), 309(c), 309(j), and 332, 47 U.S.C. 154(i),
303(r), 309(c), 309(j), and 332, as amended.
D. Ordering Clauses
101. Accordingly, it is ordered that, pursuant to the authority of
sections 4(i), 303(g), 303(r), and 332(a) of the Communications Act of
1934, as amended, 47 U.S.C. 154(i), 303(g), 303(r), and 332(a), part 22
of the Commission's rules, 47 CFR part 22, is amended as set forth
below.
102. It is further ordered that, pursuant to the authority of
sections 4(i), 303(g), 303(r), and 332(a) of the Communications Act of
1934, as amended, 47 U.S.C. 154(i), 303(g), 303(r), and 332(a), part 90
of the Commission's rules, 47 CFR part 90, is amended as set forth in
below.
103. It is further ordered that the rules adopted in this Second
Report and Order and Further Notice of Proposed Rulemaking will be
effective May 12, 1997.
104. It is further ordered that, pursuant to 47 U.S.C. 155(c), the
Chief, Wireless Telecommunications Bureau, is granted delegated
authority to implement and modify auction procedures in the part 22 and
part 90 paging services, including the general design and timing of an
auction, the number and grouping of authorizations to be offered in any
particular auction, the manner of submitting bids, the amount of
minimum opening bids and bid increments, activity and stopping rules,
and application and payment requirements, including the amount of
upfront payments, and to announce such procedures by Public Notice.
105. It is further ordered that, pursuant to 47 U.S.C. 155(c), the
Chief, Wireless Telecommunications Bureau, is granted delegated
authority to dismiss all mutually exclusive paging applications filed
as of the adoption date of this Second Report and Order and grant or
dismiss all non-mutually exclusive paging applications filed as of the
adoption date of this Second Report and Order.
List of Subjects
47 CFR Part 22
Communication common carriers, Reporting and recordkeeping
requirements.
47 CFR Part 90
Common carriers, Reporting and recordkeeping requirements.
Federal Communications Commission.
William F. Caton,
Acting Secretary.
Rules Changes
1. Part 22 of Chapter I of Title 47 of the Code of Federal
Regulations is amended as follows:
Part 22--PUBLIC MOBILE SERVICES
The authority citation for Part 22 continues to read as follows:
Authority: Secs. 4, 303, 309, and 332, 48 Stat. 1066, 1082, as
amended, 47 U.S.C 154, 303, 309, and 332, unless otherwise noted.
Section 22.99 is revised by adding the following definitions (in
alphabetical order), and revising the definition for the term
``unserved areas'', to read as follows:
Sec. 22.99 Definitions.
* * * * *
Paging geographic area authorization. An authorization conveying
the exclusive right to establish and expand one or more stations
throughout a paging geographic area or, in the case of a partitioned
geographic area, throughout a specified portion of a paging geographic
area, on a specified channel allocated for assignment in the Paging and
Radiotelephone Service. These are subject to the conditions that no
interference may be caused to existing co-channel stations operated by
other licensees within the paging geographic area and that no
interference may be caused to existing or proposed co-channel stations
of other licensees in adjoining paging geographic areas.
Paging geographic areas. Standard geographic areas used by the FCC
for administrative convenience in the licensing of stations to operate
on channels allocated for assignment in the
[[Page 11629]]
Paging and Radiotelephone Service. See Sec. 22.503(b).
* * * * *
Unserved areas. With regard to a channel block allocated for
assignment in the Cellular Radiotelephone Service: Geographic area in
the District of Columbia, or any State, Territory or possession of the
United States of America that is not within the CGSA of any cellular
system authorized to transmit on that channel block. With regard to a
channel allocated for assignment in the Paging and Radiotelephone
Service: Geographic area within the District of Columbia, or any State,
Territory or possession of the United States of America that is not
within the service contour of any base transmitter in any station
authorized to transmit on that channel.
* * * * *
The heading of Subpart B is revised to read as follows:
Subpart B--Licensing Requirements and Procedures
4. A new center heading preceding Sec. 22.101 is added to read as
follows:
Applications and Notifications
5. Section 22.115 is amended by revising the introductory text of
paragraph (a) to read as follows:
Sec. 22.115 Content of applications.
* * * * *
(a) Site-specific requirements. The following requirements apply to
all Public Mobile Service applications that involve specific
transmitting antenna sites.
* * * * *
6. Section 22.123 is amended by revising paragraphs (e)(1) and
(e)(2), to read as follows:
Sec. 22.123 Classification of filings as major or minor.
* * * * *
(e) * * *
(1) Request that a paging geographic area authorization be issued
to the filer on a requested channel;
(2) Request an authorization that would establish for the filer a
new fixed transmission path or service area (a new station) on a
requested channel, unless the new service area would be totally within
a paging geographic area for which the filer holds the paging
geographic area authorization for the requested channel;
* * * * *
7. Section 22.129 is amended by adding paragraph (e) to read as
follows:
Sec. 22.129 Agreements to dismiss applications, amendments, and
pleadings.
* * * * *
(e) Notwithstanding the provisions of this section, any payments
made or received in exchange for withdrawing a short-form application
for an FCC authorization awarded through competitive bidding shall be
subject to the restrictions set forth in Sec. 1.2105(c) of this
chapter.
8. Section 22.131 is amended by revising paragraphs (c)(4)(ii)(A)
and (c)(4)(ii)(B), and by adding a new paragraph (d)(2)(v), to read as
follows:
Sec. 22.131 Procedures for mutually exclusive applications.
* * * * *
(c) * * *
(4) * * *
(ii) * * *
(A) If all of the mutually exclusive applications in a 30-day
notice and cut-off filing group are applications for initial
authorization, the FCC administers competitive bidding procedures in
accordance with Sec. 22.201 through Sec. 22.227 and subpart Q of part 1
of this chapter, as applicable. After such procedures, the application
of the successful bidder may be granted and the other applications may
be dismissed without prejudice.
(B) If any of the mutually exclusive applications in a 30-day
notice and cut-off filing group is an application for modification, the
Commission may attempt to resolve the mutual exclusivity by
facilitating a settlement between the applicants. If a settlement is
not reached within a reasonable time, the FCC may designate all
applications in the filing group for comparative consideration in a
hearing. In this event, the result of the hearing disposes all of the
applications in the filing group.
* * * * *
(d) * * *
(2) * * *
(v) Any ``short-form'' application (filed on FCC Form 175)
requesting a new paging geographic area authorization.
* * * * *
9. Section 22.165 is amended by revising paragraph (d)(1) to read
as follows:
Sec. 22.165 Additional transmitters for existing systems.
* * * * *
(d) * * *
(1) The interfering contours of the additional transmitter(s) must
be totally encompassed by the composite interfering contour of the
existing station (or stations under common control of the applicant) on
the same channel, except that this limitation does not apply to
nationwide network paging stations or in-building radiation systems.
* * * * *
10. A new center heading consisting of Secs. 22.201 through 22.227
is added to read as follows:
Competitive Bidding Procedures
Sec.
22.201 Scope of competitive bidding rules.
22.203 Competitive bidding design for paging licensing.
22.205 Competitive bidding mechanisms.
22.207 Withdrawal, default, and disqualification payments.
22.209 Bidding applications (FCC Form 175 and 175-S short-form).
22.211 Submission of upfront payments and down payments.
22.213 Long-form applications (FCC Form 600).
22.215 Authorization grant, denial, default, and disqualification.
22.217 Bidding credits for small businesses.
22.219 Installment payments for licenses won by small businesses.
22.221 Eligibility for partitioned licenses.
22.223 Definitions concerning competitive bidding process.
22.225 Certifications, discolsures, records maintenance and audits.
22.227 Petitions to deny and limitation on settlements.
Competitive Bidding Procedures
Sec. 22.201 Scope of competitive bidding rules.
Sections 22.201 through 22.227, inclusive (and, unless otherwise
specified in this part, the procedures set forth in part 1, subpart Q,
of this chapter), apply only to competitive bidding (``auction'')
procedures for authorizations as follows:
(a) Paging geographic area authorizations issued pursuant to this
part or to part 90 of this chapter.
(b) [Reserved].
Sec. 22.203 Competitive bidding design for paging licensing.
A simultaneous multiple round auction will be used to choose from
among mutually exclusive initial applications for paging geographic
area authorizations, unless the FCC specifies otherwise by Public
Notice prior to the competitive bidding procedure.
Sec. 22.205 Competitive bidding mechanisms.
(a) Sequencing. The FCC will establish and may vary the sequence in
which paging geographic area authorizations are auctioned.
(b) Grouping. The FCC will determine which licenses will be
auctioned simultaneously or in combination based on interdependency and
administrative circumstances.
[[Page 11630]]
(c) Minimum Bid Increments. The FCC may, by public announcement
before or during an auction, require minimum bid increments in dollar
or percentage terms.
(d) Stopping Rules. The FCC may establish stopping rules before or
during an auction in order to terminate the auction within a reasonable
time.
(e) Activity Rules. The FCC may establish activity rules which
require a minimum amount of bidding activity. In the event that the FCC
establishes an activity rule in connection with a simultaneous multiple
round auction, each bidder may request waivers of such rule during the
auction. The FCC may, by public announcement either before or during an
auction, specify or vary the number of waivers available to each
bidder.
Sec. 22.207 Withdrawal, default, and disqualification payments.
The FCC will impose payments on bidders who withdraw high bids
during the course of an auction, who default on payments due after an
auction terminates, or who are disqualified. When the FCC conducts a
simultaneous multiple round auction, payments will be calculated as set
forth in Secs. 1.2104(g) and 1.2109 of this chapter. When the amount of
such a payment cannot be determined, a deposit of up to 20 percent of
the amount bid on the license will be required.
Sec. 22.209 Bidding applications (FCC Form 175 and 175-S Short-form).
Each applicant to participate in competitive bidding for paging
geographic area authorizations must submit an application (FCC Forms
175 and 175-S) pursuant to the provisions of Sec. 1.2105 of this
chapter.
Sec. 22.211 Submission of upfront payments and down payments.
(a) The FCC will require applicants to submit an upfront payment
prior to the start of a paging auction. The amount of the upfront
payment for each geographic area 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) Each winning bidder in a paging auction must submit a down
payment to the FCC in an amount sufficient to bring its total deposits
up to 20 percent of its winning bid. All winning bidders except small
businesses will be required to make such payment within ten business
days following the release of a Public Notice announcing the close of
bidding. Small businesses must bring their deposits up to 10 percent of
their winning bids within ten business days following the release of a
Public Notice announcing the close of bidding, and must pay an
additional 10 percent prior to licensing, by a date and time to be
specified by Public Notice.
Sec. 22.213 Long-form applications (FCC Form 600).
Each successful bidder for a paging geographic area authorization
must submit a ``long-form'' application (FCC Form 600) within ten
business days after being notified by Public Notice that it is the
winning bidder. Applications for paging geographic area authorizations
on FCC Form 600 must be submitted in accordance with Sec. 1.2107 of
this chapter, all applicable procedures set forth in the rules in this
part, and any applicable Public Notices that the FCC may issue in
connection with an auction. After an auction, the FCC will not accept
long-form applications for paging geographic area authorizations from
anyone other than the auction winners and parties seeking partitioned
licenses pursuant to agreements with auction winners under Sec. 22.221.
Sec. 22.215 Authorization grant, denial, default, and
disqualification.
(a) Each winning bidder, except those eligible for installment
payments, will be required to pay the full balance of its winning bid
within ten business days following Public Notice that the FCC is
prepared to award the authorization.
(b) A bidder that withdraws its bid subsequent to the close of
bidding, defaults on a payment due, or is disqualified, is subject to
the payments specified in Sec. 22.207, Sec. 1.2104(g), or Sec. 1.2109
of this chapter, as applicable.
Sec. 22.217 Bidding credits for small businesses.
(a) A winning bidder that qualifies as a small business or a
consortium of small businesses as defined in Sec. 22.223(b)(1)(i) may
use a bidding credit of 15 percent to lower the cost of its winning
bid. A winning bidder that qualifies as a small business or a
consortium of small businesses as defined in Sec. 22.223(b)(1)(ii) may
use a bidding credit of ten percent to lower the cost of its winning
bid.
(b) Unjust Enrichment:
(1) If a small business that utilizes a bidding credit under this
section seeks to transfer control or assign an authorization to an
entity that is not a small business under Sec. 22.223(b)(1), or seeks
to make any other change in ownership that would result in the licensee
losing eligibility as a small business, the small business must seek
FCC approval and reimburse the U.S. government for the amount of the
bidding credit (plus interest at the rate imposed for installment
financing at the time the license was awarded), as a condition of
approval of such assignment, transfer, or other ownership change.
(2) If a small business that utilizes a bidding credit under this
section seeks to transfer control or assign 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 FCC approval and reimburse the U.S. 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 (plus interest at the rate
imposed for installment financing at the time the license was awarded),
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 3 of the license term the payment will be 75 percent; in year 4
the payment will be 50 percent; and in year 5 the payment will be 25
percent, after which there will be no assessment.
Sec. 22.219 Installment payments for licenses won by small businesses.
(a) Each licensee that qualifies as a small business under
Sec. 22.223(b)(1) may pay the remaining 80 percent of the net auction
price for the license in installment payments over the term of the
authorization. Interest charges shall be fixed at the time of licensing
at a rate equal to the rate for ten-year U.S. Treasury obligations plus
2.5 percent. An eligible licensee may make interest-only payments for
two years. Payments of interest and principal shall be amortized over
the remaining eight years of the license term.
(b) Late Installment Payment.
(1) Any licensee that submits a scheduled installment payment more
than 15 days late will be charged a late payment fee equal to 5 percent
of the amount of the past due payment.
[[Page 11631]]
(2) Payments will be applied in the following order: late charges,
interest charges, principal payments.
(c) Unjust Enrichment:
(1) If a licensee that utilizes installment financing under this
section seeks to assign or transfer control of its license to an entity
not meeting the eligibility standards for installment financing, the
licensee must seek FCC approval and make full payment of the remaining
unpaid principal and unpaid interest accrued through the date of
assignment or transfer as a condition of FCC approval.
(2) If a licensee that utilizes installment financing under this
section seeks to make any change in ownership structure that would
result in the licensee losing eligibility for installment payments, the
licensee shall first seek FCC approval before making such a change in
ownership structure and must make full payment of the remaining unpaid
principal and unpaid interest accrued through the date of such change
in ownership structure as a condition of FCC approval.
Sec. 22.221 Eligibility for partitioned licenses.
If partitioned licenses are being applied for in conjunction with a
license(s) to be awarded through competitive bidding procedures--
(a) The applicable procedures for filing short-form applications
and for submitting upfront payments and down payments contained in this
chapter shall be followed by the applicant, who must disclose as part
of its short-form application all parties to agreement(s) with or among
other entities to partition the license pursuant to this section, if
won at auction (see 47 CFR 1.2105(a)(2)(viii));
(b) Each party to an agreement to partition the license must file a
long-form application (FCC Form 600) for its respective, mutually
agreed-upon geographic area together with the application for the
remainder of the MTA or EA filed by the auction winner.
(c) If the partitioned license is being applied for as a partial
assignment of the MTA or EA license following grant of the initial
license, request for authorization for partial assignment of a license
shall be made pursuant to Sec. 22.137.
Sec. 22.223 Definitions concerning competitive bidding process.
(a) Scope. The definitions in this section apply to Secs. 22.201
through 22.227, unless otherwise specified in those sections.
(b) Small business; consortium of small businesses. (1) A small
business is an entity that either:
(i) Together with its affiliates and controlling principals has
average gross revenues that are not more than $3 million for the
preceding three years; or
(ii) Together with its affiliates and controlling principals has
average gross revenues that are not more than $15 million for the
preceding three years.
(2) For purposes of determining whether an entity meets either the
$3 million or $15 million average annual gross revenues size standard
set forth in paragraph (b)(1) of this section, the gross revenues of
the entity, its affiliates, and controlling principals shall be
considered on a cumulative basis and aggregated.
(3) A consortium of small businesses 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 paragraph (b)(1) of this section. Each individual
member must establish its eligibility as a small business, as defined
in this section. Where an applicant (or licensee) is a consortium of
small businesses, the gross revenues of each small business shall not
be aggregated.
(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. 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). 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). 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
[[Page 11632]]
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). A owns a controlling interest
in Corporation X. A's sister-in-law, B, has a controlling interest
in a paging geographic area authorization 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). If company B holds an option to
purchase a controlling interest in company A, who holds a
controlling interest in a paging geographic area authorization
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). 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 a paging geographic area
authorization 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 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). 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.
Sec. 22.225 Certifications, disclosures, records maintenance and
audits.
(a) Short-form applications: certifications and disclosure. In
addition to certifications and disclosures required by part 1, subpart
Q, of this chapter, each applicant for a paging license which qualifies
as a small business or consortium of small businesses shall append the
following information as an exhibit to its FCC Form 175:
(1) The identity of the applicant's controlling principals and
affiliates, and, if a consortium of small businesses, the members in
the joint venture; and
(2) The applicant's gross revenues, computed in accordance with
Sec. 22.223.
(b) Long form applications: certifications and disclosure. Each
applicant submitting a long-form application for a paging geographic
area authorization and qualifying as a small
[[Page 11633]]
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. 22.223, for each of the following: the
applicant, the applicant's affiliates, the applicant's controlling
principals, and, if a consortium of 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 under Secs. 22.217 through 22.223, including the
establishment of de facto and de jure control; such agreements and
instruments include, but are not limited to, 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 shall maintain at their principal place of business an
updated file of ownership, revenue, and asset information, including
any documents necessary to establish eligibility as a small business
and/or consortium of small businesses under Sec. 22.223. Licensees (and
their successors-in-interest) shall maintain such files for the term of
the license. Applicants that do not obtain the license(s) for which
they applied shall maintain such files until the grant of such
license(s) is final, or one year from the date of the filing of their
short-form application (FCC Form 175), whichever is earlier.
(d) Audits. (1) Applicants and licensees claiming eligibility as a
small business or consortium of small businesses under Secs. 22.217
through 22.223 shall be subject to audits by the Commission. 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 paging service and shall also
include consent to the interview of principals, employees, customers
and suppliers of the applicant or licensee.
(e) Definitions. The terms affiliate, small business, consortium of
small businesses, and gross revenues, used in this section are defined
in Sec. 22.223.
Sec. 22.227 Petitions to deny and limitations on settlements.
(a) Procedures regarding petitions to deny long-form applications
in the paging service will be governed by Secs. 1.2108(b) through
1.2108(d) of this chapter, Sec. 22.130, and Sec. 90.163.
(b) The consideration that an individual or an entity will be
permitted to receive for agreeing to withdraw an application or a
petition to deny will be limited by the provisions set forth in
Sec. 22.129, Sec. 90.162, and Sec. 1.2105(c) of this chapter.
11. Section 22.313 is amended by revising paragraphs (a)(4), (a)(5)
and adding new paragraph (a)(6) to read as follows:
Sec. 22.313 Station identification.
* * * * *
(a) * * *
(4) Stations using Basic Exchange Telephone Radio Systems in the
Rural Radiotelephone Service;
(5) Nationwide network paging stations operating on 931 MHz
channels; or,
(6) Stations operating pursuant to paging geographic area
authorizations.
* * * * *
12. Section 22.352 is amended by revising the introductory
paragraph to read as follows:
Sec. 22.352 Protection from interference.
Public Mobile Service stations operating in accordance with FCC
rules that provide technical channel assignment criteria for the radio
service and channels involved, all other applicable FCC rules, and the
terms and conditions of their authorizations are normally considered to
be non-interfering. If the FCC determines, however, that interference
that significantly interrupts or degrades a radio service is being
caused, it may, in accordance with the provisions of sections 303(f)
and 316 of the Communications Act of 1934, as amended, (47 U.S.C.
303(f), 316), require modifications to any Public Mobile station as
necessary to eliminate such interference.
* * * * *
13. A new Sec. 22.503 is added, to read as follows:
Sec. 22.503 Paging geographic area authorizations.
The FCC considers applications for and issues paging geographic
area authorizations in the Paging and Radiotelephone Service in
accordance with the rules in this section. Each paging geographic area
authorization contains conditions requiring compliance with paragraphs
(h) and (i) of this section.
(a) Channels. The FCC may issue a paging geographic area
authorization for any channel listed in Sec. 22.531 of this part or for
any channel pair listed in Sec. 22.561 of this part.
(b) Paging geographic areas. The paging geographic areas are as
follows:
(1) The Nationwide paging geographic area comprises the District of
Columbia and all States, Territories and possessions of the United
States of America.
(2) The Major Trading Areas (MTAs) as defined in the Rand McNally
1992 Commercial Atlas & Marketing Guide, 123rd Edition, at pages 38-39,
with the following changes and additions:
(i) The Seattle paging geographic area does not include Alaska.
(ii) Alaska is a paging geographic area.
(iii) Guam and the Northern Mariana Islands (combined) are a paging
geographic area.
(iv) Puerto Rico and the United States Virgin Islands (combined)
are a paging geographic area.
(v) American Samoa is a paging geographic area.
(3) The Economic Areas (EAs), as defined by the Department of
Commerce, Bureau of Economic Analysis.
(c) Availability. The FCC may determine whether to issue a paging
geographic area authorization for any specific channel or channel pair
in any specific paging geographic area. The FCC may replace existing
site specific authorizations for facilities on a channel or channel
pair located in a paging geographic area with a paging geographic area
authorization for that channel or channel pair, if in its sole
discretion, the FCC determines that the public interest would be served
by such replacement.
(d) Filing windows. The FCC accepts applications for paging
geographic area authorizations only during filing windows. The FCC
issues Public Notices announcing in advance the dates of the filing
windows, and the
[[Page 11634]]
specific paging geographic areas and channels for which applications
may be accepted.
(e) One grant per geographic area. The FCC may grant one and only
one application for a paging geographic area authorization for any
specific channel or channel pair in any specific paging geographic area
defined in paragraph (b) of this section. Selection from among mutually
exclusive applications for a paging geographic area authorization will
be made in accordance with the procedures in Secs. 22.131 and 22.200
through 22.299. If after the selection process but prior to filing a
``long form'' application, a successful bidder decides to partition the
paging geographic area, the FCC may require and accept multiple ``long
form'' applications from the consortium members.
(f) Exclusive right to expand. During the term of a paging
geographic area authorization, the FCC does not accept, from anyone
other than the paging geographic area licensee, any major application
for authorization to operate a facility that would serve unserved area
within the paging geographic area specified in that paging geographic
area authorization, on the channel specified in that paging geographic
area authorization, unless any extension of the interfering contour of
the proposed facility falls:
(1) Within the composite interfering contour of another licensee;
or,
(2) Into unserved area and the paging geographic area licensee
consents to such extension.
(g) Subsequent applications not accepted. During the term of a
paging geographic area authorization, the FCC does not accept any
application for authorization relating to a facility that is or would
be located within the paging geographic area specified in that paging
geographic area authorization, on the channel specified in that paging
geographic area authorization, except in the following situations:
(1) FCC grant of an application authorizing the construction of the
facility could have a significant environmental effect as defined by
Sec. 1.1307 of this chapter. See Sec. 22.115(a)(5).
(2) Specific international coordination procedures are required,
prior to assignment of a channel to the facility, pursuant to a treaty
or other agreement between the United States government and the
government of Canada or Mexico. See Sec. 22.169.
(3) The paging geographic area licensee or another licensee of a
system within the paging geographic area applies to assign its
authorization or for FCC consent to a transfer of control.
(h) Adjacent geographic area coordination required. Before
constructing a facility for which the interfering contour (as defined
in Sec. 22.537 or Sec. 22.567, as appropriate for the channel involved)
would extend into another paging geographic area, a paging geographic
area licensee must obtain the consent of the relevant co-channel paging
geographic area licensee, if any, into whose area the interfering
contour would extend. In the event that there is no co-channel paging
geographic area licensee from whom to obtain consent in the area into
which the interfering contour would extend, the facility may be
constructed and operated subject to the condition that, at such time as
the FCC issues a paging geographic area license for that adjacent
geographic area, either consent must be obtained or the facility
modified or eliminated such that the interfering contour no longer
extends into the adjacent geographic area.
(i) Protection of existing service. All facilities constructed and
operated pursuant to a paging geographic area authorization must
provide co-channel interference protection in accordance with
Sec. 22.537 or Sec. 22.567, as appropriate for the channel involved, to
all co-channel facilities of other licensees within the paging
geographic area that were authorized on May 12, 1997 and have remained
authorized continuously since that date.
(j) Site location restriction. The transmitting antenna of each
facility constructed and operated pursuant to a paging geographic area
authorization must be located within the paging geographic area
specified in the authorization.
(k) Coverage requirements. Failure by a paging geographic area
licensee to meet either of the coverage requirements in paragraphs
(k)(1) and (k)(2) of this section, or alternatively, the substantial
service requirement in paragraph (k)(3) of this section, may result in
automatic termination or non-renewal of a paging geographic area
license. For the purpose of this paragraph, to ``cover'' area means to
include geographic area within the composite of the service contour(s)
determined by the methods of Secs. 22.537 or 22.567, as appropriate for
the particular channel involved. Licensees may determine the population
of geographic areas included within their service contours using either
the 1990 census or the 2000 census, but not both.
(1) No later than three years after the initial grant of a paging
geographic area authorization, the licensee must construct or otherwise
acquire and operate sufficient facilities to cover one third of the
population in the paging geographic area. The licensee must notify the
FCC (FCC Form 489), no later than 15 days after the end of the three
year period, either that it has satisfied this requirement or that it
plans to satisfy the alternative requirement to provide substantial
service in accordance with paragraph (k)(3) of this section.
(2) No later than five years after the initial grant of a paging
geographic area authorization, the licensee must construct or otherwise
acquire and operate sufficient facilities to cover two thirds of the
population in the paging geographic area. The licensee must notify the
FCC (FCC Form 489), no later than 15 days after the end of the five
year period, either that it has satisfied this requirement or that it
has satisfied the alternative requirement to provide substantial
service in accordance with paragraph (k)(3) of this section.
(3) As an alternative to the coverage requirements of paragraphs
(k)(1) and (k)(2) of this section, the paging geographic area licensee
may demonstrate that, no later than five years after the initial grant
of its paging geographic area authorization, it provides substantial
service to the paging geographic area. ``Substantial service'' means
service that is sound, favorable, and substantially above a level of
mediocre service that would barely warrant renewal.
14. Section 22.507 is revised to read as follows:
Sec. 22.507 Number of transmitters per station.
This section concerns the number of transmitters licensed under
each station authorization in the Paging and Radiotelephone Service,
other than paging geographic area authorizations.
(a) Operationally related transmitters. Each station must have at
least one transmitter. There is no limit to the number of transmitters
that a station may comprise. However, transmitters within a station
should be operationally related and/or should serve the same general
geographical area. Operationally related transmitters are those that
operate together as a system (e.g., trunked systems, simulcast
systems), rather than independently.
(b) Split of large systems. The FCC may split wide-area systems
into two or more stations for administrative convenience. Except for
nationwide paging and other operationally related transmitters,
transmitters that are widely separated geographically are not licensed
under a single authorization.
(c) Consolidation of separate stations. The FCC may consolidate
separately authorized stations upon request (FCC
[[Page 11635]]
Form 600) of the licensee, if appropriate under paragraph (a) of this
section.
(d) Replacement of site-by-site authorizations with single
authorization. After a paging geographic area authorization for a
channel has been issued, the FCC may, on its own motion, replace the
authorization(s) of any other licensee (for facilities located within
that paging geographic area on that channel) with a single replacement
authorization.
15. Section 22.529 is revised to read as follows:
Sec. 22.529 Application requirements for the Paging and Radiotelephone
Service.
In addition to information required by Subparts B and D of this
part, applications for authorization in the Paging and Radiotelephone
Service must contain the applicable information and data described in
this section.
(a) Administrative information. The following information,
associated with Form FCC 600, Schedule A, is required as indicated.
Each application of any type, including applications for paging
geographic area authorizations, must contain one and only one Schedule
A.
(1) The purpose of the filing is required for each application of
any type.
(2) The geographic area designator, channel and geographic area
name are required only for each application for a paging geographic
area authorization.
(3) The FCC control point number, if any, the location (street
address, city or town, state), the telephone number and an indication
of the desired database action are required only for each application
proposing to add or delete a control point.
(4) The FCC location number, file number and location (street
address, city or town, state) of authorized facilities that have not
been constructed are required only for each application requesting an
extension of time to construct those facilities.
(b) Technical data. The following data, associated with FCC Form
600, Schedule B, are required as indicated for each application that is
not an application for a paging geographic area authorization.
Applications for a paging geographic area authorization must not
contain Schedule B. Other type of applications may contain as many
Schedule Bs as are necessary for the intended purpose.
(1) For each transmitting antenna site to be added, deleted or
modified, the following are required: An indication of the desired
database action, the FCC location number, if any, the street address or
other description of the transmitting antenna site, the city, county
and state, the geographical coordinates (latitude and longitude),
correct to 1 second, of the transmitting antenna site (NAD
27 required, NAD 83 optional), and in the case of a proposed relocation
of a transmitting antenna, the FCC location number and geographical
coordinates, correct to 1 second, of the current
transmitting antenna site, and an indication of the datum (NAD 27 or
NAD 83) to which the geographical coordinates of the current location
are referenced.
(2) For each transmitting antenna site to be added, deleted or
modified, the following supplementary information is required: An
indication as to whether or not the transmitting antenna site is within
200 kilometers (124 miles) of the U.S.-Mexico border, and an indication
as to whether or not the transmitting antenna site is North of Line A
or East of Line C. Line A and Line C are defined in Sec. 2.1 of this
chapter. For each adjacent geographic area within 200 kilometers (124
miles) of each transmitting antenna site to be added, deleted or
modified, the geographic area designator and name, and the shortest
distance (in kilometers) to the boundary of that geographic area.
(3) For each antenna to be added, deleted or modified, the
following is required: An indication of the desired database action, an
indication of whether the antenna already exists or is merely proposed,
the FCC antenna number, if any, the type of antenna (e.g., collinear,
Yagi, half-wave, corner reflector, panel, etc.), the name of the
antenna manufacturer and the model number of the antenna, the height
(in meters) above average terrain of the center of radiation of the
antenna, the beamwidth of the main lobe of the horizontal radiation
pattern of the electric field of the antenna, the height (in meters) to
the tip of the antenna above ground level, a polar plot of the
horizontal gain pattern of the antenna, the antenna gain in the maximum
lobe and the electric field polarization of the wave emitted by the
antenna when installed as proposed.
(i) For each transmitter to be added, deleted or modified, the
following is required: the FCC transmitter number, if any, an
indication of the desired database action, the center frequency of the
requested channel, the transmitter classification (e.g. base, fixed
mobile), the designator for any non-standard emission type to be used,
including bandwidth and modulation type, and the maximum effective
radiated power.
(ii) For each of the eight cardinal radials, the antenna height
above the average elevation along the radial, and the effective
radiated power of each transmitter in the direction of the radial.
(iii) For each transmitter proposed to transmit on a channel
reserved for point-to-multipoint operation involving transmission to
four or more points of communications (i.e. base transmitters), the
following is required for each point of communication: an indication of
the desired database action, the FCC transmitter number or other key
indicator (e.g., I, II, III, IV), the location (city or town, state),
and the geographical coordinates (latitude and longitude, NAD 27).
16. Section 22.531 is amended by revising the preceding centered
heading, the section heading and introductory text, and adding a new
paragraph (f), to read as follows:
Paging Operation
Sec. 22.531 Channels for paging operation.
The following channels are allocated for assignment to base
transmitters that provide paging service, either individually or
collectively under a paging geographic area authorization. Unless
otherwise indicated, all channels have a bandwidth of 20 kHz and are
designated by their center frequencies in MegaHertz.
* * * * *
(f) For the purpose of issuing paging geographic area
authorizations, the paging geographic areas used for the UHF channels
are the MTAs (see Sec. 22.503(b)(2)), and the paging geographic areas
used for the low and high VHF channels are the EAs (see
Sec. 22.503(b)(3)).
17. Section 22.539 is amended by revising paragraph (e) to read as
follows:
Sec. 22.539 Additional channel policies.
* * * * *
(e) Additional transmitters on same channel. Notwithstanding other
provisions of this section, the following applications are not
considered to be requests for an additional paging channel:
(1) Applications for transmitters to be located in the same
geographic area as an authorized station controlled by the applicant,
and to operate on the same paging channel;
(2) Applications for transmitters to be located within a paging
geographic area for which the applicant holds the paging geographic
area authorization for the requested channel; and,
(3) Applications for paging geographic area authorizations.
* * * * *
Section 22.551 is revised to read as follows:
[[Page 11636]]
Sec. 22.551 Nationwide network paging service.
The rules in this section govern the application for and provision
of nationwide network paging service on the channels reserved
specifically for such service in Sec. 22.531(b).
(a) Nationwide network providers; organizers. If and when a
nationwide network paging channel becomes available for assignment, the
FCC will issue a Public Notice inviting applications from eligibles
seeking to provide or organize a nationwide network paging service. The
Public Notice will provide complete details regarding application
requirements and procedures.
(b) Licensing. The FCC may issue a paging geographic area
authorization to the nationwide network provider or organizer. All
transmissions of nationwide network messages on the channels reserved
for such service in Sec. 22.531(b) are authorized solely under the
authorization(s) of the nationwide network provider or organizer,
notwithstanding whether or not the messages pass through facilities
owned, operated or licensed to affiliated local carriers.
Section 22.559 is amended by revising the heading and introductory
text to read as follows:
Sec. 22.559 Paging application requirements.
In addition to information required by Subparts B and D and
Sec. 22.529, applications for authorization to operate a paging
transmitter on the channels listed in Sec. 22.531, other than
applications for a paging geographic area authorization, must contain
the applicable supplementary information described in this section.
* * * * *
Section 22.561 is amended by revising the introductory text to read
as follows:
Sec. 22.561 Channels for one-way or two-way mobile operation.
The following channels are allocated for paired assignment to
transmitters that provide (or support other transmitters that provide)
one-way or two-way public land mobile service, either individually or
collectively under a paging geographic area authorization. The paging
geographic areas used for these channels are the EAs (see
Sec. 22.503(b)(3)). These channels may be assigned for use by mobile or
base transmitters as indicated, and or by fixed transmitters (including
control, repeater or other fixed transmitters). The mobile channels may
also be assigned for use by base or fixed transmitters under certain
circumstances (see Sec. 22.567(h)). Unless otherwise indicated, all
channels have a bandwidth of 20 kHz and are designated by their center
frequencies in MegaHertz.
* * * * *
Section 22.569 is amended by revising paragraph (d) to read as
follows:
Sec. 22.569 Additional channel policies.
* * * * *
(d) Additional transmitters on same channel. Notwithstanding other
provisions of this section, the following applications are not
considered to be requests for an additional channel:
(1) Applications for transmitters to be located in the same
geographic area as an authorized station controlled by the applicant,
and to operate on the same paging channel;
(2) Applications for transmitters to be located within a paging
geographic area for which the applicant holds the paging geographic
area authorization for the requested channel; and,
(3) Applications for paging geographic area authorizations.
* * * * *
Section 22.589 is amended by revising the introductory text to read
as follows:
Sec. 22.589 One-way or two-way application requirements.
In addition to information required by subparts B and D and
Sec. 22.529, applications for authorization to operate a paging
transmitter on the channels listed in Sec. 22.531, other than
applications for a paging geographic area authorization, must contain
the applicable supplementary information described in this section.
* * * * *
Sec. 22.717 [Amended]
Section 22.717 is amended by removing paragraph (c).
A new Sec. 22.721 is added to read as follows:
Sec. 22.721 Geographic area authorizations.
Eligible persons may apply for a paging geographic area
authorization in the Rural Radiotelephone Service, on the channel pairs
listed in Sec. 22.725, by following the procedures and requirements set
forth in Sec. 22.503 for paging geographic area authorizations.
25. A new Sec. 22.723 is added to read as follows:
Sec. 22.723 Secondary site-by-site authorizations.
Authorizations for new facilities (including new sites and
additional channel pairs for existing sites) in the Rural
Radiotelephone Service (including BETRS facilities) may be granted
after May 12, 1997 only on the condition that such authorizations shall
be secondary to any existing or future co-channel paging geographic
area authorization in the Paging and Radiotelephone Service or the
Rural Radiotelephone Service. If the paging geographic area licensee
notifies the Rural Radiotelephone Service licensee that operation of a
co-channel secondary facility must be discontinued because it may cause
interference to existing or planned facilities, the Rural
Radiotelephone Service licensee must discontinue operation of that
facility on the particular channel pair involved no later than six
months after such notice.
II. Part 90 of Chapter I of Title 47 of the Code of Federal
Regulations is amended as follows:
1. The authority citation for part 90 continues to read as follows:
PART 90--PRIVATE LAND MOBILE RADIO SERVICES
Authority: Sec. 4, 303, 309, and 332, 48 Stat. 1066, 1082, as
amended; 47 U.S.C 154, 303, 309, and 332, unless otherwise noted.
2. Section 90.162 is amended by adding paragraph (f) to read as
follows:
Sec. 90.162 Agreements to dismiss applications, amendments, or
pleadings
* * * * *
(f) Notwithstanding the provisions of this section, any payments
made or received in exchange for withdrawing a short-form application
for an FCC authorization awarded through competitive bidding shall be
subject to the restrictions set forth in section Sec. 1.2105(c) of this
chapter.
3. A new Sec. 90.493 is added to read as follows:
Sec. 90.493 Paging operations on exclusive channels in the 929-930 MHz
band.
Paging operations on the exclusive channels in the 929-930 MHz band
are subject to the rules set forth in this section.
(a) Exclusive channels. The center frequencies of the channels in
the 929-930 MHz band that may be assigned on an exclusive basis are as
follows: 929.0125, 929.1125, 929.1375, 929.1875, 929.2125, 929.2375,
929.2875, 929.3125, 929.3375, 929.3625, 929.3875, 929.4125, 929.4375,
929.4625, 929.4875, 929.5125, 929.5375, 929.5625, 929.5875, 929.6125,
929.6375, 929.6625, 929.6875, 929.7125, 929.7375, 929.7625, 929.7875,
929.8125, 929.8375, 929.8625, 929.8875, 929.9125, 929.9375, 929.9625,
and 929.9875 MHz.
(b) Part 22 licensing, construction and operation rules apply.
Licensing, construction and operation of paging stations on the
exclusive channels in the 929-930 MHz band are subject to the
application filing, licensing procedure, auction procedure,
construction, operation and notification rules and requirements that
are set forth in part 22
[[Page 11637]]
of this chapter for paging stations operating in the 931-932 MHz band,
instead of procedures elsewhere in this part.
(c) Part 22 power limits apply; type acceptance required. Paging
operations on the exclusive channels in the 929-930 MHz band are
subject to the transmitting power limits set forth in part 22 of this
chapter for paging stations operating in the 931-932 MHz band, instead
of power limits elsewhere in this part. Transmitters used on the
exclusive channels in the 929-930 MHz band must be of a type accepted
under either part 22 of this chapter or this part (or both).
4. Section 90.494 is amended by revising the heading, paragraphs
(a), (f) and (g), to read as follows:
Sec. 90.494 Paging operations on shared channels in the 929-930 MHz
band.
(a) This section applies to licensing of paging stations on the
shared (non-exclusive) channels in the 929-930 MHz band. The center
frequencies of these channels are listed in paragraph (b) of this
section.
* * * * *
(f) The effective radiated power for base stations providing paging
service on the shared channels must not exceed 3500 Watts.
(g) Licenses may be granted on these shared paging channels only
for expansion (addition of new sites or relocation of existing sites)
or other modification, assignment or transfer of control of existing,
licensed private (including Special Emergency Radio Service) or
commercial paging systems, and for new private (including Special
Emergency Radio Service), internal-use paging systems. Any application
for authority to operate a new commercial paging system on any of these
shared channels is unacceptable for filing.
Sec. 90.495 [Removed]
5. Section 90.495 is removed.
Sec. 90.496 [Removed]
6. Section 90.496 is removed.
[FR Doc. 97-6092 Filed 3-11-97; 8:45 am]
BILLING CODE 6712-01-P
