[Federal Register Volume 62, Number 82 (Tuesday, April 29, 1997)]
[Rules and Regulations]
[Pages 23148-23176]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 97-9711]
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FEDERAL COMMUNICATIONS COMMISSION
47 CFR Parts 1, 2, 74, 78, 95, and 101
[CC Docket No. 92-297: FCC 97-82]
Use of the 28 GHz and 31 GHz Bands for Local Multipoint
Distribution Service
AGENCY: Federal Communications Commission.
ACTION: Final rule.
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SUMMARY: The Commission adopts a Second Report and Order, Order on
Reconsideration, and Fifth Notice of Proposed Rulemaking in this
proceeding. A summary of the Fifth Notice of Proposed Rulemaking
portion of this decision was published in the April 7, 1997 issue of
the Federal Register (62 FR 16514),and seeks comment on specific rules
to be applied for the partitioning and disaggregation of LMDS licenses.
The Second Report and Order designates an additional 300 megahertz of
spectrum in the 31 GHz band to LMDS and adopts service rules for LMDS,
as well as competitive bidding rules for LMDS spectrum. The Order on
Reconsideration denies petitions for reconsideration of the
Commission's dismissal of applications for waiver of the Commission's
point-to-point rules governing the 28 GHz band. The Second Report and
Order contains modified information collections subject to the
Paperwork Reduction Act of 1995 and has been submitted to the Office of
Management and Budget (OMB) for review under the PRA. OMB, the general
public, and other Federal agencies are invited to comment on the
modified information collections contained in this proceeding.
DATES: The rules in this document will become effective June 30, 1997;
applications to modify existing 31 GHz licenses must be filed no later
than July 14, 1997. Written comments by the public on the revised
information collections are due by April 21, 1997.
ADDRESSES: Secretary, Federal Communications Commission, Washington,
D.C. 20554. In addition to filing comments with the Secretary, a copy
of any comments on the information collections contained herein should
be submitted to Dorothy Conway, Federal Communications Commission, Room
234, 1919 M Street, N.W., Washington, D.C. 20554, or via the Internet
to dconway@fcc.gov., and to Timothy Fain, OMB Desk Officer, 10236 NEOB,
725--17th Street, N.W., Washington, D.C. 20503 or via the Internet at
fain__t@al.eop.gov. For additional information regarding the
information collections contained herein, contact Dorothy Conway at
202-418-0217 or via the Internet at dconway@fcc.gov.
FOR FURTHER INFORMATION CONTACT: Bob James, Private Wireless Division,
(202)418-0680, Mark Bollinger or Jay Whaley, Auctions Division,
(202)418-0660, or Joseph Levin or Jane Phillips, Policy Division, (202)
418-1310.
SUPPLEMENTARY INFORMATION: This is a synopsis of the Second Report and
Order and Order on Reconsideration segment of the Second Report and
Order, Order on Reconsideration and Fifth Notice of Proposed Rulemaking
in CC Docket No. 92-297, PP-22, FCC 97-82, adopted March 11, 1997, and
released March 13, 1997. A summary of the Fifth Notice of Proposed
Rulemaking portion of this decision was published in the April 7, 1997
issue of the Federal Register (62 FR 16514). The complete text of this
decision is available for inspection and copying during normal business
hours in the FCC Reference Center (Room 239), 1919 M Street, N.W.,
Washington, D.C., and also may be purchased from the Commission's copy
contractor, International Transcription Service, (202) 857-3800, 2100 M
Street, N.W., Suite 140, Washington, DC 20037.
Paperwork Reduction Act
The Second Report and Order contains a modified information
collection. The Commission, as part of its continuing effort to reduce
paperwork burdens, invites the general public and OMB to comment on the
information collections contained in the Second Report and Order, as
required by the Paperwork Reduction Act of
[[Page 23149]]
1995, Public Law 104-13. Public and agency comments are due May 29,
1997; OMB notification of action is due June 30, 1997. Comments should
address: (a) Whether the proposed collection of information is
necessary for the proper performance of the functions of the
Commission, including whether the information shall have practical
utility; (b) the accuracy of the Commission's burden estimates; (c)
ways to enhance the quality, utility, and clarity of the information
collected; and (d) ways to minimize the burden of the collection of
information on the respondents, including the use of automated
collection techniques or other forms of information technology.
OMB Approval Number: 3060-0531.
Title: Redesignation of 27.5 GHz Frequency Band, Establishing Rules
and Policies for Local Multipoint Distribution (NPRM CC Docket No. 92-
297).
Form No.: N/A.
Type of Review: Reinstatement, with change, of a previously
approved collection for which approval has expired.
Respondents: Business or other for-profit entities.
Number of Respondents: 986.
Estimated Time Per Response: 41 hours.
Total Annual Burden: 30,381.5 hours.
Total Annual Cost: $2,025,400.
Needs and Uses: The information requested will be used by FCC
personnel to determine whether the applicant is qualified legally and
technically to be licensed to use the radio spectrum. The original NPRM
sought comment on rules governing a substantial number of filings that
an estimated 10,000 applicants would make. It was estimated that an
average of 8 hours per respondent would be required to comply with the
proposed requirements. The Second Report and Order revised these
requirements and burdens to three specific burdens involving frequency
coordination, discontinuance of service, and certification of
construction requirements/renewal expendancy for an estimated 986
respondents that would take an average of 41 hours to comply with the
rules.
I. Designation and Licensing of Spectrum
A. 31 GHz Band and Number of Licenses
1. The Second Report and Order allocates an additional 300
megahertz of spectrum in the 31 GHz band (31.0-31.3) for LMDS. It also
adopts the use of Basic Trading Areas (BTAs) for licensing areas. Two
licenses, of unequal size, are proposed for each BTA. The larger
license is for 1150 megahertz, 1000 megahertz of which is located in
the 28 GHz band (27.5-29.5) and 150 of which is located in the center
of the 300 megahertz segment in the 31 GHz band. The smaller license is
for a total of 150 megahertz, consisting of 75 megahertz at either end
of the 150 megahertz segment in the 31 GHz band allocated to LMDS.
Incumbent governmental licensees and private business users presently
operating in the 75-megahertz segments of the band encompassed by the
smaller, 150 megahertz LMDS license, will be accorded protection from
interference from the LMDS operator in that band. (No interference
protection will be accorded to incumbents operating on a temporary
basis in the 31 GHz band.) The reverse will be the case with the 1150
megahertz LMDS license. The 1150 megahertz LMDS licensee will be
accorded protection from interference from all incumbents operating in
the center 150 megahertz segment of the 31 GHz band. However, incumbent
governmental licensees and private business users in that segment will
be permitted to migrate to the 75-megahertz segments encompassed by the
smaller LMDS license in order to obtain the protections offered such
incumbents in that band, provided they file an application to modify
their licenses no later than July 14, 1997. These applications will not
be subject to petitions to deny. Applications for new facilities in the
31 GHz band are frozen.
B. Eligibility
2. LECs and cable companies are barred from owning 1150 megahertz
LMDS licenses that are ``in-region.'' Incumbent LECs and cable
companies may participate fully in the auction of 1150 MHz licenses,
including the auction of in-region licenses, so long as they come into
compliance with the restrictions within 90 days by divesting telephone
or cable assets, or partitioning the LMDS license. An incumbent will be
defined as in-region if its authorized service area represents 10
percent or more of the population of the BTA; a 20 percent or greater
ownership level will constitute an attributable interest in a license.
These restrictions will terminate on the third anniversary of the close
of the auction, unless extended by the Commission. Parties may seek
waivers to shorten the restriction period.
C. Buildout and Flexibility of Use
3. LMDS licensees will be subject to liberal construction
requirements. LMDS licensees may disaggregate or partition a license at
any time, with certain restrictions for licensees taking advantage of
bidding credits or installment payments. (The Fifth Notice of Proposed
Rulemaking portion of this decision proposes specific provisions
regarding partitioning and disaggregation.) Licensees also have the
flexibility to choose whether they want to offer common carrier or
private carrier services, or both.
D. Petitions for Reconsideration and Pioneer's Preference
4. The Commission has also deferred decision on CellularVision's
pioneer's preference request until completion of a peer review of
CellularVision's technology, and issues concerning the pioneer's
preference license for the portion of the New York Basic Trading Area
lying outside of the New York Primary Metropolitan Statistical Area
already licensed to CellularVision are pending the outcome of such
review process and final disposition of its preference request.
Finally, the Order denies the petitions for reconsideration of the
Commission's decision to dismiss waiver applications filed by entities
seeking a license under Hye Crest Management, Inc.
II. Competitive Bidding Rules and Procedures
A. Use of Competitive Bidding
5. The Commission concludes that auctioning LMDS licenses would
further the Communications Act's objectives. First, based on its
previous experience in conducting auctions for other services, the
Commission believes that use of competitive bidding to award LMDS
licenses, as compared with other licensing methods, would speed the
development and deployment of this new technology, products and
services to the public with minimal administrative or judicial delay,
and would encourage efficient use of the spectrum as required by
Sections 309(j)(3)(A) and 309(j)(3)(D), 47 U.S.C. Secs. 309(j)(3)(A) &
309(j)(3)(D). Second, auctions meet the objectives of Section
309(j)(3)(B), 47 U.S.C. Sec. 309(j)(3)(B), because the Commission is
adopting competitive bidding rules that foster economic opportunity and
the distribution of licenses among a wide variety of applicants,
including small businesses.
6. The Commission also has determined that the use of auctions to
assign LMDS licenses will advance the goals of 47 U.S.C.
Sec. 309(j)(3)(C) by enabling the public to recover a portion of the
value of the public spectrum. If the Commission uses a licensing
[[Page 23150]]
methodology that ensures that licenses are assigned to those who value
them most highly, it follows that such licensees can be expected to
make the most efficient and intensive use of the spectrum. Because LMDS
is eligible for competitive bidding under the statutory requirements
set forth in 47 U.S.C. Sec. 309(j)(2)(A), the Commission is precluded
from using lotteries to award LMDS licenses. Accordingly, the
Commission rejects the suggestion that the Commission use lotteries to
award LMDS licenses.
7. The Commission also declines at this time to set aside LMDS
spectrum for educational purposes. While the Commission is not adopting
public interest programming obligations at this time, it reserves the
right to do so on LMDS providers who provide video services. Licensees
are specifically on notice that the Commission may adopt public
interest requirements at a later date. If public interest obligations
are found to be warranted, one option would be to adopt rules similar
to those Congress enacted for Direct Broadcast Satellite providers,
including a 4 percent to 7 percent set-aside of capacity for non-
commercial educational and informational programming. See 47 U.S.C.
Sec. 335. Another option would be to hold LMDS licensees to a ``promise
versus performance'' type standard.
B. Competitive Bidding Design for LMDS Licenses
8. Based on the record in this proceeding and its successful
experience conducting simultaneous multiple round auctions for other
services, the Commission believes a simultaneous multiple round auction
is the most appropriate competitive bidding design for LMDS. First, for
certain bidders, the value of these licenses will be significantly
interdependent because of the desirability of aggregation across
geographic regions. Simultaneous multiple round bidding will generate
more information about license values during the course of the auction,
and provide bidders with more flexibility to pursue back-up strategies,
than auctioning licenses separately. Simultaneous multiple round
bidding therefore is most likely to award licenses to the bidders who
value them the most highly and to provide bidders with the greatest
likelihood of obtaining the license combinations that best satisfy
their service needs. The Commission currently does not have the
operational capability to use combinatorial bidding but will consider
doing so in future auctions.
9. The Commission will conduct simultaneous auctions of two
licenses in each of 492 BTAs for LMDS, for a total of 984 licenses.
Each BTA will have one license consisting of 1,150 megahertz: 1,000
megahertz in the 28 GHz band (27.5-28.35 GHz and 29.1-29.25 GHz) and
150 megahertz in the 31 GHz band (31.075 GHz-31.225 GHz); and a second
license consisting of 150 megahertz in the 31 GHz band (31.0-31.075 GHz
and 31.225-31.399 GHz) will be auctioned concurrently. The Commission
will not include the New York BTA at this time in the licensing process
because of the outstanding issues connected with the CellularVision
pioneer preference request.
10. The Commission will use the competitive bidding procedures of
part 1, subpart Q, for LMDS with modifications as indicated below.
1. Bid Increments and Tie Bids
11. As it has done for previous auctions, the Commission will
announce by Public Notice prior to the LMDS auction the general
guidelines for bid increments. The Commission retains the discretion to
set and, by announcement before or during the auction, vary the minimum
bid increments for individual licenses or groups of licenses. Where a
tie bid occurs, the Commission will determine the high bidder by the
order in which the Commission received the bids. The Commission retains
the discretion to vary both absolute and percentage bid increments for
specific licenses.
2. Stopping Rules
12. The Commission will use a simultaneous stopping rule for LMDS.
The auction will close after one round passes in which no new valid
bids, proactive activity rule waivers, or bid withdrawals are
submitted. The Commission will retain the discretion, however, to keep
the auction open even if no new valid bids, proactive waivers, or bid
withdrawals are submitted. In the event that this discretion is
exercised, the effect will be the same as if a bidder had submitted a
proactive waiver. This will help ensure that the auction is completed
within a reasonable period of time, because it will enable the
Commission to utilize larger bid increments, which speed the pace of
the auction, without risking premature closing of the auction. Since it
also imposes an activity rule, the Commission believes that allowing
simultaneous closing for all licenses will afford bidders flexibility
to pursue back-up strategies without running the risk that bidders will
hold back their bidding until the final rounds. In addition, the
Commission retains the discretion to declare after forty rounds that
the auction will end after some specified number of additional rounds.
If this option is used, the Commission will only accept bids on
licenses where the high bid has increased in at least one of the last
three rounds.
3. Duration of Bidding Rounds
13. Because in simultaneous multiple round auctions bidders may
need a significant amount of time to evaluate back-up strategies and
develop their bidding plans, the Commission reserves the discretion to
vary the duration and frequency of bidding rounds. The Commission will
announce any changes to the duration of and intervals between bidding
either by Public Notice prior to the auction or by announcement during
the auction.
4. Bid Withdrawals
14. Because the Commission is awarding two licenses of different
size (1,150 megahertz and 150 megahertz) per geographic area, the
Commission finds it unnecessary to address the merits of comments
predicated on the assumption that the Commission would award two LMDS
licenses of equal size. The Commission will not make use of a bid
withdrawal period within each round as in previous auctions, but will
permit a high bidder to withdraw the high bid from a previous round
subject to the bid withdrawal payments discussed below. If a high bid
is withdrawn (and not bid upon in the same round), the license will be
offered in the next round at the second highest bid price. The
Commission may at its discretion adjust the offer price in subsequent
rounds until a valid bid is received on the license. In addition, to
prevent a bidder from strategically delaying the close of the auction,
the Commission retains the discretion to limit the number of times that
a bidder may re-bid on a license from which it has withdrawn a high
bid.
5. Activity Rules
15. For LMDS auctions, the Commission will use the Milgrom-Wilson
activity rule with some variations. Milgrom and Wilson divide the
auction into three stages. The Commission will set, by announcement
before the auction, the minimum required activity levels for each stage
of the auction. The Commission retains the discretion to set and, by
announcement before or during the auction, vary the required minimum
activity levels (and associated eligibility calculations) for each
auction stage. Retaining this flexibility will improve its ability to
[[Page 23151]]
control the pace of the auction and help ensure that the auction is
completed within a reasonable period of time.
16. For the LMDS auctions, the Commission will use the following
transition guidelines: The auction will begin in Stage One and will
generally move from Stage One to Stage Two and from Stage Two to Stage
Three when the auction activity level is below ten percent for three
consecutive rounds. Under no circumstances can the auction revert to an
earlier stage. However, the Commission retains the discretion to
determine and announce during the course of an auction when, and
whether, to move from one auction stage to the next, based on a variety
of measures of bidder activity, including, but not limited to, the
auction activity level as defined above, the percentage of licenses
(measured in terms of bidding units) on which there are new bids, the
number of new bids, and the percentage increase in revenue.
17. 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, the Commission will provide
bidders with a limited number of waivers of the above-described
activity rule. The Commission believes that some waiver procedure is
needed because the Commission does not wish to reduce a bidder's
eligibility due to an accidental act or circumstances not under the
bidder's control.
18. The Commission will provide bidders with five activity rule
waivers that may be used in any round during the course of the auction.
If a bidder's activity is below the required activity level, a waiver
will be applied automatically. That is, for example, if a bidder fails
to submit a bid in a round, and its activity from any standing high
bids (that is, high bids at the end of the previous round) falls below
its required activity level, a waiver will be automatically applied. A
waiver will preserve current eligibility in the next round. An activity
rule waiver applies to an entire round of bidding and not to a
particular BTA service area.
19. Bidders will be afforded an opportunity to override the
automatic waiver mechanism when they place a bid if they intentionally
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 will be
permanently reduced, 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 new valid bids will not keep the auction
open. Bidders will have the option of entering a proactive activity
rule waiver during any round. If a bidder submits a proactive waiver in
a round in which no other bidding activity occurs, the auction will
remain open.
20. 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.
C. Procedural and Payment Issues
21. The Commission will generally follow the procedural and payment
rules established in subpart Q of part 1 of the Commission's Rules. Any
service-specific modifications based on the particular characteristics
of LMDS will be set forth by Public Notice by the Wireless
Telecommunications Bureau.
1. Upfront Payments
22. The Commission recognizes that for purposes of LMDS the formula
of $0.02 per MHz-pop can yield very high upfront payments given the
amount of spectrum offered in each service area. The Commission
believes that the concerns of commenters about potentially high
payments may be alleviated by lowering the amount per MHz-pop used to
calculate the payment. The Commission delegates authority to the Chief,
Wireless Telecommunications Bureau, to determine an appropriate
calculation for the upfront payment, which the Bureau will announce by
Public Notice. In calculating the upfront payment, the Bureau should
take into consideration the value of similar spectrum.
2. Down Payments, Long-Form Applications, and Payment in Full
23. The Commission will require all winning bidders in LMDS
auctions to supplement their upfront payments with a down payment
sufficient to bring their total deposits up to 20 percent of their
winning bid(s). Winning bidders, except for small businesses and
businesses with annual gross revenues between $40 million and $75
million, will be required to submit this payment by wire transfer to
the Commission's lock-box bank within ten business days following
release of a public notice announcing the close of bidding and high
bidders. Winning bidders will also be required to file a long-form
application within ten business days of the announcement of the high
bidders. If, pursuant to section 309(d) of the Communications Act, the
Commission dismisses or denies any and all petitions to deny filed
against a long-form application, or if no petitions to deny are filed,
the Commission will issue an announcement to this effect, and the
winning bidder will then have ten business days to submit the balance
of its winning bid, unless it qualifies for an installment payment
plan.
3. Bid Withdrawal, Default, and Disqualification Payments
24. For the LMDS auctions, the Commission adopts the bid
withdrawal, default and disqualification rules contained in sections
1.2104(g) and 1.2109 of the Commission's Rules. 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 the subsequent
high bidder also withdraws its bid, that bidder will be required to pay
an amount equal to the difference between its withdrawn bid and the
amount of the subsequent winning bid the next time the license is
offered by the Commission. If a license that is the subject of
withdrawal or default is not re-auctioned, but is instead offered to
the highest losing bidders in the initial auction, the ``winning bid''
refers to the bid of the highest bidder who accepts the offer. The
Commission recently addressed the issue of how its bid withdrawal
provisions apply to bids that are mistakenly placed and withdrawn in a
decision involving the 900 MHz Specialized Mobile Radio (``SMR'') and
broadband personal communications services (``PCS'') C block auctions.
See Atlanta Trunking Associates, Inc. and MAP Wireless L.L.C. Request
To Waive Bid Withdrawal Payment Provisions, FCC 96-203, Order (released
May 3, 1996) (summarized in 61 FR 25,807 (May 23, 1996)), recon.
pending.
25. If a bidder has withdrawn a bid or defaulted on one or more
licenses 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 on such licenses. When it becomes possible
to calculate and assess the withdrawal or default payment, any excess
deposit will be refunded. Upfront payments will be applied to such
deposits and to bid withdrawal and default payments due before being
applied toward the bidder's down
[[Page 23152]]
payment on licenses the bidder has won and seeks to acquire.
26. In addition, if a default or disqualification involves gross
misconduct, misrepresentation or bad faith by an applicant, the
Commission retains the option to declare the applicant and its
principals ineligible to bid in future auctions, or take any other
action the Commission deems necessary, including institution of
proceedings to revoke any existing licenses held by the applicant.
D. Regulatory Safeguards
1. Transfer Disclosure
27. 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.
Sec. (j)(4)(E). The Commission will adopt the transfer disclosure
requirements contained in Section 1.2111(a) of the Commission's Rules,
47 CFR Sec. 1.2111(a), for all LMDS licenses obtained through the
competitive bidding process.
2. Anti-Collusion Rules
28. The Commission will apply the anti-collusion rules set forth in
Sections 1.2105 and 1.2107 of the Commission's Rules, 47 CFR
Secs. 1.2105 & 1.2107, to LMDS auctions. In addition, where specific
instances of collusion in the competitive bidding process are alleged
in petitions to deny, 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 or the Commission's rules in connection with participation in the
auction process may be subject to forfeiture of their down payment or
their full bid amount and revocation of their license(s), and they may
be prohibited from participating in future auctions.
E. Treatment of Designated Entities
1. Overview
29. The Commission is committed to meeting the objectives of 47
U.S.C. Sec. 309(j) 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. In Adarand Constructors v. Pena, 115 S. Ct. 2097 (1995), the
Supreme Court held that federal race-based measures are subject to
strict scrutiny. Gender-based measures, on the other hand, are required
to meet an intermediate standard of review. United States v.
Commonwealth of Virginia, 116 S. Ct. 2264 (1996). Because commenters
have submitted no evidence or data to support LMDS race- or gender-
based auction provisions, the Commission concludes that it does not
have a sufficient record to support such special provisions at this
time. The Commission therefore adopts installment payments and bidding
credits for small businesses in LMDS auctions as detailed below. The
Commission believes that these special provisions will provide small
businesses with a meaningful opportunity to obtain LMDS licenses.
Moreover, many minority- and women-owned entities are small businesses
and will therefore qualify for these same special provisions.
2. Installment Payments, Upfront Payments, Down Payments, and Unjust
Enrichment
30. In order to promote the innovation that small businesses can
bring to the development of LMDS, the Commission adopts installment
payments for small businesses bidding for LMDS licenses. The Commission
will define small businesses as entities that, together with affiliates
and controlling principals, have average gross revenues not exceeding
$40 million for the three preceding years. Because considerable capital
will be needed to bring LMDS to the public, the Commission also makes
provision for entities with gross revenues exceeding $40 million and
will provide for installment payments for entities with $75 million or
less in average gross revenues for the three preceding years. The
Commission believes that the high cost of LMDS and the presence of very
large companies in the markets for various LMDS services make this
option fully consistent with Congress's intent in enacting 47 U.S.C.
Sec. 309(j)(4)(A) to avoid a competitive bidding program that has the
effect of favoring communications providers with established revenue
streams over smaller entities.
31. Under the rules adopted, installment payments will be available
to applicants that, together with affiliates and controlling
principals, have average gross revenues for the three preceding years
of more than $40 million but not more than $75 million. Interest on
their installment payments will be equal to the rate for U.S. Treasury
obligations of maturity equal to the license term, fixed at the time of
licensing, plus 2.5 percent. Payments of interest and principal shall
be amortized over the ten years of the license term. Small businesses--
i.e., applicants that, together with affiliates and controlling
principals, have average gross revenues for the three preceding years
not exceeding $40 million--will be eligible for installment payments at
an interest rate based on the rate for U.S. Treasury obligations of
maturity equal to the license term, fixed at the time of licensing,
plus 2.5 percent (the same rate as that imposed on entities with $40
million to $75 million in average gross revenues). Payments for small
businesses shall include interest only for the first two years and
payments of interest and principal amortized over the remaining eight
years of the license term. The rate of interest on the 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.
32. The Commission believes it is appropriate to also adopt the
unjust enrichment provisions of its broadband PCS rules in order to
prevent large companies from becoming the unintended beneficiaries of
these installment payment plans. The Commission believes that these
rules are preferable to its current general unjust enrichment rules set
forth at 47 CFR Sec. 1.2111(c) because they provide greater specificity
about funds due at the time of transfer or assignment and specifically
address changes in ownership that would result in loss of eligibility
for installment payments, which the general rules do not address. These
rules specify that applicants seeking to assign or transfer control of
a license to an entity not meeting the eligibility standards for
installment payments must pay not only unpaid principal as a condition
of Commission approval but also any unpaid interest accrued through the
date of assignment or transfer.
33. Additionally, these rules provide that if a licensee utilizing
installment payment financing seeks to change its ownership structure
in such a way that would result in a loss of eligibility for
installment payments, it must pay the unpaid principal and accrued
interest as a condition of Commission approval of the change. Finally,
in recognition of the tiered installment payment plans offered to
broadband PCS licensees, the rule provides that if a licensee seeks to
make any change in ownership that would result in the licensee
qualifying for a less favorable installment plan, it must seek
Commission approval of such
[[Page 23153]]
a change and adjust its payment plan to reflect its new eligibility
status. A licensee, under this rule, may not switch its payment plan to
a more favorable plan.
34. For purposes of determining small business status, or status as
a business with average gross revenues of more than $40 million but not
more than $75 million, the Commission will attribute the gross revenues
of all controlling principals and affiliates of the small business
applicant. The Commission chooses not to impose specific equity
requirements on controlling principals. The Commission will still
require, however, that in order for an applicant to qualify as a small
business, qualifying small business principals must maintain control of
the applicant. The term ``control'' includes both de facto and de jure
control of the applicant. Typically, de jure control is evidenced by
ownership of 50.1 percent of an entity's voting stock. De facto control
is determined on a case-by-case basis. An entity must demonstrate at
least the following indicia of control to establish that it retains de
facto control of the applicant: (1) The entity constitutes or appoints
more than 50 percent of the board of directors or partnership
management committee; (2) the entity has authority to appoint, promote,
demote and fire senior executives that control the day-to-day
activities of the licensees; and (3) the entity plays an integral role
in all major management decisions. 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.
35. The Commission adopts a uniform upfront payment for all
bidders. Its experience in previous auctions indicates that the
Commission has underestimated the value of spectrum and that upfront
payments have not created a barrier to small business participation in
its auctions. The Commission believes that this action is consistent
with its policy reason for requiring upfront payments--to deter
insincere and speculative bidding and to ensure that bidders have the
financial capacity to build out their systems.
36. With regard to reduced down payments for small businesses, its
experience in previous auctions leads the Commission to adopt a uniform
20 percent down payment provision for all bidders. The Commission
believes that this sizeable down payment will discourage insincere
bidding and increase the likelihood that licenses are awarded to
parties who are best able to serve the public. A 20 percent down
payment should also provide a strong assurance against default and
sufficient funds to cover default payments in the unlikely event of
default. Small businesses and entities with average gross revenues for
the preceding three years of between $40 million and $75 million will
be required to supplement their upfront payments to bring their total
payment to 10 percent of their winning bids within 10 business days of
a public notice announcing the close of the auction. Prior to
licensing, they will be required to pay an additional 10 percent. The
government will then finance the remaining 80 percent of the purchase
price.
3. Bidding Credits and Unjust Enrichment
37. Based on the record before it, the Commission adopts a 25
percent bidding credit for small businesses in LMDS auctions, and a 15
percent bidding credit for entities with average gross revenues of more
than $40 million but not exceeding $75 million. Commenters who
advocated higher credits offered no data upon which to base such
credits. The Commission declines to adopt a bidding credit for
commercial entities that set aside part of their capacity for
educational institutions at preferential rates. At this time, the
Commission does not believe that it has an adequate record regarding
the legal and policy implications of such bidding credits.
38. The Commission believes it is appropriate to align its unjust
enrichment rules for LMDS with its narrowband PCS and 900 MHz SMR
unjust enrichment rules as they relate to bidding credits. 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 total
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
transfer will be permitted.
39. The rules which the Commission now adopts additionally provide
that, if, within the original term, a licensee applies to assign or
transfer control of a license to an entity that is eligible for a lower
bidding credit, the difference between the bidding credit obtained by
the assigning party and the bidding credit for which the acquiring
party would qualify, plus interest at the rate imposed for installment
financing at the time the license was awarded, must be paid to the
United States Treasury as a condition of approval of the 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.
Additionally, 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, this unjust enrichment provision will
apply.
40. 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, in the case of small businesses transferring to businesses
having average gross revenues between $40 million and $75 million, 100
percent of the difference between the bidding credit received by the
former and the bidding credit for which the latter 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 assessments will have to be paid to the U.S. Treasury as
a condition of approval of the assignment, transfer, or ownership
change.
4. Rural Telephone Companies
41. The Commission does not believe that special provisions are
needed to ensure adequate participation by rural telephone companies in
the provision of LMDS services for the same reasons stated in the Third
Notice of Proposed Rulemaking (Third NPRM) (60 FR 43740, August 23,
1995). Further, because the Commission is providing installment
payments for entities with average annual gross revenues as high as $75
million, the Commission believes that many rural telephone companies
may qualify for installment payments. Also, the degree of flexibility
the Commission will afford in the use of this spectrum, including
provisions for partitioning or disaggregating spectrum, should assist
in satisfying the spectrum needs of rural telephone companies at low
cost. Therefore, the Commission
[[Page 23154]]
concludes that the interests of rural telephone companies are
adequately addressed by its LMDS rules.
Final Regulatory Flexibility Analysis
42. As required by the Regulatory Flexibility Act of 1980, Public
Law 96-354, 94 Stat. 1164, as amended by the Contract with America
Advancement Act of 1996, Public Law 104-121, 110 Stat. 847, 5 U.S.C.
Sec. 601 et seq., the Commission has prepared a Final Regulatory
Flexibility Analysis of the expected impact of the rule changes adopted
in this proceeding on small entities. The Secretary shall send a copy
of this Second Report and Order, Order on Reconsideration, and Fifth
Notice of Proposed Rulemaking, including the Final Regulatory
Flexibility Analysis, to the Chief Counsel for Advocacy of the SBA, in
accordance with paragraph 603(a) of the Regulatory Flexibility Act.
Final Regulatory Flexibility Analysis
Table of Contents
I. Need for and Objectives of Action
II. Summary of Issues Raised by Public Comments in Response to
Initial Regulatory Flexibility Analysis
A. IRFA Issues
B. Other Service Issues
C. Competitive Bidding Issues
III. Description and Estimate of Small Entities Subject to Rules
A. Estimates of Potential Applicants of LMDS
B. Estimates of LECs and Cable Companies Ineligible Under the
Temporary, In-Region Eligibility Restriction
1. Local Exchange Carriers
2. Cable Services or Systems
C. Estimates of Incumbent Services in 31 GHz Band
IV. Summary of Projected Reporting, Recordkeeping, and Other
Compliance Requirements
V. Significant Alternatives to Proposed Rules Which Minimize
Significant Economic Impact on Small Entities and Accomplish Stated
Objectives
A. Alternatives To Minimize Impact of Redesignation of 31 GHz
for LMDS
B. Alternatives To Minimize Impact of LMDS Service Rules
C. Alternatives To Minimize Impact of LMDS Auction Rules
VI. Report to Congress
43. As required by the Regulatory Flexibility Act, 5 U.S.C.
Sec. 603 (RFA), an Initial Regulatory Flexibility Analysis (IRFA) was
incorporated in the First Notice of Proposed Rulemaking (First NPRM)
(58 FR 06400, January 28, 1993), the Third Notice of Proposed
Rulemaking (Third NPRM) (60 FR 43740, August 23, 1995), and the Fourth
Notice of Proposed Rulemaking (Fourth NPRM) (61 FR 39425, July 29,
1996) in this proceeding. The Commission sought written public comments
on the proposals in each of the Notices, including on the IRFA. The
Commission's Final Regulatory Flexibility Analysis (FRFA) in this
Second Report and Order (hereinafter in this Appendix referred to as
the ``Order'') conforms to the RFA, as amended by the Contract with
America Advancement Act of 1996 (CWAAA), Public Law No. 104-121, 110
Stat. 847 (1996). (Title II of the Contract with America Act is ``The
Small Business Regulatory Enforcement Fairness Act of 1996'' (SBREFA),
codified at 5 U.S.C. Secs. 601 et seq.)
I. Need for and Objectives of Action
44. We adopt licensing and service rules to establish a flexible
regulatory framework for the implementation of Local Multipoint
Distribution Service (LMDS), a new broadband wireless communications
service. We designate spectrum in the 31.0-31.3 GHz (31 GHz) band for
LMDS, in addition to the 28 GHz designated in the First Report and
Order (61 FR 44177, August 28, 1996), to ensure adequate spectrum
needed for the broad array of video programming and one-way or two-way
telecommunications and data services that may be offered by LMDS
providers and to promote competition with incumbent cable and local
exchange telephone service (LEC) providers.
45. We provide for licenses based on broad geographic areas known
as BTAs and issued in two sizes for each area, 1,150 megahertz and 150
megahertz. The larger size service areas may offer economies of scale,
while the smaller service areas may encourage new entrants and
technological experiments to meet local or special needs. We limit the
eligibility of incumbent LECs and cable companies from being issued the
larger license in their areas of operation for three years, in order to
promote the development of LMDS and ensure a meaningful increase in
competition in the local telephone and cable markets.
46. The adoption of competitive bidding rules promotes the
expedited delivery of this technology to the public and permits
recovery for the public of a portion of the value of the public
spectrum resource made available for commercial use. Additional
objectives in adopting these rules are to assure that the spectrum is
used efficiently, to provide entities of any size a meaningful
opportunity to bid on this spectrum despite limited capital resources,
and to avoid unjust enrichment through the methods used to award uses
of this resource.
47. We deny petitions for reconsideration of our dismissal in the
First NPRM of applications for waiver which sought to allow petitioners
to provide LMDS in the 28 GHz band under the existing point-to-point
rules. We defer consideration of the comments filed in response to our
tentative decision in the Third NPRM to grant CellularVision a Pioneer
Preference, until the record is supplemented upon conclusion of a peer
review process that we require in the Order.
II. Summary of Issues Raised by Public Comments in Response to Initial
Regulatory Flexibility Analysis
A. IRFA Issues
48. We received one comment in direct response to the IRFA in the
Fourth NPRM based on our request for comment on our proposal to
designate, on a primary protected basis, the 31.0-31.3 GHz (31 GHz)
band to LMDS. SBA opposes our proposed designation because it contends
that the Fourth NPRM fails to consider the impact on existing users of
the spectrum, which it argues are largely small governmental entities
and small businesses. SBA contends that, in Section IV of the IRFA, the
description and estimate of the number of small entities to which the
proposed rule will apply misconstrues and underestimates the small
entities that are incumbent licensees. It asserts that rather than 25
or 26 licensees, as we estimated, the comments of Sunnyvale indicate
there are more than 40 incumbent local governments holding licenses.
SBA contends that Sierra asserts there are as many as 100 incumbent
licensees and there are over a dozen marketers or resellers of its
equipment that are small businesses. We consider in the Order the
comments of SBA and other commenters on the number of licensees in the
31 GHz service, as discussed fully in paragraphs 44-51 of the Order,
and later in this FRFA.
49. SBA further argues that, in Section VI of the IRFA, we failed
to consider significant alternatives to redesignating the entire 31 GHz
band to LMDS that might minimize the impact on the incumbent licensees
that are small entities. It argues that the only alternative to the
proposed 31 GHz designation that we considered in the IRFA involved
alternative spectrum bands for LMDS to use, rather than any
alternatives for the incumbent licensees.
50. We consider in the Order the comments of SBA and other
commenters on numerous alternatives to accommodate existing licensees
in the 31 GHz services, as discussed fully in paragraphs 69-103 of the
Order, and later in this FRFA. The IRFA itself did not identify any
alternatives to our
[[Page 23155]]
proposed designation of 31 GHz for LMDS in order to reduce the impact
on incumbent licensees. However, the text of the Fourth NPRM, in
paragraphs 100-104, specifically identified several alternative methods
by which incumbent operations could be accommodated if LMDS were
authorized on a primary protected basis in the 31 GHz band. We
requested comments on those alternatives and any other options we
should consider that would not impose undue economic burdens on the new
LMDS operations. We modify our proposal and adopt a band-sharing plan
that provides non-LTTS incumbent licensees with protection from LMDS on
a portion of the 31 GHz band, while designating the entire band for
LMDS.
B. Other Service Issues
51. We also consider significant issues raised in comments to our
proposals in the First NPRM, Third NPRM, and Fourth NPRM that may have
a significant economic impact on a substantial number of small
entities. In response to the Fourth NPRM, several comments were filed
in response to our proposal to designate, on a primary protected basis,
the 31 GHz band for LMDS and our request for comments on various
alternatives for accommodating the incumbent 31 GHz licensees. Several
comments were received from proponents of LMDS, including
CellularVision, in favor of designating 31 GHz for LMDS, while several
comments were received from proponents of the existing 31 GHz services
that oppose changes to the services and their being relegated to
secondary status to LMDS.
52. We received several comments in response to the accommodation
proposals. All of the comments opposing our proposal, including IMSA
and ITE on behalf of their members, argue that permitting LMDS to
operate in the entire 300 megahertz on a primary basis essentially
would eliminate their operations and that co-existence under these
circumstances would not be possible. Palm Springs argues that it would
be forced to disband its 31 GHz traffic communication system, creating
undue hardship. On the other hand, CellularVision and Endgate assert
that, as LMDS licensees, they would offer leasing options to
incumbents, if available. Several comments argue against our suggestion
that current 31 GHz services could move to another frequency band where
protection for such operations is provided under our rules, such as 23
GHz. Sierra, as the primary manufacturer of the 31 GHz equipment,
asserts that the cost of modifying equipment for other bands would be
more than replacement costs and also would require the development of
new equipment. Topeka argues that moving to the 21 GHz band would cause
financial hardship that would require allocating funds through local
tax dollars and it seeks to avoid the costs of converting or replacing
equipment that may be required by a move.
53. In response to our request for cooperation among the LMDS
providers and existing licensees to explore methods for allowing the
services to coexist, CellularVision and Sierra submit two different
band-sharing plans. In CellularVision's plan for 25 megahertz at each
end of band for incumbent services, Sierra argues that the equipment
for 31 GHz would not function in the narrow bandwidth and important
traffic signal services could not be provided. It argues that the 75
megahertz at each end that it proposes in its plan would not require
expensive modifications and would accommodate existing services. Sierra
argues that its plan is supported by current 31 GHz licensees. SBA and
USDOT, as Federal Government entities, support the Sierra plan and
argue that incumbent services should be maintained to assist in meeting
national goals of reducing traffic congestion and air pollution.
54. The governmental entities, manufacturers, and organizations in
support of incumbent services argue that we should accept new
applications, modifications, and renewal applications in the band for
traffic control systems. For example, Palm Springs asserts that it
plans to build out its 31 GHz microwave system from the current 35
signals to a total of 70 signals over the next three years. It requests
that we maintain their ability to use the band for their systems.
Topeka argues that, if we adopt our proposal, we at least grandfather
existing licensees in the LMDS rules to permit renewals and
modifications and to ensure their protection from LMDS interference.
55. Of the remaining issues, some commenters oppose our proposal in
the Fourth NPRM that both the 28 GHz band and the 31 GHz band be
assigned as a single block in an LMDS license. For example, the Ad Hoc
RTC and others request that the 31 GHz block be licensed as a separate
unit in each LMDS service area. Emc \3\ argues that as little as 150
megahertz of spectrum could be used to provide a viable service using
digital technology. WCA argues for three licenses per geographic area,
the smallest being 150 megahertz. These commenters argue that
additional licenses of smaller bandwidth would provide for smaller
operators, encourage the development of niche markets, and promote
economical services similar to those in narrower bandwidth licenses,
particularly in rural areas.
56. Some commenters, including M3ITC, oppose our proposal in the
Third NPRM to license LMDS on broad geographic areas based on the Rand
McNally Commercial and Marketing Guide Basic Trading Areas (BTAs). They
argue that use of the smaller designations of Metropolitan Statistical
Areas (MSAs) and Rural Service Areas (RSAs) would provide more
manageable territories within which to initiate service and be more
affordable for entrepreneurs.
57. CellularVision and other commenters support our proposal to
permit the disaggregation of spectrum by LMDS licensees and to permit
the geographic partitioning of any part of an LMDS license.
58. Many comments support our request for comments in the Fourth
NPRM on whether to temporarily restrict eligibility of incumbent LECs
and cable companies that seek to obtain LMDS licenses in their
geographic service areas. CVTT and SkyOptics argue that LECs and cable
companies should be permanently ineligible in order to ensure that
smaller companies enter the new market. Other comments, including
WebCel, advocate restrictions limited to those areas in which LECs and
cable companies currently operate. Other parties, including
CellularVision, argue that we should impose restrictions on the largest
LECs and cable companies or allow incumbents to hold only one LMDS
license. Some parties oppose our proposal to define in-region incumbent
LECs or cable companies based on a 20 percent population threshold and
to define an attributable interest to be an ownership interest of 10
percent. Some parties, including RioVision and other small entities,
agree that the restrictions could end when competition is sufficient,
either after a five-year period or under a test established by the
Commission.
59. Virtually all the comments support our proposal in the First
NPRM to designate a new LMDS service from the existing point-to-point
microwave common carrier service to a local multipoint distribution
service that allows non-common carrier service as well as common
carrier service. CellularVision, M3ITC, and other small entities seek a
broad service definition that allows the LMDS provider to choose any
common or non-common carrier service within the technical rules.
CellularVision and other commenters oppose our proposal to
[[Page 23156]]
apply a presumption that a service is common carriage. They argue that
the licensing framework should be sufficiently open and flexible to
allow the business judgments of licensees to shape the nature of the
services to be offered.
60. Some comments, including M3ITC, oppose our proposal in the
Third NPRM to impose construction requirements on licensees and require
service to be available to a minimum of one-third of the population of
their geographic areas within five years from the date of license
grant, and to two-thirds of the population within ten years from the
date of the grant of the license. M3ITC alternatively argues that a
time limit such as eight years would be sufficient to claim a service
area, after which unserved areas should be opened for licensing.
ComTech, on the other hand, supports the requirements and requests that
we impose a faster requirement for companies that acquire a license
adjacent to their existing service area to ensure against anti-
competitive behavior.
61. With respect to the technical rules proposed in the Third NPRM,
CellularVision, Endgate, and other commenters oppose an alternative
proposal to establish a power flux density (PFD) rather than require
applicants to coordinate frequencies among themselves at their service
area boundaries. They argue that LMDS development is in its infancy and
it would be difficult to determine a PFD standard to be protective of
all LMDS system designs. CellularVision opposes requiring LMDS
operators to use active power control and interlock techniques in their
systems, which it contends are unnecessary, expensive, and will
complicate designs. Next, Endgate opposes our proposal to restrict the
use of various signal polarizations and require orthogonally-polarized
signals as unnecessary. Further, Endgate opposes our proposal to
restrict the maximum equivalent isotropically radiated power (EIRP) at
which LMDS systems operate in the 28 GHz band to a -52 dBW/Hz. It
opposes any limit less than -18 dBW/Hz and contends that the proposed
limit will not provide coverage to justify an LMDS systems
economically. CellularVision offers a compromise maximum limit of -35
dBW/Hz, which it argues is sufficient to meet the needs of LMDS
subscribers and is conducive to frequency coordination. CellularVision
and ComTech also argue that our proposal to adopt a frequency tolerance
standard for subscriber transceiver equipment would be too costly.
C. Competitive Bidding Issues
62. With respect to competitive bidding (para. 303 of the Order),
most commenters supported the Commission's proposal to auction LMDS
spectrum. M3ITC, however, disagreed and proposed the use of lotteries,
expressing a concern that small businesses may lack the financial
ability to participate in the auction, particularly in the major
markets. It suggested the imposition of a royalty or other fee on
lottery winners to generate revenue in lieu of auctions.
63. The Commission's proposal to require participants in LMDS
auctions to tender to the Commission a substantial upfront payment was
generally supported (paras. 328-330 of the Order), but CellularVision
and ComTech objected to establishing an upfront payment of $0.02 per
MHz-pop for the largest combination of MHz-pops a bidder anticipates
being active on in any single round of bidding, as this would yield an
upfront payment of approximately $20 million for a BTA with one million
pops and an upfront payment of approximately $5 billion for the whole
Nation.
64. The Commission proposed adoption of the transfer disclosure
requirements contained in 47 CFR Sec. 1.2111(a) for all LMDS licenses
obtained through the competitive bidding process. CellularVision agreed
with the Commission's proposal not to limit transfers and assignments
of LMDS licenses.
65. The Commission sought comment on the best way to promote
opportunities for businesses owned by minorities and women in light of
the Supreme Court's decision in Adarand Constructors v. Pena, which
held that federal race-based programs are subject to strict scrutiny.
Commenters were also asked to document discrimination against such
businesses. RioVision argued that the Commission should develop special
provisions to provide designated entities with realistic opportunities
to participate in the auction process, but RioVision and other
commenters failed to supply evidence of discrimination against such
businesses (paras. 344-346 of the Order).
66. The Commission's proposal to establish a small business
definition for LMDS and adopt installment payments for small businesses
bidding for LMDS licenses met with general approval from commenters.
However, CellularVision recommended that the Commission establish a
higher limit on average annual gross revenues in its definition of
small business, arguing that the proposed limit of $40 million in
average annual gross revenues was too low to help small businesses. The
Commission's request for comment on the related issue of reduced
upfront payments for small businesses yielded comments from
CellularVision and Emc\3\ in favor of reduced upfront payments for
these entities (paras. 344-345 of the Order).
67. The Commission's proposal to make the unjust enrichment
provisions adopted in the Competitive Bidding Second Report and Order
applicable to installment payments by small business applicants (paras.
344-345 of the Order) received general support, although CellularVision
argued against restrictions after the seventh year of the license term.
ComTech urged the Commission to adopt transfer rules which would
relieve the transferor of any regulatory or other burdens associated
with the newly created license. The Commission's proposal to make
available a bidding credit of 25 percent for small businesses and the
corresponding imposition of a payment requirement on transfers of such
licenses to entities that are not small businesses was supported by
commenters M3ITC, Emc\3\, and CellularVision, the latter encouraging
the Commission to consider other regulatory measures, including a small
business bidding credit higher than 25 percent. (para. 355 of the
Order).
III. Description and Estimate of Small Entities Subject to Rules
68. The service regulations we adopt to implement LMDS would apply
to all entities seeking an LMDS license, including small entities. In
addition, the in-region, temporary eligibility restrictions we adopt
would apply to qualifying LECs and cable companies. Finally, the rules
we adopt to designate additional spectrum for LMDS in the 31.0-31.3 GHz
band would apply to all entities providing incumbent services under
existing rules for 31 GHz services. We consider these three groups of
affected entities separately below.
A. Estimates of Potential Applicants of LMDS
69. SBA has developed definitions applicable to radiotelephone
companies and to pay television services. We are using these
definitions that SBA has developed because these categories approximate
most closely the services that may be provided by LMDS licensees. The
definition of radiotelephone companies provides that a small entity is
a radiotelephone company employing fewer than 1,500 persons. (13 CFR
Sec. 121.201, Standard
[[Page 23157]]
Industrial Classification (SIC) 4812.) The definition of a pay
television service is one which has annual receipts of $11 million or
less. (SIC 4841)
70. The size data provided by SBA do not enable us to make an
accurate estimate of the number of telecommunications providers which
are small entities because it combines all radiotelephone companies
with 500 or more employees. We therefore use the 1992 Census of
Transportation, Communications, and Utilities, conducted by the Bureau
of the Census, which is the most recent information available. This
document shows that only 12 radiotelephone firms out of a total of
1,178 such firms which operated during 1992 had 1,000 or more
employees. Likewise, the size data provided by SBA do not enable us to
make a meaningful estimate of the number of cable and pay television
providers which are small entities because it combines all such
providers with revenues of $11 million or less. We therefore use the
1992 Census of Transportation, Communications, and Utilities (Table
2D), conducted by the Bureau of the Census, which is the most recent
information available. This document shows that only 36 of 1,788 firms
providing cable and pay television service have a revenue of greater
than $10 million. Therefore, the majority of LMDS entities to provide
video distribution and telecommunications services may be small
businesses under SBA's definition.
71. The Commission has not developed a definition of small entities
applicable to LMDS licensees, which is a new service being licensed in
the Order. The RFA amendments were not in effect until shortly before
the Fourth NPRM was released, and no data has been received
establishing the number of small businesses associated with LMDS.
However, in the Third NPRM we proposed to auction the spectrum for
assignment and requested information regarding the potential number of
small businesses interested in obtaining LMDS spectrum, in order to
determine their eligibility for special provisions such as bidding
credits and installment payments to facilitate participation of small
entities in the auction process. In the Order we adopt criteria for
defining small businesses for purposes of determining such eligibility.
We will use this definition for estimating the potential number of
entities applying for auctionable spectrum that are small businesses.
72. As discussed in Section II.D.2.e. of the Order, we adopt
criteria for defining small businesses and other eligible entities for
purposes of defining eligibility for bidding credits and installment
payments. We define a small business as an entity that, together with
affiliates and controlling principals, has average gross revenues not
exceeding $40 million for the three preceding years (paras. 345 and 348
of the Order). Additionally, bidding credits and installment payments
are available to applicants that, together with affiliates and
controlling principals, have average gross revenues for the three
preceding years of more than $40 million but not more than $75 million
(paras. 349 and 358 of the Order).
73. SBREFA was not in effect until the record in the Third NPRM
closed, and we did not seek comment on the potential number of
prospective applicants for LMDS that might qualify as small businesses.
Therefore, we are unable to predict accurately the number of applicants
for LMDS that would fit the definition of a small business for
competitive bidding purposes. However, using the definition of small
business we adopted for auction eligibility, we can estimate the number
of applicants that are small businesses by examining the number of
applicants in similar services that qualified as small businesses. For
example, MDS authorizes non-common carrier services similar to what may
be developed through LMDS. The MDS rules provide a similar definition
of a small business as an entity that, together with its affiliates,
has annual gross revenues for the three preceding years not in excess
of $40 million. A total of 154 applications were received in the MDS
auction, of which 141, or 92 percent, qualified as small businesses.
74. We plan to issue 2 licenses for each of the 492 BTAs, excluding
New York, that are the geographic basis for licensing LMDS. Thus, 984
licenses will be made available for authorization in the LMDS auction.
Inasmuch as 92 percent of the applications were received in the MDS
auction were from entities qualifying as small businesses, we
anticipate receiving at least the same from LMDS applicants interested
in providing non-common carrier services.
75. There is only one company, CellularVision, that is currently
providing LMDS video services. Although the Commission does not collect
data on annual receipts, we assume that CellularVision is a small
business under both the SBA definition and our proposed auction rules.
B. Estimates of LECs and Cable Companies Ineligible Under the
Temporary, In-Region Eligibility Restriction
1. Local Exchange Carriers
76. Neither the Commission nor the SBA has developed a definition
for small providers of local exchange services (LECs). The closest
applicable definition under the SBA rules is for telephone
communications companies other than radiotelephone (wireless)
companies. (13 CFR Sec. 121.201, SIC 4813) The most reliable source of
information regarding the number of LECs nationwide of which we are
aware appears to be the data that we collect annually in connection
with the TRS Worksheet. According to our most recent data, 1,347
companies reported that they were engaged in the provision of local
exchange services. Although it seems certain that some of these
carriers are not independently owned and operated, or have more than
1,500 employees, we are unable at this time to estimate with greater
precision the number of LECs that would qualify as small business
concerns under SBA's definition. Consequently, we estimate that there
are fewer than 1,347 small incumbent LECs.
77. Because the small incumbent LECs subject to these rules are
either dominant in their field of operations or are not independently
owned and operated, consistent with our prior practice, they are
excluded from the definition of ``small entity'' and ``small business
concerns.'' Accordingly, our use of the terms ``small entities'' and
``small businesses'' does not encompass small incumbent LECs. Out of an
abundance of caution, however, for regulatory flexibility analysis
purposes, we will consider small incumbent LECs within this analysis
and use the term ``small incumbent LECs'' to refer to any incumbent
LECs that arguably might be defined by SBA as ``small business
concerns.''
2. Cable Services or Systems
78. The SBA has developed a definition of small entities for cable
and other pay television services, which includes all such companies
generating $11 million or less in revenue annually. (13 CFR
Sec. 121.201, SIC 4841) This definition includes cable systems
operators, closed circuit television services, direct broadcast
satellite services, multipoint distribution systems, satellite master
antenna systems and subscription television services. According to the
Census Bureau, there were 1,788 total cable and
[[Page 23158]]
other pay television services and 1,423 have $11 million or less in
revenue.
79. The Commission has developed its own definition of a small
cable system operator for the purposes of rate regulation. Under the
Commission's Rules, a ``small cable company,'' is one serving fewer
than 400,000 subscribers nationwide. (47 CFR Sec. 76.901(e)) Based on
our most recent information, we estimate that there were 1,439 cable
operators that qualified as small cable system operators at the end of
1995. Since then, some of those companies may have grown to serve over
400,000 subscribers, and others may have been involved in transactions
that caused them to be combined with other cable operators.
Consequently, we estimate that there are fewer than 1,439 small entity
cable system operators.
80. The Communications Act also contains a definition of a small
cable system operator, which is ``a cable operator that, directly or
through an affiliate, serves in the aggregate fewer than 1 percent of
all subscribers in the United States and is not affiliated with any
entity or entities whose gross annual revenues in the aggregate exceed
$250,000,000.'' The Commission has determined that there are 61,700,000
subscribers in the United States. Therefore, we found that an operator
serving fewer than 617,000 subscribers shall be deemed a small
operator, if its annual revenues, when combined with the total annual
revenues of all of its affiliates, do not exceed $250 million in the
aggregate. Based on available data, we find that the number of cable
operators serving 617,000 subscribers or less totals 1,450. We do not
request nor do we collect information concerning whether cable system
operators are affiliated with entities whose gross annual revenues
exceed $250,000,000, and thus are unable at this time to estimate with
greater precision the number of cable system operators that would
qualify as small cable operators under the definition in the
Communications Act.
81. We find that the definition of small entities developed by SBA
includes categories of services that are not included in LMDS, such as
satellite master antenna systems. Thus, the estimated figure that 1,423
cable systems are small businesses that would be affected by our rule
would be an overstatement. There is no other definition for us to use,
since none has been developed for cable systems limited to LMDS-type
services. Moreover, there is no harm in relying on the SBA number,
which overestimates rather than underestimates potential cable systems
that might be affected.
C. Estimates of Incumbent Services in 31 GHz Band
82. We proposed in the Fourth NPRM to designate the 31 GHz band for
LMDS, on a primary protected basis, and requested comment on how to
accommodate incumbent licensees, which are not protected from harmful
interference under their licenses. In the IRFA, we estimated the number
of small entities to which the proposed rule would apply based on the
number of incumbent licensees in the 31 GHz band that are governmental
entities. We stated there are 27 incumbent licensees and that a total
of 25 or 26 are small entities. Our adjustment was based on the
requirement that we estimate the number of governmental entities with
populations of less than 50,000 that would be affected by our new
rules. (See 5 U.S.C. Sec. 601(5).) We then applied the Census Bureau
ratio that 96 percent of all counties, cities, and towns in the Nation
have populations of fewer than 50,000. We requested comment in the IRFA
on the number of small entities significantly impacted by our proposed
designation of 31 GHz for LMDS.
83. We address SBA's comments in paras. 44-46 of the Order, where
we agree that we did not reflect the correct number of total licensees
in the 31 GHz band. We consider the lists of licensees and users
submitted by Sunnyvale and Sierra, which we find include duplicates and
several users that are not licensed. Based on a review of our database,
we found there are a total of 86 licensees for 31 GHz services under
the current rules. We found that licensees fall into three categories
of services, as follows: (1) Governmental entities using the band
primarily for traffic control systems; (2) cellular and other
communications companies providing LTTS; and (3) private business
users.
84. Of the total licensees, 59 licensees are LTTS licensees, 8 are
private business users, and 19 are governmental entities. Of the 19
governmental entities, 14 are municipalities and the remainder are
counties or states. The cities appear small in size, except for the
Cities of Charlotte, San Diego, and Topeka. Thus, the correct number of
small governmental entities that are licensees in the 31 GHz services
should be 11 or less, rather than the 26 or 27 we stated in the IRFA.
As for the entire number of licensees that qualify as small entities,
we cannot determine from the remaining 59 LTTS licensees or 8 private
business licensees which are small. Many of the LTTS licensees are not
small, such as MCI or Bell Atlantic New Jersey, Inc. Nevertheless, to
ensure that no small interests are overlooked, we will assume that most
of these are small licensees and, together with the 11 small
governmental entities, will consider at least 50 of all 86 licensees to
be small entities.
IV. Summary of Projected Reporting, Recordkeeping, and Other Compliance
Requirements
85. The Order adopts a number of rules that will entail reporting,
recordkeeping, and third party consultation. We find that these
requirements are the minimum needed to ensure the integrity and
efficiency of LMDS licensing and serve the public interest, as
reflected in this record.
86. In designating the 31 GHz band for LMDS, we adopt in the Order
a band-sharing plan that designates the two outer 75 megahertz segments
for non-LTTS incumbent licensees to be protected from harmful
interference from LMDS. We adopt technical rules that require LMDS
licensees to coordinate frequencies with incumbent licensees. We adopt
a procedure to allow non-LTTS incumbent licensees in the middle 150
megahertz segment that is not protected to relocate to the outer
segments within 15 days after the effective date of the Order and to
file an application to modify their licenses to reflect the new
frequencies (paras. 91-92 of the Order). Relocation and protection are
accorded to all incumbents except LTTS, which are temporary services
that operate on a secondary basis and in any band, so that the
protections would not benefit them. Many of the non-LTTS incumbent
licensees are small entities. We find that the relocation and
coordination process we have established does not impose undue cost
burdens and we believe it is administratively manageable. Moreover, we
have found that while relocation of such incumbents to adjacent bands
will involve some costs for adjusting equipment, we do not expect at
this time that such costs will impose an undue burden on small
incumbents.
87. We limit the eligibility of incumbent LECs and cable companies
to hold the larger license of 1,150 megahertz in each BTA for LMDS.
They are barred (for a period of three years from the effective date of
LMDS rules) from holding an attributable interest is such a license in
the service area in which they operate. We adopt rules similar to the
CMRS spectrum cap that defines in-region if 10 percent or more of the
population of the BTA is within the applicant's service area. We adopt
attribution rules that apply when an ownership interest is at least 20
percent. However, we permit incumbent LECs
[[Page 23159]]
and cable companies to participate fully in the auction of any in-
region license, so long as they come into compliance after conclusion
of the auction. We require such LMDS licensees to divest overlapping
ownership interests by selling their existing system or by partitioning
within 90 days after the grant of their license. We find that these
requirements should not affect many small entities, which are not
likely to be incumbents LECs or cable companies. These requirements may
also create opportunities for small businesses who wish to bid for LMDS
licenses and compete in the LMDS market.
88. We adopt a number of service rules to initiate LMDS under
procedures for licensing and filing applications, conducting
operations, and establishing technical parameters. Applicants are
required to submit a completed FCC Form 175. Auction winners are
required to file a completed FCC Form 600. All applications are
submitted for 30-day public notice and applicants are required to keep
FCC Form 600 up-to-date concerning all of the foreign ownership
information requested on the form. Licensees may change status between
common carriage and non-common carriage or add an additional status to
conduct both operations upon notification to the Commission that does
not require prior approval. However, common carriers discontinuing or
reducing operations must adhere to statutory notification requirements
imposed in Part 63 of the Commission's Rules.
89. We adopt limited technical regulations. We impose a
coordination process on each LMDS licensee prior to initiating service
in the 27.5-28.35 GHz band in which each adjacent LMDS licensee and
each potentially-affected, adjacent-channel FSS licensee must provide
values for the appropriate operational parameters. Coordinating parties
must supply information related to their channelization and frequency
plan, receiver parameters, and system geometry. Coordination between
adjacent LMDS systems need only encompass hubs located within 20
kilometers of BTA boundaries. We would resolve any conflicts between
licensees. LMDS licensees in the two outer segments of the 31 GHz band
also must coordinate with non-LTTS incumbent licensees to protect those
licensees from harmful interference. In some cases, the services of
persons with technical or engineering expertise may be required to
assist with the coordination information.
90. We are directed by Section 309(j)(4)(E) of the Communications
Act to ``require such transfer disclosures and anti-trafficking
restrictions and payment schedules as may be necessary to prevent
unjust enrichment as a result of the methods employed to issue licenses
and permits.'' The Commission adopted safeguards designed to ensure
that the requirements of this section are satisfied, including a
transfer disclosure requirements for licenses obtained through the
competitive bidding process for LMDS. An applicant seeking approval for
a transfer of control or assignment of a license within three years of
receiving a new license through competitive bidding procedures 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.
91. With respect to small businesses, we have adopted unjust
enrichment provisions to deter speculation and participation in the
licensing process by those who do not intend to offer service to the
public, or who intend to use the competitive bidding process to obtain
a license at a lower cost than they would otherwise have to pay and to
later sell it at a profit, and to ensure that large businesses do not
become the unintended beneficiaries of measures meant to help small
firms. Small business licensees seeking to transfer their licenses to
entities which do not qualify as small businesses, or entities with
more than $40 million but not more than $75 million in average gross
revenues for the three preceding years that seek to transfer their
licenses to larger entities, as a condition of approval of the
transfer, must remit to the government a payment equal to a portion of
the total value of the benefit conferred by the government.
V. Significant Alternatives to Proposed Rules Which Minimize
Significant Economic Impact on Small Entities and Accomplish Stated
Objectives
92. We modify a number of our proposals in the Third NPRM and
Fourth NPRM to minimize any significant economic impact on small
entities consistent with the objectives of the Order based on the
comments we have received in this proceeding.
A. Alternatives To Minimize Impact of Redesignation of 31 GHz for LMDS
93. Specifically, we decided that LMDS needed the additional 300
megahertz of spectrum at 31 GHz in order to obtain the 1 gigahertz of
unencumbered spectrum for broadband services and sufficient spectrum to
experiment with services and technology that competes with telephone
and cable operators. We deny requests from CellularVision and other
commenters to consider an alternative allocation to spectrum below 27.5
GHz or the request from ICE-G to consider allocation to the 40 GHz
band. We considered these matters in the First Report and Order and
their availability has not changed since then.
94. Among the alternatives, we decide that co-existence of
incumbent 31 GHz licensees with LMDS would not be possible because
incumbents would be reduced to a secondary status if LMDS were accorded
primary protected status and the interference from LMDS would render
such services useless. We agree with CellularVision that incumbents
could lease or otherwise arrange to continue to use redesignated
spectrum, but find that incumbents cannot rely on these arrangements as
a reasonable alternative to minimize the impact. We also decide that
movement to another band such as 23 GHz that provides protection for
incumbent services is not feasible because of the major costs to
incumbents to modify or replace equipment.
95. We decide that the plans submitted by CellularVision and Sierra
to share the 31 GHz band establish a framework for us to reach a
compromise based on the needs of both LMDS and 31 GHz proponents and
adopt an outcome that is more equitable and balanced. We decide to
segment the 300 megahertz for establishing protections based on the
enumerations used by Sierra. Under this plan, the middle 150 megahertz
is designated for LMDS on a primary protected basis and incumbent
licensees are not granted protection from harmful interference. At each
end of the band, a segment of 75 megahertz each is designated for
protection of non-LTTS incumbent licensees from LMDS to enable them to
continue existing operations. We decide that the plan of CellularVision
to increase the middle segment to 250 megahertz on a primary protected
basis and leave incumbents protected in only 25 megahertz at each end
would not accommodate traffic signal technology at intersections and
would be too costly. We decide that LMDS requires no more than 150
megahertz of unencumbered spectrum in the middle.
96. We do not adopt Sierra's limitations on LMDS use or access of
the entire 31 GHz band. We agree with CellularVision and other comments
that
[[Page 23160]]
the benefits to according LMDS access to the entire band and to
allowing the full array of LMDS services can be achieved while
according the protections that non-LTTS incumbent licensees need to
continue their operations. Thus, we accord LMDS a protected status
throughout the band, but require LMDS in return to protect non-LTTS
existing services in the outer segments. We do not agree with
CellularVision that incumbents should be excluded altogether from the
middle segment, inasmuch as LMDS has primary status there and is
protected from harmful interference there.
97. To accommodate incumbents, we permit them to relocate to the
outer segments and adopt a procedure that requires them to file an
application to modify their licenses within 15 days after the rules
adopted in the Order take effect, if they choose to relocate. Under our
current rules, any 31 GHz licensee filing a modification application in
accordance with the Order will be able to implement license changes any
time during the 18-month period after the Commission grants the
modification. Moreover, because the incumbents are not authorized to
provide service on a common carriage basis, their modification
applications are not subject to the public notice and petition to deny
requirements of section 101.37 of the Commission's Rules. Thus,
applications for modification of an incumbent's license under the
relocation procedure would be expedited.
98. We find that relocation within the band gives existing 31 GHz
licensees a reasonable opportunity to continue their operations with a
minimum of expense and disruption. We decide not to include LTTS
licensees for protection in the outer segments nor permit them to
relocate, but to leave their status unchanged because of the nature of
their services. These decisions are discussed more fully at paras. 85-
93 of the Order.
99. We decide to limit the band-sharing plan to achieve protections
for existing 31 GHz non-LTTS licensees in order to minimize the impact
of our objective of implementing LMDS in 31 GHz on existing traffic
control systems provided by small municipalities and other governmental
entities. Commenters, including Palm Springs, demonstrate that public
funds have been expended that would be wasted if incumbents were not
protected and that these systems help control traffic and air pollution
in furtherance of Federal goals. However, we decide not to allow future
licensing under the existing rules and to limit incumbent licensees to
their existing operations. We carefully consider the advantages and
disadvantages of future growth under such rules, and conclude that it
would be inconsistent with our objective to permit the licensing of
LMDS on 31 GHz in order to meet the consumer demand for those
telecommunications and video services it will provide.
100. We decide to permit incumbent licensees to renew and to modify
their licenses to the extent they are not expanding service. As a
result, the plans of Palm Springs and other licensees to expand
existing operations under current rules cannot be achieved. The impact
on small entities would not be extensive, inasmuch as we have shown
that all incumbents are few in number and engaged in short-range
services, as compared with the potential harm to LMDS development if
the entire 31 GHz spectrum were not available and was encumbered by
changing, incompatible, localized services.
101. Because we do not permit the licensing of new 31 GHz services,
we find the dismissal of all pending applications to be consistent with
our objectives. As we noted in para. 100 of the Order, we have
concluded that it is in the public interest to dismiss the pending
applications. Moreover, a review of our database indicates that all
pending applications were filed after the release date of the Fourth
NPRM and by new applicants not currently licensed. Thus, these
applicants were on notice that we were considering a change in our
rules for the 31 GHz band. To the extent any of these applicants are
small entities, the impact would not be considerable because they have
not invested fully in such new systems and alternative spectrum or
options to gain access to 31 GHz is available, such as leasing from
LMDS licensees.
B. Alternatives To Minimize Impact of LMDS Service Rules
102. To accommodate concerns expressed by Ad Hoc RTG and others
about our proposal to license LMDS as a single block of the 28 GHz and
31 GHz spectrum, we decided to auction two licensees of different sizes
for each BTA. We considered the band-segmentation plan we adopted for
protecting non-LTTS incumbent licensees in 31 GHz and the comments of
LMDS proponents that 150 megahertz is viable for certain LMDS services.
We decide to issue one license for 1,150 megahertz, consisting of 1,000
megahertz located in the 28 GHz band and 150 megahertz in the middle of
the 300 megahertz located in the 31 GHz band. We also will issue a
smaller license for 150 megahertz consisting of the two 75 megahertz
segments located at each end of the 300 megahertz block in 31 GHz. The
small license can be acquired by LMDS to achieve the objectives of the
broadest spectrum for its experimentation, or may be used by incumbent
licensees to accommodate their needs to continue using the 31 GHz band
on a protected basis or by small entities such as rural interests to
develop niche markets or provide more economical narrower bandwidth
services. We have decided to establish a 1,150 megahertz license
because we believe that a large block of unencumbered spectrum will
provide LMDS providers with an opportunity to compete with broadband
services and develop two-way services.
103. We decide that our proposal to license LMDS based on BTA
geographic service areas is the most logical area for LMDS. We decline
to use the smaller MSAs and RSAs requested by M3ITC and other
commenters because their areas are smaller than existing video
programming and telephony service areas and their use might result in
unnecessary fragmentation of natural markets. BTAs ensure that the wide
array of LMDS services can be provided, afford greater economies of
scale, and vary in size to afford building blocks for establishing an
LMDS system. We do not restrict the number of BTAs a licensee may
acquire at auction, but also point out that the varying sizes provide
more opportunities for smaller businesses to enter the market.
104. We decide that our proposal for disaggregating spectrum and
allowing the geographic partitioning of an LMDS licensed area would
benefit small business and allow some areas, such as rural areas, to be
served more readily (para. 145 of the Order).
105. We agree with WebCel and other small entities to adopt our
proposal to restrict eligibility of incumbent LECs and cable companies
and decide that they may not acquire the larger LMDS license of 1,150
megahertz in their geographic service areas for three years. We find
that such firms would not need the small license for unencumbered
service and thus would not have the incentive to hobble competition. We
do not adopt the request of SkyOptics and CVTT for permanent
ineligibility to protect smaller entities, because they can bid for the
smaller license and the 3-year period may be sufficient to allow new
entrants to become established. We do not agree with commenters from
the rural telephone community that argue against any restrictions on
LEC ownership of LMDS licenses. We find our restrictions should not
hinder LMDS in rural areas, because they do not have the overlap that
triggers our restriction and they can acquire
[[Page 23161]]
spectrum from an LMDS licensee through contract or partitioning and
disaggregation. We modify our proposal to define in-region incumbent
LECs or cable companies to reflect the same provisions in the CMRS
spectrum cap. This ensures consistency in our rules for wireless
services for ease of compliance and efficiency.
106. In adopting application procedures for LMDS, we agree with
CellularVision and other small entities to adopt a broad service
definition that allows the LMDS provider to provide any fixed microwave
service, whether common or non-common carrier. We expand our proposal
to allow an applicant or licensee to apply for both common and non-
common authorization in the same license, depending on the services it
seeks to provide. We clarify the effect of the Telecommunications Act
of 1996 on the nature of the video programming and telecommunications
services that we originally identified as potential services in LMDS to
assist applicants and licensees in determining the regulatory status to
govern their operations. We agree with commenters to not apply the
presumption we proposed to treat LMDS as common carriage.
107. By authorizing both common and non-common carrier service in a
single license, we eliminate the burden in our proposed procedures that
would require a licensee to submit an application whenever it sought to
change its services between common and non-common carrier services. We
decide this achieves economies in the licensing process, ensures the
flexibility licensees need to provide the full array of LMDS offerings,
and promotes the development of the services that may compete with
existing telecommunications and video programming services. To ensure
that applicants or licensees are in compliance with the statutory
requirements imposed on common carriers and reflected in the Part 101
rules that govern LMDS, we decide to subject all LMDS applications to
the 30-day public notice provisions and require all applicants to
submit information in response to all the alien ownership eligibility
restrictions. Consequently, we can rely on a simplified procedure for
licensees to notify us of any change in their regulatory status, either
by changing or adding common carrier or non-common carrier status,
through notification by application after the change is implemented,
unless the change results in the impairment of a common carrier service
that requires prior approval under the discontinuance rules. These
procedures are adopted to ensure implementation of LMDS under a
simplified format.
108. For the technical rules, we agree with commenters to use the
prior frequency coordination procedures rather than a service area
boundary PFD limit, which could stifle technology and inhibit
flexibility in system design. We decide to adopt uniform polarization
to achieve greater system efficiency. We disagree with CellularVision
and ComTech that adopting a frequency stability standard would be
costly, but find that it aids in coordinating usage to assist the rapid
development of service.
C. Alternatives To Minimize Impact of LMDS Auction Rules
109. We decline to adopt the use of lotteries in lieu of auctions.
We conclude that auctioning LMDS licenses would further the
Communications Act's objectives: first, by speeding the development and
deployment of this new technology, products and services to the public
with minimal administrative or judicial delay, and encouraging
efficient use of the spectrum; second, by fostering economic
opportunity and the distribution of licenses among a wide variety of
applicants, including small businesses; and, third, by enabling the
public to recover a portion of the value of the public spectrum.
Concerns regarding small businesses having the financial ability to
participate in LMDS auctions are addressed by the special provisions
adopted for small businesses. We also decline to adopt Public
Television's suggestion of a set-aside of spectrum for educational
purposes.
110. We adopt a uniform upfront payment for all applicants for LMDS
auctions, and decide not to adopt a reduced down payment for small
businesses, because we believe that this action is consistent with our
reason for requiring upfront payments, i.e., to deter insincere and
speculative bidding and to ensure that bidders have the financial
capacity to build out their system. We delegate authority to the
Wireless Telecommunications Bureau to determine an appropriate
calculation for the upfront payment, which the Bureau will announce by
Public Notice. The Bureau will take into consideration CellularVision's
and ComTech's objection to the proposed formula of $0.02 per MHz-pop
for the largest combination of MHz-pops a bidder anticipates being
active on in any single round of bidding.
111. Because we believe the record with regard to past
discrimination, continuing discrimination, and other significant
barriers experienced by minorities and women is insufficient to support
race- and gender-based competitive bidding provisions under the
standards of judicial review applicable to such provisions, we do not
adopt such provisions. Instead, we adopt race- and gender-neutral
provisions such as installment payments and bidding credits for small
businesses in order to provide small businesses with an opportunity to
obtain LMDS licenses. Many minority-and women-owned entities are small
businesses and will therefore qualify for these same special
provisions.
112. CellularVision recommended a definition of small business with
a ceiling of $100 million in annual gross revenues. We choose, for the
purposes of LMDS auctions, to define a small business as an entity
that, together with affiliates and controlling principals, has average
gross revenues not exceeding $40 million for the three preceding years.
To address CellularVision's concerns, we also adopt bidding credits and
installment payments for LMDS applicants that, together with affiliates
and controlling principals, have average gross revenues for the three
preceding years of more than $40 million but not more than $75 million,
as elaborated in paras. 346-348 of the Order.
113. Emc3 and CellularVision proposed a small business
bidding credit of 25 percent or more. The rules adopted in the Order
provide a 25 percent bidding credit for small business applicants in
the LMDS auctions, and a 15 percent bidding credit for entities with
average gross revenues of more than $40 million but not exceeding $75
million. Commenters who advocated higher credits offered no data upon
which to base such credits. We also decline to offer a bidding credit
to commercial entities that set aside part of their capacity for
educational institutions at preferential rates. We do not believe that
we have an adequate record regarding the legal and policy implications
of such credits.
VI. Report to Congress
114. We will submit a copy of this Final Regulatory Flexibility
Analysis, along with the Order, in a report to Congress pursuant to 5
U.S.C. Sec. 801(a)(1)(A). A copy of this FRFA will also be published in
the Federal Register.
Ordering Clauses
115. It is ordered that the actions of the Commission herein are
taken pursuant to sections 4(i), 257, 303(r), and 309(j) of the
Communications Act of 1934, 47 U.S.C. Secs. 154(i), 257, 303(r),
309(j).
[[Page 23162]]
116. It is further ordered that the Commission's Rules are amended
as set forth in Appendix A, effective June 30, 1997.
117. It is further ordered that the Petitions for Reconsideration
of the Memorandum Opinion and Order in Application of Hye Crest
Management, Inc., for License Authorization in the Point-to-Point
Microwave Radio Service in 27.5-29.5 GHz Band and Request for Waiver of
the Rules, File No. 10380-CF-P-88, filed by the University of Texas-Pan
American, RioVision of Texas, Inc., the City of Gustine, California,
Video/Phone Systems, Inc., Northeast Wireless, High Band Broadcasting
Corporation, FM Video Broadcasters, Western Sierra Bancorp, M3 Illinois
Telecommunications Corporation, Perry W. Haddon as President of GHz
Equipment Company; Connecticut Home Theater Corporation, Alliance
Associates, Stevan A. Birnbaum, BMW Associates, Joseph B. Buchwald,
Celltel Communications Corporation, Linda Chester, Thomas F. Clark, the
Committee to Promote Competition in the Cable Industry, Arnold
Cornblatt, CT Communications Corporation, Evanston Transmission
Company, Judy Feinberg, Lawrence Fraiberg, Freedom Technologies, Inc.,
Rosalie Y. Goldberg, Harry A. Hall, Lloyd Hascoe, L.D.H. International,
Inc., Paul R. Likins, William Lonergan, Herbert S. Meeker, James L.
Melcher, Frederick Myers, Frederick M. Peyser, PMJ Securities, Inc.,
Robert E. La Blanc Associates, Inc., Jeanne P. Robertson, Sanford
Robertson, Robert Rosenkranz, R&R Telecommunications Partners, SCNY
Communications, Inc., Seaview Telesystems Partners, Lewis W. Siegel,
Michael S. Siegel, Kim Sloan, SMC Associates, Charles D. Snelling,
Telecom Investment Corp., Telecommunications/Haddock Investors, Video
Communications Corporation, Diane Wechsler, and Ivan Wolff are denied.
118. It is further ordered that Local Multipoint Distribution
Service licensees shall attach appropriate labels to every subscriber
transceiver antenna and provide notice to users regarding the potential
hazard of remaining within the Maximum Permissible Exposure separation
distance of these high gain antennas, as indicated herein.
119. It is further ordered that, effective upon adoption of this
Order, applications will not be accepted for filing under Part 101 of
the Commission's Rules either for new services or for license
modifications in the 31 GHz band, except those filed by incumbent city
licensees and private business users pursuant to the terms of this
Order, and that all such applications for license modifications shall
be filed no later than 15 days following the effective date of this
Order.
120. It is further ordered that the applications filed for
authorization to operate under the existing licensing rules for the
31,000-33,000 MHz band and pending review under the existing rules
shall be dismissed, and applicants that submitted filing fees with the
applications shall be refunded.
121. It is further ordered that, pursuant to section 1.402(h) of
the Commission's Rules, the Chief, Office of Engineering and
Technology, shall select a panel of experts to review the specific
technologies set forth in the pioneer preference request that was filed
by the Suite 12 Group, on September 23, 1991, as amended on November
19, 1991, and that was accepted and placed on Public Notice on December
16, 1991.
122. It is further ordered that, pursuant to Section 5(c) of the
Communications Act of 1934, the Chief, Wireless Telecommunications
Bureau, is granted delegated authority to implement and modify auction
procedures in the Local Multipoint Distribution Service, including the
general design and timing of the auction; the number and grouping of
authorizations to be offered in a particular auction; the manner of
submitting bids; the amount of 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.
List of Subjects
47 CFR Part 1
Administrative practice and procedure, Environmental impact
statements, Radio, Reporting and recordkeeping requirements,
Telecommunications.
47 CFR Part 2
Radio.
47 CFR Part 74
Radio.
47 CFR Part 78
Radio.
47 CFR Part 95
Radio.
47 CFR Part 101
Communications common carriers, Radio, Reporting and recordkeeping
requirements.
Federal Communications Commission
William F. Caton,
Acting Secretary
Rule Changes
Parts 1, 2, 74, 78, 95, and 101 of Title 47 of the Code of Federal
Regulations are amended as follows:
PART 1--PRACTICE AND PROCEDURE
1. The authority citation for Part 1 continues to read as follows:
Authority: 47 U.S.C. Secs. 151, 154, 303 and 309(j), unless
otherwise noted.
2. Section 1.1307 is amended by revising the section heading and
adding a new entry at the end of Table 1 in paragraph (b)(1) as
follows:
Sec. 1.1307 Actions that may have a significant environmental effect,
for which Environmental Assessments (EAs) must be prepared.
(1) * * *
* * * * *
(b) * * *
Table 1.--Transmitters, Facilities, and Operations Subject to Routine
Environmental Evaluation
------------------------------------------------------------------------
Service (Title 47 CFR Rule Part) Evaluation required if:
------------------------------------------------------------------------
* * * * *
Local Multipoint Distribution Service Non-rooftop antennas: Height
(subpart L of part 101). above ground level to
radiation center <10 m="" and="" power="">1640 W EIRP.
Rooftop antennas: Power > 1640
W EIRP.
LMDS licensees are required to
attach a label to subscriber
transceiver antennas that (1)
provides adequate notice
regarding potential radio
frequency safety hazards,
e.g., information regarding
the safe minimum separation
distance required between
users and transceiver
antennas; and (2) references
the applicable FCC radio
frequency emission guidelines
contained in FCC OST Bulletin
65, 2d Edition.
------------------------------------------------------------------------
3. Section 1.77 is amended by revising paragraph (i) to read as
follows:
Sec. 1.77 Detailed application procedures, cross references.
* * * * *
(i) Rules governing applications for authorizations in the Common
Carrier and Private Radio terrestrial microwave services and Local
Multipoint
[[Page 23163]]
Distribution Services are set out in part 101 of this chapter.
4. Section 1.2102 is amended by adding paragraph (a)(9) as follows:
Sec. 1.2102 Eligibility of applications for competitive bidding.
(a) * * *
(9) Local Multipoint Distribution Service (LMDS) (see 47 CFR part
101).
PART 2--FREQUENCY ALLOCATIONS AND RADIO TREATY MATTERS; GENERAL
RULES AND REGULATIONS
5. The authority citation for Part 2 continues to read as follows:
Authority: Sec 4, 302, 303, and 307 of the Communications Act of
1934, as amended, 47 U.S.C. Sections 154, 302, 303 and 307, unless
otherwise noted.
6. Section 2.106 is amended by revising the entries for 27.5-29.5
GHz and 31.0-31.3 GHz to read as follows:
Sec. 2.106 Table of Frequency Allocations.
International table United States table FCC use designators
----------------------------------------------------------------------------------------------------------------
Government Non-
Region 1-- Region 2-- Region 3-- --------------- Government
allocation GHz allocation GHz allocation GHz --------------- Rule Special-use
Allocation Allocation part(s) frequencies.
GHz GHz
(1) (2) (3) (4) (5) (6) (7)
----------------------------------------------------------------------------------------------------------------
* * * * * * *
----------------------------------------------------------------------------------------------------------------
27.5-29.5 27.5-29.5 ................ 27.5-29.5 27.5-29.5
FIXED ................ ............. FIXED SATELLITE
FIXED-SATELLITE FIXED- COMMUNICAT
(Earth-to- SATELLITE IONS (25)
space) (Earth-to- FIXED
MOBILE space) MICROWAVE
MOBILE (101)
----------------------------------------------------------------------------------------------------------------
* * * * ............. * *
----------------------------------------------------------------------------------------------------------------
31.0-31.3 31.0-31.3 ................ 31.0-31.3 31.0-31.3
FIXED ................ Standard FIXED MOBILE FIXED
MOBILE Frequency Standard MICROWAVE
Standard and Time Frequency (101)
Frequency and Signal- and Time
Time Signal- Satellite Signal-
Satellite (space-to- Satellite
(space-to- Earth) (space-to-
Earth) Earth)
Space Research
884 885 886 ................ 886 US211 884 886 US211
----------------------------------------------------------------------------------------------------------------
* * * * * * *
----------------------------------------------------------------------------------------------------------------
* * * * *
PART 74--EXPERIMENTAL RADIO, AUXILIARY, SPECIAL BROADCAST AND OTHER
PROGRAM DISTRIBUTIONAL SERVICES
7. The authority citation for Part 74 continues to read as follows:
Authority: Secs. 4, 303, 48 Stat. 1066, as amended, 1082, as
amended; 47 U.S.C. Secs. 154, 303, 554.
Sec. 74.602 [Amended]
8. In Sec. 74.602, paragraph (h) is removed and paragraphs (i) and
(j) are redesignated as paragraphs (h) and (i).
PART 78--CABLE TELEVISION RELAY SERVICE
9. The authority citation for Part 78 continues to read as follows:
Authority: Secs. 2, 3, 4, 301, 303, 307, 308, 309, 48 Stat., as
amended, 1064, 1065, 1066, 1081, 1082, 1083, 1084, 1085; 47 U.S.C.
152, 153, 154, 301, 303, 307, 308, 309.
Sec. 78.18 [Amended]
10. In Sec. 78.18, paragraph (a)(5) is removed and paragraphs
(a)(6) through (a)(8) are redesignated as paragraphs (a)(5) through
(a)(7).
PART 95--PERSONAL RADIO SERVICES
11. The authority citation for Part 95 continues to read as
follows:
Authority: Secs. 4 , 303, 48 Stat. 1066, 1082, as amended; 47
U.S.C. 154, 303.
Sec. 95.1 [Amended]
12. In Sec. 95.1, paragraph (b) is removed and paragraph (c) is
redesignated as (b).
PART 101--FIXED MICROWAVE SERVICE
13. The authority citation for Part 101 continues to read as
follows:
Authority: 47 U.S.C. Secs. 154, 303, 309(j), unless otherwise
noted.
14. Section 101.1 is amended by revising paragraph (a) to read as
follows:
Sec. 101.1 Scope and authority.
(a) The purpose of the rules in this part is to prescribe the
manner in which portions of the radio spectrum may be made available
for private operational, common carrier, and Local Multipoint
Distribution Service fixed, microwave operations that require
transmitting facilities on land or in specified offshore coastal areas
within the continental shelf.
* * * * *
15. Section 101.3 is amended by revising the two definitions in
alphabetical order to read as follows:
* * * * *
Local Multipoint Distribution Service Hub Station. A fixed point-
to-point or point-to-multipoint radio station in a Local Multipoint
Distribution Service System that provides one-way or two-way
communication with Local Multipoint Distribution Service Subscriber
Stations.
* * * * *
Local Multipoint Distribution Service System. A fixed point-to-
point or point-to-multipoint radio system consisting of Local
Multipoint Distribution Service Hub Stations and their associated Local
Multipoint Distribution Service Subscriber Stations.
* * * * *
[[Page 23164]]
16. Section 101.5 is amended by revising paragraph (d) to read as
follows:
Sec. 101.5 Station authorization required.
* * * * *
(d) For stations authorized under subpart H (Private Operational
Fixed Point-to-Point Microwave Service), subpart I (Common Carrier
Fixed Point-to-Point Microwave Service), and subpart L of this part
(Local Multipoint Distribution Service), construction of new or
modified stations may be initiated prior to grant of an authorization.
As a condition to commencing construction under this paragraph (d), the
Commission may, at any time and without hearing or notice, prohibit
such construction for any reason. Any construction conducted under this
paragraph is at the applicant's sole risk.
17. Section 101.11 is amended by revising paragraph (a) to read as
follows:
Sec. 101.11 Filing of applications, fees, and number of copies.
(a) Part 1 of this chapter contains information on application
filing procedures and requirements for all services authorized under
this part. All filings, unless they are filed electronically, must
include the original application plus one copy. Instructions for
electronic filing will be provided by public notice.
* * * * *
18. Section 101.15 is amended by revising paragraph (a) to read as
follows:
Sec. 101.15 Application forms for common carrier fixed stations.
(a) New or modified facilities. Except for Local Multipoint
Distribution Service in subpart L of this part, FCC Form 415 must be
submitted and a license granted for each station. FCC Form 415 also
must be submitted to amend any license application, to modify any
license pursuant to Secs. 101.57(a) and 101.59, and to notify the
Commission of modifications made pursuant to Sec. 101.61. Cancellation
of a license may be made by letter.
* * * * *
19. Section 101.19 is amended by revising paragraph (a)(5) to read
as follows:
Sec. 101.19 General application requirements.
(a) * * *
(5) Show compliance with the special requirements applicable to
each radio service and make all special showings that may be applicable
(e.g., those required by Secs. 101.103(d), 101.701, and 101.1001
through 101.1015).
* * * * *
20. Section 101.21 is amended by revising the introductory
paragraph and adding a new paragraph (g) as follows:
Sec. 101.21 Technical content of applications.
Applications, except FCC Form 175, must contain all technical
information required by the application form and any additional
information necessary to fully describe the proposed facilities and to
demonstrate compliance with all technical requirements of the rules
governing the radio service involved (see subparts C, F, G, I, J, and L
of this part, as appropriate). The following paragraphs describe a
number of technical requirements.
* * * * *
(g) Each application in the Local Multipoint Distribution Service
must contain all technical information required by FCC Form 600 and any
other applicable form or associated Public Notices and by any
applicable rules in this part.
21. Section 101.29 is amended by revising paragraph (a) to read as
follows:
Sec. 101.29 Amendment of pending applications.
(a) Any pending application may be amended as a matter of right if
the application has not been designated for hearing, or for comparative
evaluation pursuant to Sec. 101.51, or for the random selection
process, or is not subject to the competitive bidding process,
provided, however, that the amendments must comply with the provisions
of Sec. 101.41 as appropriate.
* * * * *
22. Section 101.35 is amended by adding new paragraph (e) as
follows:
Sec. 101.35 Preliminary processing of applications.
* * * * *
(e) Competitive bidding applications will be processed pursuant to
part 1, subpart Q, of this chapter and subpart M of this part.
23. Section 101.37 is amended by revising paragraphs (a)(1),
(a)(3), and (a)(5) and adding new paragraph (e) to read as follows:
Sec. 101.37 Public notice period.
(a) * * *
(1) The acceptance for filing of common carrier applications, Local
Multipoint Distribution Service applications, and major amendments
thereto;
* * * * *
(3) The receipt of common carrier applications and Local Multipoint
Distribution Service applications for minor modifications made pursuant
to Sec. 101.59;
* * * * *
(5) Special environmental considerations as required by part 1 of
this chapter.
* * * * *
(e) Paragraphs (a) through (c) of this section shall not apply to
FCC Form 175.
24. Section 101.45 is amended by revising introductory paragraph
(b) as follows:
Sec. 101.45 Mutually exclusive applications.
* * * * *
(b) A common carrier application, except in the Local Multipoint
Distribution Service, will be entitled to be included in a random
selection process or to comparative consideration with one or more
conflicting applications only if:
* * * * *
25. Section 101.47 is amended by revising introductory paragraph
(f) to read as follows:
Sec. 101.47 Consideration of applications.
* * * * *
(f) Except with respect to applications subject to subpart L of
this part, whenever the public interest would be served thereby, the
Commission may grant one or more mutually exclusive applications
expressly conditioned upon final action on the applications, and then
either conduct a random selection process (in specified services under
this part), designate all of the mutually exclusive applications for a
formal evidentiary hearing or (whenever so requested) follow the
comparative evaluation procedures of Sec. 101.51, as appropriate, if it
appears:
* * * * *
26. Section 101.57 is amended by revising paragraph (a) to read as
follows:
Sec. 101.57 Modification of station license.
(a)(1) Except as provided in Sec. 101.59, and except in the case of
licenses authorized for operation in the 31,000-31,300 MHz band prior
to March 11, 1997, and except in the Local Multipoint Distribution
Service as provided in Sec. 101.61(c)(10), no modification of a license
issued pursuant to this part (or the facilities described thereunder)
may be made except upon application to the Commission.
(2) Notwithstanding the provisions of subparagraph (1) of this
paragraph, licensees (other than licensees in the Local Television
Transmission Service) authorized to operate in the 31,000-31,300 MHz
band prior to March 11,
[[Page 23165]]
1997, may submit applications to the Commission for modification of
such licenses not later than the end of the 15-day period following
June 30, 1997.
* * * * *
27. Section 101.59 is amended by revising paragraphs (a) and (b)(1)
to read as follows:
Sec. 101.59 Processing of applications for facility minor
modifications.
(a) Except in the Local Multipoint Distribution Service as provided
in Sec. 101.61(c)(10), unless an applicant is notified to the contrary
by the Commission, as of the twenty-first day following the date of
public notice, any application that meets the requirements of paragraph
(b) of this section and proposes only the change specified in paragraph
(c) of this section will be deemed to have been authorized by the
Commission.
(b) * * *
(1) It is in the Private Operational Fixed Point-to-Point
Microwave, Common Carrier Fixed Point-to-Point Microwave, Local
Television Transmission, Digital Electronic Message Services, and Local
Multipoint Distribution Services;
* * * * *
28. Section 101.61 is amended by revising introductory paragraph
(b), and paragraph (b)(3), adding new paragraphs (c)(9) and (c)(10),
and revising paragraph (d) to read as follows:
Sec. 101.61 Certain modifications not requiring prior authorization.
* * * * *
(b) Licensees of fixed stations in the Private Operational Fixed
Point-to-Point Microwave, Common Carrier Fixed Point-to-Point
Microwave, Local Television Transmission, Digital Electronic Message
Services, and Local Multipoint Distribution Services may make the
facility changes listed in paragraph (c) of this section without
obtaining prior Commission authorization, if:
* * * * *
(3) The Commission is notified of changes made to facilities by the
submission of a completed FCC Form 415 within 30 days after the changes
are made, except that licensees in the Local Multipoint Distribution
Service must notify the Commission by the submission of a completed FCC
Form 600 within 30 days or, if the change is subject to Sec. 101.305(b)
or 101.305(c), within the time periods required in those sections.
* * * * *
(c) * * *
(9) In the Local Multipoint Distribution Service, changes in
regulatory status from common carrier to non-common carrier status or
non-common carrier to common carrier status, or from the addition of
common carrier or non-common carrier status to an existing license in
order to be authorized to provide both common carrier and non-common
carrier services; except that changes that result in the
discontinuance, reduction, or impairment of the existing service are
subject to the requirements of Sec. 101.305 (b) and (c).
(10) In the Local Multipoint Distribution Service, the addition,
removal, or relocation of facilities within the area authorized by the
license, except as provided in Sec. 101.1009.
(d) Licensees may notify the Commission of permissible changes or
correct erroneous information on a license not involving a major change
(i.e., a change that would be classified as a major amendment as
defined by Sec. 101.29) without obtaining prior commission approval by
filing FCC Form 415, except in Local Multipoint Distribution Service by
filing FCC Form 600.
29. Section 101.63 is amended by revising paragraph (a) to read as
follows:
Sec. 101.63 Period of construction; certification of completion of
construction.
(a) Each station, except in the Local Multipoint Distribution
Services, authorized under this part must be in operation within 18
months from the initial date of grant. Modification of an operational
station must be completed within 18 months of the date of grant of the
applicable modification request.
* * * * *
30. Section 101.101 is amended by removing the entry for ``27,500-
29,500'' MHz and adding entries for ``27,500-28,350,'' and ``29,100-
29,250'' and revising the entry for ``31,000-31,300'' MHz and adding
LMDS in alphabetical order following the table to read as follows:
Sec. 101.101 Frequency availability.
--------------------------------------------------------------------------------------------------------------------------------------------------------
Radio service
---------------------------------------------------------------------------------------------------------------------
Frequency band (MHz) Common carrier (Part Private radio (Part Broadcast auxiliary Other (Parts 15, 21,
101) 101) (Part 74) 24, 25, 74, 78 & 100) Notes
--------------------------------------------------------------------------------------------------------------------------------------------------------
* * * * * * *
27,500-28,350..................... LMDS
29,100-29,250..................... LMDS ...................... ...................... SAT
31,000-31,300..................... CC-LMDS OFS ...................... ..................... F/M/TF
LTTS
* * * * * * *
--------------------------------------------------------------------------------------------------------------------------------------------------------
* * * * * * *
LMDS: Local Multipoint Distribution Service (including non-common carrier and common carrier services)--(Part 101, Subpart L).
* * * * *
31. Section 101.103 is amended by revising paragraph (b) and adding
new paragraphs (g) and (h) to read as follows:
Sec. 101.103 Frequency coordination procedures.
* * * * *
(b)(1) Operations in the bands 31,000-31,075 MHz and 31,225-31,300
MHz licensed prior to March 11, 1997, were licensed on an unprotected
basis and are subject to harmful interference from similarly licensed
operations in that band.
(i) Operations licensed in the Local Mulitpoint Distribution
Service and those operations licensed prior to March 11, 1997, except
in the Local Television Transmission Service, operating in these bands
are equally protected against harmful interference from each other.
[[Page 23166]]
(ii) In the case of operations licensed prior to March 11, 1997,
except in the Local Television Transmission Service, that are licensed
on a point-to-radius basis, LMDS licensees shall be subject to the
protection requirement established in this section in the case of
existing links operated by such licensees, and in the case of links
added by such licensees in the future in accordance with the terms of
their point-to-radius licenses.
(iii) An LMDS licensee may not initiate operations within the
point-to-radius area licensed to an operator (other than an operator in
the Local Television Transmission Service) prior to March 11, 1997,
even if such operator has not initiated operations to the fullest
extent of the license. An LMDS licensee, however, may initiate
operations at the border of such operator's license area without prior
coordination if the LMDS licensee's operations would not cause harmful
interference to the other operator's existing operations.
(iv) An operator (other than an operator in the Local Television
Transmission Service) licensed on a point-to-radius basis prior to
March 11, 1997, may add additional stations within its license area.
Such operator shall coordinate with any affected LMDS licensee if its
new operations might cause harmful interference to the existing
operations of such LMDS licensee.
(v) Operations licensed prior to March 11, 1997, on a point-to-
point basis may not be extended or otherwise modified through the
addition of point-to-point links. Such operations shall be limited to
the use of frequency pairs licensed as of March 11, 1997. Operations
licensed in the Local Television Transmission Service as of March 11,
1997, may continue to operate, but such operators may not expand
existing operations nor initiate new operations.
(2) Operations in the 31,075-31,225 MHz band licensed prior to
March 11, 1997, shall receive no protection against harmful
interference from authorized operations in the Local Multipoint
Distribution Service in that band.
* * * * *
(g) Licensees operating in Basic Trading Areas authorized in the
Local Multipoint Distribution Service. (1) When the transmitting
facilities in a Basic Trading Area (BTA) are to be operated in the
bands 27,500-28,350 MHz; 29,100-29,250 MHz; and 31,000-31,300 MHz and
the facilities are located within 20 kilometers of the boundaries of a
BTA, each licensee must complete the frequency coordination process of
paragraph (d)(2) of this section with respect to neighboring BTA
licensees that may be affected by its operations prior to initiating
service. In addition, all licensed transmitting facilities operating in
the bands 31,000-31,075 MHz and 31,225-31,300 MHz and located within 20
kilometers of neighboring facilities must complete the frequency
coordination process of paragraph (d)(2) of this section with respect
to such authorized operations before initiating service.
(2) Response to notification should be made as quickly as possible,
even if no technical problems are anticipated. Any response to
notification indicating potential interference must specify the
technical details and must be provided to the applicant, either
electronically or in writing, within the 30-day notification period.
Every reasonable effort should be made by all licensees to eliminate
all problems and conflicts. If no response to notification is received
within 30 days, the licensee will be deemed to have made reasonable
efforts to coordinate and commence operation without a response. The
beginning of the 30-day period is determined pursuant to paragraph
(d)(2)(v) of this section.
(h) Special requirements for operations in the band 29,100-29,250
MHz. (1)(i) Local Multipoint Distribution Service (LMDS) receive
stations operating on frequencies in the 29,100-29,250 MHz band within
a radius of 75 nautical miles of the geographic coordinates provided by
a non-GSO-MSS licensee pursuant to Sec. 101.113(c)(2) or (c)(3)(i) (the
``feeder link earth station complex protection zone'') shall accept any
interference caused to them by such earth station complexes and shall
not claim protection from such earth station complexes.
(ii) LMDS licensees operating on frequencies in the 29,100-29,250
MHz band outside a feeder link earth station complex protection zone
shall cooperate fully and make reasonable efforts to resolve technical
problems with the non-GSO MSS licensee to the extent that transmissions
from the non-GSO MSS operator's feeder link earth station complex
interfere with an LMDS receive station.
(2) No more than 15 days after the release of a public notice
announcing the commencement of LMDS auctions, feeder link earth station
complexes to be licensed pursuant to Sec. 25.257 of this chapter shall
be specified by a set of geographic coordinates in accordance with the
following requirements: no feeder link earth station complex may be
located in the top eight (8) metropolitan statistical areas (MSAs),
ranked by population, as defined by the Office of Management and Budget
as of June 1993, using estimated populations as of December 1992; two
(2) complexes may be located in MSAs 9 through 25, one of which must be
Phoenix, AZ (for a complex at Chandler, AZ); two (2) complexes may be
located in MSAs 26 to 50; three (3) complexes may be located in MSAs 51
to 100, one of which must be Honolulu, Hawaii (for a complex at
Waimea); and the three (3) remaining complexes must be located at least
75 nautical miles from the borders of the 100 largest MSAs or in any
MSA not included in the 100 largest MSAs. Any location allotted for one
range of MSAs may be taken from an MSA below that range.
(3)(i) Any non-GSO MSS licensee may at any time specify sets of
geographic coordinates for feeder link earth station complexes with
each earth station contained therein to be located at least 75 nautical
miles from the border of the 100 largest MSAs.
(ii) For purposes of paragraph (h)(3)(i) of this section, non-GSO
MSS feeder link earth station complexes shall be entitled to
accommodation only if the affected non-GSO MSS licensee preapplies to
the Commission for a feeder link earth station complex or certifies to
the Commission within sixty days of receiving a copy of an LMDS
application that it intends to file an application for a feeder link
earth station complex within six months of the date of receipt of the
LMDS application.
(iii) If said non-GSO MSS licensee application is filed later than
six months after certification of the Commission, the LMDS and non-GSO
MSS entities shall still cooperate fully and make reasonable efforts to
resolve technical problems, but the LMDS licensee shall not be
obligated to re-engineer its proposal or make changes to its system.
(4) LMDS licensees or applicants proposing to operate hub stations
on frequencies in the 29,100-29,250 MHz band at locations outside of
the 100 largest MSAs or within a distance of 150 nautical miles from a
set of geographic coordinates specified under paragraphs (h)(2) or
(h)(3)(i) of this section shall serve copies of their applications on
all non-GSO MSS applicants, permittees or licensees meeting the
criteria specified in Sec. 25.257(a). Non-GSO MSS licensees or
applicants shall serve copies of their feeder link earth station
applications, after the LMDS auction, on any LMDS applicant or licensee
within a distance of 150 nautical miles from the geographic coordinates
that it specified under Sec. 101.113(c)(2) or (c)(3)(i). Any necessary
coordination shall commence
[[Page 23167]]
upon notification by the party receiving an application to the party
who filed the application. The results of any such coordination shall
be reported to the Commission within sixty days. The non-GSO MSS earth
station licensee shall also provide all such LMDS licensees with a copy
of its channel plan.
32. Section 101.107 is amended by removing the entry for ``19,700
to 40,000'' MHz, adding the entries for ``19,700 to 27,500, 27,500 to
28,350, 29,100 to 29,250, 31,000 to 31,075, 31,075 to 31,225, 31,225 to
31,300 and 31,300 to 40,000'' and adding a footnote 8 to read as
follows:
Sec. 101.107 Frequency tolerance.
* * * * *
----------------------------------------------------------------------------------------------------------------
Frequency tolerance (percent)
----------------------------------------------------------------------------------------------------------------
Mobile Mobile
Frequency (MHz) All fixed and stations over stations 3
Base stations 3 Watts Watts or less
----------------------------------------------------------------------------------------------------------------
* * * * * *
*
19,700 to 27,500 \6\............................................ 0.03 .............. ..............
27,500 to 28,350................................................ 0.001 .............. ..............
29,100 to 29,250................................................ 0.001 .............. ..............
31,000 to 31,075 \8\............................................ 0.001 .............. ..............
31,075 to 31,225 \8\............................................ 0.001 .............. ..............
31,225 to 31,300 \8\............................................ 0.001 .............. ..............
31,300 to 40,000 \6\............................................ 0.03 .............. ..............
----------------------------------------------------------------------------------------------------------------
* * * * * * *
\8\ For stations authorized prior to March 11, 1997, transmitter frequency tolerance shall not exceed 0.03
percent.
33. Section 101.109(c) is amended by removing the entry ``31,000 to
31,300'' and adding the entries for ``31,000 to 31,075, 31,075 to
31,225, and 31,225 to 31,300'' in numerical order to read as follows:
Sec. 101.109 Bandwidth.
* * * *
* * *
(c) * * *
------------------------------------------------------------------------
Maximum authorized
Frequency band (MHz) bandwidth
------------------------------------------------------------------------
* * * *
* * *
31,000 to 31,075............................ 75 MHz
31,075 to 31,225............................ 150 MHz
31,225 to 31,300............................ 75 MHz
* * * *
* * *
------------------------------------------------------------------------
34. Section 101.113(a) is amended by removing the entry ``31,000 to
31,300'' MHz and adding entries for ``31,000 to 31,075, 31,075-31,225,
and 31,225 to 31,300,'' removing the first footnote 7, revising the
second footnote 7, revising footnote 8 and adding footnote 9 to read as
follows:
Sec. 101.113 Transmitter power limitations.
(a) * * *
------------------------------------------------------------------------
Maximum allowable EIRP \1\, \2\
Frequency band (MHz) ----------------------------------------
Fixed (dBW) Mobile (dBW)
------------------------------------------------------------------------
* * * *
* * *
+30 dBW/MHz
27,500 to 28,350 \9\
29,100 to 29,250............... (\7\)
31,000 to 31,075 \8\, \9\...... 30 dBW/MHz 30 dBW/MHz
31,075 to 31,225 \8\, \9\...... 30 dBW/MHz 30 dBW/MHz
31,225 to 31,300 \8\, \9\...... 30 dBW/MHz 30 dBW/MHz
* * * *
* * *
------------------------------------------------------------------------
* * * *
* * *
\7\ See Sec. 101.113(c).
\8\ For stations authorized prior to March 11, 1997, transmitter output
power shall not exceed 0.05 watt.
\9\ For subscriber transceivers authorized in these bands, the EIRP
shall not exceed 55dBW or 42 dBW/MHz.
[[Page 23168]]
* * * * *
35. Section 101.147 is amended by revising paragraph (a), removing
the entries for ``27,500-29,500 MHz''and adding entries for 27,500-
28,350 MHz (16) and 29,100-29,250 MHz (16), revising the entry for
``31,000-31,300 MHz'' (16), revising note 16 in paragraph (a), removing
paragraph (x), redesignating paragraphs (t) through (w) as paragraphs
(u) through (x), adding a new paragraph (t), and revising newly
designated paragraph (u), to read as follows:
Sec. 101.147 Frequency assignments
(a) Frequencies in the following bands are available for assignment
for fixed microwave services.
* * * * *
27,500-28,350 MHz (16)
29,100-29,250 MHz (5), (16)
31,000-31,300 MHz (16)
* * * * *
(5) Frequencies in this band are shared with stations in the
fixed-satellite service.
* * * * *
(16) As of June 30, 1997, frequencies in these bands are
available for assignment only to LMDS radio stations. Stations
initially authorized prior to that date may continue to operate
within the existing terms of the outstanding licenses.
* * * * *
(t) 27,500-28,350; 29,100-29,250; 31,000-31,300 MHz. These
frequencies are available for LMDS systems. Each assignment will be
made on a BTA service area basis, and the assigned spectrum may be
subdivided as desired by the licensee.
(u) 31,000-31,300 MHz. Stations licensed in this band prior to
March 11, 1997, may continue their authorized operations, subject to
license renewal, on the condition that harmful interference will not be
caused to LMDS operations licensed in this band after June 30, 1997. In
the sub-bands 31,000-31,075 and 31,225-31,300 MHz, stations initially
licensed prior to March 11, 1997, except in LTTS, and LMDS operations
authorized after June 30, 1997, are equally protected against harmful
interference from each other in accordance with the provisions of
Sec. 101.103(b). For stations, except in LTTS, permitted to relocate to
these sub-bands, the following paired frequencies are available:
------------------------------------------------------------------------
Receive
Transmit (receive) (MHz) (transmit)
(MHz)
------------------------------------------------------------------------
(1) 25 MHz Authorized Bandwidth Channels
31,012.5................................................... 31,237.5
31,037.5................................................... 31,262.5
31,062.5................................................... 31,287.5
(2) 75 MHz Authorized Bandwidth Channel
31,037.5................................................... 31,275.0
------------------------------------------------------------------------
* * * * *
36. Section 101.305 is amended by revising paragraphs (a) through
(c) to read as follows:
Sec. 101.305 Discontinuance, reduction, or impairment of service.
(a) If the public communication service provided by a station in
the Common Carrier Radio Services and the Local Multipoint Distribution
Service is involuntarily discontinued, reduced or impaired for a period
exceeding 48 hours, the station licensee must promptly notify the
Commission, in writing, at Federal Communications Commission, Common
Carrier Radio Services, 1270 Fairfield Road, Gettysburg, Pennsylvania
17325. In every such case, the licensee must furnish full particulars
as to the reasons for such discontinuance, reduction or impairment of
service, including a statement as to when normal service is expected to
be resumed. When normal service is resumed, prompt notification thereof
must be given in writing to the Federal Communications Commission,
Common Carrier Radio Services, 1270 Fairfield Road, Gettysburg,
Pennsylvania, 17325.
(b) No station licensee subject to title II of the Communications
Act of 1934, as amended, may voluntarily discontinue, reduce or impair
public communication service to a community or part of a community
without obtaining prior authorization from the Commission pursuant to
the procedures set forth in part 63 of this chapter. In the event that
permanent discontinuance of service is authorized by the Commission,
the station licensee must promptly send the station license to the
Federal Communications Commission, Common Carrier Radio Services, 1270
Fairfield Road, Gettysburg, Pennsylvania 17325 for cancellation; except
that station licensees in the Local Multipoint Distribution Service
need not surrender the license for cancellation if the discontinuance
is a result of a change of status by the licensee from common carrier
to non-common carrier pursuant to Sec. 101.61.
(c) Any licensee not subject to title II of the Communications Act
of 1934, as amended, who voluntarily discontinues, reduces or impairs
public communication service to a community or a part of a community
must give written notification to the Commission within 7 days thereof.
In the event of permanent discontinuance of service, the station
licensee must promptly send the station license to the Federal
Communications Commission, Common Carrier Radio Services, 1270
Fairfield Road, Gettysburg, Pennsylvania 17325 for cancellation; except
that station licensees in the Local Multipoint Distribution Service
need not surrender the license for cancellation if the discontinuance
is a result of a change of status by the licensee from non-common
carrier to common carrier pursuant to Sec. 101.61.
* * * * *
37. Section 101.311 is revised to read as follows:
Sec. 101.311 Equal employment opportunities.
Equal opportunities in employment must be afforded by all common
carrier licensees and all Local Multipoint Distribution Service
licensees in accordance with the provisions of Sec. 21.307.
38. Section 101.803 is amended by revising note (7) of paragraph
(a), revising note (9) of paragraph (d), removing paragraph (e), and
redesignating paragraphs (f), (g), and (h) as (e), (f), and (g), to
read as follows:
Sec. 101.803 Frequencies.
(a) * * *
(7) As of June 30, 1997, frequencies in these band
only are available for assignment to LMDS radio stations. Stations
authorized prior to that date may continue to operate within the
existing terms of the outstanding licenses, subject to renewal.
* * * * *
(d) * * *
(9) As of June 30, 1997, frequencies in these band
only are available for assignment to LMDS radio stations. Stations
authorized prior to that date may continue to operate within the
existing terms of the outstanding licenses, subject to renewal.
* * * * *
39. Subpart K is added and reserved in part 101 and Subpart L is
added, reading as follows:
Subpart L--Local Multipoint Distribution Service
Sec.
101.1001 Eligibility.
101.1003 LMDS eligibility restrictions for incumbent LECs and cable
companies.
101.1005 Frequencies available.
101.1007 Geographic service areas and number of licenses.
101.1009 System operations.
101.1011 Construction requirements and criteria for renewal
expectancy.
[[Page 23169]]
101.1013 Permissible communications services.
101.1015 Application form and contents.
101.1017 Requesting regulatory status.
Sec. 101.1001 Eligibility.
Any entity, other than one precluded by Sec. 101.7 and by
Sec. 101.1003, is eligible for authorization to provide Local
Multipoint Distribution Service (LMDS) under this subpart.
Authorization will be granted upon proper application filed under the
rules in this part.
Sec. 101.1003 LMDS eligibility restrictions for incumbent LECs and
cable companies.
(a) Eligibility for LMDS license. Except as provided in paragraph
(b) of this section, no incumbent LEC or incumbent cable company, as
defined in paragraph (c) of this section, nor any entity owning an
attributable interest in an incumbent LEC or incumbent cable company,
shall have an attributable interest in an LMDS license whose geographic
service area significantly overlaps such incumbent's authorized or
franchised service area.
(1) Termination of restriction. This restriction shall terminate
three years following June 30, 1997 unless the Commission extends its
applicability based on a determination that incumbent LECs or incumbent
cable companies continue to have substantial market power in the
provision of local telephony or cable television services.
(2) Waiver of restriction. Upon completion of the initial award of
LMDS licenses, an incumbent LEC or incumbent cable company may petition
for a waiver of the restriction on eligibility based upon a showing
that the petitioner no longer has market power in its authorized or
franchised service area as the result of the entry of new competitors,
other than an LMDS licensee, into such service area.
(b) Exception to eligibility restriction. The restriction set forth
in paragraph (a) of this section shall not apply to any license for the
31,000-31,075 megahertz and 31,225-31,300 megahertz bands of LMDS
spectrum.
(c) Incumbent LECs and cable companies defined. The terms incumbent
LEC and incumbent cable company shall be defined as follows:
(1) Incumbent LEC. The term incumbent local exchange carrier or
incumbent LEC shall be defined, in accordance with section 251(h) of
the Communications Act, to mean, with respect to an area, that:
(i) On February 8, 1996, the LEC provided telephone exchange
service in such area and was deemed to be a member of the exchange
carrier association pursuant to Sec. 69.601(b) of this chapter; or
(ii) Is a person or entity that, on or after February 8, 1996,
became a successor or assign of a member described in paragraph
(c)(1)(i) of this section; or
(iii) Is an entity, or a member of a class or category of entities,
that the Commission has determined under section 251(h)(2) of the
Communications Act to treat as a local exchange carrier.
(2) Incumbent cable company. The term incumbent cable company means
a company that is franchised to provide cable service and is not
subject to effective competition under the following definition of
effective competition in section 623(l) of the Communications Act:
(i) Fewer than 30 percent of the households in the franchise area
subscribe to the cable service of a cable system; or
(ii) The franchise area is:
(A) Served by at least two unaffiliated multichannel video
programming distributors each of which offers comparable video
programming to at least 50 percent of the households in the franchise
area; and
(B) The number of households subscribing to programming services
offered by multichannel video programming distributors other than the
largest multichannel video programming distributor exceeds 15 percent
of the households in the franchise area; or
(iii) A multichannel video programming distributor operated by the
franchising authority for that franchise area offers video programming
to at least 50 percent of the households of that franchise area; or
(iv) A local exchange carrier or its affiliate (or any multichannel
video programming distributor using the facilities of such carrier or
its affiliate) offers video programming services directly to
subscribers by any means (other than direct-to-home satellite services)
in the franchise area of an unaffiliated cable operator which is
providing cable service in that franchise area, but only if the video
programming services so offered in that area are comparable to the
video programming services provided by the unaffiliated cable operator
in that area.
(d) Significant overlap with authorized or franchised service area.
For purposes of paragraph (a) of this section, a significant overlap of
an incumbent LEC's or incumbent cable company's authorized or
franchised service area occurs when at least 10 percent of the
population of the LMDS licensed service area, as determined by the 1990
census figures for the counties contained in such service area, is
within the authorized or franchised service area.
(e) Definition of attributable interest. For purposes of paragraph
(a) of this section, an entity shall be considered to have an
attributable interest in an incumbent LEC, incumbent cable company, or
LMDS licensee pursuant to the following criteria:
(1) A controlling interest shall constitute an attributable
interest. Controlling interest means majority voting equity ownership,
any general partnership interest, or any means of actual working
control (including negative control) over the operation of the entity,
in whatever manner exercised.
(2) Partnership and similar ownership interests and any stock
interest amounting to 20 percent or more of the equity, or outstanding
stock or outstanding voting stock of an entity.
(3) Stock interests held in trust that exceed the limit set forth
in paragraph (e)(2) of this section shall constitute an attributable
interest of any person who holds or shares the power to vote such
stock, of any person who has the sole power to sell such stock, and, in
the case of stock held in trust, of any person who has the right to
revoke the trust at will or to replace the trustee at will. If the
trustee has a familial, personal, or extra-trust business relationship
to the grantor or the beneficiary, the stock interests held in trust
shall constitute an attributable interest of such grantor or
beneficiary, as appropriate.
(4) Non-voting stock shall constitute an attributable interest in
the issuing entity if it exceeds the limit set forth in paragraph
(e)(2) of this section.
(5) Debt and interests such as warrants and convertible debentures,
options, or other interests (except non-voting stock) with rights of
conversion to voting interests shall not constitute attributable
interests unless and until conversion is effected.
(6) Limited partnership interests amounting to 20 percent or more,
calculated according to both the percentage of equity paid in and the
percentage of distribution of profits and losses, shall constitute an
attributable interest of each such limited partner.
(7) Officers and directors of an incumbent LEC or incumbent cable
company, an LMDS licensee, or an entity that controls such incumbent
LEC, incumbent cable company, or LMDS licensee, shall be considered to
have an attributable interest in such incumbent LEC, incumbent cable
company, or LMDS licensee.
(8) Ownership interests that are held indirectly by any party
through one or
[[Page 23170]]
more intervening corporations or other entities shall be determined by
successive multiplication of the ownership percentages for each link in
the vertical ownership chain and application of the relevant
attribution benchmark to the resulting product, except that, if the
ownership for any interest in any link in the chain exceeds 50 percent
or represents actual control, it shall be treated as if it were a 100
percent interest.
(9) Any person who manages the operations of an incumbent LEC or
incumbent cable company or an LMDS licensee pursuant to a management
agreement shall be considered to have an attributable interest in such
incumbent LEC, incumbent cable company or LMDS licensee, if such person
or its affiliate has authority to make decisions or otherwise engage in
practices or activities that determine, or significantly influence:
(i) The nature or types of services offered by such entity;
(ii) The terms upon which such services are offered; or
(iii) The prices charged for such services.
(10) Any person or its affiliate who enters into a joint marketing
arrangement with an incumbent LEC, an incumbent cable company, an LMDS
licensee, or an affiliate of such entity, shall be considered to have
an attributable interest in such incumbent LEC, incumbent cable
company, LMDS licensee, or affiliate, if such person or its affiliate
has authority to make decisions or otherwise engage in practices or
activities that determine:
(i) The nature or types of services offered by such entity;
(ii) The terms upon which such services are offered; or
(iii) The prices charged for such services.
(f) Divestiture. Any incumbent LEC or incumbent cable company, or
any entity owning an attributable interest in an incumbent LEC or
incumbent cable company, that would otherwise be barred from
participating in an LMDS auction by the eligibility restriction in
paragraph (a) of this section, may be a party to an LMDS application
(i.e., have an attributable interest in the applicant), and such
applicant will be eligible for an LMDS license, pursuant to the
divestiture procedures set forth in paragraphs (f)(1) through (f)(6) of
this section.
(1) Divestiture shall be limited to the following prescribed means:
(i) An LMDS applicant holding an attributable interest in an
incumbent LEC or incumbent cable company may divest such interest in
the incumbent LEC or cable company.
(ii) Other LMDS applicants disqualified under paragraph (a) of this
section, will be permitted to:
(A) Partition and divest that portion of the existing authorized or
franchised service area that causes it to exceed the overlap
restriction in paragraph (d) of this section, subject to applicable
regulations of state and local governments; or
(B) Partition and divest that portion of the LMDS geographic
service area that exceeds the overlap restriction in paragraph (d) of
this section.
(iii) Divestiture may be to an interim trustee if a buyer has not
been secured in the required period of time, as long as the LMDS
applicant has no interest in or control of the trustee and the trustee
may dispose of the license as it sees fit.
(2) The LMDS applicant shall certify as an exhibit to its short
form application that it and all parties to the application will come
into compliance with paragraph (a) of this section.
(3) If such LMDS applicant is a successful bidder in an auction, it
must submit with its long-form application a signed statement
describing its efforts to date and future plans to come into compliance
with the eligibility restrictions in paragraph (a) of this section.
(4) If such an LMDS applicant is otherwise qualified, its
application will be granted subject to a condition that the applicant
shall come into compliance with the eligibility restrictions in
paragraph (a) of this section, within ninety (90) days of final grant
of such LMDS license.
(5) An LMDS applicant will be considered to have come into
compliance with paragraph (a) of this section if:
(i) In the case of the divestiture of a portion of an LMDS license,
it has submitted to the Commission an application for license
assignment or transfer of control of the requisite portion of the LMDS
geographic service area.
(ii) In all other cases, it has submitted to the Commission a
signed certification that it has come into compliance with paragraph
(a) of this section by the following means, identified in such
certification:
(A) By divestiture of a disqualifying interest in an incumbent LEC
or incumbent cable company, identified in terms of the interest owned,
the owner of such interest (and, if such owner is not the applicant
itself, the relationship of the owner to the applicant), the name of
the party to whom such interest has been divested, and the date such
divestiture was executed; or
(B) By divestiture of the requisite portion of the incumbent LEC's
or incumbent cable company's existing authorized or franchised service
area, identified in terms of the name of the party to whom such
interest has been divested, the date such divestiture was executed, the
name of any regulatory agency that must approve such divestiture, and
the date on which an application was filed for this purpose with the
regulatory agency.
(6) If no such certification or application is tendered to the
Commission within ninety (90) days of final grant of the initial
license, the Commission may consider the short form certification and
the long form divestiture statement to be material, bad faith
misrepresentations and shall invoke the condition on the initial
license, cancelling or rescinding it automatically, shall retain all
monies paid to the Commission, and, based on the facts presented, shall
take any other action it may deem appropriate.
Note to Sec. 101.1003: Waivers of Sec. 101.1003(e) may be
granted upon an affirmative showing:
1. That the interest holder has less than a 50 percent voting
interest in the licensee and there is an unaffiliated single holder
of a 50 percent or greater voting interest;
2. That the interest holder is not likely to affect the local
market in an anticompetitive manner;
3. That the interest holder is not involved in the operations of
the licensee and does not have the ability to influence the licensee
on a regular basis; and
4. That grant of a waiver is in the public interest because the
benefits to the public of common ownership outweigh any potential
anticompetitive harm to the market.
Sec. 101.1005 Frequencies available.
(a) The following frequencies are available for assignment to LMDS
in two license blocks:
Block A of 1,150 MHz
27,500-28,350 MHz
29,100-29,250 MHz
31,075-31,225 MHz
Block B of 150 MHz
31,000-31,075 MHz
31,225-31,300 MHz
(b) In Block A licenses, the frequencies are authorized as follows:
(1) 27,500-28,350 MHz is authorized on a primary protected basis
and is shared with Fixed Satellite Service (FSS) systems.
(2) 29,100-29,250 MHz is shared on a co-primary basis with feeder
links for non-geostationary orbit Mobile Satellite Service (NGSO/MSS)
systems in the band and is limited to LMDS hub-to-
[[Page 23171]]
subscriber transmissions, as provided in Sec. 25.257 and
Sec. 101.103(h).
(3) 31,075-31,225 MHz is authorized on a primary protected basis
and is shared with private microwave point-to-point systems licensed
prior to March 11, 1997, as provided in Sec. 101.103(b).
(c) In Block B licenses, the frequencies are authorized as follows:
(1) On a primary protected basis if LMDS shares the frequencies
with systems licensed as Local Television Transmission Service (LTTS)
licensed prior to March 11, 1997, as provided in Sec. 101.103(b).
(2) On a co-equal basis with systems not licensed as LTTS prior to
March 11, 1997, as provided in Sec. 101.103(g).
Sec. 101.1007 Geographic service areas and number of licenses.
LMDS service areas are Basic Trading Areas (BTAs) as defined in the
Rand McNally 1992 Commercial Atlas & Marketing Guide, 123rd Edition, at
pages 38-39, that identifies 487 BTAs based on the 50 States and as
defined to include the BTA-like areas of the United States Virgin
Islands, American Samoa, Guam, Mayaguez/Aguadilla-Ponce, Puerto Rico,
San Juan, Puerto Rico, and the Commonwealth of Northern Marinas, for a
total of 493 BTAs.
Sec. 101.1009 System operations.
(a) The licensee may construct and operate any number of fixed
stations anywhere within the area authorized by the license without
prior authorization, except as follows:
(1) A station would be required to be individually licensed if:
(i) International agreements require coordination;
(ii) Submission of an Environmental Assessment is required under
Sec. 1.1307 of this chapter.
(iii) The station would affect the radio quiet zones under
Sec. 101.123.
(2) Any antenna structure that requires notification to the Federal
Aviation Administration (FAA) must be registered with the Commission
prior to construction under Sec. 17.4 of this chapter.
(b) Whenever a licensee constructs or makes system changes as
described in paragraph (a) of this section, the licensee is required to
notify the Commission within 30 days of the change under Sec. 101.61
and include a statement of the technical parameters of the changed
station.
Sec. 101.1011 Construction requirements and criteria for renewal
expectancy.
(a) LMDS licensees must make a showing of ``substantial service''
in their license area within ten years of being licensed.
``Substantial'' service is defined as service which is sound,
favorable, and substantially above a level of mediocre service which
might minimally warrant renewal. Failure by any licensee to meet this
requirement will result in forfeiture of the license and the licensee
will be ineligible to regain it.
(b) A renewal applicant involved in a comparative renewal
proceeding shall receive a preference, commonly referred to as a
renewal expectancy, that is the most important comparative factor to be
considered in the proceeding as long as the applicant's past record for
the relevant license period demonstrates that:
(1) The renewal applicant has provided ``substantial'' service
during its past license term; and
(2) The renewal applicant has substantially complied with
applicable FCC rules, policies, and the Communications Act of 1934, as
amended.
(c) In order to establish its right to a renewal expectancy, an
LMDS renewal applicant involved in a comparative renewal proceeding
must submit a showing explaining why it should receive a renewal
expectancy. At a minimum, this showing must include:
(1) A description of its current service in terms of geographic
coverage and population served:
(2) An explanation of its record of expansion, including a
timetable of new construction to meet changes in demand for service:
(3) A description of its investments in its LMDS system; and
(4) Copies of all FCC orders finding the licensee to have violated
the Communications Act or any FCC rule or policy; and a list of any
pending proceedings that relate to any matter described in this
paragraph.
(d) In making its showing of entitlement to a renewal expectancy, a
renewal applicant may claim credit for any system modification
applications that were pending on the date it filed its renewal
application. Such credit will not be allowed if the modification
application is dismissed or denied.
Sec. 101.1013 Permissible communications services.
(a) Authorizations for stations in the Local Multipoint
Distribution Service will be granted to provide services on a common
carrier basis or a non-common carrier basis or on both a common carrier
and non-common carrier basis in a single authorization.
(b) Stations may render any kind of communications service
consistent with the Commission's rules and the regulatory status of the
station to provide services on a common carrier or non-common carrier
basis.
(c) An applicant or licensee may submit a petition at any time
requesting clarification of the regulatory status required to provide a
specific communications service.
Sec. 101.1015 Application form and contents.
(a) Applications for initial authorization are filed on FCC Form
175 in accordance with Subpart M of this part, and part 1 of this
chapter, subpart Q. FCC Form 600 is submitted subsequently either by
the winning bidder, if an auction is held to decide among two or more
mutually exclusive applications, or, in cases of no mutual exclusivity,
by the sole applicant. Applications to amend pending applications and
to modify licenses are filed on FCC Form 600.
(b) Foreign ownership information. All LMDS applicants will provide
the information requested on FCC Form 600 to address all of the
eligibility requirements in Sec. 101.7. All licensees will keep the
information updated.
Sec. 101.1017 Requesting regulatory status.
(a) Initial applications. An applicant will specify on FCC Form 600
if it is requesting authorization to provide services on a common
carrier basis, a non-common carrier basis, or on both a common carrier
and non-common carrier basis.
(b) Amendment of pending applications. (1) Any pending application
may be amended to:
(i) Change the carrier status requested, or
(ii) Add to the pending request in order to obtain both common
carrier and non-common carrier status in a single license.
(2) Amendments to change, or add to, the carrier status in a
pending application are minor amendments filed under Sec. 101.29.
(c) Modification of license. (1) A licensee may modify a license
to:
(i) Change the carrier status authorized, or
(ii) Add to the status authorized in order to obtain both common
carrier and non-common carrier status in a single license.
(2) Applications to change, or add to, the carrier status in a
license are modifications not requiring prior Commission authorization
filed under Sec. 101.61. If the change results in the discontinuance,
reduction, or impairment of an existing service, the licensee is also
governed by Sec. 101.305(b) or (c) and submits the application under
Sec. 101.61 in conformance with the time
[[Page 23172]]
frames and requirements of Sec. 101.305(b) or (c).
40. Subpart M consisting of Secs. 101.1101 through 101.1112 is
added to part 101 to read as follows:
Subpart M--Competitive Bidding Procedures for LMDS
Sec.
101.1101 LMDS service subject to competitive bidding.
101.1102 Competitive bidding design for LMDS.
101.1103 Competitive bidding mechanisms.
101.1104 Bidding application (FCC Forms 175 and 175-S).
101.1105 Submission of payments.
101.1106 Long-form application (FCC Form 600).
101.1107 Bidding credits for small businesses and entities with
average gross revenues of not more than $75 million.
101.1108 Installment payments for licenses won by small businesses
and entities with average gross revenues of not more than $75
million.
101.1109 Certifications, disclosures, records maintenance and
audits.
101.1110 Petitions to deny.
101.1111 Procedures for partitioned licenses.
101.1112 Definitions.
Sec. 101.1101 LMDS service subject to competitive bidding.
Mutually exclusive initial applications for LMDS licenses are
subject to competitive bidding procedures. The procedures set forth in
part 1, subpart Q, of this chapter will apply unless otherwise provided
in this part.
Sec. 101.1102 Competitive bidding design for LMDS.
The Commission will employ a simultaneous multiple round auction
design when choosing from among mutually exclusive initial applications
to provide LMDS, unless otherwise specified by the Wireless
Telecommunications Bureau before the auction.
Sec. 101.1103 Competitive bidding mechanisms.
(a) Sequencing. The Commission will establish and may vary the
sequence in which LMDS licenses are auctioned.
(b) Grouping. The Commission will determine which licenses will be
auctioned simultaneously or in combination based on interdependency and
administrative circumstances.
(c) Minimum bid increments. The Commission may, by public
announcement before or during an auction, require minimum bid
increments in dollar or percentage terms.
(d) Stopping rules. The Commission may establish stopping rules
before or during an auction in order to terminate the auction within a
reasonable time.
(e) Activity rules. The Commission may establish activity rules
which require a minimum amount of bidding activity. In the event that
the Commission establishes an activity rule in connection with a
simultaneous multiple round auction, each bidder may request waivers of
such rule during the auction. The Commission may, by public
announcement either before or during the auction, specify or vary the
number of waivers available to each bidder.
(f) Bid withdrawal, default and disqualification payments. The
Commission 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. 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.
(g) Tie bids. Where a tie bid occurs, the high bidder will be
determined by the order in which the bids were received by the
Commission.
Sec. 101.1104 Bidding application (FCC Forms 175 and 175-S).
Each applicant to participate in competitive bidding for LMDS
licenses must submit an application (FCC Forms 175 and 175-S) pursuant
to the provisions of Sec. 1.2105 of this chapter.
Sec. 101.1105 Submission of payments.
(a) Each applicant to participate in an LMDS auction will be
required to submit an upfront payment in accordance with Sec. 1.2106 of
this chapter as announced by the Wireless Telecommunications Bureau by
Public Notice.
(b) Winning bidders in LMDS auctions, except those businesses
meeting the definition of small business or qualifying as a business
with average gross revenues for the preceding three years of not more
than $75 million under Sec. 101.1112, must submit a down payment to the
Commission in an amount sufficient to bring their total deposits up to
20 percent of their winning bids within ten business days following the
release of a Public Notice announcing the close of the auction. Winning
bidders, except those qualifying for installment payments, must pay the
full balance of their winning bids within ten business days following
the release of a Public Notice that the Commission is prepared to award
the licenses.
(c) Winning bidders in LMDS auctions that meet the definition of
small business or businesses with average gross revenues for the
preceding three years of not more than $75 million under Sec. 101.1112
must submit a down payment to the Commission in an amount sufficient to
bring their total deposits up to 10 percent of their winning bids
within ten business days following the release of a Public Notice
announcing the close of the auction, and up to 20 percent of their
winning bids within ten business days of the release of a Public Notice
that the Commission is prepared to award the licenses. The remaining 80
percent of the purchase price will then be subject to the installment
financing provisions of Sec. 101.1108.
Sec. 101.1106 Long-form application (FCC Form 600).
Each successful bidder for an LMDS license 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 LMDS 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
Commission may issue in connection with an auction. After an auction,
the Commission will not accept long-form applications for LMDS licenses
from anyone other than the auction winners and parties seeking
partitioned licenses pursuant to agreements with auction winners under
Sec. 101.1111 of this chapter.
Sec. 101.1107 Bidding credits for small businesses and entities with
average gross revenues of not more than $75 million.
(a) A winning bidder that qualifies as a small business pursuant to
Sec. 101.1112 may use a bidding credit of 25 percent to lower the cost
of its winning bid.
(b) A winning bidder that has average gross revenues for the
preceding three years of more than $40 million but not more than $75
million pursuant to Sec. 101.1112 may use a bidding credit of 15
percent to lower the cost of its winning bid.
(c) The bidding credits referenced in paragraphs (a) and (b) of
this section are not cumulative.
(d) Unjust enrichment. (1) A licensee that utilizes a bidding
credit, and that during the initial license term seeks to assign or
transfer control of a license to an entity that does not meet the
[[Page 23173]]
eligibility criteria for a bidding credit, will be required to
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 Commission approval of the
assignment or transfer. If, within the initial term of the license, a
licensee that utilizes a bidding credit seeks to assign or transfer
control of a license to an entity that is eligible for a lower bidding
credit, the difference between the bidding credit obtained by the
assigning party and the bidding credit for which the acquiring party
would qualify, plus interest at the rate imposed for installment
financing at the time the license was awarded, must be paid to the U.S.
government as a condition of Commission approval of the assignment or
transfer. If, within the initial license term, a licensee that utilizes
a bidding credit seeks to make any ownership change that would result
in the licensee losing eligibility for a bidding credit (or qualifying
for a lower bidding credit), the amount of the bidding credit (or the
difference between the bidding credit originally obtained and the
bidding credit for which the restructured licensee would qualify), plus
interest at the rate imposed for installment financing at the time the
license was awarded, must be paid to the U.S. government as a condition
of Commission approval of the ownership change.
(2) The amount of payments made pursuant to paragraph (d)(1) of
this section will be reduced over time as follows:
(i) 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, in the case of small businesses transferring to businesses
having average gross revenues of more than $40 million but not more
than $75 million, 100 percent of the difference between the bidding
credit received by the former and the bidding credit for which the
latter is eligible);
(ii) In year three of the license term the payment will be 75
percent;
(iii) In year four the payment will be 50 percent; and
(iv) In year five the payment will be 25 percent, after which there
will be no required payment.
Sec. 101.1108 Installment payments for licenses won by small
businesses and entities with average gross revenues of not more than
$75 million.
(a) A winning bidder that qualifies as a small business pursuant to
Sec. 101.1112 must submit to the Commission a down payment of 20
percent of the net auction price for the license pursuant to
Sec. 101.1105(c) and may pay the remaining 80 percent of the net
auction price for the license in installment payments over the term of
the license. Interest shall be imposed based on the rate for ten-year
U.S. Treasury obligations applicable on the date the license is
granted, plus 2.5 percent. Payments shall include interest only for the
first two years and payments of interest and principal amortized over
the remaining eight years of the license term.
(b) A winning bidder that has average gross revenues for the three
preceding years of more than $40 million but not more than $75 million
pursuant to Sec. 101.1112 must submit to the Commission a down payment
of 20 percent of the net auction price for the license pursuant to
Sec. 101.1105(c) and may pay the remaining 80 percent of the net
auction price for the license in installment payments. Interest shall
be imposed based on the rate for ten-year U.S. Treasury obligations
applicable on the date the license is granted, plus 2.5 percent.
Payment of interest and principal shall be amortized over the ten years
of the license term.
(c) Unjust enrichment. A licensee that utilizes installment
financing and that seeks to assign or transfer control of a license to
an entity not meeting the eligibility standards for installment
payments must pay not only unpaid principal but also any unpaid
interest accrued through the date of assignment or transfer as a
condition of Commission approval. If a licensee that utilizes
installment financing seeks to assign or transfer control of a license
to an entity qualifying for a less favorable installment plan, its
payment plan will be adjusted to reflect the assignee's or transferee's
eligibility status as a condition of Commission approval of the
assignment or transfer. If a licensee that utilizes installment
financing seeks to change its ownership structure in such a way that
would result in a loss of eligibility for installment payments, it must
pay the unpaid principal and accrued interest as a condition of
Commission approval of the change. If such a change in ownership would
result in the licensee qualifying for a less favorable installment
plan, it must adjust its payment plan to reflect its new eligibility
status as a condition of Commission approval. A licensee may not change
its payment plan to a more favorable plan.
(d) Late installment payment. Any licensee that submits a scheduled
installment payment more than fifteen days late will be charged a late
payment fee equal to five percent of the amount of the past due
payment.
(e) Payments will be applied in the following order: late charges,
interest charges, principal payments.
Sec. 101.1109 Certifications, disclosures, records maintenance and
audits.
(a) Short-form applications: certifications and disclosure. In
addition to certifications and disclosures required in part 1, subpart
Q, of this chapter, each applicant for an LMDS license which qualifies
as a small business or a business with average gross revenues for the
three preceding years of more than $40 million but not more than $75
million shall append the following information as an exhibit to its FCC
Form 175:
(1) The identity of the applicant's affiliates and controlling
principals; and
(2) The applicant's gross revenues, computed in accordance with
Sec. 101.1112.
(b) Long-form applications: certifications and disclosure. In
addition to the requirements in Sec. 1.2107 of this chapter, each
applicant submitting a long-form application for an LMDS license and
qualifying as a small business or a business with average gross
revenues for the three preceding years of more than $40 million but not
more than $75 million shall, in an exhibit to its long-form
application:
(1) Disclose separately and in the aggregate the gross revenues,
computed in accordance with Sec. 101.1112, for each of the following:
the applicant, the applicant's affiliates, the applicant's controlling
principals, and, if a consortium of small businesses or businesses with
average gross revenues for the three preceding years of more than $40
million but not more than $75 million, 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 or a business with average gross revenues for the
three preceding years of more than $40 million but not more than $75
million, 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
[[Page 23174]]
of first refusal, supermajority clauses, options, veto rights, and
rights to hire and fire employees and to appoint members to boards of
directors or management committees.
(c) Records maintenance. All winning bidders qualifying as small
businesses or businesses with average gross revenues for the three
preceding years of more than $40 million but not more than $75 million
shall maintain at their principal place of business an updated file of
ownership, revenue, and asset information, including any document
necessary to establish eligibility as a small business or business with
average gross revenues for the three preceding years of more than $40
million but not more than $75 million. 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 business with average gross revenues for the three
preceding years of more than $40 million but not more than $75 million
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 LMDS service, and shall also include
consent to the interview of principals, employees, customers and
suppliers of the applicant or licensee.
Sec. 101.1110 Petitions to deny.
Procedures regarding petitions to deny long-form applications in
the LMDS service will be governed by Sec. 1.2108 (b) through (d) of
this chapter.
Sec. 101.1111 Procedures for partitioned licenses.
(a) LMDS licensees may apply to partition their licensed geographic
service area or disaggregate their licensed spectrum.
(b) If partitioned licenses or disaggregated licenses are being
applied for in conjunction with a license(s) to be awarded through
competitive bidding procedures--
(1) 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, which must disclose as part
of its short-form application all parties to agreement(s) with or among
entities to partition or disaggregate the license pursuant to this
section, if won at auction. See Sec. 1.2105(a)(2)(viii).
(2) Each entity that is a party to an agreement to partition the
license shall file a long-form application for its respective, mutually
agreed-upon geographic area or spectrum together with the application
for the remainder of the BTA or spectrum filed by the auction winner.
(c) If the partitioned or disaggregated license is being applied
for as a partial assignment of the license following grant of the
initial license, request for authorization for partial assignment of a
license shall be made pursuant to Sec. 101.115(f).
Sec. 101.1112 Definitions.
(a) Scope. The definitions in this section apply to Secs. 101.1101
through 101.1112, unless otherwise specified in those sections.
(b) Small business; consortium. (1) A small business is an entity
that, together with its affiliates and controlling principals, has
average gross revenues for the three preceding years of not more than
$40 million.
(2) For purposes of determining whether an entity meets the
definition of small business or qualifies as a business with average
gross revenues for the three preceding years of more than $40 million
but not more than $75 million, the gross revenues of the applicant, its
affiliates and controlling principals shall be considered on a
cumulative basis and aggregated.
(3) Consortium. A consortium of small businesses, or a consortium
of businesses with average gross revenues for the three preceding years
of more than $40 million but not more than $75 million, 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 or business with average
gross revenues for the three preceding years of more than $40 million
but not more than $75 million. Each individual member must establish
its eligibility as a small business or business with average gross
revenues for the three preceding years of more than $40 million but not
more than $75 million. Where an applicant (or licensee) is a consortium
of small businesses or a consortium of businesses with average gross
revenues for the three preceding years of more than $40 million but not
more than $75 million, the gross revenues of each 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), as evidenced by
audited financial statements for the relevant number of most recently
completed calendar years, or, if audited financial statements were not
prepared on a calendar-year basis, for the most recently completed
fiscal years preceding the filing of the applicant's short-form
application (FCC Form 175). If an entity was not in existence for all
or part of the relevant period, gross revenues shall be evidenced by
the audited financial statements of the entity's predecessor-in-
interest or, if there is no identifiable predecessor-in-interest,
unaudited financial statements certified by the applicant as accurate.
When an applicant does not otherwise use audited financial statements,
its gross revenues may be certified by its chief financial officer or
its equivalent.
(d) Affiliate--(1) Basis for affiliation. An individual or entity
is an affiliate of an applicant if such individual or entity:
(i) Directly or indirectly controls or has the power to control the
applicant, or
(ii) Is directly or indirectly controlled by the applicant, or
(iii) Is directly or indirectly controlled by a third party or
parties who also control or have the power to control the applicant, or
(iv) Has an ``identity of interest'' with the applicant.
(2) Nature of control in determining affiliation. (i) Every
business concern is considered to have one or more parties who directly
or indirectly control or have the power to control it. Control may be
affirmative or negative and it is immaterial whether it is exercised so
long as the power to control exists.
Example for paragraph (d)(2)(i). 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
[[Page 23175]]
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 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 control or the power to
control and the remaining 60 percent is widely distributed with no
individual stockholder having a stock interest greater than 10
percent, management has the power to control. If persons with such
management control of the other entity are controlling principals of
the applicant, the other entity will be deemed an affiliate of the
applicant.
(3) Identity of interest between and among persons. Affiliation can
arise between or among two or more persons with an identity of
interest, such as members of the same family or persons with common
investments. In determining if the applicant controls or is controlled
by a concern, persons with an identity of interest will be treated as
though they were one person.
(i) Spousal affiliation. Both spouses are deemed to own or control
or have the power to control interests owned or controlled by either of
them, unless they are subject to a legal separation recognized by a
court of competent jurisdiction in the United States.
(ii) Kinship affiliation. Immediate family members will be presumed
to own or control or have the power to control interests owned or
controlled by other immediate family members. In this context
``immediate family member'' means father, mother, husband, wife, son,
daughter, brother, sister, father-or mother-in-law, son-or daughter-in-
law, brother-or sister-in-law, step-father or -mother, step-brother or
-sister, step-son or -daughter, half-brother or -sister. This
presumption may be rebutted by showing that:
(A) The family members are estranged,
(B) The family ties are remote, or
(C) The family members are not closely involved with each other in
business matters.
Example for paragraph (d)(3)(ii). A owns a controlling interest
in Corporation X. A's sister-in-law, B, has a controlling interest
in an LMDS license 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 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 owns, controls, or has the power to
control less than 50 percent of the concern's voting stock, if the
block of stock 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 an LMDS 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 percent (70 of 100 outstanding shares) of the voting stock of
company A, who holds a controlling interest in an LMDS license
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 or the management (or both) of another entity.
(8) Affiliation through common facilities. Affiliation generally
arises where one concern shares office space, employees, or other
facilities (or any combination of the foregoing) 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
[[Page 23176]]
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
or individuals (or both), 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.
[FR Doc. 97-9711 Filed 4-28-97; 8:45 am]
BILLING CODE 6712-01-P
