[Federal Register Volume 63, Number 92 (Wednesday, May 13, 1998)]
[Rules and Regulations]
[Pages 26502-26508]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 98-12667]
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FEDERAL COMMUNICATIONS COMMISSION
47 CFR Part 101
[CC Docket No. 92-297; FCC 98-77]
Rules and Policies for Local Multipoint Distribution Service and
for Fixed Satellite Services
AGENCY: Federal Communications Commission.
ACTION: Final rule.
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SUMMARY: This action amends the rules to adopt partitioning and
disaggregation rules for the Local Multipoint Distribution Service
(LMDS). This action will encourage spectrum efficiency and the more
rapid deployment of service to the public. The effect of these rules is
to provide LMDS licensees greater flexibility to respond to marketplace
demands.
EFFECTIVE DATE: May 28, 1998.
FOR FURTHER INFORMATION CONTACT: Susan Magnotti of the Public Safety
and Private Wireless Division, Wireless Telecommunications Bureau at
202-418-0680 or via email at smagnott@fcc.gov.
SUPPLEMENTARY INFORMATION:
1. This is a summary of the Commission's Fourth Report and Order to
allow partitioning and disaggregation for LMDS spectrum.
2. On March 11, 1997, the Commission adopted the Second Report and
Order (Second Report and Order), 62 FR 23148; April 29, 1997, Order on
Reconsideration, and Fifth Notice of Proposed Rule Making (Fifth NPRM),
62 FR 16514; April 7, 1997, wherein it established service rules to
govern licensing of LMDS and competitive bidding rules to select among
mutually exclusive LMDS applications. The Commission concluded that its
actions would open the door for new broadband wireless services and
that LMDS spectrum could be used to provide competition to both local
exchange carriers (LECs) and cable television systems. It envisioned
that our LMDS service and licensing rules would foster the future
growth of this new service and permit LMDS licensees to satisfy a broad
array of their customer's communications needs. In addition, the
Commission permitted partitioning and disaggregation by LMDS licensees
to encourage spectrum efficiency and the more rapid deployment of
service, and to leave the decision of determining the correct size of
licenses to the licensees and the marketplace. It concluded that
allowing partitioning and disaggregation for LMDS spectrum would create
powerful tools for licensees to concentrate on core areas or to deliver
services outside of the major market areas. The Commission further
found that LMDS partitioning and disaggregation would provide
opportunities for small businesses seeking to enter the multipoint
video distribution and local telephony marketplaces.
3. In the Fifth NPRM, the Commission sought comment on specific
procedural, administrative and operational rules to govern LMDS
partitioning and disaggregation. It sought comment on how rights and
obligations of LMDS licensees would be affected if such licensees were
permitted to avail themselves of the partitioning and disaggregation
options. It also sought comment on whether there are any technical or
regulatory constraints unique to the LMDS service that would render any
aspects of partitioning and disaggregation impractical or
administratively burdensome. In this connection, the Commission noted
that it had recently adopted specific procedures for partitioning and
disaggregation in the broadband Personal Communications Services (PCS)
and sought comment on whether such procedures would be appropriate for
LMDS. A total of five comments and five reply comments were received in
response to the Fifth NPRM.
A. Available License Area
4. Background. In the Fifth NPRM, the Commission tentatively
concluded that parties to a LMDS partitioning agreement should be
afforded flexibility in defining partitioned license areas. It sought
comment on this tentative conclusion and, in particular, asked whether
there are any technical or other issues unique to LMDS that would
dictate a different approach.
5. Discussion. We conclude that LMDS licensees should have broad
flexibility in defining partitioned license areas. As we noted in the
Fifth NPRM, such an approach is consistent with our treatment of
partitioning in other services, particularly broadband PCS. In
addition, we believe that allowing LMDS licensees to partition their
service areas along any boundaries they wish will enhance their ability
to respond quickly to consumer demands. In this connection, we agree
with CellularVision USA, Inc. (CellularVision) that such an approach
will allow LMDS licensees to consider unique geographical or market
characteristics when designing their business plans. We also are
concerned that requiring LMDS partitioned areas to be based upon a
uniform standard, such
[[Page 26503]]
as geopolitical boundaries or county lines, might unnecessarily
restrict LMDS partitioning opportunities. For example, Hardin predicts
that LMDS operations will most likely consist of cell sites with a
small range. In this context, Hardin contends that partitioning based
upon a minimum standard, such as geopolitical boundaries or county
lines, would not accommodate small-scale partitioning options which may
be desirable for LMDS spectrum. We also previously concluded that LMDS
has the capacity to meet the more circumscribed needs of smaller
operators and niche markets. We find that permitting partitioning into
smaller units will further assist small operators to meet their
business goals and will encourage the development of niche markets and
innovative service offerings. Thus, we believe that more flexible
partitioning will better serve the interests of LMDS licensees and the
public.
6. As we have in all other contexts in which we have permitted
partitioning, we will require that parties seeking approval to
partition an LMDS license submit a description of the partitioned
service area. The partitioned service area must be defined by
coordinate points at every 3 degrees along the partitioned service area
agreed to by both parties, unless either (1) an FCC-recognized service
area is utilized (i.e., Metropolitan Statistical Area, Rural Service
Area or Economic Area) or (2) county lines are followed. If the
partitioned service area includes an FCC-recognized service area or
county and additional areas, applicants are required to identify the
FCC-recognized service areas or county and give the aforementioned
coordinate data for the additional areas. These geographical
coordinates must be specified in degrees, minutes and seconds to the
nearest second of latitude and longitude. For areas located in the
coterminous United States and Alaska the geographical coordinates must
be based upon the 1983 North American Datum (NAD83). For locations in
areas such as Hawaii, Puerto Rico, the South Pacific Islands, etc. the
geographical coordinates must be based upon the World Geodetic System
of 1984 (WGS84). This coordinate data should be supplied as an
attachment to the assignment application, but maps need not be
supplied. In cases where an FCC recognized service area or county lines
are being utilized, applicants must list the specific area(s) (through
use of FCC designations) or counties that comprise the partitioned
area.
B. Disaggregation Standards
7. Background. In conjunction with the general rule permitting
disaggregation of LMDS spectrum in the Second R&O, the Commission did
not propose any restrictions on the amount of spectrum that licensees
could disaggregate. In the Fifth NPRM, it nonetheless requested comment
as to whether there should be spectrum limits on disaggregation. The
Commission asked commenters to indicate any unique characteristics of
LMDS which would warrant such limitations.
8. Discussion. We conclude that no minimum or maximum limits should
be imposed on disaggregation of LMDS spectrum. We agree with
commenters' arguments that we should establish similar rules in LMDS
for disaggregation as we established for other wireless services such
as broadband PCS. We also agree with WebCel that regulatory parity will
be achieved by adopting a similar disaggregation rule for all wireless
services. As with partitioning, we believe that permitting market
forces to determine whether and how much spectrum is disaggregated will
ensure that LMDS licensees are able to use their spectrum more
efficiently and to respond quickly to customer demand. In addition, we
believe that affording LMDS licensees this flexibility will facilitate
participation by small businesses in the provision of LMDS.
9. Based on our review of the record, we are not persuaded that
there should be any restrictions on the amount of spectrum that LMDS
licensees can disaggregate. We disagree with Texas Instruments'
argument that LMDS licensees cannot provide competition to LECs and
cable television operators unless they are required to retain a
substantial portion of their spectrum. To the contrary, we find that
requiring LMDS licensees to retain a substantial portion of their
spectrum could potentially exclude small businesses from entering the
LMDS marketplace. We believe that such a result would ultimately limit,
rather than encourage, competition. We also disagree with Texas
Instruments' contention that LMDS has unique characteristics warranting
a requirement that a licensee retain a predominant share of its LMDS
spectrum. Texas Instruments argues that we should follow the example of
our decision in the direct broadcast satellite (DBS) proceeding. In the
DBS R&O, 60 FR 65587; December 20, 1995, we required that DBS
licensees, after 5 years from date of license grant, use a predominant
share of their authorized spectrum for DBS service. Texas Instruments
argues that we should adopt a similar requirement for LMDS licensees
with the majority of LMDS spectrum remaining with the original licensee
and being used to provide LMDS. We disagree that LMDS licensees should
be required to retain a certain amount of their spectrum. In the DBS
R&O, we required licensees to use a portion of their spectrum to
provide DBS service to ensure that this spectrum is used principally
for DBS service. We enacted this restriction to ensure the viability of
the DBS service and to carry out the international allocation of this
spectrum for DBS use. By contrast, there are no similar unique
characteristics of LMDS, particularly in light of the fact that LMDS
licensees can provide a wide array of terrestrial services. The fact
that licensees have the freedom under our rules to use their spectrum
for different applications makes it potentially constraining to adopt a
minimum disaggregation standard. Therefore, we find there is no public
interest reason to restrict the amount of LMDS spectrum that can be
disaggregated.
C. Combined Partitioning and Disaggregation
10. Background. In the Fifth NPRM, the Commission tentatively
concluded that combined partitioning and disaggregation should be
permitted to provide LMDS licensees with the additional flexibility
they need to respond to market forces and service demands. With
combined partitioning and disaggregation, it contemplated that an
entity would have the flexibility to obtain a portion of Block A or
Block B spectrum in only a portion of the original licensee's BTA.
11. Discussion. We conclude that permitting combined partitioning
and disaggregation will afford interested parties flexibility to
provide a variety of service offerings, including those of particular
interest to niche markets. We believe that this approach will further
our regulatory goals of facilitating the provision of competitive
service offerings, encouraging new market entrants, and promoting
quality service to the public.
12. While several parties agree that combined partitioning and
disaggregation should be permitted, WebCel and Alcatel contend that
such an approach could be problematic. WebCel expresses concern
regarding the potential administrative burdens associated with
processing numerous partitioning and disaggregation requests. WebCel
argues that such an approach would create the potential for a large
number of applications overwhelming the Commission's processing
resources and delaying delivery of LMDS service
[[Page 26504]]
to the public. We are unpersuaded by WebCel's speculative concern. We
note that while this potential also theoretically exists in the other
wireless services for which we have adopted partitioning and
disaggregation rules, our experience has shown that we have been able
to handle the partitioning and disaggregation applications without any
resulting undue delay in the delivery of new services. In addition, we
believe that any administrative burden of processing partitioning and
disaggregation applications will be lessened by implementation of the
Universal Licensing System (ULS) for wireless services, including LMDS,
which is already partially on-line accepting electronically-filed
applications. We expect that the electronic filing and mapping
capabilities of the ULS will ultimately allow for the expeditious
processing of LMDS partitioning and disaggregation applications.
13. Alcatel argues that it is unclear how LMDS licensees are to
conduct frequency coordination for partitioned and disaggregated
licenses. Accordingly, Alcatel seeks clarification as to the frequency
coordination obligations of LMDS partitionees and disaggregatees. We
clarify that all LMDS licensees, including partitionees and
disaggregatees, are required to comply with the frequency coordination
provisions set forth in Sec. 101.103 of the Commission's Rules. We
adopted this approach in the Second R&O and herin we do not provide an
exception for partitioning and disaggregation. We further note that the
identity of neighboring LMDS licensees should be readily available in
the Commission's database, particularly with the implementation of ULS.
Thus, we conclude that the concerns expressed by WebCel and Alcatel do
not present sufficient reasons for not permitting combined partitioning
and disaggregation.
D. Construction Requirements
14. Background. LMDS licensees must provide ``substantial service''
to their service area within ten years. In the Fifth NPRM, the
Commission proposed that, for partitioned LMDS licenses, the
partitionee must certify that it will satisfy the same construction
requirements as the original licensee. The partitionor and partitionee
would therefore be required to meet separate substantial service
requirements for their respective portions of the partitioned service
area. For disaggregation, the Commission proposed that the parties
would be required to submit a certification, signed by both the
disaggregator and disaggregatee, stating whether one or both of the
parties will retain responsibility for meeting the substantial service
requirement for the service area. It proposed that, if one party takes
responsibility for meeting the performance requirement, then actual
performance by that party would be taken into account in a renewal
proceeding at the end of the license term, but such performance would
not affect the status of the other party's license. If the parties
agreed to share the responsibility for meeting the performance
requirement, then the performance of each of the parties would be taken
into account in their respective renewal proceedings.
15. Discussion Partitioned Licenses. We conclude that the public
interest would be furthered by adopting an approach analogous to that
used in other contexts, particularly broadband PCS, rather than
adopting our proposal for partitioning. In other wireless services, we
have allowed licensees the flexibility to negotiate which party will be
responsible for meeting the applicable construction requirements. In
each of those cases, our goal has been to ensure that licensees had the
flexibility to structure their business plans while ensuring that
partitioning not be used as a vehicle to circumvent the applicable
construction requirements. We have allowed parties to partitioning
agreements in other wireless services the flexibility to choose between
two options for satisfying the construction requirements. For example,
we allow broadband PCS licensees the option of either agreeing to meet
the construction requirements for their respective portions of the
partitioned market or for the original licensee to certify that it had
or would meet the five- and ten-year construction requirements for the
entire market. We adopted this second option to allow parties the
flexibility to agree that one party would take responsibility for
meeting the construction requirement for the entire licensed area.
Similarly, we believe that parties interested in entering into LMDS
partitioning arrangements should be afforded the same flexibility.
Under the first option, the partitionor and partitionee would each
certify that it will independently satisfy the substantial service
requirement for its respective partitioned area. If a licensee fails to
meet its substantial service requirement during the relevant license
term, the non-performing licensee's authorization would be subject to
cancellation at the end of the license term. Under the second option,
the partitionor certifies that it has met or will meet the substantial
service requirement for the entire market. If the partitionor fails to
meet the substantial service standard during the relevant license term,
however, only its license would be subject to cancellation at the end
of the license term. The partitionee's license would not be affected by
that failure.
16. As indicated in the Second R&O, the availability of
partitioning will promote and facilitate smaller-scale service
offerings and market niches to develop which would be appropriate for
smaller operators who could not manage an entire BTA. Our decision to
offer two options is based on our belief that LMDS licensees may be
motivated to enter into partitioning arrangements for different reasons
and under various circumstances. For example, as discussed by DBC, a
LMDS licensee might be motivated to partition its license in order to
reduce its construction costs. In that case, the original licensee
would have less population to cover in order to meet its substantial
service requirement. Thus, it may find the first option most attractive
for its purposes. Under another scenario, a LMDS licensee that has met
or is close to meeting its substantial service requirement may be
approached by another entity interested in serving a niche market in a
portion of the service area. Under these circumstances, the second
option may seem most attractive to the parties. We believe that the
partitioning rules for LMDS should address both of these scenarios. We
further believe that in both contexts partitioning cannot be used to
circumvent the LMDS construction requirements. In any event, we note
that we will examine each situation on a case-by-case basis when the
licensees file their renewal applications and will be able to address
any abuses of the partitioning options in that context.
17. In addition, pursuant to CellularVision's request, we clarify
if a partitionor and partitionee elect to meet the substantial service
for their respective partitioned areas, then we would make an
independent assessment of the construction efforts of the partitionor
and partitionee based on the partitioned area, population served, and
actual service provided. We acknowledge CellularVision's observation
that the service offering provided by a partitionee might be quite
different than that provided by the original licensee.
18. Disaggregated Licenses. As we proposed in the Fourth NPRM, 61
FR 44177; August 28, 1996, we establish
[[Page 26505]]
two options for disaggregating licensees. This approach is consistent
with what we have done in other wireless contexts. We believe that it
would be appropriate for either the disaggregator or the disaggregatee
to assume full responsibility for construction within the shared
service area, because service would be offered over the relevant
population, even if not on the entire spectrum. As DBC points out in
its comments, supra, we agree that this option could encourage a LMDS
licensee to make some of its spectrum available to others. Accordingly,
we will permit two options for meeting the construction requirements by
disaggregators and disaggregatees. Under the first option, the
disaggregator and disaggregatee would certify that they each will share
responsibility for meeting the substantial service requirement for the
geographic service area. If parties choose this option, both parties'
performance will be evaluated at the end of the relevant license term
and both licenses could be subject to cancellation. The second option
would allow the parties to agree that either the disaggregator or the
disaggregatee would be responsible for meeting the substantial service
requirement for the geographic service area. If parties choose this
option, and the party responsible for meeting the construction
requirement fails to do so, only the license of the nonperforming party
would be subject to cancellation.
19. We continue to believe that these build-out provisions fulfill
our obligations under Section 309(j)(4)(B). We also believe that the
auction and service rules which we are adopting for LMDS, together with
our overall competition and universal service policies, constitute
effective safeguards and performance requirements for LMDS licensing.
We believe that service to rural areas will be promoted by our proposal
to allow partitioning and disaggregation of LMDS spectrum. The options
established herein are intended to provide the greatest possible
flexibility to licensees and partitionees while ensuring that rural and
niche market areas receive LMDS services. Accordingly, we continue to
reserve the right to impose additional, more stringent construction
requirements on LMDS licensees in the future in the event of actual
anticompetitive or rural service problems and if more stringent
construction requirements can effectively ameliorate those problems.
E. License Term and Renewal Expectancy
20. Background. LMDS licenses are granted for ten-year terms. In
addition, an LMDS licensee involved in a comparative renewal proceeding
may qualify for a renewal expectancy if the licensee demonstrates that
it has provided substantial service during its license term, and that
it has substantially complied with the Communications Act and
applicable Commission rules and policies. In the Fifth NPRM, the
Commission sought comment on whether our LMDS rules should provide that
parties obtaining LMDS licenses for partitioned areas or disaggregated
spectrum hold their license for the remainder of the original
licensee's ten-year term. It noted that, in the Broadband PCS R&O, 62
FR 696, January 6, 1997, the Commission found that allowing parties
acquiring licenses through partitioning and disaggregation to ``re-
start'' the license term from the date of the grant of the assignment
application could allow parties to circumvent our rules regarding
license terms and unnecessarily delay service to the public. It also
sought comment on whether LMDS partitionees and disaggregatees should
be afforded the same renewal expectancy as other LMDS licensees.
21. Discussion. We find that LMDS partitionees and disaggregatees
should hold their licenses for the remainder of the original licensee's
ten-year term. This approach is supported by the commenters and is
consistent with our action in other wireless services. We see no reason
to adopt a different approach for LMDS. As we did with licensees in
other wireless services, we believe that LMDS licensees would have less
of an incentive to fully utilize their available spectrum if they were
permitted to wait until the end of their license term to partition a
portion of their market or disaggregate a portion of their spectrum to
another entity that would receive a full ten year license term. By
limiting the license term for LMDS partitionees and disaggregatees, we
believe that there will be maximum incentive for parties to quickly
utilize their spectrum and expedite the delivery of LMDS services to
the public.
22. In addition, we will permit partitionees and disaggregatees to
obtain a renewal expectancy on the same basis as other licensees. All
licensees meeting the substantial service requirement will be deemed to
have met this facet of the renewal expectancy requirement regardless of
which of the construction options the licensees chose. CellularVision
asks that we clarify whether LMDS partitionees and disaggregatees may
seek a renewal expectancy that is based upon their reduced license
period. CellularVision maintains that it would be inequitable, for
example, to require a LMDS partitionee with a three-year initial
license term to meet the same level of substantial service to obtain a
renewal expectancy as the original licensee. We decline to recognize a
``scaled-down'' substantial service construction requirement for
partitionees and disaggregatees. Rather, we believe that parties
interested in availing themselves of the partitioning and/or
disaggregation opportunities should factor in their ability to meet the
substantial service requirement when determining the timing of such
transactions. We believe that the provisions we have made for
construction options for partitioned and disaggregated licenses provide
appropriate flexibility, while ensuring that a reasonable standard of
service will be provided to the public and that licensees will not be
able to bypass our construction requirements. Moreover, we will address
each situation on a case-by-case basis taking into account the amount
of time the licensee has had to employ its service along with other
factors.
F. Competitive Bidding Issues
23. Background. When the Commission adopted the Fifth NPRM, the
competitive bidding rules for LMDS included installment payments and
bidding credits for qualified entities. It also adopted rules to
prevent unjust enrichment by such entities that seek to transfer
licenses obtained through use of these special provisions to an entity
that would not have qualified for them. Subsequent to our adoption of
the Fifth NPRM, the Commission eliminated installment payments for
LMDS. Therefore, the proposals in the Fifth NPRM concerning whether
partitionees and disaggregatees should be able to qualify for
installment payments and how to apportion the remaining government
obligation between the parties are now moot.1 We note,
however, that three levels of bidding credits are available to LMDS
applicants. In the Fifth NPRM, the Commission sought comment on how to
calculate unjust enrichment payments for LMDS licensees that are
awarded bidding credits and subsequently partition or disaggregate to a
larger business. It asked commenters to address whether the unjust
enrichment payments should be calculated on a proportional basis, using
population of the partitioned area and amount of
[[Page 26506]]
spectrum disaggregated as the objective measures.
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\1\ We therefore do not need to consider the alternative
proposals set forth by CellularVision and DBC concerning the
handling of installment payments with respect to LMDS partitioning
and disaggregation. See CellularVision Comments at 11-13; DBC Reply
Comments at 5-6.
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24. Discussion. We recently adopted a provision in Part 1 of the
Commission's Rules for all auctionable services that follows the
approach set forth in the Fifth NPRM for calculating unjust enrichment
payments in the context of partitioning and disaggregation. Thus, we
will follow the uniform procedure set forth in Part 1 of our Rules and
calculate unjust enrichment based on population for partitioned areas
and on the amount of spectrum for disaggregated spectrum. We note that
population will be calculated based upon the latest available census
data. We have consistently adopted this approach for other wireless
services, and we agree with WebCel that this approach provides an
objective means of calculating unjust enrichment payments in the
context of partitioning and disaggregation. For purposes of applying
our unjust enrichment requirements when a combined partitioning and
disaggregation is proposed, we will use a combination of both
population of the partitioned area and amount of spectrum disaggregated
to make these pro rata calculations.
G. Licensing
25. Background. Because partitioning and disaggregation involves
the assignment of a portion of a licensee's service area or spectrum to
another entity, in the Fifth NPRM the Commission proposed to treat the
partitioning and disaggregation of LMDS licenses as assignments
requiring its prior approval. It proposed to follow the existing
assignment procedures set forth in Part 101 of our rules for purposes
of reviewing LMDS partitioning and disaggregation transactions.
26. Discussion. We adopt the procedures set forth in our Fifth NPRM
for review and approval of LMDS partitioning and disaggregation
transactions. We agree with CellularVision that all LMDS partitioning
and disaggregation agreements should be subject to our formal
assignment process. We decline to adopt WebCel's proposal that we
permit parties to enter into agreements to partition and disaggregate
without prior Commission approval so long as notification is given to
the Commission by the original LMDS licensee upon consummation of the
transaction. Under WebCel's proposal, the original licensee would
retain an ownership interest in the license and would continue to be
responsible for compliance with the Commission's rules, maintaining
records as to the spectrum allocated and geographic areas served by the
different parties, and engaging in frequency coordination among all
LMDS license holders within its BTA. WebCel states that this model
would operate like a ``landlord-tenant-subtenant'' relationship. By
contrast, we consider partitioning and disaggregation transactions to
be partial assignments of license, for which Commission review and
approval is necessary under Section 310(d) of the Communications
Act.2 Although arrangements such as that proposed by WebCel
might be permissible, we note that the Commission requires that the
licensee remain in control of its license, and for this determination,
the Commission relies on the test announced in Intermountain Microwave.
As a result, any arrangement that would result in a licensee losing
control of its license pursuant to the Intermountain Microwave indicia
would be inconsistent with our requirements for licensee
responsibility.
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\2\ 47 U.S.C. 310(d). We note that we recently determined that
we would forbear from applying our procedures for reviewing pro
forma transfers of control and assignments of license involving
wireless telecommunications carriers and we decided to allow these
carriers to simply notify the Commission after the pro forma
transaction has been consummated. See Federal Communications Bar
Association's Petition for Forbearance from Section 310(d) of the
Communications Act Regarding Non-Substantial Assignments of Wireless
Licenses and Transfers of Control Involving Telecommunications
Carriers, Memorandum Opinion and Order, FCC 98-18 (February 4,
1998). However, partitioning and disaggregation transactions are not
pro forma in nature and, therefore, the rationale we followed in
that proceeding would not apply here.
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27. WebCel's proposal also does not offer procedures for reviewing
transactions where licensees desire to assign a portion of their market
or spectrum outright to another entity and do not wish to hold the
assigned portion. We thus believe that adoption of Webcel's approach
would run counter to our goal of providing LMDS licensees with
flexibility to structure partitioning and disaggregation transactions
to meet their specific business plans. We conclude that WebCel's
proposed model is not an appropriate construct for characterizing
partitioning and disaggregation transactions. For these reasons, we
will not adopt the alternative proposal suggested by WebCel. The
procedures we adopt herein correspond to the procedures we have adopted
for reviewing partitioning and disaggregation transactions in other
wireless services. We find that adoption of similar partitioning and
disaggregation procedures for all wireless services will provide
regulatory parity, will permit our processing staff to develop common
forms and procedures for reviewing all partitioning and disaggregation
applications, and will streamline and expedite the review of such
applications.
28. We will require that parties seeking approval for an LMDS
partitioning or disaggregation transaction follow the existing
assignment procedures set forth in Part 101 of our Rules. Such
applications will be placed on Public Notice and will be subject to
petitions to deny. The LMDS licensee will be required to file an FCC
Form 702 that is signed by both the licensee and the partitionee or
disaggregatee. The partitionee or disaggregatee will also be required
to file an FCC Form 430 to demonstrate its qualifications, unless a
current FCC Form 430 is already on file with the Commission.
H. Other Matters
29. Background. In our Second R&O, we determined that two LMDS
licenses, one for 1150 MHz and one for 150 MHz, would be awarded for
each Basic Trading Area (BTA) and adopted an eligibility restriction
that prohibits incumbent LECs and incumbent cable companies from
obtaining an attributable interest in in-region 1,150 MHz LMDS licenses
for three years. We stated, however, that incumbent LECs and incumbent
cable companies could obtain LMDS licenses at auction and use
partitioning as a means to divest an overlapping portion of the BTA to
comply with the eligibility restrictions. In its comments, WebCel
argues that the Commission should reconsider this action and should not
permit incumbent LECs and cable companies to use partitioning as a
means of curing eligibility problems.
30. Discussion. We decided the issue of whether we should permit
incumbent LECs and cable companies to use partitioning to come into
compliance with the eligibility restrictions in our Second R&O. The
purpose of our Fifth NPRM was not to revisit this issue but to decide
the mechanics of implementing partitioning and disaggregation for LMDS.
Therefore, we find that, while they were styled as ``Comments,'' a
portion of WebCel's pleading is actually an untimely-filed petition for
reconsideration of the eligibility rules from our Second R&O. We agree
with Bell Atlantic, RTG and Sprint that this portion of WebCel's
Comments should not be considered in this phase of the proceeding. In
this connection, we addressed WebCel's arguments in the Third Order on
Reconsideration in this proceeding and affirmed the divestiture
provision.
[[Page 26507]]
31. We conclude that the rules we adopt herein will provide LMDS
licensees with the flexibility to structure partitioning and
disaggregation agreements which meet their business needs. We have
followed the general framework for partitioning and disaggregation that
we have previously adopted for other wireless services in an effort to
create regulatory parity among all licensees. As with the other service
and licensing rules we have adopted for LMDS, we believe that this
action will result in more efficient use of spectrum, will increase
opportunities for small businesses and other entities to enter the LMDS
marketplace, and will speed service to unserved areas.
I. PROCEDURAL MATTERS
A. Regulatory Flexibility Act
32. The Final Regulatory Flexibility Analysis pursuant to the
Regulatory Flexibility Act, 5 U.S.C. 604, is contained in the
attachment.
B. Ordering Clauses
33. Accordingly, it is ordered that, pursuant to the authority of
Sections 4(i), 303(g), 303(r), and 332(a) of the Communications Act of
1934, as amended, 47 U.S.C. 154(i), 303(g), 303(r), and 332(a),
Sec. 101.1111 of the Commission's Rules, 47 CFR 101.1111, is amended as
set forth in the rule changes attachment.
34. It is further ordered that the rule change adopted herein shall
become effective July 13, 1998. This action is taken pursuant to
Sections 4(i) and 303(r) of the Communications Act of 1934, as amended,
47 U.S.C. 154(i) and 303(r).
35. It is further ordered that the Director, Office of Public
Affairs, shall send a copy of this Fourth Report and Order, including
the Final Regulatory Flexibility Analysis, to the Chief Counsel for
Advocacy of the Small Business Administration, in accordance with
Section 605(b) of the Regulatory Flexibility Act, 5 U.S.C. 601(a).
List of Subjects in 47 CFR Part 101
Communications equipment, Radio.
Federal Communications Commission.
Magalie Roman Salas,
Secretary.
Rule Changes
Part 101 of title 47 of the Code of Federal Regulations is amended
as follows:
PART 101--FIXED MICROWAVE SERVICES
1. The authority citation for part 101 continues to read as
follows:
Authority: 47 U.S.C. 154, 303.
2. Section 101.1111 is revised to read as follows:
Sec. 101.1111 Partitioning and disaggregation.
(a) Definitions.--Disaggregation. The assignment of discrete
portions or ``blocks'' of spectrum licensed to a geographic licensee or
qualifying entity.
Partitioning. The assignment of geographic portions of a licensee's
authorized service area along geopolitical or other boundaries.
(b) Eligibility. (1) Parties seeking approval for partitioning and
disaggregation shall request an authorization for partial assignment of
a license pursuant to Sec. 101.53. Parties shall submit the forms set
forth in Sec. 101.15(e).
(2) Licensees may apply to partition their licensed geographic
service area or disaggregate their licensed spectrum at any time
following the grant of their licenses.
(c) Technical Standards.--(1) Partitioning. In the case of
partitioning, requests for authorization for partial assignment of a
license must include, as an attachment, a description of the
partitioned service area. The partitioned service area shall be defined
by coordinate points at every 3 degrees along the partitioned service
area unless an FCC recognized service area is utilized (i.e., Major
Trading Area, Basic Trading Area, Metropolitan Service Area, Rural
Service Area or Economic Area) or county lines are followed. The
geographic coordinates must be specified in degrees, minutes, and
seconds to the nearest second of latitude and longitude and must be
based upon the 1983 North American Datum (NAD83). In the case where an
FCC recognized service area or county lines are utilized, applicants
need only list the specific area(s) (through use of FCC designations or
county names) that constitute the partitioned area. In such
partitioning cases where an unjust enrichment payment is owed the
Commission, the request for authorization for partial assignment of a
license must include, as an attachment, a calculation of the population
of the partitioned service area and the licensed geographic service
area.
(2) Disaggregation. Spectrum may be disaggregated in any amount.
(3) Combined Partitioning and Disaggregation. The Commission will
consider requests for partial assignment of licenses that propose
combinations of partitioning and disaggregation.
(d) License Term. The license term for a partitioned license area
and for disaggregated spectrum shall be the remainder of the original
licensee's license term as provided for in Sec. 101.67 of this chapter.
(e) Construction Requirements. Applications requesting approval for
partitioning or disaggregation must include a certification by each
party that it will satisfy the construction requirement set forth in
Sec. 101.1011 of this chapter. Failure by a party to meet its
respective construction requirement will result in the automatic
cancellation of its license without further Commission action.
Note: The following attachment will not appear in the Code of
Federal Regulations.
Attachment--Final Regulatory Flexibility Analysis
As required by Section 603 of the Regulatory Flexibility Act
(RFA), 5 U.S.C. 603, an Initial Regulatory Flexibility Analysis
(IRFA) was incorporated in the Fifth Notice of Proposed Rule Making
(Fifth NPRM) in CC Docket No. 92-297. The Commission sought written
public comment on the proposals in the Fifth NPRM, including the
IRFA. The Commission's Final Regulatory Flexibility Analysis in this
Fourth Report and Order (Fourth R&O) conforms to the RFA, as amended
by the Contract With America Advancement Act of 1996.
A. Need for and Purpose of This Action
In the Fourth R&O, the Commission modifies the Local Multipoint
Distribution Service (LMDS) rules to permit partitioning and
disaggregation for all licensees. With more open partitioning and
disaggregation, additional entities, including small businesses, may
participate in the provision LMDS without needing to acquire
wholesale an existing license (with all of the bundle of rights
currently associated with the existing license). Acquiring ``less''
than the current license will presumably be a more flexible and less
expensive alternative for entities desiring to enter these services.
B. Summary of Issues Raised in Response to the Initial Regulatory
Flexibility Analysis
None of the commenters submitted comments that were specifically
in response to the IRFA.
C. Description and Number of Small Entities Involved
The rules adopted in the Fourth R&O will affect all small
businesses which avail themselves of these rule changes, including
small businesses that will obtain LMDS licenses through auction and
subsequently decide to partition or disaggregate, and small
businesses who may acquire licenses through partitioning and/or
disaggregation.
The Commission has not developed a definition of small entities
applicable to LMDS. In the Second Order on Reconsideration, the
Commission adopted criteria for defining small businesses for
purposes of determining eligibility for special provisions such as
bidding credits. The Commission has adopted a three-tier definition
of small businesses: businesses with gross annual revenues of not
more than
[[Page 26508]]
$15 million, businesses with gross annual revenues of more than $15
million but not more than $40 million and businesses with gross
revenues of more than $40 million but not more than $75 million. We
will use these definitions for estimating the potential number of
entities choosing to partition or disaggregate or who may acquire
licenses through partitioning and disaggregation that are small
businesses.
It is not possible to predict how many LMDS licensees meeting
one of the above definitions will be successful at auction and
subsequently decide to partition or disaggregate. The Commission
plans to issue 2 licenses each for 493 Basic Trading Areas (BTAs).
Thus, 986 licenses will be made available for authorization. It is
expected that a significant number of successful bidders in the LMDS
auction will satisfy one of the above definitions. There is only one
company, CellularVision USA, Inc. (CellularVision), that is
currently providing LMDS video services. Although the Commission
does not collect data on annual receipts, it is assumed that
CellularVision is a small business under all of the above outlined
definitions. Similarly, it is not possible to determine how many of
those entities obtaining licenses through partitioning and
disaggregation will meet one of the above definitions. However, it
is expected that many entities meeting one of the above definitions
will use partitioning and disaggregation as a means to obtain LMDS
licenses at lower costs.
D. Summary of Projected Reporting, Recordkeeping and Other
Compliance Requirements
The rules adopted in the Fourth R&O will impose reporting and
recordkeeping requirements on small businesses seeking licenses
through partitioning and disaggregation. The information
requirements will be used to determine whether the licensee is a
qualifying entity to obtain a partitioned license or disaggregated
spectrum. This information will be given in a one-time filing by any
applicant requesting such a license. The information will be
submitted on the FCC Form 702 which is currently in use and has
already received Office of Management and Budget clearance. The
Commission estimates that the average burden on the applicant is
three hours for the information necessary to complete these forms.
The Commission estimates that 75 percent of the respondents (which
may include small businesses) will contract out the burden of
responding. The Commission estimates that it will take approximately
30 minutes to coordinate information with those contractors. The
remaining 25 percent of respondents (which may include small
businesses) are estimated to employ in-house staff to provide the
information.
E. Steps Taken To Minimize Burdens on Small Entities
The rules adopted in the Fourth R&O are designed to implement
Congress' goal of giving small businesses, as well as other
entities, the opportunity to participate in the provision of
spectrum-based services and are consistent with the Communications
Act's mandate to identify and eliminate market entry barriers for
entrepreneurs and small businesses in the provision and ownership of
telecommunications services.
Allowing non-restricted partitioning and disaggregation will
facilitate market entry by parties who may lack the financial
resources for participation in auctions, including small businesses.
Some small businesses may have been unable to obtain LMDS licensees
through auction due to high bidding. By allowing open partitioning
and disaggregation, small businesses will be able to obtain licenses
for smaller service areas and smaller amounts of spectrum at
presumably reduced costs, thereby providing a method for small
businesses to enter the LMDS marketplace.
Allowing geographic partitioning of LMDS licenses by service
areas defined by the parties will provide an opportunity for small
businesses to obtain partitioned LMDS license areas designed to
serve smaller, niche markets. This will permit small businesses to
enter the LMDS marketplace by reducing the overall cost of acquiring
a partitioned LMDS license.
Allowing disaggregation of spectrum in any amount will also
promote participation by small businesses who may seek to acquire a
smaller amount of LMDS spectrum tailored to meet the needs of their
proposed service.
F. Significant Alternatives Considered and Rejected
The Commission considered and rejected the following alternative
proposals concerning LMDS partitioning and disaggregation.
The Commission rejected a plan set forth by WebCel
Communications, Inc. (WebCel). Instead of requiring all partitioning
and disaggregation transactions to comply with our existing
assignment procedures, WebCel suggested that the Commission permit
parties to enter into agreements to partition and disaggregate
without prior Commission approval so long as notification is given
to the Commission by the original LMDS licensee. The Commission
considers partitioning and disaggregation transactions to be
essentially partial assignments of license, and Commission review
and approval is necessary to ensure compliance with its rules. Thus,
the Commission concluded that WebCel's proposed model is not an
appropriate construct for characterizing partitioning and
disaggregation transactions.
Finally, the Commission rejected a suggestion by CellularVision
that LMDS partitionees and disaggregatees should be allowed to
qualify for a renewal expectancy which is based upon their reduced
license period. The Commission found that this approach would
contradict its construction requirements for LMDS partitionees and
disaggregatees which require these entities to meet a separate
substantial service requirement by the end of their license term.
Partitionees and disaggregatees are not permitted to meet a scaled-
down substantial service construction requirement simply because of
the fact that they had a license term of less than ten years. The
Commission found that, by requiring LMDS partitionees and
disaggregatees to meet the same substantial service requirement for
renewal expectancy as all other licensees, LMDS licensees will be
encouraged to quickly develop their markets and fully utilize their
available spectrum.
G. Report to Congress
The Commission shall include a copy of this Final Regulatory
Flexibility Analysis, along with this Fourth R&O, in a report to be
sent to Congress pursuant to the Small Business Regulatory
Enforcement Fairness Act of 1996, 5 U.S.C. 801(a)(1)(A).
[FR Doc. 98-12667 Filed 5-8-98; 5:08 pm]
BILLING CODE 6712-01-U
