[Federal Register Volume 62, Number 97 (Tuesday, May 20, 1997)]
[Proposed Rules]
[Pages 27563-27578]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 97-13147]
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FEDERAL COMMUNICATIONS COMMISSION
47 CFR Part 24
[GEN Docket No. 90-314; ET Docket No. 92-100; PP Docket No. 93-253; FCC
97-140]
Narrowband Personal Communications Services
AGENCY: Federal Communications Commission.
ACTION: Proposed rule.
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SUMMARY: This FNPRM addresses eligibility and service area issues for
the narrowband Personal Communications Services (narrowband PCS)
channels and response channels, proposes changes to the Commission's
build-out requirements, proposes a partitioning and disaggregation
scheme, and proposes modifications to certain provisions of narrowband
competitive
[[Page 27564]]
bidding rules. The Commission believes that these proposed changes will
serve the public interest, promote competition in the wireless services
market, allow incumbents to expand their systems, increase buildout
flexibility and simplify licensing and competitive bidding procedures.
DATES: Comments are to be filed on or before June 18, 1997; reply
comments are to be filed on or before July 7, 1997.
FOR FURTHER INFORMATION CONTACT: Alice Elder or Mark Bollinger at (202)
418-0660 (Wireless Telecommunications Bureau/Auctions Division) or
David Furth or Rhonda Lien at (202) 418-0620 (Wireless
Telecommunications Bureau/Commercial Wireless Division).
SUPPLEMENTARY INFORMATION: This is a summary of the FNPRM in GEN Docket
No. 90-314, ET Docket No. 92-100 and PP Docket 93-253, adopted April
17, 1997 and released April 23, 1997. The complete text of the FNPRM is
available for inspection and copying during normal business hours in
the FCC Reference Center (Room 239), 1919 M Street, NW, Washington DC
and also may be purchased from the Commission's copy contractor,
International Transcription Services (202) 857-3800, 2100 M Street, NW,
Suite 140, Washington, DC 20037.
Synopsis of the Notice of Proposed Rule Making
Further Notice of Proposed Rule Making
I. Discussion
A. Background
1. In the narrowband PCS First Report and Order, 58 FR 42681
(August 11, 1993), the Commission provided for operation of new,
narrowband PCS in the 900 megahertz (MHz) band. The Commission broadly
defined PCS as mobile and fixed communications offerings that serve
individuals and businesses, and can be integrated with a variety of
competing networks. In the First Report and Order, the Commission
therefore declined to adopt a restrictive definition of narrowband PCS,
such as limiting this category of PCS to advanced messaging and paging
services. The Commission also adopted a spectrum allocation and
channelization plan, licensing rules, and technical standards for
narrowband PCS. Consistent with section 309(j) of the Communications
Act of 1934, as amended, the Commission has determined that PCS is
subject to competitive bidding in the case of mutually exclusive
applications.
2. In the Competitive Bidding Second Report and Order, 59 FR 22980
(May 4, 1994) the Commission adopted general competitive bidding rules
for auctionable services. In the Competitive Bidding Third Report and
Order, 59 FR 26741 (May 24, 1994), the Commission established
competitive bidding rules specifically for narrowband PCS. On
reconsideration of that Order, the Commission revised certain auction
processing rules, expanded special provisions for designated entities
in future narrowband auctions, and sought comment on additional
designated entity provisions for the upcoming narrowband PCS auction.
Of the three MHz of spectrum allocated for narrowband PCS, two one-MHz
blocks are currently divided into specific channels for immediate
licensing. The remaining one MHz of narrowband PCS spectrum currently
is reserved to accommodate future development of narrowband PCS.
3. The Commission thus far has conducted two auctions for
narrowband PCS licenses. As a result of these two auctions, ten
nationwide narrowband PCS licenses and six regional narrowband PCS
licenses in five different regions (totalling 30 regional licenses)
have been issued. Auctions have not yet been conducted for the
narrowband PCS spectrum currently designated for licensing in 51 Major
Trading Areas (MTAs) and 493 Basic Trading Areas (BTAs). In addition,
the 204 MTA licenses and 1,968 BTA licenses designated as unpaired
response channels also have not been auctioned.
B. Service Rules
4. The Commission believes that the channelization plan for
narrowband PCS provides a flexible framework that will foster its goals
of universality, speed of deployment, diversity of services, and
competitive delivery. In the narrowband PCS First Report and Order, 58
FR 42681 (August 11, 1993), the Commission found that a mix of paired,
unpaired, and varying bandwidths would provide the most flexible
solution for meeting the stated needs of narrowband PCS providers. The
Commission determined that while there appears to be interest in
providing narrowband PCS services across a wide range of local,
regional, and nationwide licensed service areas, the bulk of demand is
for large regional or nationwide licensed service areas.
5. Thus, the Commission set aside the majority of narrowband PCS
spectrum for nationwide and MTA-based licensing. In addition, the
Commission recognized that a variety of narrowband PCS services could
be offered on a local level. As a result, the Commission's initial
channelization plan for narrowband PCS consisted of 26 channels
allocated as follows: 11 channels for nationwide use, 13 channels for
use on an MTA basis, and two channels for use on a BTA basis. The
Commission also set aside eight unpaired channels with BTA service
areas for use by existing 900 MHz paging licensees as acknowledgement
or response channels.
6. In the narrowband PCS Memorandum Opinion & Order, 59 FR 37163
(July 21, 1994), the Commission modified its initial channelization
plan in two respects. First, the Commission determined that while
regional service areas based on MTAs contain sufficient population and
geographic area to support economically viable PCS services, a
continued need existed for an additional category of licenses with a
service area smaller than a nationwide area, but larger than an
individual MTA. Therefore, the Commission designated six paired
channels for licensing in five large regions to better reflect the
technologies and business plans of the licensees desiring to implement
large regional narrowband PCS systems. Second, the Commission
determined that licensing some of the eight unpaired channels for use
by existing 900 MHz paging licenses on an MTA basis would make it
easier for operators of local and regional paging systems to upgrade
and coordinate their operations. Thus, four of the paging response
channels are currently licensed using MTA service areas and four using
BTA service areas.
7. In the Competitive Bidding Third Memorandum Opinion & Order/
FNPRM, 59 FR 44058 (August 26, 1994), the Commission proposed to
redesignate channels 25 and 26, which currently are licensed on a BTA
basis, as regional licenses with the same service areas described in
Sec. 24.102 of the Commission's rules. See 47 CFR 24.102. The proposed
redesignation of channels 25 and 26 was an outgrowth of the
Commission's concern that designated entities interested in narrowband
PCS licenses may desire service areas larger than MTAs and BTAs. In
this connection, the Commission recognized that over half of the
bidders who participated in the nationwide auction would have qualified
for an entrepreneurs' block license if it had been available. Thus, the
Commission sought comment on whether it should redesignate some or all
of the channels licensed on a BTA basis, including the response
channels licensed on a BTA basis, to be licensed on an MTA basis,
[[Page 27565]]
or take other means to achieve larger license areas. The Commission
also permitted MTA and BTA service areas to be aggregated up to and
including nationwide coverage.
8. The Commission believes the record provides support for
reconfiguring the service area size of the remaining narrowband PCS
channels. First, the Commission shares the concern of commenters that
the BTA service areas in particular are too small to provide a viable
narrowband service. The Commission's experience with similar services
suggests that larger licensing areas may be more suitable to the actual
configuration of narrowband systems. For example, the Commission
recently adopted MTA-based licensing for the 929 MHz and 931 MHz paging
bands, which are likely to be directly competitive with narrowband PCS.
The Commission also believes that narrowband PCS could be licensed
using larger areas without compromising the goal of ensuring entry for
small businesses. An illustrative comparison is provided by the 900 MHz
Specialized Mobile Radio (SMR) auction, which was MTA-based, in which
60 out of 80 high bidders are small businesses.
9. There may also be additional demand to provide narrowband PCS on
a regional or nationwide basis. In the PCS First Report and Order, the
Commission agreed with commenting parties that regional and nationwide
service areas in narrowband PCS would provide economies of scale and
should alleviate some of the problems licensees have experienced when
they have tried to aggregate smaller license areas. In the previous
narrowband PCS auctions, a number of bidders for the regional licenses
aggregated their licenses into nationwide service, and several
nationwide licenses were aggregated by a single licensee. Moreover, the
large number of regional and nationwide paging systems in the 929 and
931 MHz paging bands suggests that the market for this level of
coverage is dynamic and competitive.
10. Based on these factors, the Commission believes that its prior
proposal for reconfiguring the service areas of the remaining
narrowband PCS channels should be expanded by eliminating all BTA
licensing and instead using a combination of MTAs, regional licensing
areas, and nationwide licensing. The Commission agrees with those
commenters who argue that reallocating some of the response channels
for use in larger service areas will facilitate the upgrade of existing
paging networks. Specifically, the Commission proposes to (1)
redesignate the two remaining 50 kHz paired channels as nationwide
channels; (2) establish one nationwide, three regional, and one MTA-
based channel pairs from the five 50/12.5 kHz channel pairs; and (3)
convert the four BTA-based 12.5 kHz unpaired response channels to
regional channels. By designating these larger service areas, the
Commission seeks to give companies, including designated entities, the
opportunity to establish a viable narrowband service and to provide
regional and nationwide service if circumstances warrant. The
Commission requests comment on this proposal and on any possible
alternative service area combinations. In particular, commenters should
comment on the effect of licensing in larger areas on opportunities for
entry and competition by small businesses. The Commission also seeks
comment on whether local participation in narrowband PCS by smaller
businesses could occur through partitioning or disaggregation
arrangements with MTA-based, regional, and nationwide PCS licensees,
thus affording more opportunities to serve smaller areas.
11. The Commission also seeks comment on what effect increasing the
service area size of as-yet unlicensed channels will have on existing
narrowband PCS licenses. Although some commenters argue that using
larger areas would devalue their licenses, the Commission notes that
they were licensed over two years ago, which would appear to reduce the
impact of subsequent licensing. In addition, as noted above, numerous
paging licensees have established nationwide and regional systems that
already provide competition for narrowband PCS. Finally, the Commission
notes that the goal of its spectrum policy is not to preserve the value
of the licenses that auction winners acquire, but to promote
competition and service in the public interest. The Commission
therefore seeks comment on whether its proposals are equitable to
existing licensees, and whether they would assist new entrants in
offering services to the public in a more efficient manner.
C. Allocation of Reserve Spectrum
12. In the PCS First Report and Order, the Commission allocated
three MHz for narrowband PCS. Specifically, the narrowband PCS spectrum
was allocated into three one-MHz bands, with two MHz of this spectrum
divided into specific channels and available for immediate licensing.
At that time, the Commission determined that the service proposals for
narrowband PCS did not require use of the entire narrowband PCS
spectrum allocation. The Commission retained the flexibility to
channelize and license the remaining one MHz of spectrum for expanded
narrowband PCS licensing opportunities as the service developed.
Subsequently, several commenters to the Competitive Bidding Third
Memorandum Opinion and Order, 59 FR 44058 (August 26, 1994), raised the
issue of the reserve narrowband PCS spectrum and requested that the
Commission immediately channelize and license it.
13. The Commission believes that channelizing and licensing the
reserve narrowband PCS spectrum will serve the public interest by
facilitating competition, opening the market to new entrants, and
allowing existing narrowband PCS licensees to expand their systems
through access to additional spectrum. Therefore, the Commission
tentatively concludes that the one MHz of spectrum that it reserved in
the PCS First Report and Order should now be channelized and licensed.
The Commission seeks comment on this tentative conclusion. The
Commission also seeks comment on whether the reserve narrowband PCS
spectrum should be channelized for additional narrowband PCS paired-
channel use, or whether a greater need exists for narrowband PCS
unpaired channels. The Commission also seeks comment on the way in
which it should allocate this spectrum. For example, the Commission
could authorize three licenses: two 300-kHz licenses and one 400-kHz
license. The Commission requests comment on whether another allocation
would be preferable.
14. Additionally, the Commission requests comment on the narrowband
PCS aggregation limit and whether it should be modified in light of
this proposal. Narrowband PCS is not subject to the commercial mobile
radio service (CMRS) spectrum cap. However, a single licensee is only
permitted to hold licenses for up to three 50 kHz channels, either
paired or unpaired. This limit is based on the total narrowband PCS
spectrum held by a licensee through nationwide, regional and local
licenses at any geographic point. In light of the Commission's proposal
to open and license the narrowband PCS reserve spectrum, the Commission
seeks comment on whether these aggregation limits on narrowband PCS
spectrum are sufficient, or whether it needs to modify, increase or
eliminate such aggregation limits.
D. Construction and Coverage Requirements
15. When designing competitive bidding systems, section 309(j)(3)
of the
[[Page 27566]]
Communications Act states, in part, that ``the Commission shall include
safeguards to protect the public interest in the use of the spectrum. .
. .'' 47 CFR 309(j)(3). In addition, section 309(j)(4)(B) states that
the Commission shall include performance requirements, such as
appropriate deadlines and penalties for performance failures, to ensure
prompt delivery of service to rural areas, to prevent stockpiling or
warehousing of spectrum by licensees or permittees, and to promote
investment in and rapid deployment of new technologies and services. 47
U.S.C. 309(j)(3).
16. Pursuant to section 309(j), the Commission has previously
adopted performance requirements in the form of minimum coverage
requirements for narrowband PCS. 47 U.S.C. 24.103. Specifically,
nationwide narrowband PCS licensees must provide coverage to a
composite area of 750,000 square kilometers or serve 37.5 percent of
the U.S. population within five years of their license grants, and must
provide coverage to a composite area of 1,500,000 square kilometers or
serve 75 percent of the U.S. population within ten years of license
grant. Regional licensees must cover 150,000 square kilometers or serve
37.5 percent of the population in their licensing areas within five
years, and must cover 300,000 square kilometers or serve 75 percent of
the regional population within ten years. MTA licensees must cover
75,000 square kilometers or serve 25 percent of the MTA population in
five years, and must cover 150,000 square kilometers or serve 75
percent of the MTA population in ten years. 47 CFR 24.103.
17. Since the Commission adopted these coverage requirements for
narrowband PCS in 1994, it has moved towards a more flexible approach
to coverage requirements in other services. For example, in the paging
rulemaking, the Commission provided that paging licensees can either
meet population coverage benchmarks (one-third of licensing area
population within three years of the license grant, and two-thirds of
the population within five years) or may meet their performance
requirement by demonstrating that they are providing ``substantial
service'' in the licensing area within five years of the license grant.
Substantial service is defined as ``service that is sound, favorable,
and substantially above a level of mediocre service, which would barely
warrant renewal.'' In the Wireless Communications Service (WCS), the
Commission concluded that the unique circumstances in that case,
including an aggressive deadline for auctions and exceedingly strict
technical requirements necessary to prevent interference, necessitated
still more flexible performance requirements. WCS licensees are thus
required to provide substantial service to their service areas within
ten years. Report and Order, 62 FR 9636 (March 3, 1997). The
substantial service standard may be met in WCS by providing coverage to
20 percent of the population where mobile service is provided, or four
permanent links per one million people in its licensed service area, or
by an alternative demonstration of substantial service by the licensee.
18. In light of these developments in other services, the
Commission believes it should revisit the narrowband PCS coverage
requirements to ensure that they continue to be justified. The
Commission believes it is appropriate at a minimum to treat narrowband
PCS and paging similarly in this respect: narrowband PCS licensees
operate on adjacent bands to the 900 MHz paging licensees, and the
Commission has previously observed the close, potentially competitive
relationship between the two services. The Commission proposes to
conform its narrowband PCS rules to its paging rules by allowing
narrowband PCS licensees to meet their performance requirements through
a demonstration of substantial service as an alternative to meeting the
coverage requirements provided under the existing rules. The Commission
seeks comment on this proposal and whether an alternative coverage
standard based on geographic areas remains necessary if it adopts a
``substantial service'' alternative as proposed above.
19. The Commission also seeks comment on whether, in addition to
adopting a substantial service option, it should modify its existing
narrowband PCS coverage benchmarks. One option would be to conform
these requirements to newly adopted requirements for geographic area
paging. For example, the initial population coverage benchmark for
narrowband PCS MTA licensees is 25 percent at five years, while the
benchmark for MTA-based paging is two-thirds coverage at five years.
This may reflect differences in technology in the two services or that
paging channels already are substantially built out by incumbents,
whereas narrowband PCS licensees are only beginning their buildout
process. At ten years, MTA-based narrowband PCS licensees must achieve
75 percent population coverage or cover 150,000 square kilometers,
whereas paging licensees are not subject to any further coverage
benchmark after five years. The Commission seeks comment on whether the
existing benchmarks for MTA-based narrowband PCS licensees are
appropriate compared to its paging requirements. Commenters should also
discuss applicable coverage requirements for regional and nationwide
narrowband PCS licensees.
20. The Commission also seeks comment on whether it should
eliminate all coverage requirements for narrowband PCS. As wireless
competition evolves, narrowband PCS is likely to face significant
competition not only from other narrowband CMRS providers, including
paging and 220 MHz licensees, but also from broadband CMRS providers
who have the ability to use a portion of their spectrum to offer
``narrowband'' services such as paging and messaging. Commenters should
address whether market forces alone will provide sufficient incentives
for narrowband PCS licensees to construct facilities and provide
valuable new services to the public. In this regard, the Commission
notes that build-out requirements may encourage the provision of
service to areas that would not necessarily receive service
expeditiously solely through the operation of market forces. In
addition, build-out requirements may also prevent stockpiling or
warehousing of spectrum by allowing licenses to be recovered and made
available to entities more willing and able to provide service
expeditiously. On the other hand, simply requiring construction by
itself does not ensure that licenses are put to use in an efficient and
pro-competitive manner. Moreover, construction requirements alone may
not be effective to ensure the provision of service to rural areas,
because they can have the unintended consequence of causing licensees
to build first in urban areas where the mandatory benchmarks could be
met most cheaply, and thus may actually slow the development of service
to rural areas.
21. The Commission is obligated under section 309(j) of the
Communications Act to take sufficient measures to ``ensure prompt
delivery of service to rural areas.'' 47 U.S.C. 309(j)(4)(B). Because
narrowband PCS has already been licensed on a nationwide and regional
basis, and other competing services such as paging are widely available
throughout the U.S, including rural areas, imposing coverage
requirements with the specific intent of promoting rural service may be
unnecessary. In addition, the Commission's decisions relating to
partitioning and disaggregation in narrowband PCS should increase the
potential for service to rural or
[[Page 27567]]
underserved areas. The Commission seeks comment on the potential impact
of eliminating coverage benchmarks on service to rural or underserved
areas. Commenters should address whether the auction and service rules
that the Commission is adopting and proposing here constitute effective
safeguards and performance requirements for narrowband PCS licensing.
E. Auction Design
22. The Competitive Bidding Third Report and Order, 59 FR 26741
(May 24, 1994), established simultaneous multiple round auctions as the
methodology for awarding narrowband PCS licenses. In light of the
experience gained from the nationwide narrowband PCS auction, the
Commission later revised or clarified provisions governing minimum
opening bids, activity rules, pre-auction procedures, the release of
bidder information, and collusion. The Commission generally reaffirms
the auction methodology adopted for narrowband PCS, but seeks comment
on whether modifications should be made to the overall auction design
adopted for narrowband PCS. Additionally, having now completed thirteen
auctions under the competitive bidding authority granted by Congress
and recently having initiated a rule making to revise our general
auction rules, in this FNPRM the Commission revisits certain provisions
governing the general bidding procedures for narrowband PCS that it
believes require revision.
1. Activity Rules
23. In order to ensure that simultaneous multiple round auctions
close within a reasonable period of time and to increase the
information conveyed by bid prices during the auction, it is necessary
to impose an activity rule to prevent bidders from waiting until the
end of the auction before participating. The Commission determined in
the Competitive Bidding Third Report & Order, 59 FR 44058 (August 26,
1994) that the Milgrom-Wilson activity rule would be used in
conjunction with a simultaneous stopping rule to award narrowband PCS
licenses.
24. The Commission determined in the Competitive Bidding Third
Report and Order that a waiver procedure would apply, whereby bidders
would be permitted five automatic waivers from the activity rule during
the course of an auction. In the Competitive Bidding Third Memorandum
Opinion & Order/FNPRM, the Commission modified the waiver procedure for
the narrowband PCS auctions and allowed one automatic waiver during
each stage of an auction, or one automatic waiver during a number of
bidding rounds specified by Public Notice. The Commission noted that
while proactive waivers would keep the bidding open, under no
circumstances would an automatic waiver prevent an auction from
closing.
25. With respect to broadband PCS auctions, the Commission
initially determined that only proactive waivers, and not automatic
waivers, would keep an auction open. In that context, however, the
Commission later modified the rule by retaining the discretion to keep
an auction open even if no new acceptable bids and no proactive waivers
are submitted in a single round. The Commission observed that this
would facilitate the rapid completion of the auction by permitting the
Commission to use larger bid increments, thereby speeding the auction
pace without risking a premature auction close.
26. The Commission proposes for narrowband PCS that it retain the
same discretion as it has in the broadband PCS auctions to keep an
auction open even if no new acceptable bids and no proactive waivers
are submitted in a single round. The Commission tentatively concludes
that this provision will allow the completion of the narrowband PCS
auction in a timely and efficient manner. The Commission seeks comment
on whether this modification of its activity and stopping rules is
appropriate.
2. License Grouping
27. In the Competitive Bidding Third Report and Order, the
Commission determined that choosing which licenses to auction
simultaneously requires a judgment about the degree of interdependence
of the licenses, i.e., the extent to which the amount the bidders are
willing to pay for one license depends on the price of another. The
Commission auctioned the nationwide narrowband PCS licenses in a
simultaneous multiple round auction. The Commission then auctioned the
five regional blocks for a total of 30 licenses together in one
simultaneous multiple round auction. The Commission decided to conduct
a third simultaneous multiple round auction for all of the 50/50 kHz
paired, 50/12.5 kHz paired, and the 50 kHz unpaired MTA licenses for a
total of 357 licenses and, after the MTA licenses are auctioned, to
conduct another simultaneous multiple round auction for the 50/12.5 kHz
paired BTA licenses for a total of 986 licenses.
28. In light of the channel reallocation the Commission adopts
herein, it tentatively concludes that it will conduct one auction for
the remaining narrowband PCS spectrum that has been allocated. The
Commission reserves the right, however, to auction each category, i.e.,
nationwide, regional, MTA of the channels adopted separately. As a
result of its proposal, the Commission considers the issue raised by
commenters that BTAs should be auctioned before MTAs to be moot. The
Commission seeks comment on this proposal. The Commission also seeks
comment on whether it should auction certain categories together if it
decides to conduct more than one auction for the remaining narrowband
PCS spectrum, e.g., nationwide and regional.
3. Auction Design for Response Channels
29. There are 204 MTA 12.5 kHz unpaired response channel licenses
and 1,968 BTA 12.5 kHz unpaired response channel licenses. In the
Competitive Bidding Third Report and Order, the Commission decided to
auction the 12.5 kHz unpaired MTA and BTA response channel licenses in
a single round sealed bid auction because it determined the value of
the licenses to be low relative to the cost of conducting more complex
auctions. Moreover, because only incumbent paging licensees are
eligible to bid on these licenses, it believed that sealed bid auctions
would help to reduce the chances of collusion among the limited number
of bidders. However, petitioners convinced the Commission that paging
response channel licenses may have more interdependency and higher
value than was apparent at the time of its decision in the Competitive
Bidding Third Report and Order. In addition, the Commission stated in
the Competitive Bidding Third Memorandum Opinion & Order/FNPRM that the
nationwide narrowband auction demonstrated simultaneous multiple round
auctions are easier and less expensive to implement than anticipated.
Thus, the Commission deferred its decision regarding auction design for
the paging response channels.
30. The Commission proposes to auction the paging response channels
in one simultaneous multiple round auction, but reserves the option of
auctioning these channels with the remaining narrowband PCS licenses.
The Commission now has the experience necessary to conduct a large
simultaneous multiple round auction in an administratively efficient
manner. In addition, in balancing the advantages of simultaneous
multiple round bidding with the greater complexity that this method
entails, the Commission believes that it is the most appropriate
[[Page 27568]]
auction methodology for these auctions, because of the high value of
most narrowband PCS licenses and the significant interdependence
between spectrum blocks and geographic regions. The Commission seeks
comment on this proposal.
4. Auction Design for Reserved Spectrum
31. The Commission seeks comment on the manner in which it should
auction the one MHz of reserved spectrum. Specifically, the Commission
seeks comment on whether it should use its current narrowband PCS
rules, as set forth in part 24 of its rules or whether other rules
should be adopted to auction this spectrum. In addition, the Commission
seeks comment on whether or not it should auction the reserve spectrum
in conjunction with other narrowband spectrum. The Commission
additionally seeks comment on whether there should be any special
provisions for small businesses, and if so, whether to adopt the small
business size definition and the special provisions proposed herein.
F. Treatment of Designated Entities
1. Overview of Adarand Constructors, Inc. v. Pena
32. The Commission has employed in its narrowband PCS auction rules
a wide range of special provisions and eligibility criteria designed to
meet the statutory objectives of providing opportunities to small
businesses, rural telephone companies, and businesses owned by members
of minority groups and women, collectively known as ``designated
entities.'' Notably, the special provisions adopted for designated
entities in the two narrowband PCS auctions completed thus far produced
varied results. In the nationwide narrowband PCS auction, the
Commission provided a 25 percent bidding credit for businesses owned by
members of minority groups and/or women. No designated entities won
licenses in this auction. Although other factors could have caused this
result, the bidding credit of 25 percent proved insufficient to assist
designated entities in obtaining nationwide narrowband PCS licenses
when no other provisions were provided. The Commission considered the
results of the nationwide narrowband auction when contemplating the
provisions that would govern the regional narrowband PCS auction and
raised the bidding credit to 40 percent for businesses owned by members
of minority groups and/or women. In addition, the Commission
implemented an installment payment plan for businesses owned by members
of minority groups and women. Designated entities were more successful
in the regional narrowband PCS auction, winning all of the licenses for
which a bidding credit was provided for designated entities. In total,
designated entities won 11 of the 30 licenses offered in the regional
narrowband auction. Specifically, four of the nine winners in the
entire auction were designated entities that qualified as small
businesses owned by members of minority groups and/or women.
33. At the time the Commission's narrowband PCS rules were adopted,
an intermediate scrutiny standard of review was applied to federal
race- and gender-based programs. In Adarand Constructors v. Pena, 115
S. Ct. at 2113, the Supreme Court held that all racial classifications,
whether imposed at the federal, state or local government level, must
be analyzed by a reviewing court under a strict scrutiny standard of
review. This standard requires such classifications to be narrowly
tailored to further a compelling governmental interest. In VMI, United
States v. Commonwealth of Virginia, ____ U.S. __, 116 S.Ct. 2264
(1996), the Supreme Court reviewed a state program containing gender
classification and held it was unconstitutional under an intermediate
scrutiny standard of review. This standard requires that ``[p]arties
who seek to defend gender-based government action must demonstrate an
`exceedingly persuasive justification' for that action.'' Under this
test, the government must show ``at least that the [challenged]
classification serves `important governmental objectives and that the
discriminatory means employed' are `substantially related to the
achievement of those objectives.' '' VMI, 116 S. Ct. at 2274. While the
Supreme Court has not directly addressed constitutional challenges to
federal gender-based programs since Adarand and VMI, the Commission's
review of the relevant broad language in VMI indicates that the Court
does not differentiate between federal and state official actions in
its equal protection analysis. Similarly, the Adarand decision
definitively eliminated any distinction between federal and state race-
based programs in setting its strict scrutiny standard of judicial
review. Therefore, the Commission concludes that any gender-based
preference maintained in the narrowband PCS auction rules would need to
meet the VMI intermediate scrutiny standard of review.
34. The Adarand decision potentially affects three race- and
gender-based measures in the Commission's narrowband PCS auction rules
and proposals. First, the Commission's attribution rules enable an
applicant in which women or minorities hold 50.1 percent of the equity
while another investor holds 49.9 percent of the equity to obtain
special status as businesses owned by minorities or women. Second,
businesses owned by minorities or women and small businesses owned by
minorities or women receive larger bidding credits than other
designated entities. Finally, the Competitive Bidding Third Memorandum
Opinion & Order/FNPRM proposes that small businesses owned by
minorities or women receive the most favorable installment payment
options available. The purpose of these provisions was to address the
lack of access to capital problem that the Commission's record showed
women and minorities face.
35. The Commission tentatively concludes that the present record in
support of its race-based narrowband PCS rules lack sufficient
evidentiary support to withstand strict scrutiny. The Commission seeks
comment on its tentative conclusion and whether its provisions promote
a compelling governmental interest and, more particularly, whether
compensating for discrimination in lending practices and in practices
in the communications industry constitutes such an interest. The
Commission also asks interested parties to comment on nonremedial
objectives that could be furthered by the minority-based provisions of
its rules and whether they could be considered compelling governmental
interests, such as increased diversity in ownership and employment in
the communications industry or increased industry competition. In
commenting, the Commission asks parties to submit statistical data,
personal accounts, studies, or any other data relevant to the entry of
specific racial groups into the field of telecommunications. Examples
of relevant evidence could include discrimination against minorities
trying to obtain FCC licenses; discrimination against minorities
seeking positions of ownership or employment in communications or
related businesses; discrimination against minorities attempting to
obtain capital to start up a telecommunications enterprise, including
terms and conditions; and discrimination against minorities operating
telecommunications businesses, including treatment by vendors and
suppliers.
36. With respect to the Commission's gender-based provisions, the
Commission seeks comment on whether there are remedial or nonremedial
goals that would satisfy the ``important
[[Page 27569]]
governmental objective'' requirement of the intermediate scrutiny
standard. Are the Commission's gender-based rules ``substantially
related'' to the achievement of such objectives? Just as the Commission
requested above, in addressing evidence to support the narrowband race-
based provisions, it asks parties to submit statistical data, personal
accounts, studies, or any other data relevant to the entry of women
into the field of telecommunications. The Commission is also interested
in supplementing the current record to support race- and gender-based
provisions in its other rules. In this regard, the Commission initiated
a comprehensive rule making proceeding to explore market barriers to
women-and minority-owned businesses, as well as small businesses,
pursuant to section 257 of the Communications Act. The record created
in response to this FNPRM will also be incorporated into that docket.
37. Based on the Commission's tentative conclusions, it proposes to
offer only race- and gender-neutral provisions for narrowband PCS. The
Commission proposes that bidding credits and installment payments
should be made available to small businesses--including those owned by
minorities and women.
2. Eligibility for Bidding Credits and Installment Payments
a. Small Business Definition
38. In the Competitive Bidding Second Memorandum Opinion & Order,
59 FR 44272 (August 26, 1994), the Commission stated that it would
define eligibility requirements for small businesses on a service-
specific basis, taking into account the capital requirements and other
characteristics of each particular service. In the recently adopted
Part One NPRM, 62 FR 13540 (March 21, 1997), it proposed to continue
this practice. Once small business eligibility requirements are
defined, however, the Commission proposed in the Part One NPRM to adopt
uniform schedules of bidding credits and installment payments that
would determine the level of benefits provided to small businesses. For
the regional narrowband PCS and broadband PCS auctions, the Commission
believed that build-out and operational costs would be high and adopted
a small business threshold of $40 million. More recently, the
Commission have adopted a ``tiered'' approach for determining small
business eligibility. For instance, for the 900 MHz Specialized Mobile
Radio (SMR) service it adopted a two-tiered system for determining
eligibility for bidding credits, reduced down payments, and installment
payment plans.
39. The Commission proposes to limit eligibility for bidding
credits and installment payments to small businesses. The Commission
proposes a ``two-tiered'' approach in defining small businesses, based
on a $40 million and $15 million definition. Currently, it has a $40
million small business definition. Businesses with gross revenues of
not more than $40 million may have significantly greater difficulty in
obtaining capital than larger enterprises. At the same time, a company
with $40 million in revenue is sufficiently large that it could survive
in a competitive wireless communications market. The Commission
believes that ``small businesses,'' as defined by the Commission's
proposal, will be at a disadvantage in competing against large
companies. Accordingly, the Commission proposes to enhance special
provisions for small businesses by creating an additional category,
very small business entities, with a $15 million threshold.
40. The Commission seeks comment on these proposals. Specifically,
are $40 million and $15 million appropriate thresholds? Are such tiers
necessary to ensure that small businesses, including those owned by
minorities and women, have the opportunity to participate in providing
service on an MTA, regional, and nationwide basis? Should the
thresholds be higher or lower, based on the types of companies that are
likely to benefit from the special provisions proposed below? Also,
should different definitions of small businesses be used for different
channel blocks? For example, should the threshold for nationwide
licenses be higher than the threshold for regional licenses?
b. Attribution
41. To ensure that only bona fide small businesses avail themselves
of the special provisions provided to them, the narrowband PCS rules
requires the Commission to consider the gross revenues of the
applicant, its affiliates, and all ``attributable'' investors in the
applicant on a cumulative basis. The attribution rules established for
narrowband PCS count the gross revenues of all investors in, and
affiliates of, an applicant on a cumulative, fully-diluted basis for
purposes of determining whether the $40 million gross revenue threshold
for small businesses has been exceeded. In addition, an applicant will
not qualify as a small business if any one attributable investor in, or
affiliate of, the entity has $40 million or more in personal net worth.
There are two exceptions, however. First, applicants that meet the
definition of a small business may form consortia of small businesses
that, on an aggregate basis, exceed the gross revenue cap. Second, if
the applicant forms a ``control group,'' the gross revenues, personal
net worth, and affiliations of any investor in the applicant are not
considered so long as the investor holds 25 percent or less of the
applicant's passive equity, is not a member of the applicant's control
group, and the control group holds at least 25 percent of the
applicant's equity.
42. The Commission also established in the Competitive Bidding
Third Memorandum Opinion & Order/FNPRM a relaxed attribution standard
for women- and minority-owned businesses. Under this standard, the
gross revenues or net worth of any single investor in a minority- or
woman-owned small business applicant that is not a member of the
applicant's control group is not attributable unless it holds more than
49.9 percent of the passive equity of the applicant. The control group
must (1) own at least 50.1 percent of the applicant's equity, (2)
retain control and hold at least 50.1 percent of the voting stock, and
(3) consist entirely of minorities and/or women or entities 100 percent
owned and controlled by minorities and/or women. The gross revenues and
net worth of each member of the control group and each member's
affiliates are counted toward the gross revenue threshold or the
individual $40 million individual net worth limitation, regardless of
the size of the member's total interest in the applicant. These
provisions were intended to address the special problems of women and
minorities in obtaining financing due, in part, to discriminatory
lending practices by private financial institutions.
43. The Commission proposes replacing the ``control group''
structure established for narrowband PCS in the Competitive Bidding
Third Memorandum Opinion and Order with simpler structural and control
requirements. In determining whether an applicant qualifies as a small
business in the narrowband PCS auction, the Commission will consider
the gross revenues of the small business applicant, its affiliates, and
certain investors in the applicant. Specifically, for purposes of
determining small business status, the Commission will attribute the
gross revenues of all controlling principals in the small business
applicant as well as the gross revenues of affiliates of the applicant.
The Commission also chooses not to
[[Page 27570]]
impose specific equity requirements on the controlling principals that
meet its small business definition.
44. 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'' would include both de facto and de jure control of the
applicant. For this purpose, the Commission would borrow from certain
Small Business Administration (SBA) rules that are used to determine
when a firm should be deemed an affiliate of a small business.
Typically, de jure control is evidenced by ownership of 50.1 percent of
an entity's voting stock. De facto control is determined on a case-by-
case basis. An entity must demonstrate at least the following indicia
of control to establish that it retains de facto control of the
applicant: (1) The entity constitutes or appoints more than 50 percent
of the board of directors or partnership management committee; (2) the
entity has authority to appoint, promote, demote and fire senior
executives that control the day-to-day activities of the licensees; and
(3) the entity plays an integral role in all major management
decisions. While the Commission is not imposing specific equity
requirements on the small business principals, the absence of
significant equity could raise questions about whether the applicant
qualifies as a bona fide small business. The existence of special small
business provisions requires the Commission to adopt the provisions set
forth herein in order to prevent their improper use. Accordingly, the
Commission seeks comment on whether it should count the gross revenues
and assets only of controlling principals in the applicant to determine
small business eligibility. The Commission also seeks comment on
whether there is a more appropriate attribution standard for
determining size.
45. The Commission also proposes to eliminate the $40 million
individual net worth limitation currently applicable in the
Commission's narrowband PCS rules. The Commission eliminated the
personal net worth limits for broadband PCS. In that context, the
Commission determined that the obstacles faced by minorities and
minority-controlled businesses in raising capital are not necessarily
confined to minorities with limited personal net worth. Rather than
eliminating the personal net worth limits for minorities only, however,
it eliminated the requirement for all applicants because such limits
are difficult to apply and enforce. The Commission seeks comment on
whether the individual net worth limitation should be eliminated for
narrowband PCS.
3. Bidding Credits
46. Bidding credits allow eligible designated entities to receive a
payment discount for their winning bid in an auction. In the
Competitive Bidding Third Report and Order, the Commission determined
that women and minorities would receive a 25 percent bidding credit for
three nationwide channels, two regional channels, three MTA channels,
and one BTA channel. After considering the outcome of the nationwide
narrowband auction in which no designated entities won licenses, the
Commission increased the bidding credit on the designated regional
licenses from 25 percent to 40 percent In addition, the Commission
proposed in the Competitive Bidding Third Memorandum Opinion & Order/
FNPRM to provide bidding credits in the proposed entrepreneurs' blocks
that would give small businesses a 10 percent bidding credit, women and
minority-owned businesses a 15 percent credit, and small businesses
owned by women and minorities an aggregate credit of 25 percent.
47. Taking into account the recent Adarand decision and the
Commission's decision to redesignate the remaining narrowband channel
blocks into larger license areas, the Commission proposes to eliminate
the bidding credit scheme adopted in the Competitive Bidding Third
Report and Order and subsequently modified in the Competitive Bidding
Third Memorandum Opinion & Order/FNPRM. The Commission proposes instead
to extend a bidding credit to all small businesses on a ``tiered''
basis consistent with its proposal in the Part One NPRM. The Commission
proposes that small businesses with gross revenues of not more than $15
million for the preceding three years be entitled to a 15 percent
credit and small businesses with gross revenues of not more than $40
million for the preceding three years be entitled to a 10 percent
bidding credit. Bidding credits for small businesses will not be
cumulative. Thus, a $15 million small business will be eligible for
only a 15 percent credit, not a 25 percent credit.
48. The Commission recognizes that this proposal would enhance the
competitiveness of small businesses, which will receive a bidding
credit that they did not receive previously. The Commission tentatively
concludes, however, that extending the bidding credit to small
businesses will achieve the objectives of Congress by providing small
businesses, including women-owned and minority-owned small businesses,
a meaningful opportunity to obtain licenses in the narrowband PCS
auction. The Commission tentatively concludes that the redesignation of
channel blocks into larger geographic license areas would increase the
value of the licenses by allowing larger firms to bid on licenses that
will enable wide-area service. As a result, the Commission believes
that small businesses would require additional bidding enhancements in
order to participate in the auction.
49. The Commission further recognizes that this bidding credit
would be less than the bidding credit previously made available to
minority-and women-owned businesses in the Competitive Bidding Third
Report and Order and the Competitive Bidding Third Memorandum Opinion &
Order/FNPRM i.e., 25 percent for selected nationwide and 40 percent for
selected regional licenses. However, the Commission believes that a
lower bidding credit, combined with the installment payments will
provide sufficient opportunities for small businesses to compete for
the licenses. Furthermore, tiered bidding credits are narrowly tailored
to the varying abilities of businesses to access capital. Thus, the
Commission believes that tiering will account for the fact that smaller
businesses, which often include businesses owned by minorities and
women, have more difficulty accessing capital and thus need a more
substantial bidding credit.
4. Payment Matters
50. The current narrowband PCS rules provide installment payments
for small businesses and businesses owned by members of minority groups
and/or women bidding for any of the BTA, MTA, or regional narrowband
PCS licenses. The terms and conditions of the installment payments
follow those set forth in the Commission's general Part 1 rules,
entitling eligible licensees to pay their winning bid amount in
installments over the term of the license, with interest charges to be
fixed at the time of licensing at a rate equal to the rate for ten-year
U.S. Treasury obligations. Qualified licensees would make interest-only
payments during the first two years of the license term.
51. In light of the Adarand decision, for other services the
Commission has adopted a ``tiered'' approach to implementing
installment payment plans, which is based solely on the financial
status of licensees. Most recently, in the Broadband PCS Report and
Order, the Commission adopted a
[[Page 27571]]
tiered installment plan for the D, E, and F block broadband PCS
licenses, but limited the interest payment period to two years. 61 FR
33859 (July 1, 1996). In the earlier 900 MHz Second Order on
Reconsideration/Seventh Report and Order, 60 FR 48913 (September 21,
1995), the Commission adopted a tiered installment payment plan for 900
MHz SMR licensees.
52. The Commission tentatively concludes that quarterly installment
payments are appropriate for small businesses acquiring licenses for
narrowband PCS. Installment payments will provide financial assistance
to all small businesses. By allowing payment in installments, the
government is in effect extending credit to licensees, thus reducing
the amount of private financing needed prior to the auction. Such
government financing will promote participation by small businesses
that, because of their size and lack of access to capital, need such
incentives to participate in new spectrum opportunities such as
narrowband PCS.
53. The installment payment plan the Commission proposes today is
consistent with the plans set out in the proposed schedule in the Part
One NPRM. Small businesses with gross revenues that are not more than
$40 million for the preceding three years would be required to pay
interest only for the first two years of the license term at the
Treasury note rate plus 2.5 percent. Very small businesses with gross
revenues that are not more than $15 million for the preceding three
years would be able to make interest-only payments for two years at the
Treasury note rate without the additional 1.5 percent. In both cases,
i.e., small businesses with gross revenues of not more than $40 million
and not more than $15 million, payment of principal and interest will
be amortized over the remaining eight years of the license term and be
payable in equal, quarterly payments. Timely payment of all quarterly
installments would be a condition of the license grant, and failure to
make such timely payment could ultimately be grounds for revocation of
the license. The Commission seeks comment on this proposal. The
Commission also seeks comment on alternative installment payment plans.
54. Consistent with its recent proposal in the Part One NPRM, the
Commission seeks comment on whether it should adopt a late payment fee
on any installment payment that is overdue. Payments would be applied
in the following order: late charges, interest charges, principal
payments. Thus, a licensee who makes payment after the due date but
does make payment sufficient to pay the late fee, interest, and
principal (only if principal is due), will be deemed to have failed to
make full payment and will be subject to license cancellation pursuant
to the Commission's rules. The Commission tentatively concludes that
such a late payment provision is necessary to ensure that licensees
have an adequate financial incentive to make installment payments on
time. It notes that licensees would continue to have 90 days before a
payment is deemed delinquent but a late payment fee would be assessed
during this period. It also notes that in the Part One NPRM it proposed
that where a winning bidder misses the second down payment deadline and
fails to remit the required payment (plus the applicable late fee) by
the end of the late payment period, it would be declared in default and
subject to applicable default payments. The Commission seeks comment on
the applicability of this proposal within the context of narrowband
PCS.
55. Under Sec. 1.2110(e)(4)(ii) of the Commission's rules, interest
that accrues during a grace period will be amortized over the remaining
term of the license. Amortizing interest in this way has the effect of
changing the amount of all future payments and requiring the
Commission, or its designee, to generate a new payment schedule for the
license. Changing the amount of the installment payment has, in turn,
created uncertainty about the interest schedule, and increased the
administrative burden by requiring formulation of a new amortization
schedule. In order to avoid potential problems associated with changing
the amount of installment payments and consistent with its proposal in
the Part One NPRM, the Commission proposes to require all current
licensees who avail themselves of the grace period to pay all fees, all
interest accrued during the grace period, and the appropriate scheduled
payment with the first payment made following the conclusion of the
grace period. The Commission seeks comment on this proposal.
5. Unjust Enrichment, Holding Period and Transfer Restrictions
56. Under current rules for narrowband PCS, licensees that receive
bidding credits and installment payments, and choose to transfer their
licenses to entities not eligible for these benefits, are subject to
certain restrictions. Entities seeking to transfer a license acquired
through a bidding credit are required to repay the amount of the
bidding credit on a graduated basis until six years after the license
grant. Similarly, if a small business making installment payments seeks
to transfer a license to a non-small business entity during the term of
the license, it must pay the remaining principal balance as a condition
of the license transfer. The ineligible transferee would not have the
benefit of installment payments.
57. The Commission later sought comment on revising these
provisions in the Competitive Bidding Third Memorandum Opinion & Order/
FNPRM. With regard to bidding credits, the Commission proposed that if,
within the original 10 year term, a licensee applies to assign or
transfer control of a license to an entity that is not eligible for as
high a level of bidding credit, then the assignor would be required to
pay to the U.S. Treasury the difference between the bidding credit
obtained by the assignor and the bidding credit for which the acquiring
party would qualify as a condition of transfer. Similarly, a sale to an
entity that would not qualify for bidding credits would entail full
repayment of the original bidding credit as a condition of transfer.
With regard to installment payments, the Commission proposed to retain
the unjust enrichment provisions adopted in the Competitive Bidding
Third Report and Order and clarified these provisions, noting that if
an entity seeks to assign or transfer control of a license to an entity
that does not qualify for as favorable an installment payment plan, the
installment payment plan for which the acquiring entity qualifies would
become effective immediately upon transfer. Thus, a higher interest
rate and earlier payment of principal may begin to be applied.
58. In the Competitive Bidding Third Memorandum Opinion & Order/
FNPRM, the Commission also proposed that entrepreneurs' block licensees
be prohibited from voluntarily assigning or transferring control of
their licenses for a period of three years from the date of grant. The
Commission asked commenters whether, for the next two to seven years of
the license term, it should permit the licensee to assign or transfer
control of its authorization only to an entity that satisfies the
entrepreneurs' blocks entry criteria. During this limited transfer
period, licensees would continue to be bound by the financial
eligibility requirements, and a transferee or assignee who receives an
entrepreneurs' block license during this period would remain subject to
the transfer restrictions for the balance of the holding period. The
Commission recognized that in order to provide significant
opportunities for
[[Page 27572]]
entrepreneurs and small businesses, applicants require flexibility. The
Commission was concerned, however, that such flexibility would
undermine the more fundamental objective to ensure that designated
entities retain de facto and de jure control of their companies. Thus,
the Commission proposed a holding and limited transfer period to
address this concern.
59. The Commission now seeks further comment on the applicability
of unjust enrichment, assignment, and transfer restrictions to the
Commission's proposed narrowband PCS rules, as they apply to designated
entities. The Commission tentatively concludes that the unjust
enrichment provisions already applicable to narrowband PCS will ensure
that large businesses do not become the unintended beneficiaries of
provisions intended to benefit small firms. The Commission thus
proposes unjust enrichment restrictions as applied to bidding credits
and installment payments, similar to the existing restrictions for
narrowband PCS. Specifically, the Commission proposes that if a small
business that has received bidding credits or is making installment
payments seeks to transfer a license to a non-small business entity
during the term of the license, it will be required to reimburse the
government for the amount of the bidding credit plus interest or the
remaining principal balance on the license, respectively, as a
condition of the license transfer. The Commission seeks comment on this
proposal. The Commission also seeks comment on whether it should
eliminate the service-specific unjust enrichment rule for narrowband
PCS in favor of the rule proposed in the Part One NPRM, which conforms
to the broadband PCS unjust enrichment rules. Furthermore, in light of
the Commission's decision not to establish an entrepreneurs' block for
narrowband PCS, the Commission tentatively concludes that it is not
necessary to propose holding and transfer restrictions for the
licenses. The Commission seeks comment on this tentative conclusion.
6. Partitioning
60. The Commission recently adopted a detailed framework for
revising the geographic partitioning and spectrum disaggregation rules
for broadband PCS. In particular, it modified the rules to (1) allow
broadband PCS licensees in the non-entrepreneurs' blocks to partition
any portion of their license area or disaggregate any portion of their
spectrum post-auction to entities that are eligible to be a broadband
licensee, (2) allow entrepreneurs' block licensees to partition and/or
disaggregate during the first five years of the license term any
portion of their licensed geographic area and/or spectrum post-auction
to entities that qualify as ``entrepreneurs'' and are eligible to be
broadband PCS licensees, (3) establish license term provisions that
permit partitioned license holders (partitionees) to hold partitioned
licenses for the duration of the original ten year license term, and
(4) establish flexible construction requirements to ensure expedient
access to broadband PCS service in partitioned areas. The Commission
concluded that these rules would facilitate the efficient use of the
broadband PCS spectrum, increase competition, and expedite the
provision of broadband PCS service to areas that may not otherwise
receive broadband PCS or other wireless services in the near term.
61. In light of the Commission's decision to redesignate narrowband
PCS MTA and BTA channel blocks to create larger service areas, it
believes that a partitioning proposal for narrowband PCS is warranted.
The Commission proposes a geographic partitioning scheme similar to
that adopted for broadband PCS. Under this proposal, anyone eligible to
be a narrowband PCS licensee, i.e., ``qualifying entity,'' would be
allowed to acquire a partitioned license. This more liberal
partitioning policy would allow spectrum to be used more efficiently,
speed service to underserved areas, and increase competition. The
Commission seeks comment on this proposal. Specifically, the Commission
seeks comment on whether a partitioning scheme should be available to
all qualifying entities, or limited to rural telephone companies as in
the initial broadband PCS rules.
62. The Commission proposes to allow all narrowband PCS licensees
to partition at any time to any entity eligible for an narrowband PCS
license. It notes that small businesses and others may face certain
barriers to entry into the provision of spectrum-based services which,
it believes, may be addressed by changes in the partitioning rules. The
Commission tentatively concludes that providing narrowband PCS
licensees with the flexibility to partition their geographic service
areas would create smaller areas that could be licensed to small
businesses, including those entities which previously may not have had
the resources to participate successfully in spectrum auctions. The
Commission also tentatively concludes that partitioning may provide a
funding source that would enable licensees to construct their systems
and provide the latest in technological enhancements to the public. The
Commission seeks comment on these tentative conclusions. In particular,
commenters are invited to address whether the partitioning scheme will
help eliminate market entry barriers for small businesses pursuant to
section 257 of the Communications Act.
63. The Commission further proposes that a partitionee be
authorized to hold its license for the remainder of the original ten-
year license term. It tentatively concludes that this term is
appropriate because a licensee, through partitioning, should not be
able to confer greater rights than it was awarded under the terms of
its license grant. The Commission solicits comment on this proposal.
64. It seeks comment on what should be the respective obligations
of the participants in a partitioning arrangement. First, with respect
to scope of narrowband PCS partitioned areas, the Commission
tentatively concludes that a flexible approach, similar to the one it
adopted for broadband PCS, is appropriate for narrowband PCS licenses.
Therefore, the Commission proposes to permit partitioning of narrowband
PCS licenses based on any geographic area defined by the parties to a
partitioning arrangement. The Commission seeks comment on this
proposal, and in particular on whether this proposal is consistent with
its licensing of narrowband PCS spectrum, and whether there are any
technical or other issues unique to narrowband PCS that might impede
the adoption of a flexible approach to defining partitioned license
areas.
65. Second, with respect to construction requirements, the
Commission seeks comment as to which party should be held responsible
for satisfying outstanding construction requirements. In this FNPRM,
the Commission has proposed construction requirements for geographic
narrowband PCS licensees at the five-year and ten-year benchmarks,
including a ``substantial service'' benchmark. In the Partitioning and
Disaggregation Report and Order, the Commission adopted two
construction options for partitioning broadband PCS licensees which
give the parties the flexibility to choose how to apportion the
responsibility to build out the partitioned license areas. The
Commission tentatively concludes that a similar approach is appropriate
for the narrowband PCS context. Thus, it proposes two options for
meeting the applicable narrowband PCS construction requirements in a
partitioning arrangement: (1) The partitionee can certify that it will
satisfy the same construction requirements as
[[Page 27573]]
the original licensee with the partitionee meeting the requirements in
its partitioned area and the partitioner being responsible for
satisfying the requirements in the area it has retained; or (2) the
original licensee can certify that it has already met or will meet its
five-year construction requirement and that it will meet the 10-year
requirement for the entire market involved. The Commission also
proposes to require that the parties to such partitioning arrangements
file supporting documentation showing compliance with the applicable
construction requirements. The Commission seeks comment on these
proposals. It also seeks comment on whether, and if so, how the option
of partitioning could be extended to incumbent narrowband PCS licensees
as well.
66. Consistent with the rules for broadband PCS, the Commission
proposes to establish separate installment payment and default
obligations for the small business licensees and partitionees. When a
licensee paying its winning bid through installment payments partitions
to a party that would qualify for installment payments, the partitionee
will be permitted to make installment payments of its pro rata portion
of the remaining government obligation. The payments will be based on
the ratio of the population of the partitioned area to the population
of the entire license area calculated on the latest available census
data. Partitionees that do not qualify for installment payments will be
required to pay their entire pro rata share with 30 days of the Public
Notice conditionally granting the partitioning transaction. The
Commission requests comment on its proposals.
67. The Commission also proposes that in cases where a licensee
that has qualified as a small business has received a bidding credit
partitions a portion of its licenses to an entity that would not meet
the eligibility standards for a bidding credit, it will require that
the licensee reimburse the government for the amount of the bidding
credit calculated on a proportional basis based on the ratio of the
population. If a small business licensee that received a bidding credit
partitions to an entity that would qualify for a lower bidding credit,
the Commission will require that the licensee reimburse the government
for the difference between the amount of the bidding credit obtained by
the licensee and the bidding credit for which the partitionee is
eligible calculated on a proportional basis based upon the ratio of
population of the partitioned area. The Commission requests comment on
its proposal.
68. It also seeks comment on the type of unjust enrichment
requirements that should be placed as a condition for approval of an
application for a partial transfer of a license owned by a qualified
small business to a non-small business entity. The Commission
tentatively concludes that these unjust enrichment provisions would
include accelerated payment of bidding credits, unpaid principal, and
accrued unpaid interest, and would be applied on a proportional basis.
The Commission seeks comment on how such unjust enrichment amounts
should be calculated, especially in light of the difficulty of devising
a methodology or formula that will differentiate the relative market
value of the opportunities to provide service to various partitioned
areas within a geographic or market area. The Commission seeks comment
on whether it should consider the price paid by the partitionee in
determining the percentage of the outstanding principle balance to be
repaid.
7. Disaggregation
69. The Commission seeks comment on the feasibility of spectrum
disaggregation for narrowband PCS. Commenters should provide technical
justifications and other relevant support in responding to this issue.
Commenters should address whether minimum disaggregation standards are
necessary for narrowband PCS services. Commenters should also address
whether the Commission should permit nationwide licensees to
disaggregate spectrum.
70. The Commission also seeks comment on what the respective
obligations of the participants in a disaggregation transfer should be,
and whether each party should be required to guarantee a proportionate
amount of the disaggregator's original auctions-related obligation in
the event of default or bankruptcy by any of the parties to the
disaggregation transfer. The Commission seeks comment on whether the
disaggregator (the original licensee) should have a continuing
obligation with respect to the entire initial license. Alternatively,
should the parties have available a choice of options, ranging from an
accelerated payment based on purchase price to a guarantee for a larger
payment by one party in the event another party defaults? Parties are
invited to comment on whether the disaggregating parties should be able
to determine which party has a continuing obligation with respect to
the original license area.
71. The Commission proposes to allow all small business licensees
to disaggregate to similarly qualifying parties as well as parties not
eligible for small business provisions. It tentatively concludes that
if it permits a qualified small business licensee to disaggregate to a
non-small business entity, the disaggregating licensee should be
required to repay any benefits it received from the small business
special provisions on a proportional basis. This would include
accelerated payment of bidding credits, unpaid principal, and accrued
unpaid interest. The Commission seeks comment on how such repayment
amounts should be calculated. It also seeks comment on whether it
should consider the price paid by the disaggregatee in determining the
percentage of the outstanding principal balance to be repaid.
72. The Commission tentatively concludes that if it permits a small
business licensee to disaggregate to another qualified small business
that would not qualify for the same level of bidding credit as the
disaggregating licensee, the disaggregating licensee should be required
to repay a portion of the benefit it received. It seeks comment on how
that amount should be calculated. Finally, the Commission seeks comment
on what provisions, if any, it should adopt to address the situation of
a small business licensee's disaggregation followed by default in
payment of a winning bid at auction.
G. Ownership Disclosure Requirements
73. The rules for narrowband PCS currently require applicants to
disclose on their short-form applications, FCC Form 175, and long-form
applications, FCC Form 600, certain ownership information. Section
24.413(a) of the Commission's rules provides that parties filing the
short-form application to participate in the narrowband PCS auction and
auction winners filing the long-form application shall include in an
exhibit, inter alia, (1) a list of its subsidiaries, if any, (2) a list
of its affiliates, if any, and (3) in the case of partnerships, the
name and address of each partner, each partner's citizenship and the
share or interest participation in the partnership, and a signed and
dated copy of the partnership agreement. 47 CFR Sec. 24.413(a).
74. The broadband PCS rules similarly contained ownership
disclosure requirements for both the short-form and long-form
applications. The Commission waived the five percent ownership
disclosure requirements, however, for the broadband PCS A, B, and C
block auctions. 61 FR 25808 (May 23, 1996). In that context, the
Commission reasoned that requiring applicants to list
[[Page 27574]]
all businesses in which each attributable stockholder owns at least 5
percent would necessitate reporting of interests in firms with no
relation to the services for which licenses are being auctioned, and
for many companies, particularly investment firms with diverse
holdings, might be extremely burdensome. The Commission therefore
waived Secs. 24.813(a)(1) and 24.813(a)(2) of the rules. Disclosure of
direct, attributable ownership interests in other commercial mobile
radio service licensees or applicants, however, is still required under
Sec. 20.6 of the Commission's rules. Similarly, the Commission waived
the requirement that partnerships submit a signed and dated copy of
partnership agreements with the short-form application. In waiving this
requirement, it noted that partnership agreements often discuss
strategic business objectives and financial and business obligations,
including bidding strategies, which might be highly sensitive.
75. The Commission proposes to modify the ownership disclosure
requirements for narrowband PCS as the Commission modified those
requirements for broadband PCS through waiver. The Commission
tentatively concludes that relaxing the disclosure requirements in this
regard serves the public interest by reducing the administrative
burdens associated with the auction process. The Commission seeks
comment on this proposal. Furthermore, the Commission seeks comment on
whether a separate schedule to the FCC Form 175 should be designed,
which would formalize the ownership disclosure requirements for the
short-form application that are presently reported in separate exhibits
to the FCC Form 175.
H. Construction Prior To Grant of Licenses for Narrowband and Broadband
PCS
76. In the Third Report and Order, 59 FR 26741 (August 24, 1994),
the Commission determined that all commercial mobile radio service
applicants should be subject to the same rules governing the
construction of facilities prior to grant of pending applications. The
Commission later clarified that such rules would extend to successful
broadband PCS bidders that had filed a long-form application. Thus, 35
days after the date of the Public Notice announcing the Form 600
applications accepted for filing, PCS applicants listed therein may, at
their own risk, commence construction of facilities, provided that (1)
no petitions to deny the application have been filed, (2) the
application does not contain a request for a rule waiver; (3) the
applicant complies fully with the antenna structure provisions of 47
CFR 24.416, 24.816, including FAA notification and Commission filing
requirements; (4) the application indicates that the facilities for
which construction is commenced would not have a significant
environmental effect (see 47 CFR 24.413(f), 24.813(f)); and (5)
international coordination of the facility for which construction is
commenced is not required.
77. The Commission proposes to modify its pre-licensing
construction requirements for both broadband and narrowband PCS in
order to expedite service to the public. Specifically, the Commission
proposes that long-form applicants may begin construction of facilities
at their own risk regardless of whether petitions to deny have been
filed. In adopting pre-grant construction rules for CMRS applicants in
general, the Commission favored a more liberal approach, urged by the
industry's comments that granting applicants authority to engage in
pre-grant construction could advance the date on which the public
receives service. The Commission continues to believe that liberal pre-
grant construction rules could speed the deployment of services to the
public. The Commission also believes that applicants that begin
construction pursuant to these provisions before receiving a final
license grant do so at their own risk and, thus, they assume the risk
that their licenses may not be granted as a result of pending petitions
to deny. The Commission proposes to retain the remaining restrictions,
however, in light of the specific public interest considerations they
promote. The Commission seeks comment on these tentative conclusions
and proposals.
II. Conclusion
78. The Commission believes that the proposals set forth for
narrowband PCS in this FNPRM will promote the public policy goals set
forth by Congress.
III. Procedural Matters
A. Regulatory Flexibility Act
79. With respect to this FNPRM, as required by section 603 of the
Regulatory Flexibility Act, the Commission has prepared an Initial
Regulatory Flexibility Analysis (IRFA) of the expected impact on small
entities of the proposals suggested in this document. Written public
comments are requested on the IRFA. These comments must be filed in
accordance with the same filing deadlines as comments on the rest of
the FNPRM but they must have a separate and distinct heading
designating them as responses to the Initial Regulatory Flexibility
Analysis. The Secretary shall send a copy of this FNPRM, including the
Initial Regulatory Flexibility Analysis, to the Chief Counsel for
Advocacy of the Small Business Administration in accordance with
paragraph 603(a) of the Regulatory Flexibility Act. Pub. L. 96-354, 94
Stat. 1164, 5 U.S.C. 601 et seq. (1981).
80. Reason for Action: This FNPRM was initiated to secure comment
on proposals for revising rules for narrowband PCS. Such changes to the
rules for the narrowband PCS service would promote efficient licensing
and enhance the service's competitive potential in the Commercial
Mobile Radio Service marketplace. The adopted and proposed rules are
based on the competitive bidding authority of section 309(j) of the
Communications Act of 1934, as amended, 47 U.S.C. 309(j), which
authorized the Commission to use auctions to select among mutually
exclusive initial applications in certain services, including
narrowband Personal Communications Services (PCS).
81. Objectives of this Action: The Omnibus Budget Reconciliation
Act of 1993 (Budget Act), Pub. L. 103-66, Title VI, section 6002, and
the subsequent Commission actions to implement it are intended to
establish a system of competitive bidding for choosing among certain
applications for initial licenses, and to carry out statutory mandates
that certain designated entities, including small businesses, are
afforded an opportunity to participate in the competitive bidding
process and in the provision of narrowband PCS services.
82. Legal Basis: The proposed action is authorized under the Budget
Act and in sections 4(i), 303(r), and 309(j) of the Communications Act
of 1934, as amended, 47 U.S.C. 154(i), 303(r) and 309(j).
83. Reporting, Recordkeeping, and Other Compliance Requirements:
The proposals under consideration in this FNPRM include the possibility
of new reporting and recordkeeping requirements for a number of small
business entities, as follows. The Commission requests comment on these
proposals.
a. Service Area Reallocation. The Commission proposes revising its
current channelization plan to ensure that it provides sufficient
opportunities for all interested parties, including small businesses,
to establish a viable narrowband PCS system. The Commission is
concerned that such opportunities may not be meaningful if a single
Basic Trading Area (BTA) is not
[[Page 27575]]
a sufficiently large service area for implementation of narrowband PCS.
The Commission has previously stated that the larger Major Trading Area
licenses (MTAs) will provide for more reasonable and homogeneous
license areas for the provision of PCS. In addition, the Commission
reiterates that local participation in narrowband PCS could occur
through franchising or partitioning arrangements with nationwide and
regional PCS licensees, thus affording more opportunities to serve
smaller areas. As a result, the Commission tentatively concludes that
it will redesignate certain narrowband PCS frequencies for larger
service areas and will thus provide additional opportunities for
designated entities, including small businesses. The Commission
proposes that the remaining narrowband PCS channel blocks will be
redesignated as follows: (1) redesignate the two remaining 50 kHz
paired channels as nationwide channels; (2) establish one nationwide,
three regional, and one MTA-based channel pairs from the five 50/12.5
kHz channel pairs; and (3) convert the four BTA-based 12.5 kHz unpaired
response channels to regional channels. The Commission does not
anticipate any additional reporting or recordkeeping requirements from
this proposal.
b. Response Channel Redesignation. The Commission tentatively
concludes that the paging response channels should be reallocated for
use in larger service areas. The Commission agrees with commenters who
argue that reallocating some of the response channels for use in larger
service areas will facilitate the upgrade of existing paging networks
and enhance narrowband PCS systems. The Commission therefore proposes
to redesignate the four 12.5 kHz unpaired response channels currently
licensed as BTA channel blocks as regional channel blocks, and retain
the four MTA paging response channels. Additionally, the Commission
does not redesignate response channels to an entrepreneurs' block.
Instead, as discussed in the FNPRM, the Commission proposes to open
eligibility for these channels to all applicants, not just incumbent
paging licensees. The Commission does not anticipate any additional
reporting or recordkeeping requirements from this proposal.
c. Construction Requirements. The proposals in the FNPRM include
the possibility of imposing reporting and recordkeeping requirements
for new narrowband PCS licensees to establish compliance with the
coverage requirements, if such requirements are adopted.
d. Geographic Partitioning and Spectrum Disaggregation. The
proposals in the FNPRM include the possibility of imposing reporting
and recordkeeping requirements for small businesses seeking licenses
through the proposed partitioning and disaggregation rules. The
information requirements would be used to determine whether the
licensee is a qualifying entity to obtain partitioned or disaggregated
spectrum. This information will be a one-time filing by any applicant
requesting such a license. The information will be submitted on the FCC
Forms 490 (or 430 and/or 600 filed as one package under cover of the
Form 490) which are currently in use and have already received OMB
clearance. The Commission estimates that the average burden on the
applicant is three hours for the information necessary to complete
these forms. The Commission estimates that 75 percent of the
respondents, which may include small businesses, will contract out the
burden of responding. The Commission estimates that it will take
approximately 30 minutes to coordinate information with those
contractors. The remaining 25 percent of respondents, which may include
small businesses, are estimated to employ in-house staff to provide the
information. Applicants, including small businesses, filing the package
under cover of FCC Form 490 electronically will incur a $2.30 per
minute on-line charge. On-line time would amount to no more than 30
minutes. The Commission estimates that 75 percent of the applicants may
file electronically. The Commission estimates that applicants
contracting out the information would use an attorney or engineer, with
an average cost of $200 per hour, to prepare the information.
e. Construction Prior to Grant of Licenses for Narrowband and
Broadband PCS. The proposals in the FNPRM include the possibility of
changing existing Commission pre-licensing construction requirements
for narrowband PCS. The proposal in the FNPRM would allow long-form
applicants to begin construction of facilities at their own risk,
regardless of whether any petitions to deny have been filed. The
Commission does not anticipate any additional reporting or
recordkeeping requirements from this proposal.
f. Small Business Definition. The FNPRM proposes a two-tiered
definition to define small businesses: (1) A small business is a
business with average gross revenues for each of the preceding three
years that do not exceed $40 million, and (2) a very small business is
one which has less than an average of $15 million in gross revenues in
each of the last three years. Qualifying entities will be eligible for
bidding credits and installment plans. In order to qualify as small
business under either tier, an entity must demonstrate that its gross
revenues fall within the proposed thresholds. The information will be
submitted on the FCC Form 600, which is currently in use and which has
received OMB clearance. Such entities will also need to maintain
supporting documentation at their principal place of business.
g. Ownership Disclosure Requirements. The proposals in the FNPRM
include the possibility of changing the ownership disclosure
requirements for all applicants. The information requirements would be
used to determine whether the licensee is a qualifying entity under the
Commission's ownership rules. The proposals include relaxing the
disclosure requirements, such as the required submittal of partnership
agreements, which would reduce the administrative burdens associated
with the auction process. The Commission also seeks comment on whether
a separate schedule to FCC Form 175 should be designated, which would
formalize the disclosure requirements to the current FCC Form 175. The
proposal in the FNPRM would decrease the amount of information that a
narrowband PCS applicant would be required to file. This information
will be a one-time filing by any applicant requesting such a license.
The information will be submitted on the FCC Forms 600 and FCC Form
175, which are currently in use and have already received OMB
clearance.
84. Federal Rules Which Overlap, Duplicate or Conflict With These
Rules: None.
85. Description, Potential Impact, and Number of Small Entities
Involved: The FNPRM would establish certain narrowband PCS spectrum
blocks for bidding by smaller entities as well as larger entities, and
would provide installment payments and bidding credits to certain
eligible entities bidding within those blocks. The Commission is
required to estimate in its Final Regulatory Flexibility Analysis the
number of small entities to which a rule will apply, provide a
description of such entities, and assess the impact of the rule on such
entities. To assist the Commission in this analysis, commenters are
requested to provide information regarding how many total entities,
existing and potential, would be affected by the proposed rules in the
FNPRM. In particular, the Commission
[[Page 27576]]
seeks estimates of how many such entities will be considered small
businesses.
86. Geographic Partitioning and Spectrum Disaggregation. The
partitioning and disaggregation rule changes proposed in this
proceeding will affect all small businesses which avail themselves of
these rule changes, including small businesses currently holding
narrowband PCS licenses who choose to partition and/or disaggregate and
small businesses who may acquire licenses through partitioning and/or
disaggregation.
87. The Commission is required to estimate in its Final Regulatory
Flexibility Analysis the number of small entities to which a rule will
apply, provide a description of such entities, and assess the impact of
the rule on such entities. To assist the Commission in this analysis,
commenters are requested to provide information regarding how many
total entities, existing and potential, would be affected by the
proposed rules in the FNPRM. In particular, the Commission seeks
estimates of how many such entities will be considered small
businesses. The Commission is utilizing the SBA definition applicable
to radiotelephone companies, i.e., an entity employing less than 1,500
persons. 13 CFR 121.201, Standard Industrial Classification Code 4812.
The Commission seeks comment on whether this definition is appropriate
for narrowband PCS licensees in this context. Additionally, the
Commission requests each commenter to identify whether it is a small
business under this definition. If a commenter is a subsidiary of
another entity, this information should be provided for both the
subsidiary and the parent corporation or entity.
88. The Commission estimates that the approximately 30 current
regional narrowband PCS licensees and 11 nationwide narrowband PCS
licensees could take the opportunity to partition and/or disaggregate a
license or obtain an additional license through partitioning or
disaggregation. New entrants could obtain narrowband PCS licenses
through the competitive bidding procedure, and take the opportunity to
partition and/or disaggregate a license or obtain an additional license
through partitioning or disaggregation. Additionally, entities that are
neither incumbent licensees nor geographic area licensees could enter
the market by obtaining a narrowband PCS license through partitioning
or disaggregation. The Commission cannot estimate how many licensees or
potential licensees could take the opportunity to partition and/or
disaggregate a license or obtain a license through partitioning and/or
disaggregation, because it has not yet determined the size or number of
narrowband PCS licenses that will be granted in the future. Given the
fact that nearly all radiotelephone companies have fewer than 1,000
employees, and that no reliable estimate of the number of future
narrowband PCS licensees can be made, the Commission assumes for
purposes of this IRFA that all of the licenses will be awarded to small
businesses. It is possible that a significant number of the potential
licensees who could take the opportunity to partition and/or
disaggregate a license or who could obtain a license through
partitioning and/or disaggregation will be small businesses.
89. Any Significant Alternatives Minimizing the Impact on Small
Entities Consistent with the Stated Objectives: In the FNPRM, the
Commission seeks comment on whether coverage requirements should be
imposed for all narrowband PCS licensees. Any significant alternatives
presented in the comments will be considered. Coverage requirements for
narrowband PCS licensees, if adopted, would probably not affect small
businesses.
90. With respect to partitioning, the Commission tentatively
concludes that unjust enrichment provisions should apply when a
licensee has benefitted from the small business provisions in the
auction rules and partitions a portion of the geographic license area
to another entity that would not qualify for such benefits. The
alternative to applying the unjust enrichment provisions would be to
allow an entity who had benefitted from the special bidding provisions
for small businesses to become unjustly enriched by partitioning a
portion of their license area to parties that do not qualify for such
benefits. The Commission also seeks comment on whether spectrum
disaggregation would be feasible for narrowband PCS, and how much
spectrum a narrowband PCS licensee should be permitted to disaggregate.
91. The FNPRM proposes certain provisions for smaller entities
designed to ensure that such entities have the opportunity to
participate in the competitive bidding process and in the provision of
narrowband PCS services. Any significant alternatives presented in the
comments will be considered.
B. Paperwork Reduction Act
92. As required by the Regulatory Flexibility Act, see 3 U.S.C.
603, the Commission has prepared an Initial Regulatory Flexibility
Analysis (IRFA) of the expected impact on small entities of the
policies and rules proposed and adopted in the FNPRM section of this
Report and Order and FNPRM. Written public comments are requested on
the IRFA and must be filed by the deadlines for comments on the Report
and Order and FNPRM.
C. Federal Rules Which Overlap, Duplicate or Conflict With These Rules
None.
D. Description, Potential Impact, and Number of Small Entities Involved
93. The FNPRM would establish certain narrowband PCS spectrum
blocks for bidding by smaller entities as well as larger entities, and
would provide installment payments and bidding credits to certain
eligible entities bidding within those blocks. The Commission is
required to estimate in its Final Regulatory Flexibility Analysis the
number of small entities to which a rule will apply, provide a
description of such entities, and assess the impact of the rule on such
entities. To assist the Commission in this analysis, commenters are
requested to provide information regarding how many total entities,
existing and potential, would be affected by the proposed rules in the
FNPRM. In particular, the Commission seeks estimates of how many such
entities will be considered small businesses.
94. Geographic Partitioning and Spectrum Disaggregation. The
partitioning and disaggregation rule changes proposed in this
proceeding will affect all small businesses which avail themselves of
these rule changes, including small businesses currently holding
narrowband PCS licenses who choose to partition and/or disaggregate and
small businesses who may acquire licenses through partitioning and/or
disaggregation.
95. The Commission is required to estimate in its Final Regulatory
Flexibility Analysis the number of small entities to which a rule will
apply, provide a description of such entities, and assess the impact of
the rule on such entities. To assist the Commission in this analysis,
commenters are requested to provide information regarding how many
total entities, existing and potential, would be affected by the
proposed rules in the FNPRM. In particular, the Commission seeks
estimates of how many such entities will be considered small
businesses. The Commission is utilizing the Small Business
Administration definition applicable to radiotelephone companies, i.e.,
an entity employing less
[[Page 27577]]
than 1,500 persons. The Commission seeks comment on whether this
definition is appropriate for narrowband PCS licensees in this context.
Additionally, the Commission requests each commenter to identify
whether it is a small business under this definition. If a commenter is
a subsidiary of another entity, this information should be provided for
both the subsidiary and the parent corporation or entity.
96. The Commission estimates that the approximately 30 current
regional narrowband PCS licensees and 11 nationwide narrowband PCS
licensees could take the opportunity to partition and/or disaggregate a
license or obtain an additional license through partitioning or
disaggregation. New entrants could obtain narrowband PCS licenses
through the competitive bidding procedure, and take the opportunity to
partition and/or disaggregate a license or obtain an additional license
through partitioning or disaggregation. Additionally, entities that are
neither incumbent licensees nor geographic area licensees could enter
the market by obtaining a narrowband PCS license through partitioning
or disaggregation. The Commission cannot estimate how many licensees or
potential licensees could take the opportunity to partition and/or
disaggregate a license or obtain a license through partitioning and/or
disaggregation, because it has not yet determined the size or number of
narrowband PCS licenses that will be granted in the future. Given the
fact that nearly all radiotelephone companies have fewer than 1,000
employees, and that no reliable estimate of the number of future
narrowband PCS licensees can be made, the Commission assumes for
purposes of this IRFA that all of the licenses will be awarded to small
businesses. It is possible that a significant number of the potential
licensees who could take the opportunity to partition and/or
disaggregate a license or who could obtain a license through
partitioning and/or disaggregation will be small businesses.
E. Any Significant Alternatives Minimizing the Impact on Small Entities
Consistent With the Stated Objectives
97. In the FNPRM the Commission seeks comment on whether coverage
requirements should be imposed for all narrowband PCS licensees. Any
significant alternatives presented in the comments will be considered.
Coverage requirements for narrowband PCS licensees, if adopted, would
probably not affect small businesses.
98. With respect to partitioning, the Commission tentatively
concludes that unjust enrichment provisions should apply when a
licensee has benefitted from the small business provisions in the
auction rules and partitions a portion of the geographic license area
to another entity that would not qualify for such benefits. The
alternative to applying the unjust enrichment provisions would be to
allow an entity who had benefitted from the special bidding provisions
for small businesses to become unjustly enriched by partitioning a
portion of their license area to parties that do not qualify for such
benefits. The Commission also seeks comment on whether spectrum
disaggregation would be feasible for narrowband PCS, and how much
spectrum a narrowband PCS licensee should be permitted to disaggregate.
99. The FNPRM proposes certain provisions for smaller entities
designed to ensure that such entities have the opportunity to
participate in the competitive bidding process and in the provision of
narrowband PCS services. Any significant alternatives presented in the
comments will be considered.
100. IRFA Comments: The Commission requests written public comment
on the foregoing Initial Regulatory Flexibility Analysis. Comments must
have a separate and distinct heading designating them as responses to
the IRFA and must be filed by the deadlines provided in paragraph 109
of this FNPRM.
101. Dates. Written comments by the public on the proposed
information collections are due on or before June 18, 1997 and reply
comments are due on or before July 7, 1997. Written comments must be
submitted by the Office of Management and Budget (OMB) on the proposed
information collection on or before June 18, 1997 and reply comments
are due on or before July 7, 1997.
102. Addresses: 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 NW, Washington DC 20554, or via the
Internet to dconway@fcc.gov, and to Timothy Fain, OMB Desk Officer,
10236 NEOB, 725 17th Street NW, Washington, DC 20503 or via the
Internet to fain__t@al.eop.gov.
103. Further Information: For additional information concerning the
information collections contained in the NPRM, contact Dorothy Conway
at (202) 418-0217, or via the Internet at dconway@fcc.gov.
104. Supplementary Information:
Title: Amendment of the Commission's Rules to Establish New
Personal Communications Services, Narrowband PCS, implementation of
section 309(j) of the Communications Act--Competitive Bidding,
Narrowband PCS, FNPRM.
OMB Number: 3060-0604.
Form Number: FCC Forms 175 and 600.
Type of Review: Revision of existing collection.
Respondents:
Affected public: Individuals, State or local governments,
Businesses or other for-profit, Small businesses or organizations.
Number of respondents: 6,136.
Estimated time per response: 6 hours.
Total annual burden: 16,000.5 hours.
Needs and uses: The auction rules require narrowband PCS applicants
to submit (1) information to qualify for small businesses, (2)
ownership information, (3) proof of compliance with coverage
requirements and (4) eligibility to participate in partitioning and
disaggregation. The information needed to qualify as a small business
and the ownership information will be submitted as attachments to FCC
Form 600. Coverage requirements will be submitted in letter form during
designated benchmarks during the license term. The information for
partitioning and disaggregation will be covered under a generic
clearance which has been submitted to OMB for approval. Collection of
information is required so that the Commission can determine whether
narrowband PCS applicants are legally, technically and financially
qualified to be licensed and whether applicants are entitled to receive
certain benefits. The information will also be used to ensure that
licensees who acquire their licenses through competitive bidding are
not unjustly enriched by premature transfer of their licenses. Without
the information, the Commission could not determine whether to issue
the licenses to the applicants that provide telecommunication services
to the public. The information is used by Commission staff in carrying
out its duties under the Communications Act. This is a revision of a
previously approved collection. If no changes are made to these
collections in the Report and Order, a correction worksheet will be
submitted at that time.
F. Ex Parte Rules--Non-Restricted Proceeding
105. This is a non-restricted notice proceeding. Ex parte
presentations are permitted except during the Sunshine Agenda period,
provided they are
[[Page 27578]]
disclosed as provided in the Commission's rules. See generally 47 CFR
1.1202, 1.1203, and 1.1206(a).
G. Comment Dates
106. Pursuant to applicable procedures set forth in Secs. 1.415 and
1.419 of the Commission's rules, 47 CFR 1.415 and 1.419, interested
parties may file comments on or before June 18, 1997, and reply
comments on or before July 7, 1997. To file formally in this
proceeding, you must file an original and four copies of all comments,
reply comments, and supporting comments. If you want each Commissioner
to receive a personal copy of your comments, you must file an original
plus nine copies. You should send comments and reply comments to the
Office of the Secretary, Federal Communications Commission, Washington,
DC 20554. Comments and reply comments will be available for public
inspection during regular business hours in the FCC Reference Center of
the Federal Communications Commission, Room 239, 1919 M Street, NW,
Washington, DC 20554.
H. Ordering Clauses
107. Authority for issuance of this FNPRM is contained in sections
4(i), 303(r) and 309(j) of the Communications Act of 1934, as amended,
47 U.S.C. 154(i), 303(r) and 309(j).
List of Subjects in 47 CFR Part 24
Communications common carriers, Radio, Reporting and recordkeeping
requirements.
Federal Communications Commission.
William F. Caton,
Acting Secretary.
[FR Doc. 97-13147 Filed 5-19-97; 8:45 am]
BILLING CODE 6712-01-P
