[Federal Register Volume 60, Number 163 (Wednesday, August 23, 1995)]
[Proposed Rules]
[Pages 43740-43756]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 95-20731]
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FEDERAL COMMUNICATIONS COMMISSION
47 CFR Parts 21 and 25
[CC Docket No. 92-297, FCC 95-287]
Redesignating the 27.5-29.5 GHz Frequency Band, Reallocating the
29.5-30.0 GHz Frequency Band, and Establishing Rules and Policies for
Local Multipoint Distribution Service and for Fixed Satellite Services
AGENCY: Federal Communications Commission.
ACTION: Proposed rule.
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SUMMARY: This is the Third Notice of Proposed Rulemaking to establish
Local Multipoint Distribution Service (LMDS) in the 27.5-29.5 GHz (28
GHz) frequency band. In this Notice, the Commission proposes a band
segmentation plan designed to permit both LMDS and Fixed Satellite
Service (FSS) systems to operate in the 28 GHz frequency band. It also
proposes to accommodate feeder links for certain Mobile Satellite
Service (MSS) systems in this band. The proposal ensures the rapid
dissemination of innovative communications services by facilitating the
entry of multiple providers into the market. New providers will offer
facilities-based competition to each other and traditional cable and
telephone carriers--greatly enhancing customer choice. A wealth of
innovative services will include two-way video, teleconferencing,
telemedicine, telecommuting, data services and global networks. The
Commission proposes the use of competitive bidding to choose among
mutually exclusive LMDS and FSS applicants. It also proposes to
reallocate the 29.5-30.0 GHz band in connection with the band
segmentation plan. The Commission is also supplementing its earlier
Tentative Decision on CellularVision's request for a Pioneer
Preference.
DATES: Comments are due on or before August 28, 1995 and replies are
due on or before September 18, 1995.
FOR FURTHER INFORMATION CONTACT:
Susan Magnotti, Private Wireless Division, Wireless Telecommunications
Bureau, (202) 418-0871; Donna Bethea, Satellite and Radiocommunication
Division, International Bureau, (202) 739-0728.
[[Page 43741]]
SUPPLEMENTARY INFORMATION: This is a synopsis of the Commission's Third
Notice of Proposed Rulemaking in CC Docket 92-297, adopted July 13,
1995, and released July 28, 1995.
The complete text of the Third Notice of Proposed Rulemaking is
available for inspection and copying during normal business hours in
the FCC Reference Center (Room 230), 1919 M Street, NW., Washington,
DC, and also may be purchased from the Commission's copy contractor,
International Transcription Services, at (202) 857-3800, 1919 M Street,
NW., Room 246, Washington, DC 20554.
Synopsis of Third Notice of Proposed Rulemaking and Supplemental
Tentative Decision
In the first NPRM, 58 FR 6400 (January 28, 1993), the Commission
considered three petitions for rulemaking proposing a redesignation of
the 28 GHz band. That band currently is designated for fixed point-to-
point and fixed satellite service use. It found that redesignation of
the point-to-point use of the band to point-to-multipoint use could
stimulate greater use of a band that largely has lain fallow. However,
the Commission asked for comment from satellite entities regarding the
effect of redesignation on any proposed fixed satellite use of the
band. Non-geostationary orbit (NGSO) and Geostationary orbit (GSO) FSS
systems were proposed. In addition, entities planning mobile satellite
services requested spectrum for their uplink feederlinks.
In this Notice, the Commission proposes a band segmentation plan
that it tentatively concludes will permit both LMDS and Fixed Satellite
Service (FSS) systems to operate in the 28 GHz frequency band. It also
proposes to accommodate feeder links for certain Mobile Satellite
Service (MSS) systems in this band.
The proposal ensures the rapid dissemination of innovative
communications services by facilitating the entry of multiple providers
into the market. New providers will offer facilities-based competition
to each other and traditional cable and telephone carriers--greatly
enhancing customer choice. A wealth of innovative services will include
two-way video, teleconferencing, telemedicine, telecommuting, data
services and global networks. Flexible service rules will also promote
the efficient use of scarce spectrum by allowing providers to adjust
and respond to changes in technology and market demand.
The Commission proposes a segmentation scheme for the 28 GHz band
that it believes is equitable, allows licensees to operate viable
systems, promotes competition within the band, allows the public to
receive service as soon as possible, and provides for future growth of
both satellite and terrestrial services. The plan also supports the NII
and GII, creates competition to cable, LECs, cellular, and PCS, and
continues to promote the U.S. as a leader in satellite technology. The
Commission believes this spectrum band plan accommodates the expected
needs of all of the parties, although it does not reflect their exact
requests. The Commission maintains that each proponent can still
develop and operate viable systems within the band, and initiate
competitive services. Moreover, this proposal allows both terrestrial
LMDS and satellite industries to implement services in the near term.
The Commission's proposed plan is depicted graphically as
follows:\1\
\1\ Primary services are listed in capital letters. Lower-case
letters indicate secondary services. Primary services in a
particular frequency band have equal rights to any other services
operating in the same band. Stations operating in primary services
are protected against interference from stations of ``secondary''
services. Moreover, stations operating in a secondary service cannot
claim protection from harmful interference from stations of a
primary service. 47 CFR 2.104(d) and 2.105(c).
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BILLING CODE 6712-01-M
[GRAPHIC][TIFF OMITTED]TP23AU95.024
BILLING CODE 6712-01-C
The Commission's recommended proposals for the WRC-95 include
proposals designed to eliminate a principle regulatory obstacle to NGSO
service--ITU Radio Regulation 2613 from applying in Ka-Band uplink and
downlink spectrum. The proposals, if adopted at WRC-95, would
facilitate the implementation of the band segmentation plan it
proposes. However, adoption of different provisions at the WRC-95 could
affect the ability to implement the plan. Accordingly, the Commission
requests comment on what, if any, contingency plans may be appropriate
at this stage, and on any other information that develops from the WRC-
95 Preparatory process that may be relevant to implementation of the
proposed plan.
Supplemental Tentative Decision on CellularVision's Pioneer's
Preference Application
In the Tentative Decision on CellularVision's request for a
pioneer's preference, the Commission found that CellularVision is the
innovator of LMDS technology. Accordingly, it tentatively found that
CellularVision should be awarded a pioneer's preference.
CellularVision's specific pioneer's preference request was for the Los
[[Page 43742]]
Angeles MSA--it argued that the service it was providing in New York
was substantially different from the service for which it requested a
pioneer's preference in Los Angeles. The Commission disagreed, however,
and determined not to award a pioneer's preference for LMDS in more
than one service area. Accordingly, the Commission stated that if a
pioneer's preference to CellularVision were to be awarded, that it
would ``modify the authorization to (CellularVision) to meet the
service area, frequency, and other technical rules developed in this
proceeding for the area encompassing (CellularVision's) New York PMSA
authorization.'' However, the Commission further stated that if
CellularVision were to inform the Commission that it prefers Los
Angeles, and if it were to surrender its New York license, the
Commission would grant its pioneer's preference for Los Angeles.
CellularVision filed comments to the Tentative Decision in which it
argued that it was entitled to a pioneer's preference in the Los
Angeles area without its affiliate Hye Crest being forced to surrender
its New York license. Specifically, CellularVision argued that: (a) Hye
Crest was licensed prior to the adoption of the pioneer's preference
rules; (b) the proposed 28 GHz service rules are an outgrowth of the
work commenced by CellularVision after Hye Crest was authorized and the
pioneer's preference rules were adopted; and, (c) the service provided
by Hye Crest is different than the service for which CellularVision
seeks a pioneer's preference.
A number of parties supported CellularVision's pioneer's preference
arguments in comments and reply comments to the Tentative Decision.
However, in this supplemental tentative decision, the Commission notes
that all of those filings were made prior to the Commission being
granted comptetiive bidding authority by Congress in August 1993. Due
to the fact such authority has drastically altered the pioneer's
preference rules by requiring payment from pioneers, and due to the
unique circumstances discussed below, the Commission finds no further
need to consider whether CellularVision is entitled to a preference in
Los Angeles. Rather, it proposes to change its earlier tentative
decision, and grant CellularVision a preference for that portion of the
New York BTA (or other geographic service area utimately adopted) which
includes the New York PMSA. The pioneer's preference, covering the
portion of the BTA lying outside the PMSA, would be for the portion of
the 28 GHz band proposed to be available for LMDS in the Commission's
band splitting plan, infra, i.e., 27.5-28.35 GHz and 29.1-29.25 GHz (or
whatever band plan is ultimately adopted by the Commission). The
Commission notes that if a pioneer's preference is awarded for the
remainder of the BTA, section 309(j)(13)(B) of the Communications Act,
requiring an 85 percent payment of the value of the pioneer's
preference license, would apply only to the portion of the New York BTA
not covered by CellularVision's existing license for the PMSA. The
Commission also clarifies that the rules governing its evaluation of
CellularVision's pioneer's preference request are those that were in
effect when the Tentative Decision was adopted.\2\
\2\ When the Commission adopted amendments to its pioneer's
preference evaluation criteria in 1994, it explicitly held that the
new criteria would not apply to proceedings in which tentative
decisions had been issued, such as this one, see In the Matter of
Review of the Pioneer's Preference Rules, First Report and Order, 59
FR 8413, February 22, 1994 9 FCC Rcd 605, para. 9 (1994).
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Since the Commission's tentative decision on its pioneer's
preference request in the First NPRM, CellularVision has begun serving
a significant number of customers within its New York license area.
Therefore, the Commission does not beleive it is in the public interest
for it to continue proposing, in the context of a pioneer's preference
award, that CellularVision voluntarily discontinue service in New York
and turn in its license. Moreover, it believes that CellularVision has
made a commitment to providing service in New York, as evidenced by the
fact that it has applied for additional cell sites to cover the
remainder of the PMSA. The Commission has held that the choice of which
geographic area to be awarded as the pioneer's preference license will
be the licensee's. CellularVision's circumstances are unique, however,
in that the original license was granted before the Commission
established an LMDS service category and adopted regulations to govern
the service. Further, the license was granted pursuant to waiver, prior
to the Commission's adoption of the pioneer's preference rules, and for
reasons that are consistent with the underlying objectives of those
rules. These unique circumstances warrant the Commission's tentative
decision to waive its rules on its own motion to the extent they would
afford CellularVision the opportunity to choose the geographic area to
be awarded as the pioneer's preference license. The Commission also
notes that CellularVision would have the opportunity (as would any
interested party) to participate in any competitive bidding procedures
we may establish in this proceeding for purposes of licensing LMDS
service in the Los Angeles area.
It is the Commission's intention to accommodate CellularVision's
operations within the New York PMSA to the maximum extent possible,
while minimizing adverse effects of its operations in the 28.35-28.5
frequency band on eventual GSO licensees. It proposes, if it takes
favorable action on any renewal application CellularVision files
pursuant to its existing license (such a filing would be due in January
1996), to include as a condition of the PMSA license a provision
permitting CellularVision to operate on the contiguous 1 GHz for which
it is presently licensed for a period of time sufficient to accommodate
its operations within the New York PMSA without adversely affecting the
eventual GSO licensee. The Commission tentatively concludes that a
grandfathering period of 36 months following the release date of the
First Report and Order in this proceeding, or until the first GSO
satellite is successfully launched, whichever occurs later, is
appropriate. The Commission tentatively intends to instruct the
Wireless Telecommunications Bureau to condition any such renewed
license with a provision specifying that, after the end of the
grandfathering period it adopts, the CellularVision license would
become subject to the generally applicable rules for the provision of
LMDS service. Thus, if the proposed band segmentation plan is adopted,
at the end of the grandfathering period CellularVision would be
required to cease operation on the 150 MHz allocated for GSO/FSS
operations 36 months after release of the First Report and Order in
this proceeding or until the first GSO satellite is launched, whichever
is later. Simultaneously, CellularVision would be permitted to operate
on a co-primary basis on the 150 MHz at 29.1-29.25 GHz.
Finally, the Commission seeks comment on whether it would be
appropriate to place conditions on any pioneer's preference license
issued to CellularVision, similar to those placed on other pioneer's
preference licensees in PCS. For the pioneer's preference licenses
heretofore granted, the Commission placed a condition on the broadband
and narrowband PCS licenses that required that they be held for three
years or until the construction requirements applicable to the five-
year build-out period have been met, whichever is earlier.
[[Page 43743]]
Local Multipoint Distribution Service Licensing Issues
The Commission seeks comment on whether it is advisable, from a
competitive standpoint, to license more than one LMDS operator per
market and on any competitive concerns raised by the grant of a 1000
MHz block to a single LMDS licensee in each market.
While allowing one LMDS provider per market may help ensure the
competitive viability of this fledgling service, and thereby maximize
the ability of LMDS licensees to provide significant competition to
other services, the Commission recognizes that digital LMDS is being
developed that has the potential to greatly increase the capacity of
LMDS systems. Possible schemes include issuing only one license per
market for the entire 1000 MHz; issuing two licenses, one for the 850
MHz contiguous band of spectrum and one for the 150 MHz coprimary
portion; and issuing three licenses, two for 425 MHz and one for the
150 MHz coprimary segment. If the licensing scheme which is ultimately
adopted includes more than one license per market, the Commission seeks
comment on whether to permit aggregation of licenses within the same
geographic service area.
The Commission continues to believe that BTAs are the best
geographic area for licensing LMDS.\3\ It believes that, based on the
record submitted thus far in this proceeding, there is a reasonable
likelihood that services provided through use of the LMDs spectrum will
have a local focus. BTA service areas, it tentatively concludes, will
best approximate the likely scope of the service areas for these
services.
\3\ Rand McNally is the copyright owner of the MTA/BTA Listings,
which list the BTAs contained in each MTA and the counties within
each BTA, as embodied in Rand McNally's Trading Area System MTA/BTA
Diskette, and geographically represented in the map contained in
Rand McNally's Commercial Atlas & Marketing Guide. The conditional
use of Rand McNally's copyrighted material by interested persons is
authorized under a blanket licensee agreement dated February 10,
1994, and covers use by LMDS applicants. This agreement requires
authorized users of the material to include a legend on
reproductions (as specified in the license agreement) indicating
Rand McNally's ownership.
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The Commission seeks comment on whether the most rapid build-out of
LMDS would occur if it were to permit partitioning of the license
pursuant to eligibility and other rules adopted for this service. It
seeks comment regarding whether geographic partitioning should be
established in the case of LMDS licenses, and on the manner in which
the proposed build-out requirement would be applied to a partitioned
license.
The Commission requests comment on three alternatives for
regulating LMDS licensees. One option is that licensees would be
presumed to be common carriers subject to Title II regulation to the
extent the system is used to provide two-way data, voice, and other
telecommunications services, and in the absence of evidence
demonstrating that they provide only private carriage. The second
option is the same one set forth in the First NPRM, i.e., in their
applications, successful bidders would specify the types of services
they expect to offer and indicate the regulatory status under which
those services would be offered. Licensees would be required to
describe their proposed service in sufficient detail for the Commission
to confirm that their requested status complies with relevant judicial
and/or statutory standards. The Commission would retain oversight of
the parties' compliance with the statutory and judicial standards for
status based on the type of service offered. The third option for LMDS
licensees is to treat them similarly to the way in which MMDS licensees
are treated. MMDS licensees are permitted to provide service as common
carriers or private carriers. Under the MMDS rules, however, licensees
operating as private carriers must comply with common carriage rules,
except for the tariffing requirement.
The Third NPRM seeks comment on the eligibility of telephone
companies, commercial mobile radio service providers, cable television
companies, and multichannel multipoint distribution service providers
to be licensed for LMDS within their service areas.
Since the Commission is proposing the use of competitive bidding to
award LMDS licenses, it withdraws its proposal to limit transfer or
assignment of LMDS licenses, except in the case of licenses awarded to
designated entities. Because of the special consideration accorded
designated entities in the auction process, the Commission proposes
that such licenses be restricted in a manner similar to that proposed
for Specialized Mobile Radio licenses. A designated entity would be
prohibited from voluntarily assigning or transferring control of its
license to any other entity during the three years after license grant.
In the fourth and fifth years of the license term, the designated
entity would only be able to assign or transfer control of its license
to another qualified designated entity, and no unjust enrichment could
be gained through the transfer.
Although the Commission proposed in the First NPRM to forbear from
regulating rates of LMDS licensees if regulated as common carriers,
subsequent judicial interpretation of the Communications Act forecloses
this approach to the extent that LMDS providers operate as common
carriers. AT&T v. FCC, 978 F.2d (D.C. Cir. 1993), Southwestern Bell
Corp. v. FCC, 43 F.3d 1515 (D.C. Cir. 1995) Accordingly, to the extent
LMDS licensees offer services which are categorized as common carrier
offerings that are not within the definition of Commercial Mobile Radio
Services (CMRS), the Commission has no alternative but to impose all
statutory requirements pertaining to common carriers. In the case of
filings required under Section 214 of the Act, the Commission seeks
comment regarding whether we should consider the development of
streamlined filing provisions in the case of LMDS service providers.
The Commission tentatively concludes that some build-out
requirement is necessary for LMDS, but one which is more moderate than
was proposed in the First NPRM. The Commission proposes to require
licensees to have made service available to a minimum of one-third of
the population of their geographic areas within five years from license
grant. It proposes that licensees will have made service available to a
minimum of two-thirds of the population of their geographic areas
within ten years from license grant.
Satellite Services Licensing
There are existing rules for the GSO/FSS systems in place in part
25 of the Commission's rules. These include technical rules, such as
2 deg. orbital spacing and full frequency reuse, and licensee
qualification rules, for example, a rigorous financial qualification
standard. The Commission proposes to apply these rules to GSO/FSS
systems that will use the 27.5-30.0 GHz band. The Commission requests
comment on whether specific rules, such as the financial qualification
requirement, should be altered and whether any additional rules should
be created. It requests specific comment on any technical standards
that will facilitate sharing under the band segmentation plan.
Following the release of this Notice, the Commission will place the
pending satellite applications on separate Public Notice, and will
establish cut-off periods for both the GSO/FSS and NGSO/FSS
applications to be
[[Page 43744]]
considered concurrently with these.\4\ If all qualified applicants in
the processing group cannot be accommodated, it proposes to use
competitive bidding as the procedure to choose among the mutually
exclusive applications to provide domestic service within the United
States. The Commission is not auctioning access rights to other
countries from either NGSO/FSS or GSO/FSS systems. The Commission is
also auctioning access rights to serve the U.S. market only from
certain orbit locations for specific frequency bands.
\4\ All applicants would have to pay the filing fees set out in
our rules, for applications for authority to construct, launch, and
operate a satellite in the FSS.
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Competitive Bidding Proposal and Procedures
Following is the verbatim text of that portion of the third NPRM
pertaining to competitive bidding issues:
A. Competitive Bidding
Section 309(j)(1) of the Communications Act, as amended, 47 U.S.C.
309(j)(1), permits auctions only where mutually exclusive applications
for initial licenses or construction permits are accepted for filing by
the Commission and where the principal use of the spectrum will involve
or is reasonably likely to involve the receipt by the licensee of
compensation from subscribers in return for enabling those subscribers
to receive or transmit communications signals.\5\
\5\ As discussed infra, the LMDS services proposed to date all
appear to be subscriber-based services. However, we are aware that
interest in the use of this spectrum has been demonstrated by two
entities interested in manufacturing point-to-point equipment
(Digital Corporation and Harris Corp.--Farinon Div.) which is
unlikely to be subscriber-based.
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The Commission has previously determined that auctions are
permissible if at least a majority of the use of the spectrum would be
for service to subscribers. In making this determination, we looked to
classes of licenses and permits rather than to individual licenses.\6\
Based on the service proposals in the extensive record developed in
this proceeding to date, we believe that the principal use of the LMDS
spectrum will meet these requirements.
\6\ Second Report and Order, supra, n. 79 at 2354.
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With respect to the NGSO and GSO FSS applicants, we tentatively
conclude that the principal use of the spectrum will be to provide
subscription based services,\7\ even though certain portions of the
spectrum will be used for large bandwidth applications through gateway
terminals. We request comment on these tentative conclusions, including
information from any potential LMDS or satellite applicants on the type
of service they contemplate offering.
\7\ See First Report and Order and Second Notice of Proposed
Rulemaking in ET Docket No. 94-32, FCC 95-47, 60 FR 13102 (March 10,
1995) at 33.
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In addition, we tentatively conclude that the use of competitive
bidding to award LMDS and satellite licenses will promote the
objectives described in section 309(j)(3) of the Communications Act.
These objectives are:
(A) The development and rapid deployment of new technologies,
products, and services for the benefit of the public, including those
residing in rural areas, without administrative or judicial delays;
(B) Promoting economic opportunity and competition and ensuring
that new and innovative technologies are readily accessible to the
American people by avoiding excessive concentration of licenses and by
disseminating licenses among a wide variety of applicants, including
small businesses, rural telephone companies, and businesses owned by
members of minority groups and women;
(C) Recovery for the public of a portion of the value of the public
spectrum made available for commercial use and avoidance of unjust
enrichment through the methods employed to award uses of that
resources; and
(D) Efficient and intensive use of the electromagnetic spectrum.
First, based on our experience conducting PCS auctions, we believe
that the use of competitive bidding to award GSO/FSS and NGSO/FSS and
LMDS licenses, as compared with other licensing methods, will speed the
development and deployment of new technologies, products and services
to the public with minimal administrative or judicial delay, and will
encourage efficient use of the spectrum as required by sections
309(j)(3) (A) and (D). Second, use of auctions to assign LMDS and
satellite licenses will clearly advance the goals of section
309(j)(3)(C) by enabling us to recover for the public a portion of the
value of the public spectrum.\8\ By using a licensing methodology which
ensures that licenses are assigned to those who value them most highly,
it follows that such licensees can be expected to make the most
efficient and intensive use of the spectrum. Finally, we believe that
using auctions will meet the objectives of section 309(j)(3)(B) because
we propose to adopt competitive bidding rules that foster economic
opportunity and the distribution of licenses among a wide variety of
applicants including small businesses, rural telephone companies and
businesses owned by women and minorities (collectively referred to as
``designated entities'') who might otherwise face entry barriers.
\8\ Id.
B. Determining Mutual Exclusivity
As noted above, one of the prerequisites for use of the auction
procedures is that applications must be mutually exclusive. The
Communications Act states that ``[n]othing in [Section 309(j)], or in
the use of competitive budding, shall * * * be construed to relieve the
Commission of the obligation in the public interest to continue to use
engineering solutions, negotiation, threshold qualifications, service
regulations, and other means in order to avoid mutual exclusivity in
application and licensing proceedings * * *.'' 47 U.S.C. 309(j)(6)(E).
With respect to LMDS, we propose to use discrete geographic service
areas and spectrum blocks, thus avoiding the possibility of ``daisy
chain'' mutual exclusivity among applications. However, because of the
great interest shown in LMDS in this proceeding to date, we anticipate
that there will be multiple applications filed for each geographic
area. Moreover, we tentatively conclude that it would not serve the
public interest for the Commission to avoid mutual exclusivity
altogether because doing so would greatly circumscribe the geographic
service areas and would defeat the Commission's ability to determine
the applicants who would put the spectrum to its highest valued use.
We propose to determine mutual exclusivity based on the FCC Form
175 application for LMDS licenses. If more than one application is
filed for the same LMDS frequency in the same geographic area then
mutual exclusivity would be established and the license will be
auctioned. As we indicated in the Second Report and Order in PP Docket
No. 93-253, 9 FCC Rcd 2348 (1994) 59 FR 22980, May 4, 1994, if the
Commission receives only one application that is acceptable for filing
for a particular license, and thus there is no mutual exclusivity, the
Commission by Public Notice will cancel the auction for this license
and establish a date for the filing of a long-form application, the
acceptance of which will trigger the procedures permitting petitions to
deny.\9\ We seek comment on this proposal, particularly whether some
other type of filing method would be more appropriate for
[[Page 43745]]
determining whether initial applications are mutually exclusive.
\9\ See Second Report and Order at para. 165.
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With respect to GSO/FSS service and NGSO/FSS systems, it is
premature to determine whether mutual exclusivity will occur. We intend
to open a new filing period permitting additional parties to apply for
this spectrum. If additional entities file applications during this
filing period, it is possible, given the limited amount of spectrum
available, that we may not be able to accommodate all of the
applicants' proposals. Under these circumstances the Commission
proposes to award these licenses by auction. We seek comment on this
proposal.
C. Competitive Bidding Issues
1. Competitive Bidding Design
(a) General Competitive Bidding Principles
The Competitive Bidding Second Report and Order,\10\ as modified by
the Competitive Bidding Reconsideration Order,\11\ established the
criteria to be used in selecting which auction design method to use for
each particular auctionable service. Generally, we concluded that
awarding licenses to those parties who value them most highly will
foster the statutory policy objectives. In this regard, we noted that
since a bidder's ability to introduce valuable new services and to
deploy them quickly, intensively, and efficiently increases the value
of a license to that bidder, an auction design that awards licenses to
those bidders with the highest willingness to pay tends to promote the
development and rapid deployment of new services and the efficient and
intensive use of the spectrum.\12\
\10\ Implementation of Section 309(j) of the Communications
Act--Competitive Bidding, Second Report and Order, PP Docket No. 93-
253, 9 FCC Rcd 2348, para. 69 (1994) (Competitive Bidding Second
Report and Order).
\11\ Competitive Bidding Reconsideration Order, 9 FCC Rcd at
7249-50.
\12\ See Competitive Bidding Second Report and Order, 9 FCC Rcd
at 2360-61, para. 70.
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Based on the foregoing, we concluded that where the licenses to be
auctioned are interdependent and their value is expected to be high,
simultaneous multiple round auctions would best achieve the
Commission's goals for competitive bidding.\13\ We also noted, however,
that simultaneous multiple round auctions may not be appropriate for
all licenses. For example, where there is less interdependence among
licenses, there is less benefit to auctioning them simultaneously.
Similarly, we explained that when the values of particular licenses to
be auctioned are low relative to the costs of conducting a simultaneous
multiple round auction, we may consider auction designs that are
relatively simple, with low administrative costs and minimal costs to
the auction participants.\14\
\13\ See 9 FCC Rcd at 2367, paras. 109-111.
\14\ See id. at 2367, paras. 112-113.
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(b) Competitive Bidding Methodology for LMDS Licenses
Simultaneous Multiple Round Bidding. We believe that simultaneous
multiple round bidding should be the preferred method for licensing
LMDS spectrum blocks. Based on the record in this proceeding and our
successful experience conducting simultaneous multiple round auctions
for narrowband and broadband PCS licenses, we believe that this auction
design is the most appropriate for auctioning LMDS licenses. First, we
believe that for certain bidders the value of these licenses will be
significantly interdependent because of the desirability of aggregation
across geographic regions and because, if the Commission provides for
more than one license in each geographic service area, licenses within
the same area would likely be close substitutes or strong complements.
As indicated above, under these circumstances, simultaneous multiple
round bidding will generate more information about license values
during the course of the auction and provide bidders with more
flexibility to pursue back-up strategies than if these licenses are
auctioned separately. Simultaneous multiple round bidding is therefore
most likely to award licenses to the bidders who value them the most
highly and to provide bidders with the greatest likelihood of obtaining
the license combinations which best satisfy their service needs.
Finally, we expect the value of these licenses to be sufficiently high
to warrant the use of simultaneous multiple round auctions. Therefore,
we intend to use simultaneous multiple round bidding to award LMDS
licenses. We ask commenters to address this tentative conclusion and
whether any other competitive bidding designs would be more appropriate
for the licensing of this spectrum.
Grouping of Licenses. Assuming we use simultaneous multiple round
auctions for LMDS licenses, we also seek comment on which blocks should
be auctioned together, and the sequencing of each auction. The
importance of the choice of license groupings increases with the degree
of interdependence among the individual licenses or groups of licenses
to be auctioned. Grouping interdependent licenses together and putting
them up for bid at the same time will facilitate awarding licenses to
bidders who value them the most highly by providing bidders with
information about the prices of complementary and substitutable
licenses during the course of the auction. Based on the foregoing, we
propose to auction all LMDS licenses together in one simultaneous
multiple round auction because of the expected value and significant
interdependence of the licenses. We seek comment on this tentative
analysis and on possible alternative license groupings.
Combinatorial Bidding. Another issue for consideration in auction
design is whether to permit combinatorial bidding. In general terms,
combinatorial bidding allows bidders to bid for multiple licenses as
all-or-nothing packages (e.g., all licenses nationwide on a particular
spectrum block, with the licenses awarded as a package if the
combinatorial bid is greater than the sum of the high bids on the
individual licenses in the package).\15\ Combinatorial bidding can be
implemented with either simultaneous or sequential auction designs. At
this time, we do not plan to use combinatorial bidding in LMDS
licensing because although we recognize that there may be significant
benefits associated with combinatorial bidding, especially in terms of
efficient aggregation of licenses, we tentatively conclude that
simultaneous multiple round auctions offer many of the same advantages
without the same degree of administrative and operational complexity
and without biasing auction outcomes in favor of combination bids. We
seek comment on the specific combinatorial bidding procedures that
should be adopted if combinatorial bidding is used.
\15\ In combinatorial bidding, if a bid for a group of licenses
exceeds the sum of the highest bids for the individual licenses that
comprise the package, then the package bid would win. In the Second
Report and Order we also indicated that if we were to utilize
combinatorial bidding we might institute a premium so that the
combinatorial bid would win only if it exceeded the sum of the bids
for individual licenses by a set percentage.
See Second Report and Order at para. 114. NTIA is the main
advocate of combinatorial bidding. See comments of NTIA, and ex
parte submission of NTIA in PP Docket No. 93-253, Feb. 28, 1994.
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Alternatively, we may consider modifying the auction rules to
directly limit the risk associated with bid withdrawal for those
seeking nationwide aggregations. For example, we might cap the bid
withdrawal payment (discussed below) for nationwide bidders at five
percent of the
[[Page 43746]]
withdrawn bids. To discourage those who do not truly seek nationwide
aggregations of taking advantage of the limitations on bid withdrawal
payments and to speed up the auction, nationwide bidders might be
subject to the requirement that they be active (defined below) on all
license on each nationwide aggregation on which they did. To ensure
adequate competition for licenses which are reoffered after a
nationwide withdrawal we might also modify the activity rules
(discussed below) so that if any bidder withdraws a bid, the
eligibility of all other bidders will be increased by the amount of the
withdrawal bid up to each bidder's initial maximum eligibility. We seek
comment on this alternative method of facilitating efficient nationwide
aggregations.
(c) GSO/FSS Auction Proposals
In the event a competitive bidding approach is adopted to award
GSO/FSS and NGSO/FSS licenses, we emphasize that we would be auctioning
access to the United States only for use of specific frequency bands
within the U.S. Any international access by the satellite users depends
on the rules of that particular country. To afford licensees some
flexibility in designing their systems and to allow for the
uncertainties of the international coordination process, we propose to
allow applicants to bid on the total amount of spectrum designated for
GSO/FSS and NGSO/FSS services, respectively, set out in the band
segmentation plan.
As we discussed earlier, it is premature for us to determine
whether there will be mutually exclusive applications for GSO/FSS
licenses in the band. Applications for GSO/FSS licenses would be
mutually exclusive if we do not have a sufficient number of orbit
locations to accommodate all qualified applicants. We request comment,
with accompanying justification, from applicants and potential
applicants, on how many users, within our two degree spacing rule, they
believe can be supported in the GSO/FSS segments to provide service to
the continental United States (CONUS), without causing harmful
interference. If a mutually exclusive situation should arise, we
propose to auction the GSO/FSS spectrum at each orbit location in two
paired, uplink and downlink, 500 MHz blocks, allowing applicants to bid
for up to two blocks. We believe 500 MHz blocks are the smallest
spectrum blocks feasible to support a viable FSS system at 28 GHz. We
request comment on whether this amount of spectrum is sufficient. If
auctions are used to award GSO/FSS licenses, we propose to use a
simultaneous multiple round bidding, which will enable bidders to
express the value interdependencies between the two blocks. We request
comment on whether simultaneous multiple round bidding procedures are
appropriate for this spectrum or whether other bidding procedures would
better serve the statutory goals.
(d) NGSO/FSS Auction Proposals
The band segmentation plan designates 500 MHz of unrestricted
contiguous spectrum to NGSO/FSS systems. Our preliminary technical
analysis indicates that 500 MHz is the minimum amount of spectrum
required to implement a viable system offering NGSO/FSS services. For
NGSO/FSS systems, a mutually exclusive situation will arise if all
qualified applicant are unable to share the spectum. If mutually
exclusive applications are received, we propose to use competitive
bidding to award a single license. If competitive bidding is used to
award such a license, we propose to conduct a multiple round auction
for the entire 500 MHz block of spectrum. This multiple round auction
may be either oral or electronic. We request comment from NGSO/FSS
applicants and potential applicants on this proposal. Specifically we
ask commenters to address the specific application and auction
procedures that should be used.
(e) MSS Feeder Links
We are not proposing competitive bidding rules for MSS feeder
links. In the Second Report and Order in the Competitive Bidding
Rulemaking Proceeding, the Commission decided not to auction
intermediate links, including feeder links in the Mobile Satellite
Services (MSS).\16\ We reasoned that before employing competitive
bidding, the Commission is required to determine that mutually
exclusive applications are likely to be filed and that such bidding
would promote the objectives of section 309(j)(3)(A) through (D) of the
Communications Act. With regard to mutual exclusivity, we noted that in
those frequency bands most often utilized as intermediate links, mutual
exclusivity is usually avoided by employing a frequency coordination
process for each intermediate link prior to the time an application is
granted. With regard to the objective of section 309(j)(3)(A) through
(D), we concluded that auctioning intermediate links could
significantly delay the development and rapid deployment of new
technologies, products and services for the benefit of the public, that
auctions for these links could impose significant administrative costs
on licensees and the Commission, and that it was unclear whether
competitive bidding for intermediate links would recover for the public
a significant portion of the value of the spectrum, prevent unjust
enrichment or promote efficient and intensive use of the spectrum.\17\
\16\ See Implementation of Section 309(j) of the Communications
Act--Competitive Bidding, PP Docket No. 93-253, Second Report and
Order, 9 FCC Rcd. 2348, 2355-56 n. 30 (1994).
\17\ Id at 2355, para. 43.
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We tentatively conclude that FSS spectrum used for MSS feeder links
should be excluded from competitive bidding. We base this tentative
conclusion on the finding that auctions for MSS feeder links would not
achieve the public interest objectives in Section 309(j)(3). The feeder
links are an integral part of the MSS systems and the systems would be
unable to operate without them. Three MSS systems have also already
been licensed and auctioning the feeder links would only delay
implementation of service to the public.
(f) Bidding Procedures
If we use simultaneous multiple round auctions, we generally
propose to use bidding procedures similar to those use for broadbank
PCS.\18\ We seek comment, however, on whether any variations on these
procedures should be adopted for LMDS or FSS licenses.
\18\ Fifth Report and Order in PP Docket No. 93-253, 59 FR
37566, July 22, 1994 9 FCC Rcd 5532 (1994) (Fifth Report and Order),
recon. granted in part, Fifth Memorandum Opinion and Order, 59 FR
63210, December 7, 1994 10 FCC Rcd 403 (1995) (Fifth Memorandum
Opinion and Order).
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Bid Increments and Tie Bids. In using simultaneous multiple round
auctions to award licenses it is important to specify minimum bid
increments. The bid increment is the amount or percentage by which the
bid must be raised above the previous round's high bid in order to be
accepted as a valid bid in the current bidding round. The application
of a minimum bid increment speeds the progress of the auction and,
along with activity and stopping rules, helps to ensure that the
auction comes to closure within a reasonable period of time.
Establishing an appropriate minimum bid increment is especially
important in a simultaneous auction with a simultaneous closing rule.
In that case, all markets remain open until there is no bidding on any
license, and a delay in closing one market will delay the closing of
all markets. As we recognized in the Second Report and Order in the
[[Page 43747]]
competitive bidding docket, it is important in establishing the amount
of the minimum bid increment to express such increment as the greater
of a percentage and fixed dollar amount.\19\ This will ensure a timely
completion of the auction even if bidding begins at a very low dollar
amount. Accordingly, we propose to impose a minimum bid increment equal
to some percentage of the high bid from the previous round or a dollar
amount per MHza per pop, whichever is greater where multiple round
bidding is used.
\19\ See Second Report and Order, supra, at para. 126.
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We propose to announce by public notice prior to auction the
specific bid increment that generally will be used. We anticipate using
large bid increments early in the auction and reducing the increment as
bidding activity falls. We note, however, that the Commission proposes
to retain the discretion to set and, by announcement before or during
the auction, vary the minimum bid increments for individual licenses or
groups of licenses over the course of an auction.\20\
\20\ In oral or electronic sequential auctions the auctioneer
may within his or her sole discretion establish and vary the amount
of the minimum bid increment in each round of bidding.
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Where a tie bid occurs, we propose that the high bidder be
determined by the order in which the bids were received by the
Commission.\21\
\21\ See Second Report and Order at 2369.
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Stopping Rules. When simultaneous multiple round auctions are used,
a stopping rule must be established for determining when the auction is
over. In simultaneous multiple round auctions, bidding may close
separately on individual licenses, simultaneously on all licenses, or a
hybrid approach may be used. Under an individual, license-by-license
approach, bidding closes on each license after one round passes in
which no new acceptable bids are submitted for that particular license.
With a simultaneous stopping rule, bidding generally remains open on
all licenses until there is no new acceptable bid on any license. This
approach has the advantage of providing bidders full flexibility to bid
for any license as more information becomes available during the course
of the auction, but it may lead to very long auctions, unless an
activity rule (see discussion infra, paras. 157 ff) is imposed. A
hybrid approach combines the first two stopping rules. For example, we
may use a simultaneous stopping rule (along with an activity rule
designed to expedite closure for licenses subject to the simultaneous
stopping rule) for the higher value licenses. For lower value licenses,
where the loss from eliminating some back-up strategies is less, we may
use simpler license-by-license closings. In the Competitive Bidding
Second Report and Order we recognized that such a hybrid approach might
simplify and speed up the auction process without significantly
sacrificing efficiency or expected revenue.\22\
\22\ Id.
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For LMDS and FSS auctions, we propose to use a simultaneous
stopping rule. Under this proposal, bidding will remain open on all
licenses in an auction until bidding stops on every license. We propose
that the auction will close after one round passes in which no new
valid bids or proactive activity rule waivers (as defined below in the
section on activity rules) are submitted. The Commission proposes to
retain the discretion, however, to keep the auction open even if no new
valid bids and no proactive waivers are submitted. In the event that
the Commission exercises this discretion, the effect would be the same
as if a bidder had submitted a proactive waiver.\23\ Since we intend to
impose an activity rule (as discussed below), we believe that allowing
simultaneous closing for all licenses will afford bidders flexibility
to pursue back-up strategies without running the risk that bidders will
hold back their bidding until the final rounds.
\23\ This will help ensure that the auction is completed within
a reasonable period of time, because it will enable the Commission
to utilize larger bid increments, which speed the pace of the
auction, without risking premature closing of the auction. See
Memorandum Opinion and Order in PP Docket No. 93-253, 59 FR 64159,
December 13, 1994 9 FCC Rcd 7684-7685 (1994).
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In addition, we propose to retain the discretion to declare after
forty rounds that the auction will end after some specified number of
additional rounds. If this option were used, we propose to only accept
bids on licenses where the high bid had increased in at least one of
the last three rounds. We seek comment on our proposed use of a
simultaneous stopping rule and ask commenters to indicate whether an
alternative stopping rule would be more appropriate.
Duration of Bidding Rounds. In simultaneous multiple round
auctions, bidders may need a significant amount of time to evaluate
back-up strategies and develop their bidding plans. We seeks comment on
the appropriate duration of the bidding rounds as well as the interval
between bidding rounds. We propose to retain the discretion to
establish the duration and frequency of bidding rounds by public notice
before each auction. We also propose to announce any changes to the
duration of or intervals between bidding rounds either by public notice
prior to the auction, or announcement during the auction. We request
comment on this proposal.
Bid Withdrawals. We propose to permit a high bidder to withdraw one
or more of its high bids during the bid withdrawal period in each round
subject to the bid withdrawal payments specified below. If a high bid
is withdrawn, we propose that the license be offered in the next round
at the second highest bid price. The Commission may at its discretion
adjust the offer price in subsequent rounds until a valid bid is
received on the license. In addition, to prevent a bidder from
strategically delaying the close of the auction, we propose that the
FCC retain the discretion to limit the number of times that a bidder
may re-bid on a license from which it has withdrawn a high bid.
Activity Rules. In the Second Report and Order, we adopted the
Milgrom-Wilson activity rule as our preferred activity rule where a
simultaneous stopping rule is used. See Second Report and Order at
paras. 144-145. The Milgrom-Wilson approach encourages bidders to
participate in early rounds by limiting their maximum participation to
some multiple of their minimum participation level. Bidders are
required to declare their maximum eligibility in terms of MHz-pops, and
make an upfront payment proportional to that eligibility level.\24\
(See discussion of upfront payments infra, para. 167.) That is, in each
round, bidders will be limited to bidding on licenses encompassing no
more than the number of MHz-pops covered by their upfront payment.
Licenses on which a bidder is the high bidder at the end of the bid
withdrawal period in the previous round count against this bidding
limit. Under this approach, bidders have the flexibility to shift their
bids among any licenses for which they have applied so long as, within
each round, the total MHz-pops encompassed by those licenses does not
exceed the total number of MHz-pops on which they are eligible to bid.
Under this approach, to preserve their maximum eligibility, bidders are
required to maintain a certain level of bidding activity during each
round of the auction. The auction is divided into three stages with
increasing levels of bidding activity required in each stage of the
auction. A bidder is considered active on a license
[[Page 43748]]
in the current round if the bidder has submitted an acceptable bid for
that license in the current round, or has the high bid for that license
at the end of the bid withdrawal period in the previous round in which
case, the bidder does not need to bid on that license in the current
round to be considered active on that license. A bidder's activity
level in a round is the sum of the MHz-pops associated with licenses on
which the bidder is active.
\24\ The number of ``MHz-pops'' is calculated by multiplying the
population of the license service area by the amount of spectrum
authorized by the license. We use the terms ``per MHz-pop'' and
``per MHz per pop'' interchangeably.
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We tentatively conclude that the Milgrom-Wilson activity rule
should be used in conjunction with the proposed simultaneous stopping
rule for LMDS and FSS auctions. We believe that the Milgrom-Wilson
approach will best achieve the Commission's goals of affording bidders
flexibility to pursue backup strategies, while at the same time
ensuring that simultaneous auctions are concluded within a reasonable
period of time.
Under the Milgrom-Wilson proposal, the minimum activity level,
measured as a fraction of the bidder's eligibility in the current
round, will increase during the course of the auction. Milgrom-Wilson
divide the auction into three stages. We propose to establish the
following minimum required activity levels for each stage of the
auction: In each round of Stage One of the auction, a bidder who wishes
to maintain its current eligibility is required to be active on
licenses encompassing at least 60% of the MHz-pops for which it is
currently eligible. Failure to maintain the requisite activity level
will result in a reduction in the amount of MHz-pops upon which a
bidder will be eligible to bid in the next round of bidding (unless an
activity rule waiver, as defined below, is used). During Stage One, if
activity is below the required minimum level, eligibility in the next
round will be calculated by multiplying the current round activity by
five-thirds (\5/3\). Eligibility for each applicant in the first round
of the auction is determined by the amount of the upfront payment
received and the licenses identified in its auction application. In
each round of the Stage Two, a bidder who wishes to maintain its
current eligibility is required to be active on 80% on the MHz-pops for
which it is eligible in the current round. During the second stage, if
activity is below the required minimum level, eligibility in the next
round will be calculated by multiplying the current round activity by
five-fourths (\5/4\). In each round of Stage Three, a bidder who wishes
to maintain its current eligibility is required to be active on
licenses encompassing 95 percent of the MHz-pops for which it is
eligible in the current round. In Stage Three, if activity in the
current round is below 95 percent of current eligibility, eligibility
in the next round will be calculated by multiplying the current round
activity by twenty-nineteenths (\20/19\). We note, however, that the
Commission proposes to retain the discretion to set and, by
announcement before or during the auction, vary the required minimum
activity levels (and associated eligibility calculations) for each
auction stage. Retaining this flexibility will improve the Commission's
ability to control the pace of the auction and help ensure that the
auction is completed within a reasonable period of time.
In the PCS auctions, we specified transition guidelines for
deciding when the auction would move from Stage One to Stage Two to
Stage Three. Those guidelines are based on the ``auction activity
level,'' the sum of the MHz-pops of PCS licenses for which the high bid
increased in the current round as a percentage of the total MHz-pops of
all licenses offered in the auction.\25\ However, we also retained the
discretion to move the PCS auctions from one stage to another at a rate
different from that set out in the guidelines.\26\
\25\ See, e.g., Fifth Report and Order at 5555.
\26\ See Fourth Memorandum Opinion and Order in PP Docket No.
93-253, 9 FCC Rcd 6858, 6860 (1994), 59 FR 53364, October 24, 1994.
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For the LMDS and FSS auctions, we propose to use the following
transition guidelines: The auction will begin in Stage One and move
from Stage One to Stage Two when the auction activity level is below
ten percent for three consecutive rounds in Stage One. The auction will
move from Stage Two to Stage Three when the auction activity level is
below five percent for three consecutive rounds in Stage Two. In no
case can the auction revert to an earlier stage. We propose, however,
that the Commission retain the discretion to determine and announce
during the course of an auction when, and if, to move from one auction
stage to the next, based on a variety of measures of bidder activity,
including, but not limited to, the auction activity level as defined
above, the percentage of licenses (measured in terms of MHz-pops) on
which there are new bids, the number of new bids, and the percentage
increase in revenue.
To avoid the consequences of clerical errors and to compensate for
unusual circumstances that might delay a bidder's bid preparation or
submission in a particular round, we proposed to provide bidders with a
limited number of waivers of the above-described activity rule. We
believe that some waiver procedure is needed because the Commission
does not wish to reduce a bidder's eligibility due to an accidental act
or circumstances not under the bidder's control.\27\
\27\ See Second Report and Order at 2372.
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We propose to provide bidders five activity rule waivers that may
be used in any round during the course of the auction.\28\ If a
bidder's activity level is below the required activity level, a waiver
will automatically be applied. That is, if a bidder fails to submit a
bid in a round, and its activity level from any standing high bids
(high bids at the end of the bid withdrawal period in the previous
round) falls below its required activity level, a waiver will be
automatically applied. A waiver will preserve current eligibility in
the next round.\29\ An activity rule waiver applies to an entire round
of bidding and not to a particular BTA service area.
\28\ See Second Report and Order at 2373.
\29\ An activity rule waiver cannot be used to correct an error
in the amount bid.
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Bidders will be afforded an opportunity to override the automatic
waiver mechanism when they place a bid if they intentionally wish to
reduce their bidding eligibility and do not want to use a waiver to
retain their eligibility at its current level.\30\ If a bidder
overrides the automatic waiver mechanism, its eligibility will be
permanently reduced (according to the formulas specified above), and it
will not be permitted to regain its bidding eligibility from a previous
round. An automatic waiver invoked in a round in which there are no new
valid bids will not keep the auction open. Bidders will have the option
of proactively entering an activity rule waiver during the bid
submission period.\31\ If a bidder submits a proactive waiver in a
round in which no other bidding activity occurs, the auction will
remain open.
\30\ See Fourth Memorandum Opinion and Order in PP Docket No.
93-253, 9 FCC Rcd 6858, 6861 (1994).
\31\ Thus, a ``proactive'' waiver, as distinguished from the
automatic waiver described above, is one requested by the bidder.
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The Commission proposes to retain the discretion to issue
additional waivers during the course of an auction for circumstances
beyond a bidder's control. We also propose to retain the flexibility to
adjust by public notice prior to an auction the number of waivers
permitted, or to institute a rule that allows one waiver during a
specified number of bidding rounds or during specified stages of the
auction.\32\
[[Page 43749]]
We request comment on these proposals.
\32\ See Second Report and Order at 2373.
2. Procedural and Payment Issues
In the Competitive Bidding Second Report and Order, as modified by
the Competitive Bidding Reconsideration Order in PP Docket No. 93-253,
9 FCC Rcd 7245 (1944), the Commission established general procedural
and payment rules for auctions, but also stated that such rules may be
modified on a service-specific basis.\33\ As discussed below, we
generally propose to follow the procedural and payment rules
established in subpart Q of part 1 of the Commission's rules, but seek
comment on whether any service-specific modifications of these rules
are needed based on the particular characteristics of LMDS services.
\33\ 9 FCC Rcd at 7249-50, paras. 23-26.
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(a) Upfront Payments
As in the case of other auctionable services, we propose to require
participants in the LMDS and FSS auctions to tender to the Commission
in advance of the auction, a substantial upfront payment. We have
previously determined that a substantial upfront payment requirement is
necessary to ensure that only serious, qualified bidders participate in
auctions and to ensure that sufficient funds are available to satisfy
any bid withdrawal or default payments (discussed infra) that may be
incurred. We seek comment on the appropriate amount of such upfront
payments for LMDS and satellite auctions. In the PCS auctions the
upfront payments was established based on a formula of $0.02 per pop
per MHz for the largest combination of MHz-pops a bidder anticipates
being active in any single round of bidding. This upfront payment was
designed to require an upfront payment representing approximately 5
percent of the expected value of such licenses. We seek comment on what
the appropriate upfront payment price per MHz-pop should be for LMDS
and satellite licenses. We also seek comment on whether we should
establish a minimum upfront payment for applications and if so what the
amount of that minimum upfront should be. In the Competitive Bidding
Second Report and Order, we established a minimum upfront payment of
$2,500, but we also indicated that the minimum amount could be modified
on a service-specific basis.\34\ With respect FSS auctions, we seek
comment on whether a fixed upfront payment would be more appropriate,
and if so, what the amount of that upfront should be.
\34\ 9 FCC Rcd at 2379, para. 180.
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(b) Down Payment and Full Payment for Licenses Awarded by Competitive
Bidding
The Competitive Bidding Second Report and Order generally
established a 20 percent down payment requirement for winning bidders
to discourage default between the auction and licensing and to ensure
payment if such default occurs. We concluded that a 20 percent down
payment was appropriate to ensure that auction winners have the
necessary financial capabilities to complete payment for the license
and to pay for the costs of constructing a system, while at the same
time not being so onerous as to hinder growth or diminish access.
We similarly propose to require all winning bidders in LMDS, GSO/
FSS and NGSO/FSS auctions to supplement their upfront payments with a
down payment sufficient to bring their total deposits up to 20 percent
of their winning bid(s).\35\ Under this approach, winning bidders would
be required to submit the required down payment by cashier's check or
wire transfer to our lock-box bank by a date to be specified by Public
Notice, generally within five (5) business days following the close of
bidding. All auction winners would generally be required to make full
payment of the balance of their winning bids within five (5) business
days following notification by the Commission that it was prepared to
award the license. The license would then be granted after this payment
was received. We seek comment on whether this is an appropriate
requirement for licensing of these services, and whether 20 percent
represents an appropriate level of payment. In addition, as discussed
more fully below, we ask commenters to address whether any special
payment provisions, for example a reduced down payment, should be
adopted for designated entities, and if so, for which specific
categories of designated entities and why.
\35\ If the upfront payment already tendered by a winning
bidder, after deducting any bid withdrawal and default payments due,
amounts to 20 percent or more of its winning bids, no additional
deposit will be required. If the upfront payment amount on deposit
is greater than 20 percent of the winning bid amount after deducting
any bid withdrawal and default payments due, the additional monies
will be refunded. If a bidder has withdrawn a bid or defaulted but
the amount of the payment cannot yet be determined, the bidder will
be required to make a deposit of 20 percent of the amount bid on
such licenses. When it becomes possible to calculate and assess the
additional payment, any excess deposit will be refunded. Upfront
payments will be applied to such deposits and to bid withdrawal and
default payments due before being applied toward the bidder's down
payment on licenses the bidder has won and seeks to acquire.
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(c) Bid Withdrawal, Default, and Disqualification
As we discussed in the Second Report and Order, it is important to
the success of our system of competitive bidding that potential bidders
understand that there will be a substantial payment assessed if they
withdraw a high bid, are found not to be qualified to hold licenses or
default on payment of a balance due. Accordingly, we propose to use the
bid withdrawal, default and disqualification rules contained
Secs. 1.2104(g) and 1.2109 of the Commission's rules for LMDS, GSO/FSS
and NGSO/FSS auctions. Pursuant to these rules, any bidder who
withdraws a high bid during an auction before the Commission declares
bidding closed will be required to reimburse the Commission in the
amount of the difference between its high bid and the amount of the
winning bid the next time the license is offered by the Commission, if
this subsequent winning bid is lower than the withdrawn bid.\36\ No
withdrawal payment will be assessed if the subsequent winning bid
exceeds the withdrawn bid. After bidding closes, a defaulting auction
winner (i.e., a winner who fails to remit the required down payment
within the prescribed time, fails to pay for a license, or is otherwise
disqualified) will be assessed an additional payment of three percent
of the subsequent winning bid or three percent of the amount of the
defaulting bid, whichever is less.\37\ The additional three percent
payment is designed to encourage bidders who wish to withdraw their
bids to do so before bidding ceases. We propose to hold deposits made
by defaulting or disqualified auction winners until full payment of the
[[Page 43750]]
additional amount.\38\ We believe that these additional payments will
adequately discourage default and ensure that bidders have adequate
financing and that they meet all eligibility and qualification
requirements. In the case of defaults, we also propose to retain
discretion to offer a license to the next highest bidder at its final
bid price if the default occurs within five business days after the
close of bidding. We seek comment on these propose procedures.
\36\ If a license is re-offered by auction, the ``winning bid''
refers to the high bid in the auction in which the license is re-
offered. If a license is re-offered in the same auction, the winning
bid refers to the high bid amount, made subsequent to the
withdrawal, in that auction. If the subsequent high bidder also
withdraws its bid, that bidder will be required to pay an amount
equal to the difference between its withdrawn bid and the amount of
the subsequent winning bid the next time the license is offered by
the Commission. If a license which is the subject of withdrawal or
default is not re-auctioned, but is instead offered to the highest
losing bidders in the initial auction, the ``winning bid'' refers to
the bid of the highest bidder who accepts the offer. Losing bidders
would not be required to accept the offer, i.e., they may decline
without additional payment. We wish to encourage losing bidders in
simultaneous multiple round auctions to bid on other licenses, and
therefore we will not hold them to their losing bids on a license
for which a bidder has withdrawn a bid or on which a bidder has
defaulted.
\37\ See 47 CFR Secs. 1.2104(g) and 1.2109.
\38\ In rare cases in which it would be inequitable to retain a
down payment, we will entertain requests for waiver of this
provision.
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In addition, if a default or disqualification involves gross
misconduct, misrepresentation or bad faith by an applicant, we propose
to retain the option to declare the applicant and its principals
ineligible to bid in future auctions, or take any other action we deem
necessary, including institution of proceedings to revoke any existing
licenses held by the applicant.\39\
\39\ See Second Report and Order at para. 198.
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3. Regulatory Safeguards
(a) Unjust Enrichment Provisions
The Budget Act directs the Commission to ``require such transfer
disclosures and anti-trafficking restrictions and payment schedules as
may be necessary to prevent unjust enrichment and as a result of the
methods employed to issue licenses and permits.'' We therefore propose
to adopt the transfer disclosure requirements contained in
Sec. 1.2111(a) of our rules for all LMDS,GSO/FSS and NGSO/FSS licenses
obtained through the competitive bidding process. In addition, we
propose specific rules governing unjust enrichment by designated
entities, which are discussed below. Generally, applicants transferring
their licenses within three years after the initial license grant will
be required to file, together with their transfer application, the
associated contracts for sale, option agreements, management
agreements, and all other documents disclosing the total consideration
received in return for the transfer of their licenses. We seek comment
on these proposals.
(b) Performance Requirements
The Budget Act requires the Commission to ``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)(4)(B). In the Competitive
Bidding Second Report and Order, we determined that it was unnecessary
and undesirable to impose additional performance requirements, beyond
those already provided in the service rules, for all auctionable
services. Our proposed LMDS service rules (and GSO/FSS and NGSO/FSS
service rules) contain specific performance requirements, such as the
requirement to construct and provide service within a specific period
of time. Thus, we do not propose to adopt any additional performance
requirements for competitive bidding purposes. We seek comment on this
tentative conclusion.
(c) Rules Prohibiting Collusion
In the Competitive Bidding docket, we adopted special rules
prohibiting collusive conduct in the context of competitive bidding. We
indicated that such rules would serve the objectives of the Budget Act
by preventing parties, especially the largest firms, from agreeing in
advance to bidding strategies that divide the market according to their
strategic interests and that disadvantage other bidders. We propose to
apply these rules to LMDS, GSO/FSS and NGSO/FSS auctions. Pursuant to
these rules, from the time the short-form applications are filed until
a winning bidder has made its required down payment, all bidders will
be prohibited from cooperating, collaborating, discussing or disclosing
in any manner the substance of their bids or bidding strategies with
other bidders, unless such bidders are members of a bidding consortium
or other joint bidding arrangement identified on the bidder's short-
form application. In addition, bidders are required by
Sec. 1.2105(a)(2) of the Commission's Rules to identify on their Form
175 applications all parties with whom they have entered into any
consortium arrangements, joint ventures, partnerships or other
agreements or understandings which relate to the competitive bidding
process. Bidders will also be required to certify that they have not
entered and will not enter into any explicit or implicit agreements,
arrangements or understandings with any parties, other than those
identified, regarding the amount of their bid, bidding strategies or
the particular properties on which they will or will not bid.
We also propose to require winning bidders, pursuant to Sec. 1.2107
of the Commission's Rules, to attach as an exhibit to their license
application a detailed explanation of the terms and conditions and
parties involved in any bidding consortium, joint venture, partnership,
or other agreement or arrangement they had entered into relating to the
competitive bidding process prior to the close of bidding. All such
arrangements must have been entered into prior to the filing of short-
form applications. In addition, where specific instances of collusion
in the competitive bidding process are alleged during the petition to
deny process, the Commission may conduct an investigation or refer such
complaints to the United States Department of Justice for
investigation. Bidders who are found to have violated the antitrust
laws or the Commission's rules in connection with participation in the
auction process may be subject to forfeiture of their down payment or
their full bid amount and revocation of their license(s), and they may
be prohibited from participating in future auctions. We seek comment on
these proposals.
4. Treatment of Designated Entities
(a) Introduction
In authorizing the Commission to use competitive bidding, Congress
mandated that the Commission ``ensure that small business, rural
telephone companies, and businesses owned by members of minority groups
and women are given the opportunity to participate in the provision of
spectrum-based services.'' 47 U.S.C. 309(j)(4)(D). The statute requires
the Commission to ``consider the use of tax certificates, bidding
preferences, and other procedures'' in order to achieve this
Congressional goal. In addition, section 309(j)(3)(B) provides that in
establishing eligibility criteria and bidding methodologies the
Commission shall promote ``economic opportunity and competition . . .
by avoiding excessive concentration of licenses and by disseminating
licenses among a wide variety of applicants, including small
businesses, rural telephone companies, and businesses owned by members
of minority groups and women.'' Finally, section 309(j)(4)(A) provides
that to promote these objectives, the Commission shall consider
alternative payment schedules including installment payments.
In instructing the Commission to ensure the opportunity for
designated entities to participate in auctions and spectrum-based
services, Congress was well aware of the problems that designated
entities would have in competing against large, well-capitalized
companies in auctions and the difficulties they encounter in accessing
capital. For example, the legislative history accompanying our
[[Page 43751]]
grant of auction authority states generally that the Commission's
regulations ``must promote economic opportunity and competition,'' and
``(t)he Commission will realize these goals by avoiding excessive
concentration of licenses and by disseminating licenses among a wide
variety of applicants, including small businesses and businesses owned
by members of minority groups and women.'' \40\ The House Report states
that the House Committee was concerned that, ``unless the Commission is
sensitive to the need to maintain opportunities for small business,
competitive bidding could result in a significant increase in
concentration in the telecommunications industries.'' \41\ More
specifically, the House Committee was concerned that adoption of
competitive bidding should not have the effect of ``excluding'' small
businesses from the Commission's licensing procedures, and anticipated
that the Commission would adopt regulations to ensure that small
businesses would ``continue to have opportunities to become
licensees.'' \42\ On the other hand, the House Report also states that
``the characteristics of some services are inherently national in
scope, and are therefore ill-suited for small businesses.'' \43\
\40\ H.R. Rep. No. 111, 103d Cong., 1st Sess. 254 (1993).
\41\ Id.
\42\ Id. at 255.
\43\ Id. at 254.
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Consistent with Congress's concern that auctions not operate to
exclude small businesses, the provisions relating to installation
payments were intended to assist small businesses. The House Report
states that these related provisions were drafted to ``ensure that all
small businesses will be covered by the Commission's regulations,
including those owned by members of minority groups and women.'' \44\
It also states that the provisions in section 309(j)(4)(A) relating to
installment payments were intended to promote economic opportunity by
ensuring that competitive bidding does not inadvertently favor
incumbents with ``deep pockets'' ``over new companies or start-ups.''
\45\
\44\ Id.
\45\ Id.
---------------------------------------------------------------------------
In addition, with regard to access to capital, Congress had made
specific findings in the Small Business Credit and Business Opportunity
Enhancement Act of 1992, that ``small business concerns, which
represent higher degrees of risk in financial markets than do large
businesses, are experiencing increased difficulties in obtaining
credit.'' \46\ As a result of these difficulties. Congress resolved to
consider carefully legislation and regulations ``to ensure that small
business concerns are not negatively impacted'' and to give priority to
passage of ``legislation and regulations that enhance the viability of
small business concerns.'' \47\ In the Competitive Bidding Second
Report and Order, we also indicated that special measures may not be
appropriate in all circumstances.
\46\ Small Business Credit and Business Opportunity Enhancement
Act of 1992, section 331(a)(3), Pub. L. 102-366, Sept. 4, 1992.
\47\ Id. section 331(b)(2)-(3).
We have employed a wide range of special provisions and eligibility
criteria designed to meet the statutory objectives of providing
opportunities to designated entities in other spectrum-based services.
For instance, we determined that minority-owned and women-owned
businesses in the nationwide narrowband PCS auction would receive a 25
percent bidding credit on certain channels; \48\ in the regional
narrowband PCS auction women-owned and minority-owned businesses would
receive a 40 percent bidding credit on certain channels and small
businesses would be eligible for installment payments on all channels;
\49\ in the broadband PCS auction, on separate entrepreneurs' blocks,
the bidding credits would vary according to the type of qualifying
designated entity that applied,\50\ and all entrepreneurs' block
licensees would be eligible for installment payments.\51\ For the
Multipoint Distribution Service (``MDS'') we adopted a 15 percent
bidding credit, reduced upfront payments and installment payments for
small businesses, including those owned by members of minority groups
and women.\52\ In satellite services, we have not proposed or adopted
specific measures for designated entitles.\53\
\48\ Auctions Third Report and Order at para. 72.
\49\ Id. at para. 87. See implementation of Section 309(j) of
the Communications Act--Competitive Bidding, PP Docket No. 93-253,
Third Memorandum Opinion and Order and Further Notice of Proposed
Rulemaking, 10 FCC Rcd 175, para. 58 (1994), 5Q FR 44058, August 26,
1994.
\50\ Auctions Fifth Report & Order at para. 133; Auctions Fifth
Memorandum Opinion & Order at para. 99; See also Further Notice of
Proposed Rulemaking, FCC 95-263 (released June 23, 1995), 60 FR
34201, June 30, 1995.
\51\ Auctions Fifth Memorandum Opinion & Order at para. 103.
\52\ Report and Order, MM Docket No. 94-131 and PP Docket 93-
253, FCC 95-230 (adopted June 15, 1995), 60 FR 36524, July 17, 1995.
\53\ See Rules and Policies Pertaining to a Mobile Satellite
Service in the 1610-1626.5/2483-2500 MHz Frequency Bands, Report and
Order, CC Docket No. 92-166, 9 FCC Rcd 5936, 5969-70 (1994);
Establishment of Rules and Policies for the Digital Audio Radio
Satellite Service in the 2310-2360 MHz Frequency Band, Notice of
Proposed Rulemaking, IB Docket No. 95-91, paras. 107-108, FCC 95-229
(released June 15, 1995) 60 FR 35166, July 6 1995.
---------------------------------------------------------------------------
The measures considered thus far for each service were established
after closely examining the specific characteristics of the service and
determining whether any particular barriers to accessing capital stood
in the way of designated entity opportunities. After examining the
record in the competitive bidding proceeding in PP Docket 93-253, we
established provisions necessary to enable designated entities to
overcome the barriers to accessing capital in each particular service.
Moreover, the measures we adopted also were designed to increase the
likelihood that designated entities who win licenses in the auctions
become strong competitors in the provision of wireless services.
As in other auctionable services, we fully intend in services using
the 28 GHz band to meet the statutory objectives of promoting economic
opportunity and competition, of avoiding excessive concentration of
licenses, and of ensuring access to new and innovative technologies by
disseminating licenses among a wide variety of applicants, including
small businesses, rural telephone companies, and businesses owned by
members of minority groups and women. At the same time, we must be
cautious and deliberative in our selected approach in light of the
auction statute's directive to avoid judicial delays \54\ and the
substantial legal risks involved with providing preferential treatment
on the basis of race or gender. In this regard, on June 12, 1995, the
Supreme Court ruled in Adarand Constructors v. Pena \55\ that measures
adopted by the federal government awarding preferential treatment on
the basis of race are subject to strict scrutiny.\56\ To pass muster
under that standard, such measures must be narrowly tailored to further
compelling government interests.\57\
\54\ 47U.S.C. 309(j)(3)(A).
\55\ 63 U.S.L.W. 4523 (U.S. June 12, 1995).
\56\ Id., 63 U.S.L.W. at 4530.
\57\ Id.
---------------------------------------------------------------------------
Adarand thus introduces an additional level of complexity in
implementing Congress' mandate to ensure that businesses owned by
minorities and women are provided ``the opportunity to participate in
the provision of spectrum-based services.'' \58\ Although Adarand did
not address gender-based preferences, we
[[Page 43752]]
have included them here in an effort to seek the broadest possible
comment. We welcome comment as to the appropriateness of our approach.
Accordingly, we seek comment on how we can best promote opportunities
for businesses owned by minorities and women in the provision of LMDS
and satellite services in light of Adarand. We seek the broadest
possible comments including, but not limited to, responses to the
following questions:
\58\ 47 U.S.C. 309(j)(4)(D).
---------------------------------------------------------------------------
(1) Does the Commission have a compelling interest in establishing
opportunity-enhancing measures in the provision of LMDS and satellite
services specifically for minority-and women-owned businesses? If so,
what is that compelling interest? Would the goal of assuring a
``diversity of voices'' in the provision of LMDS and satellite
services? suffice as a compelling interest? \59\
\59\ We suggest ``diversity of voices'' as a possible compelling
interest because LMDS is likely to be used as a ``medium of mass
communication'' similar to other multipoint distribution services.
See 47 U.S.C. 309(i)(3)(C)(i). In Metro Broadcasting v. F.C.C., the
Supreme Court upheld the Commission's minority preference programs
in the awarding of broadcast licenses because they served the
``important'' governmental interest of promoting diversity in
broadcast programming. Metro Broadcasting v. F.C.C., 497 U.S. 547,
566-68 (1990). While Adarand overrules Metro, to the extent that
Metro applied ``Intermediate scrutiny,'' Adarand did not reject the
diversity interest; rather, it simply held that the diversity
interest must be ``compelling.''
---------------------------------------------------------------------------
(2) What evidence (statistical, documentary, anecdotal or
otherwise) can be marshalled to support the proposed compelling
interest?
(3) What techniques could the Commission employ that would be
narrowly tailored to further the proposed compelling interest? Would
such techniques include bidding credits and installment payments? Are
race-conscious or gender-conscious measures necessary, or are there
race-or gender-neutral measures that would be effective?
Commenters are encouraged to provide the Commission as much evidence as
possible with regard to past discrimination, continuing discrimination,
discrimination in access to capital, underrepresentation and other
significant barriers facing businesses owned by minorities and women in
satellite services, services similar to LMDS, and in licensed
communications services generally.
In the Competitive Bidding docket, we established eligibility
criteria and general rules that would govern the award of special
provisions for small businesses, rural telephone companies, and
minority-and women-owned businesses (collectively, ``designated
entities''). We also established a menu of possible special provisions
that could be awarded to designated entities in particular services,
including installment payments, spectrum set-asides, bidding credits,
and tax certificates.\60\ In addition, we set forth rules to prevent
unjust enrichment by designated entities seeking to transfer licenses
obtained through use of one of these special provisions.
\60\ Congress has now repealed the tax credit program in the
Communications Act, except with respect to fixed microwave licenses
not at issue here. 109 Stat. 93 (195), Pub. L. 104-7, April 11,
1995.
---------------------------------------------------------------------------
In keeping with the general parameters set forth in the Competitive
Bidding docket, we propose specific measures and eligibility criteria
for designated entities who seek to obtain spectrum to provide LMDS and
satellite services, designed to ensure that such entities are given the
opportunity to participate both in the competitive bidding process and
in the provision of these services. We seek comment on these proposals,
and specifically on identifying special provisions that are tailored to
the unique characteristics of the LMDS and satellite services and that
will create meaningful incentives and opportunities for designated
entities.
(b) Installment Payments
We propose to adopt installment payments for small businesses
bidding for LMDS licenses. The record in the Competitive Bidding
proceeding suggests that the most significant barrier for small
business participation in the auctioning of LMDS spectrum will be
access to adequate private financing to ensure their ability to compete
against larger firms in the competitive bidding process. In the
competitive Bidding Second Report and Order, we concluded that a
reduced down payment requirement coupled with installment payments is
an effective means to address the inability of small businesses bidding
for PCS licenses. We seek comment on our proposal to use this same
approach in the LMDS auctions, and on whether any additional or
alternative special provisions should be provided for small businesses
bidding on LMDS spectrum. We also seek comment on whether installment
payments are appropriate to encourage small businesses participation in
the provision of satellite services.
To ensure that large businesses do not become the unintended
beneficiaries of installment payment provisions meant for small
businesses, we also propose to make the unjust enrichment provisions
adopted in the Competitive Bidding Second Report and Order applicable
to installment payments by small business applicants. Specifically, if
a small business making installment payments seeks to transfer a
license to a non-small business entity during the term of the license,
we propose to require payment of the remaining principle balance and
accrued interest as a condition of the license transfer. We seek
comment on this proposal including whether additional unjust enrichment
provisions are necessary for LMDS licensing. We also see comment on
whether these unjust enrichments would be appropriate if installment
payments are also adopted for small businesses participating in
satellite auctions.
Eligibility Criteria. We propose to define a small business as an
entity that, together with affiliates and attributable investors, has
average gross revenues for the three preceding years of less than $40
million. We believe this standard is appropriate for LMDS service
because build-out costs are likely to be significant. Additionally, the
cost of acquiring a license is likely to be higher than for other
services. We also seek comment on whether this definition is
appropriate for small businesses in the context of satellite auctions.
Commenters should address whether this is an appropriate threshold
given the expected cost associated with the provision of LMDS and
satellite services. Should it be higher or lower, based on the types of
companies that are likely to benefit from the special provisions
proposed here? We also propose not to attribute the gross revenues of
investors that hold less than 25 percent interest in the applicant, but
we will include the gross revenues of the applicant's affiliates and
investors with ownership interests of 25 percent or more in the
applicant in determining whether an applicant qualifies as a small
business. Is a different attribution threshold warranted for LMDS or
for satellite services? We seek comment on these issues.
(c) Bidding Credits
Specific Special Provisions. Based on the list of special
provisions for designated entities established in the Competitive
Bidding Second Report and Order, we propose to utilize bidding credits
for small businesses participating in LMDS or FSS auctions. We
tentatively conclude that affording such businesses bidding credits and
installment payments is the most cost-effective and efficient means of
achieving Congress' objective of ensuring an opportunity for these
designated entities to participate in the provision of LMDS service,
while preserving the advantages of
[[Page 43753]]
competitive open bidding. We seek comment on this proposal.
We request comment on how we should determine the appropriate
amount of the bidding credit. Our analysis of the telecommunications
industry suggests the possibility that incumbent telecommunications
providers may be able to utilize existing infrastructure and thus enjoy
economies of scope in the provision of many of the services that may
develop in LMDS. Therefore, these incumbents may have the ability to
bid more than first-time operators.
We propose a bidding credit of 25 percent that would be available
on one of the proposed spectrum blocks. We seek comment on the
appropriateness of the proposed bidding credits for LMDS and FSS
auctions.
To prevent unjust enrichment by small businesses trafficking in
licenses acquired through the use of bidding credits, we propose
imposition of a payment requirement on transfers of such licenses to
entities that are not owned by small businesses. Small businesses
seeking to transfer a license to an entity that does not meet the
eligibility criteria for a small business would be required to
reimburse the Government for the amount of the bidding credit, plus
interest at the rate imposed for installment financing at the time the
license was awarded, before the transfer will be permitted. The amount
of the penalty would be reduced over time so that a transfer in the
first two years of the license term would result in a payment of 100
percent of the value of the bidding credit; in year three of the
license term the payment would be 75 percent; in year four the penalty
would be 50 percent and in year five the payment would be 25 percent,
after which there would be no payment. We seek comment on these
proposals.
(d) Rural Telephone Companies
We seek comment on whether we should provide bidding credits or
other special provisions for rural telephone companies. In addition,
the vast majority of rural telephone companies will qualify as small
businesses and thus will receive installment payment options. Because
many of the specific uses proposed for LMDS, including wireless cable
and video telecommunications, may be of interest to rural telephone
companies, such entities may be interested in bidding for LMDS
spectrum. However, we are unable to determine with any certainty the
potential prices these services may bring in rural areas. If service
prices in such areas are low, acquiring a license should not present
significant barriers to rural telephone companies. Also, under one
possible approach, the degree of flexibility we would afford in the use
of this spectrum, including provisions for partitioning or leasing
spectrum, should assist in satisfying the spectrum needs of rural
telephone companies at low cost. Finally, as with other incumbent
providers of telecommunications services, rural telephone companies may
be able to benefit from the use of their existing infrastructure in the
provision of some services. Such economies of scale would give rural
telephone companies an advantage in the bidding for such licenses. For
these reasons, we do not believe that special preferences are needed to
ensure adequate participation by rural telephone companies in the
provision of services in this spectrum. However, comments on this
analysis are requested.
(e) Additional Special Provisions
In addition to the special provisions proposed above for the
various classes of designated entities, we seek comment on whether
additional special provisions should be adopted that would enhance our
goal of ensuring their participation in the competitive bidding process
for LMDS and satellite licenses. We request that commenters give
particular attention to the alternatives described below.
Reduced Upfront Payments. In the Competitive Bidding Second Report
and Order, we concluded that upfront payment requirements would ensure
that bidders are qualified and serious and would provide the Commission
with a source of funds in the event of default or bid withdrawal. 9 FCC
Rcd at 2377, 2379, paras. 169, 176. We also noted that reduced upfront
payments may be particularly appropriate for auctions of spectrum
specifically set aside for designated entities as a means of
encouraging participation in the auctions, particularly by all eligible
designated entities.\61\ We seek comment on whether there should be a
similar reduction in upfront payments for small businesses or any other
designated entities applying for LMDS or satellite licenses. In
addition, we ask commenters to address the costs and benefits with
respect to auction administration and designated entity participation
associated with a reduced upfront payment for licenses in LMDS or
satellite services in the absence of a spectrum set-aside.
\61\ Competitive Bidding Fifth Report and Order, 9 FCC Rcd at
5599-5600, para. 154.
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Comment Dates
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 August 28, 1995, and reply
comments on or before September 18, 1995. To file formally in this
proceeding, you must file an original and five 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 Dockets Reference Room
of the Federal Communications Commission, 1919 M Street, NW.,
Washington, DC 20554.
Initial Regulatory Flexibility Analysis
Reason for action. The purposes of this NPRM are four-fold; first,
to obtain comment on the Commission's designation proposal for the
27.5-29.5 GHz frequency band; second, to obtain comment on the
Commission's proposal for a reallocation pertaining to the 29.5-30.0
GHz frequency band; third, to obtain comment on proposed service rules
for LMDS and FSS; and fourth, to obtain comment on the Commission's
supplemental tentative decision to grant CellularVision a Pioneer's
Preference.
Objectives. The objective of this Notice is to request public
comment on the proposals made herein for the efficient licensing of
services in the 27.5-30.0 GHz band, for the development and
implementation of a new technology to provide innovative
telecommunications services to the public.
Legal basis. The authority for this action is the Administrative
Procedure Act, 5 U.S.C. 553; and sections 4(i), 4(j), 301, 303(r) of
the Communications Act of 1934 as amended, 47 U.S.C. 145, 301, and
303(r).
Reporting, recordkeeping and other compliance requirements.
Reporting requirements are proposed to ensure that the spectrum, if
redesignated for these new uses, is used to serve the public's need for
communications services.
Federal rules which overlap, duplicate or conflict with these
rules. None.
Description, potential impact and number of small entities
involved. Any rule changes in this proceeding could
[[Page 43754]]
affect MMDS licensees, the majority of which are small businesses.
These entities may have some additional competition from video
programming service which could be provided by Suite 12's multicell
technology. In addition, rule changes could affect rural telephone
companies, to the extent that any are considered small businesses.
These entities may have competition to their local exchange service;
alternatively, these entities may be considered designated entities and
given bidding and other benefits. After evaluating the comments in this
proceeding, the Commission will further examine the impact of any rule
changes on small entities and set forth our findings in the Final
Regulatory Flexibility Analysis.
Significant Alternatives. While there are alternative methods to
provide the services proposed by LMDS and FSS parties, we find that the
services proposed will provide significant competition to existing
service providers, thus bringing the benefits of competition to the
public.
Ordering Clauses
According, it is ordered that the Notice of Proposed Rulemaking is
hereby adopted with proposed rules below.
It is further ordered that the Petition for Rulemaking filed by
Harris Corporation-Farinon Division and Digital Equipment Company is
denied.
It is further ordered that CellularVision, the successor-in-
interest to Suite 12 Group, is tentatively granted a pioneer's
preference in accordance with the discussion in paragraphs 68-73 of
this Supplemental Tentative Decision.
It is further ordered that the Acting Secretary shall mail a copy
of this document to the Chief Counsel for Advocacy, Small Business
Administration.
List of Subjects
47 CFR Part 21
Communications common carriers, Radio.
47 CFR Part 25
Satellites.
Federal Communications Commission.
LaVera F. Marshall,
Acting Secretary.
Proposed Amendatory Text
47 CFR Parts 21 and 25 are proposed to be amended as follows:
PART 21--DOMESTIC PUBLIC FIXED RADIO SERVICES
1. The authority citation for part 21 continues to read as follows:
Authority: Secs. 1, 2, 4, 201-205, 208, 215, 218, 303, 307, 313,
403, 404, 410, 602, 48 Stat. as amended, 1064, 1066, 1070-1073,
1077, 1080, 1082, 1083, 1087, 1094, 1098, 1102; 47 U.S.C. 151, 154,
201-205, 208, 215, 218, 303, 307, 313, 314, 403, 404, 602,: 47
U.S.C. 552,554.
2. Section 21.2 is proposed to be amended by adding the following
definitions, in alphabetical order, to read as follows:
* * * * *
Sec. 21.2 Definitions.
* * * * *
Local Multipoint Distribution Service Hub Station. A fixed point-
to-multipoint radio station in a Local Multipoint Distribution Service
System that provides one-way or two-way communication with Local
Multipoint Distribution Service Subscriber Stations.
* * * * *
Local Multipoint Distribution Service System. A fixed point-to-
multipoint radio system consisting of Local Multipoint Distribution
Service Hub Stations and their associated Local Multipoint Distribution
Service Subscriber Stations.
* * * * *
Local Multipoint Distribution Service Subscriber Station. Any one
of the fixed microwave radio stations located at users' premises, lying
within the coverage area of a Local Multipoint Distribution Service Hub
Station, capable of receiving one-way communications from or providing
two-way communications with the Local Multipoint Distribution Service
Hub Station.
* * * * *
Local Multipoint Distribution Service Backbone Link. A point-to-
point radio service link in a Local Multipoint Distribution Service
System that is used to interconnect Local Multipoint Distribution
Service Hub Stations with each other or with the public switched
telephone network.
* * * * *
3. Section 21.107(b) is amended by removing the entry for the
frequency band 27,500 MHz to 29,500 MHz, and adding new entires 27,500
MHz to 28,350 MHz and 29,100 MHz to 29,250 MHz to read as follows:
Sec. 21.107 Transmitter power.
* * * * *
(b) * * *
----------------------------------------------------------------------------------------------------------------
Maximum allowable transmitter Maximum allowable EIRP
power -------------------------------
Frequency band (MHz) --------------------------------
Fixed (W) Mobile (W) Fixed (dBW) Mobile (dBW)
----------------------------------------------------------------------------------------------------------------
* * * * * *
*
27,500 MHz to 28,350 MHz........................ .............. .............. -52 dBW/Hz ..............
29,100 MHz to 29,250 MHz........................ .............. .............. (5) ..............
----------------------------------------------------------------------------------------------------------------
\5\ This value is based on the value in Secs. 21.1018-21.1021.
* * * * *
4. Section 21.1002 (proposed at 58 FR 6378, Jan. 28, 1993), is
amended by adding new paragraph (c) to read as follows:
Sec. 21.1002 Frequencies.
* * * * *
(c) Special requirements for operations in the band 29.1-29.25 GHz.
(1)(i) LMDS receive stations operating on frequencies in the 29.1-
29.25 GHz band within a radius of 75 nautical miles of the geographic
coordinates provided by a non-GSO MSS licensee pursuant to paragraphs
(c)(2) or (c)(3)(i) of this section (the ``feeder link earth station
complex protection zone'') shall accept any interference caused to them
by such earth station complexes and shall not claim protection from
such earth station complexes.
(ii) LMDS licensees operating on frequencies in the 29.1-29.25 GHz
band outside a feeder link earth station complex protection zone shall
cooperate fully and make reasonable efforts to resolve technical
problems with the non-GSO MSS licensee to the extent that transmissions
from the non-GSO MSS operator's feeder link earth station complex
interfere with an LMDS receive station.
(2) At least 45 days prior to the commencement of LMDS auctions,
feeder link earth station complexes shall
[[Page 43755]]
be specified by a set of geographic coordinates in accordance with the
following requirements: No feeder link earth station complex may be
located in the top eight (8) metropolitan statistical areas (``MSAs''),
ranked by population, as defined by the Office of Management and Budget
as of June 1993, using estimated populations as of December 1992; two
(2) complexes may be located in MSAs 9 through 25, one of which must be
Phoenix, AZ (for a complex at Chandler, AZ); one (1) complex may be
located in MSAs 26 to 50; three (3) complexes may be located in MSAs 51
to 100, one of which must be Honolulu, Hawaii (for a complex at
Waimea); and the two (2) remaining complexes must be located at least
75 nautical miles from the borders of the 100 largest MSAs or in any
MSA not included in the 100 largest MSAs. Any location allotted for one
range of MSAs may be taken from an MSA below that range.
(3)(i) Any non-GSO MSS licensee may at any time specify sets of
geographic coordinates for feeder link earth station complexes with
each earth station contained therein to be located at least 75 nautical
miles from the borders of the 100 largest MSAs.
(ii) For purposes of paragraph (c)(3)(i) of this section, non-GSO
MSS feeder link earth station complexes shall be entitled to
accommodation only if the affected non-GSO MSS licensee reapplies to
the Commission for a feeder link earth station complex or certifies to
the Commission within sixty days of receiving a copy of an LMDS
application that it intends to file an application for a feeder link
earth station complex within six months of the date of receipt of the
LMDS application.
(iii) If said non-GSO MSS licensee application is filed later than
six months after certification to the Commission, the LMDS and non-GSO
MSS entities shall still cooperate fully and make reasonable efforts to
resolve technical problems, but the LMDS licensee shall not be
obligated to re-engineer its proposal or make changes to its system.
(4) LMDS licensees or applicants proposing to operate hub stations
on frequencies in the 29.1-29.25 GHz band at locations outside of the
100 largest MSAs or within a distance of 150 nautical miles from a set
of geographic coordinates specified under paragraphs (c)(2) or
(c)(3)(i) of this section shall serve copies of their applications on
all non-GSO MSS applicants, permittees or licensees meeting the
criteria specified in Sec. 25.257(a). Non-GSO MSS licensees or
applicants shall serve copies of their feeder link earth station
applications on any LMDS applicant or licensee within a distance of 150
nautical miles from the geographic coordinates that it specified under
paragraphs (c)(2) or (c)(3)(i) of this section. Any necessary
coordination shall commence upon notification by the party receiving an
application to the party who filed the application. The results of any
such coordination shall be reported to the Commission within sixty
days. The non-GSO MSS earth station licensee shall also provide all
such LMDS licensees with a copy of its channel plan.
5. A new Sec. 21.1018 is proposed to be added to read as follows:
Sec. 21.1018 LMDS single station EIRP limit.
Point-to-point stations in the 29.1-29.5 GHz band for the LMDS
backbone between LMDS hubs shall be limited to a maximum allowable EIRP
density per carrier of 23 dBW/MHz in any one megahertz in clear air,
and may exceed this limit by employment of adaptive power control in
cases where link propagation attenuation exceeds the clear air value
due to precipitation and only to the extent that the link is impaired.
6. A new Sec. 21.1019 is proposed to be added to read as follows:
Sec. 21.1019 LMDS subscriber transmissions.
LMDS licensees shall not operate transmitters from subscriber
locations in the 29.1-29.25 GHz band.
7. A new Sec. 21.1020 is proposed to be added to read as follows:
Sec. 21.1020 Hub transmitter EIRP spectral area density limit.
(a) LMDS applicants shall demonstrate that, under clear air
operating conditions, the maximum aggregate of LMDS transmitting hub
stations in a Basic Trading Area in the 29.1-29.25 GHz band will not
transmit a co-frequency hub-to-subscriber EIRP spectral area density in
any azimuthal direction in excess of X dBW/(MHz-km2) when averaged
over any 4.375 MHz band, where X is defined in Table 1. Individual hub
stations may exceed their clear air EIRPs by employment of adaptive
power control in cases where link propagation attenuation exceeds the
clear air value and only to the extent that the link is impaired.
(b) The EIRP aggregate spectral area density is calculated as
follows:
[GRAPHIC][TIFF OMITTED]TP23AU95.022
Where:
N=number of co-frequency hubs in BTA
A=Area of BTA in km2
pi=spectral power density into antenna of i-th hub (in W/MHz)
gi=gain of i-th hub antenna at zero degree elevation angle
Each pi and gi are in the same 1 MHz
(c) The climate zones in Table 1 are defined for different
geographic locations within the US as shown in Appendix 28 of the ITU
Radio Regulations and Sec. 25.254 of this chapter.
Table 1*
------------------------------------------------------------------------
EIRP
spectral
density
Climate zone (clear
air) (dbW/
MHz-
km\2\)**
------------------------------------------------------------------------
1............................................................ -23
2............................................................ -25
3,4,5........................................................ -26
------------------------------------------------------------------------
*LMDS system licensees in two or more BTAs may individually or
collectively deviate from the spectral area density computed above by
averaging the power over any 200 km by 400 km area, provided that the
aggregate interference to the satellite receiver is no greater than if
the spectral area density were as specified in Table 1. A showing to
the Commission comparing both methods of computation is required and
copies shall be served on any affected non-GSO MSS providers.
**See Sec. 21.1007(c)(i) for the population density of the BTA.
8. A new Sec. 21.1021 is proposed to be added to read as follows:
Sec. 21.1021 Hub transmitter EIRP spectral area density limit at
elevation angles above the horizon.
(a) LMDS applicants shall demonstrate that, under clear air
operating conditions, the maximum aggregate of LMDS transmitting hub
stations in a Basic Trading Area in the 29.1-29.25 GHz band will not
transmit a co-frequency hub-to-subscriber EIRP spectral area density in
any azimuthal direction in excess of X dBW/(MHz-km\2\) when averaged
over any 5.375 MHz band where X is defined in Table 2. Individual hub
stations may exceed their clear air EIRPs by employment of adaptive
power control in cases where link propagation attenuation exceeds the
clear air value and only to the extent that the link is impaired.
(b) The EIRP aggregate spectral area density is calculated as
follows:
[GRAPHIC][TIFF OMITTED]TP23AU95.023
Where:
N=number of co-frequency hubs in BTA
A=Area of BTA in km\2\
EIRP(a1)=equivalent isoptropic radiated spectral power density of
the i-th hub (in W/MHz) at elevation angle a
[[Page 43756]]
Table 2*
------------------------------------------------------------------------
Elevation
angle (a) Relative EIRP density (dBW/MHz-km\2\)
------------------------------------------------------------------------
0 deg.x)(1/x)
-a4.0*.
Where x=(a+1)/7.5 deg.
4.0<>7.7 deg.... EIRP(a)=EIRP(0 deg.)-22
------------------------------------------------------------------------
* LMDS system licensees in two or more BTAs may individually or
collectively deviate from the spectral area density computed above by
averaging the power over any 200 km by 400 km area, provided that the
aggregate interference to the satellite receiver is no greater than if
the spectral area density were as specified in Table 1. A showing to
the Commission comparing both methods of computation is required and
copies shall be served on any affected non-GSO MSS providers.
Note: Where a is the angle in degrees of elevation above horizon. EIRP(0
deg.) is the hub EIRP area density at the horizon used in Section
21.1020. The nominal antenna pattern will be used for elevation angles
between 0 deg. and 8 deg., and average levels will be used for angles
beyond 8 deg., where average levels will be calculated by sampling the
antenna patterns in each 1 deg. interval between 8 deg. and 90 deg.,
dividing by 83.
9. A new Sec. 21.1022 is proposed to be added to read as follows:
Sec. 21.1022 Power reduction techniques.
LMDS hub transmitters shall employ methods to reduce average power
levels received by non-GSO MSS satellite receivers, to the extent
necessary to comply with Secs. 21.1020 and 21.1021, by employing the
methods set forth below:
(a) Alternate Polarizations. LMDS hub transmitters in the LMDS
service area may employ both vertical and horizontal linear
polarizations such that 50 percent (plus or minus 10 percent) of the
hub transmitters shall employ vertical polarization and 50 percent
(plus or minus 10 percent) shall employ horizontal polarization.
(b) Frequency Interleaving. LMDS hub transmitters in the LMDS
service area may employ frequency interleaving such that 50 percent
(plus or minus 10 percent) of the hub transmitters shall employ channel
center frequencies which are different by one-half the channel
bandwidth of the other 50 percent (plus or minus 10 percent) of the hub
transmitters.
(c) Alternative Methods. As alternatives to paragraphs (a) and (b)
of this section, LMDS operators may employ such other methods as may be
shown to achieve equivalent reductions in average power density
received by non-GSO MSS satellite receivers.
PART 25--SATELLITE COMMUNICATIONS
1. The authority citation for part 25 continues to read as follows:
Authority: Secs. 25.101 to 25.601 issued under sec. 4, 48 Stat.
1066, as amended; 47 U.S.C. 154. Interpret or apply secs. 101-104,
76 stat. 419-427; 47 U.S.C. 701-744; 47 U.S.C. 554.
2. A new Sec. 25.257 is proposed to be added to read as follows:
Sec. 25.257 Special requirements for operations in the band 29.1-29.25
GHz
(a) Special requirements for operations in the band 29.1-29.25 GHz.
(1) Non-geostationary mobile satellite service (non-GSO MSS)
operators shall use the 29.1-29.25 GHz band for Earth-to-space
transmissions from feeder link earth station complexes. For purposes of
this subsection, a ``feeder link earth station complex'' may include up
to three (3) earth station groups, with each earth station group having
up to four (4) antennas, located within a radius of 75 nautical miles
of a given set of geographic coordinates provided by a non-GSO MSS
operator pursuant to paragraphs (c)(5) or (c)(6)(i) of this section.
(2) A maximum of eight (8) feeder link earth station complexes in
the contiguous United States, Alaska, and Hawaii may be operated
concurrently in the band 29.1-29.25 GHz.
(b) Coordination of LMDS systems and geostationary fixed satellite
systems in the band 29.1-29.25 must be done in accordance with the
technical standards of Secs. 21.1018-21.1024 of this chapter.
[FR Doc. 95-20731 Filed 8-22-95; 8:45 am]
BILLING CODE 6712-01-M
