[Federal Register Volume 60, Number 183 (Thursday, September 21, 1995)]
[Rules and Regulations]
[Pages 48912-48923]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 95-23407]



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[[Page 48913]]



FEDERAL COMMUNICATIONS COMMISSION
47 CFR Part 90

[PR Docket No. 89-553, PP Docket No. 93-253, GN Docket No. 93-252; FCC 
95-395]


SMR Systems in the 900 MHz Frequency Band

AGENCY: Federal Communications Commission.

ACTION: Final rule.

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SUMMARY: The Commission adopted a Second Order on Reconsideration and 
Seventh Report and Order, implementing final auction rules for the 900 
MHz Specialized Mobile Radio (SMR) service. The Second Order on 
Reconsideration addresses reconsideration petitions concerning the 
service rule adopted in the Second Report and Order and Second Further 
Notice of Proposed Rule Making. The Seventh Report and Order sets forth 
the rules and procedures governing the 900 MHz SMR auction, including 
reduced down payments, bidding credits and installment payment plans 
for small businesses and partitioning for rural telephone companies. 
The intended effect of this action is to facilitate the development of 
SMR services and to promote competition in the wireless marketplace.

EFFECTIVE DATE: October 23, 1995.

FOR FURTHER INFORMATION CONTACT: Amy Zoslov (202) 418-0660. Wireless 
Telecommunications Bureau or Diane Law (202) 418-0660. Wireless 
Telecommunications Bureau.

SUPPLEMENTARY INFORMATION: This is a synopsis of the Second Order on 
Reconsideration and the Seventh Report and Order, released September 
14, 1995. The complete text of this Second Order on Reconsideration and 
Seventh Report and Order is available for inspection and copying during 
normal business hours in the FCC Dockets Branch, Room 239, 1919 M 
Street, N.W., Washington, D.C., and also may be purchased from the 
Commission's copy contractor, International Transcription Service, at 
(202) 857-3800, 2100 M Street, N.W., Suite 140, Washington, D.C. 20037.

Synopsis of the Second Order on Reconsideration and Seventh Report and 
Order

Adopted: September 14, 1995
Released: September 14, 1995

I. Background

    When the Commission established the 900 MHz SMR service in 1986, it 
elected to use a two-phase licensing process. In Phase I, licenses were 
assigned in 46 ``Designated Filing Areas'' (DFAs) comprised of the top 
50 markets. Phase II licensing, for facilities outside the DFAs, was 
frozen after 1986, when the Commission opened its filing window for the 
DFAs. In 1989, the Commission adopted a Notice of Proposed Rule Making 
in PR Docket 89-533, 55 FR 744 (Jan. 9, 1990), proposing to begin Phase 
II licensing of 900 MHz SMR facilities nationwide. In 1993, the 
Commission adopted a First Report & Order and Further Notice of 
Proposed Rule Making in PR Docket 89-553, 58 FR 12176 (March 3, 1993), 
modifying its Phase II proposal and seeking comment on whether to 
license the 900 MHz SMR band to a combination of nationwide, regional, 
and local systems. Shortly thereafter, Congress amended the 
Communications Act to reclassify most SMR licensees as Commercial 
Mobile Radio Service (CMRS) providers and establish the authority to 
use competitive bidding to select from among mutually exclusive 
applicants for certain licensed services. The Commission deferred 
further consideration of Phase II and incorporated the 900 MHz docket 
into its CMRS proceeding.
    In the CMRS Third Report & Order, PR Docket 89-553, 59 FR 59945 
(Nov. 21, 1994), the Commission further revised its Phase II proposals 
and established the broad outlines for the completion of licensing in 
the 900 MHz SMR band. The Commission left the adoption of specific 
auction and service rules for the Phase II Order which the Commission 
adopted in the Second Report and Order and Second Further Notice, PR 
Docket 89-553, GN Docket No. 93-252, PP Docket No. 93-253, FCC 95-159, 
60 FR 21987 and 60 FR 22023 (May 4, 1995), (Second R&O & Second Further 
Notice). In that proceeding, the Commission adopted final service 
rules, established technical and operational rules for the new MTA 
licensees, defined the rights of incumbent SMR licensees already 
operating in the 900 MHz band, and requested comment on proposed 
auction rules. The 900 MHz SMR band will be divided into 20 ten-channel 
blocks in each of 51 service areas based on Major Trading Areas (MTAs), 
which match the blocks previously licensed for the DFAs. Each MTA 
license will give the licensee the right to operate throughout the MTA 
on the designated channels except where a co-channel incumbent licensee 
already is operating. MTA licensees will be allowed to aggregate 
multiple blocks within an MTA and to aggregate blocks geographically in 
multiple MTAs. The Commission also addressed issues raised on 
reconsideration of the CMRS Third Report & Order pertaining 
specifically to the 900 MHz SMR service. The Commission set forth 
proposals for new licensing rules and auction procedures for the 
service, including provisions for designated entities. The Commission 
later issued a Public Notice requesting further comment on the impact 
of the Supreme Court's subsequent decision in Adarand Constructors, Inc 
v. Pena, 115 S.Ct. 2097 (1995), on the proposed treatment of designed 
entities.
    In this Second Order on Reconsideration & Seventh Report & Order 
the Commission affirms the coverage requirements for MTA licensees and 
the interference protections and loading requirements for incumbents, 
and clarifies secondary site licensing, finders' preference and foreign 
ownership waiver policies. The Order also adopts auction rules, 
including a tiered bidding credit and enhanced installment payment 
plans for small businesses and partitioning for rural telephone 
companies.

II. Second Order on Reconsideration

A. Service Rules

Coverage Requirements
    As decided in the Second R&O & Second Further Notice, MTA licensees 
in this service will be required to meet coverage requirements of \1/3\ 
of the population in the service area within three years of the initial 
license grant and \2/3\ of the population within five years. 
Alternatively, a licensee may make a showing at five years that it is 
providing ``substantial service.'' The Commission denies 
reconsideration of these benchmarks, and reiterates that MTA licensees 
must satisfy these requirements regardless of the area or percentage of 
the MTA population that is served by incumbent licensees. MTA licensees 
may consider options such as resale or management agreements to fulfill 
the coverage requirements.
Treatment of Incumbents
    To ensure that incumbent licensees receive protection from 
interference by MTA licensees, Second R&O & Second Further Notice 
provides that MTA licensees either must maintain a minimum 113 
kilometer (70 mile) geographic separation or comply with the 
Commission's short-spacing rules with respect to all incumbent 
facilities in their service area or in adjacent MTAs. The Commission 
affirms its intention to allow MTA licensees to use short-spacing rules 
to comply with interference protection standards, and does not believe 
it will result in a plethora of interference disputes at the 
Commission. The Commission also 

[[Page 48914]]
affirms its adoption of the 40 dBu signal strength contour as the 
protected service area in which incumbents may modify or add 
facilities, and reject petitioners' requests to use the 22 dBu contour 
instead.
    The Commission will allow incumbents to have their licenses 
reissued if they are not the successful bidder for the MTA in which 
they are currently operating. This procedure, which would be granted 
post-auction upon the request of the incumbent, would essentially 
convert their current site licenses to a single ``partitioned'' 
license, authorizing operations throughout the contiguous and 
overlapping 40 dBu signal strength contours of the multiple sites. All 
incumbents with reissued ``partitioned'' licenses will have to make a 
one-time filing of specific information for each of their external base 
sites that will assist the staff in updating the Commission's database 
after the close of the 900 MHz SMR auction. Incumbents cannot expand 
their 40 dBu signal strength contour, so they may make additions or 
modifications to their facilities without notifying the Commission. If 
incumbents seek to gain additional geographic coverage beyond the 40 
dBu protected contour, they must apply for the MTA license.
Secondary Site Licensing/Finders' Preference
    As decided in the Second R&O & Second Further Notice, no secondary 
site licenses will be granted once an MTA licensee has been selected. 
The Commission states that it is important to assure potential MTA 
bidders that the spectrum upon which they are bidding will not become 
subsequently encumbered with secondary sites. The Commission clarifies 
that all pending finders' preference requests for 900 MHz SMR licenses 
will be processed, but eliminates future finders' preferences for the 
900 MHz SMR service. As provided by the rules, any stations licensed to 
incumbents that are not constructed or placed in operation will revert 
automatically to the MTA licensee for that channel block.
Loading Requirements
    The Commission denies further reconsideration of its decisions in 
the CMRS Third Report & Order and the Second R&O & Second Further 
Notice with respect to loading requirements in the 900 MHz service, as 
petitioners have raised no new arguments that would merit 
reconsideration. Consequently, incumbent 900 MHz SMR licensees will 
continue to be subject to loading requirements, although they are 
eliminated for MTA licensees. However, temporary relief of the loading 
rules may be available if the incumbent's unique circumstances warrant 
a waiver of the rules.
Discontinuance of Operation
    The Commission clarifies that the amended rule regarding 
discontinuance of operation (Section 90.631(f)), which provides that 
stations taken out of service for 90 consecutive days are considered 
permanently discontinued, applies only to stations that were taken out 
of service after June 5, 1995 (the effective date of the rule). The 
former rule provided that stations taken out of service for 12 months 
were considered permanently discontinued. Consequently, stations that 
were taken out of service prior to June 5, 1995, are entitled to stay 
out of service for the remainder of the original 12 months provided in 
the former rule, before they will be considered permanently 
discontinued. Those stations taken out of service on or after June 5, 
1995, will be considered permanently discontinued after 90 days. With 
regard to wide-area SMR licensees that are replacing high power analog 
sites with low power digital sites, however, the Commission will deem 
all the base stations ``in operation'' if the system meets the 
standards and conditions set out in Fleet Call, Inc., Memorandum 
Opinion and Order, 6 FCC Rcd 1533 (1991), recon. dismissed, 6 FCC Rcd 
6989 (1991). In Fleet Call, the Commission found that conversion from 
Fleet Call's existing base stations with aggregate loading from single 
high-power sites to multiple low-power sites on an integrated basis in 
six major markets would increase spectrum efficiency without posing a 
risk of spectrum warehousing.
Foreign Ownership Waivers
    In Section 332(c)(6) of the Communications Act, Congress 
reclassified certain categories of private land mobile radio providers 
(PLMRS) as commercial mobile radio service (CMRS) providers, and 
provided for their treatment as common carriers. As a result, 
reclassified providers are subject to the Section 310(b) foreign 
ownership restrictions. Congress provided for limited grandfathering of 
existing foreign interests in such licensees through a waiver petition 
process whereby any reclassified PLMRS licensee could petition the 
Commission by February 10, 1994 for waiver of the application of 
Section 310(b) to any foreign ownership that lawfully existed as of May 
24, 1993. In the Second R&O & Second Further Notice, the Commission 
decided to grandfather any timely-filed petitions for waiver of the 
foreign ownership restrictions filed by an incumbent in the event the 
incumbent wins the MTA license. In the Foreign Ownership Order, GN 
Docket 93-252, 60 FR 40177 (Aug. 7, 1995), the Wireless 
Telecommunications Bureau noted that the waivers apply to additional 
licenses granted to petitioners in the same service after May 24, 1993 
and prior to August 10, 1996, provided the same ownership structure is 
maintained. Thus, such entities may acquire other SMR licenses, 
including MTA licenses in which it is not the incumbent.

III. Seventh Report and Order

A. Auction Rules

    A total of 1,020 MTA licenses (51 MTAs times 20 licenses in each 
MTA) will be awarded in the 900 MHz SMR service. The Commission will 
use a single simultaneous multiple round auction to award these 
licenses, because the licenses are interdependent, and licensees likely 
will aggregate and/or substitute across spectrum blocks and geographic 
areas. Both incumbents and new entrants are eligible to bid for all MTA 
licenses, but winning bidders will be subject to the CMRS spectrum cap 
in 47 CFR 20.6. All applicants for MTA licenses are treated as initial 
applicants for Public Notice, application processing, and auction 
purposes. The Wireless Telecommunications Bureau will announce the time 
and place of the auction and provide additional information to bidders 
by future Public Notice.
    Applicants will apply for the 900 MHz SMR auction by filing a 
short-form application (FCC Form 175 and paying an upfront payment. The 
Commission adopts the standard upfront payment formula of $0.02 per 
pop-MHz, based on the number of 10-channel blocks in each MTA 
identified on the applicant's Form 175 and the total MTA population. 
The Wireless Telecommunications Bureau will announce, by Public Notice, 
the population calculation of each MTA, using a formula that takes into 
account incumbents within the MTA, and the upfront payment amount of 
each MTA. The Commission also adopts the Milgrom-Wilson activity rule 
used in previous multiple-round simultaneous auctions, which requires 
bidders to declare their maximum eligibility in terms of MHz-pops and 
limits them to bidding on licenses encompassing no more than the MHz-
pops covered by their upfront payment. Failure to maintain the 
requisite activity level will result in a reduction in the amount of 

[[Page 48915]]
MHz-pops upon which a bidder will be eligible to bid in the next round 
of bidding, unless an activity rule waiver is used. The Commission will 
provide bidders with five activity rule waivers which may be used in 
any round, but retains the discretion to issue additional waivers 
during the course of the auction.
    Each applicant will be required to specify on its Form 175 its 
classification, status as a designated entity (if applicable), markets 
and frequency blocks applied for, and persons authorized to place or 
withdraw bids. In the Order, the Commission modified the tables in 47 
CFR 90.617 and 90.619 to assign block letters to the former frequency 
block numbers. Applicants must identify any arrangements or agreements 
with other parties relating to the licenses that are being auctioned, 
and certify that there are no arrangements other than those specified. 
Applicants may correct minor defects in their short-form applications, 
prior to the auction, but may not make any major modifications to their 
applications, including license area changes, cognizable ownership 
changes or changes in the identification of parties to bidding 
consortia, until after the auction. Applicants may modify their short-
form applications to reflect formation of consortia or changes in 
ownership at any time before or during an auction, provided such 
changes do not result in a change in control of the applicant, and 
provided that the parties forming consortia or entering into ownership 
agreements have not applied for licenses in any of the same geographic 
license areas. In instances where only a single applicant has applied 
for a particular MTA channel block, the Commission will cancel the 
auction for that block and establish a deadline for filing of the 
applicant's long-form application. In all instances where mutually 
exclusive applications are filed, the MTA channel block will be 
included in the auction.
Bidding Issues
    Bidders will be able to submit bids on site, via personal computers 
using remote bidding software, or via telephone, but the Commission 
reserves the right to have only remote bidding--by personal computers 
and by telephone--for the 900 MHz SMR auction. The timing and duration 
of auction rounds would be determined by the Wireless 
Telecommunications Bureau and announced by Public Notice. As in prior 
auctions, the Commission expects to start the auction with relatively 
large bid increments and reduce increments as bidding activity falls. 
The Commission will use a simultaneous stopping rule for this auction 
to afford bidders flexibility to pursue back-up strategies to ensure 
that bidders will not hold back bids until the final round. During the 
auction, the Commission retains the discretion to declare that the 
auction will end after a specified number of additional rounds.
    The Commission will specify bid increments, i.e., 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 helps to ensure that 
the auction closes within a reasonable period of time and is expressed 
in both a percentage and fixed dollar amount. The Commission may impose 
a minimum bid increment of five percent or $0.02 per pop-MHz, whichever 
is greater, but also retains the discretion to set, and by announcement 
before or during the auction, vary the minimum bid increments for 
licenses over the course of an auction. Where a tie bid occurs, the 
Commission will determine the high bidder by the order in which the 
Commission receives the bids.
Withdrawal and Default
    The Commission will use the bid withdrawal and default rules for 
this auction similar to those used in prior auctions. Under these 
rules, any bidder that withdraws a high bid during an auction before 
the Commission declares bidding closed must reimburse the Commission 
for the difference between the amount of the ultimate winning bid and 
the withdrawn bid if the winning bid is lower than the withdrawn bid. 
An auction winner defaulting after the close of the auction will also 
have to pay the lesser of three percent of the subsequent winning bid 
or three percent of the amount of the defaulting bid. In the event that 
an auction winner defaults, is disqualified, or if the license is 
revoked or terminated, the Commission will re-auction the license, 
except that the Commission may offer the license to the second highest 
bidder if the default occurs within five days after the auction closes.
Down Payment and Final Payment
    At the conclusion of the auction, winning bidders must supplement 
their upfront payments and file their long-form applications (FCC Form 
600). The upfront payment must be supplemented in an amount sufficient 
to bring the winning bidder's deposit up to 20 percent of its winning 
bid within five days after the close of the auction. Small businesses 
eligible for installment payments, however, must bring their deposits 
up to five percent of the winning bid within five days after the close 
of the auction. Once each applicant has filed its long form and 
submitted its down payment, the Wireless Telecommunications Bureau will 
issue a Public Notice announcing the application's acceptance for 
filing and open a 30-day window for filing petitions to deny. Excluding 
designated entities eligible for installment payments, payment of the 
remaining balance due on the license must be paid within five business 
days following a Pubic Notice announcing that the Commission is 
prepared to award the license.
Rules Prohibiting Collusion and Transfer Requirements
    The 900 MHz SMR auction will be subject to the same regulatory 
safeguards as prior auctions to prevent applicants from colluding 
during the auction or obtaining unjust enrichment from subsequent 
transfer of the license. To prevent collusion, bidders who have applied 
for licenses in the same MTA on their short-form applications may not 
cooperate, collaborate, discuss, or disclose the substance of their 
bids or strategies with other bidders during the auction except 
pursuant to a consortium or arrangement identified in the short-form 
application. Bidders must also attach an exhibit to the Form 600 
explaining the terms, conditions, and parties involved in any bidding 
arrangement. With respect to transfers, licensees transferring their 
licenses within three years of the initial license grant must disclose 
to the Commission all contracts and other documentation associated with 
the transfer.

B. Designated Entities

Background
    Section 309(j)(3)(B) of the Communications Act provides that in 
establishing eligibility criteria and bidding methodologies the 
Commission shall ``promot[e] economic opportunity and competition and 
ensur[e] 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,'' collectively referred to as 
``designated entities.'' For broadband PCS, the Commission adopted 
special provisions for businesses owned by members of minority groups 
or women--bidding credits, installment 

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payments and a separate entrepreneur's block--and analyzed their 
constitutionality using the ``intermediate scrutiny'' standard of 
review articulated in Metro Broadcasting v. FCC, 497 U.S. 547, 564-65 
(1990), because, as in Metro, the proposed provisions involved 
Congressionally-mandated benign race- and gender-conscious measures.
    After the release of the broadband PCS rules, the Supreme Court 
decided Adarand Constructors v. Pena, 115 S. Ct. 2097 (1995), which 
overruled Metro Broadcasting ``to the extent that Metro Broadcasting is 
inconsistent with the holding in Adarand that all racial 
classifications must be analyzed under strict scrutiny. In the 
Competitive Bidding Further Notice of Proposed Rulemaking, PP Docket 
No. 93-253, 60 FR 37786 (July 21, 1995), the Commission modified the 
designated entities provisions in the entrepreneur's block auction so 
as to render them race- and gender-neutral, because of the substantial 
delay that would be incurred in supplementing the record to meet a 
``strict scrutiny'' standard, and to avoid the substantial likelihood 
that the auction would be stayed based on the holding in Adarand.
Eligibility
    In the 900 MHz SMR service, as in other auctionable services, the 
Commission remains committed to meeting the statutory objectives of 
promoting economic opportunity and competition, of avoiding excessive 
concentration of licenses, and of ensuring access to new and innovative 
technologies by disseminating licenses among a wide variety of 
applicants, including small businesses, rural telephone companies, and 
businesses owned by members of minority groups and women. Because of 
the large number of available licenses and the presence of incumbents 
throughout the 900 MHz SMR band, the Commission will not create an 
entrepreneur's block in this service. Nevertheless, the Commission 
adopts several provisions for bidding in the 900 MHz auction by small 
businesses which will foster the Commission's statutory goals. Taking 
commenters' suggestions into account, the Commission defines two 
categories of small businesses: (1) An entity that, together with 
affiliates, has average gross revenues for the three preceding years of 
$3 million or less; and (2) an entity that, together with affiliates, 
has average gross revenues for the three preceding years of $15 million 
or less. The Commission will define any investor in the applicant with 
a 20 percent or greater interest to be attributable for purposes of 
determining small business status. The 20 percent attribution threshold 
is derived from the measure of SMR attribution for purposes of applying 
the CMRS spectrum cap. The Commission also adopts the multiplier 
governing the CMRS spectrum cap, set out in 47 CFR 20.6(d)(6).
Bidding Credits, Installment Payments and Reduced Down Payments
    Under this ``tiered'' approach, small businesses falling under the 
$3 million benchmark are eligible for a 15 percent bidding credit on 
any MTA license; those falling under the $15 million benchmark are 
eligible for a 10 percent bidding credit. Bidding credits for small 
businesses are not cumulative. Thus a $3 million small business will be 
eligible for only a 15 percent bidding credit, not a 25 percent credit. 
All small businesses may make a reduced down payment (five percent of 
the winning bid following the close of the auction, with the balance of 
the down payment paid five days after a Public Notice announcing that 
the Commission is prepared to grant the license), and are entitled to 
pay the bid balance in quarterly installments over the remaining 
license term. Small businesses falling under the $3 million benchmark 
will be able to make interest-only payments (U.S. Treasury note rate) 
for the first five years of the license term; small businesses falling 
under the $15 million benchmark will be able to make interest-only 
payments (U.S. Treasury note rate plus 2.5 percent) for the first two 
years of the license term. The Commission believes that broadening the 
scope of opportunities for small businesses, particularly on a tiered 
basis, will result in substantial participation by women and 
minorities, and that the expected capital outlay for the 900 MHz 
service will not present the same type of obstacles for those entities 
as a more costly spectrum-based service like PCS. For this reason, the 
Commission does not adopt reduced upfront payments for small businesses 
in the 900 MHz service.
Transfer Restrictions and Unjust Enrichment Provisions
    Small businesses entitled to special provisions in the 900 MHz SMR 
service seeking to transfer their licenses, as a condition to approval 
of the transfer, must remit to the government a payment equal to a 
portion of the total value of the benefit conferred by the government. 
Thus, a small business that received bidding credits seeking transfer 
or assignment of a license to an entity that is not a small business or 
does not qualify as a smaller business under the definitions in 47 CFR 
Sec. 90.814(b)(1), will 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 
transfer will be permitted. The amount of this payment will be reduced 
over time as follows: a transfer in the first two years of the license 
term will result in a reimbursement of 100 percent of the value of the 
bidding credit: in year three of the license term the payment will be 
75 percent; in year four the payment will be 50 percent and in year 
five the payment will be 25 percent, after which there will be no 
payment. If a small business under the $3 million definition seeks to 
transfer or assign a license to a small business under the $15 million 
definition, for the purposes of determining the amount of payment, the 
value of the bidding credit is five percent, the difference between the 
10 and 15 percent bidding credits. The five percent difference will be 
subject to the same percentage reductions over time as specified above. 
These payments will have to be paid to the U.S. Treasury as a condition 
of approval of the assignment or transfer.
    If a licensee that was awarded installment payments seeks to assign 
or transfer control of its license to an entity that does not meet 
either of the definitions set forth in Section 90.814(b)(1) during the 
term of the license, the Commission will require payment of the 
remaining principal and any interest accrued through the date of 
assignment as a condition of the license assignment or transfer. 
Moreover, if a small business under the $3 million definition seeks to 
assign or transfer control of a license to a small business under the 
$15 million definition (that does not qualify for as favorable an 
installment payment plan), the installment payment plan for which the 
acquiring entity qualifies will become effective immediately upon 
transfer. A licensee may not switch to a more favorable payment plan. 
If an investor subsequently purchases an ``attributable'' interest in 
the business during the first five years of the license term and, as a 
result, the gross revenues or total assets of the business exceed the 
applicable financial cap, thereby requiring the applicant to forfeit 
eligibility for an installment payment scheme, unjust enrichment 
provisions also will apply.
Partitioning for Rural Telcos
    Rural telephone companies (rural telcos) are permitted to acquire 
partitioned 900 MHz SMR licenses in 

[[Page 48917]]
either of two ways: (1) They may form bidding consortia to participate 
in auctions, and then partition the licenses won among consortia 
participants; and (2) they may acquire partitioned 900 MHz SMR licenses 
from other licensees through private negotiation and agreement either 
before or after the auction. Each member of a consortium will be 
required to file a long-form application, following the auction, for 
its respective mutually agreed-upon geographic area. Partitioned areas 
must conform to established geopolitical boundaries (such as county 
lines). With respect to rural telcos, each area must include all 
portions of the wireline service area of the rural telco applicant that 
lies within the MTA service area. Rural telcos are defined as local 
exchange carriers having 100,000 or fewer access lines, including all 
affiliates. If a rural telco receives a partitioned license post-
auction from another MTA licensee, the partitioned area must be 
reasonably related to the rural telco's wireline service area that lies 
within the MTA service area. The Commission will presume as 
``reasonably related'' a partitioned area that contains no more than 
twice the population of that portion of a rural telco's wireline 
service area that lies within the MTA service area.

C. Other Matters

    Although the Commission did not request comment on this issue, the 
National Paging and Personal Communications Association (NPPCA) 
suggests that the Commission establish a Telecommunications Development 
Fund (TDF) to assist small businesses in accessing capital for build-
out purposes. While the Commission fully supports the goal of ensuring 
the participation of small businesses in the provision of SMR services, 
the proposal raised by NPPCA is beyond the scope of this proceeding. As 
such, it is not addressed in this proceeding.

IV. Procedural Matters and Ordering Clauses

Final Regulatory Flexibility Analysis

    Pursuant to the Regulatory Flexibility Act of 1980, 5 U.S.C. 
Sec. 603, the Commission incorporated an Initial Regulatory Flexibility 
Analysis (IRFA) into the Further Notice of Proposed Rule Making. 
Written public comments on the IRFA were requested. The Commission's 
final regulatory flexibility analysis for this Seventh Report and Order 
in PP Docket No. 93-253 is as follows:
    A. Need for and purpose of the action. This rule making proceeding 
was initiated to secure comment on proposals for establishing a 
flexible regulatory scheme for the 900 MHz Specialized Mobile Radio 
(SMR) service that would promote efficient licensing and enhance the 
service's competitive potential in the commercial mobile radio 
marketplace. The proposals adopted herein are also designed to 
implement Congress's goal of giving small businesses, rural telephone 
companies, and businesses owned by members of minority groups and women 
the opportunity to participate in the provision of spectrum-based 
services in accordance with 47 U.S.C. 309(j)(4)(D).
    B. Issues raised in by the public in response to the initial 
analysis. No comments were submitted specifically in response to the 
Initial Regulatory Flexibility Analysis.
    C. Significant alternatives considered. The Second Further Notice 
of Proposed Rule Making in this proceeding offered numerous proposals. 
All significant alternatives have been addressed in the Seventh Report 
and Order. The majority of commenters supported the major tenets of the 
proposed rules and some commenters suggested changes to some of the 
Commission's proposals. Any regulatory burdens we have adopted for 
applicants (for example, small businesses) in the 900 MHz SMR 
applicants are necessary to carry out the Commission's duties under the 
Communications Act of 1934, as amended, and the Omnibus Budget 
Reconciliation Act of 1993. The Final Regulatory Flexibility Analysis, 
as required by Section 604 of the Regulatory Flexibility Act is set 
forth in Appendix B.

Ordering Clauses

    Accordingly, it is ordered That, pursuant to the authority of 
Sections 4(i) 303(r), 309(j), and 332 of the Communications Act of 
2934, as amended, 47 U.S.C. 154(i), 303(r), 309(j), and 332, this 
Second Order on Reconsideration and Seventh Report and Order is adopted 
and Part 90 of the Commission's Rules is amended as set forth below.
    It is further ordered that the rule amendments set forth below will 
become effective October 23, 1995.
    It is further ordered, that the Petitions for Reconsideration filed 
by Advanced Mobilecomm, Inc., American Mobile Telecommunications 
Association, Celsmer, DW Communications, Inc., Geotek Communications, 
Inc., Nextel, Personal Communications Industry Association, RAM Mobile 
Data Limited Partnership, and Southern California Edison Company are 
granted to the extent discussed herein, and denied in all other 
respects.

List of Subjects in 47 CFR Part 90

    Radio.

Federal Communications Commission.
William F. Caton,
Acting Secretary.

Amendatory Text

    Part 90 of Chapter I of Title 47 of the Code of Federal Regulations 
is amended as follows:

PART 90--PRIVATE LAND MOBILE RADIO SERVICES

    1. The authority citation for Part 90 is revised as follows:

    Authority: Sections 4, 303, 309 and 332, 48 Stat. 1066, 1082, as 
amended; 47 U.S.C. Secs. 154, 303, 309 and 332, unless otherwise 
noted.

    2. Section 90.7 is amended by adding a definition for ``900 MHz SMR 
MTA-based license or MTA license'' in alphabetical order to read as 
follows:


Sec. 90.7  Definitions.

 * * * * *
    900 MHz SMR MTA-based license or MTA license. A license authorizing 
the right to use a specified block of 900 MHz SMR spectrum within one 
of the 47 Major Trading Areas (``MTAs''), as embodied in Rand McNally's 
Trading Areas System MTA Diskette and geographically represented in the 
map contained in Rand McNally's Commercial Atlas & Marketing Guide (the 
``MTA Map''), with the following exceptions and additions:
    (1) Alaska is separated from the Seattle MTA and is licensed 
separately.
    (2) Guam and the Northern Mariana Islands are licensed as a single 
MTA-like area.
    (3) Puerto Rico and the United States Virgin Islands are licensed 
as a single MTA-like area.
    (4) American Samoa is licensed as a single MTA-like area.
    The MTA map is available for public inspection in the Office of 
Engineering and Technology's Technical Information Center, room 7317, 
2025 M Street NW., Washington, DC.
 * * * * *
    2. Section 90.173 is amended by revising paragraph (k) to read as 
follows:


Sec. 90.173  Policies governing the assignment of frequencies.

 * * * * *
    (k) Notwithstanding any other provisions of this part, any eligible 
person may seek a dispositive preference for a channel assignment on an 
exclusive basis in the 220-222 MHz, 

[[Page 48918]]
470-512 MHz, and 800 MHz bands by submitting information that leads to 
the recovery of channels in these bands. Recovery of such channels must 
result from information provided regarding the failure of existing 
licensees to comply with the provisions of Secs. 90.155, 90.157, 
90.629, 90.631 (e) or (f), or 90.633 (c) or (d). Any recovered channels 
in the 900 MHz SMR service will revert automatically to the MTA 
licensee.
 * * * * *
    3. Section 90.617(d) is amended by revising Table 4B to read as 
follows:


Sec. 90.617  Frequencies in the 809.750-824/854.750-869 MHz, and 896-
901/935-940 MHz bands available for trunked or conventional system use 
in non-border areas.

 * * * * *
    (d) * * *

 Table 4B--SMR Category 896-901/935-940 MHz Band-Channels (200 Channels)
------------------------------------------------------------------------
              Block                             Channel Nos.            
------------------------------------------------------------------------
A................................  1-2-3-4-5-6-7-8-9-10                 
B................................  21-22-23-24-25-26-27-28-29-30        
C................................  41-42-43-44-45-46-47-48-49-50        
D................................  61-62-63-64-65-66-67-68-69-70        
E................................  81-82-83-84-85-86-87-88-89-90        
F................................  101-102-103-104-105-106-107-108-109-1
                                    10                                  
G................................  121-122-123-124-125-126-127-128-129-1
                                    30                                  
H................................  141-142-143-144-145-146-147-148-149-1
                                    50                                  
I................................  161-162-163-164-165-166-167-168-169-1
                                    70                                  
J................................  181-182-183-184-185-186-187-188-189-1
                                    90                                  
K................................  201-202-203-204-205-206-207-208-209-2
                                    10                                  
L................................  221-222-223-224-225-226-227-228-229-2
                                    30                                  
M................................  241-242-243-244-245-246-247-248-249-2
                                    50                                  
N................................  261-262-263-264-265-266-267-268-269-2
                                    70                                  
O................................  281-282-283-284-285-286-287-288-289-2
                                    90                                  
P................................  301-302-303-304-305-306-307-308-309-3
                                    10                                  
Q................................  321-322-323-324-325-326-327-328-329-3
                                    30                                  
R................................  341-342-343-344-345-346-347-348-349-3
                                    50                                  
S................................  361-362-363-364-365-366-367-368-369-3
                                    70                                  
T................................  381-382-383-384-385-386-387-388-389-3
                                    90                                  
------------------------------------------------------------------------

* * * * *
    4. Section 90.619(a)(5) is amended by revising Table 4B to read as 
follows:


Sec. 90.619  Frequencies available for use in the U.S./Mexico and U.S./
Canada border areas.

    (a) * * *
    (5) * * *

Table 4B--United States-Mexico Border Area, SMR Category 896-901/935-940
                         MHZ Band (200 Channels)                        
------------------------------------------------------------------------
              Block                             Channel Nos.            
------------------------------------------------------------------------
Channels numbered above 200 may be used only subject to the power flux  
 density limits at or beyond the Mexican border stated in paragraph     
 (a)(2) of this section.                                                
                                                                        
A................................  1-2-3-4-5-6-7-8-9-10                 
B................................  21-22-23-24-25-26-27-28-29-30        
C................................  41-42-43-44-45-46-47-48-49-50        
D................................  61-62-63-64-65-66-67-68-69-70        
E................................  81-82-83-84-85-86-87-88-89-90        
F................................  101-102-103-014-105-106-107-108-109-1
                                    10                                  
G................................  121-122-123-124-125-126-127-128-129-1
                                    30                                  
H................................  141-142-143-144-145-146-147-148-149-1
                                    50                                  
I................................  161-162-163-164-165-166-167-168-169-1
                                    70                                  
J................................  181-182-183-184-185-186-187-188-189-1
                                    90                                  
K................................  201-202-203-204-205-206-207-208-209-2
                                    10                                  
L................................  221-222-223-224-225-226-227-228-229-2
                                    30                                  
M................................  241-242-243-244-245-246-247-248-249-2
                                    50                                  
N................................  261-262-263-264-265-266-267-268-269-2
                                    70                                  
O................................  281-282-283-284-285-286-287-288-289-2
                                    90                                  
P................................  301-302-303-304-305-306-307-308-309-3
                                    10                                  
Q................................  321-322-323-324-325-326-327-328-329-3
                                    30                                  
R................................  341-342-343-344-345-346-347-348-349-3
                                    50                                  
S................................  361-362-363-364-635-366-367-368-369-3
                                    70                                  
T................................  381-382-383-384-385-386-387-388-389-3
                                    90                                  
------------------------------------------------------------------------

* * * * *
    5. Section 90.631 is amended by revising paragraph (f) to read as 
follows:


Sec. 90.631  Trunked systems loading, construction and authorization 
requirements.

* * * * *
    (f) If a station is not placed in permanent operation, in 
accordance with the technical parameters of the station authorization, 
within one year, except as provided in Sec. 90.629, its license cancels 
automatically and must be returned to the Commission. For purposes of 
this section, a base station is not considered to be placed in 
operation unless at least two associated mobile stations, or one 
control station and one mobile station, are also placed in operation. 
An SMR licensee with facilities that have discontinued operations for 
90 continuous days after the effective date of this rule is presumed to 
have permanently discontinued operations, unless the licensee notifies 
the FCC otherwise prior to the end of the 90 day period and provides a 
date on which operation will resume, which date must not be in excess 
of 30 additional days.
* * * * *
    6. Section 90.665 (c) and (d) are revised to read as follows:


Sec. 90.665  Authorization, construction and implementation of MTA 
licenses.

* * * * *
    (c) Each MTA licensee in the 896-901/935-940 MHz band must, three 
years from the date of license grant, construct and place into 
operation a sufficient number of base stations to provide coverage to 
at least one-third of the population of the MTA. Further, each MTA 
licensee must provide coverage to at least two-thirds of the population 
of the MTA five years from the date of license grant or, alternatively, 
demonstrate through a showing to the Commission that it is providing 
substantial service. The MTA licensee must meet the population coverage 
benchmarks regardless of the extent to which incumbent licensees are 
present within the MTA block.
    (d) MTA licensees who fail to meet the coverage requirements 
imposed at either the third or fifth years of their license term, or to 
make a convincing showing of substantial service, will forfeit the 
portion of the MTA license that exceeds licensed facilities constructed 
and operating on the date of the MTA license grant.
    7. Section 90.667 is revised to read as follows:


Sec. 90.667  Grandfathering provisions for incumbent licensees.

    (a) These provisions apply to all 900 MHz SMR licensees who 
obtained licenses or filed applications for secondary sites on or 
before August 9, 1994 (``incumbent licensees''), as well as to all 900 
MHz SMR licensees who obtained authorizations pursuant to 
Sec. 90.173(k). An incumbent licensee's service area shall be defined 
by its originally-licensed 40 dBu field strength contour. Incumbent 
licensees are permitted to add new or modify transmit sites in this 
existing service area without prior notification to the Commission so 
long as their original 40 

[[Page 48919]]
dBu field strength contour is not expanded.
    (b) Incumbent licensees operating at multiple sites may, after 
grant of MTA licenses has been completed, exchange multiple site 
licenses for a single license, authorizing operations throughout the 
contiguous and overlapping 40 dBu field strength contours of the 
multiple sites. Incumbents exercising this license exchange option must 
submit specific information for each of their external base sites after 
the close of the 900 MHz SMR auction.
    (c) Applications in the 900 MHz SMR service for secondary sites 
filed after August 9, 1994 shall be authorized on a secondary, non-
interference basis to MTA licensee operations. No secondary sites shall 
be granted on this basis in an MTA once the MTA licensee has been 
selected.
    6. A new subpart U consisting of Secs. 90.801 through 90.815 is 
added to Part 90 to read as follows:

Subpart U--Competitive Bidding Procedures for 900 MHz Specialized 
Mobile Radio Service

Sec.
90.801  900 MHz SMR subject to competitive bidding.
90.802  Competitive bidding design for 900 MHz SMR licensing.
90.803  Competitive bidding mechanisms.
90.804  Aggregation of 900 MHz SMR licenses.
90.805  Withdrawal, default and disqualification payments.
90.806  Bidding application (FCC Form 175 and 175-S Short-form).
90.807  Submission of upfront payments and down payments.
90.808  Long-form applications.
90.809  License grant, denial, default, and disqualification.
90.810  Bidding credits for small businesses.
90.811  Reduced down payment for licenses won by small businesses.
90.812  Installment payments for licenses won by small businesses.
90.813  Procedures for partitioned licenses.
90.814  Definitions.
90.815  Eligibility for small business status.


Sec. 90.801  900 MHz SMR subject to competitive bidding.

    Mutually exclusive initial applications to provide 900 MHz SMR 
service are subject to competitive bidding procedures. The general 
competitive bidding procedures found in Part 1, Subpart Q of this 
chapter will apply unless otherwise provided in this part.


Sec. 90.802  Competitive bidding design for 900 MHz SMR licensing.

    The Commission will employ a simultaneous multiple round auction 
design when choosing from among mutually exclusive initial applications 
to provide 900 MHz SMR service, unless otherwise specified by the 
Wireless Telecommunications Bureau before the auction.


Sec. 90.803  Competitive bidding mechanisms.

    (a) Sequencing. The Wireless Telecommunications Bureau will 
establish and may vary the sequence in which 900 MHz SMR licenses will 
be auctioned.
    (b) Grouping. All 900 MHz SMR licenses for each of the MTAs will be 
auctioned simultaneously, unless the Wireless Telecommunications Bureau 
announces, by Public Notice prior to the auction, an alternative 
auction scheme.
    (c) Minimum bid increments. The Wireless Telecommunications Bureau 
will, by announcement before or during an auction, require minimum bid 
increments in dollar or percentage terms.
    (d) Stopping rules. The Wireless Telecommunications Bureau will 
establish stopping rules before or during multiple round auctions in 
order to terminate an auction within a reasonable time.
    (e) Acitvity rules. The Wireless Telecommunications Bureau will 
establish activity rules which require a minimum amount of bidding 
activity. In the event that the Commission establishes an activity rule 
in connection with a simultaneous multiple round auction, each bidder 
will be entitled to request and will be automatically granted a certain 
number of waivers of such rule during the auction.


Sec. 90.804  Aggregation of 900 MHz SMR licenses.

    The Commission will license each 10-channel block in the 900 MHz 
SMR spectrum separately. Applicants may aggregate across spectrum 
blocks within the limitation specified in Sec. 20.6(b) of this chapter.


Sec. 90.805  Withdrawal, default and disqualification payments.

    (a) During the course of an auction conducted pursuant to 
Sec. 90.802, the Wireless Telecommunications Bureau will impose 
payments on bidders who withdraw high bids during the course of an 
auction, who default on payments due after an auction closes, or who 
are disqualified.
    (b) Bid withdrawal prior to close of auction. A bidder who 
withdraws a high bid during the course of an auction will be subject to 
a payment equal to the difference between the amount bid and the amount 
of the winning bid the next time the license is offered by the 
Commission. No withdrawal payment would be assessed if the subsequent 
winning bid exceeds the withdrawn bid. This payment amount will be 
deducted from any upfront payments or down payments that the 
withdrawing bidder has deposited with the Commission.
    (c) Default or disqualification after close of auction. If a high 
bidder defaults or is disqualified after the close of such an auction, 
the defaulting bidder will be subject to the payment in paragraph (b) 
of this section plus an additional payment equal to three (3) percent 
of the subsequent winning bid. If the subsequent winning bid exceeds 
the defaulting bidder's bid amount, the 3 percent payment will be 
calculated based on the defaulting bidder's bid amount. These amounts 
will be deducted from any upfront payments or down payments that the 
defaulting or disqualified bidder has deposited with the Commission. If 
the default occurs within five business days after the bidding has 
closed, the Commission retains the discretion to offer the license to 
the second highest bidder at its final bid level, of it that bidder 
declines the offer, to offer the license to other bidders (in 
descending order of their bid amounts) at the final bid levels.


Sec. 90.806  Bidding application (FCC Form 175 and 175-S Short-form).

    All applicants to participate in competitive bidding for 900 MHz 
SMR licenses must submit applications on FCC Forms 175 and 175-S 
pursuant to the provisions of Sec. 1.2105 of this chapter. The Wireless 
Telecommunications Bureau will issue a Public Notice announcing the 
availability of 900 MHz SMR licenses and, in the event that mutually 
exclusive applications are filed, the date of the auction for those 
licenses. This Public Notice also will specify the date on or before 
which applicants intending to participate in a 900 MHz SMR auction must 
file their applications in order to be eligible for that auction, and 
it will contain information necessary for completion of the application 
as well as other important information such as the materials which must 
accompany the Forms, any filing fee that must accompany the application 
or any upfront payment that will need to be submitted, and the location 
where the application must be filed. In addition to identifying its 
status as a small business or rural telephone company, each applicant 
must indicate whether it is a minority-owned entity, as defined in 
Sec. 90.814(g) and/or a women-owned entity.

[[Page 48920]]



Sec. 90.807  Submission of upfront payments and down payments.

    (a) Each bidder in the 900 MHz SMR auction will be required to 
submit an upfront payment of $0.02 per MHz per pop, for the maximum 
number of licenses (in terms of MHz-pops) on which it intends to bid 
pursuant to Sec. 1.2106 of this chapter and procedures specified by 
Public Notice.
    (b) Each winning bidder in the 900 MHz SMR auction shall make a 
down payment to the Commission in an amount sufficient to bring its 
total deposits up to 20 percent of its winning bid within five business 
days after the auction closes, and the remaining balance due on the 
license shall be paid within five business days after Public Notice 
announcing that the Commission is prepared to award the license. The 
grant of the application required by Sec. 90.808 is conditional upon 
receipt of full payment, except for small businesses that are winning 
bidders, which are governed by Sec. 90.811. The Commission generally 
will grant the license within ten (10) business days after the receipt 
of the remaining balance due on the license.


Sec. 90.808  Long-form applications.

    Each winning bidder will be required to submit a long-form 
application on FCC Form 600 within ten (10) business days after being 
notified by Public Notice that it is the winning bidder. Applications 
on FCC Form 600 shall be submitted pursuant to the procedures set forth 
in 90.119 and any associated Public Notices. Only auction winners (and 
rural telephone companies and incumbent 900 MHz SMR licensees seeking 
partitioned licenses pursuant to agreements with auction winners under 
Sec. 90.813) will be eligible to file applications on FCC Form 600 for 
initial 900 MHz SMR licenses in the event of mutual exclusivity between 
applicants filing Form 175.


Sec. 90.809  License grant, denial, default, and disqualification.

    (a) A bidder who withdraws its bid subsequent to the close of 
bidding, defaults on a payment due, or is disqualified, will be subject 
to the payments specified in Sec. 90.805 or Sec. 1.2109 of this 
chapter, as applicable.
    (b) MTA licenses pursued through competitive bidding procedures 
will be granted pursuant to the requirements specified in Sec. 90.166.


Sec. 90.810  Bidding credits for small businesses.

    (a) A winning bidder that qualifies as a small business or a 
consortium of small businesses, (as defined in Sec. 90.814(b)(1)(i) may 
use a bidding credit of 15 percent to lower the cost of its winning bid 
on any of the blocks identified in Sec. 90.617(d), Table 4B. A winning 
bidder that qualifies as a small business or a consortium of small 
businesses, (as defined in Sec. 90.814(b)(1)(ii) may use a bidding 
credit of 10 percent to lower the cost of its winning bid on any of the 
blocks identified in Sec. 90.617(d), Table 4B.
    (b) Unjust Enrichment. (1) A small business seeking transfer or 
assignment of a license to an entity that is not a small business under 
the definitions in Sec. 90.814(b)(1) will 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 transfer will be permitted. The amount of this payment 
will be reduced over time as follows: a transfer in the first two years 
of the license term will result in a forfeiture of 100 percent of the 
value of the bidding credit: in year three of the license term the 
payment will be 75 percent; in year four the payment will be 50 percent 
and in year five the payment will be 25 percent, after which there will 
be no assessment. If a small business as defined in 
Sec. 90.814(b)(1)(i) seeks to transfer or assign a license to a small 
business as defined in Sec. 90.814(b)(1)(ii), the value of the bidding 
credit to be repaid is five percent, the difference between the 10 and 
15 percent bidding credits. The five percent difference will be subject 
to the percentage reductions over time specified above. These payments 
must be paid back to the U.S. Treasury as a condition of approval of 
the assignment or transfer.
    (2) If a small business that utilizes a bidding credit under this 
section seeks to assign or transfer control of its license to a small 
business meeting the eligibility standards for lower bidding credits or 
seeks to make any other change in ownership that would result in the 
licensee qualifying for a lower bidding credit under this section, the 
licensee must seek Commission approval and reimburse the government for 
the difference between the amount of the bidding credit obtained by the 
licensee and the bidding credit for which the assignee, transferee or 
licensee is eligible under this section as a condition of the approval 
of such assignment, transfer or other ownership change.


Sec. 90.811  Reduced down payment for licenses won by small businesses.

    Each winning bidder that qualifies as a small business shall make a 
down payment equal to ten percent of its winning bid (less applicable 
bidding credits); a winning bidder shall bring its total amount on 
deposit with the Commission (including upfront payment) to five percent 
of its net winning bid within five (5) business days after the auction 
closes, and the remainder of the down payment (five percent) shall be 
paid within five (5) business days following Public Notice that the 
Commission is prepared to award the license. The Commission generally 
will grant the license within ten (10) business days after receipt of 
the remainder of the down payment.


Sec. 90.812  Installment payments for licenses won by small businesses.

    (a) Each licensee that qualifies as a small business may pay the 
remaining 90 percent of the net auction price for the license in 
quarterly installment payments pursuant to Sec. 1.2110(e) of this 
chapter. Licensees who qualify for installment payments are entitled to 
pay their winning bid amount in installments over the term of the 
license, with interest charges to be fixed at the time of licensing at 
a rate equal to the rate for ten-year U.S. Treasury obligations plus 
2.5 percent. Payments shall include both principal and interest 
amortized over the term of the license. An MTA license issued to an 
eligible small business that elects installment payments will be 
conditioned on the full and timely performance of the license holder's 
quarterly payments. The additional following terms apply:
    (1) An eligible licensee qualifying as a small business under 
Sec. 90.814(b)(1)(i) may make interest-only payments for five years. 
Interest will accrue at the Treasury note rate. Payments of interest 
and principal shall be amortized over the remaining five years of the 
license term.
    (2) An eligible licensee qualifying as a small business under 
Sec. 90.814(b)(1)(ii) may make interest-only payments for the first two 
years of the license term. Interest will accrue at the Treasury note 
rate plus an additional 2.5 percent. Payments of interest and principal 
shall be amortized over the remaining eight years of the license term.
    (b) Unjust Enrichment. (1) If a licensee that utilizes installment 
financing under this section seeks to assign or transfer control of its 
license to an entity not meeting the eligibility standards for 
installment payments, the licensee must make full payment of the 
remaining unpaid principal and any unpaid interest accrued through the 
date of assignment or transfer as a condition of approval.

[[Page 48921]]

    (2) If a licensee that utilizes installment financing under this 
section seeks to make any change in ownership structure that would 
result in the licensee losing eligibility for installment payments, the 
licensee shall first seek Commission approval and must make full 
payment of the remaining unpaid principal and any unpaid interest 
accrued through the date of such change as a condition of approval.
    (3) if a licensee that utilizes installment financing under this 
section seeks to assign or transfer control of a license to an entity 
that does not qualify for as favorable an installment payment plan, the 
installment payment plan for which the acquiring entity qualifies will 
become effective immediately upon transfer.


Sec. 90.813  Procedures for partitioned licenses.

    (a) Notwithstanding Sec. 90.661, a rural telephone company, as 
defined in Sec. 90.814, may be granted a 900 MHz SMR license that is 
geographically partitioned from a separately licensed MTA, so long as 
the MTA applicant or licensee has voluntarily agreed (in writing) to 
partition a portion of the license to the entity.
    (b) If partitioned licenses are being applied for in conjunction 
with a license(s) to be awarded through competitive procedures--
    (1) The applicable procedures for filing short-form applications 
and for submitting upfront payments and down payments contained in this 
part and Part 1 of this chapter shall be followed by the applicant, who 
must disclose as part of its short-form application all parties to 
agreement(s) with or among other entities to partition the license 
pursuant to this section, if won at auction (see 47 CFR 
1.2105(a)(2)(viii));
    (2) Each rural telephone company that is a party to an agreement to 
partition the license shall file a long-form application for its 
respective, mutually agreed-upon geographic area together with the 
application for the remainder of the MTA filed by the auction winner.
    (c) If the partitioned license is being applied for as a partial 
assignment of the MTA license following grant of the initial license, 
request for authorization for partial assignment of a license shall be 
made pursuant to Sec. 90.153.
    (d) Each application for a partitioned area (long-form initial 
application or partial assignment application) shall contain a 
partitioning plan that must propose to establish a partitioned area to 
be licensed that meets the following criteria:
    (1) Conforms to established geopolitical boundaries (such as county 
lines);
    (2) Includes the wireline service area of the rural telephone 
company applicant; and
    (3) Is reasonably related to the rural telephone company's wireline 
service area.

    Note to paragraph (d): A partitioned service area will be 
presumed to be reasonably related to the rural telephone company's 
wireline service area if the partitioned service area contains no 
more than twice the population overlap between the rural telephone 
company's wireline service area and the partitioned area.

    (e) Each licensee in each partitioned area will be responsible for 
meeting the construction requirements in its area (see Sec. 90.665).


Sec. 90.814  Definitions.

    (a) Scope. The definitions in this section apply to Secs. 90.810 
through 90.813, unless otherwise specified in those sections.
    (b) Small Business: Consortium of Small Business:
    (1) A small business is an entity that either:
    (i) together with its affiliates, persons or entities that hold 
attributable interests in such entity, and their affiliates, has 
average gross revenues that are not more than $3 million for the 
preceding three years; or
    (ii) together with its affiliates, persons or entities that hold 
attributable interests in such entity, and their affiliates, has 
average gross revenues that are not more than $15 million for the 
preceding three years.
    (2) For purposes of determining whether an entity meets either the 
$3 million or $15 million average annual gross revenues size standard 
set forth in paragraph (b)(1) of this section, the gross revenues of 
the entity, its affiliates, persons or entities holding interests in 
the entity and their affiliates shall be considered on a cumulative 
basis and aggregated, subject to the exceptions set forth in 
Sec. 90.814(g).
    (3) A small business consortium is a conglomerate organization 
formed as a joint venture between or among mutually-independent 
business firms, each of which individually satisfies either definition 
of a small business in paragraphs (b)(1) and (b)(2) of this section. In 
a consortium of small businesses, each individual member must establish 
its eligibility as a small business, as defined in this section.
    (c) Rural Telephone Company. A rural telephone company is a local 
exchange carrier having 100,000 or fewer access lines, including all 
affiliates.
    (d) Gross Revenues. For applications filed after December 31, 1994, 
gross revenues shall be evidenced by audited financial statements for 
the preceding relevant number of calendar or fiscal years. If an entity 
was not in existence for all or part of the relevant period, gross 
revenues shall be evidenced by the audited financial statements of the 
entity's predecessor-in-interest or, if there is no identifiable 
predecessor-in-interest, unaudited financial statements certified by 
the applicant as accurate.
    (e) Businesses Owned by Members of Minority Groups and/or Women. A 
business owned by members of minority groups and/or women in which 
minorities and/or women who are U.S. citizens control the applicant, 
have at least 50.1 percent equity ownership and, in the case of a 
corporate applicant, a 50.1 percent voting interest. For applicants 
that are partnerships, every general partner either must be a minority 
and/or woman (or minorities and/or women) who are U.S. citizens and who 
individually or together own at least 50.1 percent of the partnership 
equity, or an entity that is 100 percent owned and controlled by 
minorities and/or women who are U.S. citizens. The interests of 
minorities and women are to be calculated on a fully-diluted basis; 
agreements such as stock options and convertible debentures shall be 
considered to have a present effect on the power to control an entity 
and shall be treated as if the rights thereunder already have been 
fully exercised. However, upon a demonstration that options or 
conversion rights held by non-controlling principals will not deprive 
the minority and female principals of a substantial financial stake in 
the venture or impair their rights to control the designated entity, a 
designated entity may seek a waiver of the requirement that the equity 
of the minority and female principals must be calculated on a fully-
diluted basis.
    (f) Members of Minority Groups. Members of minority groups includes 
Blacks, Hispanics, American Indians, Alaskan Natives, Asians, and 
Pacific Islanders.
    (g) Attributable Interests. Partnership and other ownership 
interests and any stock interest amounting to 20 percent or more of the 
equity, or outstanding stock, or outstanding voting stock of a licensee 
or applicant will be attributable.
    (1) Multiplier. Ownership interests that are held indirectly by any 
party through one or more intervening corporations will be determined 
by successive multiplication of the ownership percentages for each link 
in the vertical ownership chain and 

[[Page 48922]]
application of the relevant attribution benchmark to the resulting 
product, except that if the ownership percentage for an interest in any 
line in the chain exceeds 50 percent or represents actual control, it 
shall be treated as if it were a 100 percent interest.
    (h) Affiliate. (1) Basis for Affiliation. An individual or entity 
is an affiliate of an applicant or of a person holding an attributable 
interest in an applicant (both referred to herein as ``the applicant'') 
if such individual or entity:
    (i) Directly or indirectly controls or has the power to control the 
applicant, or
    (ii) Is directly or indirectly controlled by the applicant, or
    (iii) Is directly or indirectly controlled by a third party or 
parties that also controls or has the power to control the applicant, 
or
    (iv) Has an ``identity of interest'' with the applicant.
    (2) Nature of control in determining affiliation. (i) Every 
business concern is considered to have one or more parties who directly 
or indirectly control or have the power to control it. Control may be 
affirmative or negative and it is immaterial whether it is exercised so 
long as the power to control exists.

    Example for paragraph (h)(2)(i). An applicant owning 50 percent 
of the voting stock of another concern would have negative power to 
control such concern since such party can block any action of the 
other stockholders. Also, the bylaws of a corporation may permit a 
stockholder with less than 50 percent of the voting to block any 
actions taken by the other stockholders in the other entity. 
Affiliation exists when the applicant has the power to control a 
concern while at the same time another person, or persons, are in 
control of the concern at the will of the party or parties with the 
power of control.

    (ii) Control can arise through stock ownership; occupancy of 
director, officer or key employee positions; contractual or other 
business relations; or combinations of these and other factors. A key 
employee is an employee who, because of his/her position in the 
concern, has a critical influence in or substantive control over the 
operations or management of the concern.
    (iii) Control can arise through management positions where a 
concern's voting stock is so widely distributed that no effective 
control can be established.

    Example for paragraph (h)(2)(iii). In a corporation where the 
officers and directors own various size blocks totaling 40 percent 
of the corporation's voting stock, but no officer or director has a 
block sufficient to give him or her control or the power to control 
and the remaining 60 percent is widely distributed with no 
individual stockholder having a stock interest greater than 10 
percent, management has the power to control. If persons with such 
management control of the other entity are persons with attributable 
interests in the applicant, the other entity will be deemed an 
affiliate of the applicant.

    (3) Identity of interest between and among persons. Affiliation can 
arise between or among two or more persons with an identity of 
interest, such as members of the same family or persons with common 
investments. In determining if the applicant controls or is controlled 
by a concern, persons with an identity of interest will be treated as 
though they were one person.

    Example 1 for paragraph (h)(3) introductory text. Two 
shareholders in Corporation Y each have attributable interests in 
the same SMR application. While neither shareholder has enough 
shares to individually control Corporation Y, together they have the 
power to control Corporation Y. The two shareholders with these 
common investments (or identity or interest) are treated as though 
they are one person and Corporation Y would be deemed an affiliate 
of the applicant.
    Example 2 for paragraph (h)(3) introductory text. One 
shareholder in Corporation Y, shareholder A, has an attributable 
interest in a SMR application. Another shareholder in Corporation Y, 
shareholder B, has a nonattributable interest in the same SMR 
application. While neither shareholder has enough shares to 
individually control Corporation Y, together they have the power to 
control Corporation Y. Through the common investment of shareholders 
A and B in the SMR application, Corporation Y would still be deemed 
an affiliate of the applicant.

    (i) Spousal Affiliation. Both spouses are deemed to own or control 
or have the power to control interests owned or controlled by either of 
them, unless they are subject to a legal separation recognized by a 
court of competent jurisdiction in the United States.
    (ii) Kinship Affiliation. Immediate family members will be presumed 
to own or control or have the power to control interests owned or 
controlled by other immediate family members. In this context 
``immediate family member'' means father, mother, husband, wife, son, 
daughter, brother, sister, father- or mother-in-law, son- or daughter-
in-law, brother- or sister-in-law, step-father, or -mother, step-
brother, or -sister, step-son, or -daughter, half brother or sister. 
This presumption may be rebutted by showing that
    (A) The family members are estranged,
    (B) The family ties are remote, or
    (C) The family members are not closely involved with each other in 
business matters.

    Example for paragraph (h)(3)(ii). A owns a controlling interest 
in Corporation X. A's sister-in-law, B, has an attributable interest 
in an SMR application. Because A and B have a presumptive kinship 
affiliation, A's interest in Corporation X is attributable to B, and 
thus to the applicant, unless B rebuts the presumption with the 
necessary showing.

    (4) Affiliation through stock ownership.
    (i) An applicant is presumed to control or have the power to 
control a concern if he or she owns or controls or has the power to 
control 50 percent or more of its voting stock.
    (ii) An applicant is presumed to control or have the power to 
control a concern even though he or she owns, controls or has the power 
to control less than 50 percent of the concern's voting stock, if the 
block of stock he or she owns, controls or has the power to control is 
large as compared with any other outstanding block of stock.
    (iii) If two or more persons each owns, controls or has the power 
to control less than 50 percent of the voting stock of a concern, such 
minority holdings are equal or approximately equal in size, and the 
aggregate of these minority holdings is large as compared with any 
other stock holding, the presumption arises that each one of these 
persons individually controls or has the power to control the concern; 
however, such presumption may be rebutted by a showing that such 
control or power to control, in fact, does not exist.
    (5) Affiliation arising under stock options, convertible 
debentures, and agreements to merge. Stock options, convertible 
debentures, and agreements to merge (including agreements in principle) 
are generally considered to have a present effect on the power to 
control the concern. Therefore, in making a size determination, such 
options, debentures, and agreements will generally be treated as though 
the rights held thereunder had been exercised. However, neither an 
affiliate nor an applicant can use such options and debentures to 
appear to terminate its control over another concern before it actually 
does so.

    Example 1 for paragraph (h)(5). If company B holds an option to 
purchase a controlling interest in company A, who holds an 
attributable interest in an SMR application, the situation is 
treated as though company B had exercised its rights and had become 
owner of a controlling interest in company A. The gross revenues of 
Company B must be taken into account in determining the size of the 
applicant.
    Example 2 for paragraph (h)(5).If a large company, BigCo, holds 
70% (70 to 100 outstanding shares) of the voting stock of company A, 
who holds an attributable interest in an SMR application, and gives 
a 

[[Page 48923]]
third party, SmallCo, an option to purchase 50 of the 70 shares owned 
by BigCo, BigCo will be deemed to be an affiliate of company, and 
thus the applicant, until SmallCo actually exercises its options to 
purchase such shares. In order to prevent BigCo from circumventing 
the intent of the rule which requires such options to be considered 
on a fully diluted basis, the option is not considered to have 
present in this case.
    Example 3 for paragraph (h)(5). If company A has entered into an 
agreement to merge with company B in the future, the situation is 
treated as though the merger has taken place.

    (6) Affiliation under voting trusts.
    (i) Stock interests held in trust shall be deemed controlled by any 
person who holds or shares the power to vote such stock, to any person 
who has the sole power to sell such stock, and to any person who has 
the right to revoke the trust at will or to replace the trustee at 
will.
    (ii) If a trustee has a familial, personal or extra-trust business 
relationship to the grantor or the beneficiary, the stock interests 
held in trust will be deemed controlled by the grantor or beneficiary, 
as appropriate.
    (iii) If the primary purpose of a voting trust, or similar 
agreement, is to separate voting power from beneficial ownership of 
voting stock for the purpose of shifting control of or the power to 
control a concern in order that such concern or another concern may 
meet the Commission's size standards, such voting trust shall not be 
considered valid for this purpose regardless of whether it is or is not 
recognized within the appropriate jurisdiction.
    (7) Affiliation through common management. Affiliation generally 
arises where officers, directors, or key employees serve as the 
majority or otherwise as the controlling element of the board of 
directors and/or the management of another entity.
    (8) Affiliation through common facilities. Affiliation generally 
arises where one concern shares office space and/or employees and/or 
other facilities with another concern, particularly where such concerns 
are in the same or related industry or field of operations, or where 
such concerns were formerly affiliated, and through theses sharing 
arrangements one concern has control, or potential control, of the 
other concern.
    (9) Affiliation through contractual relationships. Affiliation 
generally arises where one concern is dependent upon another concern 
for contracts and business to such a degree that one concern has 
control, or potential control, of the other concern.
    (10) Affiliation under joint venture arrangements.
    (i) A joint venture for size determination purposes is an 
association of concerns and/or individuals, with interests in any 
degree or proportion, formed by contract, express of implied, to engage 
in and carry out a single, specific business venture for joint profit 
for which purpose they combine their efforts, property, money, skill 
and knowledge, but not on a continuing or permanent basis for 
conducting business generally. The determination whether an entity is a 
joint venture is based upon the facts of the business operation, 
regardless of how the business operation may be designated by the 
parties involved. An agreement to share profits/losses proportionate to 
each party's contribution to the business operation is a significant 
factor in determining whether the business operation is a joint 
venture.
    (ii) The parties to a joint venture are considered to be affiliated 
with each other.


Sec. 90.815  Eligibility for small business status.

    (a) Short-Form Applications: Certifications and Disclosure. Each 
applicant for an MTA license which qualifies as a small business or 
consortium of small businesses shall append the following information 
as an exhibit to its short-form application (Form 175):
    (1) The identity of the applicant's affiliates, persons or entities 
that hold attributable interests in such entity, and their affiliates, 
and, if a consortium of small businesses, the members in the joint 
venture; and
    (2) The applicant's gross revenues, computed in accordance with 
Sec. 90.814.
    (b) Long Form Applications: Certifications and Disclosure. In 
addition to the requirements in subpart U of this part, each applicant 
submitting a long-form application for license(s) and qualifying as a 
small business shall, in an exhibit to its long-form application:
    (1) Disclose separately and in the aggregate the gross revenues, 
computed in accordance with Sec. 90.814, for each of the following: the 
applicant; the applicant's affiliates, the applicant's attributable 
investors, affiliates of its attributable investors, and, if a 
consortium of small businesses, the members of the joint venture;
    (2) List and summarize all agreements or other instruments (with 
appropriate references to specific provisions in the text of such 
agreements and instruments) that support the applicant's eligibility as 
a small business under Secs. 90.810 through 90.812, including the 
establishment of de facto and de jure control; such agreements and 
instruments include articles of incorporation and bylaws, shareholder 
agreements, voting or other trust agreements, franchise agreements, and 
any other relevant agreements (including letters of intent), oral or 
written; and
    (3) List and summarize any investor protection agreements, 
including rights of first refusal, supermajority clauses, options, veto 
rights, and rights to hire and fire employees and to appoint members to 
boards of directors or management committees.
    (c) Records Maintenance. All winning bidders qualifying as small 
businesses, shall maintain at their principal place of business an 
updated file of ownership, revenue and asset information, including any 
documents necessary to establish eligibility as a small business and/or 
consortium of small businesses under Sec. 90.814. Licensees (and their 
successors in interest) shall maintain such files for the term of the 
license.
    (d) Audits. (1) Applicants and licensees claiming eligibility as a 
small business or consortium of small businesses under Secs. 90.810 
through 90.812 shall be subject to audits by the Commission, using in-
house and contract resources. Selection for audit may be random, on 
information, or on the basis of other factors.
    (2) Consent to such audits is part of the certification included in 
the short-form application (Form 175). Such consent shall include 
consent to the audit of the applicant's or licensee's books, documents 
and other material (including accounting procedures and practices) 
regardless of form or type, sufficient to confirm that such applicant's 
or licensee's representations are, and remain, accurate. Such consent 
shall include inspection at all reasonable times of the facilities, or 
parts thereof, engaged in providing and transacting business, or 
keeping records regarding licensed 900 MHz SMR service and shall also 
include consent to the interview of principals, employees, customers 
and suppliers of the applicant or licensee.
    (e) Definitions. The terms affiliate, business owned by members of 
minority groups and/or women, consortium of small businesses, gross 
revenues, members of minority groups, nonattributable equity, small 
business and total assets used in this section are defined in 
Sec. 90.814.

[FR Doc. 95-23407 Filed 9-20-95; 8:45 am]
BILLING CODE 6712-01-M