[Federal Register Volume 61, Number 13 (Friday, January 19, 1996)]
[Rules and Regulations]
[Pages 1286-1288]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 96-579]



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FEDERAL COMMUNICATIONS COMMISSION

47 CFR Part 95

[FCC 95-506]


Modification of the ``Build-Out'' Construction Requirements for 
the Interactive Video and Data Service (IVDS)

AGENCY: Federal Communications Commission.

ACTION: Final rule.

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SUMMARY: The Commission has adopted a Report and Order to eliminate the 
one-year ``build-out'' requirement for the IVDS, while retaining the 
three-year and five-year build-out requirements. This action will allow 
the IVDS industry additional time to develop and deploy new and 
innovative applications.

EFFECTIVE DATE: January 19, 1996.

FOR FURTHER INFORMATION CONTACT:
Donna Kanin, (202) 418-0680, Wireless Telecommunications Bureau.

SUPPLEMENTARY INFORMATION: This is the final version of the 
Commission's Report and Order, FCC 95-506, adopted December 14, 1995, 
and released January 16, 1996. The full text of this Report and Order 
is available for inspection and copying during normal business hours in 
the FCC Reference Center, Room 230, 1919 M Street, NW., Washington, DC. 
The complete text may be purchased from the Commission's copy 
contractor, International Transcription Service, Inc., 2100 M Street, 
NW., Suite 140, Washington, DC 20037, telephone (202) 857-3800.

I. Introduction

    1. On July 31, 1995, the Commission adopted a Notice of Proposed 
Rule Making (Notice), 60 FR 43105, August 18, 1995, proposing to 
eliminate the one-year construction ``build-out'' requirement for 
Interactive Video and Data Service (IVDS)\1\ licensees.\2\ No change 
was proposed concerning the three-year and five-year construction 
requirements. We initiated the Notice in response to requests by 
several IVDS licensees \3\ that won their licenses in the IVDS auction 
held July 28-29, 1994. This Report and Order amends Section 95.833(a) 
of the Commission's Rules \4\ to eliminate the one-year build-out 
requirement as proposed. This action will allow the IVDS industry 
additional time to develop and deploy new and innovative applications, 
such as commercial data distribution services and inventory monitoring 
services.

    \1\ IVDS is a point-to-multipoint, multipoint-to-point, short 
distance communications service in which licensees may provide 
information, products, or services to individual subscribers at 
fixed locations within a service area, and subscribers may provide 
responses.
    \2\ Notice of Proposed Rule Making, (Notice), WT Docket No. 95-
131, 10 FCC Rcd 8700 (1995).
    \3\ Id. at footnote 5.
    \4\ 47 CFR Sec. 95.833(a).
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II. Background

    2. Section 95.833(a) of the Commission's Rules specifies that each 
IVDS licensee must make service available to at least ten percent of 
the population or geographic area within the licensee's service area 
within one year of the grant of the license, thirty percent within 
three years, and fifty percent within five years. As indicated in the 
Notice,\5\ Section 95.833(a) was crafted in 1992 when it was 
anticipated that licenses would be awarded by lottery.\6\ These build-
out requirements were intended ``to reduce the filing of speculative 
applications by entities that have no real intention of implementing 
[IVDS] systems and to avoid the potential for warehousing of IVDS 
spectrum.'' \7\ We stated in the Notice that the use of auctions to 
award licenses reduces the incentives for speculation, and therefore, 
tentatively concluded that the one-year benchmark is unnecessary.\8\ 
The Commission received six comments and two reply comments in response 
to the Notice.\9\

    \5\ Notice at para. 3.
    \6\ The eighteen IVDS licensees that received their licenses as 
a result of a lottery held September 15, 1993, have already passed 
their one year build-out deadline. We waived the one year deadline 
for 17 of the 18 licenses. These 17 licenses are required to meet 
the three year/30 percent construction deadline in March, 1997.
    \7\ See Report and Order in GEN Docket No. 91-2, 7 FCC Rcd 1630, 
1640 para. 73 (1992), 57 FR 8272, March 9, 1992; see also Memorandum 
Opinion and Order in GEN Docket No. 91-2, 7 FCC Rcd 4923, 4925 para. 
13 (1992), 57 FR 36372, August 13, 1992.
    \8\ Notice at para. 3.
    \9\ A list of the commenting parties is provided in Appendix A 
of the Report and Order. 
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III. Discussion

    3. Comments. Generally, the commenters favor the elimination of the 
one-year construction requirement. Erwin Aguayo, Jr. (Aguayo), the 
Coalition of IVDS Licensees \10\ (Coalition) and EON Corporation (EON) 
agree that the auction rules preclude the need for the one-year build-
out 

[[Page 1287]]
requirement.\11\ Aguayo states that by amending the rules as proposed, 
the Commission will provide IVDS licensees with the necessary 
opportunity for flexibility in establishing their IVDS services.\12\ 
EON states that the introduction of auctions to assign IVDS licenses 
has created significant short-term incentives for licensees to begin 
service as quickly as possible, and has reduced the risk of speculation 
in the IVDS license application process.\13\ Moreover, the Coalition of 
IVDS Licensees (Coalition) asserts that not only is the one-year 
benchmark unnecessary, but it will also impede the viability and 
evolutionary development of the IVDS spectrum. By requiring IVDS 
licensees to construct facilities prior to the full development of 
commercially viable services, the Coalition believes that the 
construction requirement will impede the development of new and 
innovative services.\14\ ITV, Inc. (ITV) and IVDS Affiliates, LLC 
(IALC) support eliminating the one-year deadline, but at the same time, 
recommend that the Commission establish a two-year, ten percent 
deadline for lottery and auction winners.\15\ They argue that two years 
would be sufficient for lottery winners to demonstrate the function of 
their respective IVDS systems and competing technologies, but not halt 
IVDS development. Secondly, ITV and IALC assert that such an amendment 
will permit auction winners to initiate service in a timely 
fashion.\16\

    \10\ Coalition members are listed in Appendix A of the Report 
and Order.
    \11\ Aguayo comments at 1-2; Coalition comments at 3; EON 
comments at 1-2.
    \12\ Aguayo comment at 2.
    \13\ EON comments at 1-2.
    \14\ Coalition comments at 2-4.
    \15\ ITV and IALC reply comments at 2-3.
    \16\ Id.
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    4. While supporting the proposal, EON, ITV and IALC assert that 
lack of equipment should not be the rationale for the proposed rule 
change. EON claims that its equipment will be commercially available 
before the one-year construction benchmark,\17\ but emphasize that IVDS 
licensees' equipment choices and short-term deployment schedules should 
be based on market conditions, rather than arbitrary regulatory 
constraints.\18\ Similarly, ITV and IALC state that they have developed 
a product line of IVDS equipment for data distribution, which they are 
marketing to licensees.\19\ Radio Telecom and Technology, Inc. (RTT), a 
manufacturer of IVDS equipment, is the only commenter that takes no 
position as to the elimination of the one-year build-out 
requirement.\20\

    \17\ EON comments at 2.
    \18\ Id.
    \19\ ITV and IALC comments at 3.
    \20\ RTT's comments at 1-2.
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    5. Additionally, the Notice proposed to retain the three-year and 
five-year construction benchmarks. EON, the Coalition, ITV and IALC 
agree.\21\ The Coalition believes that eliminating the one-year 
benchmark and retaining the other benchmark strikes an appropriate 
balance between the licensees' ability to manage intelligently their 
investments, and the public's interest in receiving interactive service 
on a timely basis.\22\ EON concurs that the three-year and five-year 
benchmarks are appropriate means for the Commission to meet its 
Congressional mandate to promote investment in and rapid deployment of 
new technologies and services.\23\ ITV and IALC further emphasize that 
the IVDS equipment market cannot develop without strictly enforced 
three and five-year construction deadlines.\24\ Alternatively, Richard 
L. Vega (Vega) argues that the three-year benchmark should also be 
eliminated.\25\ According to Vega, it too has become an outdated, 
unnecessary, and unduly burdensome requirement for license holders. 
Vega states that the public, as well as the fledgling IVDS industry, 
would benefit from a one-time, five-year, build-out requirement, 
allowing licensees an opportunity to focus completely on the technology 
selection process.

    \21\ Coalition comments at 3-4; EON comments at 2-3, ITV and 
IALC comments at 5-6.
    \22\ Coalition comments at 3-4.
    \23\ EON comments at 3.
    \24\ ITV and IALC comments at 4-6.
    \25\ Vega comments at 2-4.
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    6. Decision. We are adopting the proposal to eliminate the one-
year, ten percent construction requirement. As the Coalition states, 
the one-year construction requirement impedes the viability and 
evolutionary development of the IVDS spectrum. Aguayo also points out 
that amending the rules, as proposed, will provide IVDS licensees with 
the necessary opportunity for flexibility in establishing their IVDS 
services. EON further emphasizes that IVDS licensees' equipment choices 
and short-term deployment schedules should be based on market 
conditions, rather than arbitrary regulatory constraints. We conclude 
that eliminating the one-year construction requirement will provide 
licensees with greater flexibility in selecting service options, 
obtaining financing, selecting equipment, and other considerations 
relating to construction of their systems. Such action will, in turn, 
promote the development of the IVDS industry. Moreover, we believe the 
one-year construction benchmark is unnecessary to prevent spectrum 
warehousing. The use of auctions, rather than lotteries, to award 
licenses reduces the potential for spectrum warehousing and, as EON 
indicates, the introduction of auctions to assign IVDS licenses creates 
significant short-term incentives for licenses to begin service as 
quickly as possible. Finally, all of the commenters support this action 
except RTT, who takes no position regarding the one-year build-out.
    7. Further, as proposed, we will retain the three-year and five-
year build-out benchmarks. These benchmarks are consistent with the 
statutory requirement for performance benchmarks for licenses obtained 
through competitive bidding,\26\ and will ensure the timely delivery of 
service to the public. At the same time, we decline to adopt the 
suggestions offered by Vega, ITV and IALC. We believe that Vega's 
request to eliminate the three-year benchmark would not promote rapid 
delivery of new technologies and services to the public. Additionally, 
we believe ITV's and IALC's suggestion to create a two-year, ten 
percent benchmark in lieu of the one-year, ten percent benchmark, while 
retaining the three-year benchmark, is unnecessary. Imposing the first 
benchmark at two years, rather than three years, would give auction 
winners less time and flexibility to make the critical business 
decisions described above. Further, a two-year, ten percent build-out 
requirement, in light of our auction framework and the three-year and 
five-year requirements, is unnecessary to prevent speculation and 
warehousing.

    \26\ Section 309(j)(4)(B) of the Communications Act of 1934, as 
amended, 47 U.S.C. Sec. 309(j)(4)(B).
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IV. Procedural Matters

    8. Pursuant to the Regulatory Flexibility Act (Pub. L. No. 96-354, 
94 Stat. 1165.5 U.S.C. 603, et seq. (1981), the Commission attached an 
Initial Regulatory Flexibility Analysis (IRFA) as Appendix A to the 
Notice of Proposed Rule Making in WT Docket No. 95-131. Written 
comments on the IRA were requested. The Commission's Final Regulatory 
Flexibility Analysis is as follows:
    A. Need and Purpose of the Action. Our objective is to allow IVDS 
licensees greater flexibility in equipment and construction decisions, 
while meeting the Congressional mandate for specific performance 
standards in auctionable services.
    B. Issues Raised in Response to the Initial Analysis. There were no 


[[Page 1288]]
comments submitted in response to the Initial Regulatory Flexibility 
Analysis.
    C. Significant Alternatives Considered and Rejected. All 
significant alternatives have been addressed in this Report and Order.
    D. Description, Potential Impact, and Number of Small Entities 
Involved. These adopted rule changes will allow greater business 
opportunities and greater flexibility in the business decisions of IVDS 
licensees, many of which are small businesses.

V. Ordering Clauses

    9. Accordingly, it is ordered that Part 95 of the Commission's 
Rules and Regulations is amended as specified below. This action is 
taken pursuant to Section 4(i), 303(r), and 309(j) of the 
Communications Act of 1934, as amended, 47 U.S.C. Secs. 154(i), 303(r), 
and 309(j).
    10. It is further ordered that these amendments are effective 
January 19, 1996. These rule changes relieve a restriction and, 
therefore, are not subject to the 30-day effective date provision of 
the Administrative Procedure Act. See 5 U.S.C. 553(d)(1).
    11. It is further ordered that this proceeding is terminated.
    12. For further information, contact Donna L. Kanin, Federal 
Communications Commission, Wireless Telecommunications Bureau, Private 
Wireless Division, 2025 M Street, N.W., Room 8010, Mail Stop 2000-F, 
Washington, D.C. 20554; (202) 418-0680.

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

Final Rules

    Part 95 of Chapter 1 of Title 47 of the Code of Federal Regulations 
is amended as follows:

PART 95--PERSONAL RADIO SERVICES

    1. The authority citation for Part 95 continues to read as follows:


    Authority: Secs. 4, 303, 48 Stat. 1066, 1082, as amended; 47 
U.S.C. 154, 303.


    2. Section 95.831 is revised to read as follows:


Sec. 95.831  Service requirements.

    Subject to the initial construction requirements of Section 95.833, 
each IVDS system licensee must make the service available to at least 
50 percent of the population or land area located within the service 
area.
    2. Section 95.833 is revised to read as follows:


Sec. 95.833  Construction requirements.

    (a) Each IVDS system licensee must make the service available to at 
least 30 percent of the population or land area within the service area 
within three years of grant of the IVDS system license, and 50 percent 
of the population or land area within five years of grant of the IVDS 
system license. Failure to do so will cancel the IVDS system license 
automatically. For the purposes of this section, a CTS is not 
considered as providing service unless that CTS and two associated RTUs 
are placed in operation.
    (b) Each IVDS system licensee must file a progress report at the 
conclusion of each of the two benchmark periods to inform the 
Commission of the construction status of the system. The report must be 
addressed to: Federal Communications Commission. Wireless 
Telecommunications Bureau, Special Services Branch, 1270 Fairfield 
Road, Gettysburg, PA 17325-7245. The report must include:
    (1) A showing of how the system meets the benchmark; and
    (2) A list, including addresses, of all component CTSs constructed.

[FR Doc. 96-579 Filed 1-18-96; 8:45 am]
BILLING CODE 6712-01-M