[Federal Register Volume 61, Number 33 (Friday, February 16, 1996)]
[Rules and Regulations]
[Pages 6138-6164]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 96-3509]



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FEDERAL COMMUNICATIONS COMMISSION
47 CFR Part 90

[PR Docket No. 93-144; PP Docket No. 93-253; FCC 95-501]


The Future Development of SMR Systems in the 800 MHz Frequency 
Band

AGENCY: Federal Communications Commission.

ACTION: Final rule.

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SUMMARY: In this First Report and Order in PR Docket No. 93-144, and 
Eighth Report and Order in PP Docket No. 93-253, the Commission adopts 
final service and competitive bidding rules for the ``upper 10 MHz 
block'' of 800 MHz Specialized Mobile Radio (SMR) spectrum and adopts 
rules which streamline the licensing process for SMR services in the 
800 MHz band.
    In this First Report and Order (``First R&O''), the Commission 
designates a portion of 800 MHz SMR spectrum for wide-area licensing 
using license areas defined by the Economic Areas (EAs) established by 
the U.S. Department of Commerce Bureau of Economic Analysis. Under this 
wide-area licensing plan the Commission has allocated three channel 
blocks, one 120-channel block, one 60-channel block, and one 20-channel 
block.
    In this Eighth Report and Order (``Eighth R&O''), the Commission 
reiterated that competitive bidding is an appropriate licensing tool 
for the 800 MHz SMR service. The Commission also adopts specific 
auction rules for the upper 10 MHz block, including rules pertaining to 
competitive bidding design, license grouping, bidding procedures, and 
treatment of ``designated entities'' (that is, small businesses, 
businesses owned by minorities and/or women, and rural telephone 
companies). The intended effect of this action is to facilitate future 
deployment of SMR systems in the 800 MHz band through licensing 
procedures and the use of competitive bidding.

EFFECTIVE DATE: March 18, 1996.

FOR FURTHER INFORMATION CONTACT: David Furth or Lisa Warner at (202) 
418-0620.

SUPPLEMENTARY INFORMATION: This First Report and Order in PR Docket No. 
93-144, and this Eighth Report and Order in PP Docket No. 93-253, 
adopted December 15, 1995, and released December 15, 1995, is available 
for inspection and copying during normal business hours in the FCC 
Dockets Branch, Room 230, 1919 M Street N.W., Washington, D.C. The 
complete text may be purchased from the Commission's copy contractor, 
International Transcription Service, Inc., 2100 M Street, N.E., Suite 
140, Washington, D.C. 20037 (telephone (202) 857-3800).
    Synopsis of First Report and Order and Eighth Report and Order:

I. Background

    1. The Commission's current rules for the 800 MHz Specialized 
Mobile Radio (SMR) service were designed primarily to license dispatch 
radio systems on a transmitter-by-transmitter basis in local markets. 
In recent years, however, some SMR licenses have been authorized 
through waivers and extended implementation rules to expand the 
geographic scope of their services and aggregate large numbers of 
channels to provide service more directly comparable to that provided 
by cellular operators and that envisioned for Personal Communications 
Services (PCS). While the 800 MHz SMR rules have proven sufficiently 
flexible to permit such expansion, the licensing process remains 
cumbersome because of the need to license each SMR transmitter site 
individually. In May 1993, the Commission adopted a Notice of Proposed 
Rule Making in PR Docket No. 93-144, 58 FR 33062 (June 15, 1993) 
(``Notice''), proposing wide-area licensing of the 800 MHz SMR service. 
In August of 1993, Congress amended the Communications Act of 1934 to 
modify the regulatory treatment of mobile services. In the Second 
Report and Order in GN Docket No. 93-252, 59 FR 18493 (April 19, 1994) 
(``CMRS Second R&O''), the Commission reclassified all mobile services 
into two statutorily-defined categories: commercial mobile radio 
services (CMRS) and private mobile radio services (PMRS). The 
Commission concluded that all SMR systems providing or authorized to 
provide interconnected service would be reclassified as CMRS.
    2. In the Third Report and Order in GN Docket No. 93-252, 59 FR 
59945 (November 21, 1994) (``CMRS Third R&O''), the Commission 
concluded that 800 MHz SMR licensees either compete or have the 
potential to compete with other CMRS providers. As a result, the 
Commission determined that the technical and operational requirements 
for the 800 MHz SMR service should be made comparable, to the extent 
feasible, to those applicable to other CMRS providers. In this 
connection, the Commission concluded that: (1) wide-area licensing 
should be implemented in the 800 MHz SMR service; and (2) licensing of 
the 800 MHz SMR spectrum should be accomplished through competitive 
bidding procedures.
    3. On October 20, 1994, the Commission adopted a Further Notice of 
Proposed Rule Making in PR Docket No. 93-144, 59 FR 60111 (November 22, 
1994) (``Further Notice''), proposing a new framework for licensing of 
800 MHz SMR systems. Specifically, the Commission proposed to assign 10 
MHz of SMR spectrum (consisting of 200 contiguous channels) in defined 
market-based service areas to facilitate the development of wide-area, 
multi-channel SMR systems, while the remaining 4 MHz of spectrum 
(consisting of 80 non-contiguous 

[[Page 6139]]
channels) would be designated for continued licensing on a local basis 
to accommodate the needs of smaller SMR systems primarily seeking to 
provide local, more dispatch-oriented service.

II. First Report and Order

A. Wide-Area SMR Licensing in the 800 MHz Band

1. Spectrum Designated for Wide-Area Licensing
    4. In the CMRS Third R&O, the Commission determined that assigning 
contiguous spectrum, where feasible, is likely to enhance the 
competitive potential of wide-area SMR providers. The Commission 
indicated its belief that contiguous spectrum is essential to the 
competitive viability of a wide-area SMR system, because it permits use 
of spread spectrum and other broadband technologies that are available 
to other CMRS providers but unavailable to systems operating on non-
contiguous spectrum. In the Further Notice, the Commission proposed to 
designate the upper 10 MHz block of 800 MHz SMR spectrum for wide-area 
SMR licensing.
    5. In the First R&O, the Commission concludes that the 800 MHz SMR 
spectrum most suitable to be designated primarily for wide-area use is 
the upper 10 MHz block, as it is the only contiguous SMR spectrum in 
the 800 MHz band. The Commission further concludes that the entire 10 
MHz block should be used, rather than a portion thereof, because it is 
equivalent in size to the smallest amount of spectrum presently 
authorized for broadband PCS.
2. Service Areas
    6. In the CMRS Third R&O, the Commission concluded that the use of 
service areas based on Rand McNally Major Trading Areas (MTAs), 
identical to those adopted for broadband PCS, would be preferable for 
wide-area licensing of the 800 MHz SMR service. The Commission noted 
that allowing licensees to operate over MTAs as opposed to smaller 
areas, such as Rand McNally Basic Trading Areas (BTAs), would enhance 
their ability to invest in technology and to re-use channels more 
effectively.
    7. In this First R&O, the Commission determines that, despite its 
previous conclusion in the CMRS proceeding that MTAs appear to be the 
most suitable building blocks for 800 MHz SMR licensees seeking to 
construct wide-area systems, a broad range of commenters expressed 
support for Economic Areas (EAs) established by the U.S. Department of 
Commerce Bureau of Economic Analysis rather than MTAs. The Commission 
agrees with the majority of commenters that EAs reflect the actual 
coverage provided by 800 MHz SMR systems and concludes that use of EAs 
will further the public interest because it will result in the 
dissemination of licenses among a variety of applicants as anticipated 
by Section 309(j) of the Communications Act. The Commission further 
concludes that use of these smaller geographic areas ultimately will 
result in a more diverse group of prospective bidders, because small 
and medium-sized operatives will have incentives to seek EA licenses.
    8. Thus, 800 MHz SMR wide-area licenses in the upper 10 MHz block 
will be based on the 172 EAs covering the continental United States and 
Alaska, and three additional licensing regions covering the five U.S. 
possessions, Guam, Northern Marina Islands, Puerto Rico, U.S. Virgin 
Islands, and American Samoa.
3. EA Spectrum Blocks
    9. In the CMRS Third R&O, the Commission observed that most 
commenters agreed that wide-area SMR systems must have the ability to 
use (and reuse) a large number of channels, preferably on contiguous 
frequencies, to compete successfully with cellular and broadband PCS. 
Based on the record established earlier in the 800 MHz SMR proceeding 
and the comments submitted in the CMRS proceeding, the Further Notice 
proposed to divide the upper 10 MHz block of 800 MHz SMR spectrum into 
four blocks of 2.5 MHz, corresponding to 50 channels per block, under 
the Commission's existing frequency allocation rules. In addition, the 
Commission chose not to propose to issue a single license covering the 
entire 10 MHz upper block of 800 MHz SMR spectrum because it determined 
that a single 10 MHz license would preclude licensing of multiple wide-
area licensees in each market.
    10. In this First R&O, the Commission concludes that dividing the 
upper 10 MHz block into multiple spectrum blocks is both feasible and 
desirable. The Commission concludes that allocating varying size blocks 
will accomplish its goal of creating opportunities for wide-area SMR 
providers with differing spectrum needs. Thus, the Commission adopts a 
licensing plan which allocates one 120-channel block, one 60-channel 
block, and one 20-channel block for each EA. The Commission believes 
that these channel block sizes will provide opportunities for a variety 
of licensees of different sizes to participate in the provision of 
wide-area service.
4. 800 MHz SMR Spectrum Aggregation Limit
    11. In the CMRS Third R&O, the Commission concluded that a 45 MHz 
limit on aggregation of broadband PCS, cellular, and SMR spectrum, 
combined with existing service-specific caps for cellular and PCS, was 
sufficient to maintain a competitive CMRS market. In light of this 
conclusion, in the Further Notice, the Commission concluded that an 
additional aggregation limit within the 800 MHz SMR service was 
unnecessary.
    12. The Commission concludes in this First R&O that allowing 
unrestricted aggregation of 800 MHz SMR spectrum would not impede CMRS 
competition. The Commission expresses concern that limiting aggregation 
of 800 MHz SMR spectrum may result in a competitive disadvantage to SMR 
licensees as potential competitors to broadband PCS and cellular 
providers. Thus, the Commission further concludes that SMR licensees 
will be permitted to seek and (if they are the high bidders for all EA 
licenses) obtain all three of the EA licenses in a particular license 
area. The Commission reiterates, however, that even though it has 
declined to adopt a spectrum aggregation limit specific to the 800 MHz 
SMR service, such licensees remain subject to the 45 MHz CMRS spectrum 
aggregation limit and to the competitive component of the public 
interest standard.
5. Licensing in Mexican and Canadian Border Areas
    13. In the Further Notice, the Commission tentatively concluded 
that attempting to create different allocations in border areas would 
be administratively unworkable, and, thus, proposed to license wide-
area spectrum blocks on a uniform basis without distinguishing border 
from non-border areas. The Commission further proposed to license the 
channels in border areas not contained in the wide-area spectrum block 
on a channel-by-channel basis under the same rules it ultimately adopts 
for the lower 80 channels in non-border areas.
    14. The Commission concludes that EA spectrum blocks should be 
licensed on a uniform basis, without distinguishing border from non-
border areas. EA licenses will be entitled to use any available border 
area channels within their spectrum blocks, subject to international 
assignment and coordination of such channels. The Commission also 
concludes that the limited channel availability and other operating 
restrictions in the border areas are matters to be assessed by EA 

[[Page 6140]]
applicants in their valuation of EA spectrum blocks for competitive 
bidding purposes. The Commission, however, defers a decision regarding 
treatment of 800 MHz SMR channels licensed in border areas, but not 
included within the EA spectrum blocks, until the resolution of the 
Second Further Notice of Proposed Rule Making in PR Docket No. 93-144.

B. Rights and Obligations of EA Licensees

1. Operational Flexibility
    15. In the Further Notice, the Commission tentatively concluded 
that wide-area SMR licensees in the 800 MHz band should be authorized 
to construct stations at any available site and on any available 
channel within their respective spectrum blocks. In addition, the 
Commission proposed to allow wide-area licensees to ``self-coordinate'' 
system modifications within their service areas--that is, to add, 
subtract, move, and otherwise modify their base station facilities 
without prior Commission consent, provided they notify the Commission 
of the coordinates and certify compliance with its co-channel 
interference protection and emission requirements.
    16. The Commission concludes that grant of EA licenses will provide 
licensees with: (1) the right to construct at any available site within 
the EA, and to add, subtract, or move site locations within the EA 
during the license term, on a ``self-coordinated'' basis; and (2) the 
right to use any available spectrum within the EA licensee's designated 
spectrum block on a self-coordinated basis, including full discretion 
over channelization of available spectrum within the block (provided 
that emission mask requirements are met, and co-channel interference 
protection is afforded to incumbent licensees and co-channel EA 
licensees in neighboring EAs). The Commission further concludes that 
simplified initial licensing and subsequent system modification 
substantially will reduce the existing administrative burden on both 
SMR licensees and the Commission, and will establish greater 
consistency with its cellular and PCS licensing rules.
2. Spectrum Management Rights--Acquisition and Recovery of Channels 
Within Spectrum Blocks
    17. In the Further Notice, the Commission recognized that the 
operational flexibility afforded to wide-area 800 MHz SMR licensees 
would be limited by the large number of systems already authorized and 
operating in the band, particularly in major markets. The Commission 
noted that even if wide-area licensees do not immediately obtain clear 
spectrum comparable to its allocations for cellular or broadband PCS, 
wide-area licensing should confer other valuable rights that would 
enhance a licensee's ability to establish wide-area service. Thus, the 
Commission proposed to assist wide-area licensees in consolidating 
spectrum within their respective blocks by providing that (1) if an 
incumbent fails to construct, discontinues operations, or otherwise has 
its license terminated by the Commission, the spectrum covered by the 
incumbent's authorization automatically reverts to the wide-area 
licensee; and (2) if a wide-area licensee negotiates to acquire an 
incumbent system by assignment or transfer, the assignment or transfer 
presumptively will be considered in the public interest.
    18. In this First R&O, the Commission concludes that an EA licensee 
has the right to use any spectrum within the EA block that is recovered 
by the Commission. In addition, the Commission determines that 
assignments from incumbents operating in an EA spectrum block to the 
respective EA licensee generally will be presumed to be in the public 
interest. The Commission concludes that granting these rights to EA 
licensees will give them greater flexibility in managing their 
spectrum, establish greater consistency with its cellular and PCS 
rules, and reduce regulatory burdens on both licensees and the 
Commission with respect to future management of the spectrum within the 
wide-area blocks. The Commission also eliminates all waiting lists for 
SMR Category channels within the upper 10 MHz block, and dismisses all 
applications on such waiting lists. The Commission determines that 
continuing such lists would be inconsistent with the wide-area 
licensing scheme it has adopted.
    19. With respect to the impact of these rights on the finders' 
preference program, the Commission concludes that successful applicants 
for a finders' preference program will be considered an ``incumbent'' 
within the meaning of the rules adopted in the First R&O. In addition, 
the Commission no longer will accept finders' preference requests 
following the adoption of this First R&O. As a result, the EA licensee 
will have the exclusive right to recover unconstructed or non-
operational channels on blocks for which it is licensed.
3. License Term and Renewal Expectancy
    20. In the CMRS Third R&O, the Commission determined that every 
Part 90 licensee that is reclassified and treated as a CMRS licensee 
when its current license term expires thereafter shall have a ten-year 
license term and be afforded a renewal expectancy, provided it is able 
to demonstrate that it: (1) has provided ``substantial'' service during 
the license term; and (2) has complied with applicable Commission rules 
and policies, and the Communications Act. Furthermore, the Commission 
determined that ``grandfathered'' Part 90 licensees, because they 
retain their ``private'' status until August 10, 1996, would not be 
afforded either the ten-year license term or the renewal expectancy 
during the statutory transition period.
    21. In this First R&O, the Commission determines that EA licenses 
should be granted for a ten-year license term. In addition, EA 
licensees generally will be afforded a renewal expectancy as determined 
in the CMRS Third R&O.

C. Treatment of Incumbent Systems

1. Mandatory Relocation
    22. In the Further Notice, the Commission tentatively concluded 
that incumbent SMR systems should not be subject to mandatory 
relocation to new frequencies pursuant to Nextel's band-clearing 
proposal. The Commission also expressed concern that mandatory 
relocation could impose significant costs and disruption on incumbent 
licensees.
    23. The Commission concludes in this First R&O that, based on the 
record in this proceeding, a smooth and expedient transition to the new 
licensing framework for 800 MHz SMR service cannot be accomplished 
without some form of mandatory relocation. Thus, the Commission has 
created a two-phase mandatory relocation mechanism under which there is 
a fixed one-year period for voluntary negotiations between EA licensees 
and incumbents and a two-year period for mandatory negotiations. Under 
this mechanism, if an EA licensee and an incumbent licensee fail to 
reach an agreement by the conclusion of the mandatory negotiation 
period, then the EA licensee may request involuntary relocation of the 
incumbent's system provided that it: (1) guarantees payment of all 
costs of relocating the incumbent to a comparable facility; (2) 
completes all activities necessary for placing the new facilities into 
operation, including engineering and frequency coordination, if 
necessary; and (3) builds and tests the 

[[Page 6141]]
new system. Specifically, any relocation of an incumbent must be 
conducted in such a fashion that there is a ``seamless'' transition 
from the incumbent's ``old'' frequency to its ``relocated'' frequency 
(that is, there is no significant disruption in the incumbent's 
operations). In connection with this mandatory relocation mechanism, EA 
licensees will be required to notify incumbents operating on 
frequencies included in their spectrum block of their intention to 
relocate such incumbents within 90 days of the release of the Public 
Notice commencing the voluntary negotiation period. If an applicant 
does not receive timely notification of relocation, the EA licensee 
loses the right to require that incumbent to relocate.
    24. The Commission also initiates a partial lifting of the freeze 
on acceptance of new applications for SMR and General Category channels 
to permit those assignments and transfers of control that involve 
modifications to licensed facilities, provided such assignments and 
transfers are designed to accommodate market-driven, voluntary 
relocation arrangements between incumbents and potential EA applicants, 
and do not change the 22dBu service contour of the facilities to be 
relocated. This option is not available for purposes of relocating 
incumbents from one part of the upper 10 MHz block to another. 
Moreover, potential EA applicants and relocating incumbents utilizing 
this option must be completely unaffiliated. Processing of these 
assignments and transfers will continue until the date the Commission 
releases the Public Notice announcing the upper 10 MHz auction.
2. Incumbent Operation Flexibility
    25. In the Further Notice, the Commission tentatively concluded 
that in those situations in which incumbents are allowed to continue 
operating on already-licensed facilities, incumbent systems should not 
be allowed to expand beyond their existing service areas on those 
channels designated for wide-area licensing, without the consent of the 
wide-area licensee.
    26. The Commission concludes that allowing non-EA licensees to 
expand their systems at will after wide-area licensing has occurred 
would diminish substantially the value of the EA license and would 
create continuing uncertainty for EA applicants and licensees alike. 
The Commission recognizes, however, that there may be circumstances in 
which an EA licensee should be required to permit incumbents to make 
minor alterations to their service areas to preserve the viability of 
their systems. Thus, the Commission granted operational flexibility to 
incumbent SMR licensees to add, subtract, or move site locations within 
their current 22 dBu contours, on a ``self-coordinated'' basis. The 
incumbent must, however, still comply with the short-spacing criteria 
in Section 90.621(b) of the Commission's rules, even if its 
modifications do not extend its 22 dBu interference contour. Incumbent 
licensees will be required to notify the Commission of any changes in 
technical parameters or additional stations constructed, including 
agreements with an EA licensee to expand beyond their signal strength 
contour, through a minor modification of their license.

D. Co-channel Interference Protection

1. Incumbent SMR Systems
    27. In the CMRS Third R&O, the Commission concluded that, as a 
general matter, it would retain its existing co-channel protection 
rules for CMRS licensees. Under the current rules, a wide-area licensee 
would be required to afford protection to incumbents, either by 
locating its stations at least 113 km (70 mi) from the facilities of 
any incumbent, or by complying with the co-channel separation standards 
set forth in its ``short-spacing'' rule if it seeks to operate stations 
located less than 113 km (70 mi) from an incumbent licensee's 
facilities.
    28. In this First R&O, the Commission determines to require EA 
licensees to afford interference protection to incumbent SMR systems, 
as provided in Section 90.621 of the Commission's rules. As a result, 
an EA licensee will be able to satisfy its co-channel protection 
obligations with respect to incumbents in one of three ways: (1) by 
locating its stations at least 113 km (70 miles) from any incumbent's 
facilities; (2) by complying with the short-spacing rule if it seeks to 
operate stations less than 113 km from an incumbent's facilities; or, 
(3) by negotiating an even shorter distance with the incumbent 
licensee. The Commission concludes that these requirements will ensure 
adequate protection of incumbent operations, without hampering the 
ability of EA licensees to construct stations throughout their 
authorized service areas. The Commission believes that this rule will 
afford maximum flexibility to EA licensees, allow incumbents to fill in 
``dead spots,'' and protect incumbent licensees from actual 
interference.
2. Adjacent EA Licensees
    29. In the CMRS Third R&O, the Commission concluded that the co-
channel interference protection obligations of geographic-area 
licensees with respect to other geographic-area licensees would be 
similar to those imposed in the cellular and PCS services. In the 
Further Notice, the Commission tentatively concluded, therefore, that 
wide-area SMR licensees in the 800 MHz band should not be allowed to 
exceed a signal level of 22 dBuV/m at their service area boundaries 
(unless they negotiate a different signal strength limit with all 
potentially affected adjacent licensees).
    30. In this First R&O, the Commission prohibits EA licensees from 
exceeding a signal level of 40 dBuV/m at their service area boundaries, 
unless all bordering EA licensees agree to a higher field strength. The 
Commission requires coordination of frequency use between co-channel 
adjacent EA licensees and all other affected parties. This approach 
provides EA licensees with a signal strength level sufficient to 
operate their systems up to the borders of their EAs, while also 
providing protection to adjacent operations. As an exception to this 
requirement, when a single entity obtains licenses for adjacent EAs on 
the same spectrum block, it will not be required to coordinate its 
operations in this manner.
3. Emission Masks
    31. To protect against adjacent channel interference, the 
Commission has emission mask rules in most mobile radio services to 
restrict transmitter emissions on the spectrum adjacent to the 
licensee's assigned channel. In the CMRS Third R&O, the Commission 
affirmed its out-of-band emission rules for CMRS services and 
determined that out-of-band emission rules should apply only where 
emissions have the potential to affect other licensees' operations. 
With respect to licensees that have exclusive use of a block of 
contiguous channels, the Commission concluded that out-of-band emission 
rules would be applied only to the extent necessary to protect 
operations outside of the licensee's authorized spectrum.
    32. The Commission concludes that out-of-band emission rules should 
apply only to the ``outer'' channels included in an EA license and to 
spectrum adjacent to interior channels used by incumbents. The 
Commission believes that these channels alone have the potential to 
affect operations outside of the EA licensee's authorized bandwidth. 
The Commission also believes that this requirement will facilitate dual 
mode 

[[Page 6142]]
SMR/cellular operation, similar to that in the PCS/cellular context, 
which ultimately will add capacity to the systems operated by the EA 
licensees.

E. Construction Requirements

1. EA Licensees
    33. In the CMRS Third R&O, the Commission determined that the 
record in the CMRS proceeding generally supported use of longer 
construction periods, combined with interim coverage requirements, to 
ensure that wide-area CMRS licensees provide service to portions of 
their service area before the construction period expires. In the 
Further Notice, the Commission noted that such an approach has been 
used for cellular service and recently was adopted for both broadband 
and narrowband PCS. In the Further Notice, the Commission tentatively 
concluded that wide-area SMR licensees should have five years to 
construct their systems.
    34. In this First R&O, the Commission concludes that EA licensees 
should have a five-year construction period. While this construction 
period is shorter than that imposed for PCS systems, we agree with the 
majority of commenters that it is the most appropriate time period for 
the 800 MHz SMR service. In addition, given the substantial 
construction of 800 MHz SMR systems (including wide-area systems) to 
date, the ten-year construction period applicable to PCS appears 
excessive for the service. Although a five-year construction period may 
give some EA licensees more time to construct certain facilities than 
otherwise might have been allowed, the Commission believes that EA 
licensees should have this flexibility. Furthermore, the Commission 
believes that use of competitive bidding to select geographic-area 
licensees provides ample incentives for rapid system construction, 
since this permits license winners to recover their bidding expenses.
2. Extended Implementation Authority
    35. The Commission noted in the Further Notice that some existing 
SMR licensees have been granted extended implementation periods of up 
to five years to construct their systems, pursuant to either a waiver 
of its construction and loading rules or Section 90.629 of its Rules. 
The Commission's rules require SMR licensees with extended 
implementation authority to submit annual certifications of compliance 
with their yearly station construction commitments. Moreover, if the 
Commission concludes, at any time, that the licensee has failed to meet 
such construction commitments, it may terminate extended implementation 
authority and give the licensee six months from the termination date to 
complete construction of the system.
    36. Following the Commission's adoption of the Further Notice, some 
SMR licensees filed requests for extended implementation authority, 
which remain pending. With respect to two such requests filed by 
Chadmoore and PCC Management Corp., the Wireless Telecommunications 
Bureau (``Bureau'') released a Public Notice seeking comment on whether 
the requests should be granted. In its extended implementation 
authority request, Chadmoore sought three years to construct a non-
contiguous ``wide-area'' SMR system that will extend from the 
southeastern United States through the upper Midwest and use new 
technology. Chadmoore argued that grant of its extended implementation 
request was warranted on four grounds: (a) Chadmoore's principals have 
demonstrated expertise in SMR sales and service; (b) Chadmoore 
previously has demonstrated its ability to acquire and construct those 
licenses granted to SMR ``investors;'' (c) Chadmoore's proposal would 
assist those licensees ``who have, as yet, not constructed'' their 
stations, and who are in danger of losing their investment once their 
already extended deadline has expired; and, (d) grant of Chadmoore's 
proposal would promote competition in the SMR equipment manufacturing 
market. Similarly, PCC sought a period of three years to construct a 
regional, and ultimately nationwide, network of SMR systems. PCC's 
proposed system would include 2,181 channels, 849 conventional channels 
and 269 trunked channels, encompassing 1,118 licenses. PCC argued that 
grant of its extended implementation request was warranted for the 
following reasons: (a) climatic conditions for the region(s) in which 
the SMR systems are located preclude construction during certain 
seasons of the year; (b) grant of PCC's proposal would assist licensees 
who have not yet constructed their authorized facilities; (c) PCC's 
implementation plan would result in a more cost-effective build-out for 
the stations included in its proposal; and (d) grant of PCC's proposal 
would facilitate the implementation of an integrated nationwide 
network.
    37. The Commission initially established extended implementation 
authority for SMRs to facilitate construction of wide-area systems. In 
the First R&O, the Commission concludes that the availability of 
extended implementation authority in the 800 MHz SMR service is no 
longer necessary. In fact, the Commission is concerned that both 
existing and future grants of extended implementation authority would 
be contrary to the underlying goals of this proceeding. Specifically, 
the Commission believes that allowing licensees to retain extended 
implementation authority of up to five years after adoption of the 
wide-area licensing approach detailed in this First R&O would impinge 
upon the construction requirements imposed on EA licensees. Thus, the 
Commission believes that it is necessary not only to cease acceptance 
of requests for extended implementation authority but also to 
accelerate the termination date of existing implementation periods so 
that EA licensees will not be unnecessarily hampered in their efforts 
to comply with the construction requirements associated with their 
authorizations.
    38. In addition, several licensees and commenters contend that such 
extended implementation grants have resulted in spectrum warehousing. 
To address these spectrum warehousing concerns, the Commission will 
require all incumbent 800 MHz SMR licensees who have received extended 
implementation authority to demonstrate that allowing them extended 
time to construct their facilities is warranted and furthers the public 
interest. Specifically, a licensee seeking to retain extended 
implementation authority must: (a) indicate the duration of its 
extended implementation period (including commencement and termination 
date); (b) provide a copy of its implementation plan, as originally 
submitted and approved by the Commission, and any Commission-approved 
modifications thereto; (c) demonstrate its compliance with Section 
90.629 of its rules if authority was granted pursuant to that 
provision, including confirmation that it has filed annual 
certifications regarding fulfillment of its implementation plan; and 
(d) certify that all facilities covered by the extended implementation 
authority proposed to be constructed as of the adoption date of this 
First R&O are fully constructed and that service to subscribers has 
commenced as defined in the CMRS Third R&O. These showings must be 
submitted within 90 days from the effective date of this First R&O. The 
Commission notes that all of the information to be included in the 
showing presently is required by Section 90.629 of its Rules. The 
Commission delegated to the Bureau the authority to review and take 
appropriate action upon such showings.
    39. If a licensee's extended implementation authority showing is 
approved by the Bureau, such licensee 

[[Page 6143]]
will be afforded a construction period of two years or the remainder of 
its current extended implementation period, whichever is shorter. The 
Commission recognizes that some licensees were initially granted 
extended implementation periods which exceed this two-year period. In 
those instances where a licensee demonstrates that it has fully 
complied with the requirements of Section 90.629 of the Commission's 
rules and that its system cannot reasonably be completed within the 
two-year period, the Commission will entertain requests for the minimum 
period of time necessary to complete implementation of the licensee's 
proposal provided that the licensee explains why the two-year period is 
an insufficient amount of time. The Commission anticipates that such 
explanation would entail the same type of public interest showing 
associated with a request for waiver of the Commission's rules under 
Section 1.3 of the rules.
    40. Upon the termination of this two-year period, authorizations 
for facilities that remain unconstructed will cancel automatically. If 
a licensee either fails to submit the showing described above within 
the designated time frame or submits an insufficient or incomplete 
showing, such licensee will have six months from the last day on which 
it could timely file such a showing or six months from the denial of 
its request to construct the remaining facilities covered under its 
implementation plan. After this six-month period, authorizations for 
facilities still unconstructed will cancel automatically.
    41. With respect to pending requests for extended implementation 
authority, the Commission determines that grant of these requests would 
conflict with its goal of uniformly implementing wide-area licensing. 
It also reiterates that parties that remain interested in obtaining 
extended implementation authority are free to apply for an EA license 
under the Commission's new rules.
3. Interim Coverage Requirements
    42. In the CMRS Third R&O, the Commission concluded that 800 MHz 
wide-area SMR licensees should be subject to interim coverage 
requirements that are similar to those in the cellular and PCS rules. 
In the Further Notice, the Commission proposed that geographic-area 
licensees be required to provide coverage to one-third of the 
population within their license area within three years of initial 
license grant, and to two-thirds of the population by the end of their 
five-year construction period.
    43. In the CMRS Third R&O, the Commission noted that any interim 
coverage requirements for wide-area SMR systems must account for the 
fact that geographic-area licensees may be required to provide co-
channel protection to incumbent systems within their service area. In 
the Further Notice, the Commission indicated its belief that when a 
licensee acquires a wide-area license, it assumes the responsibility of 
obtaining the right to use sufficient spectrum to provide coverage if 
such spectrum is not already available. The Commission further 
indicated its expectation that coverage be achieved directly by 
constructing facilities on available spectrum authorized to the wide-
area licensee or acquiring such spectrum through buy-outs of incumbent 
licensees within its authorized spectrum block. To the extent that the 
Further Notice could be read to propose that coverage could be met 
through use of resale or similar agreements, the Commission clarifies 
its intention that the wide-area licensee is free to engage in resale 
activities, but must satisfy its construction requirements through use 
of its facilities and not capacity acquired from others through resale.
    44. The Commission will require EA licensees to provide coverage to 
one-third of the population of their respective EAs within three years 
of initial license grant and to two-thirds by the end of their five-
year construction period. This requirement is consistent with the 
Commission's 900 MHz SMR rules. Unlike its approach in the 900 MHz SMR 
context, the Commission is not adopting a ``substantial service'' 
benchmark for the upper 10 MHz block as an alternative to the 
population coverage criteria. Given the already extensive licensing in 
the upper 10 MHz block, the Commission believes it is unlikely that an 
EA licensee could provide substantial service without buying incumbent 
systems or relocating incumbents. Similarly, the Commission did not 
adopt a ``substantial service'' standard in the Multipoint Distribution 
Service (MDS) because of extensive incumbent presence in that spectrum.
4. Channel Use Requirement
    45. Given the extensive licensing of the upper 10 MHz block, the 
Commission shares the concern of several commenters that interim 
coverage requirements alone may not ensure efficient spectrum use 
unless a channel use requirement is added. Specifically, the Commission 
is concerned that an EA licensee potentially could satisfy the interim 
coverage requirements by constructing only one channel in its spectrum 
block. This would result in inefficient use of 800 MHz SMR spectrum, 
for which there is great demand. In addition, unlike the 900 MHz SMR 
service and other lightly encumbered auctionable services, the 
substantial incumbent presence in the 800 MHz SMR service presents the 
potential for a bidder who is incapable of building out a wide-area 
system to participate in the auction solely to restrict a competing 
incumbent licensee's ability to expand. Accordingly, the Commission 
will require EA licensees to construct 50 percent of the total channels 
included in their spectrum blocks in at least one location in their 
respective EAs within three years of initial license grant. Although 
the Commission does not impose an additional channel use requirement at 
the fifth year, EA licensees nonetheless are required to maintain their 
compliance with the initial channel usage requirement for the remainder 
of their construction period.
5. Non-compliance With Interim Coverage Requirements
    46. The Commission concluded that an EA licensee's failure to meet 
either the three-year or five-year coverage requirements or the channel 
usage requirement will result in forfeiture of the entire EA license. 
Forfeiture of the EA license, however, will not result in the loss of 
any constructed facilities authorized to the licensee prior to the 
auction.

F. EA License Application Issues

1. Initial Eligibility
    47. In the CMRS Third R&O and the Further Notice, the Commission 
tentatively concluded that the initial application process for wide-
area SMR licenses should be open to any qualified applicant. The 
Commission also sought comment on whether it was necessary to restrict 
eligibility for EA licenses to incumbent licensees (or to restrict 
eligibility based on other criteria) if competitive bidding procedures 
are used in the upper 10 MHz block.
    48. In this First R&O, the Commission concludes that restrictions 
on eligibility for EA licenses are not warranted, except that EA 
applicants will be presumptively classified as CMRS, and therefore will 
be required to comply with the alien ownership requirements specified 
in Section 310 of the Act. The Commission has adopted specific 
provisions in the service rules for the upper 10 MHz block to address 
these concerns, e.g., imposition of construction periods combined with 

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interim coverage and channel use requirements. Moreover, the Commission 
believes that the competitive bidding process itself will deter 
speculation by those not genuinely interested in providing service to 
the public. In addition, the Commission believes that open eligibility 
for the EA licensees will be pro-competitive and potentially will 
result in a diverse group of entities providing wide-area SMR service 
in the upper 10 MHz block.
    49. With respect to foreign ownership, all applicants will be 
subject to Section 310(b) of the Communications Act, except to the 
extent they have received waiver of preexisting ownership interests. In 
the CMRS docket, the Commission established specific procedures for 
private mobile services licensees reclassified as CMRS to file waiver 
petitions to retain existing foreign ownership interests. Thus, any 
reclassified private mobile services licensees that have levels of 
alien ownership or control that would be prohibited when these 
licensees assume CMRS status must already have filed a petition seeking 
to have such interests grandfathered.
2. Regulatory Classification of EA Licensees
    50. In the CMRS Second R&O, the Commission determined that SMR 
licensees would be classified as CMRS if they offered interconnected 
service and as PMRS if they did not offer such service. In the Further 
Notice, the Commission indicated its view that most, if not all, EA 
licensees will be classified as CMRS, because they are likely to 
provide interconnected service as part of their service offering. As a 
result, the Commission proposed to classify all EA licensees 
presumptively as CMRS providers. The Commission also proposed that EA 
applicants or licensees who do not intend to provide CMRS service would 
be able to overcome this presumption by demonstrating that their 
service does not fall within the CMRS definition. The Commission 
further proposed that the statutory grandfathering period also would 
apply with respect to the operation of this presumption. As a result, 
entities licensed in the SMR service as of August 10, 1993, would not 
be subject to CMRS regulation, other than foreign ownership 
restrictions, until August 10, 1996.
    51. The Commission reiterates its conclusion that EA licensees will 
be classified presumptively as CMRS providers. The Commission also 
concluded that EA applicants and licensees, like other CMRS providers 
(such as broadband PCS applicants and licensees), will be able to 
overcome this presumption if they demonstrate that their service does 
not fall within the CMRS definition provided in Section 332(d)(1) of 
the Communications Act.

G. Redesignation of Other 800 MHz Spectrum--General Category Channels 
and Inter-Category Sharing

    52. Currently, 800 MHz SMR systems may be licensed on the General 
Category channels or licensed under its inter-category sharing rules on 
100 channels in the Industrial/Land Transportation and Business 
Categories (collectively, ``Pool Channels''). In the Further Notice, 
the Commission indicated that although it believes that SMR licensees 
with existing operations on the General Category or Pool Channels 
should be allowed to operate on such channels, the Commission also 
believes that some restriction on future SMR applications for General 
Category or Pool Channels might be appropriate.
1. General Category Channels
    53. In the Further Notice, the Commission asked commenters to 
address whether the entire General Category or some portion thereof 
should be designated for future licensing exclusively to SMR 
applicants. The Commission's licensing records indicate that the 
overwhelming majority of General Category channels are used for SMR as 
opposed to non-SMR service. As a result, the Commission concludes that 
the demand for additional spectrum by SMR providers is significantly 
greater than the demand by non-SMR services. In addition, given the 
already extensive licensing on the upper 10 MHz block and the mandatory 
relocation established in this First R&O, as part of its wide-area 
licensing for the 800 MHz SMR service, the Commission expects that 
demand for additional SMR spectrum will increase, as EA licensees seek 
frequencies for relocation of incumbents. The Commission believes that 
by prohibiting SMR eligibility on the Pool Channels it will relieve 
much of the pressure on such frequencies. The Commission concludes that 
the most efficient use of the General Category channels is to 
redesignate them exclusively for SMR use.
2. Inter-Category Sharing
    54. In the Further Notice, the Commission noted that the Pool 
Channels are intended for non-commercial internal use by Business and 
Industrial/Land Transportation licensees, and their availability for 
SMR licensees was to be on a limited basis only. After the release of 
the Further Notice, the Bureau placed a freeze on inter-category 
sharing.
    55. The Commission is concerned that continuing to allow SMR 
applications for the Pool Channels could cause a scarcity of 
frequencies for PMRS uses. Specifically, if these channels remain 
available to SMR licensees, but are not subject to auctions, demand for 
the channels by SMR applicants seeking to avoid auctions may render 
them unavailable to other eligible Part 90 services. Thus, the 
Commission revises current eligibility rules for inter-category sharing 
of the Pool Channels to eliminate the risk of SMR encroachment on 
spectrum allocated for PMRS purposes. SMR licensees no longer will be 
eligible to apply for Pool Channels on an inter-category sharing basis.
    56. In light of its elimination of SMR eligibility for the Pool 
Channels, the Commission concludes that non-SMR licensees no longer 
will be eligible for SMR channels, including the General Category 
channels. With respect to the upper 10 MHz block, the Commission 
concludes that non-SMR incumbent licensees, like SMR incumbent 
licensees, will receive the operational rights extended to incumbents 
and will be subject to the mandatory relocation mechanism.

III. Eighth Report and Order

A. Auctionability of the Upper 10 MHz Block of 800 MHz SMR Spectrum

    57. Section 309(j) of the Communications Act, permits auctions only 
where: (1) mutually exclusive applications for initial licenses or 
construction permits are accepted for filing by the Commission; (2) the 
principal use of the spectrum will involve or is reasonably likely to 
involve the receipt by the licensee of compensation from subscribers in 
return for enabling those subscribers to receive or transmit 
communications signals; and, (3) the objectives set forth in Section 
309(j)(3) would be promoted.
    58. In the Second Report and Order in PP Docket No. 93-253, 59 FR 
22980 (May 4, 1994) (Competitive Bidding Second R&O), the Commission 
concluded that SMR as a class of service, including 800 MHz SMR, would 
satisfy the Section 309(j) criteria for auctionability. The Commission 
noted that its rules explicitly contemplate and expect that SMR 
licensees will provide service to eligible subscribers for 
compensation. The Commission concluded that the use of competitive 
bidding will speed the development and rapid deployment of SMR service, 
including service in rural areas, with minimal administrative or 
judicial 

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delays, as required by Section 309(j)(3)(A). The Commission also 
determined that competitive bidding would promote the objectives of 
Section 309(j)(3)(C) in the SMR service by recovering for the public a 
portion of the value of SMR spectrum made available for commercial use, 
and avoiding unjust enrichment.
    59. In the CMRS Third R&O, the Commission concluded that it 
generally should use competitive bidding procedures to select among 
mutually exclusive CMRS applications where it has the authority to do 
so and where the Commission find such processing to be in the public 
interest. The Commission specifically concluded that competitive 
bidding procedures should be used to select between mutually exclusive 
initial applications in the 800 MHz SMR service. The Commission also 
concluded that, because the number of mutually exclusive applications 
in future licensing in the 800 MHz SMR service may be considerable, the 
use of competitive bidding will ensure that the qualified applicants 
who place the highest value on the available spectrum will prevail in 
the selection process.
    60. The Commission reiterates its conclusion that competitive 
bidding is an appropriate licensing tool for the 800 MHz SMR service. 
The Commission emphasizes that the use of auctions will apply only to 
issuance of initial licenses in the upper 10 MHz block, the EA 
licenses. These EA licenses previously have not been issued by the 
Commission, and include certain rights and obligations that previously 
were not granted to or required of licensees. Significantly, its 
granting of these EA licenses does not affect rights afforded to 
licensees under existing authorizations, because incumbent licensees 
will be able to continue to operate their systems. Even though 
incumbents will be subject to mandatory relocation under certain 
circumstances, their existing operations will be protected. 
Furthermore, auctions will be used only in the event that there are 
competing applications for the same EA license.
    61. The Commission concludes that use of competitive bidding in the 
upper 10 MHz block is authorized by Section 309(j) of the 
Communications Act. The Commission affirmed its previous conclusion 
that 800 MHz SMR, as a service, satisfies the criteria set forth by 
Congress for determining when competitive bidding should be used. SMR 
licenses are used to provide service to subscribers for compensation, 
so a precondition to competitive bidding under Section 309(j)(2)(A) is 
met. Moreover, competitive bidding will further the public interest 
requirements of Section 309(j)(3), by promoting rapid development of 
service, fostering competition, recovering a portion of the value of 
the spectrum for the public, and encouraging efficient spectrum use. 
Where competitive bidding is utilized, a diverse group of entities, 
including incumbent licensees and potential new entrants, will be able 
to participate in the auction process, because the Commission has 
decided not to restrict eligibility for these EA licenses, an outcome 
which furthers the goals of Section 309(j)(3)(B) of the Communications 
Act.
    62. Additionally, the Commission believes that competitive bidding 
procedures will minimize administrative or judicial delays in 
licensing, particularly when compared to other licensing alternatives--
comparative hearings, lotteries (which specifically are prohibited 
since the 800 MHz SMR service is auctionable), or first-come, first-
served procedures. The Commission employed first-come, first-served 
procedures in the 800 MHz SMR service prior to its implementation of 
the Budget Act. The Commission's experience is that such procedures 
have resulted in processing delays. By contrast, the Commission expects 
that use of competitive bidding will allow interested parties to obtain 
expeditious access to 800 MHz SMR spectrum and to use such spectrum 
efficiently. The Commission concludes that this result furthers both 
Section 309(j)(3)(A) and Section 309(j)(3)(D) of the Communications 
Act.
    63. The Commission disagrees with those commenters who argue that 
the Commission's competitive bidding authority does not extend to 
existing services. Section 309(j) of the Communications Act does not 
distinguish between new services (such as PCS) and existing services in 
terms of whether initial licenses in a given service should be subject 
to competitive bidding. Accordingly, the Commission concludes that its 
determination that the 800 MHz SMR service is auctionable is fully 
consistent with Section 309(j) of the Communications Act.

B. Competitive Bidding Methodology for Upper 10 MHz Block

1. Competitive Bidding Design
    64. Simultaneous Multiple Round Auctions. Based on the record in 
this proceeding and the Commission's successful experience conducting 
simultaneous multiple round auctions for other CMRS services (e.g., 
narrowband and broadband PCS), the Commission believes a simultaneous 
multiple round auction is the most appropriate competitive bidding 
design for the 10 MHz upper block of 800 MHz SMR spectrum. The 
Commission has developed and successfully conducted auctions with 
software capable of handling numerous licenses in a simultaneous 
multiple round auction. Thus, this methodology will afford the 
Commission administrative convenience and enable it to hold an auction 
quickly and efficiently. For certain bidders, the value of these 
licenses will be significantly interdependent because of the 
desirability of aggregation across geographic regions. Given this high 
degree of interdependency among licenses, the Commission rejects SBA's 
suggestion that single round sealed bidding is a more appropriate 
competitive bidding design for licensing the upper 10 MHz SMR spectrum 
blocks. The Commission believes that simultaneous multiple round 
bidding will generate more information about license values during the 
course of the auction and provide bidders with more flexibility to 
pursue back-up strategies, than if the licenses were auctioned 
separately or through sealed bidding. As the Commission decided in the 
900 MHz SMR service, the Bidder Information Package for the 10 MHz 
upper block licenses will provide all the information about incumbent 
licensees that is available in its licensing records as of 60 days 
prior to the filing deadline for participation in the auction. In this 
connection, upon release of the Public Notice announcing the date of 
the auction for the upper 10 MHz block of 800 MHz SMR spectrum, all 
pending applications for frequencies within this spectrum will be 
returned without prejudice to the applicants. These applicants then 
will be able to seek licenses for these frequencies through the 
competitive bidding process. In addition, the Commission encourages all 
potential bidders to examine these records carefully and do their own 
independent investigation regarding existing licensees' operations in 
each EA in which they intend to bid in order to maximize their success 
in the auction. The Commission will hold a seminar for prospective 
bidders to acquaint them with this competitive bidding design. The 
Commission will announce the date and location for such seminar by 
Public Notice. The Commission concludes, therefore, that simultaneous 
multiple round bidding is most likely to award licenses to the bidders 
who value them the most highly and to provide bidders with the greatest 
likelihood of obtaining the license 

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combinations that best satisfy their service needs.
    65. Stopping Rules. The Commission will adopt a simultaneous 
stopping rule for the upper 10 MHz block 800 MHz SMR auction. The 
simultaneous stopping rule is designed to allow bidders to decide how 
long the auction will run, based on bidding strategy and demand for 
each license. Under a simultaneous stopping rule, bidding will remain 
open on all licenses in an auction until bidding stops on every 
license. In this Eighth R&O, the Commission concludes that the 
substitutability between licenses within the same EA and the ability to 
pursue back-up strategies support the use of a simultaneous stopping 
rule.
    66. As a result, the upper 10 MHz block 800 MHz SMR auction will 
close after one round passes in which no new valid bids or proactive 
activity rule waivers are submitted. The Commission retains the 
discretion to keep the auction open even if no new acceptable bids and 
no proactive waivers are submitted in a single round. In the event that 
the Commission exercise this discretion, the effect will be the same as 
if a bidder has submitted a proactive waiver. The Commission also 
retains the discretion to announce market-by-market closings.
    67. The Commission further retains the discretion to declare after 
40 rounds that the auction will end after some specified number of 
additional rounds. Bids will be accepted only on licenses where the 
high bid has increased in the last three rounds. This will deter 
bidders from continuing to bid on a few low value licenses solely to 
delay the closing of the auction. It also will enable the Commission to 
end the auction when it determines that the benefits of terminating the 
auction and issuing licenses exceed the likely benefits of continuing 
to allow bidding. The Commission will announce by Public Notice the 
number of remaining rounds and other final bidding procedures. In this 
Eighth R&O, the Commission delegates authority to the Bureau to issue 
such Public Notices.
    68. Activity Rules. In the Further Notice, the Commission proposed 
that if simultaneous multiple round auctions are used for the upper 10 
MHz block, the Commission would use activity rules the same as or 
similar to those used in simultaneous multiple round bidding for MTA-
based PCS licenses. The Commission has used the Milgrom-Wilson activity 
rule to award broadband and narrowband PCS licenses. In the Competitive 
Bidding Fifth R&O, the Commission permitted broadband PCS bidders one 
``automatic'' waiver from the activity rule during each stage of an 
auction. An automatic waiver is exercised by the Commission if a bidder 
fails to bid and fails to submit a ``proactive'' waiver, unless the 
bidder chooses to override the automatic waiver process to 
intentionally decrease eligibility: a ``proactive'' waiver is one which 
can be submitted by the bidder when it chooses not to bid in a round 
and wishes to maintain its current eligibility level. With respect to 
broadband PCS auctions, the Commission initially determined that only 
proactive waivers, and not automatic waivers, would keep an auction 
open. In that context, however, the Commission later modified the rule 
by retaining the discretion to keep an auction open even if no new 
acceptable bids and no proactive waivers are submitted in a single 
round. The Commission will employ the Milgrom-Wilson activity rule in 
conjunction with the simultaneous stopping rule. Under the Milgrom-
Wilson approach, the minimum activity level, measured as a fraction of 
the bidder's eligibility in the current round, increases during the 
course of the auction. The three-stage Milgrom-Wilson approach 
encourages bidders to participate in early rounds by limiting their 
maximum participation to some multiple of their minimum participation 
level.
    69. Absent waivers, a bidder's eligibility (in terms of activity 
units) in the current round is determined by the bidder's activity 
level and eligibility in the previous round. In the first round, 
however, eligibility is determined by the bidder's upfront payment and 
is equal to the upfront payment divided by $0.02 per activity unit.
    70. In each round of Stage I, a bidder who wishes to maintain its 
current eligibility must be active on licenses encompassing at least 
one-half (50 percent) of the activity units for which it currently is 
eligible. Failure to maintain the requisite activity level will result 
in a reduction in the amount of activity units upon which a bidder will 
be eligible to bid in the next round of bidding (unless an activity 
rule waiver is used). During Stage I, if bidding activity is below the 
required minimum level, eligibility in the next round will be 
calculated by multiplying the current round activity by two. 
Eligibility for each applicant in the first round of the auction is 
determined by the amount of the upfront payment received and the 
licenses identified in its auction application. In each round of Stage 
II, a bidder who wishes to maintain its current eligibility in the next 
round is required to be active on at least 75 percent of the activity 
units for which it is eligible in the current round. During Stage II, 
if activity is below the required minimum level, eligibility in the 
next round will be calculated by multiplying the current round activity 
by four-thirds (\4/3\). In each round of Stage III, a bidder who wishes 
to maintain its current eligibility must be active on licenses 
encompassing at least 95 percent of the activity units for which it is 
eligible in the current round. In Stage III, if activity in the current 
round is below 95 percent of current eligibility, eligibility in the 
next round will be calculated by multiplying the current round activity 
by twenty nineteenths (\20/19\). The Commission reserve the discretion 
to set and, by announcement before or during the auction, vary the 
requisite minimum activity levels (and associated eligibility 
calculations) for each auction stage. Retaining this flexibility will 
improve the Commission's ability to control the pace of the auction and 
help ensure that the auction is completed within a reasonable period of 
time.
    71. As in prior auctions, the Commission will determine the 
transition from one stage to the next in the 800 MHz SMR auction by the 
aggregate level of bidding activity, subject to its discretion. The 
transition rule also may be defined in terms of the ``auction activity 
level''--the sum of activity units of those licenses whose high bid 
increased in the current round, as a percentage of the total activity 
units of all licenses in that auction. The auction will start in Stage 
I and move to Stage II when the auction activity level is below ten 
percent for three consecutive rounds in Stage I. The auction will move 
from Stage II to Stage III when the auction activity level is below 
five percent for three consecutive rounds in Stage II. In no case can 
the auction revert to an earlier stage. The Commission retains the 
discretion, however, to determine and announce during the course of an 
auction when, and if, to move from one auction stage to the next. These 
determinations will be based on a variety of measures of bidder 
activity including, but not limited to, the auction activity level 
defined above, the percentage of licenses (measured in terms of 
activity units) on which there are new bids, the number of new bids, 
and the percentage increase in revenue.
    72. To avoid the consequences of clerical errors and to compensate 
for unusual circumstances that might delay a bidder's bid preparation 
or submission on a particular day, the Commission will provide bidders 
with five activity rule waivers that may be used in any round during 
the course of the auction. 

[[Page 6147]]
If a bidder's activity level is below the required activity level a 
waiver automatically will be applied. That is, if a bidder fails to 
submit a bid in a round, and its activity level from any ``standing'' 
high bids (i.e., high bids at the end of the bid withdrawal period in 
the previous round) falls below its required activity level, a waiver 
automatically will be applied. A waiver will preserve current 
eligibility in the next round, but cannot be used to correct an error 
in the bid amount. An activity rule waiver applies to an entire round 
of bidding and not to a particular EA service area.
    73. Bidders will be afforded an opportunity to override the 
automatic waiver mechanism when they place a bid, if they wish to 
reduce their bidding eligibility and do not want to use a waiver to 
retain their eligibility at its current level. If a bidder overrides 
the automatic waiver mechanism, its eligibility permanently will be 
reduced, and it will not be permitted to regain its bidding eligibility 
from a previous round. An automatic waiver invoked in a round in which 
there are no valid bids will not keep the auction open. Bidders will 
have the option to enter a ``proactive'' waiver during the bid 
submission period. If a bidder submits a proactive waiver in a round in 
which no other bidding activity occurs, the auction will remain open.
    74. The Commission retains the discretion to issue additional 
waivers during the course of an auction for circumstances beyond a 
bidder's control. The Commission also retains the flexibility to 
adjust, by Public Notice prior to an auction, the number of waivers 
permitted, or to institute a rule that allows one waiver during a 
specified number of bidding rounds or during specified stages of the 
auction. In this Eighth Report and Order, the Commission delegated to 
the Bureau the discretion to issue additional waivers or restrict the 
use of such waivers.
2. License Grouping
    75. In the Further Notice, the Commission tentatively concluded 
that if simultaneous multiple round auctions were used for the 800 MHz 
SMR wide-area spectrum blocks, the wide-area licenses covering these 
spectrum blocks should be auctioned simultaneously, because of the 
relatively high value and significant interdependence of the licenses.
    76. The Commission believes that the licenses for the upper 10 MHz 
band are significantly interdependent. The Commission believes that 
grouping interdependent licenses and putting them up for bid at the 
same time will facilitate awarding licenses to bidders who value them 
most highly by providing bidders with information about the prices of 
complementary and substitutable licenses during the course of an 
auction. Because potential bidders may be interested in aggregating 
spectrum across geographic areas as well as across spectrum blocks, the 
Commission disagrees with Cellcall's suggestion to auction each 
geographic area individually. As a result, the Commission concludes 
that all EA licenses for the upper 10 MHz block should be auctioned 
simultaneously. The Commission further concludes that holding a single 
auction for all 176 EAs in the 800 MHz SMR band will be the fairest, 
fastest, and most efficient means of distributing these licenses.
3. Bidding Issues for Upper 10 MHz Block of 800 MHz SMR Spectrum
    77. Bidding Procedures. In the Further Notice, the Commission 
proposed that if simultaneous multiple round auctions are used for 
wide-area SMR licenses, the Commission would use the same or similar 
bidding procedures to those used in simultaneous multiple round bidding 
for broadband PCS licenses. The Commission adopts the same bidding 
procedures used for MTA-based PCS licenses. Under these procedures, 
bidders will be able to submit bids via remote bidding, using special 
bidding software, or via telephone. The Commission has established a 
schedule of fees that participants in the competitive bidding process 
will be assessed for certain on-line computer services, bidding 
software, and for Bidder Information Packages. In addition, bidders 
will be permitted to bid electronically only if they have filed a 
short-form application electronically. Bidders who file their short-
form manually may bid only telephonically. When submitting bids 
telephonically, bidders may utilize the Internet to learn the round-by-
round results of the auction. Online services such as CompuServe, 
Prodigy, and America Online provide Internet access at a reasonable 
cost. Bidders also may, at negligible cost, use a computerized bulletin 
board service, accessible by telephone lines, from which auction 
results can be downloaded to a personal computer. The Commission 
intends to hold a seminar for prospective bidders to acquaint them with 
these bidding procedures.
    78. Bid Increments. In the Further Notice, the Commission proposed 
that if simultaneous multiple round auctions are used for the upper 10 
MHz block, the Commission would use the same or similar procedures for 
bid increments as those used in simultaneous multiple round bidding for 
MTA-based PCS licenses.
    79. The Commission will announce, by Public Notice prior to the 
auction, the general guidelines for bid increments. The Commission 
retains the discretion to set and, by announcement before or during the 
auction, vary the minimum bid increments for individual licenses or 
groups of licenses over the course of the auction.
    80. Duration of Bidding Rounds. In simultaneous multiple round 
auctions, the Commission recognize that bidders may need a significant 
amount of time to evaluate back-up strategies and develop their bidding 
plans. The Commission delegated to the Bureau the discretion to vary 
the duration of the bidding rounds or the interval at which bids are 
accepted (e.g., to run more than one round per day) in order to move 
the auction to closure more quickly. The Bureau will announce any 
changes to the duration of and intervals between bidding rounds, either 
by Public Notice prior to the auction or by announcement during the 
auction.
4. Procedural and Payment Issues
    81. Pre-Auction Application Procedures. In the Competitive Bidding 
Second R&O, the Commission determined that it should require only a 
short-form application (FCC Form 175) prior to auction, and that only 
winning bidders should be required to submit a long-form license 
application (FCC Form 600) after the auction. In this connection, the 
Commission determined that such a procedure would fulfill the statutory 
requirements and objectives and adequately protect the public interest. 
In the Further Notice, the Commission proposed to treat all wide-area 
applicants as initial applicants for public notice, application 
processing, and competitive bidding purposes, regardless of whether 
they already are incumbent licensees in the 800 MHz band. In addition 
in the Further Notice, the Commission proposed to require applicants 
for wide-area SMR licenses to file an initial ``short-form'' 
application in order to qualify for competitive bidding.
    82. The Commission will extend the pre-auction application 
procedures established in the Competitive Bidding Second R&O to the 
competitive bidding process for the upper 10 MHz block. With respect to 
the definition of ``initial'' application in the upper 10 MHz block of 
800 MHz SMR spectrum, the Commission believes that the most appropriate 
basis for this determination is an evaluation of the nature of the EA 
license. As EA licensees will gain use of 

[[Page 6148]]
a large geographic area and the freedom to locate base stations 
anywhere within that larger geographic region, they differ from the 
existing 800 MHz SMR licensees that essentially are confined to smaller 
geographic areas, are site-specific, and do not encompass a large 
number of frequencies. Accordingly, the Commission will treat all EA 
applicants as initial applicants for public notice, application 
processing, and auction purposes, regardless of whether they already 
are incumbent operators.
    83. Prior to the start of the 800 MHz SMR auction, the Commission 
will release an initial Public Notice announcing the auction. The 
initial Public Notice will specify the licenses to be auctioned and the 
time and place of the auction in the event that mutually exclusive 
applications are filed. The Public Notice will specify the method of 
competitive bidding to be used, applicable bid submission procedures, 
stopping rules, activity rules, the deadline by which short-form 
applications must be filed, and the amounts and deadlines for 
submitting upfront payments. The Commission will not accept 
applications filed before or after the dates specified in the Public 
Notice. Applications submitted before the release of the Public Notice 
will be returned as premature. Likewise, applications submitted after 
the deadline specified by the Public Notice will be dismissed, with 
prejudice, as untimely.
    84. Soon after the release of the initial Public Notice, a Bidder 
Information Package will be made available to prospective bidders. The 
Bidder Information Package for the 800 MHz SMR service will contain 
information on the incumbents occupying blocks on which bidding will be 
available.
    85. Section 309(j)(5) provides that no party may participate in an 
auction ``unless such bidder submits such information and assurances as 
the Commission may require to demonstrate that such bidder's 
application is acceptable for filing.'' Moreover, ``[n]o license shall 
be granted to an applicant selected pursuant to this subsection unless 
the Commission determines that the applicant is qualified pursuant to 
Section 309(a), Section 308(b), and Section 310'' of the Communications 
Act. As the legislative history of Section 309(j) makes clear, the 
Commission may require that bidders' applications contain all 
information and documentation sufficient to demonstrate that the 
application is not in violation of the Commission's rules, and the 
Commission will dismiss applications not meeting those requirements 
prior to the auction.
    86. Thus, all bidders will be required to submit short-form 
applications on FCC Form 175 (and FCC Form 175-S, if applicable), by 
the date specified in the initial Public Notice. Applicants are 
encouraged to file FCC Form 175 electronically. Detailed instructions 
regarding electronic filing will be contained in the Bidder Information 
Package. Those applicants filing manually will be required to submit 
one paper original and one diskette original of their application, as 
well as two diskette copies. In addition, applicants filing manually 
will not be permitted to bid electronically. The short-form 
applications will require applicants to provide the information 
required by Section 1.2105(a)(2) of the Commission's rules. 
Specifically, each applicant will be required to specify on its FCC 
Form 175 application certain identifying information, including its 
status as a designated entity, its classification (i.e., individual, 
corporation, partnership, trust, or other), the EAs and spectrum blocks 
for which it is applying, and, assuming that the licenses will be 
auctioned, the names of persons authorized to place or withdraw a bid 
on its behalf. The Commission requests applicants indicate their 
designated entity status in order to assist us in analyzing the 
applicant pool and the auction results to determine whether the 
Commission has accomplished substantial participation by minorities, 
women, small businesses, and rural telephone companies. In this 
connection, the Commission notes that Section 309(j) of the 
Communications Act requires us to prepare a report on the participation 
of designated entities in the auction and in the provision of spectrum-
based services.
    87. As the Commission indicated in the Competitive Bidding Second 
R&O, if it receives only one application that is acceptable for filing 
for a particular license, and thus there is no mutual exclusivity, the 
Commission will issue a Public Notice cancelling the auction for this 
license and establishing a date for the filing of a long-form 
application, the acceptance of which will trigger the procedures 
permitting petitions to deny. If no petitions to deny are filed, the 
application will be grantable after 30 days. By ensuring that bidders 
and license winners are serious, qualified applicants, these rules will 
minimize the need to re-auction licenses and will prevent delays in the 
provision of 800 MHz SMR service to the public. In response to those 
commenters concerned about the ability of unsuccessful bidders to 
participate in geographic-area licensing, the Commission reiterated its 
decision in the First R&O that incumbents, post-auction, will be able 
to trade-in their multiple licenses for a single authorization in a 
particular area, provided certain conditions are satisfied.
    88. Amendments and Modifications. The Commission will adopt the 
following procedures for amendments to and modifications of short-form 
applications in the 800 MHz SMR service. Upon reviewing the short-form 
applications, the Commission will issue a Public Notice listing all 
defective applications, and applicants with minor defects will be given 
an opportunity to cure them and resubmit a corrected version. By the 
resubmission date, all applicants will be required to submit an upfront 
payment to the Commission, as discussed below, to the Commission's 
lock-box by the date specified in the Public Notice, which should be no 
later than 14 days before the scheduled auction. After the Commission 
receives from its lock-box bank the names of all applicants who have 
submitted timely upfront payments, the Commission will issue a second 
Public Notice announcing the names of all applicants that have been 
determined to be qualified to bid. An applicant who fails to submit a 
sufficient upfront payment to qualify it to bid on any license being 
auctioned will not be identified on this Public Notice as a qualified 
bidder. Each applicant listed on this Public Notice will be issued a 
bidder identification number and further information and instructions 
regarding auction procedures.
    89. On the date set for submission of corrected applications, 
applicants that on their own have discovered minor errors in their 
applications (e.g., typographical errors, incorrect license 
designations, etc.) will be permitted to file corrected applications. 
The Commission also will waive the ex parte rules as they apply to the 
submission of amended short-form applications for the 800 MHz SMR 
auctions, to maximize applicants' opportunities to seek Commission 
staff advice on making such amendments. Applicants will not be 
permitted to make any major modifications to their applications, 
including, but not limited to, changes in license areas and changes in 
control of the applicant, or additions of other bidders into the 
bidding consortia, until after the auction. Applicants also 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 will not result in a change in de jure or de facto control 
of the applicant, 

[[Page 6149]]
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, i.e., EAs. In addition, applications that are 
not signed will be dismissed as unacceptable for filing, as will 
applications in which no market designations are made.
    90. In addition, a single member of a bidding consortium may 
withdraw from a consortium only in a particular EA(s), but otherwise 
remain in the consortium for purposes of bidding on all other markets 
specified on the short-form application. However, such arrangements to 
assign the member's interests in particular licenses to other 
consortium members after the auction must be disclosed on an original 
or amended short-form application, and a request to transfer or assign 
the license also must be filed in conjunction with the long-form 
application.
5. Upfront Payments
    91. In the Competitive Bidding Second R&O, the Commission 
established a minimum upfront payment of $2,500 and stated that this 
amount could be modified on a service-specific basis. In the Further 
Notice, the Commission proposed to require 800 MHz SMR auction 
participants to tender in advance to the Commission a substantial 
upfront payment, $0.02 per activity unit for the largest combination of 
activity units on which a bidder anticipates bidding in any round, as a 
condition of bidding in order to ensure that only serious, qualified 
bidders participate in auctions, and to ensure payment of the monetary 
assessment in the event of bid withdrawal or default. The Commission 
also sought comment on the upfront payment formula and minimum upfront 
payment most appropriate for the 800 MHz SMR service.
    92. The Commission adopts the standard $0.02 per activity unit 
formula to calculate the upfront payment. The Commission also adopts a 
minimum upfront payment of $2,500 for the 800 MHz SMR service. In the 
initial Public Notice issued prior to the auction, the Commission will 
announce population information corresponding to each license and the 
upfront payment amount for each EA license. In general, population 
coverage for each channel block in each EA will be based on a formula 
that takes into account the presence of incumbent licensees.
    93. Upfront payments will be due by a date specified by Public 
Notice, but generally no later than 14 days before a scheduled auction. 
Each qualified bidder will be issued a bidder identification number and 
further information and instructions regarding the auction procedures. 
During the auction, bidders will be required to provide their bidding 
identification numbers when submitting bids.
6. Down Payments and Full Payments
    94. Down Payments. In the Competitive Bidding Second R&O, the 
Commission generally required successful bidders to tender a 20 percent 
down payment on their bids to discourage default between the auction 
and licensing, and to ensure payment of the monetary assessment if such 
default occurs. In the Further Notice, the Commission proposed to 
require the winning bidders for 800 MHz SMR licenses to supplement 
their upfront payments with a down payment sufficient to bring their 
total deposits up to 20 percent of their winning bid(s).
    95. The Commission concludes that winning bidders must supplement 
their upfront payments with a down payment sufficient to bring their 
total deposits up to 20 percent of their winning bid(s). If the upfront 
payment already tendered by a winning bidder, after deducting any bid 
withdrawal and default payments due, amounts to 20 percent or more of 
its winning bids, no additional deposit will be required. If the 
upfront payment amount on deposit is greater than 20 percent of the 
winning bid amount after deducting any bid withdrawal and default 
payments due, the additional monies will be refunded. If a bidder has 
withdrawn a bid or defaulted, but the amount of the payment cannot yet 
be determined, the bidder will be required to make a deposit of 20 
percent of the amount bid on such licenses. When it becomes possible to 
calculate and assess the payment, any excess deposit will be refunded. 
Upfront payments will be applied to such deposits, and to bid 
withdrawal and default assessments due, before being applied toward the 
bidder's down payment on licenses the bidder has won and seeks to 
acquire.
    96. The Commission also will require winning bidders to submit the 
required down payment by cashier's check or wire transfer to its lock-
box bank by a date and time to be specified by Public Notice, generally 
within five business days following the close of bidding. The 
Commission will hold the down payment until the high bidder is awarded 
the license and has paid the remaining balance due on such license, or 
until the winning bidder is found unqualified to be a licensee or has 
defaulted, in which case it will be returned, less applicable monetary 
assessments. All auction winners generally will be required to make 
full payment of the balance of their winning bids within five business 
days following Public Notice that the Commission is prepared to award 
the license. The Commission generally will grant uncontested licenses 
within ten business days after receiving full payment. During the 
period that deposits are held pending the ultimate award of the 
license, the interest that accrues, if any, will be retained by the 
U.S. Treasury.
    97. Long-Form Applications. The Commission will follow these 
procedures if the winning bidder makes the down payment in a timely 
manner: A long-form application filed on FCC Form 600 must be filed by 
a date specified by Public Notice, generally within ten business days 
after the close of bidding. After the Commission receives the winning 
bidder's down payment and long-form application, the Commission will 
review the long-form application to determine if it is acceptable for 
filing. Upon acceptance for filing of the long-form application, the 
Commission will issue a Public Notice announcing this fact, triggering 
the filing window for petitions to deny. If the Commission denies all 
petitions to deny, and otherwise is satisfied that the applicant is 
qualified, the license(s) will be granted to the auction winner.
    98. Petitions to Deny and Limitations on Settlements. A party 
filing a petition to deny against an 800 MHz SMR application will be 
required to demonstrate standing and meet all other applicable filing 
requirements. The restrictions in Section 90.162 were established to 
prevent the filing of speculative applications and pleadings (or 
threats of the same) designed to extract money from 800 MHz SMR 
applicants. Thus, the Commission will limit the consideration that an 
applicant or petitioner is permitted to receive for agreeing to 
withdraw an application or petition to deny to the legitimate and 
prudent expenses of the withdrawing applicant or petitioner.
    99. With respect to petitions to deny, the Commission need not 
conduct a hearing before denying an application if it determines that 
an applicant is not qualified and no substantial and material issue of 
fact exists concerning that determination. In the event the Commission 
identifies substantial and material issues of fact, Section 309(i)(2) 
of the Communications Act permits the submission of all or part of 
evidence in written form in any hearing and allows employees other than 
administrative law judges to preside over the taking of written 
evidence. 

[[Page 6150]]

    100. Bid Withdrawal, Default, and Disqualification. In the Further 
Notice, the Commission proposed to adopt bid withdrawal, default, and 
disqualification rules for the 800 MHz SMR service, based on the 
procedures established in its general competitive bidding rules.
    101. The Commission believes that forfeiture of the entire upfront 
payment is too extreme for the bidder who withdraws only one bid. Since 
commenters have not stated why the 800 MHz SMR service differs in this 
respect from the narrowband and broadband PCS services, there is no 
justification for departing from the already tested narrowband and 
broadband PCS withdrawal, default, and disqualification assessments. 
Therefore, the Commission believes applying Section 1.2104(g)(1) of its 
Rules to the 800 MHz SMR auction is more equitable and is consistent 
with its practice in prior auctions. Section 1.2104(g)(1) provides that 
any bidder that withdraws a high bid during an auction before the 
Commission declares bidding closed will be required to reimburse the 
Commission in the amount of the difference between its high bid and the 
amount of the winning bid the next time the license is offered by the 
Commission, if this subsequent winning bid is lower than the withdrawn 
bid.
    102. If a license is re-offered by auction, the ``winning bid'' 
refers to the high bid in the auction in which the license is re-
offered. If a license is re-offered in the same auction, the winning 
bid refers to the high bid amount, made subsequent to the withdrawal, 
in that auction. If the subsequent high bidder also withdraws its bid, 
that bidder will be required to pay an assessment equal to the 
difference between its withdrawn bid and the amount of the subsequent 
winning bid the next time the license is offered by the Commission. If 
a license which is the subject of withdrawal or default is not re-
auctioned, but instead is offered to the highest losing bidders in the 
initial auction, the ``winning bid'' refers to the bid of the highest 
bidder who accepts the offer. Losing bidders will not be required to 
accept the offer, i.e., they may decline without penalty. The 
Commission wish to encourage losing bidders in simultaneous multiple 
round auctions to bid on other licenses, and therefore the Commission 
will not hold them to their losing bids on a license for which a bidder 
has withdrawn a bid or on which a bidder has defaulted.
    103. After bidding closes, the Commission will apply Section 
1.2104(g)(2) of its Rules to assess a defaulting auction winner an 
additional payment of three percent of the subsequent winning bid or 
three percent of the amount of the defaulting bid, whichever is less. 
The additional three percent payment is designed to encourage bidders 
who wish to withdraw their bids to do so before bidding ceases. The 
Commission will hold deposits made by defaulting or disqualified 
auction winners until full payment is made. In the unlikely event that 
there is more than one bid withdrawal on the same license, the 
Commission will hold each withdrawing bidder responsible for the 
difference between its withdrawn bid and the amount of the winning bid 
the next time the licenses are offered for auction by the Commission.
    104. These payment requirements will discourage default and ensure 
that bidders meet all eligibility and qualification requirements. If a 
default or disqualification involves gross misconduct, 
misrepresentation or bad faith by an applicant, the Commission may 
declare the applicant and its principals ineligible to bid in future 
auctions, and may take any other action that it deems necessary, 
including institution of proceedings to revoke any existing licenses 
held by the applicant.
    105. If the EA license winner defaults, is otherwise disqualified 
after having made the required down payment, or the license is 
terminated or revoked, then the Commission will re-auction the license. 
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, or if that bidder 
declines the offer, to offer the license to other bidders (in 
descending order of their bid amounts) at the final bid levels. If only 
a short time has passed since the initial auction, the Commission may 
choose to offer the license to the highest losing bidders if the cost 
of running another auction exceeds the benefits.
7. Regulatory Safeguards
    106. Rules Prohibiting Collusion. The Commission's rules prevent 
parties from agreeing in advance to bidding strategies that divide the 
market according to their strategic interests and/or disadvantage other 
bidders. Bidders will be required to (i) disclose all parties with whom 
they have entered into any agreement that relates to the competitive 
bidding process, and (ii) certify they have not entered into any 
explicit or implicit agreements, arrangements, or understandings with 
any parties, other than those identified, regarding the amount of their 
bid, bidding strategies, particular properties on which they will or 
will not bid or any similar agreement.
    107. The Commission will subject 800 MHz SMR licensees to the 
reporting requirements and rules prohibiting collusion embodied in 
Sections 1.2105 and 1.2107 of the Commission's rules. Bidders will be 
required by Section 1.2105(a)(2) to identify on their FCC Form 175 
applications all parties with whom they have entered into any 
consortium arrangements, joint ventures, partnerships or other 
agreements or understandings which relate to the competitive bidding 
process. If parties agree in principle on all material terms, those 
parties must be identified on the short-form application, even if the 
agreement has not been reduced to writing. Only at such level of 
agreement can it be fairly stated that the parties have entered into a 
bidding consortium or other joint bidding arrangement. If the parties 
have not agreed in principle by the short-form filing deadline, an 
applicant would not include the names of those parties on its 
application, and may not continue negotiations with those parties. 
Bidders will be required to certify that they have not entered and will 
not enter into any explicit or implicit agreements, arrangements or 
understandings with any parties, other than those identified, regarding 
the amount of their bid, bidding strategies or the particular 
properties on which they will or will not bid. In this connection, any 
communications between EA bidders and incumbent licensees should take 
place prior to the deadline for filing FCC Form 175 applications.
    108. After the FCC Form 175 filing deadline, applicants may not 
discuss the substance of their bids or bidding strategies with bidders, 
other than those identified on their FCC Form 175 application, that are 
bidding in the same license areas, i.e., EAs. This prohibition on 
discussions extends to providing indirect information that affects bids 
or bidding strategy. For example two applicants not listed on each 
other's FCC Form 175 applications for the 800 MHz SMR auctions may not 
discuss bids or bidding strategies with each other if they are bidding 
for licenses in any of the same EAs, even if they are not bidding for 
the same spectrum blocks.
    109. Section 1.2105(c) of the Commission's rules, however, provides 
certain exceptions to the rule prohibiting discussions with other 
applicants after the filing of the short-form application. First, 
applicants may make agreements to bid jointly for licenses, so long as 
the applicants have not applied for licenses in any of the same license 
areas. Second, an applicant 

[[Page 6151]]
may modify its short-form application to reflect formation of bidding 
agreements or changes in ownership at any time before or during the 
auction, as long as the changes do not result in change of de jure or 
de facto control of the applicant, and the parties forming the bidding 
agreement have not applied for licenses in any of the same license 
areas. Finally, a holder of a non-controlling attributable interest in 
an applicant may acquire an ownership interest in, or enter into a 
bidding agreement with other applicants in the same license area, if 
(1) the owner of the attributable interest certifies that it has not 
communicated and will not communicate bids or bidding strategies of 
more than one of the applicants in which it holds an attributable 
interest or with which it has a bidding agreement; and (2) the 
arrangements do not result in any change of control of the applicant. 
However, once the short-form application has been filed, a party with 
an attributable interest in once bidder may not acquire a controlling 
interest in another bidder bidding for licenses in any of the same 
license areas.
    110. Where the applicant does not meet one of these exceptions, it 
may not discuss matters relating to bidding with other applicants. Even 
when an applicant has withdrawn its application after the short-form 
filing deadline, the applicant may not enter into a bidding agreement 
with another applicant bidding on authorizations in the license areas 
from which the first applicant withdrew.
    111. If an applicant has the high bid for a license, Section 
1.2107(d) of the Commission's rules requires the applicant to include 
with its long-form application a detailed explanation of the terms and 
conditions and parties involved in any bidding consortia, joint 
venture, partnership or other agreement or arrangement it had entered 
into relating to the competitive bidding process prior to the time 
bidding was completed. Under the Commission's rules prohibiting 
collusion, the term ``applicant'' includes the entity submitting the 
application, owners of 5 percent or more of the entity, and all 
officers and directors of such entity.
    112. The Commission noted that even where the applicant discloses 
parties with whom it has reached on agreement on the short-form 
application, thereby permitting discussions with those parties, the 
applicant nevertheless is subject to existing antitrust laws. As 
discussed in the Competitive Bidding Fourth Memorandum Opinion & Order 
in PP Docket No. 93-253, 59 FR 53364 (October 24, 1994) (``Competitive 
Bidding MO&O''), under the antitrust laws, the parties to an agreement 
may not discuss bid prices if they have applied for licenses in the 
same license area. In addition, agreements between actual or potential 
competitors to submit collusive, non-competitive or rigged bids are per 
se violations of Section One of the Sherman Antitrust Act. Further, 
actual or potential competitors may not agree to divide territories 
horizontally in order to minimize competition, regardless of whether 
they split a license area in which they both do business, or whether 
they merely reserve one license area for one and another for the other.
    113. The Commission noted that where specific instances of 
collusion in the competitive bidding process are alleged during the 
petition to deny process, the Commission may conduct an investigation 
or refer such complaints to the United States Department of Justice for 
investigation. Bidders who are found to have violated the antitrust 
laws, in addition to any penalties they incur under the antitrust laws, 
or who are found to have violated the Commission's rules in connection 
with their participation in the auction process may be subject to a 
variety of sanctions, including forfeiture of their down payment or 
their full bid amount, revocation of their license(s), and may be 
prohibited from participating in future auctions.
    114. Transfer Disclosure Requirements. In Section 309(j)(4)(E) of 
the Communications Act, Congress directed the Commission to ``require 
such transfer disclosures and anti-trafficking restrictions and payment 
schedules as may be necessary to prevent unjust enrichment as a result 
of the methods employed to issue licenses and permits.'' In the 
Competitive Bidding Second R&O, the Commission adopted safeguards 
designed to ensure that the requirements of Section 309(j)(4)(E) are 
satisfied. The Commission decided that it was important to monitor 
transfers of licenses awarded by competitive bidding to accumulate the 
necessary data to evaluate its auction designs and to judge whether 
``licenses [have been] issued for bids that fall short of the true 
market value of the license.'' Therefore, the Commission imposed a 
transfer disclosure requirement on licenses obtained through the 
competitive bidding process, whether such licenses were held by a 
designated entity or not. The Commission proposed in the Further Notice 
to adopt the transfer disclosure requirements of Section 1.2111(a) of 
its Rules to all 800 MHz SMR licenses obtained through the competitive 
bidding process.
    115. The Commission believes that a three-year holding period is 
unnecessary. In other auctionable services, the Commission has required 
holding periods only in limited circumstances. For example, the 
Commission's broadband PCS rules require those successful bidders 
benefitting from special provisions for designated entities to hold 
their licenses for a certain period of time and restrict the type of 
transfers and assignments of such licenses during that time. The 
Commission is not adopting special provisions for designated entities 
on the upper 10 MHz block of 800 MHz SMR spectrum. When the Commission 
has not established special provisions for designated entities in other 
auctionable services, the Commission generally has required only 
disclosure of certain information regarding transfers or assignments 
within the first three years after initial license grant. The 
Commission concludes that this is the most appropriate course of action 
here. Thus, the Commission will apply Section 1.2111(a) to all 800 MHz 
SMR licenses obtained through the competitive bidding process. 
Generally, licensees transferring their licenses within three years 
after the initial license grant will be required to file, together with 
their transfer applications, the associated contracts for sale, option 
agreements, management agreements, and all other documents disclosing 
the total consideration received in return for the transfer of their 
licenses. The Commission will give particular scrutiny to auction 
winners who have not yet begun commercial service and who seek approval 
for a transfer of control or assignment of their licenses within three 
years after the initial license grant, so that the Commission may 
determine if any unforeseen problems relating to unjust enrichment have 
arisen.
    116. Performance Requirements. The Communications Act requires the 
Commission to ``include performance requirements, such as appropriate 
deadlines and penalties for performance failures, to ensure prompt 
delivery of service to rural areas, to prevent stockpiling or 
warehousing of spectrum by licensees or permittees, and to promote 
investment in and rapid deployment of new technologies and services.'' 
In the Competitive Bidding Second R&O, the Commission decided it was 
unnecessary and undesirable to impose additional performance 
requirements, beyond those already provided in the service rules, for 
all auctionable services. In the Further Notice, the Commission did not 
propose 

[[Page 6152]]
to adopt any additional performance requirements for competitive 
bidding purposes.
    117. The service rules for the upper 10 MHz block contain specific 
performance requirements, such as the requirement to construct within a 
specific period of time, channel construction requirements, and interim 
coverage requirements. Because the failure to meet these requirements 
will result in automatic cancellation of the EA license, the Commission 
believes this is a sufficient incentive to promote prompt service and 
prevent spectrum warehousing. Thus, the Commission will not adopt any 
performance requirements for the 800 MHz SMR service beyond those 
required by Section 90.685 of the Rules.
8. Treatment of Designated Entities
    118. Overview, Objectives, and the Impact of Adarand Constructors 
v. Pena. The Communications Act provides that, in developing 
competitive bidding procedures, the Commission shall consider various 
statutory objectives and consider several alternative methods for 
achieving them. Specifically, the statute 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.'' Small businesses, rural 
telephone companies and businesses owned by minorities and/or women are 
collectively referred to as ``designated entities.'' Section 
309(j)(4)(A) provides that in order to promote the Communications Act's 
objectives, the Commission shall ``consider alternative payment 
schedules and methods of calculation, including lump sums or guaranteed 
installment payments, with or without royalty payments, or other 
schedules or methods * * * and combinations of such schedules and 
methods.'' The Communications Act also requires the Commission to 
``ensure that small businesses, rural telephone companies, and 
businesses owned by members of minority groups and women are given the 
opportunity to participate in the provision of spectrum-based 
services.''
    119. To meet the statutory objectives of providing opportunities 
for designated entities, the Commission has employed a wide range of 
special provisions and eligibility criteria in other spectrum-based 
services. The measures adopted thus far for each service were 
established after closely examining the specific characteristics of the 
service and determining whether any particular barriers to accessing 
capital impeded opportunities for designated entities. After examining 
the record in the Competitive Bidding proceeding in PP Docket 93-253, 
the Commission established provisions to enable designated entities to 
overcome the barriers to accessing capital in each particular service. 
Moreover, these provisions were designed to increase the likelihood 
that designated entities who win licenses in the auctions become strong 
competitors in the provision of wireless services.
    120. Impact of Adarand Constructors, Inc. v. Pena. In the broadband 
PCS docket, the Commission determined that, on separate entrepreneurs' 
blocks, the bidding credits would vary according to the type of 
designated entity that applied (i.e., a small business would receive a 
10 percent bidding credit, a business owned by minorities or women 
would receive a 15 percent bidding credit, and a small business owned 
by women or minorities would receive an aggregated bidding credit of 25 
percent), and all entrepreneurs' block licensees would be eligible for 
varying degrees of installment payments. The Commission adopted special 
provisions for businesses owned by members of minority groups or women 
and analyzed their constitutionality using the ``intermediate 
scrutiny'' standard of review articulated in Metro Broadcasting v. FCC, 
because, as in Metro Broadcasting, the proposed provisions involved 
Congressionally-mandated benign race- and gender-conscious measures.
    121. After the release of the Further Notice, the Supreme Court 
decided Adarand Constructors, Inc. v. Pena, which overruled Metro 
Broadcasting ``to the extent that Metro Broadcasting is inconsistent 
with'' the holding in Adarand that ``all racial classifications . . . 
must be analyzed by a reviewing court under strict scrutiny.'' As a 
result of the Adarand decision, the constitutionality of any federal 
program that makes distinctions on the basis of race must serve a 
compelling governmental interest and must be narrowly tailored to serve 
that interest. In this connection, the Bureau issued a Public Notice 
requesting further comment on the effect of the decision in Adarand on 
the proposals made in the Further Notice in order to supplement the 
record in the 800 MHz SMR proceeding.
    122. Special Provisions for Designated Entities. In instructing the 
Commission to ensure the opportunity for designated entities to 
participate in auctions and provision of spectrum-based services, 
Congress was well aware of the problems that designated entities would 
have in competing against large, well-capitalized companies in auctions 
and the difficulties these bidders encounter in accessing capital. For 
example, the legislative history accompanying Congress's grant of 
auction authority states generally that the Commission's regulations 
``must promote economic opportunity and competition,'' and ``[t]he 
Commission will realize these goals by avoiding excessive concentration 
of licenses and by disseminating licenses among a wide variety of 
applicants, including small businesses and businesses owned by members 
of minority groups and women.'' The House Report states that the House 
Committee was concerned that, ``unless the Commission is sensitive to 
the need to maintain opportunities for small businesses, competitive 
bidding could result in a significant increase in concentration in the 
telecommunications industries.'' More specifically, the House Committee 
was concerned that adoption of competitive bidding should not have the 
effect of ``excluding'' small businesses from the Commission's 
licensing procedures, and anticipated that the Commission would adopt 
regulations to ensure that small businesses would ``continue to have 
opportunities to become licensees.''
    123. Consistent with Congress's concern that auctions not operate 
to exclude small businesses, the provisions relating to installment 
payments clearly were intended to assist small businesses. The House 
Report states that these related provisions were drafted to ``ensure 
that all small businesses will be covered by the Commission's 
regulations, including those owned by members of minority groups and 
women.'' It also states that the provisions in Section 309(j)(4)(A) 
relating to installment payments were intended to promote economic 
opportunity by ensuring that competitive bidding does not inadvertently 
favor incumbents with deep pockets ``over new companies or start-ups.''
    124. In addition, with regard to access to capital, Congress 
previously made specific findings in the Small Business Credit and 
Business Opportunity Enhancement Act of 1992, that ``small business 
concerns, which represent higher degrees of risk in financial markets 
than do large businesses, are 

[[Page 6153]]
experiencing increased difficulties in obtaining credit.'' As a result 
of these difficulties, Congress resolved to consider carefully 
legislation and regulations ``to ensure that small business concerns 
are not negatively impacted'' and to give priority to passage of 
``legislation and regulations that enhance the viability of small 
business concerns.''
    125. In the 800 MHz SMR service, as in other auctionable services, 
the Commission is 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. Accordingly, 
in balancing the objectives set forth in the Communications Act, the 
Further Notice proposed bidding credits and a tax certificate program 
for businesses owned by women and minorities and installment payments 
for small businesses on all 800 MHz SMR channel blocks in each MTA.
    126. The Commission concludes that special provisions for small 
businesses are appropriate for the 800 MHz SMR service because build-
out of an EA license may require a significant amount of capital. 
Although the Commission believes that the 800 MHz SMR service is less 
capital intensive than PCS, the Commission also believes that it is 
more capital-intensive than the 900 MHz SMR service. The Commission 
further believes that small entities may be disadvantaged in their 
efforts of acquiring 800 MHz SMR licenses if required to bid against 
existing large companies. For instance, if one or more of these big 
firms targets a market for strategic reasons, there is almost no 
likelihood that it could be outbid by a small business. The Commission 
will address this potential outcome in two ways. First, for the upper 
10 MHz block, the Commission will adopt the same ``tiered'' installment 
payments approach adopted in the 900 MHz SMR service. Specifically, 
licensees who qualify for installment payments will be entitled to pay 
their winning bid amount in quarterly 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. Small businesses with gross revenues less than $15 million 
will be required to pay interest only for the first two years of the 
license term at the same interest rate as set forth above. Interest 
will accrue at the Treasury note rate plus 2.5 percent. Small 
businesses with gross revenues less that $3 million will be able to 
make interest-only payments for five years. Interest will accrue at the 
Treasury note rate without the additional 2.5 percent. Timely payment 
of all quarterly installments will be a condition of the license grant, 
and failure to make such timely payment will be grounds for revocation 
of the license. As the Commission have noted previously, allowing 
installment payments reduces the amount of private financing needed by 
prospective small business licensees and therefore mitigates the effect 
of limited access to capital by small businesses. In determining 
eligibility for these installment payment plans, the Commission will 
not attribute gross revenues of investors that hold less than a 20 
percent interest in the applicant, but the Commission will include the 
gross revenues of the applicant's affiliates and investors with 
ownership interests of 20 percent or more in the applicant. As has been 
the case in prior auctions where special provisions for small 
businesses have been made, it also is the Commission's expectation that 
a qualifying small business or principals of a qualifying small 
business will retain de facto and de jure control of the applicant. In 
determining attribution when 800 MHz SMR licensees are held indirectly 
through intervening corporate entities, the Commission will use the 
same multiplier employed for the 900 MHz SMR service.
    127. Second, the Commission has proposed additional special 
provisions for small businesses seeking licenses for the lower 80 and 
General Category channels in the Second Further Notice of Proposed Rule 
Making in PR Docket No. 93-144, because the Commission believes that 
most, if not all, of the incumbent licensees relocated will qualify as 
small businesses under its proposed definition, and the lower 80 and 
General Category channels will be the spectrum to which they most 
likely will be relocated. This approach is consistent with the 
Commission's approach in the broadband PCS context in which the 
Commission designated certain frequency blocks as ``entrepreneurs' 
blocks'' and restricted eligibility based on size limitations. The 
Commission also believes that the service areas and spectrum blocks for 
the upper 10 MHz block the Commission adopted in the First R&O will 
permit operators of smaller SMR systems to participate in the upper 10 
MHz block auction.
    128. At this time the Commission concludes that there is an 
insufficient record to support the adoption of special provisions 
solely benefitting minority- and women-owned businesses (regardless of 
size) for the upper 10 MHz block auction. The Commission notes, 
however, that in the Second Further Notice of Proposed Rule Making, the 
Commission is seeking comment on this issue with respect to the lower 
80 and General Category channels. Moreover, the Commission believes 
that most minority- and women-owned businesses will be able to take 
advantage of the installment plan described above. The Commission 
expects that the vast majority of minority- and women-owned businesses 
will be able to qualify as small businesses under any definition the 
Commission adopts.
    129. Partitioning. In the Further Notice, the Commission did not 
propose any special provisions for rural telephone companies, on the 
basis that: (1) they, like other wireline carriers, then were 
ineligible to hold SMR licenses; (2) even if wireline entry into SMR 
was permitted, the Commission questioned whether special bidding 
provisions would be necessary to ensure the participation of rural 
telephone companies in the provision of SMR service given the 
relatively modest build-out costs involved to serve rural areas; and 
(3) in view of the fact that rural telephone companies may use their 
existing infrastructure to support integrated 800 MHz SMR service in 
their rural service areas, the Commission anticipated that they would 
have ample opportunity to participate in 800 MHz SMR.
    130. Since adoption of the Further Notice, rural telephone 
companies have gained eligibility to hold SMR licenses. Thus, the 
Commission concludes that rural telephone companies will be permitted 
to acquire partitioned EA licenses in 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 800 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 
geo-political boundaries (such as county lines), and each area must 
include all portions of the wireline service area of the rural 
telephone company applicant that lie within the EA service area. The 
Commission also will use the definition for rural telephone companies 
used in its 

[[Page 6154]]
broadband PCS and 900 MHz SMR rules. Thus, rural telephone companies 
will be defined as ``local exchange carriers having 100,000 or fewer 
access lines, including all affiliates.'' In the Second Further Notice 
of Proposed Rule Making, the Commission seeks comment on its proposal 
to extend the partitioning option to SMR licensees generally.
    131. Set-Aside Spectrum. In the Further Notice, the Commission 
expressed its concern, based on its experience with PCS, that 
designated entities may have difficulties competing for 800 MHz SMR 
licenses against large firms with significant financial resources. The 
Commission tentatively concluded, however, that it would not be 
feasible to designate a wide-area spectrum block as an entrepreneurs' 
block because the large number of incumbents already licensed 
throughout the spectrum designated for wide-area licensing make it 
virtually impossible to identify a suitable block.
    132. The Commission does not adopt an entrepreneurs' block in the 
upper 10 MHz block of 800 MHz SMR spectrum. The Commission concluded 
that an entrepreneur's block in this portion of 800 MHz SMR spectrum is 
not feasible, given the substantial number of licensees already 
licensed on such spectrum. However, the Commission is interested in 
ensuring that small businesses have a meaningful opportunity to 
continue to participate in the provision of 800 MHz SMR service. Thus, 
in the Second Further Notice of Proposed Rule Making the Commission 
seeks additional comment on whether designation of an entrepreneurs' 
block for other 800 MHz spectrum would be feasible.

IV. Procedural Matters and Ordering Clauses

A. Final Regulatory Flexibility Analysis

    133. With respect to this First Report and Order and Eighth Report 
and Order, pursuant to the Regulatory Flexibility Act of 1980, an 
Initial Regulatory Flexibility Analysis (IRFA) was incorporated in the 
Further Notice of Proposed Rule Making in PR Docket No. 93-144. Written 
comments on the IRFA were requested. The Commission's final analysis is 
as follows:
    Need for and purpose of the action. The rule making proceeding has 
implemented Sections 332 and 3(n), respectively, of the Communications 
Act of 1934, as amended. The rules adopted herein will carry out 
Congress's intent to establish a consistent framework for all 
commercial mobile radio services (CMRS).
    Issues raised in response to the IRFA. No comments were submitted 
in response to the IRFA.
    Significant alternatives considered and rejected. All significant 
alternatives have been addressed in the First Report and Order in PR 
Docket No. 93-144, the Third Report and Order in GN Docket No. 93-252, 
and the Eighth Report and Order in PP Docket No. 93-253.

B. Paperwork Reduction Act

SUMMARY: The Federal Communications Commission, as part of its 
continuing effort to reduce paperwork burden, invites the general 
public and other Federal agencies to take this opportunity to comment 
on the following proposed and/or continuing information collections, as 
required by the Paperwork Reduction Act of 1995, Public Law 104-13. 
Comments are requested concerning (a) whether the proposed collection 
of information is necessary for the proper performance of the functions 
of the Commission, including whether the information shall have 
practical utility; (b) the accuracy of the Commission's burden 
estimates; (c) ways to enhance the quality, utility, and clarity of the 
information collected; and (d) ways to minimize the burden of the 
collection of information on the respondents, including the use of 
automated collection techniques or other forms of information 
technology.

DATES: Written comments should be submitted on or before April 16, 
1996. If you anticipate that you will be submitting comments but find 
it difficult to do so within the period of time allowed by this notice, 
you should advise the contact listed below as soon as possible.

ADDRESSES: Direct all comments to Dorothy Conway, Federal 
Communications Commission, Room 234, 1919 M St., NW., Washington, DC 
20554, or via Internet to [email protected]; and Timothy Fain, OMB Desk 
Officer, 10236 NEOB, 725 17th St., NW., Washington, DC 20503, or via 
Internet to [email protected].

FOR FURTHER INFORMATION CONTACT: Dorothy Conway, (202) 418-0217, or via 
Internet at [email protected].

SUPPLEMENTARY INFORMATION:

    Title: Amendment to the Commission's Rules to Facilitate Future 
Development of SMR Systems in the 800 MHz Frequency Band.
    Type of Review: Revised collection.
    Respondents: Individuals or households; Business or other for-
profit; Not-for-profit institutions; State, Local or Tribal Government.
    Number of Respondents: 9,570.
    Estimated Time Per Response: Approximately 2 hours.
    Total Annual Burden: Approximately 17,254 hours.
    Total Annual Cost: $6,468,260 this includes the costs for filing 
the information electronically or mailing submissions and hiring 
consultants that may be necessary to respond the requests.
    Needs and Uses: The information will be used by the Commission for 
the following purposes: (a) To determine if the grant or retention of 
an extended implementation schedule is warranted; (b) to update the 
Commission's licensing database and thereby facilitate the successful 
coexistence of EA licensees and incumbents in the upper 10 MHz block of 
800 MHz SMR spectrum; (c) to ensure that incumbents are timely notified 
of possible relocation thus allowing relocation to occur in an orderly, 
efficient, and expedient manner; and (d) to determine whether an 
applicant is eligible for special provisions for small businesses 
provided for applicants in the 800 MHz SMR service.

C. Ex Parte Rules--Non-Restricted Proceeding

    This is a non-restricted notice and comment rulemaking proceeding. 
Ex parte presentations are permitted except during the Sunshine Agenda 
period, provided they are disclosed as provided in the Commission's 
rules, 47 CFR Secs. 1.1202, 1.1203, 1.1206(a).

D. Authority

    The legal authority for this proposed information collection 
includes 47 U.S.C. Sections 154(i), 303(c), 303(f), 303(g), 303(r), 
309(j) and 332 47 U.S.C. Secs. 154(i), 303(c), 303(f), 303(g), 303(r), 
309(j), 332, as amended. The information collection would not affect 
any FCC forms. The proposed collection would increase minimally the 
burden on 800 MHz SMR service applicants.

E. Ordering Clauses

    It is ordered that the rule changes made herein will become 
effective March 18, 1996. This action is taken pursuant to Sections 
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).
    It is further ordered that all requests for extended implementation 
authority for the 800 MHz SMR service filed pursuant to Section 90.629 
of the Commission's rules and currently pending before the Commission 
are denied.
    It is further ordered that the Secretary shall send a copy of this 
First Report 

[[Page 6155]]
and Order and Eighth Report and Order to the Chief Counsel for Advocacy 
of the Small Business Administration.

List of Subjects in 47 CFR Part 90

    Common carriers, Radio, Reporting and recordkeeping requirements.

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

Rule Changes

    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

    The authority citation for Part 90 is revised to read as follows:

    Authority: 47 U.S.C. Secs. 154, 303, and 332, unless otherwise 
noted.

    Section 90.7 is amended by adding the definitions for ``EA-based or 
EA license'' and ``Economic Areas (EAs)'' in alphabetical order to read 
as follows:


Sec. 90.7  Definitions.

* * * * *
    EA-based or EA license. A license authorizing the right to use a 
specified block of SMR spectrum within one of the 175 Economic Areas 
(EAs) as defined by the Department of Commerce Bureau of Economic 
Analysis. The EA Listings and the EA Map are available for public 
inspection at the Wireless Telecommunications Bureau's public reference 
room, Room 5608, 2025 M St. NW, Washington, DC 20554 and Office of 
Operations--Gettysburg, 1270 Fairfield Road, Gettysburg, PA 17325.
    Economic Areas (EAs). A total of 175 licensing regions based on the 
United States Department of Commerce Bureau of Economic Analysis 
Economic Areas available from the Bureau of Economic Analysis at (202-
606-3700) defined as of February 1995, with the following exceptions:
    (1) Guam and Northern Mariana Islands are licensed as a single EA-
like area
    (2) Puerto Rico and the U.S. Virgin Islands are licensed as a 
single EA-like area
    (3) American Samoa is licensed as a single EA-like area
* * * * *
    3. Section 90.155 is amended by revising paragraph (a) to read as 
follows:


Sec. 90.155  Time in which station must be placed in operation.

    (a) All stations authorized under this part, except as provided in 
paragraphs (b) and (d) of this section and in Secs. 90.629, 90.631(f), 
90.665, and 90.685, must be placed in operation within eight (8) months 
from the date of grant or the authorization cancels automatically and 
must be returned to the Commission.
* * * * *
    4. Section 90.173 is amended by revising paragraph (k) and adding a 
new paragraph (n) 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, 470-512 MHz, and 800/900 MHz 
(except on frequencies designated exclusively for SMR service) 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.
* * * * *
    (n) Any recovered channels in the 800 MHz SMR service will revert 
automatically to the holder of the EA license within which such 
channels are included. If there is no EA licensee for recovered 
channels, such channels will be retained by the Commission for future 
licensing.
    Section 90.210 is amended by adding a new footnote 3 to the entry 
for ``806-821/851-866'' in the introductory paragraph table to read as 
follows:


Sec. 90.210  Emission masks.

* * * * *

                        Applicable Emission Masks                       
------------------------------------------------------------------------
                                                                        
------------------------------------------------------------------------
Frequency Band MHz..............  Mask for equipment  Mask for equipment
                                   with audio low      without audio low
                                   path filter.        path filter.     
                                                                        
                  *        *        *        *        *                 
806-821/851-866 \3\.............  B.................  G.                
                                                                        
                  *        *        *        *        *                 
------------------------------------------------------------------------
\3\ Equipment used in this band licensed to EA systems shall comply with
  the emission mask provisions of Sec.  90.691.                         

* * * * *
    6. Section 90.609 is amended by revising paragraphs (c) and (d) 
introductory text to read as follows:


Sec. 90.609  Special limitations on amendment of applications for 
assignment or transfer of authorizations for radio systems above 800 
MHz.

* * * * *
    (c) Licensees of constructed systems in any category other than 
Spectrum Block D frequencies in the 800 MHz SMR service (formerly 
General Category) are permitted to make partial assignments of an 
authorized grant to an applicant proposing to create a new system or to 
an existing licensee that has loaded its system to 70 mobiles per 
channel and is expanding that system. An applicant authorized to expand 
an existing system or to create a new system with frequencies from any 
category other than Spectrum Block D frequencies in the 800 MHz SMR 
service obtained through partial assignment will receive the assignor's 
existing license expiration date and loading deadline for the 
frequencies that are assigned. A licensee that makes a partial 
assignment of a station's frequencies will not be authorized to obtain 
additional frequencies for that station for a period of one year from 
the date of the partial assignment.
    (d) A constructed system originally licensed in the General 
Category that is authorized to operate in the conventional mode may be 
combined with an existing SMR system above 800 MHz authorized to 
operate in the trunked mode by assignment of an authorized grant of the 
General Category station to the SMR station.
* * * * *
    7. Section 90.611 is amended by revising paragraphs (a) and (c) and 
by removing and reserving paragraph (d) to read as follows:


Sec. 90.611  Processing of applications.

* * * * *
    (a) All applications will first be considered to determine whether 
they are substantially complete and acceptable for filing. If so, 
except as otherwise specifically provided for in this subpart, they 
will be assigned a file number and put in pending status. If not, they 
will be returned to the applicant.
* * * * *
    (c) Each application will be reviewed to determine whether it can 
be granted. Applicants must specify the intended frequency (or 
frequencies) of operation.
* * * * *
    8. Section 90.615 is revised to read as follows: 
    
[[Page 6156]]



Sec. 90.615  Frequencies available in Spectrum Block D in the 800 MHz 
SMR service (formerly General Category).

    (a) Except as indicated in Sec. 90.619, as of March 18, 1996, 
frequencies in the 800 MHz Spectrum Block D (Channels 1-150) previously 
designated as General Category channels are re-allocated for use 
exclusively by the SMR service for either trunked or conventional 
operations. The frequencies are available to SMR licensees in areas 
farther than 110 km (68.4 miles) from the U.S./Mexico border and 
farther than 140 km (87 miles) from the U.S./Canada border.
    (b) Non-SMR stations that were authorized to transmit on these 
frequencies prior to March 18, 1996 and have remained so authorized 
continuously since that time may continue to operate in accordance with 
their current authorizations. Such authorizations may be renewed 
unchanged or with minor modifications as described in Sec. 90.693.
    9. Section 90.617 is amended by revising introductory paragraphs 
(b) and (c) (the Tables remain unchanged), paragraph (d) and Table 4A 
of paragraph (d) 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.

* * * * *
    (b) The channels listed in Table 2A are available to eligible 
applicants in the Industrial/Land Transportation Category (consisting 
of the Power, Petroleum, Forest Products, Film and Video Production, 
Relay Press, Special Industrial, Manufacturers, Telephone Maintenance, 
Motor Carrier, Railroad, Taxicab and Automobile Emergency Radio 
Services). These frequencies are available in areas farther than 110 km 
(68.4 miles) from the U.S./Mexico border and farther than 140 km (87.0 
miles) from the U.S./Canada border. Specialized Mobile Radio (SMR) 
systems will not be authorized on these frequencies. These channels are 
available for inter-category sharing as indicated in Sec. 90.621(g).
* * * * *
    (c) The channels listed in Table 3A are available to eligible 
applicants in the Business Radio Category. This category does not 
include Specialized Mobile Radio Systems as defined in Sec. 90.7. These 
frequencies are available in areas farther than 110 km (68.4 miles) 
from the U.S./Mexico border and farther than 140 km (87.0 miles) from 
the U.S./Canada border. Specialized Mobile Radio Systems will not be 
authorized on these frequencies. These channels are available for 
inter-category sharing as indicated in Sec. 90.621(g).
* * * * *
    (d) The channels listed in Tables 4A and 4B are available only to 
eligibles in the SMR category which consists of Specialized Mobile 
Radio (SMR) stations and eligible end users. The frequencies listed in 
Table 4A are available to SMR eligibles desiring to be authorized for 
EA-based service areas in accordance with Sec. 90.681. SMR licensees 
licensed on Channels 401-600 on or before March 18, 1996 may continue 
to utilize these frequencies within their existing service areas, 
subject to the mandatory relocation provisions of Sec. 90.699. Systems 
licensed on the channels listed in Table 4A as Spectrum Block D or E 
Channels will be licensed on a site-specific basis. This paragraph 
deals with the assignment of frequencies only in areas farther than 110 
km (68.4 miles) from the U.S./Mexico border and farther than 140 km 
(87) miles from the U.S./Canada border. See Sec. 90.619 for the 
assignment of SMR frequencies in these border areas. For stations 
located within 113 km (70 miles) of Chicago, channels 401-600 will be 
assigned in blocks as outlined in Table 4C.

        Table 4A.--SMR Category 806-821/851-866 MHz Band Channels       
------------------------------------------------------------------------
              Spectrum block                         Channel No.        
------------------------------------------------------------------------
EA-Based SMR Category Systems (200                                      
 channels):                                                             
    A.....................................  401-420.                    
    B.....................................  421-480.                    
    C.....................................  481-600.                    
SMR Category (230 channels):                                            
    D.....................................  1-150.                      
    E.....................................  201-208, 221-228, 241-248,  
                                             261-268, 281-288, 301-308, 
                                             321-328, 341-348, 361-368, 
                                             381-388.                   
------------------------------------------------------------------------

* * * * *
    10. Section 90.619 is amended by revising introductory paragraph 
(a)(3), the introductory text of paragraph (a)(5) and Table 4A of 
paragraph (a)(5), Table 12 in paragraph (b)(8), Table 16 in paragraph 
(b)(9), Table 20 in paragraph (b)(10), and Table 24 in paragraph 
(b)(11) to read as follows:


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

    (a) * * *
    (3) Tables 2A and 2B list the channels that are available for 
assignment to eligible applicants in the Industrial/Land Transportation 
Category (consisting of the Power, Petroleum, Forest Products, Video 
Production, Relay Press, Special Industrial, Manufacturers, Telephone 
Maintenance, Motor Carrier, Railroad, Taxicab and Automobile Emergency 
Radio Services). New applications for Specialized Mobile Radio systems 
will not be accepted for these channels after March 18, 1996.
* * * * *
    (5) Tables 4A and 4B list the channels that are available for 
assignment for the SMR Category (consisting of Specialized Mobile Radio 
systems as defined in Sec. 90.7). These channels are not available for 
inter-category sharing.

 Table 4A.--United States-Mexico Border Area, SMR Category 806-821/851- 
                       866 MHZ Band (95 Channels)                       
------------------------------------------------------------------------
             Spectrum block                     Offset channel No.      
------------------------------------------------------------------------
EA-Based SMR Category (30 Channels):                                    
  A....................................  None.                          
  B....................................  429, 431, 433, 435, 437,439,   
                                          469, 471, 473, 475, 477, 479. 
  C....................................  509, 511, 513, 515, 517, 519,  
                                          549, 551, 553, 555, 557, 559, 
                                          589, 591, 593, 595, 597, 599. 
SMR Category (65 Channels):                                             
  D....................................  None.                          
  E....................................  None.                          
  Other................................  228-240, 268-280, 308-320, 348-
                                          360, 388-400.                 
------------------------------------------------------------------------

* * * * *
    (b) * * *
    (8) * * *

                  Table 12.--SMR Category--95 Channels                  
                          [Regions 1, 4, 5, 6]                          
------------------------------------------------------------------------
             Spectrum block                        Channel No.          
------------------------------------------------------------------------
EA-Based SMR Category (90 Channels):                                    
  A....................................  None.                          
  B....................................  463-480.                       
  C....................................  493-510, 523-540, 553-570, 583-
                                          600.                          
SMR Category (5 Channels):                                              

[[Page 6157]]
                                                                        
  D....................................  30, 60, 90, 120, 150.          
  E....................................  None.                          
------------------------------------------------------------------------



    (9) * * *

                  Table 16.--SMR Category--60 Channels                  
                               [Region 2]                               
------------------------------------------------------------------------
             Spectrum block                        Channel No.          
------------------------------------------------------------------------
EA-Based SMR Category (55 Channels):                                    
  A....................................  None.                          
  B....................................  None.                          
  C....................................  518-528, 536-546, 554-564, 572-
                                          582, 590-600.                 
SMR Category (5 Channels):                                              
  D....................................  18, 36, 54, 72, 90.            
  E....................................  None.                          
------------------------------------------------------------------------

    (10) * * *

                  Table 20.--SMR Category--135 Channels                 
                               [Region 3]                               
------------------------------------------------------------------------
             Spectrum block                        Channel No.          
------------------------------------------------------------------------
EA-Based SMR Category (120 Channels):                                   
  A....................................  417-420.                       
  B....................................  421-440, 457-480.              
  C....................................  497-520, 537-560, 577-600.     
SMR Category (15 Channels):                                             
  D....................................  38, 39, 40, 78, 79, 80, 118,   
                                          119, 120.                     
  E....................................  None.                          
  Other................................  158, 159, 160, 198, 199, 200.  
------------------------------------------------------------------------

    (11) * * *

          Table 24.--(Regions 7, 8) SMR Category--190 Channels          
------------------------------------------------------------------------
             Spectrum block                        Channel No.          
------------------------------------------------------------------------
EA-Based SMR Category (80 Channels):                                    
  A....................................  None.                          
  B....................................  425-440, 465-480.              
  C....................................  505-520, 545-560, 585-600.     
SMR Category (110 Channels):                                            
  D....................................  35-40, 75-80, 115-120.         
  E....................................  225-228, 265-268, 305-308, 345-
                                          348, 385-388.                 
  Other................................  155-160, 195-200, 229-240, 269-
                                          280, 309-320, 349-360, 389-   
                                          400.                          
------------------------------------------------------------------------

* * * * *
    11. Section 90.621 is amended by revising paragraphs (a) 
introductory text, (a)(1)(iii), (b) introductory text, (c), and (e) 
introductory text, removing paragraph (a)(1)(iv), and removing and 
reserving paragraphs (e)(2), (e)(3), and (e)(4) to read as follows:


Sec. 90.621  Selection and assignment of frequencies.

    (a) Applicants for frequencies in the Public Safety, Industrial/
Land Transportation, and Business Categories must specify on the 
application the frequencies on which the proposed system will operate 
pursuant to a recommendation by the applicable frequency coordinator. 
Applicants for frequencies in the SMR Category must request specific 
frequencies by including in their applications the frequencies 
requested.
    (1) * * *
    (iii) There are no limitations on the number of frequencies that 
may be trunked. Authorizations for non-SMR stations may be granted for 
up to 20 trunked frequency pairs at a time in accordance with the 
frequencies listed in Secs. 90.615, 90.617, and 90.619.
* * * * *
    (b) Stations authorized on frequencies listed in this subpart, 
except for those stations authorized pursuant to paragraph (g) of this 
section and EA-based and MTA-based SMR systems, will be afforded 
protection solely on the basis of fixed distance separation criteria. 
The separation between co-channel systems will be a minimum of 113 km 
(70 mi) with the following exceptions:
* * * * *
    (c) Conventional systems authorized on frequencies in the Public 
Safety (except for those systems that have participated in a formal 
regional planning process as described in Sec. 90.16), Industrial/Land 
Transportation, Business, and Spectrum Block D frequencies in the 800 
MHz SMR service (formerly General) Categories which have not met the 
loading levels necessary for channel exclusivity will not be afforded 
co-channel protection.
* * * * *
    (e) Frequencies in the 806-821/851-866 MHz bands listed as 
available for eligibles in the Public Safety, Industrial/Land 
Transportation, and Business Categories are available for inter-
category sharing under the following conditions:
* * * * *
    12. Section 90.629 is amended by adding a new paragraph (e) to read 
as follows:


Sec. 90.629  Extended implementation period.

* * * * *
    (e) As of March 18, 1996, Specialized Mobile Radio systems are not 
eligible for extended implementation periods under this section. 
Additionally, all 800 MHz SMR licensees that are operating under 
extended implementation authority as of March 18, 1996 must, by May 16, 
1996, demonstrate that continuing to allow them to have an extended 
period of time to construct their facilities is warranted and furthers 
the public interest. If a licensee's extended implementation authority 
showing is approved by the Bureau, such licensee will be afforded an 
extended implementation of two years or the remainder of its current 
extended implementation period, whichever is shorter. Upon the 
termination of this period, the authorizations for those facilities 
that remain unconstructed will terminate automatically. If a licensee 
with a current extended implementation period fails to submit the 
showing mentioned above within the designated timeframe or submits an 
insufficient or incomplete showing, such licensee will have six months 
from the last day on which it could timely file such a showing or from 
the disapproval of its request to construct the remaining facilities 
covered under its implementation plan to construct any unconstructed 
facilities for which it is authorized. The authorizations for those 
facilities remaining unconstructed after this six-month period will 
terminate automatically.
    13. Section 90.631(b) is amended by removing the words ``General 
Category'' and adding in their place ``Spectrum Block D frequencies in 
the 800 MHz SMR service (formerly General Category)''.
    14. Subpart S is amended by adding a new centered heading following 
Section 90.671 to read as follows:

[[Page 6158]]


Policies Governing the Licensing and Use of EA-Based SMR Systems in the 
816-821/861-866 Band

    15. A new Sec. 90.681 is added to Subpart S to read as follows:


Sec. 90.681  EA-based SMR service areas.

    EA licenses for SMR spectrum blocks in the 816-821/861-866 band 
listed in Table 4A of Sec. 90.617(d) are available in 175 Economic 
Areas (EAs) as defined in Sec. 90.7.
    16. A new Sec. 90.683 is added to Subpart S to read as follows:


Sec. 90.683  EA-Based SMR system operations.

    (a) EA-based licensees authorized in the 816-821/861-866 MHz band 
pursuant to Sec. 90.681 may construct and operate base stations using 
any of the base station frequencies identified in their spectrum block 
anywhere within their authorized EA, provided that:
    (1) The EA licensee affords protection, in accordance with 
Sec. 90.621(b), to all previously authorized co-channel stations that 
are not associated with another EA license;
    (2) The EA licensee complies with any rules and international 
agreements that restrict use of frequencies identified in their 
spectrum block, including the provisions of Sec. 90.619 relating to 
U.S./Canadian and U.S./Mexican border areas;
    (3) The EA licensee limits the field strength of its base stations 
at any location on the border of the EA service area in accordance with 
Sec. 90.689;
    (4) The EA licensee notifies the Commission within 30 days of the 
completion of the addition, removal, relocation or modification of any 
of its facilities within the EA. Such notification must be made by 
submitting an FCC Form 600 and must include the appropriate filing fee, 
if any; and
    (5) For any construction or alteration that would exceed the 
requirements of Sec. 17.7 of this chapter, licensees must notify the 
appropriate Regional Office of the Federal Aviation Administration (FAA 
Form 7460-1) and file a request for antenna height clearance and 
obstruction marking and lighting specifications (FCC Form 854) with the 
FCC, WTB, Support Services Branch, Gettysburg, PA 17325.
    (6) Any additional transmitters placed in operation must not have a 
significant environmental effect as defined by Secs. 1.1301 through 
1.1319 of this chapter.
    (b) In the event that the authorization for a previously authorized 
co-channel station within the EA licensee's spectrum block is 
terminated or revoked, the EA licensee's co-channel obligations to such 
station will cease upon deletion of the facility from the Commission's 
official licensing records, and the EA licensee then will be able to 
construct and operate without regard to that previous authorization.
    17. A new Sec. 90.685 is added to Subpart S to read as follows:


Sec. 90.685  Authorization, construction and implementation of EA 
licenses.

    (a) EA licenses in the 816-821/861-866 MHz band will be issued for 
a term not to exceed ten years. Additionally, EA licensees generally 
will be afforded a renewal expectancy only for those stations put into 
service after August 10, 1996.
    (b) EA licensees in the 816-821/861-866 band will be permitted five 
years to construct their stations. This five-year period will commence 
with the issuance of the EA-based license and will apply to all of the 
licensee's stations within the EA spectrum block, including any 
stations that may have been subject to an earlier construction deadline 
arising from a pre-existing authorization.
    (c) EA licensees in the 816-821/861-866 MHz band must, within three 
years, construct and place into operation a sufficient number of base 
stations to provide coverage to at least one-third of the population of 
its EA-based service area. Further, each EA licensee must provide 
coverage to at least two-thirds of the population of the EA-based 
service area within five years.
    (d) Channel use requirement. In addition to the population coverage 
requirements described in this section, we will require EA licensees to 
construct 50 percent of the total channels included in their spectrum 
block in at least one location in their respective EA-based service 
area within three years of initial license grant and to retain such 
channel usage for the remainder of the construction period.
    (e) An EA licensee's failure to meet the population coverage 
requirements of paragraphs (c) and (d) of this section, will result in 
forfeiture of the entire EA license. Forfeiture of the EA license, 
however, would not result in the loss of any constructed facilities 
authorized to the licensee prior to the date of the commencement of the 
auction for the EA licenses.
    18. A new Sec. 90.687 is added to Subpart S to read as follows:


Sec. 90.687  Special provisions regarding assignments and transfers of 
authorizations for incumbent SMR licensees in the 816-821/861-866 MHz 
band.

    An SMR licensee initially authorized on any of the channels listed 
in Table 4A of Sec. 90.617 may transfer or assign its channel(s) to 
another entity subject to the provisions of Secs. 90.153 and 90.609(b). 
If the proposed transferee or assignee is the EA licensee for the 
spectrum block to which the channel is allocated, such transfer or 
assignment presumptively will be deemed to be in the public interest. 
However, such presumption will be rebuttable.
    19. A new Sec. 90.689 is added to Subpart S to read as follows:


Sec. 90.689  Field strength limits.

    (a) For purposes of implementing Secs. 90.689 through 90.699, 
predicted 40 dBuV/m contours shall be calculated using Figure 10 of 
Sec. 73.699 of this chapter with a correction factor of -9 dB, and 
predicted 22 dBuV/m contours shall be calculated using Figure 10a of 
Sec. 73.699 of this chapter with a correction factor of -9 dB.
    (b) The predicted or measured field strength at any location on the 
border of the EA-based service area for EA licensees must not exceed 40 
dBuV/m unless all bordering EA licensees agree to a higher field 
strength. In the event that this standard conflicts with the EA 
licensee's obligation to provide co-channel protection to incumbent 
licensees pursuant to Sec. 90.621(b), the requirements of 
Sec. 90.621(b) shall prevail.
    20. A new Sec. 90.691 is added to Subpart S to read as follows:


Sec. 90.691  Emission mask requirements for EA-based systems.

    (a) Out-of-band emission requirement shall apply only to the 
``outer'' channels included in an EA license and to spectrum adjacent 
to interior channels used by incumbent licensees. The emission limits 
are as follows:
    (1) For any frequency removed from the EA licensee's frequency 
block by up to and including 37.5 kHz, the power of any emission shall 
be attenuated below the transmitter power (P) in watts by at least 116 
Log10(f/6.1) decibels or 50 + 10 Log10(P) decibels or 80 
decibels, whichever is the lesser attenuation, where f is the frequency 
removed from the center of the outer channel in the block in kilohertz 
and where f is greater than 12.5 kHz.
    (2) For any frequency removed from the EA licensee's frequency 
block greater than 37.5 kHz, the power of any emission shall be 
attenuated below the transmitter power (P) in watts by at least 43 + 
10Log10(P) decibels or 80 decibels, whichever is the lesser 
attenuation, where f is the frequency removed from the center of the 
outer channel in the block in kilohertz and where f is greater than 
37.5 kHz. 

[[Page 6159]]

    (b) When an emission outside of the authorized bandwidth causes 
harmful interference, the Commission may, at its discretion, require 
greater attenuation than specified in this section.
    21. A new Sec. 90.693 is added to Subpart S to read as follows:


Sec. 90.693  Grandfathering provisions for incumbent licensees in 
spectrum blocks A, B, and C.

    (a) These provisions apply to ``incumbent licensees'', all 800 MHz 
SMR licensees who obtained licenses or filed applications on or before 
December 15, 1995. An incumbent licensee's service area shall be 
defined by its originally-licensed 40 dBu field strength contour and 
its interference contour shall be defined as its originally-licensed 22 
dBu field strength contour. Incumbent licensees are permitted to add, 
remove or modify transmitter sites within this existing service area 
without prior notification to the Commission so long as their original 
22 dBu field strength contour is not expanded and the station complies 
with the Commission's short-spacing criteria in Secs. 90.621(b)(4) 
through 90.621(b)(6). The incumbent licensee must, however, notify the 
Commission within 30 days of the completion of any changes in technical 
parameters or additional stations constructed through a minor 
modification of their license. Such notification must be made by 
submitting an FCC Form 600 and must include the appropriate filing fee, 
if any. These minor modification applications are not subject to public 
notice and petition to deny requirements or mutually exclusive 
applications.
    (b) Incumbent licensees operating at multiple sites may, after 
grant of EA 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 800 MHz SMR auction.
    22. A new Sec. 90.699 is added to Subpart S to read as follows:


Sec. 90.699  Transition of the upper 200 channels in the 800 MHz band 
to EA licensing.

    In order to facilitate provision of service throughout an EA, an EA 
licensee may relocate incumbent licensees in its EA by providing 
``comparable facilities'' on other frequencies in the 800 MHz band. 
Such relocation is subject to the following provisions:
    (a) EA licensees may negotiate with incumbent licensees as defined 
in Sec. 90.693 operating on frequencies in Spectrum Blocks A, B, and C 
for the purpose of agreeing to terms under which the incumbents would 
relocate their operations to other channels in the 800 MHz band, or 
alternatively, would accept a sharing arrangement with the EA licensee 
that may result in an otherwise impermissible level of interference to 
the incumbent licensee's operations. EA licensees may also negotiate 
agreements for relocation of the incumbents' facilities within Spectrum 
Blocks A, B or C in which all interested parties agree to the 
relocation of the incumbent's facilities elsewhere within these bands. 
``All interested parties'' includes the incumbent licensee, the EA 
licensee requesting and paying for the relocation, and any EA licensee 
of the spectrum to which the incumbent's facilities are to be 
relocated.
    (b) The relocation mechanism consists of two phases that must be 
completed before an EA licensee may proceed to request the involuntary 
relocation of an incumbent licensee.
    (1) Voluntary period. There is a one year voluntary period during 
which an EA licensee and an incumbent may negotiate any mutually 
agreeable relocation agreement. The Commission will announce the 
commencement of the first phase voluntary period by Public Notice. EA 
licensees must notify incumbents operating on frequencies included in 
their spectrum block of their intention to relocate such incumbents 
within 90 days of the release of the Public Notice that commences the 
voluntary negotiation period. Failure on the part of the EA licensee to 
notify the incumbent licensee during this 90 period of its intention to 
relocate the incumbent will result in the forfeiture of the EA 
licensee's right to request involuntary relocation of the incumbent at 
any time in the future.
    (2) Mandatory period. If no agreement is reached by the end of the 
voluntary period, a two-year mandatory period will begin during which 
both the EA licensee and the incumbent must negotiate in ``good 
faith''. Failure on the part of the EA licensee to negotiate in good 
faith during this mandatory period will result in the forfeiture of the 
EA licensee's right to request involuntary relocation of the incumbent 
at any time in the future.
    (c) If no agreement is reached during either the voluntary or 
mandatory negotiating periods, the EA licensee may request involuntary 
relocation of the incumbent's system. In such a situation, the EA 
licensee must:
    (1) Guarantee payment of all costs of relocating the incumbent to a 
comparable facility;
    (2) Complete all activities necessary for placing the new 
facilities into operation; and
    (3) Build and test the new system.
    (d) If an EA licensee cannot provide comparable facilities to an 
incumbent licensee as defined in this section, the incumbent licensee 
may continue to operate its system on a primary basis in accordance 
with the provisions of this part.
    23. A new Subpart V, Sections 90.901 through 90.913, is added to 
read as follows:

Subpart V--Competitive Bidding Procedures for 800 MHz Specialized 
Mobile Radio Service

Sec. 90.901  800 MHz SMR spectrum subject to competitive bidding.
Sec. 90.902  Competitive bidding design for 800 MHz SMR licensing.
Sec. 90.903  Competitive bidding mechanisms.
Sec. 90.904  Aggregation of EA licenses for spectrum blocks A, B, 
and C.
Sec. 90.905  Withdrawal, default and disqualification payments.
Sec. 90.906  Bidding application (FCC Form 175 and 175-S Short-
form).
Sec. 90.907  Submission of upfront payments and down payments.
Sec. 90.908  Long-form applications.
Sec. 90.909  License grant, denial, default, and disqualification 
for spectrum blocks A, B, and C.
Sec. 90.910  Installment payments for licenses for spectrum blocks 
A, B, and C.
Sec. 90.911  Procedures for partitioned licenses in spectrum blocks 
A, B, and C.
Sec. 90.912  Definitions for spectrum blocks A, B, and C.
Sec. 90.913  Eligibility for small business status for spectrum 
blocks A, B, and C.


Sec. 90.901.  800 MHz SMR spectrum subject to competitive bidding.

    Mutually exclusive initial applications for Spectrum Blocks A, B, 
and C in the 800 MHz band are subject to competitive bidding 
procedures. The general competitive bidding procedures provided in part 
1, subpart Q of this chapter will apply unless otherwise indicated in 
this subpart.


Sec. 90.902  Competitive bidding design for 800 MHz SMR licensing.

    The Commission will employ a simultaneous multiple round auction 
design when selecting from among mutually exclusive initial 
applications for EA licenses for Spectrum Blocks A, B, and C in the 800 
MHz band, unless otherwise specified by the Wireless Telecommunications 
Bureau before the auction. 

[[Page 6160]]



Sec. 90.903  Competitive bidding mechanisms.

    (a) Sequencing. The Wireless Telecommunications Bureau will 
establish and may vary the sequence in which 800 MHz SMR licenses for 
Spectrum Blocks A, B, and C will be auctioned.
    (b) Grouping. All EA licenses for Spectrum Blocks A, B, and C will 
be auctioned simultaneously, unless the Wireless Telecommunications 
Bureau announces, by Public Notice prior to the auction, an alternative 
competitive bidding design.
    (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 the multiple round auctions 
in order to terminate an auction within a reasonable time.
    (e) Activity 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. 90.904  Aggregation of EA licenses for spectrum blocks A, B, and 
C.

    The Commission will license each Spectrum Block A, B, and C in the 
800 MHz band separately. Applicants may aggregate across spectrum 
blocks within the limitations specified in Sec. 20.6 of this chapter.


Sec. 90.905  Withdrawal, default and disqualification payments.

    (a) During the course of an auction conducted pursuant to 
Sec. 90.902, the Commission 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 monetary asssessment 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 (5) 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, or if 
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. 90.906  Bidding application (FCC Form 175 and 175-S Short-form).

    All applicants to participate in competitive bidding for 800 MHz 
SMR licenses in Spectrum Blocks A, B, and C 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 these 800 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 800 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 and/or a women-owned entity, as 
defined in Sec. 90.912(e).


Sec. 90.907  Submission of upfront payments and down payments.

    (a) Bidders in the 800 MHz SMR auction for Spectrum Blocks A, B, 
and C will be required to submit an upfront payment of $0.02 per 
activity unit, in accordance with Sec. 1.2106 of this chapter.
    (b) Winning bidders in a 800 MHz SMR auction for Spectrum Blocks A, 
B, and C must submit a down payment to the Commission in an amount 
sufficient to bring their total deposits up to 20 percent of their 
winning bids within five (5) business days after the auction closes, 
and the remaining balance due on the license shall be paid within five 
(5) business days after Public Notice announcing that the Commission is 
prepared to award the license.


Sec. 90.908  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 Sec. 90.119 of this part and any associated Public Notices. Only 
auction winners (and rural telephone companies seeking partitioned 
licenses pursuant to agreements with auction winners under Sec. 90.911) 
will be eligible to file applications on FCC Form 600 for initial 800 
MHz SMR licenses in the event of mutual exclusivity between applicants 
filing FCC Form 175.


Sec. 90.909  License grant, denial, default, and disqualification for 
spectrum blocks A, B, and C.

    (a) Except with respect to entities eligible for installment 
payments (see Sec. 90.912) each winning bidder will be required to pay 
the balance of its winning bid in a lump sum payment within five (5) 
business days following Public Notice that the license is ready for 
grant. The Commission will grant the license within ten (10) business 
days after receipt of full and timely payment of the winning bid 
amount.
    (b) 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. 90.905 or Sec. 1.2109 of this 
chapter, as applicable.
    (c) EA licenses pursued through competitive bidding procedures will 
be granted pursuant to the requirements specified in Sec. 90.166.


Sec. 90.910  Installment payments for licenses for spectrum blocks A, 
B, and C.

    (a) Each licensee for Spectrum Blocks A, B, and C 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 

[[Page 6161]]
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 EA 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. 90.912(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. 90.912(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.
    (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. 90.911  Procedures for partitioned licenses in spectrum blocks A, 
B, and C.

    (a) Notwithstanding Sec. 90.661, a rural telephone company, as 
defined in Sec. 90.912, may be granted a 800 MHz SMR license that is 
geographically partitioned from a separately licensed EA, so long as 
the EA applicant or licensee has voluntarily agreed (in writing) to 
partition a portion of the license to the rural telephone company.
    (b) If partitioned licenses are being applied for in conjunction 
with a license(s) to be awarded through competitive bidding 
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 
Sec. 1.2105(a)(2)(viii) of this chapter);
    (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 EA filed by the auction winner.
    (c) If the partitioned license is being applied for as a partial 
assignment of the EA 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)(3): 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 set forth in 
Sec. 90.685.


Sec. 90.912  Definitions for spectrum blocks A, B, and C.

    (a) Scope. The definitions in this section apply to Secs. 90.910 
and 90.911, unless otherwise specified in those sections.
    (b) Small business: Consortium of small businesses.
    (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 three 
preceding 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 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. 90.912(h).
    (3) A small business consortium is conglomerate organization formed 
as a joint venture between or among mutually-independent business 
firms, each of which individually satisfies the 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 is one 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 

[[Page 6162]]
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.

    Note to paragraph (g): 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 
application of the relevant attribution benchmark to the resulting 
product, except that if the ownership percentages for an interest in 
any link 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;
    (ii) Is directly or indirectly controlled by the applicant;
    (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 of stock 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. 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 of interest) 
are treated as though they are one person and Corporation Y would be 
deemed an affiliate of the applicant.
    Example 2. 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 

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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 of 100 outstanding shares) of the voting stock of company A, 
who holds an attributable interest in an SMR application, and gives 
a 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 effect 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 these 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 or 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. 90.913  Eligibility for small business status for spectrum blocks 
A, B, and C.

    (a) Short-form applications: Certifications and disclosure. Each 
applicant for an EA license for Spectrum Blocks A, B, or C which 
qualifies as a small business or consortium of small businesses shall 
append the following information as an exhibit to its short-form 
application (FCC 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 of the joint 
venture; and
    (2) The applicant's gross revenues, computed in accordance with 
Sec. 90.912.
    (b) Long-form applications: Certifications and disclosure. In 
addition to the requirements in this subpart, each applicant submitting 
a long-form application for license(s) for Spectrum Blocks A, B, or C 
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. 90.912, 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. 90.910 and 90.911, 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 
document necessary to establish eligibility as a small business and/or 
consortium of small businesses under Sec. 90.912. 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 and/or consortium of small businesses under Secs. 90.910 
and 90.911 shall be subject to audits by the Commission, using in-house 
and 

[[Page 6164]]
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 (FCC 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 800 MHz SMR service and shall also 
include consent to the interview of principals, employees, customers 
and suppliers of the applicant or licensee.
    (3) Definitions. The terms affiliate, attributable interests, 
consortium of small businesses, gross revenues, small business used in 
this section are defined in Sec. 90.912.

[FR Doc. 96-3509 Filed 2-13-96; 5:06 pm]
BILLING CODE 6712-01-P