[Federal Register Volume 61, Number 33 (Friday, February 16, 1996)]
[Proposed Rules]
[Pages 6212-6230]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 96-3511]



-----------------------------------------------------------------------


FEDERAL COMMUNICATIONS COMMISSION
47 CFR Part 90

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


Future Development of SMR Systems in the 800 MHz Frequency Band

AGENCY: Federal Communications Commission.

ACTION: Proposed rule.

-----------------------------------------------------------------------

SUMMARY: In this Second Further Notice of Proposed Rule Making (Second 
Further Notice) in PR Docket No. 93-144, the Commission seeks comment 
on disaggregation of channel blocks and partitioning on the upper 200 
channels of 800 MHz Specialized Mobile Radio (SMR) spectrum, certain 
aspects of mandatory relocation as adopted in the First Report and 
Order (First R&O) in PR Docket No. 93-144, and eligibility of Basic 
Exchange Telecommunications Radio Service (BETRS) operators for certain 
upper 200 channels. In addition, we propose to adopt service and 
competitive bidding rules for the lower 80 SMR channels and the General 
Category channels in the 800 MHz band. Further, we have redesignated 
the General Category channels for exclusive SMR use. The intended 
effect of this action is to facilitate future development of SMR 
systems in the 800 MHz band through implementation of streamlined 
licensing procedures and the use of competitive bidding.

DATES: Comments are to be filed on or before February 15, 1996, and 
Reply Comments are to be filed on or before March 1, 1996.

ADDRESSES: Federal Communications Commission, 1919 M Street NW., 
Washington, DC 20554.

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

SUPPLEMENTARY INFORMATION: This Second Further Notice, 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. 20037 (telephone: (202) 
857-3800).

I. Disaggregation of Channel Blocks on the Upper 200 Channels of 800 
MHz SMR Spectrum

    1. Background. In the Further Notice of Proposed Rule Making in PR 
Docket No. 93-144, 59 FR 60111 (November 22, 1994) (Further Notice), we 
asked commenters to address whether licensees should be allowed to 
sublicense portions of larger blocks instead of aggregating smaller 
blocks.
    2. Comments. Total Com, AMTA, AMI and Motorola contend that 
licensees with service areas based on Economic Areas (EAs) established 
by the United States Department of Commerce, Bureau of Economic 
Analysis should be permitted to sublicense portions of their spectrum 
blocks. Motorola argues that allowing sublicensing on a spectrum basis 
would allow excess spectrum capacity to be made available for 
alternative uses and provide small SMR licensees with the opportunity 
to participate in the provision of wide-area service at levels 
commensurate with their business and customer interests and their 
financial resources. AMTA argues that such sublicensing should be 
permitted as long as construction and coverage requirements are 
satisfied, because such an approach would encourage development of 
bidding consortia of smaller operators, which otherwise might be 
incapable of participating in the competitive bidding process. 
Parkinson, et al. express concern that, by allowing sublicensing, an 
incumbent's operations unfairly and unreasonably would be restricted by 
the EA licensee.
    3. Discussion. Given the extensive incumbent presence in the upper 
10 MHz block of the 800 MHz SMR spectrum, we tentatively conclude that 
EA licensees should be permitted to disaggregate their spectrum blocks. 
We believe that this additional tool will enable EA licensees to manage 
their spectrum blocks more effectively and efficiently. We further 
believe that disaggregation not only will facilitate the coexistence of 
EA licensees and incumbents in the upper 200 channels, but also will 
result in the most efficient use of the 800 MHz SMR spectrum. We seek 
comment on this tentative conclusion.
    4. As a general matter, we believe that any disaggregation 
agreements must comply with the Commission's pro-competitive policies. 
We propose that spectrum covered by an EA license may be sublicensed in 
either of two ways: (1) a group of licensees or entities may form 
bidding consortia to participate in auctions, and then disaggregate or 
partition the EA license(s) won among consortia participants; and (2) 
an EA licensee, through private negotiation and agreement before or 
after the auction, may elect to disaggregate or partition its spectrum 
block. We seek comment on this proposal.
    5. Although we are interested in affording EA licensees optimal 
flexibility for spectrum management, we nonetheless do not want to 
undermine our goal to facilitate an effective and efficient wide-area 
licensing scheme. We ask commenters to discuss the conditions under 
which EA licensees should be permitted to disaggregate their spectrum 
blocks. Should EA licensees be required to retain a specified portion 
of their spectrum block, and if so, what is an appropriate amount? In 
addition, should there be a minimum amount of spectrum that EA 
licensees must disaggregate in order to utilize this spectrum 
management tool? Should geographic area licensees be permitted to 
disaggregate only after they have satisfied applicable construction and 
coverage requirements? We also ask commenters to discuss any other type 
of considerations applicable to disaggregation.

II. Partitioning on the Upper 200 Channels of 800 MHz SMR Spectrum

    6. Background. In the Eighth Report and Order (Competitive Bidding 
Eighth R&O) in PP Docket No. 93-253 we adopted a partitioning option 
for rural telephone companies.
    7. Comments. Nextel contends that smaller, local operators wishing 
to participate in wide-area service could become involved through 
arrangements with the EA licensee to partition its service area. 

[[Page 6213]]

    8. Proposal. We tentatively conclude that partitioning should be an 
option not only for rural telephone companies but also for incumbents 
and eligible SMR licensees generally. We tentatively conclude that 
extending the partitioning option will further the goal of Section 
309(j) in the dissemination of licenses to a variety of licensees 
because small businesses will have additional flexibility and 
opportunities to serve areas in which they already provide service, 
while the remainder of the service area could be served by other 
providers.
    9. We propose that SMR licensees 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; or (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 would be required to file a long-form 
application, following the auction, for its respective mutually agreed-
upon geographic area. We propose that partitioned areas be required to 
conform to established geo-political boundaries (such as county lines). 
We further propose that these entities be subject to the same interim 
coverage and channel use requirements as EA licensees with respect to 
the geographic areas covered by their partitioned authorizations. We 
seek comment on our proposals and tentative conclusions and any 
alternatives.
    10. As a general matter, we believe that any partitioning agreement 
must comply with the Commission's pro-competitive policies. We ask 
commenters to discuss the conditions under which EA licensees should be 
permitted to partition their service areas to other SMR licensees. 
Should EA licensees be required to retain a specified portion of their 
service area, and if so, what is an appropriate amount? Should 
geographic area licensees be permitted to partition only after they 
have satisfied applicable construction and coverage requirements? We 
also ask commenters to discuss any other type of considerations 
applicable to partitioning.

III. Mandatory Relocation in the Upper 200 Channels

A. Distributing Relocation Costs Among EA Licensees

    11. In the First R&O, we determined that EA licensees must notify 
incumbents operating on the upper 200 channels of their intention to 
relocate such incumbents within 90 days of the release of the Public 
Notice commencing the voluntary negotiation period. We also determined 
that any incumbent licensee who has been so notified may require all EA 
licensees in whose spectrum blocks it operates to negotiate 
collectively with the incumbent. Because an incumbent licensee can 
compel simultaneous negotiations with all affected EA licensees, we 
tentatively conclude that the elaborate cost-sharing plan proposed for 
broadband PCS is unnecessary for the 800 MHz SMR service. Therefore, we 
propose to require EA licensees to share the relocation costs on a pro 
rata basis (based on the actual number of the incumbent's channels 
located in the EA licensees' respective spectrum blocks), unless all 
such licensees agree to a different cost-sharing arrangement. We 
believe that this approach would enhance significantly the speed of 
relocation given that incumbent licensees most likely will elect to 
negotiate with EA licensees collectively rather than individually to 
accommodate system-wide relocation agreements. This would in turn 
result in faster delivery of wide-area SMR service to the public. We 
seek comment on our tentative conclusions and on the advantages and 
disadvantages of our cost-sharing proposal.

B. Relocation Costs

    12. Compensable Costs. When relocation will benefit multiple 
licensees, the issue arises as to what relocation costs should be 
shared by the benefitting licensees. Relocation costs can be divided 
roughly into two categories: (1) the actual cost of relocating an 
incumbent licensee to comparable facilities, and (2) payments above the 
cost of providing comparable facilities, also referred to as ``premium 
payments.''
    13. Comments. Louisville believes that relocation costs should 
include expenses for: engineering, equipment, labor, construction, 
testing, FCC application fees, local fees, additional recurring 
operating costs, pay for lost time, cost analysis, frequency 
coordination, and any other expenses incurred by the incumbent as long 
as the expenses were caused by the new facilities not being comparable 
with the old facilities and they occurred within one year after the 
incumbent took control of the new facilities. Clarus argues that 
expenses paid by the EA licensee should include administrative costs 
and any loss of goodwill that the incumbent might suffer. Nextel 
believes that all out-of-pocket costs associated with retuning should 
be borne by the auction winner, such costs include those covered by the 
Commission's Emerging Technologies relocation plan.
    14. Proposal. We tentatively conclude that premium payments should 
not be reimbursable, because such payments are likely to be paid by EA 
licensees to accelerate relocation so that they can be the first 
licensee in the market area to implement wide-area SMR service. Because 
other EA licensees have not received the corresponding advantage of 
being first to market and did not actively participate in the 
relocation negotiations, we do not believe that such licensees should 
be required to contribute to premium payments. We therefore propose to 
limit the calculation of reimbursable costs for the 800 MHz SMR service 
to actual relocation costs, unless the EA licensees involved mutually 
and expressly agree to share any premium payments. We tentatively 
conclude that ``actual relocation costs'' would include, but not be 
limited to: SMR equipment; towers and/or modifications; back-up power 
equipment; engineering costs; installation; system testing; FCC filing 
costs; site acquisition and civil works; zoning costs; training; 
disposal of old equipment; test equipment; spare equipment; project 
management; and site lease negotiation. We request comment on this 
proposal. We also ask commenters to address any additional costs they 
believe should be reimbursable and a supporting rationale for such 
treatment.
    15. Creation of Reimbursement Rights. We tentatively conclude that 
an EA licensee who negotiates a relocation agreement that benefits one 
or more other EA licensees should obtain a right to reimbursement of a 
share of the relocation costs. We seek comment on how such rights 
should be created procedurally. We believe that some form of 
reimbursement rights should be conferred on EA licensees so that it 
will be possible to enforce the right to reimbursement and collect 
reimbursement from other EA licensees. We seek comment on these 
tentative conclusions and any alternatives.
    16. Payment. We seek comment on when reimbursement payments should 
be due. Specifically, we ask commenters to address whether such 
payments should be due when the benefitting EA licensee begins to use 
the particular frequency or when the EA licensee commences testing of 
its wide-area system in the EA.
    17. Dispute Resolution Issues. Comments. PCIA, AMI, and Motorola 
all argue that the Commission should establish a mediation mechanism to 


[[Page 6214]]
resolve disputes. PCIA believes that the EA winner should pay for the 
mediation unless the mediator finds that the incumbent is not acting in 
good faith. If mediation is not successful, Motorola and PCIA believe 
that the Commission should resolve the dispute.
    18. Proposal. We tentatively conclude that incumbents and EA 
licensees should attempt to resolve disputes arising over the amount of 
reimbursement required, in the first instance, amongst themselves. We 
encourage parties to use expedited alternative dispute resolution 
(``ADR'') procedures, such as binding arbitration or mediation. We seek 
comment on this proposal and on any other mechanisms that would 
expedite resolution of these disputes should they arise.
    19. Similarly, to the extent that disputes arise between incumbents 
and EA licensees over relocation negotiations (including disputes over 
the comparability of facilities and the requirement to negotiate in 
good faith), we also encourage parties to use alternative dispute 
resolution techniques. We believe such techniques are an appropriate 
first step during both the voluntary and mandatory negotiation periods. 
We emphasize again that resolution of such disputes entirely by our 
adjudication processes would be time consuming and costly to all 
parties.
    20. We also seek comment on whether either the industry trade 
associations or the FCC's Compliance and Information Bureau should be 
designated as arbiters for such disputes. We ask commenters to discuss 
the advantages and disadvantages of such designations as well as 
suggested dispute resolution procedures in the event that they were so 
designated. In addition, we seek comment on whether failure to comply 
with the relocation obligations or requirements should be taken into 
consideration by the Commission when deciding on renewal or transfer of 
control or assignment applications.

C. Comparable Facilities

    21. Background. Under the mandatory relocation scheme we adopt in 
the First R&O, we require EA licensees to provide incumbents with 
``comparable facilities'' as a condition for involuntary relocation. In 
the broadband PCS context, we also adopted a mandatory relocation 
scheme in which PCS licensees are required to provide microwave 
incumbents with comparable facilities as a condition for involuntary 
relocation. Although we have not adopted a definition of comparable 
facilities in the broadband PCS context, we have indicated that we 
generally require that comparable facilities be equal to or superior to 
existing facilities. We also indicated that we would consider, inter 
alia, system reliability, speed, bandwidth, throughput, overall 
efficiency, bands authorized for such services, and interference 
protection in making a determination regarding comparability. In the 
Further Notice, we asked commenters to discuss the meaning of 
comparable facilities in the 800 MHz SMR context.
    22. Comments. Some commenters suggest, as a general matter, that a 
comparable system is one that is as good as or superior to the 
incumbent's existing system. The majority of commenters attempt to 
define comparable facilities by specifying what would need to be 
provided to the incumbent being relocated. These commenters argue that 
comparable facilities would include: (1) the same number of channels as 
are currently held by the incumbent; (2) the retuned frequencies being 
compatible in a multi-channel system at the incumbent's current 
location; (3) the retuned frequencies not having any co-channel 
licensees within the EA; (4) incumbents having 70-mile co-channel 
interference protection; (5) base station equipment being modified to 
operate on the retuned frequencies; (6) all user units and user control 
units being reprogrammed or recrystallized to the retuned frequencies 
(or, if modification of the incumbent's equipment is not possible, the 
EA licensee would be required to provide new equipment); (7) the 
incumbent's ``retuned'' system providing the same, if not superior, 
performance as the incumbent's existing system operating at the same 
antenna height, and with the same power and interference protection; 
and, (8) the same channel separation for the retuned frequencies.
    23. Some commenters define ``comparable facilities'' on the basis 
of operational characteristics. For example, commenters contend that 
comparable facilities mean that the incumbent's retuned system should 
have the same or superior coverage as its existing system. Nextel 
argues that comparable facilities means having the same 40 dBu contour 
as the incumbent's current system. Several commenters argue that only 
other 800 MHz SMR channels could constitute comparable frequencies. In 
this connection, Spectrum believes that incumbents should be relocated 
elsewhere on the 800 MHz spectrum or to the 900 MHz spectrum, or the 
auction winner should buy-out the incumbent's system.
    24. PCIA, supported by other commenters, proposes that retuned 
incumbents receive the following rights and privileges associated with 
mandatory relocation: (1) The ability to obtain geographic area 
licenses on retuned channels; (2) protection against being relocated 
more than once; (3) the right to demand one unified retuning plan from 
all EA license holders in whose spectrum blocks their frequencies are 
located; (4) a requirement of ``seamless'' transition, such that the EA 
holder would complete retuning before the incumbent moves; (5) no 
obligation to cease operations on the original channels unless 
alternative frequencies are identified and accepted; and, (6) the right 
to timely notification by the EA licensee that incumbents will be 
moved. PCIA also suggests that EA licensees be given one year in which 
to complete retuning, so that incumbents can make future business 
plans. Several commenters argue that there should be no selective 
retuning of incumbent channels; rather, all of an incumbent's channels 
within an EA spectrum block should be retuned. Moreover, several 
commenters argue that in terms of an EA licensee's relocation 
obligations, an incumbent system should be defined as all licenses 
issued to an entity or multiple entities participating in an integrated 
network. Nextel, on the other hand, contends that selective retuning 
should be allowed, so long as the channels are ``comparable.''
    25. Proposal. Although we wish to provide parties with sufficient 
flexibility to negotiate mutually agreeable terms for determining 
comparability, based on our experience in the broadband PCS context, we 
tentatively conclude that comparable facilities, at a minimum, should 
provide the same level of service as the incumbents' existing 
facilities. We propose that by ``comparable facilities,'' a relocated 
incumbent would: (a) Receive the same number of channels with the same 
bandwidth; (b) have its entire system relocated, not just those 
frequencies desired by a particular EA licensee; and, (c) once 
relocated, have a 40 dBu service contour that encompasses all of the 
territory covered by the 40 dBu contour of its original system. We 
believe that this definition will ensure that incumbents' operations 
will not be adversely affected. We further believe that such definition 
would not preclude incumbents and EA licensees from negotiating to 
trade-off any of these system parameters for premium payments or other 
operational rights which are consistent with our rules. We believe that 
this flexibility in 

[[Page 6215]]
designing replacement facilities will expedite relocation, given the 
many variables involved with the system design of each individual 
system. We seek comment on our proposed definition of and tentative 
conclusions regarding ``comparable facilities.'' We ask commenters to 
discuss whether the ``comparable facilities'' definition should include 
additional operational characteristics, if so, what characteristics 
should be specified.
    26. With respect to old and new SMR equipment, we tentatively 
conclude that an EA licensee's relocation obligations to an incumbent 
will not require the EA licensee to replace existing analog equipment 
with digital equipment when there is an acceptable analog alternative 
that satisfies the comparable facilities definition. In the event that 
an incumbent still wishes to obtain digital equipment under these 
circumstances, we believe that the incumbent should be required to bear 
the additional costs associated with such an upgrade of its system. 
Consequently, we propose that under these circumstances, the cost 
obligation of the EA licensee would be the minimum cost the incumbent 
would incur if it sought to replace, but not upgrade, its system. 
However, if an analog alternative fails to meet any of the criteria 
included in the comparable facilities definition, the incumbent would 
not be required to accept such an alternative. In those instances in 
which an incumbent licensee is operating with digital equipment prior 
to relocation, we tentatively conclude that the incumbent's new system 
also must be digital, unless the EA licensee and incumbent mutually 
agree to different terms. We believe that the proposed definition of 
comparability would facilitate negotiations between incumbents and EA 
licensees during the voluntary period, because both parties would be 
better informed about the EA licensees' minimum obligation under our 
rules. We seek comment on our proposals and tentative conclusions and 
any alternatives.

D. Relocation Guidelines--Good Faith Requirement During Mandatory 
Negotiations

    27. In the First R&O, we establish a mandatory relocation mechanism 
for the upper 10 MHz block. Under this mechanism, incumbents and EA 
licensees have a one-year voluntary negotiation period during which EA 
licensees are free to offer incumbents a variety of incentives to 
expedite relocation. If a relocation agreement is not reached during 
this period, the EA licensee may initiate a mandatory negotiation 
period during which the parties are required to negotiate in ``good 
faith.''
    28. We believe that additional clarification of the term ``good 
faith'' will facilitate negotiations and help reduce the number of 
disputes that may arise over varying interpretations of what 
constitutes good faith. We tentatively conclude that, for purposes of 
the mandatory negotiation period, an offer by an EA licensee to replace 
an incumbent's system with comparable facilities constitutes a good 
faith offer. Likewise, an incumbent that accepts such an offer 
presumably would be acting in good faith; whereas, failure to accept an 
offer of comparable facilities would create a rebuttable presumption 
that the incumbent is not acting in good faith. Comparable facilities 
would be limited to actual costs associated with providing a 
replacement system and would exclude any expenses incurred by the 
incumbent without securing the approval, in advance, of the EA 
licensee. We believe that the time for expansive negotiation is during 
the voluntary negotiation period and that, by the time the parties have 
reached the mandatory negotiation period, only the bare essentials of 
comparability should be required. We seek comment on our proposal. We 
also seek comment on the appropriate penalty to impose on a licensee 
that fails to act in good faith.

IV. BETRS Eligibility on the Upper 200 Channels of 800 MHz SMR Spectrum

    29. Background. Under Section 90.621(h) of the Commission's rules, 
Channel Numbers 401-410, 441-450, 481-490, 521-530, and 561-570 are 
available on co-primary basis to stations in Basic Exchange 
Telecommunications Radio Service (BETRS) as described in Part 22 of the 
Commission's rules.
    30. Proposal. According to our licensing records, there are few 
BETRS facilities currently licensed on these frequencies. Based on the 
limited BETRS licensing on these frequencies and the goals of the wide-
area licensing plan adopted in the First R&O (in which these channels 
are included), we propose that BETRS stations no longer be authorized 
on these frequencies. In addition, as of the adoption of this Second 
Further Notice, we will no longer accept applications for BETRS 
facilities on these channels.

V. Licensing of Lower 80 and General Category Channels

A. Geographic Area Licensing

    31. Background. Under our current rules the lower 80 and General 
Category channels are licensed on a site-specific basis. In the Further 
Notice, we sought comment on whether to continue site-specific 
licensing or to adopt a form of geographic area licensing on these 
channels.
    32. Comments. Several commenters advocate that we continue 
licensing channels designated for local SMR use based on the geographic 
separation and channelization criteria in our current SMR rules. These 
commenters argue that continued site-specific licensing would: (1) 
Allow local operators to define their own markets; (2) permit 
construction of niche systems designed to meet unique and customized 
needs; and, (3) minimize disruption to operations of existing 
licensees.
    33. Other commenters advocate discontinuing site-specific licensing 
of the lower 80 and General Category channels and instead offering 
licenses for individual channels or small channel blocks covering 
defined geographic areas. Cumulous argues that market-area licensing 
would allow local SMR operators to grow and develop into geographic 
area licensees in the future. Dru Jenkinson, et al. contend that 
market-area licensing would permit more efficient service area coverage 
than site-specific authorizations. Total Com believes that market-area 
licensing will be advantageous to market development, with minimal 
regulation.
    Some commenters expressly oppose market-area licensing on the basis 
that: (1) There is no reason to license these channels on a market-
defined area basis given the scarcity of vacant channels; and, (2) it 
could create an artificial shortage of local channels simply because a 
licensee secures an authorization covering a particular geographic 
area. Pittencrief contends that such an approach, if adopted, should be 
used only in those areas where the spectrum currently is not being 
used.
    35. Although AMTA does not expressly support this licensing 
approach, it notes that there are certain advantages associated with 
geographic area licensing, including facilitation of future integration 
of local systems into wide-area operations should additional spectrum 
be desired. Pittencrief contends that even if site-specific licensing 
is retained, geographic area licensing would not necessarily be 
foreclosed in the future. In this regard, Pittencrief recommends that 
in order to secure a market-based license, a local licensee would be 
required to demonstrate either that: (a) No other co-channel systems 
serve the geographic area; or, (b) it has secured the consent of all 
affected co-channel licensees. In either case, Pittencrief suggests 
that the local licensee should be required to 

[[Page 6216]]
serve a certain percentage of the Commission-defined service area or 
face loss of the wide-area authorization.
    36. Proposal. We tentatively conclude that the lower 80 and General 
Category channels should be converted to geographic area licensing. We 
believe that this new licensing approach will afford smaller SMR 
operators the flexibility to provide service to a defined geographic 
area on the same basis as licensees in the upper 10 MHz block. We 
further believe that geographic licensing would simplify system 
expansion and substantially reduce the administrative burden on both 
lower 80 and General Category licensees and the Commission. In fact, we 
expect that in many instances, existing licensees will seek to obtain 
market-area licenses for those areas in which they already operate, 
which would enable them to consolidate and expand their operations 
under a more flexible regulatory regime. We seek comment on our 
tentative conclusion.

B. Service Areas

    37. Background. In the Further Notice, we indicated our belief that 
the Basic Trading Areas (BTAs), established by Rand McNally, could be 
an appropriate service area for geographic area licensing on the lower 
80 channels. In the First R&O, we adopt EAs as the service area for 
licenses in the upper 10 MHz block.
    38. Comments. AMTA recommends using EAs rather than BTAs, partly 
because EAs appear to approximate more closely the coverage range of 
existing systems. Pittencrief also supports use of EAs. DCL Associates 
and Telecellular support use of BTA service areas, because they believe 
that such licensing would permit substantially more operational 
flexibility than the traditional 35-mile radius licensing areas. E.F. 
Johnson believes use of BTAs is contrary to the public interest because 
it potentially would require operators to construct facilities where 
they did not anticipate providing service; and, it would limit the 
possibility that a co-channel licensee legitimately could reuse those 
channels to serve an adjacent area. CellCall favors licensing the lower 
80 channels based on Rand McNally's Major Trading Areas (MTAs). Dru 
Jenkinson, et al. believe that uniformity and efficiency of 
administration suggest that the lower 80 channels be licensed on the 
same geographic area as the upper 200 channels. Similarly, AMTA 
contends that such uniformity will preserve the value of lower 80 
channels.
    39. Proposal. We tentatively conclude that EAs would be the most 
appropriate service areas for a geographic area licensing approach on 
the lower 80 and General Category channels. As discussed in the First 
R&O, EAs are based on urban, suburban, and rural traffic patterns that 
accurately reflect the coverage provided by most 800 MHz SMR operators 
other than the largest wide-area systems. We therefore believe that 
this is an appropriate service area definition for the smaller systems 
that we anticipate will occupy the lower 80 and General Category 
channels. We also believe that using the same service area definition 
for licenses on these channels as for licenses on the upper 200 
channels will result in greater administrative efficiency. We seek 
comment on this tentative conclusion and on alternative area 
definitions.

C. Channel Assignments

    40. Background. In the Further Notice, we indicated that by 
continuing to license the lower channels in five-channel blocks, as we 
do currently, we would enable existing licensees to expand local 
systems on the same channels they are using presently. We also 
indicated that licensing fewer channels in each block might be an 
option that would give SMR operators more flexibility in channel 
configuration.
    41. Comments. CellCall, Telecellular, AMI, Dru Jenkinson, et al., 
and Palmer support licensing the lower 80 channels in five-channel 
blocks. Palmer believes that such an approach would limit spectrum 
warehousing severely because channels would not be sitting idle while 
reserved for future service areas within a larger defined geographic 
region. Dru Jenkinson, et al. believes that a five-channel block is an 
appropriate grouping which would permit limited service application on 
a local basis, yet provide flexibility for system modification within 
the designated area.
    42. Proposal. The five-channel blocks, which proved to be 
administratively convenient under a site-by-site licensing scheme, may 
also continue to be feasible under a geographic area licensing approach 
since incumbent licensees have established their systems based on such 
channelization. We anticipate that licensees operating on the lower 80 
channels increasingly may become more interested in expanding the 
geographic areas served by their systems and preoccupied less with the 
number of frequencies utilized by such systems. We tentatively conclude 
that the lower 80 channels should be licensed in the same five-channel 
blocks under a geographic licensing approach in order to allow SMR 
operators to build upon the systems they have already established. 
Thus, we propose to license the lower 80 channels in five-channel 
blocks. We seek comment on this tentative conclusion and any 
alternatives.
    43. For the General Category channels, we are not convinced that 
five-channel blocks would be the best licensing alternative. Unlike the 
lower 80 channels, the General Category channels are contiguous. As a 
result, licensees may be interested in establishing multiple-channel 
system networks. In addition, we are concerned that the competitive 
bidding process for these frequencies may be administratively 
unmanageable if they are licensed on a channel-by-channel basis, given 
the large number of channels involved. Thus, we tentatively conclude 
that the General Category channels should be licensed in channel 
blocks. We seek comment on our tentative conclusion. We also ask 
commenters to discuss what specific channel block size would be 
appropriate. One alternative is to license channel blocks of different 
sizes, e.g., a 120-channel block, a 20-channel block, and a 10-channel 
block. Another alternative is to license channel blocks of the same 
size, e.g., 25-channel or 10-channel blocks. We seek comment on these, 
as well as other, alternatives.

D. Operational and Eligibility Restrictions

    Background. In the Further Notice, we proposed to allow licensees 
to use the lower 80 channels for any purpose that is technically 
consistent with our rules. We also did not propose to restrict the 
ability of licensees on the lower 80 channels to aggregate channels or 
integrate local systems to provide service over a larger area.
    45. Comments. The majority of commenters addressing this issue 
endorse the Commission's proposal to allow licensees to use the lower 
80 channels for any purpose that is technically consistent with our 
rules. Cumulous believes that the Commission should pursue licensing 
policies that allow the same use to be made of both the upper 10 MHz 
block of 800 MHz SMR spectrum and the lower 80 channels. OneComm 
believes that such a regime would make local channels more fungible in 
relocation negotiations and preserve the value of the lower 80 
channels.
    46. Some commenters, on the other hand, oppose allowing EA 
licensees to be able to obtain lower 80 channels. Ericsson believes 
that such channels should be reserved as a safe haven for any local 
licensees who currently operate in the upper 10 MHz block and 

[[Page 6217]]
do not obtain the EA license if a mandatory relocation plan is adopted. 
UTC believes that, in order to ensure the benefits of competition 
within all geographic markets, an entity should be restricted from 
holding EA licenses and authorizations for the lower 80 channels in the 
same geographic area. Fisher urges the Commission to clarify that if an 
EA licensee also holds licenses for systems made up of frequencies from 
the lower 80 channels, it would be allowed to incorporate such 
frequencies into its wide-area system. Fisher believes that such use 
would further the Commission's goal of efficient and full utilization 
of spectrum.
    47. Proposal. We tentatively conclude that lower 80 and General 
Category SMR licensees should be permitted to use these channels for 
any purpose which is technically consistent with our rules. In light of 
our designation of 10 MHz of 800 MHz spectrum for wide-area licensing, 
however, we wish to ensure that our rules do not inadvertently allow 
licensees in the upper 10 MHz to acquire large numbers of additional 
SMR channels primarily intended for other use. As discussed infra, 2we 
propose to adopt size restrictions on eligibility for the lower 80 and 
General Category channels by designating these channels as an 
entrepreneurs' block. As a result of the economic size limitations 
associated with such designation, the largest licensees in the upper 10 
MHz block would likely be ineligible for the lower 80 and General 
Category channels. Aside from this proposed restriction, however, we 
tentatively conclude that limiting the potential uses of lower 80 and 
General Category licenses would not serve the public interest. We 
believe that operational restrictions ultimately may restrict the 
ability of smaller SMR operators to expand their service area and 
service offerings by such means as integrating their frequencies into a 
wide-area system or establishing a multiple-channel network. Thus, we 
do not propose any additional restrictions for these channels.

E. Channel Aggregation Limit

    48. Background. In the Further Notice, we tentatively concluded 
that a limit should be placed on the number of lower 80 channels that 
an applicant may obtain at one time in an area without constructing and 
commencing operations on previously licensed channels in the same area. 
We proposed to limit grants of the lower 80 channels to no more than 
five channels at one time, which is the applicable limit under our 
current rules.
    49. Comments. All commenters addressing this issue agree that a 
limit should be placed on the number of lower 80 channels that an 
applicant may obtain at one time in an area without constructing and 
commencing operations on previously licensed channels in the same area. 
CellCall proposes a five-channel limit in a particular area for the 
lower 80 frequencies. Russ Miller believes, however, that a five-
channel limit is too restrictive over a geographic area as large as a 
BTA service area. It proposes a five-channel limit, per location, not 
per area, for requested frequencies not licensed to the applicant 
within its existing footprint. Russ Miller suggests that the limit 
apply to any of the 800 MHz frequencies, not just SMR channels. 
Telecellular believes that lower 80 licensees should be permitted to 
apply for additional channels only after construction has been 
completed for any frequencies covered by previously issued 
authorizations in a given area, with ``area'' defined as any location 
within 40 miles of the unbuilt site. Total Com suggests that any 
licensee must have 90 percent of its channels constructed in each 
market before additional channels are authorized.
    50. Proposal. We propose not to limit the number of frequencies a 
single applicant can request at one time. Under our site-specific 800 
MHz SMR licensing rules, we generally have restricted the number of 
channels for which an entity could apply in a particular area at one 
time, to deter spectrum warehousing. We believe that the risk of 
channel warehousing would be limited because these licenses will be 
subject to competitive bidding and we anticipate that licensees will 
not bid for more channels than they actually need or can use. We also 
believe that lower 80 and General Category licensees should have the 
flexibility to pursue plans to establish wide-area systems by 
aggregating the lower 80 and General Category frequencies. We note, 
however, that Commercial Mobile Radio Services (CMRS) spectrum holdings 
by these licensees still would be subject to the CMRS spectrum 
aggregation limit provided in Section 20.6 of our Rules. We seek 
comment on these proposals and any alternatives.

F. Construction Requirements

1. Construction Period
    51. Background. In the Third Report and Order in GN Docket No. 93-
252, 59 FR 59945 (November 21, 1994) (CMRS Third R&O), we established a 
uniform 12-month period for constructing a standard base station in all 
CMRS services that are licensed on a site specific basis. In the 
Further Notice, we indicated that licensees of SMR systems 
presumptively are subject to this 12-month construction period. In the 
CMRS Third R&O, we also indicated that CMRS providers would be required 
to commence service to subscribers by the end of their construction 
period, with ``service to subscribers'' defined to mean the provision 
of service to at least one party not affiliated with, controlled by, or 
related to the CMRS provider.
    52. Comments. All commenters addressing this issue endorse the 
Commission's proposal of a 12-month construction period, coupled with a 
commencement of service to subscribers requirement.
    53. Proposal. Consistent with our conclusions in the CMRS Third 
R&O, we propose that lower 80 and General Category licensees be subject 
to a 12-month construction period. We further propose that these 
licensees be required to construct their facilities and commence 
``service to subscribers'' within twelve months from the grant of their 
licenses. We seek comment on this proposal and any alternatives.
2. Coverage Requirements
    54. We seek comment on whether geographic area SMR licensees 
operating on the lower 80 and General Category frequencies should be 
subject to minimum coverage requirements as a condition of licensing. 
In the First R&O, we require EA licensees operating in the upper 200 
channels to provide coverage to one-third of the population within 
their EA within three years of initial license grant and to two-thirds 
of the population by the end of their five-year construction period. We 
propose to apply these same requirements to lower 80 and General 
Category geographic area licensees. We believe that these coverage 
requirements serve the public interest by deterring spectrum 
warehousing and ensuring the speedy delivery of SMR service to the 
public. We also propose that lower 80 and General Category licensees be 
able to satisfy their coverage requirements by meeting a ``substantial 
service'' standard, like that adopted in the broadband PCS 10 MHz 
blocks and 900 MHz SMR services. We ask commenters to address the 
advantages and disadvantages of imposing coverage requirements on lower 
80 and General Category licensees, the specific coverage criteria 
proposed, and any alternative criteria that could be used.
    55. We also tentatively conclude that the geographic area lower 80 
and General Category licensees should be 

[[Page 6218]]
responsible for meeting their coverage requirements, regardless of the 
extent to which their service areas are occupied by co-channel 
incumbents. We believe that incumbents that already provide substantial 
coverage in certain areas will have sufficient incentive to seek 
geographic area licenses for these areas. Thus, we propose to require 
the geographic area licensees for the lower 80 and General Category 
channels to satisfy their coverage requirements directly. This proposal 
is consistent with our approach for EA licensees on the upper 200 
channels. We seek comment on these proposals and any alternatives, 
including the impact, if any, on the construction period for the lower 
80 and General Category channels. Assuming a twelve-month construction 
period, we ask commenters to address whether the coverage requirements 
should be imposed earlier in the license term. If so, we ask commenters 
to discuss what would be the appropriate time frame.
    56. If we adopt coverage requirements, we also must determine what 
penalty should be imposed if the geographic area licensee fails to 
comply with such requirements. We tentatively conclude that a 
geographic area licensee's failure to meet the coverage requirements 
should result in forfeiture of the market-area license. We also 
tentatively conclude that in the event that a licensee loses its 
geographic area license for failure to comply with coverage 
requirements, any authorizations that such licensee held in that area 
prior to the auction for facilities that are constructed and operating 
would be reinstated. This approach is consistent with the sanctions 
provided for in our rules for the upper 10 MHz block of 800 MHz SMR 
spectrum, 900 MHz SMR, and broadband PCS. We seek comment on our 
proposal and any alternatives.

G. Treatment of Incumbents

    57. Given the extensive licensing of the 800 MHz SMR service, we 
remain concerned about the ramifications of implementing a market-area 
licensing approach where systems have been licensed already on a site-
specific basis. In the First R&O, we adopt a mandatory relocation 
mechanism for the upper 10 MHz block. With respect to the lower 80 and 
General Category channels, however, we believe that there are no 
equitable means of relocating incumbents to alternative channels, and 
that there are no identifiable alternative channels to accommodate all 
such incumbents. We also believe that incumbent licensees relocated 
from the upper 200 channels should not be subject to relocation a 
second time. We therefore tentatively conclude that there should be no 
mandatory relocation mechanism for SMR operators operating on the lower 
80 and General Category channels. We propose that incumbent SMR 
licensees on these frequencies be allowed to continue to operate under 
their existing site-specific authorizations, and geographic area 
licensees would be required to provide protection to all co-channel 
systems that are constructed and operating within their service areas. 
We further propose that no incumbent SMR licensee be allowed to expand 
beyond its existing service area (as discussed in further detail, 
infra) and into the geographic area licensee's territory without 
obtaining the prior consent of the geographic area licensee (unless, of 
course, the incumbent in question is itself the market-area licensee 
for the relevant channel). We seek comment on this proposal. In 
addition, we ask commenters to address how non-SMR licensees operating 
on the lower 80 and General Category channels should be treated. Should 
these licensees be relocated to non-SMR channels, and if so, under what 
circumstances and pursuant to what type of relocation plan?
    58. Because incumbent licensees' ability to expand their service 
areas would be restricted as a result of our proposal, we believe that 
it is imperative that they be given the optimum amount of operational 
flexibility possible, without encroaching upon market-area licensees' 
operations. Consistent with our approach on the upper 200 channels, we 
propose that incumbent licensees on lower 80 and General Category 
channels be able to modify or add transmitters in their existing 
service area without prior notification to the Commission, so long as 
their 22 dBu interference contour is not expanded. As we note in the 
First R&O, we believe that by using the 22 dBu interference contour as 
the benchmark for defining an incumbent's service area, incumbents will 
be afforded significant operational flexibility without detracting from 
the market-area licensee' operational capabilities. We seek comment on 
this proposal. We ask commenters to address whether our proposal 
strikes the appropriate balance between the competing interests of 
market-area and incumbent licensees. We also ask commenters to discuss 
whether a basis other than the 22 dBu interference contour should be 
used to determine an incumbent's service area.
    59. In addition, similar to our approach in the upper 200 channels 
and the 900 MHz SMR service, we propose to allow SMR incumbents 
operating on the lower 80 and General Category channels to have their 
licenses reissued if they are not the successful bidder for the 
geographic area license which includes the area in which they are 
currently operating. Under this procedure, which will be granted post-
auction upon the request of the incumbent, an incumbent may convert its 
current multiple site licenses to a single license, authorizing 
operations throughout the contiguous and overlapping 22 dBu contours of 
the incumbent's previously authorized sites. We propose that incumbents 
seeking such reissued licenses be required to make a one-time filing 
identifying each of their external base station sites to assist the 
staff in updating the Commission's database after the close of the 
auction for the lower 80 and General Category channels. We also propose 
to require evidence that such facilities are constructed and placed in 
operation and that, by operation of our rules, no other licensee would 
be able to use these channels within this geographic area. We believe 
that facilities added or modified within the 22 dBu contour without 
prior approval or subsequent notification under this procedure will not 
receive interference, because they will be protected by the presence of 
surrounding stations of the same licensee on the same channel or 
channel block. We seek comment on this proposal.

H. Co-Channel Interference Protection

    60. Under our market-area licensing proposal for the lower 80 and 
General Category channels, market-area licensees will be required to 
provide interference protection both to incumbent co-channel facilities 
and to co-channel licensees in neighboring market areas. With respect 
to incumbent co-channel facilities, we propose to retain the level of 
protection afforded under our existing rules. Thus, a market-area 
licensee would be required either to locate its stations at least 113 
km (70 mi) from the facilities of any incumbent or to comply with the 
co-channel separation standards set forth in our short-spacing rule if 
it seeks to operate stations located less than 113 km (70 mi) from an 
incumbent licensee's facilities. With respect to adjacent market-area 
licensees, we propose that market-area licensees provide interference 
protection either by reducing the signal level at their service area 
boundary, or negotiating some other mutually acceptable agreement with 
all potentially affected adjacent licensees. We seek comment on these 

[[Page 6219]]
proposals and we invite commenters to provide alternatives.

I. Licensing in Mexican and Canadian Border Areas

    61. We recognize that a limited number of lower 80 channels are 
available for SMR licensing in the Mexican and Canadian border areas. 
In the First R&O, we have decided not to distinguish between border 
areas and non-border areas for licensing purposes. We propose the same 
approach for the lower 80 channels in the border areas, i.e., all 
market areas should be licensed on a uniform basis without 
distinguishing border from non-border areas, even if some spectrum is 
unusable. We believe that lower 80 and General Category applicants, 
like those in the upper 10 MHz block and other services, will be able 
to assess the impact of more limited spectrum availability when valuing 
those market areas for competitive bidding purposes. Moreover, we 
believe that altering the size of particular market areas because they 
are located near an international border is likely to be 
administratively unworkable. Thus, we propose that market-area 
licensees be entitled to use any available border-area channels, 
subject to the relevant rules regarding international assignment and 
coordination of such channels. We seek comment on this proposal.

VI. Regulatory Classification of Lower 80 and General Category Channels

    62. Background. In the CMRS Third R&O, we determined that SMR 
licensees would be classified as CMRS if they offered interconnected 
service and as Private Mobile Radio Service (PMRS) if they did not 
offer such service. In the Further Notice, we sought comment on whether 
the presumption of CMRS status should apply to licensees authorized for 
the lower 80 channels.
    63. Comments. All of the commenters addressing this issue believe 
that there should not be a CMRS presumption for the lower 80 channels 
or any other channels designated primarily for local service. E.F. 
Johnson and Genesee opine that there is a significant difference 
between the type of services provided by local SMR systems and wide-
area systems. AMTA opines that it is not persuaded that Congress 
intended to adopt a definition of CMRS so sweeping as to encompass even 
the smallest, most rural SMR system, irrespective of its practical 
ability to provide a service substantially similar to cellular or other 
CMRS systems.
    64. Proposal. Based on our geographic area licensing proposal for 
the lower 80 and General Category channels, we believe that it is not 
evident that the operations of the licensees on these frequencies will 
be local in nature. In fact, some licensees may desire to establish 
regional networks on these frequencies. Furthermore, contrary to the 
suggestion by some commenters, the CMRS definition provided in the 
Communications Act does not distinguish mobile service providers based 
on their economic size. Instead, a service provider's regulatory 
classification is determined based on factors associated with the 
nature of its operations. In this connection, we believe that the 
operational opportunities for the lower 80 and General Category 
channels are not significantly different. Thus, we tentatively conclude 
that most if not all geographic area licensees on these channels will 
be classified as CMRS, because they are likely to provide 
interconnected service as part of their service offering. We therefore 
propose to classify all geographic area licensees on the lower 80 and 
General Category channels presumptively as CMRS. We also propose that 
market-area applicants or licensees who do not intend to provide CMRS 
service may overcome this presumption by demonstrating that their 
service does not fall within the CMRS definition. We also propose not 
to apply this presumption prior to August 10, 1996 in the case of any 
geographic area licensee who previously was licensed in the SMR service 
as of August 10, 1993. We seek comment on our tentative conclusion and 
proposals.

VII. Competitive Bidding Issues for Lower 80 and General Category 
Channels

A. Auctionability of Lower 80 and General Category Channels

    65. In the Competitive Bidding Eighth R&O, we affirmed our previous 
determination that the 800 MHz SMR service is auctionable. In addition, 
we concluded that use of competitive bidding in the upper 200 channels 
of 800 MHz SMR spectrum is fully consistent with Section 309(j) of the 
Communications Act. Because the lower 80 frequencies are SMR channels, 
and thus a subset of the 800 MHz SMR service, we believe that they also 
are auctionable. Consistent with our approach regarding the upper 200 
channels, we propose to employ competitive bidding as a licensing tool 
to select among mutually exclusive applicants on the lower 80 channels. 
We seek comment on this proposal.
    66. We also seek comment on whether to adopt equivalent auction 
procedures for competing applications for General Category channels. In 
the Competitive Bidding Eighth R&O, we determine that in the future the 
General Category Channels will be licensed exclusively for SMR use. 
Consistent with our approach for other 800 MHz SMR spectrum, we 
tentatively conclude that if two or more entities file mutually 
exclusive initial applications, we intend to use competitive bidding to 
select from among competing applications.
    67. We anticipate that a large number of applicants will file 
mutually exclusive geographic area applications for SMR operations on 
General Category frequencies. Competitive bidding will ensure that the 
qualified applicants who place the highest value on the available 
spectrum, and who will provide valuable services rapidly to the public, 
will prevail in the selection process. Thus, we tentatively conclude 
that all potential conflicts among General Category applicants will not 
be eliminated by our proposed geographic area licensing scheme. 
Competitive bidding procedures will be necessary to select from among 
competing applicants for these channels. We seek comment on this 
tentative conclusion.

B. Competitive Bidding Design

1. Bidding Methodology
    68. Background. In the Second Report and Order in PP Docket No. 93-
253, 59 FR 22980 (May 4, 1994) (Competitive Bidding Second R&O) we 
established criteria to be used in selecting which auction design to 
use for particular auctionable services. Generally, we concluded that 
awarding licenses to parties who value them most highly will foster 
Congress's policy objectives of stimulating economic growth and 
enhancing access to telecommunications services. We further noted that, 
because a bidder's ability to introduce valuable new services and to 
deploy them quickly, intensively, and efficiently increases the value 
of a license to that bidder, an auction design that awards licenses to 
those bidders with the highest willingness to pay tends to promote the 
development and rapid deployment of new services and the efficient and 
intensive use of the spectrum. In determining how best to promote this 
objective, we identified several auction design elements which, in 
combination, produce many different auction types. The two most 
important design elements are: (1) the number of auction rounds (single 
or multiple), and (2) the order in which licenses are auctioned 
(sequentially or simultaneously). These two elements can be combined to 
create four basic auction designs: sequential 

[[Page 6220]]
single round, simultaneous single round, sequential multiple round, and 
simultaneous multiple round.
    69. In the Further Notice, we noted that because of the non-
contiguous nature of the lower 80 channels, there did not appear to be 
a high degree of interdependency among them. We further noted that the 
limited geographic scope of the licenses is likely to make them less 
valuable than the licenses for the spectrum blocks for the upper 200 
channels.
    70. Comments. SBA supports use of single round sealed bidding. 
Genesee disagrees that one single round of auctions in sealed bidding 
would be fair, and suggests that at least two rounds be done with 30 
day intervals. AMTA does not dispute the Commission's tentative 
conclusion regarding the appropriate competitive bidding methodology 
for local licenses. AMTA notes that it is reluctant to suggest an 
approach that might further complicate what would be an unjustifiably 
costly and complex process for those entities. AMTA contends that some 
grouping of frequency blocks and geographic areas might be necessary 
for this purpose, if the Commission determines to issue local licenses 
on a geographic, rather than site-specific basis. Morris proposes the 
use of multiple round auctions for local area licenses, limited to five 
rounds. Nextel proposes that after relocation is completed, the lower 
80 channels and any other spectrum reallocated to exclusive SMR use, be 
auctioned on a single channel basis.
    71. Proposal. We seek comment on which of the above auction 
methodologies should be used for the auction of the lower 80 and 
General Category licenses. In the Competitive Bidding Second R&O, we 
stated that simultaneous multiple round auctions would be the preferred 
method where licenses have strong value interdependencies. Accordingly, 
we have used this method in broadband and narrowband PCS services and 
the 900 MHz SMR service, and we will use the same methodology for the 
upper 200 channels in the 800 MHz SMR service.
    72. Given our successful experience in conducting simultaneous 
multiple round auctions, we propose to use this competitive bidding 
methodology for the lower 80 and General Category channels as well. We 
seek comment on this proposal. We also note, however, that there is 
less interdependency between licenses for the lower 80 and General 
Category channels, both because channel aggregation is not required to 
provide SMR service and because channel selection may be largely 
dictated by which channels currently are licensed to incumbents in each 
license area. We therefore seek comment on alternatives to simultaneous 
multiple round bidding for these channels. One alternative would be to 
use the oral outcry method, i.e., sequential multiple round bidding. 
This method may allow us to conduct auctions expeditiously and in a 
manner that is not burdensome to applicants.
2. License Grouping
    73. Background. Depending upon the auction methodology chosen, 
several alternatives exist for grouping the lower 80 and General 
Category licenses. For example, the Commission determined in the 
Competitive Bidding Second R&O that in a multiple round auction, highly 
interdependent licenses should be grouped together and put up for bid 
at the same time, because such grouping provides bidders with the most 
information about the prices of complementary and substitutable 
licenses during the course of an auction. We also determined that the 
greater the degree of interdependence among the licenses, the greater 
the benefit of auctioning a group of licenses together in a 
simultaneous multiple round auction.
    74. Proposal. We seek comment on how lower 80 and General Category 
licenses should be grouped for competitive bidding purposes. As noted 
above, it does not appear that licenses on these channels are likely to 
be highly interdependent. We therefore propose that lower 80 licenses 
be grouped in 16 five-channel blocks for each license area. We seek 
comment on this proposal. We also ask commenters to indicate if there 
are instances in which licenses on multiple channels should be grouped 
together for competitive bidding purposes.
    75. Assuming that we group lower 80 licenses by 16 five-channel 
blocks, the issue remains whether all geographic area licenses for 
specific channel blocks should be grouped together for competitive 
bidding purposes. Given the large number of licenses, we believe that 
it would be administratively feasible to employ an additional means of 
grouping the five-channel blocks. We believe that some licensees may 
elect to pursue regional service plans. Thus, we propose to group the 
five-channel blocks on a regional basis. We seek comment on this 
proposal. We recognize that there are other sets of interdependencies 
which could form a basis for license grouping. In a simultaneous 
multiple round auction, for example, we could auction all of the market 
areas for a five-channel block simultaneously. Alternatively, we could 
begin with the largest (i.e., most populated) markets and then move to 
smaller markets. We seek comment on these alternatives as well. 
Assuming that we group, the licenses on a regional basis, we ask 
commenters to discuss how the regions should be defined. For example, 
should the regions be defined by sequential groupings of EAs or some 
other basis? We also ask commenters to address whether there is a 
particular order in which the regions should be auctioned.
    76. With respect to the General Category channels, which we propose 
to license in a 120-channel block, 20-channel block and 10-channel 
block, we believe that these licenses will be significantly 
interdependent, primarily due to their contiguity. Thus, we propose to 
auction the General Category geographic area licenses simultaneously. 
We seek comment on this proposal and any alternatives.
3. Bidding Procedures
    77. Background. In the Competitive Bidding Second R&O, the 
Commission established general procedures for simultaneous multiple 
round auctions, including bid increments, duration of bidding rounds, 
stopping rules, and activity rules. We further noted that these 
procedures could be modified on a service-specific basis. We seek 
comment on the bidding procedures that should be used for licensing of 
the lower 80 and General Category channels.
    78. Bid Increments. If we use a multiple round auction, we propose 
to establish minimum bid increments for bidding in each round of the 
auction, based on the same considerations in the Competitive Bidding 
Eighth R&O. The bid increment is the amount or percentage by which the 
bid must be raised above the previous round's high bid in order to be 
accepted as a valid bid in the current bidding round. The application 
of a minimum bid increment speeds the progress of the auction and, 
along with activity and stopping rules, helps to ensure that the 
auction closes within a reasonable period of time. Establishing an 
appropriate minimum bid increment is especially important in a 
simultaneous auction with a simultaneous closing rule, because all 
markets remain open until there is no bidding on any license and a 
delay in closing one market will delay the closing of all markets. We 
seek comment on the appropriate minimum bid increments for the lower 80 
and General Category channels.
    79. For example, if simultaneous multiple round auctions are 
employed 

[[Page 6221]]
for the lower 80 and General Category licenses, we believe that we 
should start such auctions with relatively large bid increments, and 
reduce the increments as the number of active bidders declines. We also 
propose to adopt a minimum bid increment of five percent of the high 
bid in the previous round or $0.01 per activity unit, whichever is 
greater. We believe that applying a $0.01 per activity unit minimum bid 
increment in addition to the percentage calculation is appropriate to 
provide flexibility for a wide range of different license values, and 
to ensure timely closure of auctions. In addition, we propose to retain 
the discretion to vary the minimum bid increments for individual 
licenses or groups of licenses at any time before or during the course 
of the auction, based on the number of bidders, bidding activity, and 
the aggregate high bid amounts. We also propose to retain the 
discretion to keep an auction open if there is a round in which no bids 
or proactive waivers are submitted. We seek comment on these proposals.
    80. Stopping Rules. If multiple round auctions are used, a stopping 
rule must be established for determining when the auction is over. 
Three types of stopping rules exist that could be employed in 
simultaneous multiple round auctions: markets may close individually, 
simultaneously, or a hybrid approach may be used. We believe a market-
by-market stopping rule is most appropriate for the lower 80 channels 
given the lack of strong interdependencies among these licenses. We 
also believe that a market-by-market stopping rule would be the least 
complex approach from an administrative perspective. Under a market-by-
market approach, bidding closes on each license after three rounds pass 
in which no new acceptable bids are submitted for that particular 
license. We tentatively conclude that a simultaneous stopping rule is 
not appropriate for these licenses, because market-by-market closure 
will provide bidders with sufficient flexibility to bid on the license 
of their choice. In addition, the complexity of implementation and the 
vulnerability to strategic delay by bidders seeking to impede closure 
of the auction outweigh the benefits of a simultaneous stopping rule 
given the nature of these SMR licenses. With a simultaneous stopping 
rule, bidding remains open on all licenses until there is no bidding on 
any license. Under this approach, all markets will close if three 
rounds pass in which no new acceptable bids are submitted for any 
license. We seek comment on our tentative conclusions. We also ask 
commenters to address the advantages and disadvantages of using a 
hybrid stopping rule. Under a hybrid approach, a simultaneous stopping 
rule, coupled with an activity rule designed to bring the markets to 
close within a reasonable period of time, could be used to close 
auctions with high value licenses. For lower value licenses, the 
simpler market-by-market closing could be employed. For the General 
Category licenses, we tentatively conclude that a simultaneous stopping 
rule is most appropriate, given the significant interdependencies 
between these licenses. We seek comment on this tentative conclusion. 
Regardless of which stopping rule we ultimately apply, we further 
propose to retain the discretion to declare when the auction will end, 
whether it be after one additional round or some other specified number 
of rounds. This proposal will ensure ultimate Commission control over 
the duration of the auction. We seek comment on this proposal.
    81. Activity Rules. Based on our proposal to employ a market-by-
market stopping rule for the lower 80 licenses, we tentatively conclude 
that it is unnecessary to implement an activity rule. We believe that 
an activity rule is less important when markets close one-by-one, 
because failure to participate in any given round may result in losing 
the opportunity to bid at all, if that round turns out to be the last. 
We seek comment on this tentative conclusion. We also ask commenters to 
address what activity rules, if any, would be appropriate if an 
alternative stopping rule is adopted. For example, in order to ensure 
that simultaneous auctions with simultaneous stopping rules close 
within a reasonable period, we believe that it may be necessary to 
impose an activity rule to prevent bidders from waiting until the end 
of the auction before participating. Because simultaneous stopping 
rules generally keep all markets open as long as anyone wishes to bid, 
they also create incentives for bidders to hold back, until prices 
approach equilibrium, before making a bid and risking payment of a 
monetary assessment for withdrawing. We believe that this could lead to 
very long auctions.
    82. Thus, in the Competitive Bidding Second R&O, we adopted the 
Milgrom-Wilson activity rule as our preferred activity rule where a 
simultaneous stopping rule is used. We subsequently have adopted or 
proposed the Milgrom-Wilson rule in each of our simultaneous multiple 
round auctions. The Milgrom-Wilson approach encourages bidders to 
participate in early rounds by limiting their maximum participation to 
some multiple of their minimum participation level. Bidders are 
required to declare their maximum eligibility in terms of activity 
units, and make the required upfront payment. That is, bidders will be 
limited to bidding on licenses encompassing no more than the number of 
activity units covered by their upfront payment. Licenses on which a 
bidder is the high bidder from the previous round, as well as licenses 
on which a new valid bid is placed, count toward this activity unit 
limit. Under this approach, bidders have the flexibility to shift their 
bids among any licenses for which they have applied, so long as the 
total activity units encompassed by those licenses does not exceed the 
number for which they made an upfront payment. Moreover, bidders have 
the freedom to participate at whatever level they deem appropriate by 
making a sufficient upfront payment. To preserve their maximum 
eligibility, however, bidders are required to maintain some minimum 
activity level during each round of the auction. Accordingly, we 
propose to employ the Milgrom-Wilson activity rule for the General 
Category licenses. We seek comment on this proposal and any 
alternatives.
    83. Under the Milgrom-Wilson approach, the minimum activity level, 
measured as a fraction of the self-declared maximum eligibility, will 
increase during the course of the auction. For this purpose, Milgrom 
and Wilson divide the auction into three stages. During the first stage 
of the auction, a bidder is required to be active on licenses 
encompassing one-third of the activity units for which it is eligible. 
The penalty for falling below that activity level is a reduction in 
eligibility. At this stage, bidder would lose three activity units in 
maximum eligibility for each activity unit below the minimum required 
activity level. In other words, each bidder would retain eligibility 
for three times the activity units for which it is an active bidder, up 
to the activity units covered by the bidder's upfront payment. In the 
second stage, bidders are required to be active on two-thirds of the 
activity units for which they are eligible. The penalty for falling 
below that activity level would be a loss of 1.5 activity units in 
eligibility for each activity unit below the minimum required activity 
level. In the third stage, bidders are required to be active on 
licenses encompassing all of the activity units for which they are 
eligible. The penalty for falling below that activity level is a loss 
of one activity unit in eligibility for each 

[[Page 6222]]
activity unit below the minimum required activity. Each bidder thus 
retains eligibility equal to its current activity level (1 times the 
activity units for which it is an active bidder). We seek comment on 
this alternative.
    84. Duration of Bidding Rounds. We propose to retain the discretion 
to vary the duration of bidding rounds or the interval at which bids 
are accepted (e.g., run two or more rounds per day rather than one), in 
order to close the auction more quickly. If this mechanism is used, we 
most likely would shorten the duration and/or intervals between bidding 
rounds where there are relatively few licenses to be auctioned, where 
the value of the licenses is relatively low, or in early rounds to 
speed the auction process. Where license values are expected to be high 
or where large numbers of licenses are being auctioned, we propose to 
increase the duration and/or intervals between bidding rounds. We would 
announce by Public Notice, and may vary by announcement during an 
auction, the duration and intervals between bidding rounds. We also 
propose to announce by Public Notice, before each auction, the stopping 
rule we adopt. We seek comment on these proposals.
4. Rules Prohibiting Collusion
    85. Background. In the Competitive Bidding Second R&O, as modified 
on reconsideration, we adopted special rules prohibiting collusive 
conduct in the context of competitive bidding. In the Further Notice, 
we proposed to apply these rules prohibiting collusion to the 800 MHz 
SMR service. We want to prevent parties, especially large entities, 
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) reveal 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.
    86. Proposals. We tentatively conclude that we should subject the 
lower 80 and General Category licenses to the reporting requirements 
and rules prohibiting collusion embodied in Sections 1.2105 and 1.2107 
of the Commission's rules. Specifically, we propose to implement 
Section 1.2105(a) to require bidders to identify on their short-form 
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. We propose to apply Section 1.2105(c) of our rules, which 
prohibits bidders from communicating with one another (if they have 
applied for any of the same markets) regarding the substance of their 
bids or bidding strategies after short-form applications (FCC Form 175) 
have been filed. Section 1.2105(c) also prohibits bidders from entering 
into consortium arrangements or joint bidding agreements after the 
deadline for short-form applications has passed. Prohibited 
communications between such bidders cannot take place directly or 
indirectly.
    87. Further, in the Fourth Memorandum Opinion and Order in PP 
Docket No. 93-253, 59 FR 53364 (October 24, 1994), we noted that 
communications among bidders concerning matters unrelated to the 
license auction would be permitted. In making this proposal, it is not 
our intent to discourage potential applicants from entering into 
consortia, joint ventures, or similar joint bidding arrangements for 
geographic area licenses prior to the short form filing deadline. To 
the contrary, we intend to provide parties with time to negotiate such 
arrangements before the start of the application process. To avoid 
compromising the auction process, however, such negotiations must end 
at the point that short forms are filed. As in other services, we also 
propose to require winning bidders to submit with their long-form 
application a detailed explanation of the terms, conditions and parties 
involved in any auction-related consortium, joint venture, partnership, 
or other agreement entered into prior to the close of bidding. We seek 
comment on these proposals.

C. Procedural and Payment Issues

1. Pre-Auction Application Procedures
    88. Background. In the Competitive Bidding Second R&O, the 
Commission established general competitive bidding rules and 
procedures, which we noted may be modified on a service-specific basis. 
We also determined that we 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, we determined that such a 
procedure would fulfill the statutory requirements and objectives and 
adequately protect the public interest.
    89. As discussed below, we propose to follow generally the 
processing and procedural rules established in the Competitive Bidding 
Second R&O, with certain modifications designed to address the 
particular characteristics of the lower 80 and General Category 
licenses. These proposed rules are structured to ensure that bidders 
and licensees are qualified and will be able to construct systems 
quickly and offer service to the public. By ensuring that bidders and 
license winners are serious, qualified applicants, these proposed rules 
will minimize the need to re-auction licenses and prevent delays in the 
provision of SMR services to the public.
    90. Section 309(j)(5) of the Communications Act 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) and Section 308(b) and 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 Commission rules, and we 
propose to dismiss applications not meeting those requirements prior to 
the competitive bidding.
    91. Under this proposal, before the auction for the lower 80 and 
General Category channels, the Bureau would release an initial Public 
Notice announcing the auction. The initial Public Notice would 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 would specify the method of competitive bidding to be used, 
applicable bid submission procedures, stopping rules, activity rules, 
and the deadline by which short-form applications must be filed and the 
amounts and deadlines for submitting the upfront payment. We would not 
accept applications filed before or after the dates specified in the 
Public Notice. Applications submitted before the release of the Public 
Notice would be returned as premature. Likewise, applications submitted 
after the deadline specified by the Public Notice would be dismissed, 
with prejudice, as untimely. We seek comment on these proposals.

[[Page 6223]]

    92. Soon after the release of the initial Public Notice, a Bidder's 
Information Package will be made available to prospective bidders. The 
Bidder's Information Package will contain information on the incumbents 
occupying blocks on which bidding will be available. Incumbents will be 
expected to update information on file with the Commission, such as 
current address and phone number, so that such information will be of 
use to prospective bidders.
    93. Under this proposal, all bidders would 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 would be encouraged to file Form 175 electronically. 
Detailed instructions regarding electronic filing would be contained in 
the Bidder Information Package. Those applicants filing manually would 
be required to submit one paper original and one microfiche original of 
their application, as well as two microfiche copies. The short form 
applications would require applicants to provide the information 
required by Section 1.2105(a)(2) of the Commission's rules. 
Specifically, each applicant would be required to specify on its Form 
175 application certain identifying information, including its status 
as a designated entity (if applicable), its classification (i.e., 
individual, corporation, partnership, trust, or other), the license 
areas and frequency 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.
    94. As we indicated in the Competitive Bidding Second R&O, if we 
receive only one application that is acceptable for filing for a 
particular license, and thus there is no mutual exclusivity, we propose 
to 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 would trigger the procedures permitting petitions 
to deny. If no petitions to deny are filed, the application would be 
grantable after 30 days. We seek comment on the proposals discussed 
above.
2. Amendments and Modifications
    95. Background. To encourage maximum bidder participation, we 
proposed in the Competitive Bidding Second R&O to provide applicants 
with an opportunity to correct minor defects in their short-form 
applications prior to the auction. We stated that applicants whose 
short-form applications are substantially complete, but contain minor 
errors or defects, would be provided an opportunity to correct their 
applications prior to the auction. In the broadband PCS context, we 
modified our rules to permit ownership changes that result when 
consortium investors drop out of bidding consortia, even if control of 
the consortium changes due to this restructuring. In the CMRS Third 
R&O, we decided to adopt the same or similar definitions for initial 
applications and major and minor amendments and modifications for all 
CMRS in Part 22 and Part 90, in order to facilitate similar system 
proposals and modifications for equal treatment of substantially 
similar services.
    96. On the date set for submission of corrected applications, 
applicants that discover minor errors in their own applications (e.g., 
typographical errors, incorrect license designations, etc.) also would 
be permitted to file corrected applications. Recently, the Commission 
waived the ex parte rules as they applied to the submission of amended 
short-form applications for the A and B blocks of the broadband PCS 
auctions, to maximize applicants' opportunities to seek Commission 
staff advice on making such amendments. We propose to apply the same 
principles to the SMR auctions. Under this proposal, applicants would 
not be permitted to make any major modifications to their applications, 
including 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 could 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 would 
not result in a change in control of the applicant, and provided that 
the parties forming consortia or entering into ownership agreements 
have not applied for licenses in any of the same geographic license 
areas. In addition, applications that are not signed would be dismissed 
as unacceptable.
    97. Upon our review of the short-form applications, we propose to 
issue a Public Notice listing all defective applications, and 
applicants with minor defects would be given an opportunity to cure 
errors and resubmit a corrected version. After reviewing the corrected 
applications, the Commission would release a second Public Notice 
announcing the names of all applicants whose applications have been 
accepted for filing. These applicants would 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 
generally would 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 
would issue a third Public Notice announcing the names of all 
applicants that are determined qualified to bid. An applicant who fails 
to submit a sufficient upfront payment to qualify it to bid on any 
license being auctioned would not be identified on this Public Notice 
as a qualified bidder. Each applicant listed on this Public Notice 
would be issued a bidder identification number and further information 
and instructions regarding auction procedures. We seek comment on the 
proposals discussed above.
3. Upfront Payments
    98. Background. In the Competitive Bidding Second R&O, we 
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, we 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 a 
bidder anticipates bidding on 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 penalty (discussed infra) in the 
event of bid withdrawal or default. We also sought comment on the 
upfront payment formula and minimum upfront payment most appropriate 
for the 800 MHz SMR service.
    99. Proposals. As in the case of other auctionable services, we 
propose to require participants for the lower 80 and General Category 
auction to tender in advance to the Commission a substantial upfront 
payment as a condition of bidding, in order to ensure that only 
serious, qualified bidders participate in auctions and to ensure 
payment of the additional monetary assessments in the event of bid 
withdrawal or default. For services that are licensed by simultaneous 
multiple round auction, we have established a standard upfront payment 
formula of $0.02 per activity unit for the largest combination of 
activity units a bidder anticipates bidding on in any single round of 
bidding. We tentatively conclude that a minimum $2,500 upfront payment 
should be required, regardless of the bidding methodology we employ. We 
seek comment on our proposal regarding the appropriate minimum upfront 
payment for 

[[Page 6224]]
applications for the lower 80 or General Category channels. In 
particular, we seek comment on whether a minimum upfront payment of 
$2,500 is sufficient to discourage frivolous or speculative bidders in 
the auction process.
    100. We tentatively conclude that upfront payments should be due no 
later than 14 days before a scheduled auction. This period should be 
sufficient to allow the Commission to process upfront payment data and 
release a Public Notice listing all qualified bidders. The specific 
procedures to be followed in the tendering and processing of upfront 
payments are set forth in Section 1.2106 of the Commission's rules.
4. Down Payment and Full Payment
    101. Background. In the Competitive Bidding Second R&O, we 
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 penalty if such default occurs. 
We concluded that this requirement was appropriate to ensure that 
auction winners have the necessary financial capabilities to complete 
payment for the license and to pay for the costs of constructing a 
system, while not being so onerous as to hinder growth or diminish 
access. In the Further Notice, we proposed to require the winning 
bidders for 800 MHz SMR licenses to supplement their upfront payments 
with down payments sufficient to bring their total deposits up to 20 
percent of their winning bid(s).
    102. Proposals. We propose to apply the 20 percent down payment 
requirement to winning bidders for lower 80 and General Category 
licenses. Such a down payment would be due within five business days 
following the Public Notice announcing the winning bidders. We further 
propose that auction winners be required to pay the full balance of 
their winning bids within five business days following Public Notice 
that the Commission is prepared to award the license. We seek comment 
on this proposal.
    103. To the extent that an auction winner is eligible to make 
payments through an installment plan (small businesses, as proposed 
infra), we propose to apply different down payment requirements. Such 
an entity would be required to bring its deposit with the Commission up 
to five percent of its winning bid after the bidding closes (this 
amount would include the upfront payment), and would have to pay an 
additional five percent of its winning bid to the Commission within 
five business days following Public Notice that the Commission is 
prepared to award the license. We seek comment on this proposal.
5. Bid Withdrawal, Default, and Disqualification
    104. Background. In the Further Notice, we proposed to adopt bid 
withdrawal, default, and disqualification rules for the 800 MHz SMR 
service based on the procedures established in our general competitive 
bidding rules. In the Competitive Bidding Second R&O, we noted that it 
is critically important to the success of our competitive bidding 
process that potential bidders understand that there will be a 
substantial penalty assessed if they withdraw a high bid, are found not 
to be qualified to hold licenses, or default on payment of a balance 
due. If a bidder withdraws a high bid before the Commission closes 
bidding or defaults by failing to timely remit the required down 
payment, it would be required to reimburse the Commission for any 
differences between its high bid and the amount of the winning bid, if 
the winning bid is lower. A defaulting auction winner also would be 
assessed three percent of either the subsequent winning bid or the 
amount of the defaulting bid, whichever is less.
    105. Proposal. We propose to adopt bid withdrawal, default, and 
disqualification rules for the lower 80 and General Category licenses 
based on the procedures in our general competitive bidding rules. Under 
these procedures, any bidder who withdraws a high bid during an auction 
before the Commission declares bidding closed, or defaults by failing 
to remit the required down payment within the prescribed time, would be 
required to reimburse the Commission. The bidder would be required to 
pay the difference between its high bid and the amount of the winning 
bid the next time the license is offered by the Commission, if the 
subsequent winning bid is lower. A defaulting auction winner would be 
assessed an additional payment of three percent of the subsequent 
winning bid or three percent of the amount of the defaulting bid, 
whichever is less. The monetary assessment would be offset by the 
upfront payment. In the event that an auction winner defaults or is 
otherwise disqualified, we propose to re-auction the license either to 
existing or new applicants. The Commission would retain discretion, 
however, to offer the license to the next highest bidder at its final 
bid level if the default occurs within five business days of the close 
of bidding. We seek comment on these proposed procedures.
6. Long-Form Applications
    106. Background. In the Competitive Bidding Second R&O, we 
established rules that require a winning bidder to submit a long-form 
application. The long-form application is required to be filed by a 
specific date, generally within ten business days after the close of 
the auction. We stated that after we received the high bidder's down 
payment and the long-form application, we would review the long-form 
application to determine if it is acceptable for filing. Once the long-
form application is accepted for filing, we stated that we would 
release a Public Notice announcing this fact, triggering the filing 
window for petitions to deny. We also stated that if, pursuant to 
Section 309(d), we deny or dismiss all petitions to deny, if any are 
filed, and we otherwise are satisfied that the applicant is qualified, 
we would grant the license(s) to the auction winner. In the Further 
Notice, we proposed to use application procedures similar to those used 
for licensing PCS. Consistent with our approach in PCS, we proposed to 
require only the winning bidder to file a long-form application (FCC 
Form 600).
    107. Proposal. If the winning bidder makes the down payment in a 
timely manner, we propose the following procedures: A long-form 
application filed on FCC Form 600 must be filed by a date specified by 
Public Notice, generally within ten (10) business days after the close 
of bidding. After the Commission receives the winning bidder's down 
payment and long-form application, we will review the long-form 
application to determine if it is acceptable for filing. In addition to 
the information required in the Form 600, designated entities will be 
required to submit evidence to support their claim to any special 
provision available for designated entities described in this Order. 
This information may be included in an exhibit to FCC Form 600. This 
information will enable the Commission, and other interested parties, 
to ensure the validity of the applicant's certification of eligibility 
for bidding credits, installment payment options, and other special 
provisions. 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 is otherwise satisfied that the 
applicant is qualified, the license(s) will be granted to the auction 
winner. We seek comment on this proposal. 

[[Page 6225]]

7. Petitions to Deny and Limitations on Settlements
    108. Background. We determined in the Competitive Bidding Second 
R&O that the procedures concerning petitions to deny found in Section 
309(j)(2) of the Communications Act, should apply to competitive 
bidding. We determined that we would adopt expedited procedures to 
resolve substantial and material issues of fact concerning 
qualifications. We stated that we would entertain petitions to deny the 
application of the auction winner if the petitions to deny otherwise 
are provided for under the Communications Act or our rules. We then 
determined that we would not conduct a hearing before denial if we 
determined that an applicant is not qualified and no substantial and 
material issue of fact exists concerning that determination. We also 
stated that if we identified substantial and material issues of fact in 
need of resolution, Sections 309(j)(5) and 309(j)(2) of the 
Communications Act permit submission of all or part of evidence in 
written form, and also allow employees other than administrative law 
judges to preside at the taking of written evidence. Additionally, we 
previously have stated that our anti-collusion and settlement 
procedures were designed to avoid the problem of entities filing 
applications solely for the purpose of demanding payment from other 
bidders in exchange for settlement or withdrawal.
    109. As we have determined, the petition to deny procedures in 
Section 90.163 of the Commission's rules, adopted in the CMRS Third 
R&O, will apply to the processing of applications for the 800 MHz SMR 
service. Thus, a party filing a petition to deny against an application 
for the lower 80 and General Category channels will be required to 
demonstrate standing and meet all other applicable filing requirements. 
We also have adopted restrictions in Section 90.162 to prevent the 
filing of applications and pleading (or threats of the same) designed 
to extract money from SMR applicants. Thus, we will limit the 
consideration that an applicant or petitioner is permitted to receive 
for agreeing to withdraw an application or a petition to deny to the 
legitimate and prudent expenses of the withdrawing applicant or 
petitioner.
    110. 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 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. We seek comment on these proposals.
8. Transfer Disclosure Requirements
    111. In Section 309(j) 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. We decided that it was important 
to monitor transfers of licenses awarded by competitive bidding to 
accumulate the necessary data to evaluate our auction designs and to 
judge whether ``licenses [have been] issued for bids that fall short of 
the true market value of the license.'' Therefore, we imposed a 
transfer disclosure requirement on licenses obtained through the 
competitive bidding process, whether by a designated entity or not.
    112. We tentatively conclude that the transfer disclosure 
requirements of Section 1.2111(a) should apply to all lower 80 and 
General Category licenses obtained through the competitive bidding 
process. Generally, licensees transferring their licenses within three 
years after the initial license grant would 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 license. As we indicated in the Competitive Bidding Second 
R&O, we would 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 we may determine if any unforeseen 
problems relating to unjust enrichment have arisen outside the 
designated entity context. We seek comment on these proposals.
9. Performance Requirements
    113. Section 309(j)(4)(B) of the Communications Act requires the 
Commission to establish rules for auctionable services that ``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, we 
decided that in most auctionable services, existing construction and 
coverage requirements provided in our service rules would be sufficient 
to meet this standard, and that it was unnecessary to impose additional 
performance requirements. We have proposed service rules for SMR that 
would require market-area licensees to meet minimum population coverage 
requirements in their licensing areas. We tentatively conclude that 
these proposed coverage requirements are sufficient to meet the 
requirements of Section 309(j)(4)(B). As discussed supra, we propose 
that failure to meet these requirements would result in automatic 
license cancellation. Accordingly, we do not propose to adopt 
additional performance requirements for the lower 80 and General 
Category licenses. We seek comment on this proposal.

D. Treatment of Designated Entities

1. Overview and Objectives
    114. Section 309(j)(3)(B) of the Communications Act provides that 
in establishing auction 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.'' Section 
309(j)(4)(A) provides that to promote the statute'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.''
    115. In the Competitive Bidding Second R&O, we established 
eligibility criteria and general rules regarding special measures for 
small businesses, rural telephone companies, and businesses owned by 
women and minorities (sometimes referred to collectively as 
``designated entities''). We also identified several measures, 
including installment payments, spectrum set-asides, and bidding 

[[Page 6226]]
credits, from which we could choose when establishing rules for 
auctionable services. We stated that we would decide whether and how to 
use these special provisions, or others, when we developed specific 
competitive bidding rules for particular services. In addition, we set 
forth rules designed to prevent unjust enrichment by designated 
entities who transfer ownership in licenses obtained through the use of 
these special measures or who otherwise lose their designated entity 
status.
    116. When deciding which provisions to adopt to encourage 
designated entity participation in particular services, we have closely 
examined the specific characteristics of the service and determined 
whether any particular barriers to accessing capital have stood in the 
way of designated entity opportunities. In accordance with our 
statutory directive, we have adopted measures designed both to enhance 
the ability of designated entities to acquire licenses and to increase 
the likelihood that designated entity licensees will become strong 
competitors in the provision of wireless services. In narrowband PCS, 
for instance, we provided installment payments for small businesses and 
bidding credits for minority-owned and women-owned businesses. In 
broadband PCS, we designated certain spectrum blocks as entrepreneurs' 
blocks, allowed entrepreneurs' block licensees to make installment 
payments, and provided bidding credits for designated entities. In 900 
MHz SMR, we adopted bidding credits and installment payments for small 
businesses. In the 800 MHz SMR service, we did not adopt special 
provisions for designated entities, with respect to the upper 200 
channels. We nonetheless indicated that such approach would meet the 
statutory objectives of promoting economic opportunity and competition, 
avoiding excessive concentration of licenses, and ensuring access to 
new and innovative technologies by designated entities. As discussed in 
greater detail below, we seek comment on the type of designated entity 
provisions that should be incorporated into our competitive bidding 
procedures for the lower 80 and General Category channels.
2. Eligibility for Designated Entity Provisions
    a. Small Businesses. i. Special Provisions. 117. Proposal. We 
tentatively conclude that it is appropriate to establish special 
provisions for small businesses in our competitive bidding rules for 
the lower 80 and General Category channels. We note that Congress 
specifically cited the needs of small businesses in enacting auction 
legislation. The House Report states that the statutory provisions 
related to installment payments were enacted 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 inadvertently does not favor incumbents with ``deep 
pockets'' over new companies or start-ups.
    118. In addition, Congress made specific findings with regard to 
access to capital in the Small Business Credit and Business Opportunity 
Enhancement Act of 1992: that ``small business concerns, which 
represent higher degrees of risk in financial markets than do large 
businesses, are experiencing increased difficulties in obtaining 
credit.'' 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.'' For these reasons, and as discussed in 
greater detail below, we tentatively conclude that small businesses 
applying for these licenses should be entitled to some form of bidding 
credit and should be allowed to pay their bids in installments. This is 
consistent with our approach in the 900 MHz SMR service. We seek 
comment on this tentative conclusion.
    ii. Definition. 119. Comments. DCL Associates and Dru Jenkinson, et 
al. suggest that we adopt the SBA definition of small business 
initially adopted in the Competitive Bidding Second Report and Order. 
Under that definition, a ``small business'' is one which has a net 
worth not in excess of $6 million with average net income for the two 
preceding years not in excess of $2 million. Morris recommends using 
the small business definition utilized by the Internal Revenue Service. 
The SBA opines that a revenue test remains the best and least 
problematic guideline for determining whether a business is small. AMTA 
suggests that the better approach for the 800 MHz SMR service would be 
to incorporate preferential provisions for existing operators.
    120. Several commenters offer other small business definitions. AMI 
suggests that small businesses be defined to have 30 channels licensed 
or managed and/or less than $540,000 in current system revenues. 
Genesee suggests using the U.S. Chamber of Commerce standard for 
retail/service companies of less than $5.5 million annually. Genesee 
and the SBA believe that the PCS small business definition, with a $40 
million maximum would be inappropriate for the 800 MHz SMR service. The 
SBA believes that a smaller revenue figure, such as $15 million, would 
be more appropriate.
    121. Proposal. We seek comment on the appropriate definition of 
``small business'' to be applied for purposes of the bidding credits 
proposed above. We have stated previously that we would define 
eligibility requirements for small businesses on a service-specific 
basis, taking into account the capital requirements and other 
characteristics of each particular service in establishing the 
appropriate threshold. In broadband PCS and regional narrowband PCS, we 
defined small businesses based on a $40 million annual revenue 
threshold. In the 220 MHz service, we have proposed two small business 
definitions: (1) for purposes of bidding on a nationwide or regional 
license, small businesses would be defined as entities with $15 million 
in average gross revenues for the preceding three years; and (2) for 
purposes of bidding on EA licenses, small businesses be would be 
defined as entities with $6 million in average gross revenues for the 
preceding three years. After considering the record in the 900 MHz 
proceeding, we concluded that both $15 million and $3 million small 
business definitions were warranted, which would entitle applicants for 
MTA licenses to 10 percent and 15 percent bidding credits respectively.
    122. In conjunction with our proposal to provide two levels of 
bidding credits, we propose to establish two small business 
definitions: to obtain the 10 percent bidding credit, an applicant 
would be limited to $15 million in average gross revenues for the 
previous three years; to obtain the 15 percent credit, the applicant 
would be limited to $3 million in gross revenues for the previous three 
years. In both cases, we would require the applicant to aggregate the 
gross and revenues of its affiliates and investors for the preceding 
three years for purposes of determining eligibility. These proposed 
thresholds are comparable to what we have adopted in 900 MHz SMR, and 
they reflect our tentative view of the capital requirements and 
potential barriers to entry in the 800 MHz SMR service. We seek comment 
on whether these thresholds, and the proposed bidding credit amounts 
associated with them, are sufficient for the lower 80 and General 
Category Channels in light of the build-out costs associated with 

[[Page 6227]]
constructing an SMR system throughout a market area, or whether 
alternative definitions would be more suitable. We also seek comment on 
whether our proposed small business definitions are sufficiently 
restrictive to protect against businesses receiving bidding credits 
which in fact do not need them.
    b. Minority- and Women-Owned Businesses. 123. Background. Prior to 
the Supreme Court's decision in Adarand Constructors, Inc. v. Pena, we 
concluded that in the licensing of broadband and narrowband PCS, 
minority and women-owned businesses might have difficulty accessing 
sufficient capital to be viable auction participants or service 
providers, in the absence of special provisions in our auction rules. 
We therefore adopted special provisions for minorities and women in 
these services. We further determined that such provisions were 
constitutional under the ``intermediate scrutiny'' standard used in 
Metro Broadcasting, Inc. v. FCC.
    124. In Adarand, however, the Supreme Court ruled that racial 
classifications imposed by the federal government are subject to strict 
scrutiny. This holding will apply to any proposal to incorporate race-
based measures into our rules; thus, it introduces an additional level 
of complexity to implementing Congress' mandate to ensure that 
businesses owned by minorities and women are provided ``the opportunity 
to participate in the provisions of spectrum-based services.'' We 
emphasize that we have not concluded that race or gender-based measures 
are unconstitutional or otherwise inappropriate for spectrum auctions 
we will hold in the future. At a minimum, however, we believe that 
Adarand requires us to build a thorough factual record concerning the 
participation of minorities and women in spectrum-based services to 
support race- and gender-based measures.
    125. Comments. DCL Associates and Dru Jenkinson, et al., the only 
commenters addressing this specific issue, propose that the PCS 
definitions of minority- and/or female-controlled firms should be 
utilized in the 800 MHz SMR service. Dru Jenkinson, et al. further 
suggest that there should be no difference in eligibility requirements 
for the wide-area and local licenses.
    126. Proposal. We propose to adopt special provisions in the lower 
80 and General Category competitive bidding rules for small businesses. 
We believe that such provisions can be structured in a way that would 
increase the likelihood of participation by women- and minority-owned 
businesses. In adopting designated entity measures for PCS, for 
example, we noted that such targeted provisions might not be necessary 
in services that are less capital intensive. We consider 800 MHz SMR to 
be significantly less capital-intensive than PCS and some other 
wireless services. In addition, we anticipate that our proposal to 
license each channel separately on an EA basis will mean lower entry 
costs for applicants. We also expect that the vast majority of minority 
and women-owned businesses will be able to qualify as small businesses 
under any definition we adopt. For example, U.S. Census Data shows that 
approximately 99 percent of all women-owned businesses and 99 percent 
of all minority-owned businesses generated net receipts of $1 million 
or less. Finally, in light of the statute's instruction to ``design and 
test multiple alternative methodologies'' we believe that it would be 
suitable to use more uniform measures for the lower 80 and General 
Category channels, because capital entry requirements are expected to 
be comparatively lower than other CMRS services. We seek comment on 
this proposal.
    127. We also request comment on the possibility that in addition to 
small business provisions, separate provisions for women- and minority-
owned entities should be adopted for the lower 80 and General Category 
channels. To comply with the Supreme Court's ruling in Adarand, any 
race-based classification must be a narrowly tailored measure that 
furthers a compelling governmental interest. We also believe that 
gender-based provisions, although not addressed in Adarand, should be 
subject to the broadest possible comment. We therefore ask that 
commenters discuss whether the capital requirements of the 800 MHz SMR 
service pose a barrier to entry by minorities and women, and whether 
assisting women and minorities to overcome such a barrier, if it 
exists, would constitute a compelling government interest. In 
particular, we seek comment on the actual costs associated with 
acquisition, construction, and operation of an 800 MHz SMR system with 
a service area based on a pre-defined geographic area and the 
proportion of existing 800 MHz SMR businesses that are owned by women 
and minorities. We also seek comment on the analytical framework for 
establishing a history of past discrimination in the 800 MHz SMR 
industry and urge parties to submit evidence (statistical, documentary, 
anecdotal or otherwise) about patterns or actual cases of 
discrimination in this and related communications services. Assuming 
that a compelling government interest is established, we seek comment 
on whether separate provisions for women and minorities are necessary 
to further this interest, and whether such provisions can be narrowly 
tailored to satisfy the strict scrutiny standard.
    c. Reduced Down Payment. 128. Background. In the Competitive 
Bidding Second R&O, we noted that reduced upfront payments particularly 
may be appropriate for auctions of spectrum specifically set aside for 
designated entities as a means of encouraging participation in the 
auction, particularly by all eligible designated entities. For 
broadband PCS, we reduced the upfront payment requirement for 
designated entities in the entrepreneurs--blocks, observing that 
requiring full compliance with the upfront payment could discourage 
auction participation by designated entities.
    129. Comments. Several commenters support offering a reduced 
upfront payment option to designated entities. DCL Associates strongly 
supports availability of reduced upfront payments for minority- and/or 
women-owned businesses. Dru Jenkinson, Inc., et al., on the other hand, 
support offering the reduced upfront payment option to all designated 
entities. To encourage the participation of designated entities in an 
auction for a geographic area licenses, Pittencrief does not oppose a 
reduced upfront payment. Southern opines, however, that if the 
Commission imposes a higher than usual upfront payment, as other 
commenters suggest, then a reduced upfront payment option will not do 
much to facilitate participation by designated entities in the auctions 
for wide-area licenses.
    130. Proposal. We propose to adopt reduced upfront payments for 
small businesses for geographic licenses on the lower 80 and General 
Category channels. We believe that this special provision will 
encourage participation in the auction by eligible designated entities. 
We seek comment on this proposal and tentative conclusion.
3. Bidding Credits
    131. Background. Bidding credits allow eligible designated entities 
to receive a payment discount (or credit) for their winning bid in an 
auction. In the Competitive Bidding Second R&O, we determined that 
competitive bidding rules applicable to individual services would 
specify the entities eligible for bidding credits and the bidding 
credit amounts for each particular service. As a result, we have 
adopted a variety of bidding credit provisions for small businesses and 
other designated entities 

[[Page 6228]]
in auctionable services. In the nationwide narrowband PCS auction, for 
example, we established a 25 percent bidding credit for minority and 
women-controlled businesses, while a 40 percent credit was used in the 
regional narrowband PCS auction. In broadband PCS, our pre-Adarand 
entrepreneurs' block rules included a 10 percent bidding credit for 
small businesses, a 15 percent credit for businesses owned by 
minorities or women, and an aggregated 25 percent credit for small 
businesses owned by women and/or minorities. In the Multipoint 
Distribution Service (MDS), we allowed small businesses a 15 percent 
bidding credit. In the 900 MHz SMR service, we adopted a 15 percent 
bidding credit for small businesses with gross revenues that are not 
more than $3 million for the preceding three years and a 10 percent 
bidding credit for small businesses with gross revenues that are more 
than $3 million but not more than $15 million for the preceding three 
years. Finally, in the 220 MHz service, we proposed a 40 percent small 
business bidding credit for nationwide and regional licenses and a 10 
percent bidding credit for smaller EA licenses.
    132. Comments. Few commenters addressed whether special provisions 
should be provided for businesses owned by minorities and/or women in 
the 800 MHz SMR auctions. With respect to bidding credits, Morris, 
Pittencrief, DCL Associates, Dru Jenkinson, et al. and the SBA support 
the Commission's proposal to provide bidding credits for such entities. 
DCL Associates, Dru Jenkinson, et al., and the SBA support a forty 
percent bidding credit for minority-and women-owned entities for wide-
area licenses. The SBA further supports affording minority- and women-
owned entities a twenty-five percent bidding credit for local SMR 
licenses. Other commenters, however, oppose giving such entities any 
type of bidding credit. AMI opines that a bidding credit would be 
inappropriate, based on the uncertainty of the value of wide-area 
licenses at auction. Dial Call opposes bidding credits, contending the 
questionable constitutionality of such provisions only would serve to 
delay the ultimate resolution of the proceeding.
    133. Proposal. We seek comment on the appropriate level of bidding 
credit for the lower 80 and General Category channels, in comparison to 
the services discussed above. We also seek comment on the possibility 
of offering ``tiered'' bidding credits for different classes of small 
businesses. We note that small businesses may vary in their ability to 
raise capital, depending on their size and gross revenues. By offering 
levels of bidding credits which depend on the size of the small 
business, we could increase the likelihood that the full range of small 
businesses would be able to participate in an auction and potentially 
provide service. We therefore propose to establish two levels of 
bidding credits: a 10 percent bidding credit for all small businesses, 
and a 15 percent credit for small businesses that meet a more 
restrictive gross revenue threshold. We believe that tiered bidding 
credits can help achieve our statutory objective under Section 
309(j)(3)(B), by providing varying sizes of small businesses with a 
meaningful opportunity to obtain SMR licenses. We seek comment on this 
proposal.
    134. We also seek comment on the degree to which the revenues of 
affiliates and major investors should be considered in determining 
small business eligibility. For example, in determining whether a PCS 
applicant qualifies as a small business, we include the gross revenues 
of the applicant's affiliates and investors with ownership interests of 
twenty-five percent or more in the applicant, but we do not attribute 
the gross revenues of investors who hold less than a twenty-five 
percent interest in the applicant unless they are members of the 
applicant's control group. We seek comment on what attribution standard 
should be applied to 800 MHz SMR applicants seeking to qualify as small 
businesses. Would a smaller attribution standard be more appropriate?
    135. We propose to make the small business bidding credit available 
on all lower 80 and General Category Channels that are licensed on a 
market-area basis. We recognize that this would be a departure from our 
900 MHz SMR rules, in which we offered bidding credits to small 
businesses on any available channel block. Our proposal is consistent, 
however, with our PCS rules in which bidding credits are available only 
on designated channels. We seek comment on this proposal. We also seek 
comment on whether there is a reasonable basis for providing credits on 
some channels and not others.
4. Installment Payments
    136. Background. We previously have indicated that in the future we 
would not necessarily limit the availability of installment payments to 
small businesses, but would consider offering the installment option 
(with varying rates and payment schedules) to other classes of 
designated entities.
    137. Comments. AMI, CellCall, DCL Associates, Genesee, Pittencrief, 
and the SBA support the proposal that small businesses be eligible for 
installment payments. AMI opines that the availability of installment 
payments may prove useful in facilitating the participation of small 
operators in the 800 MHz SMR auctions. In addition, CellCall, DCL 
Associates, and Morris advocate that the Commission afford small 
businesses reduced upfront payments. Telecellular believes that the 
Commission should maximize the opportunities for small businesses by 
granting them bidding credits. Telecellular suggests adoption of the 
bidding credits provided under the Commission's broadband PCS 
designated entity provisions.
    138. DCL Associates strongly supports the availability of 
installment payments for minority and/or women-owned businesses. 
Pittencrief does not object to offering installment payments as a means 
to encourage participation of designated entities in the auctions for 
wide-area licenses.
    139. Proposal. We propose to adopt an installment payment option 
for small businesses that successfully bid for lower 80 and General 
Category licenses. As we noted in the Competitive Bidding Second R&O, 
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. Under this 
proposal, licensees who qualify for installment payments would be 
entitled to pay their winning bid amount in quarterly installments over 
the ten-year license term, 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. In addition, we propose to 
tailor installment payments to reflect the needs of different size 
entities. Under our proposal, small businesses with $3 million or less 
in gross revenues would make interest-only payments for the first five 
years of the license term, while small businesses with $15 million or 
less in gross revenues would make interest-only payments during the 
first two years. We believe that this installment payment structure, 
which is consistent with our approach in 900 MHz SMR and the upper 200 
channels, will enable entities with less immediate access to capital to 
increase their chances of obtaining licenses. Timely payment of all 
installments would be a condition of the license grant and failure to 
make timely payment would be grounds for revocation of the license. We 
seek comment on this proposal. 

[[Page 6229]]

5. Set-Aside Spectrum
    140. Background. In the Competitive Bidding Eighth R&O, we 
determined that designation of an entrepreneur's block for the upper 
200 channels was not feasible. In the Further Notice, we indicated that 
an entrepreneurs' block could be feasible for the lower 80 channels 
which we contemplated would be used primarily by smaller SMR operators.
    141. Proposal. We tentatively conclude that the lower 80 and the 
General Category Channels should be designated as an entrepreneurs' 
block. Such a designation would ensure that smaller SMR operators would 
have opportunities to maintain competitive and viable systems and also 
to pursue wide-area licensing strategies should they desire to do so. 
In our broadband PCS rules where we have authorized entrepreneurs' 
block licenses, we have required entrepreneurs to comply with financial 
caps based on gross revenues and total assets over a certain period of 
time. Because the 800 MHz SMR service is less capital-intensive than 
PCS, we believe that the entrepreneurs' block financial caps in the 800 
MHz SMR service should be set at a lower level than those in broadband 
PCS. We seek comment on the feasibility of designating the lower 80 and 
General Category channels as an entrepreneurs' block. We also ask 
commenters to discuss what would be appropriate financial caps for such 
entrepreneurs' block.
6. Unjust Enrichment Provisions
    142. Background. In the Competitive Bidding Second R&O, we 
indicated that licensees that received bidding credits and installment 
payments and also chose to transfer their licenses to entities not 
eligible for these benefit, were required to repay the amount of the 
bidding credit on a graduated basis. No repayment would be required six 
years after the license grant. In addition, the ineligible transferee 
would not have the benefit of installment payments, and principal and 
accrued interest would come due. For the 900 MHz SMR service, we 
adopted unjust enrichment provisions which required reimbursement of 
the benefit received by a small business through bidding credits and 
installment payments in the event that such small business transferred 
its license to an entity not qualifying as a small business. We 
previously adopted restrictions on the transfer or assignment of 
broadband PCS entrepreneurs' block licenses to ensure that designated 
entities do not take advantage of special provisions by immediately 
assigning or transferring control of their licenses.
    143. Proposal. Permitting an immediate transfer of a discounted 
license to an entity that is not a small business could undermine our 
basis for offering special provisions to small businesses, but we note 
that in services with no entrepreneurs' block, we have limited unjust 
enrichment to repayment of bidding credits or installment payments. We 
therefore seek comment on whether we should use an approach similar to 
that adopted for the 900 MHz SMR service or that adopted for broadband 
PCS entrepreneurs' block licenses.
7. Partitioning
    144. The Communications Act directs the Commission to ensure that 
rural telephone companies have the opportunity to participate in the 
provision of spectrum-based services. Rural areas, because of their 
more dispersed populations, tend to be less profitable to serve than 
more densely populated urban areas. Rural telephone companies, however, 
are well positioned because of their existing infrastructure to serve 
these areas. In other services, such as broadband PCS and 900 MHz SMR, 
we have acknowledged this fact by allowing rural telephone companies to 
partition their licenses on a geographic basis, thereby increasing the 
likelihood of rapid introduction of service into rural areas. We also 
afforded rural telephone companies this opportunity under our rules for 
the upper 200 channels of 800 MHz SMR spectrum. We seek comment on 
whether we should incorporate similar provisions into our rules for the 
lower 80 and General Category channels.
    145. If we adopt geographic partitioning for rural telephone 
companies, geographic partitioning should be made available to them on 
the same basis as in PCS and the upper 200 channels. Such a 
partitioning scheme would provide rural telephone companies with the 
flexibility to serve areas in which they already provide service, while 
the remainder of the service area could be served by other providers. 
Under this proposal, rural telephone companies would be permitted to 
acquire partitioned SMR licenses in one of two ways: (1) By forming 
bidding consortia consisting entirely of rural telephone companies to 
participate in auctions, and then partitioning the licenses won among 
consortia participants, or (2) by acquiring partitioned paging licenses 
from other licensees through private negotiation and agreement either 
before or after the auction. We also would require that partitioned 
areas conform to established geo-political boundaries, include all 
portions of the wireline service area of the rural telephone company 
applicant, and be reasonably related to the rural telephone company's 
wireline service area. We also propose to use the definition for rural 
telephone companies implemented in broadband PCS. Rural telephone 
companies would be defined as local exchange carriers having 100,000 or 
fewer access lines, including all affiliates. We seek comment on this 
proposal. We also seek comment on whether we should extend partitioning 
options to entities other than rural telephone companies, as we did in 
MDS and as we proposed for the upper 200 channels in this service.

VIII. Procedural Matters

A. Regulatory Flexibility Analysis

    With respect to this Second Further Notice, 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
    147. 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).
    148. Issues raised in response to the IRFA. No comments were 
submitted in response to the IRFA.
    149. 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

    150. 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, 

[[Page 6230]]
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: 12,195.
    Estimated Time Per Response: Approximately 1 to 5 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.

    151. 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.

    152. 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, 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.

List of Subjects in 47 CFR Part 90

    Radio.

Federal Communications Commission.
William F. Caton,
Acting Secretary.
[FR Doc. 96-3511 Filed 2-13-96; 5:07 pm]
BILLING CODE 6712-01-P