[Federal Register Volume 61, Number 144 (Thursday, July 25, 1996)]
[Proposed Rules]
[Pages 38693-38701]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 96-18847]


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FEDERAL COMMUNICATIONS COMMISSION
47 CFR Part 24

[WT Docket No. 96-148; GN Docket No. 96-113; FCC 96-287]


Geographic Partitioning and Spectrum Disaggregation by Commercial 
Mobile Radio Services Licensees; and Implementation of Section 257 of 
the Communications Act--Elimination of Market Entry Barriers

AGENCY: Federal Communications Commission.

ACTION: Notice of Proposed Rulemaking.

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SUMMARY: In this Notice of Proposed Rulemaking in WT Docket No. 96-148 
and GN Docket No. 96-113, the Commission proposes modifications to the 
broadband personal communications services (PCS) rules to expand 
geographic partitioning and spectrum disaggregation provisions. The 
Commission also solicits comment on certain issues relating to these 
rules. The Commission's objective in expanding the partitioning and 
disaggregation rules is to enable a wide variety of applicants, 
including small businesses, to overcome barriers to entry in the 
broadband PCS market, to increase competition, and to expedite the 
provision of broadband PCS to areas that may not otherwise receive 
wireless services.

DATES: Comments must be filed on or before August 15, 1996. Reply 
comments are to be filed on or before August 30, 1996.

ADDRESSES: Federal Communications Commission, 1919 M Street, N.W., 
Washington D.C. 20554.

FOR FURTHER INFORMATION CONTACT: David Nall or Mika Savir, Commercial 
Wireless Division, Wireless Telecommunications Bureau, at (202) 418-
0620.

SUPPLEMENTARY INFORMATION: This Notice of Proposed Rulemaking in WT 
Docket No. 96-148 and GN Docket No. 96-113, adopted on June 28, 1996, 
and released on July 15, 1996, is available for inspection and copying 
during normal business hours in the FCC Reference Center, Room 575, 
2000 M Street N.W., Washington D.C. The complete text may also be 
purchased from the Commission's copy contractor, International 
Transcription Service, Inc., 2100 M Street, N.W., Suite 140, Washington 
D.C. 20037, (202) 857-3800. Synopsis of Notice of Proposed Rulemaking:

I. Background

    1. In the Broadband PCS Memorandum Opinion and Order, Amendment of 
the Commission's Rules to Establish New Personal Communications 
Services, GN Docket No. 90-314, Memorandum Opinion and Order, 59 FR 
32830 (June 24, 1994) (Broadband PCS Memorandum Opinion and Order), the 
Commission declined to allow general geographic partitioning, noting 
that licensees might use partitioning as a means of circumventing 
construction requirements. The Commission observed, however, that a 
limited partitioning scheme might facilitate participation by certain 
groups, including rural telephone companies and other designated 
entities, in the provision of broadband PCS. The Commission stated that 
it would consider the issue of geographic partitioning in a future 
proceeding to establish competitive bidding rules for broadband PCS.
    2. The Commission established geographic partitioning provisions 
for rural telephone companies in the Competitive Bidding Fifth Report 
and Order, Implementation of Section 309(j) of the Communications Act--
Competitive Bidding, PP Docket No. 93-253, 59 FR 37566 (July 22, 1995) 
(Competitive Bidding Fifth Report and Order). The Commission determined 
that partitioning would satisfy the Congressional mandate to provide an 
opportunity for rural telephone companies to participate at auction and 
in the provision of broadband PCS. The Commission decided that rural 
telephone companies could acquire a partitioned license (1) by forming 
an auction bidding consortium comprised entirely of rural telephone 
companies, and partitioning the license(s) won among consortium 
members; or (2) through private negotiation, either before or after an 
auction. The Commission required that partitioned areas conform to 
established

[[Page 38694]]

geopolitical boundaries (such as county lines) and that each area 
include all portions of the rural telephone company's wireline service 
area within the PCS service area.
    3. In the Competitive Bidding Further Notice of Proposed 
Rulemaking, Implementation of Section 309(j) of the Communications 
Act--Competitive Bidding, PP Docket No. 93-253, Further Notice of 
Proposed Rulemaking, 59 FR 41426 (August 12, 1994) (Competitive Bidding 
Further Notice of Proposed Rulemaking), the Commission requested 
comment on whether to extend post-auction partitioning of broadband PCS 
licenses to women- and minority-owned businesses. The Commission 
observed that allowing these entities to acquire partitioned licenses 
may, like rural telephone companies, facilitate their ability to 
participate in the provision of broadband PCS.
    4. In the Broadband PCS Memorandum Opinion and Order, the 
Commission held that broadband PCS licensees may disaggregate licensed 
broadband PCS spectrum under the current rules after January 1, 2000 if 
they have met the five-year construction requirement. The Commission 
reasoned that this limit on spectrum disaggregation for broadband PCS 
would allow the PCS market to take shape and prevent anti-competitive 
practices with regard to disaggregation. The Commission indicated, 
however, that it would initiate a proceeding at a later date to specify 
rules for allowing spectrum disaggregation.

II. Notice of Proposed Rulemaking

A. Partitioning

1. License Eligibility
    The Commission proposes to relax the broadband PCS geographic 
partitioning rules for the A, B, D, and E spectrum blocks to allow any 
party to acquire a license for a partitioned geographic service area 
that meets the eligibility requirements to be a broadband PCS licensee. 
The Commission tentatively concludes that this would allow spectrum to 
be used more efficiently, speed service to underserved areas, and 
increase competition. The Commission invites comment on this proposal. 
The Commission solicits comment on whether this proposal to liberalize 
the geographic partitioning rules would hinder a rural telephone 
company's ability to participate in the provision of broadband PCS.
2. Available License Area, Timing, and Financial Obligations
    The Commission proposes that any partitioning of broadband PCS 
licenses be along county lines in the same manner that rural telephone 
companies must partition along county lines under the current rules. 
The Commission tentatively concludes that this would reduce the 
administrative burden and minimize interference coordination concerns. 
Commenters are invited to address the merits of the Commission's 
proposal.
    7. Non-entrepreneur block licensees. The Commission believes that 
there may be significant advantages in broadening the partitioning 
rules to permit A, B, D, and E block broadband PCS licensees to 
partition a portion of their license area to any qualifying entity at 
any time after receiving a license. The Commission proposes that all 
licensees in the A, B, D, and E blocks be permitted to partition their 
license area along county lines, at any time. Commenters are invited to 
discuss whether the Commission should impose any limitations on the 
size of geographic area that a licensee would be allowed to partition 
in the non-entrepreneurs' blocks.
    8. Licensees with competitive bidding benefits. The Commission 
observes that small businesses face certain barriers to entry into the 
broadband PCS market that changes in the partitioning rules may 
address. The Commission proposes that an entrepreneurs' block (C and F 
block) licensee be permitted to partition at any time to other parties 
that would be eligible for a license in those blocks. The Commission 
seeks comment on this tentative conclusion.
    9. The Commission seeks comment on the treatment of installment 
plans for winning auction bids owned by partitioning licensees. The 
Commission seeks comment on whether an entrepreneur block licensee who 
partitions to another entrepreneur should be required to repay, on an 
accelerated basis, a portion of the outstanding principle balance owed 
under an installment payment plan. The Commission seeks comment on 
whether the partitionee should be required to guarantee payment of a 
portion of the partitioner's obligation.
    10. The Commission tentatively concludes that some form of the 
unjust enrichment requirements should apply to a partitioning licensee 
that has received bidding credits or is paying the winning bid through 
installment payments when the partitionee qualifies as an entrepreneur, 
but would receive less favorable installment plan payments. The 
Commission seeks comment on whether such unjust enrichment requirements 
in this case should be on a proportional basis, and how the payments 
should be calculated.
    11. The Commission proposes to apply the current five-year 
restriction against complete license transfers to prohibit partitioning 
and/or disaggregation by an entrepreneur block licensee to a non-
entrepreneur during the first five years of the license period. The 
Commission states that applying this holding period to partitioning and 
disaggregation will ensure the objective that entrepreneurs and small 
businesses continue to participate as PCS licensees for substantial 
periods of time, and through that participation obtain experience and 
profits that will enable their long-term participation in 
communications industries. The Commission tentatively concludes that 
after the five-year holding period, unjust enrichment requirements 
should apply as a condition for approval of an application for a 
partitioning transfer of an entrepreneur block license to a non-
entrepreneur. The unjust enrichment provisions would include 
accelerated payment of bidding credits, unpaid principal, and accrued 
unpaid interest, and would be applied on a proportional basis. The 
Commission seeks comment on how such unjust enrichment amounts should 
be calculated. The Commission seeks comment on whether the price paid 
by the partitionee should be considered in determining the percentage 
of the outstanding principle balance to be repaid.
    12. The Commission seeks comment on what the respective obligations 
of the participants in a partitioning transfer should be, and whether 
each party should be required to guarantee all or a portion of the 
partitionee's original auctions-related obligation in the event of 
default or bankruptcy by any of the parties to the partitioning 
transfer. The Commission seeks comment on whether the partitioner (the 
original licensee) should have a continuing obligation with respect to 
the entire initial geographic area. The Commission seeks comment on 
whether partitioning parties should be able to determine which party 
has a continuing obligation with respect to the original licensed area.
    13. The Commission tentatively concludes that the proposals to 
permit partitioning in the manner described above would allow broadband 
PCS spectrum to be used most efficiently, speed service to unserved or 
underserved areas, and facilitate competition. The Commission 
tentatively concludes that the proposal to permit partitioning by 
entrepreneur block licensees to similarly qualified parties would 
ensure that these entities retain a significant presence in the market. 
Additionally, this proposal may

[[Page 38695]]

help small business licensees compete more effectively in the areas 
they retain and assist in the elimination of entry barriers to the PCS 
market. The Commission solicits comment on this analysis of the 
intended effects of these proposals.
3. License Term
    14. The Commission proposes that a partitionee be authorized to 
hold its license for the remainder of the partitioner's original ten-
year license term. The Commission tentatively concludes that this 
approach is appropriate because a licensee, through partitioning, 
should not be able to confer greater rights than it was awarded under 
the terms of its license grant. The Commission solicits comment on this 
tentative conclusion.
    15. The Commission also proposes that a partitionee be afforded the 
same renewal expectancy as a market area licensee. Specifically, a 
partitionee would be granted a preference at a comparative renewal 
proceeding if it can demonstrate that it has provided ``substantial'' 
service during its past license term and has substantially complied 
with applicable Commission rules, policies and the Communications Act 
of 1934, as amended. The Commission invites comment on this proposal.
4. Construction Requirements
    16. In the Broadband PCS Memorandum Opinion and Order, the 
Commission found that broadband PCS would likely be a highly 
competitive service and that licensees would have incentives to 
construct facilities to meet the service demands in their licensed 
areas. Nevertheless, the Commission imposed minimum construction 
requirements to expedite service to the public and promote efficient 
use of the spectrum. Specifically, the Commission required 30 MHz 
broadband PCS licensees to construct facilities that provide coverage 
to one-third of the population of their service area within five years 
of the license grant and two-thirds of the population within ten years. 
Ten MHz licensees are required to provide coverage to one-fourth of the 
service area's population within five years or, alternatively, they may 
submit a showing to the Commission demonstrating that they are 
providing substantial service.
    17. The Commission tentatively concludes that both the partitioner 
and partitionee should be subject to coverage requirements that ensure 
that both portions of a partitioned licensing area will receive 
service. This proposal would facilitate partitioning by offering a 
choice between two different build-out options, which could be 
negotiated between the partitioner and partitionee. Applicants would 
then select in their assignment and transfer applications the 
construction option they would be obligated to meet.
    18. Under the first option, a partitionee would be obligated to 
satisfy the same construction requirements as the original licensee 
within its partitioned area, regardless of when it acquired the 
partitioned license. The Commission invites comment on this option.
    19. As a second option, the Commission proposes more modest build-
out requirements for a partitioned area where the original licensee has 
met its five-year build-out requirements and certifies that it will 
meet the ten-year coverage requirements for its entire license area. 
Specifically, the Commission proposes that partitionees must only 
satisfy the substantial service requirement for renewal expectancy for 
its partitioned area by the end of the original ten-year license term. 
For example: an A Block licensee who meets its five-year build-out 
requirements within three years after receiving its license, may, in 
its partitioning application, certify that it will meet the ten-year 
coverage requirement for its original license. In this scenario, the 
partitionee would only be required to meet the substantial service 
requirement for its partitioned area at the end of the A Block 
licensee's original ten-year license term.
    20. The Commission tentatively concludes that establishing flexible 
build-out requirements would encourage partitioning to entities that 
have a sincere interest in providing broadband PCS and would thereby 
expedite the provision of service to areas that otherwise may not 
receive it as quickly. The Commission also observes that this option 
may facilitate partitioning agreements, especially in the latter 
portion of a license term, by acknowledging licensees' efforts to bring 
broadband PCS service to their licensed areas. The Commission solicits 
comment on these build-out proposals.

B. Disaggregation

1. Timing of Disaggregation
    21. Currently, a broadband PCS licensee who has met the five-year 
construction requirement may assign portions of its licensed PCS 
spectrum after January 1, 2000. In the Broadband PCS Memorandum Opinion 
and Order, the Commission stated that allowing immediate disaggregation 
of spectrum before that time may impede competition in the provision of 
broadband PCS.
    22. The Commission tentatively concludes that the prohibitions on 
disaggregation may no longer be warranted. The Commission tentatively 
concludes that the current prohibitions on disaggregation may 
constitute a barrier to market entry for small businesses and other 
entrepreneurs which may lack the resources to participate successfully 
in auctions for 30 MHz and 10 MHz broadband PCS spectrum blocks. The 
Commission proposes to eliminate such market entry barriers by making 
changes in the disaggregation rules. The Commission seeks comment on 
these tentative conclusions.
    23. The Commission proposes to allow spectrum disaggregation prior 
to January 1, 2000, and to eliminate the condition that the licensee 
must satisfy the five-year build-out requirements before 
disaggregating. The Commission invites comment on whether to retain the 
five-year build-out requirement before allowing disaggregation. 
Commenters should discuss whether the goals of elimination of market 
entry barriers, efficient spectrum use, expedited access to broadband 
PCS service, and competition would be better served by eliminating this 
restriction. Specifically, the Commission proposes to allow non-
entrepreneurs to disaggregate to other qualified entities at any time, 
and to allow entrepreneurs to disaggregate to other qualified 
entrepreneurs at any time, but entrepreneurs would be restricted from 
disaggregating spectrum to non-entrepreneurs until after the five-year 
holding period. Commenters should discuss whether any alternate 
restrictions on allowing disaggregation may be appropriate.
2. Amount of Spectrum to Disaggregate
    24. In the Broadband PCS Memorandum Opinion and Order, the 
Commission established six frequency blocks of spectrum for licensed 
broadband PCS. Three of the blocks (A, B, and C) each have 30 MHz of 
spectrum, while the remaining blocks (D, E, and F) have 10 MHz of 
spectrum each. The Commission determined that this broadband PCS 
spectrum allocation plan would facilitate the rapid deployment of 
broadband PCS and enable broadband PCS licensees to compete fully with 
other commercial mobile radio services. The Commission determined that 
30 MHz blocks of spectrum would facilitate competition and the rapid 
development and implementation of the fullest range of PCS services and 
ensure that PCS is

[[Page 38696]]

more fully competitive with other mobile radio services. The Commission 
observed that 10 MHz licensees may be able to provide services ranging 
from specialized applications to services comparable to those now 
provided by cellular systems, through the use of advanced digital 
techniques, such as Code Division Multiple Access (CDMA) and Time 
Division Multiple Access (TDMA), and micro-cellular technology.
    25. The Commission seeks comment and proposals for the amount of 
spectrum that a licensee should be required to retain if disaggregation 
is allowed on a more expedited basis. The Commission seeks comment 
generally concerning whether some restriction or limit should be placed 
on the amount of spectrum a licensee may disaggregate or the timing of 
such disaggregation.
    26. The Commission proposes that licensees disaggregate frequencies 
in accordance with the pairings specified in our rules. The Commission 
tentatively concludes that for these purposes, disaggregation for 
broadband PCS in blocks smaller than a 1 MHz block of paired 
frequencies will not be permitted. The Commission seeks comment on this 
tentative conclusion. The Commission requests that commenters 
suggesting alternative approaches provide technical justifications and 
other relevant support in responding to this issue.
    27. The Commission seeks comment on whether broadband PCS licensees 
should be required to retain or acquire spectrum above the 
administrative minimum of 1 MHz. The Commission also seeks comment on 
the minimum amount of spectrum a disaggregatee could utilize for the 
provision of broadband type services. The Commission seeks comment 
generally on the relevance of the distinction between broadband and 
narrowband for purposes of disaggregation rules.
    28. The Commission tentatively concludes that elimination of the 
current prohibitions on broadband PCS disaggregation would be 
consistent with the recent elimination of the cellular/PCS cross-
ownership rule and the 40 MHz PCS spectrum cap, and the retention of 
the 45 MHz CMRS spectrum cap, because such actions facilitate market 
transfers of spectrum among cellular and PCS licensees while 
maintaining a provision to ensure a diversity of service providers. The 
Commission requests comment on this tentative conclusion, and generally 
on the impact of the present 45 MHz spectrum cap on these proposals.
3. Matters Relating to Entrepreneur Block Licensees
    29. The Commission proposes to allow all entrepreneur block 
licensees to disaggregate to similarly qualifying parties at any time 
without restriction, and to parties not eligible for entrepreneur block 
licenses after a five-year holding period. The Commission tentatively 
concludes that if an entrepreneur block licensee is permitted to 
disaggregate to a non-entrepreneur entity after the five-year holding 
period, the disaggregating entrepreneur block licensee will be required 
to repay the unjust enrichment provisions on a proportional basis. 
These unjust enrichment provisions would include accelerated payment of 
bidding credits, unpaid principal, and accrued unpaid interest, and 
would be applied on a proportional basis. The Commission seeks comment 
on how such unjust enrichment amounts should be calculated. The 
Commission seeks comment on whether the price paid by the 
disaggregating party should be considered in determining the percentage 
of the outstanding principle balance to be repaid.
    30. The Commission seeks comment on what the respective obligations 
of the participants in a disaggregation transfer should be, and whether 
each party should be required to guarantee all or a portion of the 
disaggregatee's original auctions-related obligation in the event of 
default or bankruptcy by any of the parties to the disaggregation 
transfer. The Commission seeks comment on whether the disaggregator 
(the original licensee) should have a continuing obligation with 
respect to the entire initial license. The Commission seeks comment on 
whether the parties should have available a choice of options, ranging, 
for example, from an accelerated payment based on purchase price to a 
guarantee for a larger payment by one party in the event another party 
defaults. Parties are also invited to comment on whether the 
disaggregating parties should be able to determine which party has a 
continuing obligation with respect to the original licensed area.
    31. The Commission tentatively concludes that if an entrepreneur 
block licensee is permitted to disaggregate to an entrepreneur that 
would not qualify for the same level of benefits as the disaggregating 
licensee, the disaggregating entrepreneur block licensee will be 
required to repay a portion of the unjust enrichment provisions as they 
apply to a full assignment of a license. The Commission seeks comment 
on whether this should be a proportional amount of its bidding credits, 
unpaid principal, and accrued unpaid interest to the U.S. Treasury, and 
how the amounts should be calculated. The Commission seeks comment on 
what provisions, if any, should be adopted to address the situation of 
an entrepreneur block licensee's disaggregation followed by default in 
payment of a winning bid at auction.
    32. The Commission seeks comment on whether there should be 
different requirements for entrepreneur block licensees and for non-
entrepreneur block licensees regarding the amounts of spectrum which a 
licensee must retain or may disaggregate.
4. Construction Requirements
    33. The Commission's rules currently require 30 MHz broadband PCS 
licensees to construct facilities that provide coverage to one-third of 
the population of their service area within five years of the initial 
license grant and two-thirds of the population within ten years. Ten 
MHz licensees are required to construct facilities that provide 
coverage to one-fourth of the service area's population within five 
years or, alternatively, they may submit a showing to the Commission 
demonstrating that they are providing substantial service.
    34. To address the concerns raised in the Broadband PCS Memorandum 
Opinion and Order about anti-competitive incentives to disaggregate and 
engage in spectrum warehousing, the Commission proposes two 
construction build-out options to apply to entities receiving 
disaggregated spectrum that do not already possess a broadband PCS 
license in the same geographic service area. Such applicants seeking to 
receive disaggregated spectrum would select the construction option for 
which they would be obligated to meet in their assignment and transfer 
applications. The Commission tentatively concludes that this proposal 
would prevent licensees from warehousing spectrum and would enable new 
entrants to provide service.
    35. Under the first option, a disaggregatee entering the geographic 
market would be obligated to satisfy the same construction requirements 
as the licensee, regardless of when it acquired the disaggregated 
spectrum. For example, an entity that acquires spectrum from a 30 MHz 
broadband PCS licensee (an A, B, or C block licensee) would be 
obligated to provide service to at least one-third of the population in 
the license area within five years of the underlying license term and 
two-thirds of the population in the

[[Page 38697]]

license area by the end of the ten-year license term. An entity that 
acquires spectrum from a 10 MHz broadband PCS licensee (a D, E, or F 
block licensee) would have to provide adequate service to at least one-
quarter of the population in the license area or make a showing of 
substantial service at the five-year benchmark. The Commission 
tentatively concludes that this approach would prevent spectrum 
warehousing and ensure expedited access to broadband PCS services. 
Commenters are invited to discuss the merits of this option.
    36. As a second option, the Commission proposes a modified build-
out requirement after the disaggregating licensee has met its five-year 
build-out requirement and certifies that it will meet the ten-year 
construction requirement by the end of its license term. Specifically, 
a disaggregatee must only satisfy the five-year build-out requirements 
for the license area by the end of the original ten-year license term. 
The Commission tentatively concludes that this build-out option will 
facilitate the rapid introduction of broadband PCS service and increase 
spectrum efficiency. The Commission seeks comment on this approach. 
Commenters are also invited to address whether these build-out 
requirements should apply where a licensee disaggregates a portion of 
its spectrum after the initial ten-year license term has expired.
    37. The Commission proposes to require, as a pre-condition for 
approving a proposed disaggregation, certifications from both the 
disaggregator and the disaggregatee that the time remaining before the 
ten-year construction benchmarks is sufficient for the disaggregator 
and disaggregatee to meet the pertinent construction benchmark for 
their respective licenses. This proposal would ensure against delay in 
the build-out of PCS, and place all parties on notice that the 
construction requirements must be considered during the negotiations. 
In addition, disaggregatees must file maps and other supporting 
documents showing compliance with the construction requirements within 
the appropriate five-year and ten-year bench marks of the date of their 
initial licenses.
    38. The Commission proposes that if a licensee fails to meet the 
construction requirements, the license of the disaggregator or 
disaggregatee would revert back to the Commission. In light of the fact 
that the disaggregator and disaggregatee are each licensees, their 
prospective construction requirements are independent from each other 
and failure to satisfy one construction requirement will not affect the 
renewal of the other.
    39. The Commission proposes no new construction requirements for 
disaggregatees already possessing a broadband PCS license in a 
geographic service area, on the premise that these licensees are 
already subject to coverage requirements under their existing licenses. 
The Commission seeks comment on this proposal. The Commission seeks 
comment on the construction requirements, if any, that should apply to 
other CMRS licensees receiving disaggregated broadband PCS spectrum.
5. License Term
    40. The Commission proposes a similar license term for 
disaggregation as for partitioning, i.e., that a disaggregatee would be 
authorized to hold its license for the disaggregated spectrum for the 
remainder of the disaggregator's original ten-year license term. The 
Commission believes this approach is appropriate because a licensee, 
through disaggregation, should not be able to bestow greater rights 
than it was awarded under the terms of its license grant. The 
Commission seeks comment on whether administrative efficiency and 
convenience for licensees support a limited exception to this general 
rule. The Commission proposes that a disaggregatee be afforded the same 
renewal rights as a market area licensee. A disaggregatee would be 
granted a preference at a comparative renewal proceeding if it can 
demonstrate that it has provided ``substantial'' service during its 
past license term and has substantially complied with applicable 
Commission rules, policies, and the Communications Act. The Commission 
invites comment on this proposal.

C. Related Matters

1. Combination of Partitioning and Disaggregation
    41. The Commission tentatively concludes that combinations of 
partitioning and disaggregation should be permitted. The Commission 
seeks comment on whether the benefits of allowing licensees to combine 
disaggregation and partitioning at any time outweigh factors supporting 
restrictions on such a combination. In those situations where the 
combination of partitioning and disaggregation is allowed under the 
proposed rules, the Commission proposes to implement the rules proposed 
for partitioning in the event there is a conflict in the application of 
the rules. The Commission seeks comment on where such conflicts 
conceivably could arise and on the overall approach to the combination 
of partitioning and disaggregation addressed herein.
2. Licensing
    42. The Commission proposes to follow existing partial assignment 
procedures for broadband PCS licenses in reviewing requests for 
geographic partitioning, disaggregation, or a combination of both. 
Thus, the licensee must file an FCC Form 490 that is signed by both the 
licensee and qualifying entity. The qualifying entity would also file 
an FCC Form 430 unless a current FCC Form 430 is already on file with 
the Commission. An FCC Form 600 would be filed by the qualifying entity 
to receive authorization to operate in the market area which is being 
partitioned or to modify an existing station of the qualifying entity 
to include the new or additional market area being partitioned. The 
Commission seeks comment on these proposed licensing rules.
    43. The Commission proposes that any requests for a partitioned 
license or disaggregated spectrum would contain the FCC Forms 490, 430, 
and 600 and be filed as one package under cover of the FCC Form 490. 
Parties are invited to comment on whether any additional procedures 
should be required. A broadband PCS disaggregatee must file FCC Form 
430 qualifying it as a common carrier unless a current FCC Form 430 is 
already on file with the Commission. An FCC Form 600 should be filed by 
the disaggregatee to receive authorization to operate in the market 
area which is covered by the disaggregated spectrum or to modify an 
existing station of the disaggregatee to include the new or additional 
spectrum being disaggregated. Parties are invited to comment whether 
any additional procedures should be required.
3. Technical and Microwave Relocation Rules
    44. In the Broadband PCS Second Report and Order, Amendment of the 
Commission's Rules to Establish New Personal Communications Services, 
GN Docket No. 90-314, Second Report and Order, 58 FR 59174 (November 8, 
1993) (Broadband PCS Second Report and Order) the Commission adopted 
minimal technical standards to allow PCS to develop in the most rapid, 
economically feasible and diverse manner. The Commission tentatively 
concludes that the current technical rules with respect to service area 
boundary limits and protections, which provide for coordination and 
negotiation among licensees, should be maintained and applied to 
partitioned license areas. The Commission seeks

[[Page 38698]]

comment on this tentative conclusion. The Commission seeks comment on 
whether any modifications to the technical rules are needed to 
accommodate these partitioning and disaggregation proposals.
    45. The Commission tentatively concludes that a new entrant PCS 
licensee who gains its license through partitioning or disaggregation 
should be treated as any other subsequent PCS licensee for purposes of 
the microwave relocation cost-sharing plan, including eligibility for 
installment plan payments if the transferee would be eligible for an 
installment plan equivalent to that enjoyed by the transferring 
licensee, unless the reimbursement obligations to which they would be 
subject have already been paid by the transferring licensee. The 
Commission seeks comment on this approach.
4. Clearinghouse for Spectrum.
    46. The Commission seeks comment on whether establishing an 
electronic database to make more readily accessible the information 
about licensed PCS spectrum would lower market entry barriers, 
consistent with the mandate of Section 257 of the Telecommunications 
Act of 1996, or otherwise be in the public interest. The Commission 
requests comment on how to encourage the creation of private 
information clearinghouses on available spectrum and what procedures 
could be utilized to assist small businesses in obtaining available 
licenses or spectrum from licensees to meet very limited or defined 
telecommunications needs. The Commission also seeks comment on how to 
promote information clearinghouses or other market solutions so that 
the public can be informed about spectrum availability in particular 
geographic areas or excess or available spectrum that could be 
disaggregated in minimum amounts.

III. Conclusion

    47. The Commission believes that these partitioning and 
disaggregation proposals are consistent with a pro-competitive 
deregulatory national policy framework and will promote the rapid 
creation of a competitive market to deliver broadband PCS to the 
largest number of consumers. These proposals are designed to meet the 
Congressional objectives of opening telecommunications markets to 
competition, providing advanced technologies and services efficiently 
and quickly, and identifying and eliminating market entry barriers for 
entrepreneurs and other small businesses in the provision and ownership 
of telecommunications services.

IV. Procedural Matters and Ordering Clauses

A. Regulatory Flexibility Act

    Summary: As required by Section 603 of the Regulatory Flexibility 
Act, the Commission has prepared an Initial Regulatory Flexibility 
Analysis (IRFA) of the expected impact on small entities of the 
policies and rules proposed in this Notice of Proposed Rulemaking.
    Reason for Action: This rulemaking proceeding was initiated to 
secure comment on proposals to modify our broadband PCS rules to permit 
partitioning and disaggregation for all Part 24 licensees. The 
proposals advanced in the Notice of Proposed Rulemaking are also 
designed to implement Congress' goal of giving small businesses the 
opportunity to participate in the provision of spectrum-based services.
    Objectives: The Commission proposes changes to its rules for 
broadband PCS that are intended to facilitate the efficient use of 
broadband PCS spectrum, increase competition, and expedite the 
provision of broadband PCS service to areas that may not otherwise 
receive broadband PCS or other wireless services in the near term. 
These proposals seek to increase the level of small business 
participation in the provision of broadband PCS. The Commission 
proposes to allow broadband PCS licensees in the non-entrepreneurs' 
blocks to partition any portion of their geographic license area to 
entities that are eligible to be broadband PCS licensees. The 
Commission further proposes to allow entrepreneurs' block licensees to 
partition any portion of their licensed geographic area to entities 
that qualify as entrepreneurs and are otherwise eligible to be 
broadband PCS licensees. Additionally, the Commission proposes to 
eliminate the January 1, 2000 benchmark for disaggregation, and allow 
disaggregation any time after the broadband PCS licensee meets the 
five-year build-out requirement. Specifically, the Commission proposes 
to allow broadband PCS licensees in the non-entrepreneurs' blocks to 
disaggregate spectrum to entities that are eligible to be broadband PCS 
licensees. The Commission proposes to allow entrepreneurs' block 
licensees to disaggregate to another entrepreneur, otherwise qualified 
to be a broadband PCS licensee. Additionally, the Commission proposes 
to establish license terms that permit partitionees to hold partitioned 
licenses and disaggregatees to hold disaggregated spectrum for the 
remaining duration of the original ten-year license term. The 
Commission also proposes to establish construction requirements to 
ensure expedient access to broadband PCS service in partitioned areas 
to ensure coverage and increase spectrum efficiency. Finally, the 
Commission proposes to allow licensees to combine partitioning and 
disaggregation under limited circumstances.
    Legal Basis: The proposed action is authorized under Sections 4(i), 
257, 303(r) and 309(j) of the Communications Act of 1934, as amended, 
47 U.S.C. Secs. 154(i), 257, 303(r) and 309(j), as amended.
    Reporting, Recordkeeping, and Other Compliance Requirements: The 
proposals under consideration in this Notice of Proposed Rulemaking 
include the possibility of imposing reporting and recordkeeping 
requirements for small businesses seeking licenses through the proposed 
partitioning and disaggregation rules. The information requirements 
would be used to determine if the licensee is a qualifying entity to 
obtain a partitioned license or disaggregated spectrum. This 
information will be a one-time filing by any applicant requesting such 
a license. The information will be submitted on the FCC Forms 490 (or 
430 and/or 600 filed as one package under cover of the Form 490) which 
are currently in use and have already received OMB clearance. We 
estimate that the average burden on the applicant is three hours for 
the information necessary to complete these forms. We estimate that 75 
percent of the respondents (which may include small businesses) will 
contract out the burden of responding. We estimate that it will take 
approximately 30 minutes to coordinate information with those 
contractors. The remaining 25 percent of respondents (which may include 
small businesses) are estimated to employ in-house staff to provide the 
information. Applicants (including small businesses) filing the package 
under cover of FCC Form 490 electronically will incur a $2.30 per 
minute on-line charge. On-line time would amount to no more than 30 
minutes. We estimate that 75 percent of the applicants may file 
electronically. We estimate that applicants contracting out the 
information would use an attorney or engineer (average of $200 per 
hour) to prepare the information.
    Federal Rules Which Overlap, Duplicate or Conflict With These 
Rules: None.
    Description, Potential Impact, and Number of Small Entities 
Involved: The rule changes proposed in this proceeding will affect all 
small businesses which avail themselves of these rule changes, 
including small

[[Page 38699]]

businesses currently holding broadband PCS licenses who choose to 
partition and/or disaggregate, and small businesses who may acquire 
licenses through partitioning and/or disaggregation. The Commission is 
required to estimate in its Final Regulatory Flexibility Analysis the 
number of small entities to which a rule will apply, provide a 
description of such entities, and assess the impact of the rule on such 
entities. To assist the Commission in this analysis, commenters are 
requested to provide information regarding how many total broadband PCS 
entities, existing and potential, would be affected by the proposed 
rules in the Notice of Proposed Rulemaking. In particular, the 
Commission seeks estimates of how many broadband PCS entities, existing 
and potential, will be considered small businesses. ``Small business'' 
is defined as a firm that has revenues of less than $40 million in each 
of the last three calendar years. This definition was used in the PCS C 
block auction and approved by the Small Business Administration. The 
Commission seeks comment as to whether this definition is appropriate 
in this context. Additionally, the Commission requests each commenter 
to identify whether it is a small business under this definition. If 
the commenter is a subsidiary of another entity, this information 
should be provided for both the subsidiary and the parent corporation 
or entity.
    The broadband PCS spectrum is divided into six frequency blocks 
designated A through F. The Commission has auctioned broadband PCS 
licenses in blocks A, B, and C. The Commission does not have sufficient 
information to determine whether any small businesses within the SBA-
approved definition bid successfully for licenses A or B block 
auctions. There were 89 winning bidders that qualified as small 
businesses in the C block PCS auctions. Based on this information, the 
Commission concludes that the number of broadband PCS licensees 
affected by the rules proposed in this Notice of Proposed Rulemaking 
includes the 89 winning bidders that qualified as small entities in the 
C block broadband PCS auction.
    The Commission estimates that up to 10,370 PCS licensees or 
potential licensees could take the opportunity to partition and/or 
disaggregate a license or obtain a license through partitioning and/or 
disaggregation. This estimate is based on the total number broadband 
PCS licenses auctioned and subject to auction, 2,074, and the estimate 
that each license would probably not be partitioned and/or 
disaggregated to more than five parties. The Commission notes that the 
A and B blocks each consist of 51 licenses (a total of 102 licenses) 
and the C, D, E, and F blocks each consist of 493 licenses (a total of 
1,972 licenses). Currently the C and F block licensees and potential 
licensees (holding a total of 986 licenses) must be small businesses or 
entrepreneurs with average gross revenues over the past three years of 
less than $125 million. Under the proposed rules they will be permitted 
to partition and/or disaggregate to other qualified entrepreneurs. The 
A, B, D, and E block licensees and potential licensees (holding a total 
of 1,088 licenses) will also be permitted under the proposed rules to 
partition and/or disaggregate to small businesses.
    At present, there have been no auctions held for the D, E, and F 
blocks of broadband PCS spectrum. The Commission anticipates a total of 
1,479 licenses will be awarded in the D, E, and F block PCS auctions, 
which are scheduled to begin on August 26, 1996. Eligibility for the F 
block licenses is limited to entrepreneurs with average gross revenues 
of less than $125 million. However, there is no basis upon which to 
estimate the number of licenses that will be awarded to small 
businesses, nor is there a basis for an estimate as to how many small 
businesses will win D or E block licenses. Given the fact that nearly 
all radiotelephone companies have fewer than 1,000 employees, and that 
no reliable estimate of the number of D, E, and F block licensees can 
be made, the Commission assumes, for purposes of this IRFA that all of 
the licenses will be awarded to small businesses. The Commission 
believes that it is possible that a significant number of the up to 
10,370 PCS licensees or potential licensees who could take the 
opportunity to partition and/or disaggregate a license or who could 
obtain a license through partitioning and/or disaggregation will be 
small businesses.
    Any Significant Alternatives Minimizing the Impact on Small 
Entities Consistent with the Stated Objectives: The proposals advanced 
in the Notice of Proposed Rulemaking are designed to implement 
Congress' goal of giving small businesses, as well as other entities, 
the opportunity to participate in the provision of spectrum-based 
services. The impact on small entities in the proposals in the Notice 
of Proposed Rulemaking is the opportunity to enter the broadband PCS 
market through the partitioning and disaggregation proposals herein.
    The rule changes proposed in the Notice of Proposed Rulemaking by 
the Commission are consistent with the mandate under the Communications 
Act of 1934, as amended, to identify and eliminate market entry 
barriers for entrepreneurs and small businesses in the provision and 
ownership of telecommunications services, and the mandate under Section 
309(j) of the Communications Act of 1934, as amended, to utilize 
auctions to ensure that small, minority and women-owned businesses and 
rural telephone companies have an opportunity to participate in the 
provision of spectrum-based services. The Commission's proposals in 
this Notice of Proposed Rulemaking, if implemented, will facilitate 
market entry by parties who may lack the financial resources for 
participation in PCS auctions, including small businesses. These 
proposals, if implemented, will promote technological advancement and 
participation by diverse entities, as well as facilitate the efficient 
use of broadband PCS spectrum. The alternative to the Commission's 
proposal to allow geographic partitioning would be to maintain the 
status quo and only permit rural telephone companies to utilize 
partitioning through forming an auction bidding consortium comprised 
entirely of rural telephone companies or through private negotiation 
post-auction. Limiting geographic partitioning to rural telephone 
companies would not permit other small businesses to obtain partitioned 
licenses or to partition to other parties, and thus would not promote 
the participation of small businesses in the provision of PCS. The 
Commission also noted that the proposed partitioning policy would allow 
spectrum to be used more efficiently, speed service to underserved 
areas, and increase competition.
    In this Notice of Proposed Rulemaking, the Commission observed that 
initially general partitioning by broadband PCS licensees was not 
permitted because of the concern that licensees might use partitioning 
as a means to circumvent construction requirements. The Commission 
tentatively concludes that both the partitioner and partitionee should 
be subject to coverage requirements that ensure that both portions of a 
partitioned licensing area will receive service. The Commission 
proposes facilitating partitioning by offering a choice between two 
different build-out options, which could be negotiated between the 
partitioner and partitionee. The first option proposed by the 
Commission would require a partitionee to satisfy the same construction

[[Page 38700]]

requirements as the original licensee within its partitioned area, 
regardless of when it acquired the partitioned license. This approach 
is consistent with the present construction requirements for rural 
telephone companies. The second option proposed by the Commission would 
apply where the original licensee has met its five-year build-out 
requirements and certifies that it will meet the ten-year coverage 
requirements for its entire license area. Specifically, the Commission 
proposes that partitionees must only satisfy the substantial service 
requirement for renewal expectancy for its partitioned area by the end 
of the original ten-year license term. The Commission tentatively 
concludes that these proposed flexible build-out requirements, if 
adopted, will encourage partitioning to entities that have a sincere 
interest in providing broadband PCS and will thereby expedite the 
provision of service to areas that otherwise may not receive it as 
quickly.
    The Commission considered the fact that many broadband PCS 
licensees may meet their five-year build-out construction obligation 
early, and therefore proposes revisiting the current prohibition on 
disaggregation. The Commission considered the alternative, requiring 
PCS licensees to wait until January 1, 2000 before disaggregating, and 
noted that this would not permit small businesses to disaggregate or 
obtain disaggregated spectrum and therefore, would not promote an 
efficient use of spectrum.
    The Commission is proposing to allow partitioning and/or 
disaggregation by entrepreneurs only to other qualified entrepreneurs 
for five years, to ensure the objective that entrepreneurs and small 
businesses continue to participate as PCS licensees for substantial 
periods of time, and through that participation obtain experience and 
profits that will enable their long term participation in 
communications industries. The Commission is proposing to apply 
proportional unjust enrichment provisions for partitioning and 
disaggregation by entrepreneurs to non-entrepreneurs after the five-
year period. The alternative to this proposal, would be to either 
prohibit partitioning by entrepreneurs or to allow entrepreneurs who 
have benefitted from special bidding provisions to become unjustly 
enriched by immediately partitioning a portion of their license area to 
parties that do not qualify for such benefits. The Commission also 
noted that allowing partitioning and/or disaggregation by entrepreneurs 
only to other qualified entrepreneurs for five years is consistent with 
the Commission's rule allowing license transfers by entrepreneurs only 
to other entrepreneurs in the first five years of the license period.
    The Commission believes that allowing entrepreneurs and small 
businesses to partition and/or disaggregate their licenses to other 
qualified entrepreneurs and small businesses, and allowing all non-
entrepreneurs to partition and/or disaggregate to any qualified party 
(including small businesses) will help attain the Congressional 
objective of ensuring that small businesses have an opportunity to 
participate in the provision of broadband PCS. These proposals will 
enable a wide variety of applicants, including small businesses, to 
overcome entry barriers in the provision and ownership of 
telecommunications services.
    This Notice of Proposed Rulemaking solicits comment on a variety of 
alternatives discussed herein. Any significant alternatives presented 
in the comments will be considered.
    IRFA Comments: The Commission requests public comment on the 
foregoing IRFA. Comments must have a separate and distinct heading 
designating them as responses to the IRFA and must be filed by the 
comment deadlines set forth in the Notice of Proposed Rulemaking.

B. Paperwork Reduction Act

    This Notice of Proposed Rulemaking contains either a proposed or 
modified information collection. The Commission, as part of its 
continuing effort to reduce paperwork burdens, invites the general 
public and the Office of Management and Budget (OMB) to comment on the 
information collections contained in this Notice of Proposed 
Rulemaking, as required by the Paperwork Reduction Act of 1995, Public 
Law No. 104-13. Public and agency comments are due at the same time as 
other comments on this Notice of Proposed Rulemaking; OMB notification 
of action is due September 23, 1996. Comments should address: (a) 
Whether the proposed collection of information is necessary for the 
proper performance of the functions of the Commission, including 
whether the information shall have practical utility; (b) the accuracy 
of the Commission's burden estimates; (c) ways to enhance the quality, 
utility, and clarity of the information collected; and (d) ways to 
minimize the burden of the collection of information on the 
respondents, including the use of automated collection techniques or 
other forms of information technology.

Dates: Written comments by the public on the proposed and/or modified 
information collections are due August 15, 1996. Written comments must 
be submitted by the Office of Management and Budget (OMB) on the 
proposed and/or modified information collections on or before September 
23, 1996.

Addresses: In addition to filing comments with the Secretary, a copy of 
any comments on the information collections contained herein should be 
submitted to Dorothy Conway, Federal Communications Commission, Room 
234, 1919 M Street, N.W., Washington D.C. 20554, or via the Internet to 
[email protected], and to Timothy Fain, OMB Desk Officer, 10236 NEOB, 
725-17th Street, N.W., Washington D.C. 20503 or via the Internet to 
[email protected].

For Further Information Contact: For additional information concerning 
the information collections contained in this Notice of Proposed 
Rulemaking contact Dorothy Conway at (202) 418-0217, or via the 
Internet at [email protected].

Supplementary Information:

    Title: Geographic Partitioning and Spectrum Disaggregation by 
Commercial Mobile Radio Services Licensees and Implementation of 
Section 257 of the Communications Act-Elimination of Market Entry 
Barriers.
    Type of Review: New Collection.
    Respondents: Number of Respondents: We estimate up to 10,370 PCS 
licensees or potential licensees could take the opportunity to 
partition and/or disaggregate a license or obtain a license through 
partitioning and/or disaggregation.
    Estimated Time Per Response: The average burden on the applicant is 
3 hours for the information necessary to complete FCC Forms 490, 430 or 
600 and be filed as one package under cover of the FCC Form 490. We 
estimate 75% of respondents will contract out the burden of responding. 
We estimate that it will take approximately 30 minutes to coordinate 
information with those contractors. The remaining 25% of respondents 
are estimated to employ in house staff to provide the information. 
7,778 applications (contracting out)  x .5 hour = 3,889 hours. 2,592 
applications (in house)  x 3 hours = 7,776 hours.
    Total burden = 3,889 + 7,776 = 11,665 hours.
    Estimated Cost to the Respondent: Total capital and start-up costs: 
Applicants wishing to file the package under cover of the FCC Form 490 
electronically will incur a $2.30 per minute on-line charge. On-line 
time

[[Page 38701]]

would amount to no more than 30 minutes. Seventy-five percent of the 
respondents are expected to file electronically. 7,778 applications  
x $2.30  x = $536,682. All other respondents would be expected to file 
manually and would incur the following costs: 2,592 applications  
x $1.15 = $2,981. Total capital and start-up costs = $536,682+$2,981 = 
$539,663.
    We assume that the respondents contracting out the information 
would use an attorney or engineer (average of $200 per hour) to prepare 
the information. 7,778 applications x $200 per hour x 3 hours = 
$4,666,800. Total Respondent Costs: $539,663 + $4,666,800 = $5,203,463.
    Cost to the Federal Government: The government review time for this 
submission is estimated at 15 minutes per response with the review 
being done by personnel at the GS-6 level. 10,370 applications  x $3.39 
= $35,154.

C. Ex Parte Rules--Non-Restricted Proceeding

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

D. Comment Period

    Pursuant to applicable procedures set forth in Sections 1.415 and 
1.419 of the Commission's rules, interested parties may file comments 
on or before August 15, 1996. Reply comments are to be filed on or 
before August 30, 1996. To file formally in this proceeding, you must 
file an original and four copies of all comments, reply comments, and 
supporting comments. If you want each Commissioner to receive a 
personal copy of your comments, you must file an original plus nine 
copies. You should send comments and reply comments to Office of the 
Secretary, Federal Communications Commission, Washington D.C. 20554. A 
copy of all comments should also be filed with the Commission's copy 
contractor, ITS, Inc., 2100 M Street, N.W., Suite 140, (202) 857-3800.

E. Authority

    The above action is authorized under the Communications Act, 
Secs. 4(i), 303(r), 309(c), 309(j), and 332, 47 U.S.C. Secs. 154(i), 
303(r), 309(c), 309(j), and 332, as amended.

F. Ordering Clauses:

    It is ordered that, pursuant to Sections 4(i), 303(r), 309(c), 
309(j), and 332 of the Communications Act of 1934, as amended, 47 
U.S.C. Secs. 154(i), 303(r), 309(c), 309(j), and 332, a NOTICE OF 
PROPOSED RULEMAKING is hereby ADOPTED.
    It is further ordered, that comments in WT Docket No. 96-148 will 
be due August 15, 1996 and reply comments will be due August 30, 1996.

List of Subjects in 47 CFR Part 24

    Communications common carriers, Federal Communications Commission, 
Reporting and recordkeeping requirements.

Federal Communications Commission.
William F. Caton,
Acting Secretary.
[FR Doc. 96-18847 Filed 7-24-96; 8:45 am]
BILLING CODE 6712-01-P