[Federal Register Volume 62, Number 3 (Monday, January 6, 1997)]
[Rules and Regulations]
[Pages 653-662]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 97-98]


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FEDERAL COMMUNICATIONS COMMISSION

47 CFR Part 24

[WT Docket No. 96-148; GN Docket No. 96-113; FCC 96-474]


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: Final rule.

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SUMMARY: In this Report and Order in WT Docket No. 96-148, the 
Commission adopts rules concerning geographic partitioning and spectrum 
disaggregation by broadband personal communications service (PCS) 
licensees. The rules adopted for broadband PCS will permit partitioning 
and disaggregation by all broadband PCS licensees. This will provide 
broadband PCS licensees with desirable flexibility to determine the 
amount of spectrum they will occupy and the geographic area they will 
serve. Such flexibility will: facilitate the efficient use of spectrum 
by providing licensees with the flexibility to make offerings directly 
responsive to market demands for particular types of service; increase 
competition by allowing market entry by new entrants; and expedite the 
provision of service to areas that otherwise may not receive broadband 
PCS service in the near term.

EFFECTIVE DATE: March 7, 1997.

FOR FURTHER INFORMATION CONTACT: Shaun A. Maher, Commercial Wireless 
Division, Wireless Telecommunications Bureau at (202) 418-0620.

SUPPLEMENTARY INFORMATION: This Report and Order in WT Docket No. 96-
148 and GN Docket No. 96-113, adopted on December 13, 1996, and 
released December 20, 1996, is available for inspection and copying 
during normal business hours in the FCC Reference Center, Room 234, 
1919 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 Report and Order.

I. Background

    1. The Commission's initial regulations and policies for broadband 
PCS were adopted in the Broadband PCS Second Report and Order, 
Amendment of the Commission's Rules to Establish New Personal 
Communications Services, GEN Docket No. 90-314, Second Report and 
Order, 58 FR 59174 (November 8, 1993) (Broadband PCS Second Report and 
Order), and amended in the Broadband PCS Memorandum Opinion and Order, 
Amendment of the Commission's Rules to Establish New Personal 
Communications Services, GEN Docket No. 90-314, Memorandum Opinion and 
Order, 59 FR 32830 (June 24, 1994) (Broadband PCS Memorandum Opinion 
and Order). In the Broadband PCS Memorandum Opinion and Order, the 
Commission declined to adopt unrestricted geographic partitioning for 
broadband PCS based on its concern that licensees might use 
partitioning as a means of circumventing construction requirements. 
However, the Commission stated that it would consider the issue of 
geographic partitioning for rural telephone companies (rural telcos) 
and other designated entities in a future proceeding to establish 
competitive bidding rules for broadband PCS. The Commission then 
permitted broadband PCS geographic partitioning for rural telcos in the 
Competitive Bidding Fifth Report and Order, Implementation of Section 
309(j) of the Communications Act--Competitive Bidding, PP Docket No. 
93-253, Fifth Report and Order, 59 FR 37566 (July 22, 1995) 
(Competitive Bidding Fifth Report and Order). The Commission observed 
that partitioning was one method to satisfy Congress' mandate to 
provide an opportunity for rural telcos to participate in the provision 
of broadband PCS. The Commission also found that rural telcos could 
take advantage of their existing infrastructure to provide broadband 
PCS services, thereby speeding service to rural areas. In the 
Competitive Bidding Further Notice of Proposed Rule Making, 
Implementation of Section

[[Page 654]]

309(j) of the Communications Act--Competitive Bidding, PP Docket No. 
93-253, Further Notice of Proposed Rule Making, 59 FR 41426 (August 12, 
1994) (Competitive Bidding Further Notice of Proposed Rule Making), the 
Commission sought comment on whether to extend post-auction geographic 
partitioning of broadband PCS licenses to women- and minority-owned 
businesses.
    2. Section 24.229(c) of the Commission's rules permits a broadband 
PCS licensee that has met its five-year construction requirement to 
disaggregate its licensed PCS spectrum after January 1, 2000. In the 
Broadband PCS Memorandum Opinion and Order, the Commission reasoned 
that this limit on spectrum disaggregation for broadband PCS would 
allow the PCS market to develop and prevent anti-competitive practices 
with regard to disaggregation.
    3. The Commission believes that it is appropriate at this time to 
liberalize its rules to allow partitioning and disaggregation for 
broadband PCS. The rules adopted in the Report and Order will provide 
licensees with the flexibility to use their spectrum more efficiently, 
will increase opportunities for small businesses and other entities to 
enter into the broadband PCS market, and will speed service to 
underserved or unserved areas.

II. Discussion

A. Partitioning

1. License Eligibility
    4. The Commission concludes that relaxing its PCS geographic 
partitioning rules, as discussed herein, will help to (1) remove 
potential barriers to entry thereby increasing competition in the PCS 
marketplace; (2) encourage parties to use PCS spectrum more 
efficiently; and (3) speed service to unserved and underserved areas. 
Parties that were unsuccessful bidders or that did not participate in 
the PCS auctions will be able to use partitioning as a method to 
acquire PCS licenses after the auctions. Smaller or newly-formed 
entities, for example, may enter the PCS market for the first time 
through partitioning. Under the prior rules, such entities would have 
been unable to qualify for partitioning because of the Commission's 
rural telco restriction. By eliminating that restriction, these 
entities will be able to negotiate for licenses for portions of the 
original service area at a cost that is proportionately less than that 
of the full geographic market.
    5. The Commission also finds that increasing the number of parties 
that may obtain partitioned PCS licenses will lead to more efficient 
use of PCS spectrum and will speed service to underserved or rural 
areas. PCS licensees will be able to partition portions of their 
markets to entities more willing to serve niche markets instead of 
postponing service to those areas. The Commission believes that 
retaining the existing partitioning restrictions, as recommended by the 
rural telco commenters, would prevent additional small businesses and 
other entities from using partitioning to enter the broadband PCS 
market. In addition, restricting the number of parties that are 
eligible for partitioned PCS licenses only serves to unreasonably 
reduce the number of potential entrants into the PCS marketplace 
without any corresponding public interest benefit.
    6. The rural telco commenters claim that changing the current 
partitioning rules would be inconsistent with the mandate set forth in 
Section 309(j)(3)(B) of the Communications Act of 1934, as amended 
(Communications Act), 47 U.S.C. 309(j)(3)(B), to ensure that licenses 
are disseminated among a wide variety of applicants including rural 
telcos. They contend that partitioning was the sole means by which the 
Commission sought to fulfill the mandate of Section 309(j)(3)(B) of the 
Communications Act, 47 U.S.C. 309(j)(3)(B) for rural telcos. The 
Commission disagrees. Rural telcos are able to take advantage of the 
special provision for small businesses the Commission designed in its 
auction rules to obtain licenses in the entrepreneur block auctions. 
Furthermore, Sections 309(j)(3)(A), (B), and (D) of the Communications 
Act, 47 U.S.C. 309(j)(A), (B) & (D), direct the Commission to further 
the rapid deployment of new technologies for the benefit of the public 
including those residing in rural areas, to promote economic 
opportunity and competition, and to ensure the efficient use of 
spectrum. While encouraging rural telco participation in PCS service 
offerings is an important element in meeting these goals, Congress did 
not dictate that this should be the sole method of ensuring the rapid 
deployment of service in rural areas. The Commission concludes that 
allowing open partitioning will further the goals of Section 309(j)(3) 
of the Communications Act, 47 U.S.C. 309(j)(3), by allowing PCS 
licensees to partition to multiple entities within their markets rather 
than limiting partitioning to a small number of rural telcos.
    7. The rural telcos argue further that they will not be able to 
compete for partitioned PCS licenses unless the Commission retains its 
current restriction because PCS licensees will be unwilling to 
partition their licenses to rural telcos and will choose to partition 
to Commercial Mobile Radio Service (CMRS) providers with greater 
financial resources. The rural telco commenters also argue that they 
relied to their detriment upon the current partitioning restrictions 
when devising their business plans and that many of them chose not to 
participate in the broadband PCS auctions because they believed that 
they would be the only parties that could obtain partitioned PCS 
licenses. The Commission is unpersuaded that its action herein will 
harm the rural telcos' business plans. Under the new rules adopted 
herein, rural telcos will be fully able to obtain partitioned PCS 
licenses, as they were previously. Moreover, in many instances, rural 
telcos are likely to be in a superior position to obtain partitioned 
licenses.
    8. The Commission declines to adopt the rural telcos' proposal to 
require a right of first refusal. Granting the rural telcos a right of 
first refusal would limit the number of parties that could obtain 
partitioned PCS licenses which would be at odds with the Commission's 
goals of encouraging participation in the PCS marketplace by as many 
parties as possible and reducing barriers to entry for small 
businesses. The Commission finds that increasing the number of 
potential entities that can acquire partitioned PCS licenses will 
result in better service and increased competition which may result in 
lower prices for PCS service.
    9. The Commission also finds that the right of first refusal would 
be difficult to administer and could discourage partitioning. The area 
proposed in a partitioning agreement may not coincide exactly with the 
area for which a rural telco would have a right of first refusal or a 
single partitioning transaction may encompass more than one rural 
telcos' service area. In those cases, the consent of multiple rural 
telcos would be required before a partitioning transaction could be 
consummated. Additionally, a partitioning agreement may be part of a 
larger assignment transaction. If a rural telco were to exercise its 
right of first refusal to acquire the partitioned area, it may not be 
possible to separate out the partitioning agreement to stand on its own 
and the entire assignment transaction could not be consummated.

[[Page 655]]

2. Available License Area, Restrictions on Timing of Partitioning, and 
Matters Related to Entrepreneur Block Licensees
    a. License Area. 10. The Commission is persuaded by the commenters' 
arguments that limiting geographic partitioning of PCS licenses to 
those areas defined by county lines may not be reflective of market 
realities and may otherwise inhibit partitioning. As the commenters 
note, parties seeking a partitioned license may not desire to serve an 
entire county but rather a smaller niche market. The Commission 
believes that permitting partitioning along any service area defined by 
the partitioner and partitionee is the most logical approach, provided 
they submit sufficient information to the Commission to maintain its 
licensing records. This will be the rule for all parties, including 
rural telcos.
    11. Partitioning applicants will be required to submit, as separate 
attachments to the partial assignment application, a description of the 
partitioned service area and a calculation of the population of the 
partitioned service area and licensed market. The partitioned service 
area must be defined by coordinate points at every 3 seconds along the 
partitioned service area agreed to by both parties, unless either (1) 
an FCC-recognized service area is utilized (i.e., Major Trading Area, 
Basic Trading Area, Metropolitan Service Area, Rural Service or 
Economic Area) or (2) county lines are followed. These geographical 
coordinates must be specified in degrees, minutes and seconds to the 
nearest second of latitude and longitude, and must be based upon the 
1927 North American Datum (NAD27). Applicants may also supply 
geographical coordinates based on 1983 North American Datum (NAD83) in 
addition to those required based on NAD27. This coordinate data should 
be supplied as an attachment to the partial assignment application, and 
maps need not be supplied. In cases where an FCC recognized service 
area or county lines are being utilized, applicants need only list the 
specific area(s) (through use of FCC designations) or counties that 
make up the newly partitioned area. Allowing partitioning along any 
agreed-upon service area will provide an opportunity for PCS licensees 
to design flexible and efficient partitioning agreements. By providing 
such flexibility to licensees for determining partitioned areas, the 
Commission will permit the market to decide the most suitable service 
areas.
    b. Non-entrepreneur block licenses. 12. The Commission concludes 
that the public interest will be served by allowing non-entrepreneur 
block licensees to freely partition their licenses to any other 
qualifying entity following the issuance of the license. Since non-
entrepreneur block licensees are permitted to assign their entire 
license after grant, the Commission finds they should be able to assign 
a portion of their license following the issuance of their license. PCS 
licensees will be permitted to partition their licensed market areas 
without limitation on the overall size of the partitioned areas 
consistent with the Commission's rules.
    c. Entrepreneur block licenses. 13. The Commission will permit 
entrepreneur block PCS licensees to partition at any time to other 
parties that would be eligible for licenses in those blocks. 
Partitioning of entrepreneur block license areas to non-entrepreneurs 
will not be permitted for the first five years of an entrepreneur block 
license term. This restriction is necessary in order to ensure that 
entrepreneurs do not circumvent the Commission's restrictions on full 
license transfers by attempting to immediately partition a portion of 
their licenses to non-entrepreneurs.
    14. The Commission finds that its unjust enrichment requirements 
should be applied if an entrepreneur block licensee partitions a 
portion of its license area to a non-entrepreneur, after the initial 
five-year license term. The Commission will apply its unjust enrichment 
rules to transactions where entrepreneurs obtain partitioned licenses 
from other entrepreneurs and subsequently seek to assign their 
partitioned license to a non-entrepreneur. The Commission will also 
apply the unjust enrichment provisions to an entrepreneur block 
licensee that qualifies as a small business who partitions to an entity 
that satisfies the entrepreneur block eligibility criteria but is not a 
small business that would be eligible for bidding credits or 
installment payments.
    15. The Commission will use population as the objective measure to 
calculate the relative value of the partitioned area for determining 
all of its unjust enrichment obligations. Population will be calculated 
based upon the latest census data.
    16. In partitioning cases involving installment payments, the 
Commission finds that separating the payment obligations and default 
provisions of the original licensee and partitionee is the best 
approach because it reduces each party's risk and creates payment 
obligations that can be enforced separately against the defaulting 
party without adversely affecting the other licensee. The Commission 
adopts the following rules to address the various combinations of 
parties and the relative obligations for each in the event an 
entrepreneur seeks to partition its license:
    (a) No Continued Installment Payments. When an entrepreneur block 
licensee with installment payments partitions its license after the 
five-year holding period to a party that would not qualify for 
installment payments under our rules or to an entity that does not 
desire to pay for its share of the license with installment payments, 
the Commission will first apportion the percentage of the remaining 
government obligation (including accrued and unpaid interest calculated 
on the date the partial assignment application is filed) between the 
partitionee and original licensee based upon the ratio of the 
population of the partitioned area to the population of the entire 
original licensed area. Under this procedure, both parties will be 
responsible to the U.S. Treasury for their proportionate share of the 
balance due including accrued and unpaid interest calculated on the 
date the partial assignment application is filed. The Commission will 
require, as a condition of grant of the partial assignment application, 
that the partitionee pay its entire pro rata amount within 30 days of 
Public Notice conditionally granting the partial assignment 
application. Failure to meet this condition will result in the 
automatic cancellation of the grant of the partial assignment 
application. The partitioner will receive new financing documents 
(promissory note and security agreement) with a revised payment 
obligation, based on the remaining amount of time on the original 
installment payment schedule. These financing documents will replace 
the partitioner's existing financing documents which will be marked 
``superseded'' and returned to the licensee upon receipt of the new 
financing documents. The original interest rate, established at the 
time of the issuance of the initial license in the market, will 
continue to be applied to the partitioner's portion of the remaining 
government obligation. The Commission will require, as a further 
condition to approval of the partial assignment application, that the 
partitioner execute and return to the U.S. Treasury the new financing 
documents within 30 days of the Public Notice conditionally granting 
the partial assignment application. Failure to meet this condition will 
result in the automatic cancellation of the grant of the partial 
assignment application. A

[[Page 656]]

default on an obligation will only affect that portion of the market 
area held by the defaulting party. The payments to the U.S. Treasury 
are required notwithstanding any additional terms and conditions agreed 
to between or among the parties.
    (b) Partitioning With Continued Installment Payments. Where both 
parties to the partitioning arrangement qualify for installment 
payments under Sec. 24.720(b)(1), 47 CFR 24.720(b)(1), the Commission 
will permit the partitionee to make installment payments on its portion 
of the remaining government obligation. Partitionees are free, however, 
to make a lump sum payment of their pro rata portion of the remaining 
government obligation within 30 days of the Public Notice conditionally 
granting the partial assignment application. Should a partitionee 
choose to make installment payments, the Commission will require, as a 
condition to approval of the partial assignment application, that both 
parties execute financing documents (promissory note and security 
agreement) agreeing to pay the U.S. Treasury their pro rata portion of 
the balance due (including accrued and unpaid interest on the date the 
partial assignment application is filed) based upon the installment 
payment terms for which they would qualify. These documents must be 
executed and returned to the U.S. Treasury within 30 days of the Public 
Notice conditionally granting the partial assignment application. 
Either party's failure to meet this condition will result in the 
automatic cancellation of the grant of the partial assignment 
application. The original interest rate, established at the time of the 
issuance of the initial license in the market, will apply to both 
parties' portion of the remaining government obligation. Each party 
will receive a license for its portion of the market area and each 
party's financing documents will provide that a default on its 
obligation would only affect their portion of the market area. These 
payments to the U.S. Treasury are required notwithstanding any 
additional terms and conditions agreed to between or among the parties.
3. Construction Requirements
    17. The Commission will adopt two alternative construction options 
for broadband PCS partitioning. Under the first option, the partitionee 
certifies that it will satisfy the same construction requirements as 
the original licensee. The partitionee then must meet the same five- 
and ten-year service requirements as the original 10 MHz or 30 MHz 
licensee in its partitioned area, while the partitioner remains 
responsible for meeting those requirements in the area it has retained. 
Under the second option, the partitioner certifies that it has already 
met or will meet its five-year construction requirement and that it 
will meet the ten-year construction requirement for the entire market. 
Because the partitioner retains the responsibility for meeting the 
construction requirements for the entire market, the partitionee will 
only be required to meet the substantial service requirement for its 
partitioned area at the end of the ten-year license term. The 
definition of substantial service will be that definition found at 
Sec. 24.16(a) of the rules, 47 CFR 24.16(a). If a partitionee fails to 
meet its construction requirements, the license for the partitioned 
area will automatically cancel without further Commission action.
    18. At the five- and ten-year benchmarks, partitionees are required 
to file supporting documentation showing compliance with the 
construction requirements. Licensees failing to meet the coverage 
requirements will be subject to forfeiture, license cancellation, or 
other penalties.

B. Disaggregation

1. Timing of Disaggregation
    19. The Commission concludes that disaggregation of broadband PCS 
spectrum should be allowed prior to January 1, 2000, and that the 
condition that the licensee must first satisfy the five-year build out 
requirement before disaggregating should be eliminated. To the extent 
that disaggregation would enable other entities to provide broadband 
PCS within geographic market areas, the Commission finds that allowing 
immediate disaggregation would encourage rather than impede competition 
by enabling the entry of new competitors. Moreover, the current 
prohibition on disaggregation may constitute a barrier to entry for 
small businesses that lacked the resources to participate successfully 
at auction for 30 MHz and 10 MHz spectrum blocks. In furtherance of the 
mandate prescribed by Section 257 of the Communications Act, the 
Commission is eliminating such market entry barriers by permitting non-
entrepreneur block (A, B, D, and E block) PCS licensees to disaggregate 
spectrum at any time to other entities with minimum eligibility 
qualifications. Entrepreneur block (C and F block) licensees may 
disaggregate at any time to other entrepreneurs, or to non-
entrepreneurs after a five-year holding period. While the Commission 
concludes that disaggregation should generally be allowed, it 
emphasizes that all proposed disaggregation agreements, like 
partitioning agreements, will be subject to Commission review and 
approval under the public interest standard of Section 310 of the Act. 
In addition, as discussed below, disaggregatees will be subject to the 
CMRS spectrum cap to ensure that disaggregation is not used to 
accumulate large amounts of spectrum in order to preclude entry by 
other competitors.
2. Amount of Spectrum to Disaggregate
    20. The Commission concludes that there should be no restriction on 
the amount of broadband PCS spectrum that can be disaggregated. 
Providing the flexibility to allow parties to decide the exact amount 
of spectrum to be disaggregated is preferable because it will encourage 
more efficient use of spectrum and will permit the deployment of a 
broader mix of service offerings, leading to a more competitive 
wireless marketplace. The Commission finds that requiring parties to 
obtain disaggregated spectrum in a predetermined amount, such as a 
block of 1 MHz, may result in parties obtaining more spectrum they 
need, leaving some spectrum unused, and may foreclose some parties from 
using disaggregation as a means of obtaining the spectrum they need to 
provide their service offerings. Therefore, the Commission will not 
restrict the amount of broadband PCS spectrum that can be 
disaggregated. Similarly, it will not require the disaggregator to 
retain a minimum amount of spectrum.
    21. The Commission is not adopting a limit on the maximum amount of 
spectrum that licensees may disaggregate, provided that the 
disaggregatee complies with the CMRS spectrum cap. The Commission finds 
no evidence at this time that a maximum limitation for disaggregation 
is necessary. PCS licensees shall be permitted to disaggregate spectrum 
without limitation on the overall size of the disaggregation as long as 
such disaggregation is otherwise consistent with the rules.
3. Matters Relating to Entrepreneur Block Licensees
    22. In keeping with the proposals the Commission is adopting for 
partitioning, it will permit entrepreneur block licensees to 
disaggregate at any time to other parties that qualify as 
entrepreneurs. Disaggregation to entities that do not qualify as 
entrepreneurs is not permitted for the first five years of a license 
term. Allowing unrestricted entrepreneur block disaggregation

[[Page 657]]

would be inconsistent with the five-year restriction on full license 
transfers to non-entrepreneurs which was designed to ensure that 
entrepreneurs do not take advantage of special entrepreneur block 
provisions by immediately seeking to transfer their licenses to non-
entrepreneurs. The Commission believes the same rationale would apply 
to entrepreneur block disaggregation, as licensees who have benefited 
from such provisions could immediately disaggregate spectrum to parties 
that would not qualify for such benefits.
    23. The Commission declines to permit entrepreneur block licensees 
to swap equivalent blocks of entrepreneur spectrum with non-
entrepreneurs within the same market area. The administrative burden of 
keeping track of such arrangements would far outweigh any benefit to 
the public.
    24. The Commission will follow the approach outlined for 
partitioning and apply unjust enrichment payments to entrepreneur block 
licensees that disaggregate to non-entrepreneurs after the five-year 
holding period and to entrepreneur block licensees that qualified for 
bidding credits and installment payments and that disaggregate to other 
entrepreneurs that would not have qualified for such benefits. All such 
unjust enrichment payments will be calculated based upon the ratio of 
the amount of spectrum disaggregated to the amount of spectrum retained 
by the original licensee. With respect to disaggregation from an 
entrepreneur block licensee to another entrepreneur that would also 
qualify for installment payments, the Commission adopts an approach 
similar to the one it adopted for partitioning. The Commission will 
apportion the payment obligations between the disaggregator and 
disaggregatee based upon the amount of spectrum disaggregated and 
require separate payment obligations, promissory notes and default 
liabilities for each party.
4. Construction Requirements
    25. The Commission concludes that the proposed construction 
requirements for disaggregation set forth in the NRPM would be 
inconsistent with the approach adopted in its partitioning rules, and 
that a more flexible approach is appropriate. Because the rules do not 
dictate a minimum level of spectrum usage by the original PCS licensee, 
the Commission believes it would be inconsistent to impose separate 
construction requirements on both disaggregator and disaggregatee for 
their respective spectrum portions. At the same time, the Commission 
wishes to ensure that the parties do not use disaggregation to 
circumvent its underlying construction requirements. Therefore, the 
Commission adopts a flexible approach analogous to its approach in the 
partitioning context: to retain the underlying five- and ten-year 
construction requirements for the spectrum block as a whole, but allow 
either party to meet the requirements on its disaggregated portion. 
Thus, a PCS licensee who disaggregates a portion of its spectrum may 
elect to retain responsibility for meeting the five- and ten-year 
coverage requirements, or it may negotiate a transfer of this 
obligation to the disaggregatee. In either case, the rules ensure that 
the spectrum will be developed to at least the same degree that was 
required prior to disaggregation.
    26. To ensure compliance with the rules, the Commission will 
require that parties seeking Commission approval of a disaggregation 
agreement include a certification as to which party will be responsible 
for meeting the applicable five- and ten-year construction 
requirements. Parties may also propose to share the responsibility for 
meeting the construction requirements. The specific requirements to be 
met will depend on whether the spectrum being disaggregated was 
originally licensed as a 30 MHz block or a 10 MHz block. In the event 
that only one party agrees to take responsibility for meeting the 
construction requirement and later fails to do so, that party's license 
will be subject to forfeiture, but the other party's license will not 
be affected. Should both parties agree to share the responsibility for 
meeting the construction requirements and either party later fails to 
do so, both parties' licenses will be subject to forfeiture. So that 
the CMRS rules remain consistent and competitively neutral, 
disaggregatees that already hold a broadband PCS license or other CMRS 
license in the same geographic market will be subject to the same 
coverage requirements as disaggregatees who do not hold other licenses 
for disaggregated spectrum.

C. Related Matters

1. Combination of Partitioning and Disaggregation
    27. To allow parties flexibility to design the types of agreements 
they desire, the Commission will permit combined partitioning and 
disaggregation. For example, this will allow a party to obtain a 
license for a single county of an A block market with only 15 MHz of 
spectrum. In the event that there is a conflict in the application of 
the partitioning and disaggregation rules, the partitioning rules 
should prevail. For the purpose of applying the unjust enrichment 
requirements and/or for calculating obligations under installment 
payment plans, when a combined partitioning and disaggregation is 
proposed, the Commission will use a combination of both population of 
the partitioned area and amount of spectrum disaggregated to make these 
pro rata calculations.
2. Licensing
    28. The Commission will follow existing partial assignment 
procedures for broadband PCS licenses in reviewing requests for 
geographic partitioning, disaggregation, or a combination of both. Such 
applications will be placed on Public Notice and will be subject to 
petitions to deny. A licensee will be required to file an FCC Form 490 
that is signed by both the licensee and the qualifying entity. With 
respect to partitioning, the FCC Form 490 must include the attachment 
defining the partitioned license area and an attachment demonstrating 
the population of the partitioned license area. Partial assignment 
applications that are filed seeking partitioning or disaggregation in 
the entrepreneur blocks must include an attachment demonstrating 
compliance with the five year entrepreneur block holding period. The 
qualifying entity will also be required to file an FCC Form 430 unless 
a current FCC Form 430 is already on file with the Commission. An FCC 
Form 600 must be filed by the qualifying entity to receive 
authorization to operate in the market area being partitioned or to 
operate the disaggregated spectrum or to modify an existing license of 
the qualifying entity to include the new/additional market area being 
partitioned or the spectrum that is disaggregated. Any requests for a 
partitioned license or disaggregated spectrum must contain the FCC 
Forms 490, 430, and 600 and be filed as one package under cover of the 
FCC Form 490.
    29. The 45 MHz CMRS spectrum cap contained in Section 20.6 of the 
rules applies to partitioned license areas and disaggregated spectrum.
3. License Term
    30. The Commission will allow partitionees and disaggregatees to 
hold their licenses for the remainder of the original licensee's ten-
year license term. Partitionees and disaggregatees may also earn a 
renewal expectancy on the same basis as other PCS licensees.
    31. The Commission will not permit an existing broadband PCS 
licensee acquiring a partitioned license or disaggregated spectrum in a 
market in

[[Page 658]]

which it is already a licensee to apply its original license term to 
the partitioned license or spectrum. Such a proposal would be 
burdensome to administer because the processing staff would be required 
to determine the licensee's other licenses in the market and calculate 
the correct expiration date for the partitioned or disaggregated 
license. The Commission finds that such an administrative burden would 
outweigh the benefit that may result from such a proposal.
4. Technical Rules
    32. The Commission finds that its existing technical rules are 
sufficient for application in the partitioning and disaggregation 
contexts and that no additional technical rules are required at this 
time. Should technical difficulties arise, however, the Commission will 
take whatever action is necessary to alleviate any technical or 
interference problems that result from partitioning or disaggregation, 
including appropriate modifications to its technical rules.
5. Microwave Relocation
    33. The Commission concludes that partitionees and disaggregatees 
should be treated the same as all other PCS licensees with respect to 
microwave relocation issues. In particular, partitionees will have the 
same rights and obligations as other broadband PCS licensees under the 
cost-sharing plan adopted in Amendment of the Commission's Rules 
Regarding a Plan for Sharing the Costs of Microwave Relocation, WT 
Docket No. 95-157, Report and Order and Further Notice of Proposed 
Rulemaking, 61 FR 24470 (May 15, 1996). Thus, partitionees and 
disaggregatees may seek reimbursement under the plan if they relocate 
incumbents and they will be required to pay their share of microwave 
relocation costs if they benefit from the spectrum-clearing efforts of 
another party, according to the cost-sharing formula adopted by the 
Commission.
    34. The Commission declines to require that the original PCS 
licensee guarantee payments under the cost-sharing plan by the 
partitionee or disaggregatee. To require licensees to guarantee such 
payments would be unfair because the original licensees would have no 
control over the actions of the partitionees and disaggregatees.
6. Clearinghouse for Spectrum
    35. The Commission declines to create a Commission-based resource 
of information, but will continue to make available, in a user-friendly 
manner, information contained in its existing databases, concerning 
geographic areas open to partitioning and spectrum that would be 
available through disaggregation. Although a few entities offered to 
serve as commercial clearinghouses of PCS spectrum information, the 
Commission declines to establish an official Commission clearinghouse.

VI. Conclusion

    36. The partitioning and disaggregation proposals the Commission 
has adopted are consistent with a pro-competitive policy framework. 
These rules will eliminate barriers to entry for small businesses 
seeking to enter the PCS marketplace and will promote the rapid 
creation of a competitive market for the provision of PCS services. 
These rules also meet the Congressional objectives to further the rapid 
development of new technologies for the benefit of the public including 
those residing in rural areas, without administrative delay, to promote 
economic opportunity and competition, and to ensure that new 
technologies are available by avoiding excessive concentration of 
licenses.

VII. Procedural Matters and Ordering Clauses

A. Regulatory Flexibility Act

Summary
    As required by Section 603 of the Regulatory Flexibility Act (RFA), 
5 U.S.C. 603 (RFA), an Initial Regulatory Flexibility Analysis (IRFA) 
was incorporated in the Notice of Proposed Rulemaking (NRPM) in WT 
Docket No. 96-148. The Commission sought written public comment on the 
proposals in the NPRM, including the IRFA. The Commission's Final 
Regulatory Flexibility Analysis in this Report and Order conforms to 
the RFA, as amended by the Contract With America Advancement Act of 
1996.
Need for and Purpose of this Action
    In this Report and Order the Commission modifies the broadband PCS 
rules to permit partitioning and disaggregation for all Part 24 
licenses. The proposals adopted herein also implement Congress' goal of 
giving small businesses the opportunity to participate in the provision 
of spectrum-based services in accordance with 47 U.S.C. 309(j)(4)(D) 
and to reduce entry barriers for small businesses in accordance with 47 
U.S.C. 257. With more open partitioning and disaggregation, additional 
entities, including small businesses, may participate in the provision 
of broadband PCS service without needing to acquire wholesale an 
existing license (with all of the bundle of rights currently associated 
with the existing license). Acquiring less than the current license 
will presumably be a more flexible and less expensive alternative for 
entities desiring to enter these services.
Summary of Issues Raised in Response to the Initial Regulatory 
Flexibility Analysis
    Only one commenter, National Telephone Cooperative Association 
(NTCA), submitted comments that were specifically in response to the 
IRFA. NTCA argues that the Commission is required under the RFA to 
identify significant alternatives to the proposed rules in order to 
accomplish the stated objectives of Sections 309(j) and 257 of the 
Communications Act of 1934, as amended (Communications Act). 
Specifically, NTCA argues that the Commission must consider the right 
of first refusal approach suggested by some commenters as an 
alternative to allowing open partitioning of PCS licenses and how it 
might minimize significant economic impacts on rural telcos. NTCA 
contends that, for the purposes of determining which businesses are to 
be included in an RFA analysis, the Commission should adopt the U.S. 
Small Business Administration's (SBA) definition of small business, 
which is any company with fewer than 1,500 employees.
    In the Report and Order, significant alternatives were identified 
and considered in order to further the mandates of Sections 309(j) and 
257 of the Communications Act. In addition, significant consideration 
was given to the rural telcos' right of first refusal approach for 
partitioning; however, the Commission concluded that such an approach 
was unworkable and would actually discourage partitioning. Finally, the 
Commission declined to adopt NTCA's suggestion to utilize the SBA 
definition of small business (businesses with fewer than 1,500 
employees). As noted below, the existing definition of small business 
(firms with revenues of less than $40 million in each of the last three 
years) was used in the PCS C-Block auction and was approved by the SBA. 
The Commission also notes that it has found incumbent LECs to be 
``dominant in their field of operation'' since the early 1980's, and it 
has consistently certified under the RFA that incumbent LECs are not 
subject to regulatory flexibility analyses because they are not small 
businesses. The Commission has made similar determinations in other 
areas.

[[Page 659]]

Description and Number of Small Entities Involved
    The rules adopted in the Report and Order will affect all small 
businesses which avail themselves of these rule changes, including 
small 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 rules will 
also affect rural telephone companies which, under the current rules, 
have the exclusive right to obtain partitioned broadband PCS licenses. 
Small businesses will be defined for these purposes as firms that have 
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 SBA. The definition of rural telephone company shall be that 
definition found at Sec. 24.720(e) of the rules, 47 CFR 24.720(e).
    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 in the A or B block 
PCS auctions. There were 89 winning bidders that qualified as small 
businesses in the C block PCS auctions. Based upon this information, 
the Commission concludes that the number of broadband PCS licensees 
affected by the rules adopted herein includes the 89 winning bidders 
that qualified as small entities in the block C broadband PCS auctions.
    The Commission anticipates that a total of 10,370 PCS licensees or 
potential licensees could take the opportunity to partition or 
disaggregate a license or obtain a license through partitioning and/or 
disaggregation. This estimate is based on the total number of broadband 
PCS licenses auctions and subject to auction, 2,074, and the 
Commission's estimate that each license would probably not be 
partitioned and/or disaggregated to more than five parties. 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 rules adopted in the Report and Order, they will be permitted 
to partition and/or disaggregate to other qualified entrepreneurs at 
any time and to non-entrepreneurs after the first five years of their 
license term. 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.
    The Commission is presently conducting auctions for the D, E, and F 
blocks of broadband PCS spectrum. The Commission anticipates that a 
total of 1,479 licenses will be awarded in the D, E, and F block PCS 
auctions. Eligibility for the F block licenses is limited to 
entrepreneurs with average revenues of less than $125 million. It is 
not possible to estimate the number of licenses that will be awarded to 
small businesses in the F block nor is it possible to estimate how many 
small businesses will win the D or E block licenses. The Commission 
believes that it is possible that small businesses will constitute a 
significant number of the up to 10,370 PCS licensees or potential 
licensees who could take the opportunity to partition and/or 
disaggregate or who could obtain a license through partitioning and/or 
disaggregation.
Summary of Projected Reporting, Recordkeeping and Other Compliance 
Requirements
    The rules adopted in the Report and Order will impose reporting and 
recordkeeping requirements on small businesses seeking licenses through 
partitioning and disaggregation. The information requirements will be 
used to determine whether the licensee is a qualifying entity to obtain 
a partitioned license or disaggregated spectrum. This information will 
be given in a one-time filing by any applicant requesting such a 
license. The information will be submitted on the FCC Form 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. The 
Commission estimates that the average burden on the applicant is three 
hours for the information necessary to complete these forms. The 
Commission estimates that 75 percent of the respondents (which may 
include small businesses) will contract out the burden of responding. 
The Commission estimates 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.
Steps Taken To Minimize Burdens on Small Entities
    The rules adopted in the Report and Order 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 and are consistent with the Communications Act's mandate to 
identify and eliminate market entry barriers for entrepreneurs and 
small businesses in the provision and ownership of telecommunications 
services.
    Allowing non-restricted partitioning of PCS licenses will 
facilitate market entry by parties who may lack the financial resources 
for participation in PCS auctions, including small businesses. Some 
small businesses may have been unable to be winning bidders at the PCS 
auctions due to high bidding and would have been unable to qualify for 
partitioning because of our current restriction which permits 
partitioning of PCS licenses to only rural telephone companies (rural 
telcos). By eliminating this restriction, small businesses will be able 
to obtain partitioned PCS licenses for smaller service areas at 
presumably reduced costs, thereby providing a method for small 
businesses to enter the PCS marketplace.
    Similarly, allowing immediate disaggregation of PCS licenses will 
facilitate the entry of new competitors to the provision of PCS 
services, many of whom will be small businesses seeking to acquire a 
smaller amount of PCS spectrum at a reduced cost.
    Allowing geographic partitioning of PCS licenses by services areas 
defined by the parties rather than only by county lines will provide an 
opportunity for small businesses to obtain partitioned PCS license 
areas designed to serve smaller, niche markets. This will permit small 
businesses to enter the PCS marketplace by reducing the overall cost of 
acquiring a partitioned PCS license.
    Allowing disaggregation of spectrum in any amount will also promote 
participation by small businesses who may seek to acquire a smaller 
amount of PCS spectrum tailored to meet the needs of their proposed 
service.
    The Commission's proposals to allow non-entrepreneur block 
licensees to partition or disaggregate to any party and to allow 
entrepreneurs to partition or disaggregate to other entrepreneurs at 
any time and to non-entrepreneurs after a five year holding period will 
significantly increase the opportunities for small businesses to enter 
the PCS marketplace. Allowing entrepreneur partitionees and 
disaggregatees to pay their proportionate share of the remaining 
government obligation through installment payments will provide a 
further opportunity for small

[[Page 660]]

businesses to participate in the provision of PCS services.
    The Commission's decision to allow partitioning parties to choose 
between two construction requirements will provide small businesses 
with more flexibility to construct their systems at a rate that is 
determined by market forces, thus allowing them to conserve their 
resources.
Significant Alternatives Considered and Rejected
    The Commission considered and rejected a number of alternative 
proposals concerning partitioning and disaggregation.
    The rural telephone companies (rural telcos) argued that the 
Commission should either retain the current partitioning restriction or 
adopt a right of first refusal approach that would require partitioning 
parties to notify the rural telco and offer it the partitioned license 
area under similar terms and conditions. The Commission found that 
retaining the current partitioning restriction would prevent small 
businesses from using partitioning to enter the broadband PCS market. 
Since retaining the partitioning restriction would constitute a 
significant barrier to entry for small businesses, the Commission 
declined to continue to limit partitioning to rural telcos.
    The Commission found that the right of first refusal would be 
difficult to implement and could discourage partitioning. Areas 
proposed in partitioning agreements may not coincide exactly with areas 
for which a rural telco may have a right of first refusal. A single 
partitioning transaction may encompass more than one rural telco's 
service area, or a partitioning agreement may be part of a larger 
assignment transaction. Parties would be unwilling to enter into 
partitioning agreements not knowing how much of an area would 
ultimately be partitioned or whether they could consummate the 
transaction. This determination will make it easier for non-rural-
telcos, including some small business entities, to enter partitioning 
agreements.
    The Commission declined to adopt the proposal set forth in the NPRM 
to limit partitioning to areas defined by county lines. The Commission 
was convinced by the majority of commenters that geographic 
partitioning along county lines is too restrictive. The Commission 
found that parties seeking a partitioned license may not desire to 
serve an entire county but rather a smaller niche market. Therefore, 
the Commission found that allowing partitioning along service areas 
defined by the parties would allow the parties to design flexible 
partitioning agreements.
    The Commission rejected proposals to permit partitioning and 
disaggregation during the first five years of an entrepreneur's license 
term. While allowing entrepreneurs to immediately partition or 
disaggregate to non-entrepreneurs may have resulted in additional 
entities participating in the provision of PCS services, the Commission 
concluded that the five year holding period restriction is necessary in 
order to ensure that entrepreneurs do not take advantage of the special 
entrepreneur block benefits by immediately partitioning a portion of 
their licenses or disaggregating a portion of their spectrum to parties 
that would not have qualified at auction, on their own merits, for such 
benefits. Furthermore, limiting partitioning and disaggregation during 
the first five years of an entrepreneur's license term will increase 
the possibility that small businesses will be able to acquire PCS 
licenses.
    The Commission declined to adopt proposals to apply a new license 
term to partitioned license areas and disaggregated spectrum. Under 
this approach, entities obtaining partitioned licenses or disaggregated 
spectrum would receive a new ten-year license term beginning from the 
date the Commission approved the partitioning or disaggregation. The 
Commission found that permitting parties to ``re-start'' their license 
term would effectively allow a licensee to extend its license term and 
could lead to circumvention of our license term rules.
    The Commission rejected the proposal to require disaggregation of 
broadband PCS spectrum in blocks of 1 MHz of paired frequencies (500 
kHz plus 500 kHz). The Commission found that requiring parties to 
obtain that large a block of spectrum could act as a barrier to entry 
for entities that do not require that much spectrum to provide service.
    Finally, the Commission declined the proposal put forth by some 
commenters that PCS licensees be required to assume the obligations and 
responsibilities for microwave relocation costs for their entire 
license area and spectrum block even if they partition a portion of 
their license area or disaggregate a portion of their spectrum to 
another party. The Commission found that requiring licensees to 
guarantee the payments of partitionees and disaggregatees would be 
unfair because licensees would not have control over the actions of 
partitionees and disaggregatees and because there was no reason to 
treat those parties differently than other late-entrant PCS licensees 
with respect to microwave relocation costs.
Report to Congress:
    The Commission shall include a copy of this Final Regulatory 
Flexibility Analysis, along with this Report and Order, in a report to 
be sent to Congress pursuant to the Small Business Regulatory 
Enforcement Fairness Act of 1996, 5 U.S.C. 801(a)(1)(A). A copy of this 
Final Regulatory Flexibility Analysis will also be published in the 
Federal Register.

B. Ordering Clauses

    Accordingly, it is ordered That, pursuant to the authority of 
Sections 4(i), 257, 303(g), 303(r) and 332(a) of the Communications Act 
of 1934, as amended, 47 U.S.C. 154(i), 257, 303(g), 303(r), and 332(a), 
Part 24 of the Commission's Rules, 47 CFR 24, is amended as set forth 
below.
    It is further ordered That the rules adopted herein will become 
effective March 7, 1997. This action is taken pursuant to 4(i), 303(r) 
and 332(a) of the Communications Act of 1934, as amended, 47 U.S.C. 
154(i), 303(r), and 332(a).

List of Subjects in 47 CFR Part 24

    Communications common carriers, Reporting and recordkeeping 
requirements.

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

Rule Changes

    Part 24 of Chapter I of Title 47 of the Code of Federal Regulations 
is amended as follows:

PART 24--PERSONAL COMMUNICATIONS SERVICES

    1. The authority citation for Part 24 continues to read as follows:

    Authority: 47 U.S.C. 154, 301, 302, 303, 309, and 332, unless 
otherwise noted.


Sec. 24.229   [Amended]

    2. Section 24.229 is amended by removing paragraph (c).


Sec. 24.707   [Amended]

    3. Section 24.707 is amended by removing the phrase from the third 
sentence: ``(and applicants seeking partitioned licenses pursuant to 
agreements with auction winners under Sec. 24.714).''
    4. Section 24.714 is revised to read as follows:

[[Page 661]]

Sec. 24.714   Partitioned licenses and disaggregated spectrum.

    (a) Eligibility. (1) Parties seeking approval for partitioning and 
disaggregation shall request an authorization for partial assignment of 
a license pursuant to Sec. 24.839.
    (2) Broadband PCS licensees in spectrum blocks A, B, D, and E may 
apply to partition their licensed geographic service area or 
disaggregate their licensed spectrum at any time following the grant of 
their licenses.
    (3) Broadband PCS licensees in spectrum blocks C and F may not 
partition their licensed geographic service area or disaggregate their 
licensed spectrum for the first five years of the license term unless 
it is to an entity that meets the eligibility criteria set forth in 
Sec. 24.709 at the time the request for partial assignment of license 
is filed or to an entity that holds license(s) for frequency blocks C 
and F that met the eligibility criteria set forth in Sec. 24.709 at the 
time of receipt of such license(s). Partial assignment applications 
seeking partitioning or disaggregation of broadband PCS licenses in 
spectrum blocks C and F must include an attachment demonstrating 
compliance with this section.
    (b) Technical standards--(1) Partitioning. In the case of 
partitioning, requests for authorization for partial assignment of a 
license must include, as attachments, a description of the partitioned 
service area and a calculation of the population of the partitioned 
service area and the licensed geographic service area. The partitioned 
service area shall be defined by coordinate points at every 3 seconds 
along the partitioned service area unless an FCC recognized service 
area is utilized (i.e., Major Trading Area, Basic Trading Area, 
Metropolitan Service Area, Rural Service Area or Economic Area) or 
county lines are followed. The geographic coordinates must be specified 
in degrees, minutes, and seconds to the nearest second of latitude and 
longitude and must be based upon the 1927 North American Datum (NAD27). 
Applicants may supply geographical coordinates based on 1983 North 
American Datum (NAD83) in addition to those required (NAD27). In the 
case where an FCC recognized service area or county lines are utilized, 
applicants need only list the specific area(s) (through use of FCC 
designations or county names) that constitute the partitioned area.
    (2) Disaggregation. Spectrum may be disaggregated in any amount.
    (3) Combined partitioning and disaggregation. The Commission will 
consider requests for partial assignment of licenses that propose 
combinations of partitioning and disaggregation.
    (c) Unjust enrichment--(1) Installment payments. Licensees in 
frequency Blocks C and F making installment payments that partition 
their licenses or disaggregate their spectrum to entities not meeting 
the eligibility standards for installment payments, will be subject to 
the provisions concerning unjust enrichment as set forth in 
Secs. 1.2111 of this chapter and 24.716(d).
    (2) Bidding credits. Licensees in frequency Blocks C and F that 
received a bidding credit and partition their licenses or disaggregate 
their spectrum to entities not meeting the eligibility standards for 
such a bidding credit, will be subject to the provisions concerning 
unjust enrichment as set forth in Secs. 1.2110(f) of this chapter and 
24.717(c).
    (3) Apportioning unjust enrichment payments. Unjust enrichment 
payments for partitioned license areas shall be calculated based upon 
the ratio of the population of the partitioned license area to the 
overall population of the license area and by utilizing the most recent 
census data. Unjust enrichment payments for disaggregated spectrum 
shall be calculated based upon the ratio of the amount of spectrum 
disaggregated to the amount of spectrum held by the licensee.
    (d) Installment payments--(1) Apportioning the balance on 
installment payment plans. When a winning bidder elects to pay for its 
license through an installment payment plan pursuant to Secs. 1.2110(e) 
of this chapter or 24.716, and partitions its licensed area or 
disaggregates spectrum to another party, the outstanding balance owed 
by the licensee on its installment payment plan (including accrued and 
unpaid interest) shall be apportioned between the licensee and 
partitionee or disaggregatee. Both parties will be responsible for 
paying their proportionate share of the outstanding balance to the U.S. 
Treasury. In the case of partitioning, the balance shall be apportioned 
based upon the ratio of the population of the partitioned area to the 
population of the entire original license area calculated based upon 
the most recent census data. In the case of disaggregation, the balance 
shall be apportioned based upon the ratio of the amount of spectrum 
disaggregated to the amount of spectrum allocated to the licensed area.
    (2) Parties not qualified for installment payment plans. (i) When a 
winning bidder elects to pay for its license through an installment 
payment plan, and partitions its license or disaggregates spectrum to 
another party that would not qualify for an installment payment plan or 
elects not to pay for its share of the license through installment 
payments, the outstanding balance owed by the licensee (including 
accrued and unpaid interest) shall be apportioned according to 
Sec. 24.714(d)(1).
    (ii) The partitionee or disaggregatee shall, as a condition of the 
approval of the partial assignment application, pay its entire pro rata 
amount within 30 days of Public Notice conditionally granting the 
partial assignment application. Failure to meet this condition will 
result in a rescission of the grant of the partial assignment 
application.
    (iii) The licensee shall be permitted to continue to pay its pro 
rata share of the outstanding balance and shall receive new financing 
documents (promissory note, security agreement) with a revised payment 
obligation, based on the remaining amount of time on the original 
installment payment schedule. These financing documents will replace 
the licensee's existing financing documents which shall be marked 
``superseded'' and returned to the licensee upon receipt of the new 
financing documents. The original interest rate, established pursuant 
to Sec. 1.2110(e)(3)(i) of this chapter at the time of the grant of the 
initial license in the market, shall continue to be applied to the 
licensee's portion of the remaining government obligation. We will 
require, as a further condition to approval of the partial assignment 
application, that the licensee execute and return to the U.S. Treasury 
the new financing documents within 30 days of the Public Notice 
conditionally granting the partial assignment application. Failure to 
meet this condition will result in the automatic cancellation of the 
grant of the partial assignment application.
    (iv) A default on the licensee's payment obligation will only 
affect the licensee's portion of the market.
    (3) Parties qualified for installment payment plans. (i) Where both 
parties to a partitioning or disaggregation agreement qualify for 
installment payments, the partitionee or disaggregatee will be 
permitted to make installment payments on its portion of the remaining 
government obligation, as calculated according to Sec. 24.714(d)(1).
    (ii) Each party will be required, as a condition to approval of the 
partial assignment application, to execute separate financing documents 
(promissory note, security agreement) agreeing to pay their pro rata 
portion of

[[Page 662]]

the balance due (including accrued and unpaid interest) based upon the 
installment payment terms for which they qualify under the rules. The 
financing documents must be returned to the U.S. Treasury within thirty 
(30) days of the Public Notice conditionally granting the partial 
assignment application. Failure by either party to meet this condition 
will result in the automatic cancellation of the grant of the partial 
assignment application. The interest rate, established pursuant to 
Sec. 1.2110(e)(3)(i) of this chapter at the time of the grant of the 
initial license in the market, shall continue to be applied to both 
parties' portion of the balance due. Each party will receive a license 
for their portion of the partitioned market or disaggregated spectrum.
    (iii) A default on an obligation will only affect that portion of 
the market area held by the defaulting party.
    (iv) Partitionees and disaggregatees that qualify for installment 
payment plans may elect to pay some of their pro rata portion of the 
balance due in a lump sum payment to the U.S. Treasury and to pay the 
remaining portion of the balance due pursuant to an installment payment 
plan.
    (e) License term. The license term for a partitioned license area 
and for disaggregated spectrum shall be the remainder of the original 
licensee's license term as provided for in Sec. 24.15.
    (f) Construction requirements--(1) Requirements for partitioning. 
Parties seeking authority to partition must meet one of the following 
construction requirements:
    (i) The partitionee may certify that it will satisfy the applicable 
construction requirements set forth in Sec. 24.203 for the partitioned 
license area; or
    (ii) The original licensee may certify that it has or will meet its 
five-year construction requirement and will meet the ten-year 
construction requirement, as set forth in Sec. 24.203, for the entire 
license area. In that case, the partitionee must only satisfy the 
requirements for ``substantial service,'' as set forth in 
Sec. 24.16(a), for the partitioned license area by the end of the 
original ten-year license term of the licensee.
    (iii) Applications requesting partial assignments of license for 
partitioning must include a certification by each party as to which of 
the above construction options they select.
    (iv) Partitionees must submit supporting documents showing 
compliance with the respective construction requirements within the 
appropriate five- and ten-year construction benchmarks set forth in 
Sec. 24.203.
    (v) Failure by any partitionee to meet its respective construction 
requirements will result in the automatic cancellation of the 
partitioned or disaggregated license without further Commission action.
    (2) Requirements for disaggregation. Parties seeking authority to 
disaggregate must submit with their partial assignment application a 
certification signed by both parties stating which of the parties will 
be responsible for meeting the five- and ten-year construction 
requirements for the PCS market as set forth in Sec. 24.203. Parties 
may agree to share responsibility for meeting the construction 
requirements. Parties that accept responsibility for meeting the 
construction requirements and later fail to do so will be subject to 
license forfeiture without further Commission action.

[FR Doc. 97-98 Filed 1-3-97; 8:45 am]
BILLING CODE 6712-01-P